SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
HPL Technologies, Inc.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies: common stock, par value $0.001 per share, of HPL
Technologies, Inc. ("HPL").
(2) Aggregate number of securities to which transaction applies:
(i) 41,305,348 shares of HPL common stock (representing the
number of shares of HPL common stock outstanding as of October
2, 2005) and (ii) 5,460,168 shares of HPL common stock
issuable pursuant to stock options outstanding as of October
2, 2005 under HPL's stock option plans with exercise prices of
less than $0.30 per share.
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined): (i) $0.30 per share of HPL common stock and
(ii) $352,950.44 to be paid to the holders of HPL's stock
options with exercise prices of less than $0.30 per share.
(4) Proposed maximum aggregate value of transaction: $12,744,554.
(5) Total fee paid: $2,549.
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:___________________________________________
(2) Form, Schedule or Registration Statement No.:_____________________
(3) Filing Party:_____________________________________________________
(4) Date Filed:_______________________________________________________
HPL TECHNOLOGIES, INC.
2033 Gateway Place, Suite 400
San Jose, CA 95110
Dear Stockholder:
We invite you to attend a special meeting of stockholders of HPL
Technologies, Inc. ("HPL", or the "Company") to be held on December 6, 2005, at
10:00 a.m. PST, at the Doubletree Hotel, 2050 Gateway Place, San Jose,
California 95110. Holders of record of HPL common stock at the close of business
on October 21, 2005 will be entitled to notice of and to vote at the special
meeting or any adjournment or postponement of that meeting.
At the special meeting, we will ask you to adopt the merger agreement
that we entered into on October 2, 2005 with Synopsys, Inc., a Delaware
corporation ("Synopsys"), and Snap Acquisition, Inc., a Delaware corporation and
a wholly-owned subsidiary of Synopsys ("Merger Sub"). As contemplated by the
merger agreement, Merger Sub will merge with and into HPL, with HPL surviving
the merger as a wholly-owned subsidiary of Synopsys. If we complete the merger,
each stockholder of HPL will be entitled to receive $0.30 per share in cash for
each outstanding share of HPL common stock held by such stockholder.
We cannot complete the merger unless all of the conditions to closing
are satisfied, including the adoption of the merger agreement by holders of a
majority of the outstanding shares of HPL common stock. Assuming the merger
agreement is adopted by the stockholders of HPL common stock and the other
conditions to closing are satisfied, the merger will be completed promptly
following the special meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
ADOPTION OF THE MERGER AGREEMENT.
Several HPL executive officers and all HPL directors, who collectively
own approximately 12.4% of the outstanding shares of HPL common stock, have
expressed their support for the merger and have entered into voting agreements
and executed irrevocable proxies obligating them to vote their shares in favor
of the adoption of the merger agreement. In addition, pursuant to the merger
agreement, Synopsys, which owns approximately 15.1% of the outstanding shares of
HPL common stock, has agreed to vote its shares in favor of the adoption of the
merger agreement.
The attached notice of special meeting and proxy statement explain the
proposed merger and the merger agreement and provide detailed information
concerning the special meeting. Please carefully read these materials, including
the annexes.
Your vote is very important. Even if you plan to attend the special
meeting in person, we request that you complete, sign, date and return the
enclosed proxy card and thus ensure that your shares will be represented at the
special meeting if you are unable to attend. If you do attend the special
meeting and wish to vote in person, you may withdraw your proxy and vote in
person.
Sincerely
/s/ Cary D. Vandenberg
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Cary D. Vandenberg
President and Chief Executive Officer
November 1, 2005
HPL TECHNOLOGIES, INC.
2033 Gateway Place, Suite 400
San Jose, CA 95110
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 6, 2005
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of HPL
Technologies, Inc. ("HPL") will be held on December 6, 2005, at 10:00 a.m. PST,
at the Doubletree Hotel, 2050 Gateway Place, San Jose, California 95110, for the
following purposes, as more fully described in the attached proxy statement:
(1) To consider and vote upon a proposal to adopt the Agreement
of Merger, dated as of October 2, 2005, by and among Synopsys,
Inc., Snap Acquisition, Inc. and HPL;
(2) To vote to adjourn the special meeting, if necessary, to
another time or place for the purpose of soliciting additional
proxies; and
(3) To consider such other business as may properly come before
the special meeting and any adjournment or postponement
thereof.
The Board of Directors of HPL has unanimously determined that the
merger is in the best interests of HPL and its stockholders and unanimously
recommends that you vote to adopt the merger agreement. The merger agreement and
the proposed merger are more fully described in the attached proxy statement,
which we urge you to read carefully.
Stockholders of record at the close of business on October 21, 2005 are
entitled to notice of and to vote at the special meeting and any adjournment or
postponement of the meeting. All stockholders are cordially invited to attend
the special meeting in person. Adoption of the merger agreement will require the
affirmative vote of the holders of a majority of outstanding shares of HPL
common stock. Holders of HPL common stock are entitled to appraisal rights under
the General Corporation Law of the State of Delaware, if they meet certain
conditions. See "The Merger - Appraisal Rights of Stockholders" on page 28 of
the attached proxy statement.
YOUR VOTE IS IMPORTANT.
Even if you plan to attend the special meeting in person, we request
that you complete, sign, date and return the enclosed proxy card and thus ensure
that your shares will be represented at the special meeting if you are unable to
attend.
If you sign, date and mail your proxy card without indicating how you
wish to vote, the shares represented by that proxy card will be voted in favor
of all of the proposals, including the adoption of the merger agreement. If you
fail to return your proxy card and do not vote in person at the special meeting,
your shares cannot be counted for the purposes of determining whether a quorum
is present at the special meeting. If a quorum is not present at the special
meeting, the merger agreement cannot be adopted and the merger will be delayed
or, at worst, may be canceled. If you attend the special meeting and wish to
vote in person, you may withdraw your proxy and vote in person at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Michael P. Scarpelli
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Michael P. Scarpelli
Secretary
San Jose, California
November 1, 2005
2.HPL TECHNOLOGIES, INC.
PROXY STATEMENT
DATED NOVEMBER 1, 2005
SPECIAL MEETING OF STOCKHOLDERS
QUESTIONS AND ANSWERS ABOUT THE MERGER
The following questions and answers are provided for your convenience
and briefly address some commonly asked questions about the proposed merger. A
more detailed description of these matters can be found elsewhere in this proxy
statement. We urge you to read the entire proxy statement carefully.
Q: When and where is the special meeting?
A: HPL will hold a special meeting of its stockholders on December 6, 2005, at
10:00 a.m. PST, at the Doubletree Hotel, 2050 Gateway Place, San Jose,
California 95110.
Q: What is the purpose of the special meeting?
A: At the special meeting, you will be asked to adopt the Agreement of Merger,
dated as of October 2, 2005, by and among Synopsys, Inc. ("Synopsys"), Snap
Acquisition, Inc. ("Merger Sub") and HPL Technologies, Inc. ("HPL"). Only HPL
stockholders as of the close of business on October 21, 2005 (the "Record Date")
will be entitled to notice of and to vote at the special meeting.
Q: What effect will the merger have on HPL?
A: Pursuant to the merger agreement, Snap Acquisition, Inc., a wholly-owned
subsidiary of Synopsys, will be merged with and into HPL, with HPL surviving the
merger as a wholly-owned subsidiary of Synopsys.
Q: What will I be entitled to receive pursuant to the merger?
A: As a result of the merger, HPL stockholders (other than stockholders who have
perfected their appraisal rights) will be entitled to receive $0.30 in cash for
each share of HPL common stock they own. For example, if you own 1,000 shares of
HPL common stock, you will be entitled to receive $300.00 in cash in exchange
for all of your HPL shares.
Q: Will I own any shares of HPL common stock or Synopsys common stock after
completion of the merger?
A: No. You are entitled only to be paid cash for your shares of HPL common
stock.
Q: What do I need to do now?
A: HPL urges you to read this proxy statement carefully, including the annexes,
and consider how the merger affects you. After reading this proxy statement
carefully, you should complete, date and sign your proxy card and mail it in the
enclosed return envelope as soon as possible, even if you plan to attend the
meeting in person, so that your shares may be represented at the special
meeting. Unless contrary instructions are indicated on your proxy card, all of
your shares of HPL common stock represented by your proxy card will be voted
"FOR" the adoption of the merger agreement.
Q: How do HPL's Board of Directors recommend I vote?
A: At a meeting held on October 2, 2005, HPL's Board of Directors (the "Board")
unanimously approved, adopted and declared advisable the merger agreement and
the merger and recommended that HPL stockholders adopt the merger agreement.
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Q: What happens if I do not return a proxy card?
A: If you fail to return a proxy card and do not vote in person at the special
meeting (or by Internet or phone as discussed below), your shares will not be
counted for purposes of determining whether a quorum is present at the special
meeting and will effectively be counted as a vote against adoption of the merger
agreement.
Q: May I vote in person?
A: Yes. If your shares are not held by a broker or bank, you may vote your
shares in person at the special meeting. If your shares are held by a broker or
bank, you must obtain a proxy card from your broker or bank in order to vote in
person at the special meeting.
Q: May I submit a proxy via the Internet or telephone?
A: Yes, if your shares are held by a broker or bank and such a service is
provided by your broker or bank, you may submit a proxy by completing and
returning the voting form provided by your broker or bank or via the Internet or
by telephone through your broker or bank. To submit a proxy via the Internet or
telephone, you should follow the instructions on the voting form provided by
your broker or bank. If your shares are registered in your name, you may vote
your shares only by returning a signed proxy card or voting in person at the
special meeting - you will not be able to submit a proxy via the Internet or
telephone.
Q: May I change my vote after I have submitted my proxy card?
A: Yes. You may change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of several ways. First, you can send a
written, dated notice to the secretary of HPL stating that you revoke your
proxy. Second, you can complete, date and submit a new proxy card. Third, if you
submitted a proxy via the Internet or telephone, you can submit a revised proxy
through the Internet or telephone prior to the close of the Internet or
telephone proxy submission facility. Fourth, you can attend the special meeting
and vote in person. Your attendance at the meeting alone will not revoke your
proxy. If you have instructed a broker to vote your shares, you must follow
directions received from your broker to change those instructions.
Q: If my broker holds my shares, will my broker vote my shares for me?
A: Yes, but only if your broker receives instructions from you. Otherwise, your
broker will not be able to vote your shares on the proposal to adopt the merger
agreement and the proposal to grant discretionary authority to adjourn the
special meeting for the purpose of soliciting additional proxies. You should
instruct your broker to vote your shares, following the procedures provided by
your broker. Without instructions, your shares will not be voted on such
matters, the effect of which will be that your shares will not be counted for
purposes of determining whether a quorum is present at the special meeting and
will effectively be counted as a vote against adoption of the merger agreement,
and will not be counted as a vote for or against the adjournment proposal.
Q: Should I send in my stock certificates now?
A: No. If the merger is completed, each share of HPL common stock issued and
outstanding immediately prior to the completion of the merger will be canceled
and will be automatically converted into the right to receive the cash merger
consideration provided in the merger agreement. After the merger is completed,
Synopsys will send you written instructions for exchanging your HPL stock
certificates for the cash merger consideration.
Q: When do you expect the merger to be completed?
A: Assuming the merger agreement is adopted by the holders of a majority of the
outstanding shares of HPL common stock, the merger is expected to be completed
promptly following the special meeting. However, we cannot assure you that all
conditions to the merger will be satisfied or, if satisfied, the date by which
they will be satisfied.
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Q: Am I entitled to appraisal rights?
A: Appraisal rights entitle, under certain circumstances, stockholders of
Delaware corporations to receive a cash payment equal to the fair value of their
shares as determined by the Delaware Court of Chancery. Holders of HPL common
stock who do not vote in favor of adoption of the merger agreement, who timely
submit a written demand for appraisal of their shares, who continuously hold
such shares through the effective time of the merger and who otherwise comply
with the procedures of Section 262 of the General Corporation Law of the State
of Delaware, have appraisal rights. A detailed description of the appraisal
rights and procedures available to HPL stockholders is included in "The
Merger--Appraisal Rights of Stockholders" beginning on page 28. The full text of
Section 262 of the General Corporation Law of the State of Delaware is included
as Annex D to this proxy statement.
Q: Will I be taxed on the merger consideration?
A: Yes. Stockholders will generally recognize capital gain or capital loss equal
to the difference between the cash received pursuant to the merger agreement and
their adjusted tax basis in their shares of HPL common stock.
Q: Who should I contact if I have more questions about the merger?
If you have questions about the merger or would like additional copies of this
proxy statement, you should contact Michael P. Scarpelli, Chief Financial
Officer of HPL, at (408) 501-9281.
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SUMMARY
This summary highlights selected information from this proxy statement
and may not contain all of the information that is important to you. To
understand the merger and related transactions fully and for a more complete
description of the legal terms of the merger agreement, you should read
carefully this entire proxy statement and the documents we refer to herein. See
"Where You Can Find More Information." A copy of the merger agreement is
attached as Annex A to this proxy statement. HPL encourages you to read the
merger agreement as it is the legal document that governs the merger. HPL has
included page references to other sections of this proxy statement in
parentheses to direct you to a more complete description of the topics presented
in this summary.
Forward-Looking Statements
This proxy statement contains "forward-looking statements," as defined
in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), that are based on
HPL's current expectations, assumptions, estimates and projections about HPL and
its industry. The forward-looking statements are subject to various risks and
uncertainties. Generally, these forward-looking statements can be identified by
the use of forward-looking terminology such as "anticipate," "believe,"
"estimate," "expect," "intend," "project," "should" and similar expressions.
Those statements include, among other things, the risk that the merger may not
be completed in a timely manner, if at all, risks regarding employee retention
and other risks detailed in HPL's current filings with the SEC, including HPL's
most recent filings on Form 10-K and Form 10-Q which discuss these and other
important risk factors concerning HPL and HPL's operations. HPL cautions you
that reliance on any forward-looking statement involves risks and uncertainties,
and that although HPL believes that the assumptions on which its forward-looking
statements are based are reasonable, any of those assumptions could prove to be
inaccurate, and, as a result, the forward-looking statements based on those
assumptions could be incorrect. In light of these and other uncertainties, you
should not conclude that HPL will necessarily achieve any plans and objectives
or projected financial results referred to in any of the forward-looking
statements. HPL does not undertake to release the results of any revisions of
these forward-looking statements to reflect future events or circumstances.
The Companies
HPL Technologies, Inc.
2033 Gateway Place, Suite 400
San Jose, CA 95110
Telephone: (408) 501-9281
HPL supplies the software, services and technology necessary for
semiconductor companies to streamline their design process and optimize product
yields. Integrated device manufacturers, fab-less semiconductor companies and
foundries utilize HPL's comprehensive portfolio of silicon-proven intellectual
property, highly flexible data analysis platforms, factory floor systems and
professional services to facilitate product development from design through
manufacturing and test phases.
Synopsys, Inc.
700 E. Middlefield Road
Mountain View, CA 94043
Telephone: (650) 584-5000
Synopsys is a world leader in electronic design automation software for
semiconductor design. Synopsys delivers semiconductor design and verification
software platforms and integrated circuit manufacturing software products to the
global electronics market, enabling the development and production of complex
systems-on-chips. Synopsys also provides intellectual property and design
services to help simplify the design process, reduce design costs and accelerate
time to market for its customers.
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Snap Acquisition, Inc.
700 E. Middlefield Road
Mountain View, CA 94043
Telephone: (650) 584-5000
Merger Sub is a Delaware corporation and a wholly-owned subsidiary of
Synopsys. Merger Sub was organized solely for the purpose of entering into the
merger agreement and completing the merger with HPL and has not conducted any
business operations.
Conversion of Shares; Procedures for Exchange of Common Stock Certificates
(Page 27)
Upon the completion of the merger, each issued and outstanding share of
HPL common stock (other than shares held by Synopsys or stockholders who have
perfected their appraisal rights) will be canceled and will be automatically
converted into the right to receive $0.30 in cash.
Upon the completion of the merger, you will have the right to receive
the merger consideration described above, but you will no longer have any rights
as a HPL stockholder. You will receive the merger consideration after exchanging
your HPL stock certificates in accordance with the instructions contained in a
letter of transmittal to be sent to you shortly after completion of the merger.
Treatment of Stock Options and ESPP (Page 31)
In connection with the merger, Synopsys will not assume any outstanding
options to acquire HPL common stock. Prior to the effective time of the merger,
HPL will cause all of the outstanding options to be accelerated and converted
into the right to receive cash in the amount equal to the excess, if any, of (i)
the merger consideration over (ii) the exercise price payable in respect of the
shares subject to such option. If the exercise price of an option exceeds $0.30,
then the holder of such option will not receive any cash consideration. All
outstanding stock options will be terminated upon the effective time of the
merger.
HPL has previously suspended its employee stock purchase plans
("ESPPs"). As a result, there are no outstanding rights to purchase shares of
HPL common stock under such plans.
Subject to consummation of the Merger, HPL's stock option plans and
ESPPs will be terminated.
Reasons for the Merger (Page 17)
In the course of reaching its decision to adopt the merger agreement
and recommend its adoption by HPL stockholders, the Board considered a number of
factors in its deliberations, including, among others:
o HPL's distressed financial condition, including management's view that
the near term cash and liquidity constraints are such that without an
immediate infusion of capital, HPL's ability to continue as a going
concern is in question;
o The Board's review of management's preliminary report on revenues and
new bookings for HPL's fiscal quarter ended September 30, 2005, which
are expected to fall significantly short of internal projections;
o HPL's recent inability to raise additional capital without substantial
discount and dilution to existing stockholders due in part to HPL's
inability to qualify for listing on a major exchange and to the lack of
liquidity in its shares;
o HPL's diminished cash position and its inability to borrow to support
operations, other than to bridge a transaction for HPL or another
financing;
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o The substantial efforts undertaken by HPL and its financial advisor to
raise capital and/or find a merger partner for HPL;
o The terms of the merger agreement, including the ability of HPL to
accept a superior offer and terminate the merger agreement, subject to
payment of a termination fee; and
o The opinion of SVB Alliant, HPL's financial advisor, that the merger
consideration to be received by HPL stockholders is fair from a
financial point of view.
These factors and others are further described below in this proxy statement.
Recommendation of the Board of Directors (Page 17)
The Board unanimously:
o approved and declared advisable the merger, the merger agreement and
the transactions contemplated by the merger agreement;
o determined and believed that the merger is advisable, and fair to and
in the best interests of HPL's stockholders; and
o recommended that HPL's stockholders adopt the merger agreement.
Opinion of Financial Advisor to HPL (Page 18)
On October 2, 2005, SVB Alliant, HPL's financial advisor, delivered its
written opinion to the Board that, as of the date of such opinion, and based
upon the assumptions made, general procedures followed, matters considered and
limitations on the review undertaken, as set forth in such opinion, the merger
consideration for HPL common stock is fair to HPL stockholders from a financial
point of view.
The full text of SVB Alliant's written opinion which sets forth 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. The SVB Alliant opinion is addressed to the Board and is
directed only to the fairness from a financial point of view of the
consideration to be received in the merger by the holders of HPL common stock.
The SVB Alliant opinion does not constitute a recommendation to any HPL
stockholder as to how such stockholder should vote. HPL stockholders are urged
to read the SVB Alliant opinion in its entirety.
Voting Agreements (Page 41)
As a condition to Synopsys entering into the merger agreement, all of
the members of the Board and certain of HPL's executive officers have entered
into voting agreements with Synopsys, providing that they will vote all shares
of HPL's common stock owned by them for the adoption of the merger agreement and
against any action or agreement that would result in a breach of any
representation, warranty, covenant or obligation of HPL under the merger
agreement and certain other actions discussed further below in this proxy
statement. The voting agreements terminate upon the earlier of the date upon
which the merger becomes effective or the termination of the merger agreement.
Interests of Our Directors and Executive Officers in the Merger (Page 24)
In considering the recommendation of the Board, you should be aware
that the executive officers and directors of HPL have interests in the merger
that may be different from, or in addition to, yours, including, among others,
continuation of certain indemnification and insurance arrangements, acceleration
of vesting in stock options and the right to receive a cash payment for the
difference between the merger consideration and the exercise price for such
options, opportunities for continued employment, and eligibility for certain
severance benefits, bonus payments and other benefits.
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Conditions to the Merger (Page 36)
Completion of the merger is subject to the satisfaction or waiver of
various conditions, including, among others, the following conditions to the
obligations of one or both of HPL and Synopsys: (i) the adoption of the merger
agreement by HPL stockholders, (ii) the accuracy of the representations and
warranties of each of HPL and Synopsys made in the merger agreement, (iii) the
performance by HPL and Synopsys of their respective covenants and obligations in
all material respects, (iv) holders of no more than 10% of the shares of HPL
common stock as of the date of the completion of the merger having demanded
appraisal rights, (v) the absence of any material adverse change to HPL, (vi)
the receipt of all approvals and consents of applicable governmental and
regulatory agencies, (vii) certain employees of HPL having entered into offer
letters with Synopsys and (viii) the absence of any legal restraint or
prohibition that has the effect of preventing completion of the merger or
related transactions.
Termination of the Merger Agreement (Page 38)
Each of Synopsys and HPL has the right to terminate the merger
agreement under the circumstances set forth in the merger agreement.
Expenses and Termination Fees (Page 40)
The merger agreement provides that regardless of whether the merger is
completed, all expenses incurred by the parties will be borne by the party
incurring such expenses, provided, however, that HPL shall pay Synopsys'
expenses up to $150,000 if the merger agreement is terminated because HPL's
stockholders do not adopt the merger agreement. In addition, HPL has agreed to
pay a termination fee of $500,000 if the merger agreement is terminated under
certain circumstances set forth in the merger agreement.
No Solicitation of Other Transactions (Page 35)
HPL has agreed it will not solicit or encourage the initiation of
inquiries regarding any acquisition proposals by third parties, or take other
actions with respect to such proposals that are prohibited by the merger
agreement. HPL may, however, provide non-public information to, and enter into
discussions with, another party or parties with respect to an acquisition
proposal that constitutes or is likely to lead to a superior offer, subject to
the provisions of the merger agreement.
Material United States Federal Income Tax Consequences of the Merger (Page26)
The exchange of shares of HPL common stock for the cash merger
consideration will be a taxable transaction to HPL's stockholders for United
States federal income tax purposes.
Because individual circumstances may differ, we urge you to consult
your tax advisor with respect to the tax consequences of the merger to you.
Accounting Treatment (Page 28)
The merger will be accounted for as a purchase transaction for
financial accounting purposes.
Regulatory Filings and Approvals Required to Complete the Merger (Page 26)
HPL is not aware of any material governmental or regulatory approval
required for completion of the merger other than compliance with Delaware law.
Appraisal Rights of Stockholders (Page 28)
HPL stockholders have the right under Delaware law to exercise
appraisal rights and to receive payment in cash for the fair value of their
shares of HPL common stock determined in accordance with Delaware law. The fair
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value of shares of HPL common stock as determined in accordance with Delaware
law may be more or less than, or the same as, the merger consideration to be
paid to non-dissenting stockholders pursuant to the merger agreement.
Stockholders who wish to exercise appraisal rights must not vote in favor of the
adoption of the merger agreement, must timely submit a written demand for
appraisal of their shares, must continue to hold such shares through the
effective time of the merger and must precisely follow other specific
procedures, or their appraisal rights may be lost. These procedures are
described in this proxy statement, and the provisions of Delaware law that grant
appraisal rights and govern such procedures are attached as Annex D. HPL's
stockholders are encouraged to read these provisions carefully and in their
entirety.
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RISK FACTORS RELATED TO PROPOSAL 1
In connection with Proposal 1, you should consider the following
factors in conjunction with the other information included in this proxy
statement.
HPL faces serious liquidity challenges and, as a result, if the proposed
merger with Synopsys and Merger Sub were delayed or not completed, HPL
expects that its business and future prospects would be materially and
adversely affected and HPL might be forced to cease operations as a going
concern.
Due to a combination of factors, HPL currently anticipates that its
available cash resources will be insufficient to meet HPL's obligations by some
point in the fourth quarter of calendar year 2005. The factors contributing to
this belief include softness in HPL's revenues in 2005, cash payment
requirements under its existing bank credit facility with Silicon Valley Bank
and costs associated with the merger. If HPL does not complete the merger or
obtain additional financing prior to the time its cash resources become
insufficient for its needs, HPL will be unable to meet all of its obligations,
which would seriously harm its business and future prospects and could
jeopardize its ability to complete the merger. HPL believes that it would be
unable to obtain additional financing on acceptable terms under its existing
bank credit facility or otherwise and HPL presently anticipates being unable to
meet its obligations for the foreseeable future.
In order to obtain financing from any other source, HPL would be
required to obtain the approval of Synopsys and Merger Sub (assuming the merger
agreement had not been terminated) and the lender under its existing bank credit
facility. Even if HPL obtained the requisite consents, it is likely that HPL
would be unable to procure additional financing, and if any financing were
available, it would likely be on highly disadvantageous terms given HPL's
financial condition. HPL believes such financing would merely postpone rather
than avert its liquidity challenges. See "The Merger--Background of the Merger,"
"--Reasons for the Merger," and "--Opinion of Financial Advisor to HPL".
HPL believe that its sale represents the only available strategic
alternative to address HPL's urgent need for liquidity and capital resources. As
a result, if the merger is not completed, HPL believes it would no longer be
able to pursue its business strategy and would be forced to effect a liquidation
or a comparable alternative and HPL believes its stockholders would receive no
consideration for their shares in such a scenario. Upon termination of the
merger agreement under certain specified conditions, HPL may be required to
reimburse the documented transaction expenses of Synopsys up to a maximum of
$150,000. Upon termination of the merger agreement under certain other specified
conditions, HPL may be required to pay Synopsys a termination fee of $500,000.
HPL believes that any obligation to pay such expenses or fees would further
diminish its cash position.
The fact that there is a merger pending could have an adverse effect on
HPL's business, revenue and results of operations.
While the merger is pending, it creates uncertainty about HPL's future.
As a result of this uncertainty, customers may decide to delay, defer or cancel
purchases of HPL products and services pending completion of the merger or
termination of the merger agreement. If these decisions represent a significant
portion of HPL's anticipated revenue, HPL's results of operations and quarterly
revenues could be substantially below its expectations and internal projections.
In addition, while the merger proposal is pending, HPL is subject to a
number of risks that may adversely affect its business, revenue and results of
operations, including:
o The diversion of management and employee attention and the unavoidable
disruption to HPL's relationships with customers and vendors may
detract from HPL's ability to grow revenues and minimize costs;
o HPL has and will continue to incur significant expenses related to the
merger prior to its closing;
9
o HPL may be unable to respond effectively to competitive pressures,
industry developments and future opportunities; and
o Under the terms of the merger agreement HPL is bound by a number of
affirmative and negative covenants that restrict its ability to take
certain actions, including, for example, (i) a covenant requiring HPL
to obtain Synopsys' consent prior to obtaining any additional
financing, and (ii) a covenant requiring HPL to attempt to renegotiate
certain contracts, and these restrictions may impair HPL's relations
with its customers or harm HPL's business.
10
THE SPECIAL MEETING
Date, Time and Place
HPL will hold the special meeting on December 6, 2005, at 10:00 a.m.
PST, at the Doubletree Hotel, 2050 Gateway Place, San Jose, California 95110.
Purpose of Special Meeting
At the special meeting, HPL stockholders will be asked to:
(1) consider and vote upon a proposal to adopt the Agreement of Merger, dated
as of October 2, 2005, by and among Synopsys, Inc., Snap Acquisition, Inc.
and HPL;
(2) vote to adjourn the special meeting, if necessary, to another time or place
for the purpose of soliciting additional proxies; and
(3) consider such other business as may properly come before the special
meeting and any adjournment or postponement thereof.
Record Date; Stock Entitled to Vote; Quorum
Only holders of record of HPL common stock at the close of business on
October 21, 2005, the Record Date, are entitled to notice of and to vote at the
special meeting. At the close of business on the Record Date, 41,373,910 shares
of HPL common stock were issued and outstanding and held by approximately 1,241
holders of record. The presence at the meeting, either in person or by proxy, of
the holders of a majority of the total voting power of the shares of HPL common
stock outstanding on the Record Date is necessary to constitute a quorum and to
conduct business at the special meeting. In the event that a quorum is not
present at the special meeting, it is expected that the meeting will be
adjourned or postponed to solicit additional proxies.
Votes Required
The adoption of the merger agreement by HPL stockholders requires the
affirmative vote of a majority of the outstanding shares of HPL common stock as
of the close of business on the Record Date. If a stockholder fails to return
his or her proxy card and does not vote in person at the special meeting, or
otherwise cast a valid ballot at the special meeting in respect of the
stockholder's shares, it will have the effect of a vote against adoption of the
merger agreement. Holders of record of HPL common stock at the close of business
on the Record Date are entitled to one vote per share at the special meeting on
each of the proposals.
Voting by HPL's Directors, Executive Officers and Certain Stockholders
HPL's directors and certain of its executive officers, in their
capacity as stockholders, have agreed, pursuant to voting agreements with
Synopsys, to vote their shares of HPL common stock in favor of the adoption of
the merger agreement. As of the Record Date these stockholders held
approximately 5,106,750 shares of HPL common stock, representing approximately
12.4% of the outstanding shares of HPL common stock as of the close of business
on the Record Date. The voting agreements do not assure that the required vote
will be obtained.
Synopsys has also agreed to vote the 6,239,128 shares of common stock
it holds as of the Record Date, representing approximately 15.1% of the
outstanding shares of HPL common stock as of the close of business on the Record
Date, in favor of adoption of the merger agreement.
11
Voting of Proxies
All shares represented by properly executed proxies received in time
for the special meeting will be voted at the special meeting in the manner
specified by the holders. Properly executed proxies that do not contain voting
instructions will be voted "FOR" each of the proposals to be voted upon at the
special meeting, including the adoption of the merger agreement.
Shares of HPL common stock represented at the special meeting but not
voting, including shares of HPL common stock for which proxies have been
received but for which stockholders have abstained, will be treated as present
at the special meeting for purposes of determining the presence or absence of a
quorum for the transaction of all business.
If a stockholder abstains from voting or fails to return his or her
proxy card and does not vote in person at the special meeting in respect of the
stockholder's shares, it will have the effect of a vote against adoption of the
merger agreement. Brokers who hold shares of HPL common stock in street name for
customers who are the beneficial owners of such shares may not give a proxy to
vote their customers' shares on the adoption of all proposals, including the
adoption of the merger agreement and the adjournment proposal in the absence of
specific instructions from those customers. These non-voted shares will have the
effect of votes against the adoption of all proposals, including the adoption of
the merger agreement.
HPL does not expect that any matters other than the proposals to (i)
adopt the merger agreement and (ii) grant discretionary authority to adjourn the
special meeting for the purpose of soliciting additional proxies, will be
brought before the special meeting. If, however, other matters are properly
presented at the special meeting, the persons named as proxies will vote in
accordance with their judgment as to matters that they believe to be in the best
interests of HPL and its stockholders.
Revocability of Proxies
The grant of a proxy on the enclosed proxy card does not preclude a
stockholder from voting in person at the special meeting. A stockholder may
revoke a proxy at any time before the proxy card is voted by:
o filing with the secretary of HPL a duly executed revocation of proxy
at any time before the commencement of the special meeting;
o submitting a revised proxy through the Internet or by telephone prior
to the close of the Internet or telephone proxy submission facility,
respectively, if a stockholder initially submitted a proxy through the
Internet or by telephone;
o submitting a duly executed proxy card to the secretary of HPL bearing
a later date; or
o appearing at the special meeting and voting in person. (Attendance at
the special meeting will not in and of itself constitute revocation of
a proxy.)
If you have instructed your broker to vote your shares, you must follow
directions received from your broker to change these instructions.
Solicitation of Proxies
HPL will bear the entire cost of this solicitation of proxies,
including the preparation, assembly, printing and mailing of this proxy
statement, the proxy and any additional solicitation materials furnished to
stockholders by HPL. Certain of HPL's directors, officers and other employees,
without commission or other remuneration, may also solicit proxies personally or
in writing, by telephone, e-mail or otherwise. You should send in your proxy
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card by mail without delay. HPL will reimburse brokers and other custodians,
nominees and fiduciaries for their expenses in sending these materials to you
and obtaining your voting instructions.
You should not send stock certificates with your proxy card. A letter
of transmittal with instructions for the surrender of HPL common stock
certificates will be mailed to you as soon as practicable after completion of
the merger.
The attached proxy statement is first being mailed to the HPL
stockholders on or about November 2, 2005.
13
THE MERGER
This section describes the proposed merger and the merger agreement.
While HPL believes that the description covers the material terms of the
proposed merger, this summary may not contain all of the information that is
important to you. Stockholders should carefully read this entire document and
the other documents referred to in this proxy statement, such as the merger
agreement, for a more complete understanding of the merger.
Background of the Merger
HPL has been involved in litigation since reporting financial
irregularities on July 19, 2002, which led to the restatement of its financial
statements for the years ended March 31, 2001 and 2002. Since that time, HPL's
operating results have declined, primarily as a result of litigation and the
uncertainty of HPL's future, and its financial condition has continuously
deteriorated.
On June 22, 2004, Synopsys purchased 6,239,128 shares of HPL common
stock from UBS Financial Services, Inc. ("UBS") for investment purposes.
Concurrently with Synopsys' purchase, HPL granted board observer rights to
Synopsys. This acquisition of shares enabled HPL to settle its litigation with
UBS.
On November 4, 2004, a motion for preliminary approval of the
settlement of a federal securities class action lawsuit brought against HPL and
other defendants in connection with the financial irregularities was heard in
the United States District Court for the Northern District of California. The
motion was granted in an order issued on November 5, 2004, with final approval
of the settlement being set for February 24, 2005. The preliminary approval made
it feasible for HPL to begin to assess viable financing alternatives. Following
approval of the order, HPL commenced discussions with various investment banks
to help raise capital for HPL.
On December 14, 2004, HPL retained SVB Alliant as its exclusive
financial advisor to assist in raising additional capital for HPL. SVB Alliant
contacted 62 potential investors (none of whom were Synopsys), 24 of whom agreed
to meet with HPL. Twelve of these potential investors had follow-on meetings and
discussions with HPL. Of these potential investors, five discussed terms of a
potential transaction and one delivered a draft term sheet to HPL on April 20,
2005 that was subject to completion of due diligence by the potential investor.
The Board found the terms of each potential transaction unacceptable for a
number of reasons, including valuation, dilution and preferential rights for the
new investors.
In March 2005, SVB Alliant informed the Board that several potential
investors it had contacted displayed more interest in a possible acquisition of
HPL than a financing transaction. As a result, the Board authorized management
to instruct SVB Alliant to solicit bids for HPL. SVB Alliant notified eight
potential bidders, including Synopsys, and asked them to submit indications of
interest.
On April 1, 2005, Randy Tinsley, Vice President of Synopsys, contacted
Michael Scarpelli, Chief Financial Officer and Senior Vice President,
Administration of HPL, and indicated that he was interested in meeting with Mr.
Scarpelli on April 6, 2005.
On April 6, 2005, Mr. Tinsley and other technical personnel from
Synopsys met with Cary Vandenberg, Chief Executive Officer of HPL and Mr.
Scarpelli. Synopsys executed a confidentiality agreement and the parties
discussed whether Synopsys was interested in exploring a possible acquisition
transaction.
During the period from April 6, 2005 to April 27, 2005, representatives
from HPL and Synopsys met to discuss various aspects of HPL's business and
operations.
Between April 6, 2005 and May 24, 2005, HPL also entered into
confidentiality agreements with seven other companies that expressed an interest
in discussing an acquisition transaction with HPL. Thereafter, HPL entered into
discussions and preliminary due diligence with each of the interested parties.
14
On June 3, 2005, the Board met to review the status of negotiations
with potential acquirors. SVB Alliant reported to the Board that three of the
potential acquirors had decided to cease discussions at the present time, while
five, including Synopsys, expressed an interest in continuing discussions.
On June 4, 2005, representatives from HPL and Synopsys met to discuss
further various aspects of HPL's business and operations.
On June 9, 2005, HPL received a written nonbinding term sheet from one
party ("Party A"), subject to further due diligence. Also, a second party had
indicated that it was preparing to submit a written term sheet to HPL.
On June 10, 2005, the Board met to review Party A's term sheet and the
status of pending negotiations. The Board determined that it was in the best
interests of HPL to solicit term sheets from other potential acquirors before
Party A's term sheet expired. Although Synopsys had indicated that it remained
interested in discussing a possible acquisition transaction, possibly at a
higher price than the price offered in Party A's term sheet, Synopsys had not
delivered a written offer prior to the Board meeting. The Board again instructed
management to continue negotiations with each potential bidder so that all
proposals could be evaluated before expiration of Party A's term sheet. The
Board also instructed management to negotiate alternative financing to bridge
HPL through the sale process.
On June 13, 2005, the Board met with management, SVB Alliant and HPL's
counsel, Heller Ehrman LLP ("Heller Ehrman"), to review the status of potential
offers to acquire HPL. SVB Alliant indicated that one of the potential bidders
had decided to withdraw from the process and a second would be unable to present
an offer during the prescribed time frame. SVB Alliant also advised the Board
that it was expecting to receive a term sheet from another potential acquiror
("Party B"). Later that day HPL received a term sheet from Party B. At that
time, Synopsys had not expressed any commitment to make an offer for HPL.
On June 15, 2005, the Board met with management, SVB Alliant and Heller
Ehrman to review the status of the discussions with potential acquirors and
Party B's term sheet. The Board rejected Party B's term sheet because of the
structure of the proposed transaction and the price offered. SVB Alliant
reported that Party A was unwilling to increase its initial offer. SVB Alliant
also reported that it was continuing discussions with Synopsys. In the following
weeks, HPL continued to negotiate with Synopsys and Party A.
On June 22, 2005, Mr. Vandenberg and Mr. Scarpelli met with Mr. Tinsley
and various Synopsys personnel to discuss HPL's products and business outlook.
In the following weeks, HPL and Synopsys were unable to reach an agreement on
how to proceed with a possible acquisition of HPL by Synopsys.
On July 14, 2005, the Board met to review the status of the pending
negotiations. SVB Alliant reported that Party A had decided to disengage from
the process and the third potential acquiror had advised SVB Alliant that it
would not submit a proposal. However, SVB Alliant reported that Party B remained
interested in the possible acquisition of HPL. The Board instructed management
to continue negotiations with Party B.
On July 21, 2005, the Board met with management and SVB Alliant to
review the status of pending negotiations and the terms of various bridge
financing alternatives which Mr. Scarpelli obtained from three sources. Mr.
Scarpelli updated the Board on the status of the various acquisition proposals
and the Board authorized management to enter into an exclusivity arrangement
with Party B. The Board also authorized HPL to enter into a financing facility
with Silicon Valley Bank that HPL deemed to be more competitive than other
alternatives it had reviewed. The bridge financing facility enabled HPL to
borrow up to $3.0 million to bridge HPL through a merger, sale or other
financing transaction.
On July 25, 2005, HPL received a new term sheet from Party B and
entered into an exclusivity agreement with that party, pursuant to the Board's
prior authorization, and ceased discussions with other potential bidders. From
July 25, 2005 to August 25, 2005, Party B undertook a due diligence review of
HPL and its operation, and began negotiating the terms of a potential
acquisition of HPL. The parties were unable to come to an understanding on the
structure or price of a transaction and, on August 25, 2005, the parties
15
terminated discussions and Party B released HPL from the exclusivity agreement.
On August 31, 2005 HPL received another term sheet from Party B which it
rejected because of the structure and price of the proposed transaction.
On August 31, 2005, Mr. Scarpelli had two conversations with Mr.
Tinsley to determine whether Synopsys might still be interested in exploring a
transaction with HPL.
On September 1, 2005, Mr. Scarpelli again spoke with Mr. Tinsley
regarding Synopsys' interest in a possible transaction with HPL. Mr. Tinsley
indicated that Synopsys would commence preliminary due diligence provided that
HPL would not expect Synopsys to offer a purchase price of more than $15 million
in the aggregate.
During the period from September 2, 2005 to September 9, 2005, HPL
provided Synopsys with preliminary information regarding HPL's business and
operations.
On September 9, 2005, Synopsys delivered a due diligence request list
and a draft exclusivity agreement.
On September 12, 2005, Mr. Tinsley contacted Mr. Scarpelli and informed
him that Synopsys would only be interested in continuing with its preliminary
due diligence review of HPL's business and operations provided that HPL would
not expect Synopsys to offer a purchase price of more than $0.30 per share of
HPL common stock.
On September 13, 2005, HPL and Synopsys entered into an exclusivity
agreement, with an expiration date of September 26, 2005. During the next two
weeks, Synopsys, its legal counsel, Cooley Godward LLP, and its accounting
advisor, KPMG LLP, conducted due diligence on HPL's business and operations.
On September 23, 2005, the Board met with management, SVB Alliant and
Heller Ehrman to review the status of discussions with Synopsys. Management and
SVB Alliant briefed the board on the due diligence process undertaken by
Synopsys and outlined the terms of a proposed transaction with Synopsys. The
Board then instructed management to negotiate a definitive agreement with
Synopsys as soon as possible.
On September 26, 2005, Synopsys delivered a letter to HPL expressing
its interest in engaging in negotiations with HPL regarding a possible
acquisition of HPL by Synopsys. The letter specified that Synopsys was
interested in engaging in negotiations with HPL regarding a possible transaction
based on certain key terms, including the acquisition by Synopsys of all of the
outstanding capital stock of HPL at a price of approximately $0.30 per share,
payable in cash, with no assumption of HPL stock options. The parties entered
into a new exclusivity agreement with an expiration date of October 3, 2005.
On September 28, 2005, Synopsys delivered to HPL and its counsel a
draft merger agreement. From September 28, 2005 through October 1, 2005, HPL,
with assistance of Heller Ehrman, negotiated the terms of the merger agreement
with Synopsys and its counsel.
On October 2, 2005, the Board met to consider the merger agreement with
Synopsys and the transactions contemplated thereby, including the voting
agreements. At this meeting, HPL's counsel advised the Board regarding its
fiduciary duties in connection with the proposed transaction and reviewed the
terms of the merger agreement. Messrs. Vandenberg and Scarpelli reviewed the
history of the bidding process for HPL and HPL's current financial condition and
business prospects, the anticipated revenues for the quarter ended September 30,
2005, the trend in bookings during the quarter and growing customer concerns due
to their perceptions of HPL's financial condition. SVB Alliant reviewed with the
Board the efforts it had undertaken to raise capital for HPL and then, to
solicit offers for the acquisition of HPL. SVB Alliant then reviewed with the
Board the financial analysis it performed in connection with its fairness
opinion, entertained questions from the directors and delivered its written
opinion to the Board. The Board then unanimously determined that the merger
agreement and the merger were advisable and fair to and in the best interest of
HPL and its stockholders and unanimously approved the merger agreement and the
merger. Later that evening, the parties executed and delivered the merger
agreement. On October 3, 2005, HPL and Synopsys issued press releases announcing
the signing of the merger agreement.
16
Purpose of the Merger; Certain Effects of the Merger
The purpose of the merger is to provide liquidity to HPL stockholders
and to enable HPL to meet its obligations as they mature. The merger will be
accomplished by a merger of Merger Sub with and into HPL, with HPL surviving the
merger as a wholly-owned subsidiary of Synopsys. In the merger, each of the
outstanding shares of HPL common stock, other than shares held by Synopsys or
dissenting stockholders who perfect their appraisal rights, will be converted
into the right to receive the merger consideration. Based on 41,305,348 shares
of common stock outstanding on October 2, 2005, the aggregate merger
consideration will be approximately $12.4 million.
Prior to the effective time of the merger, all of HPL's outstanding
stock options will be canceled and terminated upon completion of the merger and
holders of stock options that are in-the-money will be entitled to receive a
cash amount equal to the excess of the merger consideration over the exercise
price per share of HPL common stock for each underlying share. The total amount
of such payment is approximately $0.36 million.
The merger will terminate all equity interests in HPL held by its
stockholders and Synopsys will become the sole stockholder of HPL following the
merger. HPL common stock is currently registered under the 1934 Act, and traded
over-the-counter and reported on the "pink sheets" under the symbol "HPLA.PK."
Upon the completion of the merger, HPL common stock will no longer be publicly
traded and registration of HPL common stock under the 1934 Act will be
terminated.
Recommendation of the Board of Directors
On October 2, 2005, the Board unanimously determined that the terms of
the merger agreement and the merger are advisable and are fair to and in the
best interests of HPL and its stockholders and unanimously approved the merger
agreement and the merger. Accordingly, the Board unanimously recommends that HPL
stockholders vote "FOR" the adoption of all proposals, including the adoption of
the merger agreement.
Reasons for the Merger
In determining to adopt and recommend the merger agreement for adoption
by HPL's stockholders, and in reaching its determination that the merger
agreement and the merger are advisable and are fair to and in the best interests
of HPL and its stockholders, the Board consulted with HPL's financial and legal
advisors, and considered, among other things, the following factors:
o Historical information concerning HPL's business, financial performance
and condition, operations, technologies, management and competitive
position including signs of continuing deterioration in its operations
and financial condition;
o HPL's distressed financial condition, including management's view that
the near term cash and liquidity constraints are such that without an
immediate infusion of capital HPL's ability to continue as a going
concern is in question;
o The Board's review of management's preliminary report on revenues and
new bookings for HPL's fiscal quarter ended September 30, 2005, which
are expected to fall significantly short of internal projections;
o HPL's recent inability to raise additional capital without substantial
discount and dilution to existing stockholders due in part to HPL's
inability to qualify for listing on a major exchange and to the lack of
liquidity of its shares;
o HPL's diminished cash position and its inability to borrow to support
operations, other than to bridge a transaction for HPL or another
financing;
o HPL's need to meet its obligations under its existing bank credit
facility with Silicon Valley Bank on or prior to the maturity date of
November 30, 2005;
17
o Increasing reluctance among customers to do business with HPL due to
HPL's financial condition;
o The substantial efforts undertaken by HPL and its financial advisor to
raise capital and/or find a merger partner for HPL;
o The terms of the merger agreement, including the ability of HPL to
accept a superior offer and terminate the merger agreement, subject to
payment of a termination fee;
o Current financial market conditions and historical market prices,
significant price volatility and limited trading volume with respect to
HPL common stock;
o The view of the Board that, based on the level of interest shown by
other potential acquirors, the merger agreement and the transactions
contemplated thereby represent the most attractive alternative
available to maximize stockholder value;
o The opinion of SVB Alliant, HPL's financial advisor, that the merger
consideration to be received by HPL stockholders is fair from a
financial point of view; and
o The reasonable likelihood of completion of the transactions
contemplated by the merger agreement.
The Board also took into account:
o The limitations in the merger agreement on the operation of HPL's
business pending the completion of the merger;
o HPL's ability to obtain the consent of third parties and to renegotiate
various business relationships of HPL;
o The closing conditions to the merger, including the performance of
HPL `s covenants;
o The time necessary to obtain stockholder approval;
o The adequacy of available cash resources;
o The challenge of retaining key personnel pending the completion of the
merger; and
o The fact that HPL's stockholders will not be able to participate in the
success of HPL as a subsidiary of Synopsys.
The above discussion concerning the information and factors considered
by the Board includes many of the factors considered by the Board in making its
determination. In view of the variety of factors considered in connection with
its evaluation of the merger agreement and the proposed merger, the Board did
not quantify or otherwise attempt to assign relative weights to the specific
factors it considered in reaching its determination. In addition, individual
members of the Board may have given different weight to different factors. The
interests of HPL directors and executive officers may be different from, or in
addition to, the interests of HPL stockholders generally as described under "The
Merger - Interests of Our Directors and Executive Officers in the Merger"
beginning on page 24.
Opinion of Financial Advisor to HPL
HPL retained SVB Alliant as its financial advisor to assist it and its
board of directors (i) initially in raising capital for HPL, (ii) subsequently,
in identifying parties interested in acquiring HPL and assisting HPL in
soliciting and evaluating offers by potential acquirors, and (iii) in the
18
consideration of valuation, financial and other matters relating to the merger,
including providing a fairness opinion to the Board in connection with the
proposed merger with Synopsys.
On October 2, 2005, SVB Alliant delivered its written opinion to the
Board that, as of the date of such opinion, and based upon the assumptions made,
general procedures followed, matters considered and limitations on the review
undertaken, as set forth in such opinion, the merger consideration to be
received by the holders of shares of common stock was fair to such holders from
a financial point of view.
The full text of the written opinion of SVB Alliant, which sets forth
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 SVB Alliant
opinion is directed to the Board only and addresses only the fairness from a
financial point of view of the consideration to be received in the merger by the
holders of common stock. The SVB Alliant opinion does not address any other
aspect of the merger and does not constitute a recommendation to any HPL
stockholder as to how such stockholder should vote. HPL stockholders are urged
to read the opinion in its entirety. The summary of the SVB Alliant opinion set
forth in this proxy statement is qualified in its entirety by reference to the
full text of such opinion.
In connection with rendering its financial opinion and performing its
related financial analysis, SVB Alliant, among other things:
o discussed the past and current operations, financial condition, and
prospects for HPL with senior executives of HPL;
o discussed with the senior executives of HPL the strategic objectives
of the merger;
o reviewed certain financial statements and other financial and operating
data concerning HPL prepared by HPL management and its representatives;
o analyzed certain financial projections for HPL prepared by HPL
management;
o compared the financial performance of HPL with that of certain other
comparable publicly-traded companies and the valuations for securities
of those publicly-traded companies;
o reviewed the financial terms, to the extent publicly available, of
certain merger and acquisition transactions involving companies SVB
Alliant believed to be comparable in whole or in part to HPL;
o assessed the value of HPL using a discounted cash flow analysis of
projected future cash flows and rejected the use of that analysis;
o reviewed HPL's trading history and relative stock price performance;
o reviewed a draft of the merger agreement and certain related documents
and discussed the proposed terms of the merger with senior executives
of HPL;
o reviewed with HPL management HPL's anticipated operating expenses, the
potential for default under HPL's third-party secured line of credit,
other cash needs and liquidity constraints, including the ability of
HPL to secure alternative sources of financing; and
o performed such other financial studies, analyses and investigations and
reviewed such other information and factors as SVB Alliant deemed
appropriate.
In its review and analysis and in formulating its opinion, SVB Alliant
relied upon and assumed, without independent verification, the accuracy and
completeness of all of the financial and other information publicly available or
furnished or otherwise communicated to it. With respect to the financial
19
projections of HPL, SVB Alliant assumed that they were reasonably prepared on a
basis reflecting the best currently available estimates and judgments of the
future financial performance of HPL. The financial and other information
regarding HPL reviewed by or discussed with SVB Alliant in connection with the
rendering of its opinion was limited to publicly available information and that
provided by HPL's management, and certain discussions with HPL's Board regarding
HPL's financial condition and future prospects, as well as the strategic
objectives of the merger, respectively.
SVB Alliant also assumed that the merger would be consummated in a
timely fashion in accordance with the terms set forth in the form of merger
agreement reviewed by it. SVB Alliant did not make any independent valuation or
appraisal of any of HPL's assets or liabilities (including any derivative or
off-balance sheet assets or liabilities), and was not furnished with any such
appraisals. SVB Alliant relied on HPL and its legal counsel as to all legal and
tax matters.
In formulating its opinion, SVB Alliant also relied on:
o the fact that HPL's decision to enter into the merger agreement was
preceded by (i) a nine month engagement to obtain financing for HPL and
(ii) a concurrent five month process to solicit bids for HPL from
strategic partners or minority investors believed by HPL to be the most
logical such partners or investors, and
o HPL's assessment that the merger represents the only currently
available transaction that provides the necessary cash to fund its
ongoing operations, liquidate its interim bridge financing, and provide
a liquidity event for its stockholders at the best price available.
In addition, in formulating its opinion, SVB Alliant assumed that:
o HPL would be unable to secure alternative financing in sufficient time
to provide working capital to continue operations and avoid actions
that would severely impair its future prospects;
o HPL would not be able to pay its obligations as they became due or
continue its operations in the absence of consummation of the merger;
and
o even with drastic measures, there would be no assurance that such
measures would provide anything more than a temporary solution to HPL's
working capital deficiency leading HPL ultimately to seek protection
from creditors pursuant to a bankruptcy proceeding, a reasonably
possible outcome that could produce no value to HPL's stockholders.
The following is a brief summary of the material financial analyses
performed by SVB Alliant in connection with its preliminary findings and the
preparation of its opinion letter dated as of October 2, 2005. Some of the
summaries of financial analyses below include information presented in tabular
format. In order to understand fully the financial analyses used by SVB Alliant,
the tables must be read together with the text of each summary. The tables alone
do not constitute a complete description of the financial analyses. Considering
the data set forth below in the tables without considering the full narrative
description of the financial analyses, including the methodologies and
assumptions underlying the analyses, could create a misleading or incomplete
view of SVB Alliant's financial analyses.
Public Company Comparables Analysis - Ratios of a company's Common
Stock Share Price and Equity Market Capitalization, adjusted for cash and debt
when appropriate, to selected historical and projected operating metrics
indicate the value public equity markets place on companies. A handful of
companies are comparable to HPL based on market focus and business model. SVB
Alliant reviewed seven public company comparables in the electronic design
automation ("EDA") industry from a financial point of view including last twelve
month ("LTM") Revenue, Projected Calendar Year Revenue for the next year
("CY2005"); Cash; Debt; Current Share Price; Current Share Price as a Percent of
52-Week High; Equity Market Value; Enterprise Value ("EV") (defined as Equity
Market Value plus debt minus cash and short term investments); Enterprise
Value/Revenue (LTM and CY05E); and Revenue Growth from 2005 to 2006. The public
company comparables were selected from SVB Alliant internal sources.
20
In alphabetical order, the public EDA company comparables consist of:
1. Ansoft Corp.;
2. Cadence Design Systems Inc.;
3. Magma Design Automation Inc.;
4. Mentor Graphics Corp.;
5. PDF Solutions Inc.;
6. Synopsys, Inc.; and
7. Synplicity Inc.
These EDA comparable companies exhibited the following medians and
ranges for the applicable multiples:
Median Multiple Range of Multiples
--------------- ------------------
EV/LTM Revenue 2.34 x 1.30 x - 5.87 x
EV/LTM Revenue 1.17 x 0.65 x - 2.94 x
(with Going Concern Discount - see below)
HPL EV/LTM Revenue Multiple: 1.24 x
These EDA comparable companies implied the following median and ranges of
enterprise values for HPL (in millions):
Median Implied Value Range of Implied Values
-------------------- -----------------------
Enterprise Value $ 22.22 $ 12.34 - $ 55.73
Enterprise Value $ 11.11 $ 6.17 - $ 27.86
(with Going Concern Discount - see below)
HPL Enterprise Value: $ 11.78
In addition to company comparables in the EDA industry, SVB Alliant
reviewed five comparable distressed financial public companies. The criteria for
a distressed financial comparable included: industry classification of Software
and Services as defined by Standard Industrial Classification ("SIC");, annual
revenue greater than $8 million and less than $20 million; equity market
capitalization greater than $5 million and less than $25 million; net cash to
equity market capitalization less than 5%; and net income less than zero.
In alphabetical order, the public distressed financial company
comparables consist of:
1. Brainpower NV;
2. BVR Systems Ltd.;
3. Media Sciences International Inc.;
4. Onstream Media Corp.; and
5. Pipeline Data, Inc.
These comparable distressed financial companies exhibited the following
medians and range for the applicable multiples:
21
Median Multiple Range of Multiples
-------------- ------------------
EV/LTM Revenue 1.66 x 1.37 x - 2.41 x
HPL EV/LTM Revenue Multiple: 1.24 x
These comparable distressed financial companies imply the following median and
range of enterprise values (in millions):
Median Implied Value Range of Implied Values
-------------------- -----------------------
EV/LTM Revenue $ 15.76 $ 13.01 - $ 22.88
HPL Enterprise Value: $ 11.78
Transaction Comparables Analysis - Ratios of Equity Purchase Price,
adjusted for the seller's cash and debt if available, or Transaction Value, to
selected historical operation metrics indicate the value strategic and financial
acquirers have been willing to pay for companies in a particular market segment.
A handful of companies involved in recent transactions are comparable to HPL
based on market focus and business model. SVB Alliant reviewed nine comparable
merger and acquisition transactions from September 23, 2003 thorough September
23, 2005 involving a seller in the EDA industry, from a financial point of view
including each transaction's: Purchase Price/LTM Revenue ratio. Transactions
were selected from SVB Alliant's proprietary database of published and
confidential merger and acquisition transactions in the Software and Services
Industries.
In chronological order, the transactions used are the acquisitions of:
1. Integrated Systems Engineering by Synopsys, Inc.;
2. Confidential by Confidential;
3. 0-In Design Automation Inc. by Mentor Graphics Corp.;
4. Mojave Inc. by Magma Design Automation Inc.;
5. Axis Systems Inc. by Verisity Ltd.;
6. Silicon Metrics Corp. by Magma Design Automation Inc.;
7. Verplex Systems Inc. by Cadence Design Systems Inc.;
8. IDS Software Systems Inc. by PDF Solutions Inc.; and
9. WaferYield Inc. by PDF Solutions Inc.
These EDA comparable transactions exhibited the following median and
ranges for the applicable multiple:
Median Multiple Range of Multiples
--------------- ------------------
Transaction Value/LTM Revenue 3.34 x 1.66 x - 5.39 x
Transaction Value /LTM Revenue 1.67 x 0.83 x - 2.70 x
(with Going Concern Discount - see below)
HPL Transaction Enterprise Value/LTM Revenue: 1.49 x
These EDA comparables imply the following median and ranges of
enterprise values (in millions):
Median Implied Values Range of Implied Values
-------------------- -----------------------
Transaction Value $ 31.71 $ 15.76 - $ 51.17
Transaction Value $ 15.85 $ 7.88 - $ 25.59
(with Going Concern Discount - see below)
HPL Transaction Enterprise Value: $ 14.12
In addition to comparable transactions in the EDA industry, SVB Alliant
reviewed five comparable distressed financial transactions from August 1, 1998
22
to September 23, 2005. The criteria for a distressed financial transaction
comparable included: industry classification of Software and Services as defined
by SIC; revenue less than $100 million; market capitalization greater than $5
million and less than $100 million; net cash to market capitalization less than
5%; and net income less than zero.
In chronological order, the transactions used are the acquisitions of:
1. nStor Technologies by Xyratex;
2. Alphawest by Optus Networks;
3. Intelidata Technologies by Corillian Corp;
4. Sensory Science by SonicBlue; and
5. Conversion Sciences International by Elligent Consulting
Group.
These distressed financial comparable transactions exhibited the
following median and range for the applicable multiple:
Median Multiple Range of Multiples
--------------- ------------------
Transaction Value /LTM Revenue 0.93 x 0.11 x - 1.44 x
HPL Transaction Value/LTM Revenue: 1.49 x
These distressed financial comparables implied the following median and range of
transaction value (in millions):
Median Implied Values Range of Implied Values
--------------------- -----------------------
Transaction Value $ 8.83 $ 1.04 - $ 13.67
HPL Transaction Enterprise Value: $ 14.12
Going Concern Discount - HPL management has represented that the near
term cash and liquidity constraints are such that without an immediate injection
of capital, HPL's ability to continue as a going concern is in question.
Furthermore, management has indicated that it is unlikely that HPL would be able
to secure alternative financing in sufficient time to provide working capital
necessary to continue operations and avoid actions that would severely impair
its future prospects. In order to assess the impact of this distressed financial
position on HPL's valuation, SVB Alliant conducted an analysis that examined (a)
the trading values for other similarly distressed public companies and (b) the
change in market value for companies during the 60 days prior to filing for
bankruptcy protection. Based on this analysis, SVB Alliant determined that the
median going concern discount was approximately 60% and it established a going
concern discount of 50% which has been used in assessing the value of HPL.
Consideration of the Discounted Cash Flow Valuation Methodology - While
discounted cash flow is a commonly used valuation methodology, SVB Alliant did
not employ such an analysis for the purposes of this opinion. Discounted cash
flow analysis is most appropriate for companies which exhibit relatively steady
or somewhat predictable streams of future cash flow. For a company such as HPL,
a preponderance of the value in a valuation based on discounted cash flow will
be in the terminal value of the entity, which is extremely sensitive to
assumptions about the sustainable long-term growth rate of the company. Given
the uncertainty in estimating both the future cash flows and a sustainable
long-term growth rate for HPL, SVB Alliant considered a discounted cash flow
analysis inappropriate for valuing HPL.
The preparation of a fairness opinion is a complex process and, because
of this, a fairness opinion is not easily summarized. SVB Alliant believes that
selecting any portion of its analyses, without considering all of its analyses,
would create an incomplete view of the process underlying its opinion. In
addition, SVB Alliant may have given various analyses and factors more or less
weight than other analyses and factors, and may have deemed various assumptions
more or less probable than other assumptions. As a result, the ranges of
purchase price resulting from any particular analysis described above should not
be taken to be SVB Alliant's view of the actual value of HPL. In performing its
analyses, SVB Alliant made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters. Many of
these matters are beyond the control of HPL and any estimates contained in SVB
23
Alliant's analyses are not necessarily indicative of future results or actual
values, which may be significantly more or less favorable than those suggested
by such estimates.
SVB Alliant conducted the analyses described above solely as part of
its analysis of the fairness of the purchase price to be received by holders of
shares of HPL common stock pursuant to the merger from a financial point of view
and in connection with the delivery of its opinion to HPL's board. These
analyses do not purport to be appraisals or to reflect the prices at which HPL
might actually be sold.
The type and amount of consideration payable in the merger were
determined through arm's-length negotiations between HPL and Synopsys and were
approved by HPL's board of directors. SVB Alliant provided advice to HPL during
these negotiations. SVB Alliant did not, however, recommend any specific
purchase price to HPL or that any specific purchase price constituted the only
appropriate purchase price for the merger.
HPL's board retained SVB Alliant based upon SVB Alliant's
qualifications, experience and expertise in investment banking. As part of SVB
Alliant's investment banking services, it is regularly engaged in the valuation
of businesses and their securities in connection with mergers, acquisitions,
divestitures, and private placements. SVB Alliant and its affiliates have
provided, and may in the future provide, financial advisory and financing
services for HPL or Synopsys or their affiliates for which SVB Alliant has
received or would expect to receive customary fees for the rendering of these
services. As of October 2, 2005, Silicon Valley Bank, a subsidiary of SVB
Financial Group and parent company of SVB Alliant, had a loan in the amount of
$3.0 million extended to HPL. On October 18, 2005 the loan amount was increased
to $4.0 million, of which $3.0 million was drawn as of November 1, 2005. Upon
completion of the merger, the surviving corporation will succeed to the
obligation to repay Silicon Valley Bank for such outstanding amounts plus any
related fees, including a fee equal to five percent (5%) of the aggregate
advances under the loan.
In connection with SVB Alliant's engagement, HPL requested that SVB
Alliant evaluate the fairness, from a financial point of view, to the holders of
HPL common stock of the purchase price provided for in the merger. Under the
terms of an engagement letter dated December 14, 2004, between HPL and SVB
Alliant, HPL agreed to pay SVB Alliant a fee of $125,000 for rendering its
fairness opinion, which fee was earned and payable in cash upon delivery of the
opinion, but has not been paid as of November 1, 2005. This fee may be credited
against the fee described below.
Pursuant to the engagement letter with SVB Alliant, HPL agreed to pay
SVB Alliant a fee of a minimum of $500,000 if a transaction, including the
merger, is completed during the term of the letter agreement, which fee includes
the fairness opinion fee described above. In addition to the above described
compensation, HPL agreed to reimburse SVB Alliant for all of its reasonable
out-of-pocket expenses incurred in connection with its engagement including, but
not limited to, fees, disbursements and other charges of its legal counsel and
travel-related expenses. In addition, HPL agreed to indemnify SVB Alliant and
its affiliates, their respective directors, officers, agents and employees and
each person, if any, controlling SVB Alliant or any of its affiliates against
certain liabilities and expenses, including certain liabilities under the
federal securities laws, related to or arising out of SVB Alliant's engagement
and any related transactions.
Interests of Our Directors and Executive Officers in the Merger
In considering the recommendation of the Board with respect to the
merger, stockholders should be aware that the executive officers and directors
of HPL have some interests in the merger that may be different from, or in
addition to, the interests of HPL stockholders generally. The Board was aware of
these interests and considered them, among other matters, in making its
recommendation.
Director and Officer Indemnification and Insurance.
HPL's certificate of incorporation provides that HPL shall indemnify
its directors and officers against proceedings brought against them as directors
and officers of HPL. In addition, HPL has entered into indemnification
24
agreements with each of the following officers and directors of HPL: Michael
Scarpelli, Elias Antoun, Lawrence Kraus and Yervant Zorian. HPL also maintains
directors' and officers' liability insurance policies to insure its risk that of
its officers and directors.
The merger agreement provides that all rights of indemnification,
advancement of expenses and exculpation from liabilities for acts or omissions
occurring at or prior to the effective time of the merger existing in favor of
HPL's directors or officers as of the date of the merger agreement as provided
in HPL's certificate of incorporation or bylaws, or as provided in any
indemnification agreement in existence on that date, will survive the merger and
continue in full force and effect in accordance with their terms. It shall, or
shall cause the surviving corporation in the merger to, honor and fulfill the
obligations of HPL in respect of the directors' and officers' rights to
indemnification, advancement of expenses and exculpation.
The merger agreement further provides that for six years after the
completion of the merger, Synopsys will maintain, or cause the surviving
corporation in the merger to, maintain directors' and officers' liability
insurance for acts or omissions occurring prior to the completion of the merger
covering those persons who were, as of the date of the merger agreement, covered
by HPL's directors' and officers' liability insurance policies, on terms not
materially less advantageous than those in effect on the date of the merger
agreement. Synopsys' obligation to provide this insurance coverage is subject to
an annual cap of 200% of the current annual premium paid by HPL for its existing
directors' and officers' liability insurance policies. If Synopsys cannot
maintain the existing or equivalent insurance coverage without exceeding the
cap, Synopsys is required to maintain as much insurance coverage as can be
obtained by paying an annual premium equal to the cap.
Director and Officer Options to Purchase Shares of HPL Common Stock.
In connection with the merger, Synopsys will not assume any outstanding
options to acquire HPL common stock. Prior to the effective time of the merger,
HPL will cause all of the outstanding options to be accelerated and converted
into the right to receive cash in the amount equal of the excess, if any, of (i)
the merger consideration over (ii) the exercise price payable in respect of the
shares subject to such option. Such acceleration will result in payment to HPL
option holders of approximately $0.36 million, of which officers and directors
will receive approximately $0.12 million. If the exercise price of an option
exceeds $0.30, then the holder of such option will not receive any cash
consideration. All outstanding stock options will be terminated upon the
effective time of the merger.
Officers of HPL
All executive officers and directors of HPL will resign their positions
effective as of the completion of the merger.
Pursuant to Cary D. Vandenberg's employment agreement, Mr. Vandenberg,
the President and Chief Executive Officer of HPL, will receive a special
one-time bonus equal to six months of his current salary, or $137,500, upon
completion of the merger. Upon termination of Mr. Vandenberg's employment by HPL
or its successor without "cause" (as defined in the employment agreement), Mr.
Vandenberg is entitled to receive a lump sum severance payment equal to six
months of his then-current salary and, commencing six months following the date
of such termination, Mr. Vandenberg will receive six monthly payments at the
rate of his salary at the time of termination. HPL also has agreed to pay for
Mr. Vandenberg's COBRA benefits for the twelve month period following the date
of such termination.
Pursuant to Michael Scarpelli's employment agreement, Mr. Scarpelli,
the Chief Financial Officer and Senior Vice President of Administration of HPL,
will receive a special one-time bonus equal to nine months of his current
salary, or $187,500, upon completion of the merger. Upon termination of Mr.
Scarpelli's employment by HPL or its successor without "cause" (as defined in
the employment agreement), Mr. Scarpelli is entitled to receive a lump sum
severance payment equal to six months of his then-current salary and, commencing
six months following the date of such termination, Mr. Scarpelli will receive
twelve monthly payments at the rate of his salary at the time of termination. In
addition, all outstanding principal (currently $300,000) and accrued interest on
a loan made by HPL to Mr. Scarpelli in 2002 in connection with his original
employment agreement will be forgiven.
25
Upon completion of the merger, the following officers of HPL will
receive bonuses in the following amounts:
o Dr. Greg Yeric- $55,000
o Dean Frazier- $33,300
o Brian Gordon- $30,000
In connection with the execution of the merger agreement, each member
of the Board and each of Messrs. Vandenberg, Scarpelli, Gordon and Frazier
entered into a voting agreement with Synopsys, in which such directors and
executive officers agreed to vote their respective shares of HPL common stock in
favor of the merger and granted Synopsys a proxy to vote their shares at any HPL
stockholder meeting convened to consider the merger. A copy of the form of
voting agreement is attached hereto as Annex C and is further described below in
"Voting Agreements".
Merger Financing; Source of Funds
Synopsys has informed HPL that the aggregate merger consideration of
approximately $12.4 million to be paid to HPL stockholders and the cash payments
of approximately $0.36 million to be paid to holders of HPL stock options will
be financed through existing cash on hand.
Regulatory Filings and Approvals Required to Complete the Merger
HPL is not aware of any material governmental or regulatory approval
required for completion of the merger.
Material United States Federal Income Tax Consequences of the Merger
This section discusses the material United States federal income tax
consequences of the merger to HPL's stockholders who receive cash consideration
of $0.30 per share pursuant to the merger, or who receive cash in respect of
dissenting shares of HPL common stock by validly exercising appraisal rights
under Delaware law. The discussion below applies only to HPL's stockholders that
hold HPL common stock as capital assets at the time of the completion of the
merger and does not apply to other transactions occurring prior to, at, or after
the completion of the merger. In addition, this discussion may not apply to
stockholders that are subject to special tax rules, including:
o financial institutions, insurance companies, dealers in securities,
persons that mark-to-market their securities, or persons that hold
common stock as part of a "straddle," "hedge" or "synthetic security
transaction" (including a "conversion" transaction);
o persons with a "functional currency" other than the United States
dollar;
o investors in pass-through entities;
o retirement plans and tax-exempt organizations;
o stockholders who acquired HPL common stock pursuant to the exercise of
stock options pursuant to participation in an employee stock purchase
plan or otherwise as compensation; or
o stockholders that are nonresident alien individuals, foreign
corporations, foreign partnerships, foreign trusts or foreign estates.
The discussion below is based upon United States federal income tax
laws as in effect as of the date of this proxy statement and does not take into
account possible changes in these tax laws or in the legislative, judicial or
26
administrative interpretation of these tax laws, any of which may be applied
retroactively. The discussion does not include any description of the tax laws
of any state, local or foreign government that may be applicable to HPL's
stockholders. No ruling from the Internal Revenue Service or opinion of counsel
has been or will be obtained regarding the tax consequences described herein.
The merger will be a fully taxable transaction for United States
federal income tax purposes. Accordingly, a stockholder generally will recognize
capital gain or capital loss equal to the difference between the cash received
by the stockholder pursuant to the merger or in respect of dissenting shares, as
the case may be, and the stockholder's adjusted tax basis in the shares of HPL
common stock surrendered in the merger or in connection with the exercise of
appraisal rights. Gain or loss will be calculated separately for each block of
shares held by the stockholder (i.e., shares acquired at the same cost in a
single transaction). Gain or loss will be long-term capital gain or loss if the
shares of HPL common stock have been held for more than one year at the time of
the completion of the merger. Long-term capital gain recognized by a
non-corporate stockholder is currently taxed at a maximum United States federal
income tax rate of 15%. If the non-corporate stockholder has a short-term
capital gain, such gain will be subject to United States federal income tax at
the same rate as ordinary income. There are limits on the deductibility of
capital losses for non-corporate stockholders.
For corporations, capital gain is currently taxed at the same rate as
ordinary income, and capital loss in excess of capital gain is not deductible.
Corporations, however, generally may carry back capital losses up to three
taxable years and carry forward capital losses up to five taxable years.
Cash received by HPL's non-corporate stockholders pursuant to the
merger or in respect of dissenting shares of HPL common stock, as the case may
be, may be subject to backup withholding at a 28% rate. Backup withholding
generally will apply only if the stockholder fails to furnish a correct social
security number or other taxpayer identification number, or otherwise fails to
comply with applicable backup withholding rules and certification requirements.
Corporations generally are exempt from backup withholding. Each non-corporate
stockholder should complete and sign the substitute Form W-9 that will be part
of the letter of transmittal to be returned to the payment agent in order to
provide the information and certification necessary to avoid backup withholding,
unless an applicable exemption exists and is otherwise proved in a manner
satisfactory to the payment agent. Persons not eligible to complete a Form W-9
(i.e. foreign stockholders) should supply the payment agent with the appropriate
completed and executed Form W-8 BEN.
Any amounts withheld under the backup withholding rules will be allowed
as a credit against the stockholder's United States federal income tax liability
and may entitle the stockholder to a refund, provided the stockholder timely
furnishes specified required information to the Internal Revenue Service.
The United States federal income tax consequences set forth above are
for general informational purposes only and are not intended to constitute a
complete description of all tax consequences relating to the merger. Because
individual circumstances may differ, stockholders are strongly urged to consult
their tax advisors as to the specific tax consequences to them of the merger,
including the applicability and effect of United States federal, state, local
and foreign income and other tax laws.
Conversion of Shares; Procedures for Exchange of Common Stock Certificates
The conversion of HPL common stock into the right to receive $0.30 per
share in cash, without interest (subject to appraisal rights), will occur
automatically upon the completion of the merger. The merger agreement provides
that within five business days after the completion of the merger, the payment
agent selected by Synopsys will send a letter of transmittal to each of HPL's
former stockholders. The letter of transmittal will contain instructions for
obtaining cash in exchange for shares of HPL common stock. Stockholders should
not return stock certificates with the enclosed proxy card.
Upon surrender of a stock certificate representing, immediately prior
to the effective time of the merger, shares of HPL common stock, together with a
duly completed and validly executed letter of transmittal and any other
documents that may be reasonably required by the payment agent or Synopsys, the
holder of that stock certificate will be entitled to receive $0.30 in cash for
each share formerly represented by the stock certificate and that stock
certificate will be canceled.
27
No interest will be paid or accrue on any cash payable upon the
surrender of stock certificates formerly representing shares of HPL common
stock. The cash paid upon conversion of shares of HPL common stock will be
issued in full satisfaction of all rights relating to the shares of HPL common
stock.
Accounting Treatment
The merger will be accounted for using the purchase method of
accounting under generally accepted accounting principles. After the merger, the
results of operations of HPL will be included in the consolidated financial
statements of Synopsys. The purchase price will be allocated to the fair value
of the net assets acquired. The excess purchase price over the fair value of the
assets will be allocated to goodwill. A final determination of the allocation of
the purchase price to the assets acquired and liabilities assumed based on their
respective fair values has not yet been made.
Appraisal Rights of Stockholders
Holders of shares of HPL common stock who do not vote in favor of the
adoption of the merger agreement and who properly demand appraisal of their
shares will be entitled to appraisal rights in connection with the merger under
Section 262 of the General Corporation Law of the State of Delaware ("Section
262"). Synopsys' obligations to close the merger are conditioned upon holders of
10% or less of the outstanding HPL common stock exercising these appraisal
rights.
The following discussion is not a complete statement of the law
pertaining to appraisal rights under Section 262 and is qualified in its
entirety by the full text of Section 262 which is attached to this proxy
statement as Annex D. All references in Section 262 and in this summary to a
"stockholder" are to the record holder of the shares of HPL common stock as to
which appraisal rights are asserted. A person having a beneficial interest in
shares of HPL common stock held of record in the name of another person, such as
a broker or nominee, must act promptly to cause the record holder to follow the
steps summarized below properly and in a timely manner to perfect appraisal
rights.
Under Section 262, persons who hold shares of HPL common stock who
follow the procedures set forth in Section 262 will be entitled to have their
shares of HPL common stock appraised by the Delaware Court of Chancery and to
receive payment of the "fair value" of the shares, exclusive of any element of
value arising from the accomplishment or expectation of the merger, together
with a fair rate of interest, as determined by the court.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the case of the adoption of the merger agreement
by HPL's stockholders, the corporation, not less than 20 days prior to the
meeting, must notify each of its stockholders entitled to appraisal rights that
appraisal rights are available and include in the notice a copy of Section 262.
This proxy statement shall constitute the notice, and the applicable statutory
provisions are attached to this proxy statement as Annex D. Any holder of HPL
common stock who wishes to exercise appraisal rights or who wishes to preserve
such holder's right to do so, should review the following discussion and Annex D
carefully because failure to timely and properly comply with the procedures
specified will result in the loss of appraisal rights.
A holder of shares of HPL common stock wishing to exercise the holder's
appraisal rights must deliver to HPL, before the vote on the adoption of the
merger agreement at the special meeting, a written demand for the appraisal of
their shares and must not vote in favor of the adoption of the merger agreement.
A holder of shares of HPL common stock wishing to exercise appraisal rights must
hold of record the shares on the date the written demand for appraisal is made
and must continue to hold the shares of record through the effective time of the
merger. A vote against the adoption of the merger agreement will not in and of
itself constitute a written demand for appraisal satisfying the requirements of
Section 262. The demand must reasonably inform HPL of the identity of the holder
as well as the intention of the holder to demand an appraisal of the "fair
value" of the shares held by the holder.
Only a holder of record of shares of HPL common stock is entitled to
assert appraisal rights for the shares of HPL common stock registered in that
28
holder's name. A demand for appraisal in respect of shares of HPL common stock
should be executed by or on behalf of the holder of record, fully and correctly,
as the holder's name appears on the holder's stock certificates, and must state
that the person intends thereby to demand appraisal of the holder's shares of
HPL common stock in connection with the merger. If the shares of HPL common
stock are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, execution of the demand should be made in that capacity,
and if the shares of HPL common stock are owned of record by more than one
person, as in a joint tenancy and tenancy in common, the demand should be
executed by or on behalf of all joint owners. An authorized agent, including two
or more joint owners, may execute a demand for appraisal on behalf of a holder
of record; however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, the agent is agent
for the owner or owners. A record holder such as a broker who holds shares of
HPL common stock as nominee for several beneficial owners may exercise appraisal
rights with respect to the shares of HPL common stock held for one or more
beneficial owners while not exercising the rights with respect to the shares of
HPL common stock held for other beneficial owners; in such case, however, the
written demand should set forth the number of shares of HPL common stock as to
which appraisal is sought and where no number of shares of HPL common stock is
expressly mentioned the demand will be presumed to cover all shares of HPL
common stock held in the name of the record owner. Stockholders who hold their
shares of HPL common stock in brokerage accounts or other nominee forms and who
wish to exercise appraisal rights are urged to consult with their brokers or
other nominees, as the case may be, to determine the appropriate procedures for
the making of a demand for appraisal by such a nominee.
All written demands for appraisal pursuant to Section 262 should be
sent or delivered to HPL at HPL Technologies, Inc., 2033 Gateway Place, Suite
400, San Jose, CA 95110, Attention: Secretary.
Within 10 days after the effective time of the merger, the surviving
corporation must notify each holder of HPL common stock who has complied with
Section 262 and who has not voted in favor of the adoption of the merger
agreement that the merger has become effective. Within 120 days after the
effective time of the merger, but not thereafter, the surviving corporation or
any holder of HPL common stock who has so complied with Section 262 and is
entitled to appraisal rights under Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of the
holder's shares of HPL common stock. The surviving corporation is under no
obligation to and has no present intention to file a petition. Accordingly, it
is the obligation of the holders of HPL common stock to initiate all necessary
action to perfect their appraisal rights in respect of shares of HPL common
stock within the time prescribed in Section 262.
Within 120 days after the effective time of the merger, any holder of
HPL common stock who has complied with the requirements for exercise of
appraisal rights will be entitled, upon written request, to receive from the
surviving corporation a statement setting forth the aggregate number of shares
not voted in favor of the merger and with respect to which demands for appraisal
have been received and the aggregate number of holders of such shares. The
statement must be mailed within ten days after a written request therefor has
been received by the surviving corporation or within ten days after the
expiration of the period for delivery of demands for appraisal, whichever is
later.
If a petition for an appraisal is timely filed by a holder of shares of
HPL common stock and a copy thereof is served upon the surviving corporation,
the surviving corporation will then be obligated within 20 days to file with the
Delaware Register in Chancery a duly verified list containing the names and
addresses of all stockholders who have demanded an appraisal of their shares and
with whom agreements as to the value of their shares have not been reached.
After notice to the stockholders as required by the Court, the Delaware Court of
Chancery is empowered to conduct a hearing on the petition to determine those
stockholders who have complied with Section 262 and who have become entitled to
appraisal rights thereunder. The Delaware Court of Chancery may require the
holders of shares of HPL common stock who demanded payment for their shares to
submit their stock certificates to the Register in Chancery for notation thereon
of the pendency of the appraisal proceeding; and if any stockholder fails to
comply with the direction, the Court of Chancery may dismiss the proceedings as
to the stockholder.
After determining the holders of HPL common stock entitled to
appraisal, the Delaware Court of Chancery will appraise the "fair value" of
their shares of HPL common stock, exclusive of any element of value arising from
the accomplishment or expectation of the merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
Holders of HPL common stock considering seeking appraisal should be aware that
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the fair value of their shares of HPL common stock as so determined could be
more than, the same as or less than the consideration they would receive
pursuant to the merger if they did not seek appraisal of their shares of HPL
common stock and that investment banking opinions as to fairness from a
financial point of view are not necessarily opinions as to fair value under
Section 262. The Delaware Supreme Court has stated that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in the
appraisal proceedings. In addition, Delaware courts have decided that the
statutory appraisal remedy, depending on factual circumstances, may or may not
be a dissenter's exclusive remedy. The Court will also determine the amount of
interest, if any, to be paid upon the amounts to be received by persons whose
shares of HPL common stock have been appraised. The costs of the appraisal
proceeding may be determined by the Court of Chancery and taxed upon the parties
as the Court deems equitable. The Court may also order that all or a portion of
the expenses incurred by any stockholder in connection with an appraisal,
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts utilized in the appraisal proceeding, be charged pro rata
against the value of all the shares entitled to be appraised.
Any holder of shares of HPL common stock who has duly demanded an
appraisal in compliance with Section 262 will not, after the effective time of
the merger, be entitled to vote the shares of HPL common stock subject to the
demand for any purpose or be entitled to the payment of dividends or other
distributions on those shares of HPL common stock (except dividends or other
distributions payable to holders of record of HPL common stock as of a record
date prior to the effective time of the merger).
If any stockholder who demands appraisal of shares of HPL common stock
under Section 262 fails to perfect, or effectively withdraws or loses, such
holder's right to appraisal, the shares of HPL common stock of the stockholder
will be converted into the right to receive $.30 per share in cash, without
interest. A stockholder will fail to perfect, or effectively lose or withdraw,
the holder's right to appraisal if no petition for appraisal is filed within 120
days after the effective time of the merger, or if the stockholder delivers to
the surviving corporation a written withdrawal of the holder's demand for
appraisal and an acceptance of the merger, except that any attempt to withdraw
made more than 60 days after the effective time of the merger will require the
written approval of the surviving corporation and, once a petition for appraisal
is filed, the appraisal proceeding may not be dismissed as to any holder absent
court approval.
Failure to follow the steps required by Section 262 for perfecting
appraisal rights may result in the loss of such rights.
PROPOSAL NO. 1
ADOPTION OF AGREEMENT OF MERGER
THE MERGER AGREEMENT
The following is a summary of the material provisions of the merger
agreement. You are urged to read the full text of the merger agreement attached
as Annex A to this proxy statement. In addition, important information about the
merger is provided in the section titled "The Merger" beginning on page 14.
Structure of the Merger
The merger agreement provides that following the adoption of the merger
agreement by HPL stockholders and the satisfaction or waiver of the other
conditions to the merger, Merger Sub will be merged with and into HPL, with HPL
surviving the merger as a wholly-owned subsidiary of Synopsys. The merger will
become effective upon the filing of a certificate of merger with the Secretary
of State of the State of Delaware or at such later time as is agreed to in
writing by the parties and as specified in the certificate of merger. The filing
of the certificate of merger and the closing of the merger will occur promptly
following the special meeting if the merger agreement is adopted by the HPL
stockholders at the meeting.
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Conversion of Capital Stock
At the effective time of the merger, pursuant to the merger agreement
and the General Corporation Law of the State of Delaware, each issued and
outstanding share of HPL common stock, other than any shares held by Synopsys or
a dissenting stockholder that has exercised and perfected appraisal rights, will
be canceled and will be automatically converted into the right to receive merger
consideration, equal to $0.30 in cash, without interest.
The cash paid to you upon conversion of your shares of HPL common stock
will be issued in full satisfaction of all rights relating to the shares of HPL
common stock.
Exchange of Common Stock Certificates
At the effective time, each certificate representing shares of HPL
common stock then outstanding, other than any shares held by Synopsys or a
dissenting stockholder exercising appraisal rights, will represent the right to
receive the merger consideration. At the effective time, all such shares of HPL
common stock will be canceled and will cease to exist. As a result, each holder
of a certificate representing any such shares will cease to have an equity
interest in HPL and will cease to have any voting or other rights with respect
to such shares, except the right to receive upon the surrender of such
certificate the merger consideration payable under the merger agreement, without
interest.
Synopsys will designate a bank or trust company to act as payment agent
and will deposit with the payment agent sufficient funds to pay the merger
consideration payable to HPL stockholders who surrender their stock
certificates. Synopsys will direct the payment agent to mail a letter of
transmittal to the former HPL stockholders within five business days after the
effective time of the merger. The letter of transmittal will provide
instructions regarding how to surrender HPL stock certificates in exchange for
the merger consideration payable for the HPL shares. You should not send in your
stock certificates until you receive a letter of transmittal and you should only
send your certificates as instructed in such letter of transmittal. In all
cases, the merger consideration will only be paid in accordance with the
procedures set forth in the merger agreement and the letter of transmittal
mailed to you by Synopsys' payment agent.
We strongly recommend that stock certificates and letters of
transmittal be transmitted only by registered United States mail, return receipt
requested, and appropriately insured. Holders of common stock whose stock
certificates are lost will be required to make an affidavit identifying such
certificate or certificates as lost, stolen or destroyed and, if required by
Synopsys or the payment agent, to post a bond in such amount as Synopsys or the
paying agent may reasonably require to indemnify against any claim that may be
made against Synopsys, the surviving corporation, or the payment agent with
respect to such certificate or certificates.
Any merger consideration payable in respect of stock certificates that
have not been surrendered prior to one year after the effective time of the
merger will be delivered to Synopsys upon its demand and thereafter holders
shall look only to Synopsys for satisfaction of any claim to merger
consideration.
Treatment of Stock Options and ESPP
Prior to the effective time of the merger, HPL will use commercially
reasonable efforts to cause each outstanding stock option to be canceled and
converted at the effective time into the right to receive a cash amount equal to
the excess, if any, of (i) the merger consideration over (ii) the exercise price
payable in respect of the shares subject to such option. If the exercise price
of an option exceeds $0.30, then the holder of such option will not receive any
cash consideration. Immediately prior to the effective time, HPL shall terminate
its stock option plans and its ESPPs. Prior to the effective time, Synopsys
shall deposit with the payment agent an amount of cash equal to the sum of the
aggregate amount payable in respect of the outstanding stock options (subject to
any applicable withholding tax), together with instructions that such cash be
promptly distributed following the effective time to the holders of such
options.
HPL has previously suspended its ESPPs so there are no rights to
purchase shares of HPL common stock outstanding under such plans.
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Required Withholding
The payment agent may deduct and withhold from the merger consideration
or other consideration or amount deliverable or otherwise payable upon
completion of the merger to any holder or former holder of HPL common stock or
option to purchase HPL common stock any amounts as may be required to be
deducted or withheld under applicable provisions of federal, state, local or
foreign tax law or under any other applicable legal requirement. To the extent
any amounts are so deducted or withheld by the paying agent, these amounts will
be treated for all purposes under the merger agreement as having been delivered
or otherwise paid to the person to whom those amounts would otherwise have been
delivered or otherwise paid upon completion of the merger.
Representations and Warranties
The merger agreement contains representations and warranties made by each
of HPL, Synopsys and Merger Sub relating to, among other things, the following:
o corporate organization and corporate matters of HPL, Synopsys and
Merger Sub;
o corporate authorization of the merger agreement and authorization to
enter into and complete the transactions contemplated by the merger
agreement;
o the binding effect of the merger agreement; and
o conflicts or violations under its certificate of incorporation or
bylaws as a result of the completion of the transactions contemplated
by the merger agreement.
In addition, the merger agreement contains representations and warranties
by HPL, relating to, among other things:
o its subsidiaries;
o its capitalization;
o reports, registration statements and documents filed by HPL with the
Securities and Exchange Commission (the "SEC"), including financial
statements;
o disclosure controls related to SEC filings;
o absence of specified material changes or events relating to HPL or its
business since June 30, 2005;
o ownership and condition of HPL's tangible assets;
o property, equipment and leasehold matters;
o intellectual property;
o material contracts and the absence of defaults under such contracts;
o absence of undisclosed liabilities;
o compliance with laws;
o governmental approvals and consents;
o tax matters and compliance with relevant tax laws;
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o employee benefit plans;
o insurance matters;
o legal proceedings;
o finder's fees, brokerage commissions and legal, accounting or similar
fees;
o receipt of a fairness opinion from HPL's financial advisor; and
o accuracy of the information provided by HPL to Synopsys in connection
with the merger agreement and this proxy statement.
Certain Covenants
Under the merger agreement, HPL has agreed that from October 2, 2005
until the effective time of the merger, HPL will conduct its businesses in the
ordinary course consistent with past practice and not take any action
inconsistent with the merger agreement or the completion of the merger. In
addition, except as expressly contemplated or allowed by the terms of the merger
agreement and except as HPL has previously expressly disclosed to Synopsys,
during the period from October 2, 2005 and continuing until the effective time
of the merger, HPL has agreed not to take any of the following actions, among
others, unless Synopsys agrees in writing:
o declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock, or
repurchase, redeem or otherwise reacquire any shares of capital
stock or other securities (other than repurchases of common stock
from employees pursuant to restricted stock purchase agreements);
o sell, issue, grant or authorize the sale, issuance or grant of:
(A) any capital stock or other security; (B) any option, call,
warrant or right to acquire any capital stock or other security;
or (C) any instrument convertible into or exchangeable for any
capital stock or other security, except that HPL may issue shares
of common stock upon the valid exercise of options outstanding as
of the date of the merger agreement;
o amend or waive any of HPL's rights under any other contract
evidencing or relating to any equity award (whether payable in
cash or stock);
o amend or permit the adoption of any amendment to HPL's certificate
of incorporation or bylaws or other charter or organizational
documents, or effect or become a party to any merger,
consolidation, share exchange, business combination, amalgamation,
recapitalization, reclassification of shares, stock split, reverse
stock split, division or subdivision of shares, consolidation of
shares or similar transaction;
o form any subsidiary or acquire any equity interest or other
interest in any other entity other than the purchase, in the
ordinary course of business consistent with past practices, of
marketable securities that would be classified as short-term
investments on HPL's balance sheet;
o make any capital expenditure (except a capital expenditure that:
(A) is in the ordinary course of business and consistent with past
practices; (B) does not exceed $30,000 individually; and (C) when
added to all other capital expenditures made on behalf of the
Acquired Corporations (as defined in the merger agreement) since
the date of the merger agreement, does not exceed $100,000 in the
aggregate);
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o enter into or become bound by, or permit any of the assets owned
or used by it to become bound by, any material contract, or amend
or terminate, or waive or exercise any material right or remedy
under, any material contract (other than certain material
contracts referenced in the merger agreement);
o enter into, amend or waive any right under any indemnification
contract;
o acquire, lease or license any right or other asset from any other
person or sell or otherwise dispose of, or lease or license, any
right or other asset to any other person (except in each case for
assets (that are not material individually or in the aggregate)
acquired, leased, licensed or disposed of by HPL in the ordinary
course of business and consistent with past practices), or waive
or relinquish any material right;
o other than in the ordinary course of business consistent with past
practices, write off as uncollectible, or establish any
extraordinary reserve with respect to, any receivable or other
indebtedness;
o make any pledge of any of its assets or permit any of its assets
to become subject to any encumbrances, except for certain
permitted encumbrances;
o make a loan to any person except for advances made to its
employees in the ordinary course of business consistent with past
practice (A) pursuant to HPL's policies in order to defray routine
travel expenses or (B) as commission advances pursuant to HPL's
sales commission plans;
o without limiting the ability of HPL and its subsidiaries to pay or
accrue in accordance with applicable legal requirements its
obligations for payroll taxes incurred in the ordinary course of
business and in accordance with past practices, incur or guarantee
any indebtedness in an amount in excess of $3,500,000 in the
aggregate (including amounts incurred or guaranteed as of October
2, 2005), except that if the Acquired Corporations have reasonably
incurred or guaranteed indebtedness in an amount in excess of
$3,250,000, Synopsys shall not unreasonably withhold, delay or
condition its consent to HPL incurring indebtedness in excess of
$3,500,000 but in no event to exceed $4,000,000;
o establish, adopt, enter into or amend (except as may be required
by applicable legal requirements) any HPL benefit plan, pay any
bonus or make any profit-sharing or similar payment to, or
increase the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any HPL
directors, officers or other employees (except that HPL may: (A)
grant routine, reasonable salary increases to non-officer
employees in the ordinary course of business and in accordance
with past practices in connection with HPL's customary employee
review process; and (B) make customary bonus payments and profit
sharing payments consistent with past practices and in accordance
with existing bonus and profit sharing plans disclosed to Synopsys
prior to or on October 2, 2005);
o hire any employee with an annual base salary greater than
$100,000, hire any employee with an annual base salary greater
than that paid to comparably situated (considering, among other
things, title, experience and geographic location of employment)
employees of HPL as of October 2, 2005, hire any employee such
that the total number of HPL's employees exceeds 210, promote any
employee except in order to fill a position vacated after October
2, 2005, or, except in the ordinary course of business, terminate
the employment of any key employees or any employee with an annual
base salary greater than $50,000;
o except in the ordinary course of business consistent with past
practices or as required by applicable legal requirements (A)
change any of its pricing policies, product return policies,
product maintenance polices, service policies, product
modification or upgrade policies, personnel policies or other
business policies or (B) change any of its methods of accounting
or accounting practices in any respect (other than as required by
the rules and regulations of the SEC or by U.S. GAAP);
o make any material tax election;
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o commence or settle any legal proceeding, other than routine
collection proceedings commenced in the ordinary course of
business consistent with past practices and involving less than
$200,000 in the aggregate;
o purchase or renew any liability insurance of any nature;
o enter into any material transaction or take any other material
action outside the ordinary course of business or inconsistent
with past practices; or
o agree or commit to take any of the actions described above.
The merger agreement also contains covenants by HPL relating to the
following:
o obtaining stockholder approval of the merger agreement;
o filing of this proxy statement;
o providing Synopsys with access to information about HPL;
o providing Synopsys with notice regarding the commencement by HPL
of any litigation regarding its proprietary technology;
o providing Synopsys with notice upon discovery by HPL of
information indicating that any of the representations and
warranties provided by HPL in the merger agreement may be
inaccurate or that an event has occurred that could reasonably be
expected to make satisfaction of the merger covenants and
completion of the merger impossible or unlikely or could
reasonably be expected to result in a material adverse effect on
HPL's business;
o certain tax-related matters; and
o HPL's filings with the Securities and Exchange Commission.
The covenants contained in the merger agreement that relate to the
conduct of HPL's business are complicated and are not easily summarized. You are
urged to read carefully the sections of the merger agreement titled "Certain
Covenants of the Company" and "Additional Covenants of the Parties."
No Solicitation of Other Transactions
Prior to the effective time of the merger and subject to the provisions of the
following paragraph, HPL has agreed to not, and HPL will ensure that no
director, officer, financial advisor, legal advisor or accounting advisor of or
to any of HPL or HPL's subsidiaries will, and will use reasonable efforts to
ensure that no representative of any of HPL or HPL's subsidiaries will, directly
or indirectly:
o solicit, initiate, encourage, knowingly induce or knowingly
facilitate the communication, submission or announcement of any
"Acquisition Proposal" (as defined in the merger agreement) or
inquiry;
o furnish any nonpublic information regarding HPL's or any of HPL's
subsidiaries in connection with or in response to any Acquisition
Proposal or inquiry;
o engage in discussions or negotiations with any person that has
made, submitted or announced an Acquisition Proposal or inquiry,
or with any of such person's representatives;
o approve, endorse or recommend any Acquisition Proposal;
35
o execute or enter into any letter or intent or similar document
contemplating or otherwise relating to any Acquisition
Proposal; or
o release any person from, or waive any provision of or right under,
any confidentiality, non-solicitation, no hire, standstill or
similar agreement to which HPL or any of HPL's subsidiaries is a
party or under which any of them has any rights.
At any time prior to HPL stockholders' adoption of the merger
agreement, if HPL has not otherwise violated the foregoing restrictions, HPL
may, after complying with certain requirements set forth in the merger
agreement, in response to an unsolicited bona fide written Acquisition Proposal
that the Board determines in good faith, after having consulted with its outside
legal counsel and financial advisor, that such Acquisition Proposal is or is
likely to lead to the submission of a "Superior Offer" (as defined in the merger
agreement) by the person making the acquisition proposal, (i) furnish to the
person making the Acquisition Proposal nonpublic information regarding HPL and
HPL's subsidiaries and (ii) engage in discussions or negotiations with the
person making the acquisition proposal if the Board determines in good faith,
after having consulted with its outside legal counsel, that such action is
required in order for the Board to comply with its fiduciary obligations. HPL is
required to provide written notice to Synopsys as set forth in the merger
agreement upon receipt of such an unsolicited offer or any indications of
interest from a third party.
Conditions to the Merger
Each party's obligation to complete the merger is subject to the
satisfaction, at or prior to the completion of the merger, of various
conditions, which include the adoption of the merger agreement by the
stockholders of HPL.
Synopsys will not be obligated to complete the merger unless the
following additional conditions are satisfied or waived by Synopsys:
o the representations and warranties of HPL contained in the merger
agreement must have been accurate in all respects as of the date of the
merger agreement and remain accurate in all respects as of the date of
the completion of the merger as if made on and as of such date (except
for representations and warranties that by their terms speak as of a
specified date, which must be accurate in all respects only as of the
specified date), provided that any materiality qualifications that are
contained in such representations and warranties will be disregarded,
and this closing condition will be considered satisfied unless the
circumstances giving rise to all inaccuracies contained in such
representations and warranties (considered collectively) would
constitute, or would reasonably be expected to have or to result in, a
"Material Adverse Effect" (as defined in the merger agreement) on HPL;
o in addition to the condition described in the preceding paragraph,
certain representations and warranties of HPL contained in the merger
agreement relating to HPL capital stock, HPL's cash balance, the
binding nature of the merger agreement and corporate authority to enter
into the merger agreement, the inapplicability of certain anti-takeover
restrictions under Delaware corporate law, financial advisory fees and
the opinion provided to HPL by its financial advisor, must have been
accurate in all material respects as of the date of the merger
agreement and must be accurate in all material respects as of the date
of the completion of the merger as if made on and as of such date
(except for representations and warranties that by their terms speak as
of a specified date, which must be accurate in all material respects
only as of the specified date);
o HPL must have performed in all material respects its covenants and
obligations as set forth or referenced in the merger agreement;
o holders of no more than 10% of the shares of HPL common stock
outstanding as of the date of the completion of the merger cannot have
demanded appraisal of such shares in accordance with Section 262 of the
General Corporation Law of the State of Delaware;
36
o all governmental approvals required to complete the merger shall have
been obtained and remain in full force and effect and no such
authorization shall impose or contain any term, limitation, condition
or restriction that Synopsys determines in good faith to be materially
burdensome;
o certain HPL employees identified by Synopsys and agreed to by HPL
pursuant to the merger agreement shall have signed offer letters to
continue their employment following consummation of the merger;
o since the date of the merger agreement, there must not have occurred
any Material Adverse Effect on HPL, and no event must have occurred or
circumstance must exist that, in combination with any other events that
shall have occurred since the date of the merger agreement, or
circumstances that shall have arisen since the date of the merger
agreement, would reasonably be expected to have or to result in a
Material Adverse Effect on HPL;
o no temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other
legal restraint or prohibition that has the effect of preventing the
completion of the merger must remain in effect, and there must not be
any legal requirement enacted or deemed applicable to the merger or any
of the other related transactions that makes completion of the merger
or any of the other transactions illegal;
o there must not be any pending or threatened legal proceeding in which a
governmental body is or is threatened to become a party that (i)
challenges or seeks to restrain or prohibit the completion of the
merger or any of the transactions contemplated by the merger agreement,
(ii) relates to the merger or any of the transactions contemplated by
the merger agreement and seeks to obtain from Synopsys or HPL any
damages or other relief that may be material to Synopsys or HPL, (iii)
seeks to limit in any material respect Synopsys' ability to exercise
ownership rights with respect to HPL, (iv) would materially affect the
right or ability of Synopsys or HPL to own the assets or operate the
business of HPL or (v) seeks to compel Synopsys or HPL to dispose of or
hold separate any material assets; and
o neither the chief executive officer nor the chief financial officer of
HPL must have failed to provide, with respect to HPL's SEC filings, on
or after the date of the merger agreement, any necessary certifications
in the form required under Rule 13a-14 under the 1934 Act and 18 U.S.C.
Section 1350.
HPL will not be obligated to complete the merger unless the following
additional conditions are satisfied or waived by HPL:
o the representations and warranties of Synopsys and Merger Sub contained
in the merger agreement must have been accurate in all respects as of
the date of the merger agreement and must be accurate in all respects
as of the date the merger is completed as if made on and as of such
date (except for representations and warranties that by their terms
speak as of a specified date, which must be accurate in all respects
only as of the specified date), and this closing condition will be
considered satisfied unless the circumstances giving rise to all
inaccuracies contained in such representations and warranties have a
material adverse effect on the ability of Synopsys to complete the
merger;
o Synopsys and Merger Sub must have performed in all material respects
their respective covenants and obligations as set forth or referenced
in the merger agreement, except where the failure to so comply or
perform would not reasonably be expected to have or to result in a
material adverse effect on the ability of Synopsys or Merger Sub to
complete the merger; and
o no temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other
legal restraint or prohibition that has the effect of preventing the
completion of the merger must remain in effect, and there must not be
any legal requirement enacted or deemed applicable to the merger or any
of the other related transactions that makes completion of the merger
or any of the other transactions illegal.
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Termination of the Merger Agreement
The merger agreement may be terminated, at any time prior to the
effective time of the merger, whether before or after receiving stockholder
approval, under certain circumstances, including the following:
o By the mutual written consent of the parties;
o By HPL or Synopsys:
o if the merger is not completed by April 2, 2006 (except this right to
terminate the merger agreement is not available to any party
responsible for the delay);
o if a court of competent jurisdiction or other governmental body has
issued a final and nonappealable order, decree or ruling, or has taken
any other action, having the effect of permanently restraining,
enjoining or otherwise prohibiting the merger; or
o if, at the special meeting, HPL stockholders fail to adopt the merger
agreement, provided that (i) neither party will be permitted to
terminate the merger agreement pursuant to this provision if the
failure to have the merger agreement adopted and approved by the
requisite HPL stockholder vote was attributable primarily to a failure
on the part of such party to perform any covenant or obligation in the
merger agreement that is required to be performed by such party at or
prior to the completion of the merger, and (ii) HPL will not be
permitted to terminate the merger agreement pursuant to this provision
unless HPL makes a nonrefundable cash payment to Synopsys prior to such
termination in an amount equal to the lesser of $150,000 or the
aggregate amount of all fees and expenses that have been paid or that
may become payable by Synopsys in connection with the preparation and
negotiation of the merger agreement;
o By Synopsys, if HPL's board of directors takes any of the following
actions (each referred to as an "adverse recommendation change"):
o if the Board fails unanimously to recommend that HPL stockholders vote
to adopt the merger agreement, or the Board withdraws or modifies in a
manner adverse to Synopsys its recommendation that HPL stockholders
vote to adopt the merger agreement;
o HPL fails to include in this proxy statement the recommendation of the
Board that HPL stockholders vote to adopt the merger agreement or fails
to include a statement to the effect that the Board has determined and
believes that the merger is advisable and fair to and in the best
interests of HPL stockholders;
o the Board fails to reaffirm publicly its recommendation that HPL
stockholders vote to adopt the merger agreement, or fails to reaffirm
its determination that the merger is advisable and fair to and in the
best interests of HPL stockholders, in each case within five business
days after Synopsys requests in writing that such recommendation or
determination be reaffirmed publicly;
o the Board approves, endorses or recommends any acquisition offer,
proposal or indication of interest by a party other than Synopsys;
o HPL executes any letter of intent, memorandum of understanding or
similar document or contract relating to any acquisition offer,
proposal or indication of interest by a party other than Synopsys,
other than as expressly permitted by the merger agreement;
o a tender or exchange offer relating to securities of HPL is commenced
and HPL does not send to its stockholders, within 10 business days
after the commencement of such tender or exchange offer, a statement
disclosing that HPL recommends rejection of such tender or exchange
offer; or
38
o any acquisition offer, proposal or indication of interest from a third
party that arises from any breach of the provisions relating to
non-solicitation in the merger agreement, or any of the subsidiaries of
HPL or any representative of such subsidiaries otherwise materially and
willfully breaches the non-solicitation provision in the merger
agreement in connection with any Acquisition Proposal;
o By Synopsys if, among other conditions:
o any of HPL's representations and warranties contained in the merger
agreement were inaccurate as of the date of merger agreement or becomes
inaccurate as of a date subsequent to the date of the merger agreement,
such that the closing condition related to the accuracy of
representations and warranties would not be satisfied; or
o any of HPL's covenants or obligations contained in the merger agreement
were breached such that the closing condition related to compliance
with such covenants and obligations would not be satisfied;
provided that, if an inaccuracy in any of HPL's representations and warranties
as of a date subsequent to the date of the merger agreement or a breach of a
covenant or obligation by HPL is curable by HPL within 20 days after the date on
which HPL receives notice of such inaccuracy or breach and HPL continues to
exercise reasonable efforts to cure such inaccuracy or breach, then Synopsys may
not terminate the merger agreement under this provision on account of such
inaccuracy or breach: (i) during the 20-day period commencing on the date on
which HPL receives notice of such inaccuracy or breach; or (ii) after such
20-day period if such inaccuracy or breach was cured during such 20-day period
in a manner that does not result in a breach of any covenant or obligation of
HPL;
o By HPL if, among other conditions:
o any of Synopsys' or Merger Sub's representations and warranties
contained in the merger agreement were inaccurate as of the date of the
merger agreement, or became inaccurate as of a date subsequent to the
date of the merger agreement, such that the closing condition related
to the accuracy of such representations and warranties would not be
satisfied; or
o any of Synopsys' covenants or obligations contained in the merger
agreement were breached such that the closing condition related to
compliance with such covenants and obligations would not be satisfied,
except where the failure to so comply or perform would not reasonably
be expected to have or to result in a material adverse effect on the
ability of Synopsys or Merger Sub to complete the merger;
provided that, if an inaccuracy in any of Synopsys' representations and
warranties as of a date subsequent to the date of the merger agreement or a
breach of a covenant or obligation by Synopsys is curable by Synopsys within 20
days after the date on which Synopsys received notice of such inaccuracy or
breach and Synopsys continues to exercise reasonable efforts to cure such
inaccuracy or breach, then HPL may not terminate the merger agreement under
provision on account of such inaccuracy or breach: (i) during the 20-day period
commencing on the date on which Synopsys received notice of such inaccuracy or
breach; or (ii) after such 20-day period if such inaccuracy or breach shall have
been fully cured during such 20-day period in a manner that does not result in a
breach of any covenant or obligation of Synopsys; and
o By HPL (prior to obtaining stockholder approval in order to accept a
Superior Offer and enter into a definitive agreement providing for the
completion of the transaction contemplated by the Superior Offer) if,
among other conditions:
o the Superior Offer did not arise from any breach of HPL's covenants in
the merger agreement relating to non-solicitation and HPL has complied
with those covenants in connection with the Superior Offer;
39
o the Board, after satisfying all requirements in connection with the
Superior Offer, authorized HPL to enter into a definitive acquisition
agreement providing for the completion of the transaction contemplated
by the Superior Offer;
o HPL provides notice to Synopsys at least three business days prior to
the meeting of the Board to consider withdrawing or modifying in a
manner adverse to Synopsys, or proposes publicly to withdraw or modify
in a manner adverse to Synopsys, the recommendation or declaration of
advisability by the Board to HPL stockholders that they vote in favor
of the adoption of the merger agreement;
o five business days have lapsed following Synopsys' receipt of a written
notice advising Synopsys that the party making the Superior Offer has
executed a definitive agreement with HPL providing for the completion
of the transaction contemplated by that Superior Offer, the Board has
authorized the execution of that definitive agreement and the
termination of the merger agreement and intends to enter into that
definitive agreement contemporaneously with the termination of the
merger agreement, and gives Synopsys a reasonable opportunity during
this period to negotiate with HPL regarding an amendment to the merger
agreement or alternative transaction with Synopsys;
o the Board has considered in good faith any written proposal by Synopsys
to amend the merger agreement or enter into an alternative transaction
and the Board determines in good faith (after consulting with HPL's
financial advisor) that the amended terms of the proposed merger with
Synopsys are not as favorable to HPL stockholders from a financial
point of view as the terms of the transaction contemplated by the
definitive agreement providing for the completion of the transaction
contemplated by the Superior Offer;
o on the date five business days after Synopsys' receipt of the notice
described above, HPL enters into the definitive agreement providing for
the completion of the transaction contemplated by the Superior Offer
and that agreement becomes fully binding and effective; and
o HPL pays a $500,000 termination fee (the "Termination Fee")
concurrently with termination of the merger agreement.
Additionally, the Termination Fee is also payable by HPL:
o if the merger agreement is terminated because (i) the merger has not
been completed by April 2, 2006 as discussed above, (ii) at or prior to
the time of termination either (A) the special meeting has not been
held and completed, or (B) an Acquisition Proposal by a third party
shall have been commenced, submitted or made, and (iii) within 180 days
following the termination, an "acquisition transaction", as defined in
the merger agreement, with a party other than Synopsys is completed or
a definitive agreement providing for an acquisition transaction is
executed;
o if the merger agreement is terminated because HPL stockholders failed
to approve the merger at the special meeting as discussed above, an
Acquisition Proposal by a third party had been publicly disclosed at
the time of termination and not been publicly withdrawn as of the date
five business days prior to the special meeting and, within 180 days
following the termination, an acquisition transaction with a party
other than Synopsys is completed or a definitive agreement providing
for an acquisition transaction is executed; or
o the merger agreement is terminated by Synopsys due to an adverse
recommendation change as described above.
40
In the event of termination of the merger agreement by either Synopsys
or HPL, the merger agreement will become void and have no effect, provided that
the termination of the merger agreement will not relieve a breaching party from
liability for a breach of the merger agreement or for the payment of the
termination fee and expenses reimbursement.
Voting Agreements
As an inducement and a condition to Synopsys entering into the merger
agreement and incurring the obligations set forth therein, each member of the
Board and each of Messrs. Vandenberg, Scarpelli, Gordon and Frazier entered into
a voting agreement with Synopsys. Under the terms of the voting agreements,
these stockholders agreed to vote, and granted an irrevocable proxy to Synopsys
to vote, all shares of HPL common stock owned by such stockholders as of October
2, 2005 and any additional shares of HPL capital stock they might acquire prior
to the completion of the merger or termination of the merger agreement (the
"Expiration Date"):
o in favor of the adoption of the merger agreement and the completion of
the merger;
o against any action or agreement that would result in a breach in any
material respect by HPL under the merger agreement; and
o against: (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving HPL or any
subsidiary of HPL; (ii) any sale, lease, sublease, license, sublicense
or transfer of a material portion of the rights or other assets of HPL
or any subsidiary of HPL; (iii) any reorganization, recapitalization,
dissolution or liquidation of HPL or any subsidiary of HPL; (iv) any
change in a majority of the board of directors of HPL; (v) any
amendment to HPL's certificate of incorporation or bylaws; (vi) any
material change in the capitalization of HPL or HPL's corporate
structure; and (vii) any other action which is intended, or would
reasonably be expected, to impede, interfere with, delay, postpone,
discourage or adversely affect the merger or any of the other
transactions contemplated by the merger agreement or the voting
agreements.
The stockholders who entered into the voting agreements held an
aggregate of 5,106,750 outstanding shares of HPL common stock (representing
approximately 12.4% of the combined voting power of HPL common stock) as of the
Record Date.
In addition, these stockholders have agreed not to dispose of any
shares of HPL common stock except for certain permitted transfers, or grant any
proxy or power of attorney with respect to their shares of HPL common stock
prior to the Expiration Date, provided that any permitted transferee agrees in
writing to be bound by the voting agreement. The form of voting agreement
entered into by the stockholders is attached to this proxy statement as Annex C.
THE BOARD OF DIRECTORS OF HPL UNANIMOUSLY RECOMMENDS A VOTE "FOR"
ADOPTION OF THE AGREEMENT OF MERGER.
PROPOSAL NO. 2
ADJOURNMENT OF THE SPECIAL MEETING
In the event that there are not sufficient votes to constitute a quorum
or approve the merger agreement at the time of the special meeting, the
proposals could not be approved unless the meeting was adjourned to a later date
or dates in order to permit further solicitation of proxies. Under HPL's bylaws,
written notice of an adjourned meeting need not be given to stockholders if the
date, place and time of the adjourned meeting are announced at the special
meeting before adjournment and a new record date is not fixed for the adjourned
meeting, provided the adjournment is for not more than 30 days.
The affirmative vote of the holders of a majority of shares of HPL's
common stock present in person or represented by proxy and voting on the matter
41
at the special meeting is required to approve the proposal to adjourn the
special meeting if necessary to permit further solicitation of proxies on any of
the foregoing proposals if there are not sufficient votes at the time of the
special meeting to approve the proposal to adopt the merger agreement.
In order to allow proxies that have been received by HPL at the time of
the special meeting to be voted for an adjournment, if necessary, HPL has
submitted the question of adjournment to its stockholders as a separate matter
for their consideration. THE BOARD OF DIRECTORS OF HPL UNANIMOUSLY RECOMMENDS A
VOTE "FOR" THE ADJOURNMENT PROPOSAL.
SECURITY OWNERSHIP OF HPL COMMON STOCK
The following table sets forth certain information with respect to
beneficial ownership of HPL common stock as of October 2, 2005, as to (i) each
person (or group of affiliated persons) known by us to own beneficially more
than 5% of outstanding HPL common stock, (ii) each HPL director, (iii) each HPL
executive officer, and (iv) all directors and executive officers of HPL as a
group.
For the purpose of this table, beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission. The number
of shares beneficially owned by a person includes shares of common stock subject
to options held by that person that are currently exercisable or exercisable
within 60 days of October 2, 2005. Shares issuable pursuant to such options are
deemed outstanding for computing the percentage ownership of the person holding
such options, but are not deemed outstanding for the purposes of computing the
percentage ownership of each other person.
Shares Beneficially Owned and Shares Underlying
Options Exercisable Within 60 days of
October 2, 2005
Name and Address ------------------------------------------------- Percent
of Beneficial Owner + Shares (#) Options (#) Total (#) of Class (1)
- --------------------------------------------------- ---------------- ----------------- ------------- ------------
Synopsys, Inc. 6,239,128 6,239,128 15.10%
700 East Middlefield Road
Mountain View, CA 94043(2)
Lawrence Kraus 3,924,250 7,500 3,931,750 9.52%
Dr. Yervant Zorian 782,500 15,000 797,500 1.93%
Elias Antoun 400,000 100,170 500,170 1.21%
Cary D. Vandenberg 501,042 501,042 1.20%
Michael P. Scarpelli 243,750 243,750 0.59%
Brian Gordon 189,583 189,583 0.46%
Greg Yeric 27,284 176,495 203,779 0.49%
Dean Frazier 134,895 134,895 0.33%
Victor Boksha 119,792 119,792 0.29%
All directors and executive officers as a group
(9 persons) 5,134,034 1,488,227 6,622,261 15.47%
<FN>
- ---------------------
+ Unless indicated otherwise, the address of each beneficial owner is HPL Technologies, Inc. 2033 Gateway Place, Suite 400,
San Jose, California 95110.
(1) Applicable percentage of ownership is based on approximately 41,305,348
shares of Common Stock outstanding as of October 2, 2005, together with
applicable stock options for such stockholder. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission.
(2) Does not include 5,106,750 shares owned by parties to voting agreements
with Synopsys entered into in connection with the merger. See "Voting
Agreements" on page 41.
</FN>
42
Price Range of Common Stock and Dividends
No established public trading market exists for HPL common stock and
shares of HPL common stock are neither listed on any national securities
exchange nor presently traded on any public stock exchange or in any other
public market. Although quotations for shares of HPL common stock may be
obtained through the over-the-counter "pink sheets" maintained by Pink Sheets
LLC (a centralized quotation service that collects and publishes market maker
quotes for over-the-counter securities), because secondary market activity for
shares of HPL common stock has been limited and sporadic, such quotations may
not accurately reflect the price or prices at which purchasers or sellers would
currently be willing to purchase or sell shares of HPL common stock. The
following table shows the range of high and low closing bid prices for our
common stock for the periods indicated, as reported in the Pink Sheets under the
symbol "HPLA.PK." The quotations on the Pink Sheets reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
Fiscal 2006 High Low
- --------------------------------------------- ------------ ------------
First Quarter $ 0.80 0.10
Second Quarter $ 0.61 0.20
Fiscal 2005 High Low
- ---------------------------------------------- ------------ ------------
First Quarter $ 0.70 $ 0.14
Second Quarter $ 0.86 $ 0.45
Third Quarter $ 0.66 $ 0.51
Fourth Quarter $ 0.93 $ 0.55
Fiscal 2004 High Low
- ----------------------------------------------- ------------ ------------
Third Quarter $ 0.30 $ 0.18
Fourth Quarter $ 0.36 $ 0.20
On September 30, 2005, the last full trading day prior to the public
announcement of the signing of the merger agreement, the closing sale price of
HPL common stock reported on the "pink sheets" was $0.25 per share. On October
25, 2005, the most recent practicable date prior to the printing of this proxy
statement, the closing price of HPL common stock reported on the "pink sheets"
was $0.289. You are urged to obtain current market quotations for HPL common
stock prior to making any decision with respect to the proposed merger.
Holders of Common Equity
As of the Record Date, there were 1,241 registered holders of record of
HPL common stock.
Dividends
HPL has never declared or paid dividends on its common stock.
OTHER MATTERS
As of the date of this proxy statement, we know of no business that
will be presented for consideration at the special meeting other than the items
referred to in this proxy statement. If any other matter is properly brought
before the meeting for action by stockholders, proxies in the enclosed form
returned to us will be voted in accordance with the recommendation of the Board
or, in the absence of such a recommendation, in accordance with the judgment of
the proxy holder.
43
PROPOSALS BY HPL STOCKHOLDERS
If HPL completes the merger, it will no longer have public stockholders
or any public participation in its stockholder meetings. If HPL does not
complete the merger, it intends to hold its next annual stockholder meeting in
2006. In that case, if you are still an HPL stockholder as of the record date of
that meeting, you would continue to be entitled to attend and participate in
HPL's stockholder meetings. In addition, stockholders who wish to bring a
proposal before the 2006 annual meeting must comply with the notification
requirements set forth in HPL's bylaws by providing timely written notice of the
proposal to the Company's Secretary at HPL's principal executive offices.
Pursuant to HPL's bylaws, notice must be received must be received not earlier
than 120 days, and not later than 90 days prior to the 2006 annual meeting, or
the tenth day following the day on which public announcement of the 2006 annual
meeting is made. The stockholder's submission must include certain specified
information concerning the proposal and information as to the stockholder's
ownership of HPL common stock. Proposals not meeting the requirements set forth
in HPL's bylaws will not be entertained at the 2006 annual meeting.
WHERE YOU CAN FIND MORE INFORMATION
As required by law, HPL files reports, proxy statements and other
information with the Securities and Exchange Commission. Copies of HPL's
reports, proxy statements and other information may be inspected and copied at
the public reference facilities maintained by the Securities and Exchange
Commission at Room 1580, 100 F. Street, N.E., Washington, D.C. 20549.
Copies of HPL's reports, proxy statements and other information may
also be obtained by mail at prescribed rates from the Public Reference Section
of the Securities and Exchange Commission, 100 F. Street, N.E., Washington, D.C.
20549 or by calling the Securities and Exchange Commission at 1-800-SEC-0330.
The Securities and Exchange Commission maintains a website on the Internet that
contains reports, proxy statements and other information regarding HPL. The
address of the website maintained on the Internet by the Securities and Exchange
Commission is http://www.sec.gov. Copies of HPL's periodic reports on Forms 10-K
and 10-Q and its current reports on Form 8-K are also available on the HPL's
website at http://www.hpl.com.
Neither Synopsys nor HPL has authorized anyone to give any information
or make any representation about the merger or about the respective companies
that differs from or adds to the information in this proxy statement or in the
documents that Synopsys or HPL files publicly with the Securities and Exchange
Commission. Therefore, you should not rely upon any information that differs
from or is in addition to the information contained in this proxy statement or
in the documents that Synopsys or HPL files publicly with the Securities and
Exchange Commission.
The information contained in this proxy statement speaks only as of the
date on the cover, unless the information specifically indicates that another
date applies.
With respect to the information contained in this document, Synopsys
has supplied the information concerning Synopsys and Merger Sub, and HPL has
supplied the information concerning it.
HOUSEHOLDING OF ANNUAL DISCLOSURE DOCUMENTS
The Securities and Exchange Commission has approved a rule governing
the delivery of disclosure documents. This rule allows HPL to send a single set
of this proxy statement to any household at which two or more stockholders of
HPL reside, if it believes that the stockholders are members of the same family.
Some banks, brokers and other intermediaries may be participating in this
practice of "householding" proxy statements and annual reports. This rule
benefits both HPL and its stockholders as it reduces the volume of duplicate
information received at a stockholder's house and helps reduce HPL's expenses.
Each stockholder, however, will continue to receive individual proxy cards or
voting instruction forms.
Stockholders who receive a single set of disclosure documents may
request their own copy this year or in future years by contacting their bank,
broker or other nominee record holder. HPL will also deliver a separate copy of
44
the proxy statement to any stockholder upon written request to HPL Technologies,
Inc., 2033 Gateway Place, Suite 400, San Jose, California 95110, Attention:
Chief Financial Officer, or upon oral request by calling (408) 437-1466.
45
ANNEX A
===============================================================================
AGREEMENT OF MERGER
among:
SYNOPSYS, INC.,
a Delaware corporation;
SNAP ACQUISITION, INC.,
a Delaware corporation; and
HPL TECHNOLOGIES, INC.,
a Delaware corporation
---------------------------
Dated as of October 2, 2005
---------------------------
===============================================================================
i
TABLE OF CONTENTS
PAGE
Section 1. Description Of Transaction.............................................................................1
1.1 Merger of Merger Sub into the Company...........................................................1
1.2 Effects of the Merger...........................................................................1
1.3 Closing; Effective Time.........................................................................1
1.4 Certificate of Incorporation and Bylaws; Directors and Officers.................................1
1.5 Conversion of Shares............................................................................2
1.6 Closing of the Company's Transfer Books.........................................................2
1.7 Surrender of Certificates.......................................................................2
1.8 Appraisal Shares................................................................................3
1.9 Treatment of Stock Options......................................................................4
1.10 Further Action..................................................................................4
Section 2. Representations And Warranties Of The Company..........................................................4
2.1 Subsidiaries; Due Organization; Etc.............................................................4
2.2 Certificate of Incorporation; Bylaws; Charters and Codes of Conduct.............................5
2.3 Capitalization, Etc.............................................................................5
2.4 SEC Filings; Financial Statements...............................................................6
2.5 Absence of Changes..............................................................................7
2.6 Title to Assets.................................................................................9
2.7 Cash Balance; Receivables; Customers............................................................9
2.8 Equipment; Real Property; Leasehold.............................................................9
2.9 Intellectual Property...........................................................................9
2.10 Contracts......................................................................................13
2.11 Sale of Products; Performance of Services. ....................................................15
2.12 Liabilities....................................................................................15
2.13 Compliance with Legal Requirements.............................................................15
2.14 Certain Business Practices.....................................................................16
2.15 Governmental Authorizations....................................................................16
2.16 Tax Matters....................................................................................16
2.17 Employee and Labor Matters; Benefit Plans......................................................17
2.18 Environmental Matters..........................................................................23
2.19 Insurance......................................................................................24
2.20 Transactions with Affiliates...................................................................24
2.21 Legal Proceedings; Orders......................................................................24
2.22 Authority; Binding Nature of Agreements........................................................25
2.23 Inapplicability of Anti-takeover Statutes......................................................25
2.24 Vote Required..................................................................................25
2.25 Non-Contravention; Consents....................................................................25
2.26 Fairness Opinion...............................................................................26
2.27 Financial Advisor..............................................................................26
2.28 Full Disclosure................................................................................26
Section 3.Representations and Warranties of Parent and Merger Sub................................................26
3.1 Valid Existence................................................................................26
3.2 Authority; Binding Nature of Agreement.........................................................26
3.3 Non-Contravention..............................................................................27
3.4 No Legal Proceedings Challenging the Merger....................................................27
3.5 Activities of Merger Sub.......................................................................27
Section 4.Certain Covenants Of The Company.......................................................................27
4.1 Access and Investigation.......................................................................27
4.2 Operation of the Company's Business............................................................28
4.3 No Solicitation................................................................................31
4.4 Amendment of Contracts.........................................................................32
Section 5.Additional Covenants Of The Parties....................................................................33
5.1 Proxy Statement................................................................................33
5.2 Company Stockholders' Meeting..................................................................33
ii
TABLE OF CONTENTS
PAGE
5.3 Regulatory Matters.............................................................................34
5.4 Stock Options and ESPP.........................................................................34
5.5 Employees and Employee Benefits................................................................35
5.6 Indemnification of Officers and Directors......................................................35
5.7 Additional Agreements..........................................................................36
5.8 Disclosure.....................................................................................37
Section 6. Conditions Precedent To Obligations Of Parent And Merger Sub..........................................37
6.1 Accuracy of Representations....................................................................37
6.2 Performance of Covenants.......................................................................37
6.3 Stockholder Approval...........................................................................37
6.4 Dissenting Shares..............................................................................38
6.5 Agreements and Other Documents.................................................................38
6.6 Employees......................................................................................38
6.7 No Company Material Adverse Effect.............................................................38
6.8 Regulatory Matters.............................................................................38
6.9 No Restraints..................................................................................38
6.10 No Governmental Proceedings Relating to Contemplated Transactions or Right to Operate Business.38
6.11 Sarbanes-Oxley Certifications..................................................................39
Section 7. Conditions Precedent To Obligation Of The Company.....................................................39
7.1 Accuracy of Representations....................................................................39
7.2 Performance of Covenants.......................................................................39
7.3 Stockholder Approval...........................................................................39
7.4 Certificate....................................................................................39
7.5 No Restraints..................................................................................39
Section 8. Termination...........................................................................................39
8.1 Termination....................................................................................39
8.2 Effect of Termination..........................................................................41
8.3 Expenses; Termination Fee......................................................................41
Section 9. Miscellaneous Provisions..............................................................................42
9.1 Amendment......................................................................................42
9.2 Waiver.........................................................................................42
9.3 No Survival of Representations and Warranties..................................................43
9.4 Entire Agreement; Counterparts.................................................................43
9.5 Applicable Law; Jurisdiction...................................................................43
9.6 Disclosure Schedule............................................................................43
9.7 Attorneys' Fees................................................................................43
9.8 Assignability..................................................................................43
9.9 Notices........................................................................................43
9.10 Cooperation....................................................................................44
9.11 Non-Exclusivity................................................................................44
9.12 Severability...................................................................................44
9.13 Construction...................................................................................45
Exhibit A - Certain Definitions
iii
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER ("Agreement") is made and entered into as of
October 2, 2005, by and among: SYNOPSYS, INC., a Delaware corporation
("Parent"); SNAP ACQUISITION, INC., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"); and HPL TECHNOLOGIES, INC., a Delaware
corporation (the "Company"). Certain capitalized terms used in this Agreement
are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger
of Merger Sub into the Company (the "Merger") in accordance with this Agreement
and the Delaware General Corporation Law (the "DGCL"). Upon consummation of the
Merger, Merger Sub will cease to exist, and the Company will become a
wholly-owned subsidiary of Parent.
B. Contemporaneously with the execution and delivery of this
Agreement: certain stockholders of the Company, are entering into Voting
Agreements in favor of Parent (the "Voting Agreements") and Proxies related
thereto (the "Proxies"), to take effect upon consummation of the Merger.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 Merger of Merger Sub into the Company. Upon the terms and subject
to the conditions set forth in this Agreement, at the Effective Time (as defined
in Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 Effects of the Merger. The Merger shall have the effects set forth
in this Agreement and in the applicable provisions of the DGCL.
1.3 Closing; Effective Time. The consummation of the Contemplated
Transactions (the "Closing") shall take place at the offices of Cooley Godward
LLP, 3175 Hanover Street, Palo Alto, California, on a date to be designated by
Parent, which shall be no later than the second business day after the
satisfaction or waiver of the last to be satisfied or waived of the conditions
set forth in Sections 6 and 7 (other than the conditions set forth in Section
6.5(c) and Section 7.4 which by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of each of such conditions). The date
on which the Closing actually takes place is referred to as the "Closing Date."
A certificate of merger satisfying the applicable requirements of the DGCL shall
be duly executed by the Company in connection with the Closing, and,
concurrently with or as soon as practicable following the Closing, shall be
filed with the Secretary of State of the State of Delaware. The Merger shall
become effective at the time of the filing of such certificate of merger with
the Secretary of State of the State of Delaware or at such later time as may be
specified in such certificate of merger with the mutual consent of Parent and
the Company prior to the Closing (the time as of which the Merger becomes
effective being referred to as the "Effective Time").
1.4 Certificate of Incorporation and Bylaws; Directors and Officers.
At the Effective Time:
(a) the Certificate of Incorporation of the Surviving Corporation
shall be amended and restated to conform to the Certificate of Incorporation of
Merger Sub as of the date of this Agreement (other than with respect to the name
of the Surviving Corporation);
(b) the Bylaws of the Surviving Corporation shall be amended and
restated to conform to the Bylaws of Merger Sub as in effect immediately prior
to the Effective Time; and
1
(c) unless otherwise determined by Parent prior to the Effective Time,
the directors and officers of the Surviving Corporation shall be the respective
individuals who are directors and officers of Merger Sub immediately prior to
the Effective Time.
1.5 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and without any
further action on the part of Parent, Merger Sub, the Company or any stockholder
of the Company:
(i) any shares of Company Common Stock held by the Company or any
wholly-owned Subsidiary of the Company (or held in the Company's treasury)
immediately prior to the Effective Time shall be canceled and retired and shall
cease to exist, and no consideration shall be paid in exchange therefor;
(ii) any shares of Company Common Stock held by Parent, Merger
Sub or any other wholly-owned Subsidiary of Parent immediately prior to the
Effective Time shall be canceled and retired and shall cease to exist, and no
consideration shall be paid in exchange therefor;
(iii) except as provided in clauses "(i)" and "(ii)" above and
subject to Sections 1.5(b), 1.5(c) and 1.8, each share of Company Common Stock
outstanding immediately prior to the Effective Time shall be converted into the
right to receive $0.30 in cash, without interest; and
(iv) each share of the common stock, $0.01 par value per share,
of Merger Sub outstanding immediately prior to the Effective Time shall be
converted into one share of common stock of the Surviving Corporation.
The amount of cash consideration per share specified in clause "(iii)" of the
preceding sentence (as such amount may be adjusted in accordance with Section
1.5(b)) is referred to as the "Per Share Merger Price."
(b) If, during the period commencing on the date of this Agreement and
ending at the Effective Time, the outstanding shares of Company Common Stock are
changed into a different number or class of shares by reason of any stock split,
division or subdivision of shares, stock dividend, reverse stock split,
consolidation of shares, reclassification, recapitalization or other similar
transaction, then the Per Share Merger Price shall be appropriately adjusted.
1.6 Closing of the Company's Transfer Books. At the Effective Time:
(a) all shares of Company Common Stock outstanding immediately prior to the
Effective Time shall automatically be canceled and retired and shall cease to
exist, and all holders of certificates representing shares of Company Common
Stock that were outstanding immediately prior to the Effective Time shall cease
to have any rights as stockholders of the Company; and (b) the stock transfer
books of the Company shall be closed with respect to all shares of Company
Common Stock outstanding immediately prior to the Effective Time. No further
transfer of any such shares of Company Common Stock shall be made on such stock
transfer books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any shares of Company Common Stock
outstanding immediately prior to the Effective Time (a "Company Stock
Certificate") is presented to the Payment Agent (as defined in Section 1.7) or
to the Surviving Corporation or Parent, such Company Stock Certificate shall be
canceled and shall be exchanged as provided in Section 1.7.
1.7 Surrender of Certificates.
(a) On or prior to the Closing Date, Parent shall select a reputable
bank or trust company to act as payment agent in the Merger (the "Payment
Agent"). Within one business day after the Effective Time, Parent shall deposit
with the Payment Agent cash sufficient to pay the cash consideration payable
pursuant to Section 1.5. The cash amount so deposited with the Payment Agent is
referred to as the "Payment Fund." The Payment Agent will invest the funds
included in the Payment Fund in the manner directed by Parent. Any interest or
other income resulting from the investment of such funds shall be the property
of, and will be paid promptly to, Parent.
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(b) Within five business days after the Effective Time, the Payment
Agent will mail to the Persons who were record holders of Company Stock
Certificates immediately prior to the Effective Time: (i) a letter of
transmittal in customary form containing such provisions as Parent or the
Payment Agent may reasonably specify (including a provision confirming that
delivery of Company Stock Certificates shall be effected, and risk of loss and
title to Company Stock Certificates shall pass, only upon delivery of such
Company Stock Certificates to the Payment Agent); and (ii) instructions for use
in effecting the surrender of Company Stock Certificates in exchange for Merger
Consideration. Upon surrender of a Company Stock Certificate to the Payment
Agent for exchange, together with a duly executed letter of transmittal and such
other documents as may be reasonably required by the Payment Agent or Parent:
(A) the holder of such Company Stock Certificate shall be entitled to receive in
exchange therefor the dollar amount that such holder has the right to receive
pursuant to the provisions of Section 1.5; and (B) the Company Stock Certificate
so surrendered shall be canceled. Until surrendered as contemplated by this
Section 1.7(b), each Company Stock Certificate shall be deemed, from and after
the Effective Time, to represent only the right to receive Merger Consideration
as contemplated by Section 1.5. If any Company Stock Certificate shall have been
lost, stolen or destroyed, Parent or the Payment Agent may, in its discretion
and as a condition precedent to the payment of any Merger Consideration with
respect to the shares of Company Common Stock previously represented by such
Company Stock Certificate, require the owner of such lost, stolen or destroyed
Company Stock Certificate to provide an appropriate affidavit and to deliver a
bond (in such sum as Parent or the Payment Agent may reasonably direct) as
indemnity against any claim that may be made against the Payment Agent, Parent
or the Surviving Corporation with respect to such Company Stock Certificate.
(c) Any portion of the Payment Fund that remains undistributed to
holders of Company Stock Certificates as of the date one year after the Closing
Date shall be delivered to Parent upon demand, and any holders of Company Stock
Certificates who have not theretofore surrendered their Company Stock
Certificates in accordance with this Section 1.7 shall thereafter look only to
Parent for satisfaction of their claims for Merger Consideration.
(d) Each of the Payment Agent, Parent and the Surviving Corporation
shall be entitled to deduct and withhold from any consideration payable to any
holder of any Company Stock Certificate (in his or her capacity as a holder of
Company Common Stock) such amounts as are required to be deducted or withheld
from such consideration under the Code or any provision of state, local or
foreign tax law or under any other applicable Legal Requirement. To the extent
such amounts are so deducted or withheld, such amounts shall be treated for all
purposes under this Agreement as having been paid to the Person to whom such
amounts would otherwise have been paid.
(e) Neither Parent nor the Surviving Corporation shall be liable to
any holder of any Company Stock Certificate or to any other Person with respect
to any Merger Consideration delivered to any public official pursuant to any
applicable abandoned property law, escheat law or similar Legal Requirement.
1.8 Dissenting Shares.
(a) Notwithstanding anything to the contrary contained in this
Agreement, shares of Company Common Stock held by a holder who has made a demand
for appraisal of such shares in accordance with Section 262 of the DGCL (any
such shares being referred to as "Dissenting Shares" until such time as such
holder fails to perfect or otherwise loses such holder's appraisal rights under
Section 262 of the DGCL with respect to such shares) shall not be converted into
or represent the right to receive Merger Consideration in accordance with
Section 1.5, but shall be entitled only to such rights as are granted by the
DGCL to a holder of Dissenting Shares.
(b) If any Dissenting Shares shall lose their status as such (through
failure to perfect or otherwise), then, as of the later of the Effective Time or
the date of loss of such status, such shares shall automatically be converted
into and shall represent only the right to receive Merger Consideration in
accordance with Section 1.5, without interest thereon, upon surrender of the
Company Stock Certificate representing such shares.
(c) The Company shall give Parent: (i) prompt written notice of (A)
any demand for appraisal received by the Company prior to the Effective Time
pursuant to the DGCL, (B) any withdrawal of any such demand and (C) any other
demand, notice or instrument delivered to the Company prior to the Effective
3
Time pursuant to the DGCL; and (ii) the opportunity to participate in all
negotiations and proceedings with respect to any such demand, notice or
instrument. The Company shall not make any payment or settlement offer prior to
the Effective Time with respect to any such demand, notice or instrument unless
Parent shall have given its written consent to such payment or settlement offer.
1.9 Treatment of Stock Options. Prior to the Effective Time, the
Company shall use commercially reasonable efforts to cause each Company Option
granted pursuant to an Option Plan that is outstanding immediately prior to the
Effective Time (whether or not then vested or exercisable) and that represents
the right to acquire shares of Company Common Stock to be canceled and
terminated and converted at the Effective Time into the right to receive a cash
amount equal to the Option Consideration (as hereinafter defined) for each share
of Company Common Stock then subject to the Company Option. Prior to the
Effective Time, the Company shall take all actions necessary to terminate the
Company Stock Plans, such termination to be effective at or before the Effective
Time. Prior to the Effective Time, Parent shall deposit with the Payment Agent
an amount of cash equal to the sum of the aggregate Option Consideration for
each Company Option then outstanding (subject to any applicable withholding
tax), together with instructions that such cash be promptly distributed
following the Effective Time to the holders of such Company Options in
accordance with this Section 1.9. For purposes of this Agreement, "Option
Consideration" means, with respect to any share of Company Common Stock issuable
under a particular Company Option, an amount equal to the excess, if any, of:
(1) Per Share Merger Price over (2) the exercise price payable in respect of
such share of Company Common Stock issuable under such Option (it being
understood that if the exercise price payable in respect of such share of
Company Common Stock issuable under such Company Option exceeds the Per Share
Merger Price the Option Consideration shall be zero).
1.10 Further Action. If, at any time after the Effective Time, any
further action is determined by Parent or the Surviving Corporation to be
necessary or desirable to carry out the purposes of this Agreement or to vest
the Surviving Corporation with full right, title and possession of and to all
rights and property of Merger Sub and the Company, then the officers and
directors of the Surviving Corporation and Parent shall be fully authorized (in
the name of Merger Sub, in the name of the Company and otherwise) to take such
action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as expressly set forth in the applicable Part of the Disclosure
Schedule, the Company represents and warrants to Parent and Merger Sub as
follows:
2.1 Subsidiaries; Due Organization; Etc.
(a) The Company has no Subsidiaries, except for the Entities
identified in Part 2.1(a)(i) of the Disclosure Schedule; and neither the Company
nor any of the other Entities identified in Part 2.1(a)(i) of the Disclosure
Schedule owns any capital stock of, or any equity interest of any nature in, any
other Entity, other than (i) interests in the Entities identified in Part
2.1(a)(ii) of the Disclosure Schedule and (ii) interests classified as cash
equivalents or short-term investments on the June 30, 2005 Balance Sheet. Each
of the Entities identified in Part 2.1(a)(i) is a wholly-owned direct or
indirect subsidiary of the Company and no other Person holds any equity interest
(contingent or otherwise) in such Entities. None of the Acquired Corporations
has agreed or is obligated to make, or is bound by any Contract under which it
may become obligated to make, any future investment in or capital contribution
to any other Entity. None of the Acquired Corporations has, at any time, been a
general partner of, or has otherwise been liable for any of the debts or other
obligations of, any general partnership, limited partnership or other Entity.
(b) Each of the Acquired Corporations is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all necessary power and authority: (i) to conduct its
business in the manner in which its business is currently being conducted; (ii)
to own and use its assets in the manner in which its assets are currently owned
and used; and (iii) to perform its obligations under all Contracts by which it
is bound.
(c) Each of the Acquired Corporations is qualified to do business as a
foreign corporation, and is in good standing, under the laws of all
jurisdictions where the nature of its business requires such qualification.
4
2.2 Certificate of Incorporation; Bylaws; Charters and Codes of
Conduct. The Company has Made Available to Parent accurate and complete copies
of the certificate of incorporation, bylaws and other charter and organizational
documents of the respective Acquired Corporations, including all amendments
thereto. Part 2.2 of the Disclosure Schedule lists, and the Company has Made
Available to Parent, accurate and complete copies of: (a) the charters of all
committees of the Company's board of directors; and (b) any code of conduct or
similar policy adopted by any of the Acquired Corporations or by the board of
directors, or any committee of the board of directors, of any of the Acquired
Corporations, each as in effect on the date of this Agreement.
2.3 Capitalization, Etc.
(a) The authorized capital stock of the Company consists of: (i)
75,000,000 shares of Company Common Stock, $0.001 par value, of which 41,305,348
shares were issued and outstanding as of the date of this Agreement; and (ii)
10,000,000 shares of Preferred Stock, $.001 par value per share, of which no
shares have been issued or are outstanding. All of the outstanding shares of
Company Common Stock have been duly authorized and validly issued, and are fully
paid and nonassessable. The Company does not hold any shares of its capital
stock in its treasury. There are no shares of Company Common Stock held by any
of the other Acquired Corporations. None of the outstanding shares of Company
Common Stock is entitled or subject to any preemptive right, right of
participation, right of maintenance or any similar right. None of the
outstanding shares of Company Common Stock is subject to any right of first
refusal in favor of the Company. There is no Company Contract relating to the
voting or registration of, or restricting any Person from purchasing, selling,
pledging or otherwise disposing of (or granting any option or similar right with
respect to), any shares of Company Common Stock. None of the Acquired
Corporations is under any obligation, or is bound by any Contract pursuant to
which it may become obligated, to repurchase, redeem or otherwise acquire any
outstanding shares of Company Common Stock. Part 2.3(a)(iii) of the Disclosure
Schedule accurately and completely describes all repurchase rights held by the
Company with respect to shares of Company Common Stock as of the date of this
Agreement, and specifies which of those repurchase rights are currently
exercisable.
(b) As of the date of this Agreement: (i) 6,260,285 shares of Company
Common Stock are subject to issuance pursuant to stock options granted and
outstanding under the Company's 2001 Amended and Restated Equity Incentive Plan
(the "2001 Plan"), (ii) 130,827 shares of Company Common Stock are subject to
issuance pursuant to stock options granted and outstanding under equity
incentive plans of the other Acquired Corporations (collectively, such plans
together with the 2001 Plan, the "Option Plans"), (iii) 4,367,391 additional
shares of Company Common Stock are reserved for future issuance pursuant to the
2001 Plan, and (iv) 1,097 shares of Company Common Stock are reserved for
issuance pursuant to the Amended and Restated Employee Stock Purchase Plan and
the 2001 Foreign Employee Stock Purchase Plan (collectively, the "ESPP").
(Options to purchase shares of Company Common Stock (whether granted by the
Company pursuant to the 2001 Plan, assumed by the Company in connection with any
merger, acquisition or similar transaction or otherwise issued or granted) are
referred to in this Agreement as "Company Options.") Part 2.3(c) of the
Disclosure Schedule sets forth the following information with respect to each
Company Option outstanding as of the date of this Agreement: (A) the particular
Option Plan (if any) pursuant to which such Company Option was granted; (B) the
name of the optionee; (C) the number of shares of Company Common Stock subject
to such Company Option; (D) the exercise price of such Company Option; (E) the
date on which such Company Option was granted; (F) the applicable vesting
schedule, and the extent to which such Company Option is vested and exercisable
as of the date of this Agreement; (G) the date on which such Company Option
expires; and (H) whether such Company Option is an "incentive stock option" (as
defined in the Code) or a non-qualified stock option. The Company has Made
Available to Parent accurate and complete copies of all stock option plans
pursuant to which any of the Acquired Corporations has ever granted stock
options, and the forms of all stock option agreements evidencing such options.
(c) Except as set forth in Part 2.3(c) of the Disclosure Schedule and
except for options granted after the date of this Agreement in accordance with
Section 4.2(b)(ii) or rights under the ESPP to purchase shares of Company Common
Stock, there is no: (i) outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of the capital
stock or other securities of any of the Acquired Corporations; (ii) outstanding
security, instrument or obligation that is or may become convertible into or
exchangeable for any shares of the capital stock or other securities of any of
the Acquired Corporations; (iii) stockholder rights plan (or similar plan
5
commonly referred to as a "poison pill") or Contract under which any of the
Acquired Corporations is or may become obligated to sell or otherwise issue any
shares of its capital stock or any other securities; or (iv) to the Company's
Knowledge, condition or circumstance that has given rise to or provides a basis
for the assertion of a claim by any Person to the effect that such Person is
entitled to acquire or receive any shares of capital stock or other securities
of any of the Acquired Corporations.
(d) All outstanding shares of Company Common Stock, options, warrants
and other securities of the Acquired Corporations have been issued and granted
in compliance with: (i) all applicable securities laws and other applicable
Legal Requirements; and (ii) all requirements set forth in applicable Contracts.
(e) All of the shares of capital stock of each of the Company's
Subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof, and are owned beneficially and of record by
the Company, free and clear of any Encumbrances, other than restrictions on
transfer imposed by applicable securities laws.
2.4 SEC Filings; Financial Statements.
(a) The Company has Made Available to Parent accurate and complete
copies of all registration statements, proxy statements, Certifications (as
defined below) and other statements, reports, schedules, forms and other
documents filed by the Company with the SEC since July 30, 2001 (the "Company
SEC Documents") as well as all comment letters received by the Company from the
SEC since July 30, 2001 and all responses to such comment letters provided to
the SEC by or on behalf of the Company. Except as set forth in Part 2.4(a) of
the Disclosure Schedule, all statements, reports, schedules, forms and other
documents required to have been filed by the Company, or by any of its directors
or officers (as such statements, reports, schedules, forms and other documents
relate to the Company or to such director's or officer's ownership of securities
of the Company), with the SEC have been so filed on a timely basis. None of the
Company's Subsidiaries is required to file any documents with the SEC. As of the
time it was filed with the SEC (or, if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing): (i) each of the
Company SEC Documents complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act (as the case may be); and
(ii) none of the Company SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The certifications and
statements required by Rule 13a-14 under the Exchange Act, and 18 U.S.C. ss.1350
(Section 906 of the Sarbanes-Oxley Act) relating to the Company SEC Documents
(collectively, the "Certifications") are accurate and complete, and complied as
to form and content with all applicable Legal Requirements as of the date of
such filing (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing). As used in this Section 2, the term
"file" and variations thereof shall be broadly construed to include any manner
in which a document or information is furnished, supplied or otherwise made
available to the SEC.
(b) The Acquired Corporations maintain disclosure controls and
procedures that satisfy the requirements of Rule 13a-15 under the Exchange Act.
Such disclosure controls and procedures are effective to ensure that all
material information concerning the Acquired Corporations is made known on a
timely basis to the individuals responsible for the preparation of the Company's
filings with the SEC. Part 2.4(b) of the Disclosure Schedule lists, and the
Company has Made Available to Parent accurate and complete copies of, all
written descriptions of, and all policies, manuals and other documents
promulgating, such disclosure controls and procedures in effect as of the date
of this Agreement.
(c) The financial statements (including any related notes) contained
or incorporated by reference in the Company SEC Documents: (i) complied as to
form in all material respects with the published rules and regulations of the
SEC applicable thereto; (ii) were prepared in accordance with generally accepted
accounting principles in the United States ("U.S. GAAP") applied on a consistent
basis throughout the periods covered (except as may be indicated in the notes to
such financial statements or, in the case of unaudited financial statements, as
permitted by Form 10-Q or Form 8-K of the SEC, and except that the unaudited
financial statements may not contain footnotes and are subject to normal and
recurring year-end adjustments that will not, individually or in the aggregate,
be material in amount); and (iii) fairly present in all material respects the
consolidated financial position of the Company and its consolidated subsidiaries
as of the respective dates thereof and the consolidated results of operations
and cash flows of the Company and its consolidated subsidiaries for the periods
covered thereby. No financial statements of any Person other than the Acquired
Corporations are required by U.S. GAAP to be included in the consolidated
financial statements of the Company. The financial statements required to be
delivered to Parent pursuant to Section 4.1(i): (x) will be prepared in
accordance with U.S. GAAP applied on a consistent basis throughout the periods
6
covered (except that such financial statements may not contain footnotes and may
be subject to normal and recurring year-end adjustments that will not,
individually or in the aggregate, be material in amount); and (y) will fairly
present in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries as of the respective dates thereof and
the consolidated results of operations of the Company and its consolidated
subsidiaries for the periods covered thereby.
(d) To the Company's Knowledge, the Company's independent auditor has
at all times since the date of enactment of the Sarbanes-Oxley Act been: (i) a
registered public accounting firm (as defined in Section 2(a)(12) of the
Sarbanes-Oxley Act); (ii) "independent" with respect to the Company within the
meaning of Regulation S-X under the Exchange Act; and (iii) in compliance with
subsections (g) through (l) of Section 10A of the Exchange Act and the rules and
regulations promulgated by the SEC and the Public Company Accounting Oversight
Board thereunder. Part 2.4(e) of the Disclosure Schedule contains an accurate
and complete description of all non-audit services performed by the Company's
auditors for the Acquired Corporations since March 31, 2005 and the fees paid
for such services. All non-audit services were approved as required by Section
202 of the Sarbanes-Oxley Act.
(e) The Acquired Corporations maintain a system of internal accounting
controls sufficient 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 U.S. 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. Part 2.4(f) of the Disclosure Schedule
lists as of the date of this Agreement, and the Company has Made Available to
Parent accurate and complete copies of, all written descriptions of, and all
policies, manuals and other documents promulgating, such internal accounting
controls.
(f) Part 2.4(f) of the Disclosure Schedule lists, and the Company has
Made Available to Parent accurate and complete copies of the documentation
creating or governing, all securitization transactions and "off-balance sheet
arrangements" (as defined in Item 303(c) of Regulation S-K under the Exchange
Act) effected by any of the Acquired Corporations since July 30, 2001.
2.5 Absence of Changes. Since June 30, 2005:
(a) there has not been any Company Material Adverse Effect, and no
event has occurred or circumstance has arisen that, in combination with any
other events that shall have occurred since June 30, 2005, or circumstances that
shall have arisen since June 30, 2005, would reasonably be expected to have a
Company Material Adverse Effect;
(b) there has not been any material loss, damage or destruction to, or
any material interruption in the use of, any of the assets of any of the
Acquired Corporations (whether or not covered by insurance);
(c) none of the Acquired Corporations has (i) declared, accrued, set
aside or paid any dividend or made any other distribution in respect of any
shares of capital stock, or (ii) repurchased, redeemed or otherwise reacquired
any shares of capital stock or other securities;
(d) none of the Acquired Corporations has sold, issued or granted, or
authorized the issuance of: (i) any capital stock or other security (except for
Company Common Stock issued upon the valid exercise of outstanding Company
Options); (ii) any option, warrant or right to acquire any capital stock or any
other security (except for Company Options identified in Part 2.3(c) of the
Disclosure Schedule or pursuant to the ESPP); or (iii) any instrument
convertible into or exchangeable for any capital stock or other security (except
for Company Options identified in Part 2.3(c) of the Disclosure Schedule or
pursuant to the ESPP);
7
(e) the Company has not amended or waived any of its rights under, or
permitted the acceleration of vesting under any provision of: (i) any of the
Option Plans; (ii) any Company Option or any Contract evidencing or relating to
any Company Option; (iii) any restricted stock purchase agreement; or (iv) any
other Contract evidencing or relating to any equity award (whether payable in
cash or stock);
(f) there has been no amendment to the certificate of incorporation,
bylaws or other charter or organizational documents of any of the Acquired
Corporations, and none of the Acquired Corporations has effected or been a party
to any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(g) none of the Acquired Corporations has formed any Subsidiary or
acquired any equity interest or other interest in any other Entity other than
any interest classified as a short-term investment on the June 30, 2005 Balance
Sheet;
(h) none of the Acquired Corporations has amended or terminated, or
waived any material right or remedy under, any Material Contract (as defined in
Section 2.10);
(i) none of the Acquired Corporations has: (i) acquired, leased or
licensed any material right or other material asset from any other Person; (ii)
sold or otherwise disposed of, or leased or licensed, any material right or
other material asset to any other Person; or (iii) waived or relinquished any
right, except for rights or other assets acquired, leased, licensed or disposed
of in the ordinary course of business and consistent with past practices;
(j) none of the Acquired Corporations has written off as uncollectible
other than in the ordinary course of business consistent with past practice, or
established any extraordinary reserve with respect to, any account receivable or
other indebtedness;
(k) none of the Acquired Corporations has made any pledge of any of
its assets or otherwise permitted any of its assets to become subject to any
Encumbrance, except for Permitted Encumbrances;
(l) none of the Acquired Corporations has: (i) lent money to any
Person other than money advanced to its employees in the ordinary course of
business consistent with past practice and pursuant to the Company's policies in
order to defray routine travel expenses; or (ii) incurred or guaranteed any
indebtedness for borrowed money;
(m) none of the Acquired Corporations has, except as required by
applicable Legal Requirements: (i) adopted, established or entered into any
Company Benefit Plan or Company Benefit Agreement; (ii) caused or permitted any
Company Benefit Plan to be amended in any material respect; or (iii) paid any
bonus or made any profit-sharing or similar payment to, or materially increased
the amount of the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of its directors, officers or
employees other than in the ordinary course of business consistent with past
practices or upon the promotion of the affected employee;
(n) none of the Acquired Corporations has changed any of its methods
of accounting or accounting practices in any material respect other than as
required by the rules and regulations of the SEC or by U.S. GAAP;
(o) none of the Acquired Corporations has made any material Tax
election;
(p) none of the Acquired Corporations has commenced or settled any
Legal Proceeding other than routine collection proceedings initiated by the
Acquired Corporations in the ordinary course of business;
(q) none of the Acquired Corporations has entered into any material
transaction or taken any other material action outside the ordinary course of
business or inconsistent with past practices; and
8
(r) none of the Acquired Corporations has agreed or committed to take
any of the actions referred to in clauses "(c)" through "(r)" above.
2.6 Title to Assets. The Acquired Corporations own, and have good and
valid title to, all assets (excluding Intellectual Property Rights and
Intellectual Property) purported to be owned by them, including: (a) all assets
reflected on the June 30, 2005 Balance Sheet (except for inventory sold or
otherwise disposed of in the ordinary course of business since June 30, 2005);
and (b) all other assets reflected in the books and records of the Acquired
Corporations as being owned by the Acquired Corporations. All of said assets are
owned by the Acquired Corporations free and clear of any Encumbrances, except
for (i) Permitted Encumbrances and (ii) liens described in Part 2.6 of the
Disclosure Schedule. The Acquired Corporations are the lessees of, and hold
valid leasehold interests in, all assets purported to have been leased by them,
including: (A) all assets reflected as leased on the June 30, 2005 Balance
Sheet; and (B) all other assets reflected in the books and records of the
Acquired Corporations as being leased by the Acquired Corporations. The Acquired
Corporations enjoy adequate rights of ingress and egress to all real property
leased by them and undisturbed possession of all personal property leased by
them.
2.7 Cash Balance; Receivables; Customers.
(a) As of June 30, 2005, the sum of the Company's cash, cash
equivalents and short-term investments, determined in accordance with U.S. GAAP
(applied on a basis consistent with the basis on which the financial statements
contained in the Company SEC Documents have been prepared) exceeded $1,400,000.
(b) All existing accounts receivable of the Acquired Corporations
(including those accounts receivable reflected on the June 30, 2005 Balance
Sheet that have not yet been collected and those accounts receivable that have
arisen since June 30, 2005 and have not yet been collected): (i) represent valid
obligations of customers of the Acquired Corporations arising from bona fide
transactions entered into in the ordinary course of business; and (ii) are
current and, to the Company's Knowledge, will be collected in full when due,
without any counterclaim or set off (net of an allowance for doubtful accounts
not to exceed $100,000 in the aggregate).
(c) Part 2.7(c) of the Disclosure Schedule contains an accurate and
complete list of each outstanding loan or advance made by any of the Acquired
Corporations to any Company Associate, other than routine travel advances made
to employees in the ordinary course of business.
(d) Part 2.7(d) of the Disclosure Schedule accurately identifies, and
provides an accurate and complete breakdown of the revenues received from, the
20 largest customers (measured by the aggregate dollar amount of revenue
generated by the Acquired Corporations from each customer in the applicable
fiscal year) of the Acquired Corporations in each of the fiscal years ended
March 31, 2004 and 2005. None of the Acquired Corporations has received any
notice or other communication or information (in writing or otherwise)
indicating, and the Company has no basis for believing, that any customer
identified in Part 2.7(d) of the Disclosure Schedule may cease dealing with any
of the Acquired Corporations or may otherwise materially reduce the volume of
business transacted by such customer with any of the Acquired Corporations.
2.8 Equipment; Real Property; Leasehold. All material items of
equipment and other tangible assets owned by or leased to the Acquired
Corporations are adequate for the uses to which they are being put, are in good
and safe condition and repair (ordinary wear and tear excepted) and are adequate
for the conduct of the business of the Acquired Corporations in the manner in
which such business is currently being conducted. None of the Acquired
Corporations own any real property or any interest in real property, except for
the leaseholds created under the real property leases identified in Part 2.8 of
the Disclosure Schedule.
2.9 Intellectual Property.
(a) Part 2.9(a) of the Disclosure Schedule accurately identifies and
describes as of the date of this Agreement:
9
(i) in Part 2.9(a)(i) of the Disclosure Schedule: (A) each
Patent, registered Trademark and other item of Registered IP in which any of the
Acquired Corporations has an ownership interest of any nature (whether
exclusively, jointly with another Person or otherwise); (B) the jurisdiction in
which such Patent, Trademark or other item of Registered IP has been registered
or filed and the applicable registration or serial number; and (C) any other
Person that has an ownership interest in such Patent, Trademark or other item of
Registered IP and the nature of such ownership interest;
(ii) in Part 2.9(a)(ii) of the Disclosure Schedule, each Contract
pursuant to which any Intellectual Property Right or Intellectual Property is
licensed to any of the Acquired Corporations (other than any non-exclusive
license to non-customized software that: (1) is so licensed solely in executable
or object code form, (2) is not incorporated into or bundled with any Company
Software, and (3) is generally available on standard terms); and
(iii) in Part 2.9(a)(iii) of the Disclosure Schedule, each
Contract entered into since July 30, 2001 pursuant to which any Person has been
granted any license directly or indirectly from an Acquired Company under, or
otherwise has received or acquired any right (whether or not currently
exercisable) or interest directly or indirectly from an Acquired Company in, any
Company IP (other than end user licenses for Company Software granted by an
Acquired Corporation, or an authorized reseller or distributor of an Acquired
Corporation, in the ordinary course of business, and Channel Agreements
identified in Part 2.10(a)(iv) of the Disclosure Schedule).
(b) The Company has Made Available to Parent an accurate and complete
copy of the current version of each standard form of Company IP Contract used by
any of the Acquired Corporations, including each standard form of: (i) end user
license agreement; (ii) maintenance or support agreement; (iii) distributor or
reseller agreement; (iv) employee agreement containing any assignment or license
of Intellectual Property or Intellectual Property Rights or any confidentiality
provision; (v) consulting or independent contractor agreement containing any
assignment or license of Intellectual Property or Intellectual Property Rights
or any confidentiality provision; or (vi) confidentiality or nondisclosure
agreement. The Company has provided to Parent or to Parent's outside counsel
each Company IP Contract (other than end user license agreements on the current
versions of any of Acquired Corporation's standard form) that is either (1) an
end user license agreement with one of the 20 largest customers (measured by the
aggregate dollar amount of revenue generated by the Acquired Corporations from
each customer in the applicable fiscal year) of the Acquired Corporations in
each of the fiscal years ended March 31, 2004 and 2005 or (2) an end user
license agreement based on a form of agreement proposed by the customer (as
opposed to the Company's standard form of end user license agreement).
(c) The Acquired Corporations exclusively own all right, title and
interest to and in the Company IP (other than Intellectual Property Rights or
Intellectual Property licensed to the Company, as identified in Part 2.9(a)(ii)
of the Disclosure Schedule and the Intellectual Property Rights or Intellectual
Property described in the Contracts exempted from disclosure by the terms of
Section 2.9(a)(ii)) free and clear of any Encumbrances (other than (i)
nonexclusive licenses granted pursuant to the Contracts listed in Part
2.9(a)(iii) of the Disclosure Schedule, (ii) nonexclusive licenses granted
pursuant to the Contracts exempted from disclosure by the terms of Section
2.9(a)(iii) and (iii) end user licenses for Company Software granted by an
Acquired Corporation, or an authorized distributor of an Acquired Corporation,
in the ordinary course of business and Channel Agreements identified in Part
2.10(a)(iv) of the Disclosure Schedule). Without limiting the generality of the
foregoing:
(i) all documents and instruments necessary to record the
assignment or transfer to the Acquired Corporations of the rights held by the
Acquired Corporations in the Company IP that is Registered IP have been validly
executed, delivered and filed in a timely manner with the appropriate
Governmental Body;
(ii) No Person developed any components of the Company IP who was
not an employee or independent contractor of an Acquired Corporation at the time
such development took place, and each Person who is or was an employee or
independent contractor of any of the Acquired Corporations and who is or was
involved in any material respect in the creation or development of any Company
IP has signed a written agreement containing an irrevocable assignment of
Intellectual Property Rights to the Acquired Corporation for which such Person
is or was an employee or independent contractor and confidentiality provisions
protecting the Company IP;
10
(iii) to the Company's Knowledge, no Company Associate has any
claim, right (whether or not currently exercisable) or interest to or in any
Company IP;
(iv) to the Company's Knowledge, no employee or independent
contractor of any of the Acquired Corporations is: (A) bound by or otherwise
subject to any Contract restricting him or her from performing his or her duties
for such Acquired Corporation; or (B) in breach of any Contract with an Acquired
Corporation, any former employer or other Person concerning Intellectual
Property Rights or confidentiality;
(v) no funding, facilities or personnel of any Governmental Body
were used, directly or indirectly, to develop or create, in whole or in part,
any Company IP;
(vi) each of the Acquired Corporations has taken reasonable steps
to maintain the confidentiality of and otherwise protect and enforce its rights
in the material Company Source Code and all other material proprietary
information held by any of the Acquired Corporations, or purported to be held by
any of the Acquired Corporations, as a trade secret;
(vii) none of the Acquired Corporations has assigned or otherwise
transferred ownership of, or agreed to assign or otherwise transfer ownership
of, any material Intellectual Property Right to any other Person;
(viii) none of the Acquired Corporations is now or has ever been
a member or promoter of, or a contributor to, any industry standards body or
similar organization that required (or has the right under any Contract to
require) any of the Acquired Corporations to disclose, or grant or offer to any
other Person any license or right to, any Company IP;
(ix) other than (i) the Intellectual Property Rights and
Intellectual Property licensed to the Company, as identified in Part 2.9(a)(ii)
of the Disclosure Schedule, (ii) the Intellectual Property Rights and
Intellectual Property described in Contracts exempted from disclosure by the
terms of Section 2.9(a)(ii), (iii) the nonexclusive licenses granted pursuant to
the Contracts listed in Part 2.9(a)(iii) of the Disclosure Schedule, (iv) the
nonexclusive licenses granted pursuant to the Contracts exempted from disclosure
by the terms of Section 2.9(a)(iii), (v) end user licenses for Company Software
granted by an Acquired Corporation, or an authorized distributor of an Acquired
Corporation, in the ordinary course of business and on the Company's standard
form of end user license agreement and (vi) Channel Agreements identified in
Part 2.10(a)(iv) of the Disclosure Schedule, none of the Acquired Corporations
is bound by, and no Company IP is subject to, any Contract containing any
covenant or other provision that in any way limits or restricts the ability of
any of the Acquired Corporations in any material way to use, exploit, assert, or
enforce any Company IP anywhere in the world; and
(x) the Acquired Corporations own or otherwise have, and
immediately after the Closing the Surviving Corporation will continue to have,
all Intellectual Property Rights needed to conduct the business of the Acquired
Corporations as currently conducted and currently planned by the Company to be
conducted.
(d) To the Company's Knowledge, all Company IP is valid, subsisting
and enforceable. Without limiting the generality of the foregoing:
(i) each item of Company IP that is Registered IP is and at all
times has been in compliance with all Legal Requirements, and all filings,
payments and other actions required to be made or taken to maintain such item of
Company IP in full force and effect have been made by the applicable deadline
(other than those actions not made or taken that have not jeopardized or
diminished any Company IP or any Intellectual Property Right therein);
11
(ii) no application for a patent or for a copyright, mask work or
trademark registration or any other type of Registered IP filed by or on behalf
of any of the Acquired Corporations has been abandoned, allowed to lapse or
rejected;
(iii) the Company has Made Available to Parent accurate and
complete copies of all applications and other material documents (including
correspondence with the U.S. Patent and Trademark Office and similar authorities
in other jurisdictions) related to each patent included in Company IP; and
(iv) no interference, opposition, reissue, reexamination or other
Legal Proceeding of any nature is or has been pending or, to the Company's
Knowledge, has been threatened, in which the scope, validity or enforceability
of any Company IP is being, has been or would reasonably be expected to be
contested or challenged.
(e) Neither the execution, delivery or performance of this Agreement
nor the consummation of any of the Contemplated Transactions will, with or
without notice or the lapse of time, result in or give any other Person the
right or option to cause or declare: (i) a material loss of, or material
Encumbrance on, any Company IP; (ii) a material breach of any Material Contract;
(iii) the release, disclosure or delivery of any Company Source Code or other
material Company IP by or to any escrow agent or other Person; or (iv) the
grant, assignment or transfer to any other Person of any material license or
other material right or interest under, to or in any of the Company IP.
(f) To the Company's Knowledge, no Person is currently infringing,
misappropriating or otherwise violating, any Company IP in any material respect.
Part 2.9(f) of the Disclosure Schedule accurately identifies (and the Company
has actually delivered to Parent or to Parent's outside counsel an accurate and
complete copy of) each letter or other written or electronic communication or
correspondence that has been sent or otherwise made available by or to any of
the Acquired Corporations or any Representative of any of the Acquired
Corporations since July 30, 2001 regarding any actual, alleged or suspected
infringement or misappropriation of any Company IP, and provides a brief
description of the current status of the matter referred to in such letter,
communication or correspondence.
(g) Except as set forth in the applicable subsection of Part 2.9(g) of
the Disclosure Schedule, to the Company's Knowledge: (i) none of the Acquired
Corporations has ever infringed (directly, contributorily, by inducement or
otherwise), misappropriated or otherwise violated any Intellectual Property
Right of any other Person; and (ii) none of the Company Software infringes any
Intellectual Property Right of any Person or contains or embodies any software
code, algorithms, or other Intellectual Property that has been misappropriated
from any Person.
(h) No infringement, misappropriation or similar claim or Legal
Proceeding is pending or, to the Company's Knowledge, has been threatened
against any of the Acquired Corporations. To the Company's Knowledge, no
infringement, misappropriation or similar claim or Legal Proceeding is pending
or has been threatened against any other Person who may be entitled to be
indemnified, defended, held harmless or reimbursed by the Company with respect
to such claim or Legal Proceeding. To the Company's Knowledge, no facts or
circumstances exist that provide a basis for any claim of the kind described in
this Section 2.9(h).
(i) Except as described in Part 2.9(i) of the Disclosure Schedule,
since July 30, 2001 none of the Acquired Corporations has received any notice or
other communication (in writing or otherwise) claiming that any Acquired
Corporation or Company Software is or may be infringing, misappropriating or
otherwise violating, or has or may have infringed, misappropriated or otherwise
violated, or offering a license to or suggesting that any Acquired Corporation
may need a license to, any Intellectual Property Right of another Person. Part
2.9(i) of the Disclosure Schedule provides a brief description of the current
status of each matter described therein. The Company has Made Available to
Parent an accurate and complete copy of each written or electronic notice or
communication identified in Part 2.9(i) of the Disclosure Schedule.
(j) None of the Acquired Corporations has ever assumed, or agreed to
indemnify, hold harmless, defend, discharge or otherwise take responsibility
for, any existing or potential liability of another Person for infringement,
misappropriation or violation of any Intellectual Property Right (other than
12
pursuant to indemnification provisions in (i) end user license agreements for
Company Software entered into by an Acquired Corporation in the ordinary course
of business or (ii) Channel Agreements identified in Part 2.10(a)(iv) of the
Disclosure Schedule).
(k) None of the Company Software contains any Malicious Code.
(l) None of the Company Software is subject to any "copyleft" or other
obligation or condition (including any obligation or condition under any "open
source" license such as the GNU Public License, Lesser GNU Public License or
Mozilla Public License) that by its terms: (i) requires, or conditions the use
or distribution of such Company Software on, the disclosure, licensing or
distribution of any source code for any portion of such Company Software; or
(ii) otherwise imposes any material limitation, restriction or condition on the
right or ability of the Company to use or distribute any Company Software.
(m) No Company Source Code has been delivered, licensed or made
available to any escrow agent or other Person who is not, as of the date of this
Agreement, an employee of one of the Acquired Corporations. None of the Acquired
Corporations has any duty or obligation (whether present, contingent or
otherwise) to deliver, license or make available any Company Source Code to any
escrow agent or other Person. No event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or would
reasonably be expected to, result in the delivery, license or disclosure of any
Company Source Code to any other Person.
2.10 Contracts.
(a) Part 2.10 of the Disclosure Schedule identifies each Company
Contract that constitutes a "Material Contract" (other than Company IP Contracts
that are not required to be identified in Part 2.9 of the Disclosure Schedule
and that would not otherwise be considered Material Contracts under any
subsection of this Section 2.10(a) other than subsection (ii) below). For
purposes of this Agreement, each of the following shall be deemed to constitute
a "Material Contract":
(i) any Company Contract: (A) relating to the employment of, or
the performance of services by, any employee or consultant that requires, or may
require, payments in excess of $100,000 on an annual basis to any Person; (B)
the terms of which obligate or may in the future obligate any of the Acquired
Corporations to make any severance, termination or similar payment to any
current or former employee or director; or (C) pursuant to which any of the
Acquired Corporations is or may become obligated to make any bonus or similar
payment (other than payments constituting base salary or sales commissions) in
excess of $20,000 to any current or former employee or director;
(ii) any Company IP Contract;
(iii) any Company Contract relating to the acquisition, sale,
spin-off, outsourcing or disposition of any business operation or unit or any
product line of any Acquired Corporation (except for Company Contracts
terminated prior to July 30, 2001 under which the Company had no remaining
obligations following such date);
(iv) any Company Contract in which another Person is or was
appointed as a distributor, reseller or sales representative with respect to, or
otherwise is or was authorized to market, promote, distribute, resell,
sublicense, support or solicit orders for, any Company Software (a "Channel
Agreement");
(v) any Company Contract (other than Channel Agreements) that
provides for indemnification of any Company Associate or any current or former
agent of any of the Acquired Corporations (an "Indemnification Contract");
(vi) any Company Contract imposing any restriction on the right
or ability of any Acquired Corporation: (A) to compete with any other Person;
(B) to acquire any product or other asset or any services from any other Person;
(C) to solicit, hire or retain any Person as an employee, consultant or
13
independent contractor; (D) to develop, sell, supply, distribute, offer, support
or service any product or any technology or other asset to or for any other
Person; (E) to perform services for any other Person; or (F) to transact
business or deal in any other manner with any other Person;
(vii) any Company Contract (other than Company Contracts
evidencing Company Options or rights under the ESPP): (A) relating to the
acquisition, issuance, voting, registration, sale or transfer of any securities;
(B) providing any Person with any preemptive right, right of participation,
right of maintenance or similar right with respect to any securities; or (C)
providing any of the Acquired Corporations with any right of first refusal with
respect to, or right to repurchase or redeem, any securities;
(viii) any Company Contract that imposes on any Acquired
Corporation any guaranty, any warranty or any indemnity or similar obligation,
except for Channel Agreements and end user license agreements for Company
Software entered into by an Acquired Corporation in the ordinary course of
business;
(ix) any Company Contract relating to any currency hedging;
(x) any Company Contract: (A) imposing any confidentiality
obligation on any of the Acquired Corporations or on any other Person (other
than confidentiality or nondisclosure agreements entered into by any Acquired
Corporation in the ordinary course of business that do not otherwise constitute
Material Contracts under this Section 2.10(a)); or (B) containing "standstill"
or similar provisions;
(xi) any Company Contract requiring that any of the Acquired
Corporations give any notice or provide any information to any Person prior to
considering or accepting any Acquisition Proposal or similar proposal, or prior
to entering into any discussions, agreement, arrangement or understanding
relating to any Acquisition Transaction or similar transaction;
(xii) any Company Contract that contemplates or involves the
payment or delivery of cash or other consideration in an amount or having a
value in excess of $100,000 in the aggregate, or contemplates or involves the
performance of services having a value in excess of $100,000 in the aggregate;
(xiii) any Company Contract that would reasonably be expected to
have a Material Adverse Effect on: (A) the business, financial condition,
capitalization, aggregate fair market value of the assets (including cash, cash
equivalents, short-term investments and Intellectual Property) of the Acquired
Corporations minus the amount of the liabilities (accrued, contingent or
otherwise) of the Acquired Corporations, operations or financial performance of
the Acquired Corporations taken as a whole; or (B) the ability of the Company to
consummate the Merger or any of the other Contemplated Transactions or to
perform any of its obligations under this Agreement; and
(xiv) any other Company Contract, if a breach of such Company
Contract would reasonably be expected to have a Company Material Adverse Effect.
The Company has Made Available to Parent an accurate and complete copy of each
Company Contract that constitutes a Material Contract (other than Company IP
Contracts that do not need to be specifically identified in Part 2.9 of the
Disclosure Schedule). For each Material Contract that is a Channel Agreement,
Part 2.10(a) of the Disclosure Schedule identifies such Material Contract as a
Channel Agreement and also indicates whether such Channel Agreement is currently
in effect.
(b) Each Company Contract that constitutes a Material Contract is
valid and in full force and effect, and is enforceable in accordance with its
terms, subject to: (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors; and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
(c) (i) None of the Acquired Corporations has violated or breached, or
committed any default under, any Company Material; and, to the Company's
Knowledge, no other Person has violated or breached, or committed any default
14
under, any Company Contract; (ii) except for express warranty and
indemnification remedies set forth in the standard forms of Company IP Contracts
described in Section 2.9(b) or in any Channel Agreement or end user license
agreement entered into in the ordinary course of business that was Made
Available to Parent, no end user, distributor, or other licensee of the Company
Software has any conditional or unconditional return, refund, or credit rights
exercisable against the Acquired Corporations with respect to such Company
Software; (iii) to the Company's Knowledge, no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time)
would reasonably be expected to: (A) result in a material violation or breach of
any of the provisions of any Company Contract; (B) give any Person the right to
declare a default or exercise any material remedy under any Company Contract;
(C) give any Person the right to receive or require a material rebate,
chargeback, penalty or change in delivery schedule under any Company Contract;
(D) give any Person the right to accelerate the maturity or performance of any
Company Contract; (E) result in the disclosure, release or delivery of any
Company Source Code; or (F) give any Person the right to cancel, terminate or
modify any Company Contract; (iv) since July 30, 2001, none of the Acquired
Corporations has received any notice or other communication regarding any actual
or possible violation or breach of, or default under, any Company Contract,
except for claims under or based upon any warranty provided by or on behalf of
any of the Acquired Corporations or based upon any services performed by any of
the Acquired Corporations; and (v) without limiting the generality of the
foregoing, none of the Acquired Corporations has failed to meet any development
or delivery milestone under any Company Contract.
2.11 Sale of Products; Performance of Services.
(a) Part 2.11(a) of the Disclosure Schedule accurately identifies each
Company Software product that is currently being developed, marketed,
distributed, licensed or sold by any Acquired Corporation.
(b) The data and other information Made Available to Parent relating
to bugs, design defects and other defects or deficiencies in the Company
Software is accurate and complete.
(c) Since March 31, 2005, no customer or other Person has asserted or,
to the Company's Knowledge, threatened to assert any claim against any of the
Acquired Corporations: (i) under or based upon any warranty provided by or on
behalf of any of the Acquired Corporations; or (ii) based upon any services
performed by any of the Acquired Corporations. For the avoidance of doubt,
Customer requests for technical support in the ordinary course of business do
not constitute "claims" for purposes of this Section 2.11(c).
(d) Since March 31, 2005, no end user customer that was one of the 20
largest customers (measured by the aggregate dollar amount of revenue generated
by the Acquired Corporations from each customer in the applicable fiscal year)
of the Acquired Corporations in either of the fiscal years ended March 31, 2004
and 2005, and no distributor, reseller, or sales representative of any Acquired
Corporation, has terminated or, to the Company's Knowledge, overtly threatened
or expressed an intention to terminate or not to renew, its relationship or any
Contract with any of the Acquired Corporations.
2.12 Liabilities. None of the Acquired Corporations has, and none of
the Acquired Corporations is responsible for performing or discharging, any
accrued, contingent or other liabilities of any nature, either matured or
unmatured, except for: (a) liabilities identified as such on the face of the
June 30, 2005 Balance Sheet; (b) normal and recurring current liabilities that
have been incurred by the Acquired Corporations since June 30, 2005 in the
ordinary course of business and consistent with past practices; (c) liabilities
for performance of obligations of the Acquired Corporation under Company
Contracts, to the extent such liabilities are readily ascertainable (in nature,
scope and amount) from the copies of such Company Contracts Made Available to
Parent prior to the date of this Agreement; (d) liabilities described in Part
2.12(a) of the Disclosure Schedule; and (e) liabilities and obligations under
this Agreement.
2.13 Compliance with Legal Requirements. Each of the Acquired
Corporations is, and has at all times since July 30, 2001 been, in compliance in
all material respects with all applicable Legal Requirements. To the Company's
Knowledge, each Person who is or was a director or officer of any Acquired
Corporation is, and has at all times since July 30, 2001 been, in compliance in
all material respects with all applicable Legal Requirements as such Legal
Requirements apply to such Person in his or her capacity as a director or
officer of the Company. Since July 30, 2001, none of the Acquired Corporations
has received any notice or other communication from any Governmental Body or
other Person regarding any actual or possible violation of, or failure to comply
with, any Legal Requirement.
15
2.14 Certain Business Practices. None of the Acquired Corporations,
and (to the Company's Knowledge) no director, officer, other employee or agent
of any of the Acquired Corporations acting or purporting to act in his capacity
as such, has: (a) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (b)
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 (c)
made any other unlawful payment.
2.15 Governmental Authorizations. The Acquired Corporations hold all
material Governmental Authorizations necessary to enable the Acquired
Corporations to conduct their respective businesses in the manner in which such
businesses are currently being conducted. All such Governmental Authorizations
are valid and in full force and effect. Each Acquired Corporation is, and at all
times since July 30, 2001 has been, in compliance in all material respects with
the terms and requirements of such Governmental Authorizations. Since July 30,
2001, none of the Acquired Corporations has received any notice or other
communication from any Governmental Body regarding: (a) any actual or possible
violation of or failure to comply with any term or requirement of any material
Governmental Authorization; or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
material Governmental Authorization.
2.16 Tax Matters.
(a) Each of the material Tax Returns required to be filed by or on
behalf of the respective Acquired Corporations with any Governmental Body on or
before the Closing Date (the "Company Returns"): (i) has been or will be filed
on or before the applicable due date (including any extensions of such due
date); and (ii) has been, or will be when filed, prepared in all material
respects in compliance with all applicable Legal Requirements. All Taxes
required to be paid by the Acquired Corporations on or before the Closing Date
have been or will be paid on or before the Closing Date, other than any Taxes
for which adequate reserves have been established in accordance with Section
2.16(b).
(b) The June 30, 2005 Balance Sheet fully accrues all actual and
contingent liabilities for Taxes with respect to all periods through the date of
this Agreement in accordance with U.S. GAAP, except for liabilities for Taxes
incurred since June 30, 2005 in the operation of the business of the Acquired
Corporations. On or before the Closing Date, each Acquired Corporation will
establish, in the ordinary course of business and consistent with its past
practices, reserves adequate for the payment of all Taxes for the period from
June 30, 2005 through the Closing Date.
(c) No Company Return has ever been examined or audited by any
Governmental Body. No extension or waiver of the limitation period applicable to
any of the Company Returns has been granted (by the Company or any other
Person), and no such extension or waiver has been requested from any Acquired
Corporation.
(d) No claim or Legal Proceeding is pending or, to the Company's
Knowledge, has been threatened against or with respect to any Acquired
Corporation in respect of any material Tax. There are no unsatisfied liabilities
for material Taxes (including liabilities for interest, additions to tax and
penalties thereon and related expenses) with respect to any notice of deficiency
or similar document received by any Acquired Corporation with respect to any
material Tax (other than liabilities for Taxes asserted under any such notice of
deficiency or similar document which are being contested in good faith by the
Acquired Corporations and with respect to which adequate reserves for payment
have been established on the June 30, 2005 Balance Sheet). There are no liens
for Taxes upon any of the assets of any of the Acquired Corporations except
liens for current Taxes not yet due and payable. None of the Acquired
Corporations will be required to include any adjustment in taxable income for
any tax period (or portion thereof) after the Closing pursuant to Section 481 or
Section 263 or 263A of the Code (or any comparable provision of state or foreign
Tax laws) as a result of transactions or events occurring, or accounting methods
employed, prior to the Closing.
16
(e) There is no agreement, plan, arrangement or other Contract
covering, benefiting or relating to any Company Associate that, considered
individually or considered collectively with any other such Contracts, would
reasonably be expected to give rise directly or indirectly to the payment of any
amount that would not be deductible pursuant to Section 280G or Section 162(m)
of the Code (or any comparable provision of state or foreign Tax laws). None of
the Acquired Corporations is, or has ever been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or similar
Contract. No Acquired Corporation is a party to any agreement to compensate any
Person for excise taxes payable pursuant to Section 4999 of the Code.
(f) No written claim has ever been made by any Governmental Body in a
jurisdiction where an Acquired Corporation does not file a Tax Return that such
Acquired Corporation is or may be subject to taxation by that jurisdiction.
(g) There is no Company Contract relating to allocating or sharing of
Taxes. No Acquired Corporation: (i) is liable for Taxes of any other Person, or
is currently under any contractual obligation to indemnify any Person with
respect to any portion of such Person's Taxes (except for customary agreements
to indemnify lenders or security holders in respect of Taxes); or (ii) is a
party to or bound by any Contract providing for payments by such Acquired
Corporation with respect to any amount of Taxes of any other Person, other than
such a Company Contract of which Acquired Corporations are the only parties.
(h) No Acquired Corporation has constituted either a "distributing
corporation" or a "controlled corporation" within the meaning of Section
355(a)(1)(A) of the Code. No Acquired Corporation is or has been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code, and Parent will not be required to withhold any Tax on the purchase of the
Company by reason of Section 1445 of the Code.
(i) No Acquired Corporation has been a member of an affiliated group
of corporations within the meaning of Section 1504 of the Code or within the
meaning of any similar Legal Requirement to which an Acquired Corporation may be
subject, other than the affiliated group of which the Company is the common
parent.
(j) The Company has Made Available to Parent copies of all Tax Returns
of the Acquired Corporations for all fiscal years still open to potential audit.
(k) The Company has disclosed on its federal income Tax Returns all
positions that could give rise to a material understatement penalty within the
meaning of Section 6662 of the Code or any similar Legal Requirement.
(l) No Acquired Corporation has participated, or is currently
participating, in a "Listed Transaction" or a "Reportable Transaction" within
the meaning of Treasury Regulation Section 1.6011-4(b)(2) or in a similar
transaction under any corresponding or similar Legal Requirement.
2.17 Employee and Labor Matters; Benefit Plans.
(a) Part 2.17(a) of the Disclosure Schedule identifies each Company
Benefit Plan.
(b) None of the Acquired Corporations maintains, sponsors or
contributes to, and none of the Acquired Corporations has at any time in the
past maintained, sponsored or contributed to, any employee pension benefit plan
(as defined in Section 3(2) of ERISA), or any similar pension benefit plan that
is a Foreign Plan, whether or not excluded from coverage under specific Titles
or Subtitles of ERISA, for the benefit of any Company Associate.
(c) With respect to each Company Benefit Plan, the Company has Made
Available to Parent (where applicable): (i) an accurate and complete copy of
such Company Benefit Plan (including all amendments thereto); (ii) an accurate
and complete copy of the annual report (Form Series 5500 and all schedules and
financial statements attached thereto), if any, required under ERISA or the
17
Code, with respect to such Company Benefit Plan for the three most recent plan
years; (iii) if such Company Benefit Plan is subject to the minimum funding
standards of ERISA Section 302, the most recent annual and periodic accounting
of such Company Benefit Plan's assets; (iv) an accurate and complete copy of the
most recent summary plan description, together with each summary of material
modifications, if required under ERISA, with respect to such Company Benefit
Plan; (v) if such Company Benefit Plan is funded through a trust or any third
party funding vehicle, an accurate and complete copy of the trust or other
funding agreement (including all amendments thereto) and accurate and complete
copies of the most recent financial statements thereof; (vi) accurate and
complete copies of all Contracts relating to such Company Benefit Plan,
including service provider agreements, insurance contracts, minimum premium
contracts, stop-loss agreements, investment management agreements, subscription
and participation agreements and recordkeeping agreements; (vii) all written
materials provided to any Company Associate relating to such Company Benefit
Plan and any proposed Company Benefit Plan, in each case relating to any
amendments, terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting schedules or other events which could result
in any material liability to any of the Acquired Corporations; (viii) all
material correspondence, if any, to or from any Governmental Body relating to
such Company Benefit Plan; (ix) all forms and related notices required under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
with respect to such Company Benefit Plan; (x) all insurance policies, if any,
in the possession of any of the Acquired Corporations pertaining to fiduciary
liability insurance covering the fiduciaries for such Company Benefit Plan; (xi)
if such Company Benefit Plan is intended to be qualified under Section 401(a) of
the Code, all discrimination tests, if any, required under the Code for such
Company Benefit Plan for the three most recent plan years; (xii) if such Company
Benefit Plan is intended to be qualified under Section 401(a) of the Code, the
most recent determination letter (or opinion letter, if applicable) received
from the Internal Revenue Service with respect to such Company Benefit Plan; and
(xiii) if such Company Benefit Plan is a Foreign Plan, all Governmental
Authorizations received from any foreign Governmental Body with respect to such
Company Benefit Plan.
(d) None of the Acquired Corporations is or has ever been required to
be treated as a single employer with any other Person other than the Acquired
Corporations under Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or
(o) of the Code. None of the Acquired Corporations has ever been a member of an
"affiliated service group" within the meaning of Section 414(m) of the Code.
(e) No Acquired Corporation has ever maintained, established,
sponsored, participated in or contributed to or could incur any liability under
any: (i) Company Benefit Plan subject to Section 302 or Title IV of ERISA or
Section 412 of the Code; (ii) "multiemployer plan" within the meaning of Section
3 (37) of ERISA; (iii) "multiple employer plan" (within the meaning of Section
413(c) of the Code); or (iv) Company Benefit Plan in which stock of any of the
Acquired Corporations is or was held as a "plan asset" within the meaning of DOL
Regulations Section 2510.3-101. For purposes of clarity, stock of an Acquired
Corporation shall not be deemed to be a "plan asset" for purposes of the
preceding sentence solely by virtue of the fact that such stock is held by an
investment company registered under the Investment Company Act of 1940 and the
stock of such investment company is a "plan asset." None of the Acquired
Corporations has ever made a complete or partial withdrawal from a multiemployer
plan, as such term is defined in Section 3(37) of ERISA, resulting in withdrawal
liability, as such term is defined in Section 4201 of ERISA (without regard to
subsequent reduction or waiver of such liability under either Section 4207 or
Section 4208 of ERISA).
(f) With respect to each Company Benefit Plan as to which any of the
Acquired Corporations may incur any liability under, or that is subject to,
Section 302 or Title IV of ERISA or Section 412 of the Code: (i) such Company
Benefit Plan has not been terminated so as to result, directly or indirectly, in
any material liability, contingent or otherwise, of any of the Acquired
Corporations under Title IV of ERISA; (ii) no complete or partial withdrawal
from such Company Benefit Plan has been made by any of the Acquired
Corporations, or by any other Person, so as to result in any material liability
to any of the Acquired Corporations, whether such liability is contingent or
otherwise; (iii) no proceeding has been initiated by any Person (including the
Pension Benefit Guaranty Corporation (the "PBGC")) to terminate such Company
Benefit Plan or to appoint a trustee for such Company Benefit Plan; (iv) no
condition or event exists or is expected to occur that could result, directly or
indirectly, in any material liability of any of the Acquired Corporations under
Title IV of ERISA, whether to the PBGC or otherwise, on account of the
termination of such Company Benefit Plan; (v) if such Company Benefit Plan were
to be terminated as of the Closing Date or if any Person were to withdraw from
such Company Benefit Plan, none of the Acquired Corporations would incur,
directly or indirectly, any material liability under Title IV of ERISA; (vi) no
"reportable event" (as defined in Section 4043 of ERISA) has occurred with
respect to such Company Benefit Plan, nor has notice of any such event or
similar notice to any foreign Governmental Body been required to be filed for
18
such Company Benefit Plan within the past twelve months nor will any such notice
be required to be filed as a result of any of the Contemplated Transactions;
(vii) such Company Benefit Plan has not incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code,
respectively), whether or not waived, and none of the Acquired Corporations has
provided, or is required to provide, security to such Company Benefit Plan
pursuant to Section 401(a)(29) of the Code; and (viii) none of the Contemplated
Transactions will result in any event described in Section 4062(e) of ERISA with
respect to such Company Benefit Plan.
(g) None of the Acquired Corporations has any plan or commitment to
create any additional Company Benefit Plan, or to modify or change any existing
Company Benefit Plan (other than to comply with applicable Legal Requirements as
previously disclosed to Parent in writing) in a manner that would create any
material liability for any of the Acquired Corporations.
(h) No Company Benefit Plan provides (except at no cost to the
Acquired Corporations), or reflects or represents any liability of any of the
Acquired Corporations to provide, retiree life insurance, retiree health
benefits or other retiree employee welfare benefits to any Person for any
reason, except as may be required by COBRA or other applicable Legal
Requirements. Other than commitments made that involve no future costs to any of
the Acquired Corporations, no Acquired Corporation has ever represented,
promised or contracted (whether in oral or written form) to any Company
Associate (either individually or as part of a group of Company Associates) or
any other Person that such Company Associate or other Person would be provided
with retiree life insurance, retiree health benefits or other retiree employee
welfare benefits, except to the extent required by applicable Legal
Requirements.
(i) Each of the Company Benefit Plans has been operated and
administered in all material respects in accordance with its terms and with
applicable Legal Requirements, including ERISA, the Code, applicable U.S. and
non-U.S. securities laws and regulations and applicable foreign Legal
Requirements. The Acquired Corporations have performed all material obligations
required to be performed by them under the Company Benefit Plans and none of the
Acquired Corporations is in default or violation of any material term of any
Company Benefit Plan. To the Company's Knowledge, there has been no default or
violation by any other party with respect to any material term of any Company
Benefit Plan. Each Company Benefit Plan intended to be qualified under Section
401(a) of the Code has obtained a favorable determination letter (or opinion
letter, if applicable) as to its qualified status under the Code or has
remaining a period in which to apply for such a letter, and to the Company's
Knowledge, there is not and there has never been any event, condition or
circumstance that would reasonably be expected to result in disqualification
under the Code. To the Company's Knowledge, there is not and there has never
been any event, condition or circumstance that would reasonably be expected to
result in any Company Benefit Plan that is a Foreign Plan failing to qualify for
the Tax benefits customarily associated with plans of such type. There are no
claims or Legal Proceedings pending, or to the Company's Knowledge, threatened
or reasonably anticipated (other than routine claims for benefits) against any
Company Benefit Plan or against the assets of any Company Benefit Plan. To the
Company's Knowledge, no breach of fiduciary duty has occurred with respect to
which any Acquired Corporation or any of its fiduciaries would reasonably be
expected to incur a material liability. Each Company Benefit Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to any of the Acquired Corporations
(other than ordinary administration expenses). To the Company's Knowledge, no
Company Benefit Plan is under audit or investigation, or is subject to any other
Legal Proceeding commenced by the Internal Revenue Service, the DOL or any other
Governmental Body, nor is any such audit, investigation or other Legal
Proceeding pending or, to the Company's Knowledge, threatened. No "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections 406 and
407 of ERISA (other than a transaction exempt under Section 408 of ERISA and the
regulatory guidance thereunder), has occurred with respect to any Company
Benefit Plan. No mortgage, lien, pledge, charge, security interest or other
Encumbrance of any kind has been imposed under the Code, ERISA or any foreign
Legal Requirement with respect to any Company Benefit Plan or any of the assets
of any Company Benefit Plan, with the exception of participant loans granted
under pension plans. All contributions, premiums and expenses to or in respect
of each Company Benefit Plan have been paid in full or, to the extent not yet
due, have been adequately accrued on the June 30, 2005 Balance Sheet.
19
(j) None of the Acquired Corporations has incurred or reasonably
expects to incur, either directly or indirectly (including as a result of an
indemnification obligation), any material liability under Title I or IV of ERISA
or under the penalty, excise tax or joint and several liability provisions of
the Code or any foreign Legal Requirement relating to employee benefit plans
(including Section 406, 409, 502(i), 502(l), 4069 or 4212(c) of ERISA, or
Section 4971, 4975 or 4976 of the Code), or under any Contract or Legal
Requirement pursuant to or under which any of the Acquired Corporations or any
Company Benefit Plan has agreed to indemnify or is required to indemnify any
Person against liability incurred under, or for a violation or failure to
satisfy the requirements of, any such Contract or Legal Requirement; and, to the
Company's Knowledge, no event, transaction or condition has occurred, exists or
is expected to occur which could result in the incurrence of any such material
liability by any of the Acquired Corporations or by Parent.
(k) Neither the execution, delivery or performance of this Agreement,
nor the consummation of any of the Contemplated Transactions (either alone or in
combination with another event, whether contingent or otherwise), will: (i)
result in any bonus, severance or other payment or obligation to any Company
Associate (whether or not under any Company Benefit Plan); (ii) materially
increase the benefits payable or provided to, or result in a forgiveness of any
indebtedness of, any Company Associate; or (iii) accelerate the vesting, funding
or time of payment of any compensation, equity award or other similar benefit.
(l) Under each Company Benefit Plan that is a single employer defined
benefit plan, as of the last day of the most recent plan year ended prior to the
date of this Agreement, the actuarially determined present value of all "benefit
liabilities," within the meaning of Section 4001(a)(16) of ERISA (as determined
on the basis of the actuarial assumptions contained in the Company Benefit
Plan's most recent actuarial valuation), did not exceed the then current value
of the assets of such Company Benefit Plan, and there has been no material
adverse change in the financial condition of such Company Benefit Plan (with
respect to either assets or benefits) since the last day of such most recent
plan year. The fair market value of the assets of each funded Foreign Plan, the
liability of each insurer for any Foreign Plan funded through insurance or the
book reserve established for any Foreign Plan, together with any accrued
contributions, is sufficient to procure or provide in full for the accrued
benefit obligations with respect to all current and former participants in such
Foreign Plan according to the actuarial assumptions and valuations most recently
used to determine employer contributions to and obligations under such Foreign
Plan. Neither the execution of this Agreement nor the consummation of any of the
Contemplated Transactions, will cause any of the assets or insurance obligations
to be less than the benefit obligations under such Company Benefit Plan or
Foreign Plan.
(m) None of the Acquired Corporations: (i) maintains any plan,
agreement or arrangement, formal or informal, that provides material benefits in
the nature of severance; or (ii) has any outstanding liabilities with respect to
material severance benefits.
(n) None of the Acquired Corporations has any material liability
(including a material liability arising out of an indemnification, guarantee,
hold harmless or similar agreement) relating to any insurance Contract held
under or purchased to fund a Company Benefit Plan, the issuer of which is or was
insolvent or in reorganization or the payments under which were suspended.
(o) Except for the 2001 Plan and the ESPP, none of the Acquired
Corporations maintains any plan, program or arrangement or is a party to any
Contract that provides any material benefits or provides for material payments
to any Person based on or measured by the value of any equity security of, or
interest in, any of the Acquired Corporations.
(p) No Acquired Corporation has undertaken any option re-pricing or
option exchange program with respect to any stock options.
(q) Part 2.17(q) of the Disclosure Schedule sets forth any and all
indebtedness of any Company Associate to any of the Acquired Corporations in
excess of $5,000 that is currently outstanding other than commission advances
made to any of the Acquired Corporations' employees pursuant to the Company's
sales commission plans and routine travel advances made in the ordinary course
of business consistent with past practices and pursuant to the Company's
policies.
20
(r) With respect to each Company Benefit Plan and with respect to each
state workers' compensation arrangement that is funded wholly or partially
through an insurance policy or public or private fund, all premiums required to
have been paid under such insurance policy or fund have been paid when due, and
none of the Acquired Corporations has any material liability under any such
insurance policy or fund or under any related Contract (whether in the nature of
a retroactive rate adjustment or loss sharing arrangement or otherwise).
(s) Part 2.17(s) of the Disclosure Schedule accurately sets forth, as
of the date of this Agreement, with respect to each employee of each of the
Acquired Corporations (including any employee of any of the Acquired
Corporations who is on a leave of absence or on layoff status):
(i) the name of such employee, the Acquired Corporation by which
such employee is employed and the date as of which such employee was originally
hired by such Acquired Corporation;
(ii) such employee's title and current written description of
such employee's duties and responsibilities;
(iii) the aggregate dollar amount of the compensation (including
wages, salary, commissions, director's fees, fringe benefits, bonuses, profit
sharing payments and other payments or benefits of any type) received by such
employee from the applicable Acquired Corporation with respect to services
performed in the fiscal year ended March 31, 2005;
(iv) such employee's annualized base wages or salary, as
applicable, annualized target commission and annualized target bonus as of the
date of this Agreement;
(v) each Company Benefit Plan in which such employee participates
or is eligible to participate; and
(vi) any material Governmental Authorization that is held by such
employee and that relates to or is useful in connection with the businesses of
the Acquired Corporations.
(t) Part 2.17(t) of the Disclosure Schedule accurately identifies, as
of the date of this Agreement, each employee of any of the Acquired Corporations
who is not fully available to perform work because of disability or other leave
and sets forth the type of such disability or leave and the anticipated date of
return to full service.
(u) Part 2.17(u) of the Disclosure Schedule accurately identifies, as
of the date of this Agreement, each former employee of any of the Acquired
Corporations who is receiving or is scheduled to receive (or whose spouse or
other dependent is receiving or is scheduled to receive) any benefits (whether
from any of the Acquired Corporations or otherwise) relating to such former
employee's employment with any of the Acquired Corporations; and Part 2.17(u) of
the Disclosure Schedule accurately and completely describes such benefits.
(v) None of the Acquired Corporations is a party to, or has a duty to
bargain for, any collective bargaining agreement or other Contract with a labor
organization representing any of its employees, and there are no labor
organizations representing, purporting to represent or, to the Company's
Knowledge, seeking to represent any employees of any of the Acquired
Corporations. Since July 30, 2001, none of the Acquired Corporations has had any
strike, slowdown, work stoppage, lockout, job action, or threat of any of the
foregoing, or question concerning representation, by or with respect to any of
its employees.
(w) The employment of each of the Acquired Corporations' employees is
terminable by the applicable Acquired Corporation at will. The Company has Made
Available to Parent accurate and complete copies of all employee manuals and
employee handbooks of each of the Acquired Corporations used or in force at any
time since July 30, 2001. The Company has Made Available to Parent accurate and
21
complete copies of all material disclosure materials, material policy statements
and other material materials, in each case relating to the employment of
employees of each of the Acquired Corporations on or after July 30, 2001.
(x) To the Company's Knowledge:
(i) no employee of any of the Acquired Corporations currently
intends to terminate his employment with the Company; and
(ii) no employee of any Acquired Corporation is a party to or is
bound by any confidentiality agreement, noncompetition agreement or other
Contract (with any Person) that may have an adverse effect on: (A) the
performance by such employee of any of his duties or responsibilities as an
employee of such Acquired Corporation; or (B) the business or operations of any
of the Acquired Corporations.
(y) Each of the Acquired Corporations: (i) is in compliance in all
material respects with all applicable Legal Requirements and with any order,
ruling, decree, judgment or arbitration award of any arbitrator or any court or
other Governmental Body respecting employment, employment practices, terms and
conditions of employment, wages, hours or other labor-related matters, including
Legal Requirements, orders, rulings, decrees, judgments and awards relating to
discrimination, wages and hours, labor relations, leave of absence requirements,
occupational health and safety, privacy, harassment, retaliation, immigration,
wrongful discharge or violation of the personal rights of employees, former
employees or prospective employees; (ii) has withheld and reported all material
amounts required by any Legal Requirement or Contract to be withheld and
reported with respect to wages, salaries and other payments to any Company
Associate; (iii) has no material liability for any arrears of wages or any Taxes
or any penalty for failure to comply with any of the foregoing; and (iv) has no
liability for any payment to any trust or other fund governed by or maintained
by or on behalf of any Governmental Body with respect to unemployment
compensation benefits, social security or other benefits or obligations for any
Company Associate (other than routine payments to be made in the normal course
of business and consistent with past practice). Since July 30, 2001, none of the
Acquired Corporations has effectuated a "plant closing," partial "plant
closing," "relocation" or "termination" (each as defined in the Worker
Adjustment and Retraining Notification Act (the "WARN Act") or any similar Legal
Requirement) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of any of the Acquired
Corporations.
(z) Part 2.17(z) of the Disclosure Schedule accurately sets forth,
with respect to each Person who is or was, at any time since March 31, 2005, an
independent contractor of any of the Acquired Corporations and who has received
or may be entitled to receive in excess of $50,000 from any of the Acquired
Corporations:
(i) the name of such independent contractor, the Acquired
Corporation with which such independent contractor is or was under contract and
the date as of which such independent contractor was originally retained by such
Acquired Corporation;
(ii) a description of such independent contractor's performance
objectives, services, duties and responsibilities;
(iii) the aggregate dollar amount of the compensation (including
all payments or benefits of any type) received by such independent contractor
from the applicable Acquired Corporation with respect to services performed in
the fiscal year ended March 31, 2005;
(iv) the terms of compensation of such independent contractor;
and
(v) any material Governmental Authorization that is held by such
independent contractor and that relates to or is useful in connection with the
businesses of the Acquired Corporations.
(aa) No current or former independent contractor of any of the
Acquired Corporations could be deemed to be a misclassified employee. No
independent contractor is eligible to participate in any material Company
22
Benefit Plan. Since July 30, 2001, no Acquired Corporation has had any temporary
or leased employees that were not treated and accounted for in all respects as
employees of such Acquired Corporation.
(bb) There is no Legal Proceeding, claim, labor dispute or grievance
pending, or to the Company's Knowledge, threatened or reasonably anticipated
relating to any employment contract, wages and hours, leave of absence, plant
closing notification, employment statute or regulation, privacy right, labor
dispute, workers' compensation policy, long-term disability policy, safety,
retaliation, immigration or discrimination matter involving any Company
Associate, including charges of unfair labor practices or harassment complaints.
To the Company's Knowledge, none of the Acquired Corporations has engaged in any
unfair labor practice within the meaning of the National Labor Relations Act.
Each of the Acquired Corporations has good labor relations, and, to the
Company's Knowledge, there are no facts indicating that (i) the consummation of
any of the Contemplated Transactions will have a material adverse effect on the
labor relations of any of the Acquired Corporations, or (ii) any of the
employees of any of the Acquired Corporations intends to terminate his or her
employment.
(cc) The provisions of Section 5.4 are consistent with, and the
actions contemplated by Section 5.4 will not result in a breach or violation of,
any Option Plan or any other Company Benefit Plan or Company Benefit Agreement.
2.18 Environmental Matters.
(a) Each of the Acquired Corporations: (i) is and has been in
compliance in all material respects with, and has not been and is not in
material violation of or subject to any material liability under, any applicable
Environmental Laws (as defined below); and (ii) possesses all material permits
and other Governmental Authorizations required under applicable Environmental
Laws for the conduct of its business as currently conducted and is in compliance
in all material respects with the terms and conditions of such Governmental
Authorizations.
(b) None of the Acquired Corporations has received any written notice,
whether from a Governmental Body or otherwise, that alleges that any of the
Acquired Corporations is not or might not be in compliance with any
Environmental Law.
(c) To the Company's Knowledge: (i) all property that is or was leased
to, controlled by or used by any of the Acquired Corporations, and all surface
water, groundwater and soil associated with or adjacent to such property, is
free of any Materials of Environmental Concern (as defined in Section 2.18(f))
or material environmental contamination of any nature; (ii) none of the property
that is or was leased to, controlled by or used by any of the Acquired
Corporations contains any underground storage tanks, asbestos, equipment using
PCBs or underground injection wells; and (iii) none of the property that is or
was leased to, controlled by or used by any of the Acquired Corporations
contains any septic tanks in which process wastewater or any Materials of
Environmental Concern have been Released (as defined in Section 2.18(f)).
(d) No Acquired Corporation has ever Released any Materials of
Environmental Concern except in compliance in all material respects with all
applicable Environmental Laws.
(e) No Acquired Corporation has ever sent or transported, or arranged
to send or transport, any Materials of Environmental Concern to a site that,
pursuant to any applicable Environmental Law: (i) has been placed on the
"National Priorities List" of hazardous waste sites or any similar state list;
(ii) is otherwise designated or identified as a potential site for remediation,
cleanup, closure or other environmental remedial activity; or (iii) is subject
to a Legal Requirement to take "removal" or "remedial" action as detailed in any
applicable Environmental Law or to make payment for the cost of cleaning up any
site.
(f) For purposes of this Section 2.18: (i) "Environmental Law" means
any federal, state, local or foreign Legal Requirement relating to pollution by
or protection of human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata) from Materials of
Environmental Concern, including any Legal Requirement relating to Releases or
23
threatened Releases of Materials of Environmental Concern, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern; (ii) "Materials of
Environmental Concern" means chemicals, pollutants, contaminants, wastes, toxic
substances, petroleum and petroleum products and any other substance that is now
or hereafter regulated by any Environmental Law; and (iii) "Release" means any
spilling, leaking, emitting, discharging, depositing, escaping, dumping or other
releasing of Materials of Environmental Concern into the environment, whether
intentional or unintentional.
2.19 Insurance.
(a) The Company has Made Available to Parent accurate and complete
copies of all material insurance policies and all material self insurance
programs and arrangements relating to the business, assets, liabilities and
operations of the Acquired Corporations. To the Company's Knowledge, each of
such insurance policies is in full force and effect. Since July 30, 2001, none
of the Acquired Corporations has received any notice or other communication
regarding any actual or possible: (a) cancellation or invalidation of any
insurance policy; (b) refusal or denial of any material coverage, reservation of
rights or rejection of any material claim under any insurance policy; or (c)
material adjustment in the amount of the premiums payable with respect to any
insurance policy. There is no pending workers' compensation or other claim under
or based upon any insurance policy of any of the Acquired Corporations. All
information provided to insurance carriers (in applications and otherwise) on
behalf of each of the Acquired Corporations is accurate and complete to the
extent that the failure of such information to be accurate and complete would
entitle the applicable insurance carrier to cancel the insurance policy procured
on the basis of or in reliance on such information, reduce the scope of coverage
under such policy, increase the premiums payable by the Acquired Corporations or
otherwise take any action adverse to any of the Acquired Corporations in any
material respect. The Company has provided timely written notice to the
appropriate insurance carrier(s) of each Legal Proceeding pending or threatened
in writing against any of the Acquired Corporations, and no such carrier has
issued a denial of coverage or a reservation of rights with respect to any such
Legal Proceeding, or informed in writing any of the Acquired Corporations of its
intent to do so.
(b) The Company has Made Available to Parent accurate and complete
copies of all material correspondence between any of the Acquired Corporations
and any insurance carrier or insurance broker.
(c) Attached as Annex 2.19(c) to the Disclosure Schedule are accurate
and complete copies of the existing policies (primary and excess) of directors'
and officers' liability insurance maintained by the Company as of the date of
this Agreement (the "Existing D&O Policies"). The Company has Made Available to
Parent accurate and complete copies of all directors' and officers' liability
insurance policies issued to the Company incepting on or after July 30, 2001.
Part 2.19(c) of the Disclosure Schedule accurately sets forth as of the date of
this Agreement the most recent annual premiums paid by the Company with respect
to the Existing D&O Policies.
2.20 Transactions with Affiliates. Since March 31, 2005, no event has
occurred that would be required to be reported by the Company pursuant to Item
404 of Regulation S-K promulgated by the SEC. Part 2.20(a) of the Disclosure
Schedule identifies each Person who is (or who may be deemed to be) an
"affiliate" (as that term is used in Rule 145 under the Securities Act) of the
Company as of the date of this Agreement.
2.21 Legal Proceedings; Orders.
(a) Except as set forth on Part 2.21(a) of the Disclosure Schedule,
there is no pending Legal Proceeding, and to the Company's Knowledge, no Person
has threatened to commence any Legal Proceeding: (i) that involves any of the
Acquired Corporations or any of the assets owned or used by any of the Acquired
Corporations; or (ii) that challenges, or that, if decided adversely to any
Acquired Corporation, would reasonably be expected to have the effect of
preventing, delaying, making illegal or otherwise interfering with, the Merger
or any of the other Contemplated Transactions. To the Company's Knowledge, there
is no pending Legal Proceeding, and no Person has threatened to commence any
Legal Proceeding, that involves any Company Associate (in his or her capacity as
such). To the Company's Knowledge, no event has occurred, and no claim, dispute
or other condition or circumstance exists, that would reasonably be expected to
give rise to or serve as a basis for the commencement of any such Legal
Proceeding. The Legal Proceedings identified in Part 2.21(a) of the Disclosure
Schedule have not had and, if decided adversely to any Acquired Corporation,
would not reasonably be expected to have a Company Material Adverse Effect.
24
(b) There is no order, writ, injunction, judgment or decree to which
any of the Acquired Corporations, or any of the assets owned or used by any of
the Acquired Corporations, is subject. To the Company's Knowledge, no officer or
other key employee of any of the Acquired Corporations is subject to any order,
writ, injunction, judgment or decree that prohibits such officer or other
employee from engaging in or continuing any conduct, activity or practice
relating to the business of any of the Acquired Corporations.
2.22 Authority; Binding Nature of Agreements.
(a) The Company has all necessary corporate power and authority to
enter into and to perform its obligations under this Agreement. The board of
directors of the Company has duly and unanimously adopted resolutions by which
such board of directors has: (a) determined that this Agreement and the Merger
are advisable and fair to and in the best interests of the Company and its
stockholders; (b) authorized and approved the execution, delivery and
performance of this Agreement; (c) recommended the adoption of this Agreement by
the holders of Company Common Stock and directed that this Agreement be
submitted for consideration by the Company's stockholders at the Company
Stockholders' Meeting (as defined in Section 5.2(a)). This Agreement constitutes
a legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to: (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors; and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies. Prior to the execution of the Voting Agreements, the board
of directors of the Company approved the Voting Agreements and the transactions
contemplated thereby.
2.23 Inapplicability of Anti-takeover Statutes. The restrictions
applicable to business combinations contained in Section 203 of the DGCL are
not, and will not be, applicable to the execution, delivery and performance of
this Agreement and the Voting Agreements and to the consummation of the Merger
and the other Contemplated Transactions. No other state takeover statute or
similar Legal Requirement applies or purports to apply to the Merger, this
Agreement, the Voting Agreements or any of the other Contemplated Transactions.
2.24 Vote Required. The affirmative vote of the holders of a majority
of the shares of Company Common Stock outstanding on the record date for the
Company Stockholders' Meeting and entitled to vote (the "Required Stockholder
Vote") is the only vote of the holders of any class or series of the Company's
capital stock necessary to adopt this Agreement.
2.25 Non-Contravention; Consents. Neither (x) the execution, delivery
or performance of this Agreement, nor (y) the consummation of the Merger or any
of the other Contemplated Transactions, will directly or indirectly (with or
without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the certificate of incorporation, bylaws or other charter or
organizational documents of any of the Acquired Corporations, or (ii) any
resolution adopted by the stockholders, the board of directors or any committee
of the board of directors of any of the Acquired Corporations;
(b) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge the Merger (other than
existing rights of stockholders under the DGCL) or any of the other Contemplated
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any order, writ, injunction, judgment or decree to which any of
the Acquired Corporations, or any of the assets owned or used by any of the
Acquired Corporations, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any material Governmental
Authorization that is held by any of the Acquired Corporations or that otherwise
relates to the business of any of the Acquired Corporations or to any of the
assets owned or used by any of the Acquired Corporations;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any material Company Contract, or
25
give any Person the right to: (i) declare a default or exercise any remedy under
any material Company Contract; (ii) a rebate, chargeback, penalty or change in
delivery schedule under any such material Company Contract; (iii) accelerate the
maturity or performance of any material Company Contract; or (iv) cancel,
terminate or modify any term of material Company Contract;
(e) result in the imposition or creation of any Encumbrance upon or
with respect to any asset owned or used by any of the Acquired Corporations
(except for Permitted Encumbrances); or
(f) result in, or increase the likelihood of, the disclosure or
delivery to any escrow holder or other Person of any Company Source Code, or the
transfer of any material asset of any of the Acquired Corporations to any
Person.
Except as may be required by the Exchange Act or the DGCL or as set forth on
Part 2.25 of the Disclosure Schedule, none of the Acquired Corporations was, is
or will be required to make any filing with or give any notice to, or to obtain
any Consent from, any Person in connection with (x) the execution, delivery or
performance of this Agreement or (y) the consummation of the Merger or any of
the other Contemplated Transactions.
2.26 Fairness Opinion. The board of directors of the Company has
received the written opinion of SVB Alliant, financial advisor to the board of
directors (the "Financial Advisor"), dated October 2, 2005 and addressed to the
board of directors, to the effect that subject to the assumptions,
qualifications and limitations set forth therein, the Per Share Merger Price is
fair, from a financial point of view, to the stockholders of the Company. For
informational purposes only, the Company has furnished an accurate and complete
copy of said written opinion to Parent.
2.27 Financial Advisor. Except for the Financial Advisor and Silicon
Valley Bank, no broker, finder or investment banker is entitled to any brokerage
fee, finder's fee, opinion fee, success fee, transaction fee or other fee or
commission in connection with the Merger or any of the other Contemplated
Transactions based upon arrangements made by or on behalf of any of the Acquired
Corporations. The Company has furnished or Made Available to Parent accurate and
complete copies of all agreements under which any such fees, commissions or
other amounts have been paid or may become payable and all indemnification and
other agreements related to the engagement of the Financial Advisor and Silicon
Valley Bank.
2.28 Full Disclosure. This Agreement (including the Disclosure
Schedule) does not, and the certificate referred to in Section 6.5(c) will not:
(i) contain any representation, warranty or information that is false,
misleading or incomplete with respect to any material fact; or (ii) omit to
state any material fact necessary in order to make the representations,
warranties and information contained and to be contained herein and therein (in
the light of the circumstances under which such representations, warranties and
information were or will be made or provided) not false or misleading.
Section 3. Representations and Warranties of Parent and Merger Sub
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 Valid Existence. Parent and Merger Sub are corporations validly
existing and in good standing under the laws of the State of Delaware.
3.2 Authority; Binding Nature of Agreement. Parent has all necessary
corporate power and authority to enter into and to perform its obligations under
this Agreement and the execution, delivery and performance by Parent of this
Agreement has been duly authorized by any necessary action on the part of Parent
and its board of directors. This Agreement constitutes the legal, valid and
binding obligations of Parent, enforceable against it in accordance with its
26
terms, subject to: (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors; and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies. Merger Sub has all
necessary corporate power and authority to enter into and to perform its
obligations under this Agreement; and the execution, delivery and performance by
Merger Sub of this Agreement has been duly authorized by any necessary action on
the part of Merger Sub and its board of directors (subject to the adoption of
this Agreement by Parent as the sole stockholder of Merger Sub, which adoption
shall occur immediately after the execution and delivery of this Agreement by
the parties hereto). This Agreement constitutes the legal, valid and binding
obligation of Merger Sub, enforceable against it in accordance with its terms,
subject to: (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors; and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
3.3 Non-Contravention. Neither the execution and delivery of this
Agreement by Parent and Merger Sub nor the consummation by Parent and Merger Sub
of the Merger will (a) result in a violation of any provision of the certificate
of incorporation or bylaws of Parent or Merger Sub or (b) result in a violation
by Parent or Merger Sub of any order, writ, injunction, judgment or decree to
which Parent or Merger Sub is subject, except in each case for any violation
that will not have a material adverse effect on the ability of Parent or Merger
Sub to consummate the Merger.
3.4 No Legal Proceedings Challenging the Merger. As of the date of
this Agreement, (a) there is no Legal Proceeding pending against Parent or
Merger Sub challenging the Merger or the other Contemplated Transactions, and
(b) to Parent's Knowledge no Legal Proceeding has been threatened against Parent
or Merger Sub challenging the Merger or the other Contemplated Transactions.
3.5 Activities of Merger Sub. Merger Sub was formed solely for the
purpose of effecting the Merger and the other Contemplated Transactions. Merger
Sub has not and will not engage in any activities other than those contemplated
by this Agreement and has, and will have as of immediately prior to the
Effective Time, no liabilities other than those contemplated by this Agreement.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY
4.1 Access and Investigation. Subject to the Confidentiality
Agreement, during the period commencing on the date of this Agreement and ending
at the Effective Time (the "Pre-Closing Period"), the Company shall, and shall
cause the respective Representatives of the Acquired Corporations to: (a)
provide Parent and Parent's Representatives with reasonable access to the
Acquired Corporations' Representatives, personnel, books, records, Tax Returns,
material operating and financial reports, work papers and other documents and
information relating to the Acquired Corporations; (b) provide Parent and
Parent's Representatives with such copies of the books, records, Tax Returns,
work papers and other documents and information relating to the Acquired
Corporations, and with such additional financial, operating and other data and
information regarding the Acquired Corporations, as Parent may reasonably
request; and (c) permit Parent's officers and other employees to meet, upon
reasonable notice and during normal business hours, with the chief financial
officer and other officers and managers of the Company responsible for the
Company's financial statements and the internal controls of the Acquired
Corporations to discuss such matters as Parent may reasonably deem necessary or
appropriate in order to enable Parent to satisfy its obligations under the
Sarbanes-Oxley Act and the rules and regulations relating thereto or otherwise
in connection with the Merger or any of the other Contemplated Transactions.
Without limiting the generality of any of the foregoing, subject to the
Confidentiality Agreement, during the Pre-Closing Period, the Company shall
promptly provide Parent with copies of:
(i) the quarterly financial statements for the three and six
month periods ending September 30, 2005 shall be provided by the Company to
Parent as soon as they become available, and in any event no later than November
1, 2005, and as reviewed by the Company's independent registered public
accounting firm no later than November 10, 2005;
(ii) the unaudited monthly consolidated balance sheets of the
Acquired Corporations as of the end of each calendar month and the related
unaudited monthly consolidated statements of operations, statements of
stockholders' equity and statements of cash flows for such calendar month, which
shall be delivered by the Company to Parent within fifteen days after the end of
such calendar month;
(iii) the monthly booking forecast updates for the upcoming
calendar month, which shall be delivered by the Company to Parent within three
business days before the beginning of such calendar month;
27
(iv) any written materials or other written communications sent
by or on behalf of the Company to its stockholders (in their capacity as
stockholders);
(v) any material notice, document or other written communication
sent by or on behalf of any of the Acquired Corporations to any party to any
Material Contract or sent to any of the Acquired Corporations by any party to
any Material Contract containing any allegation of any actual, possible,
potential or threatened breach, violation or default of or under such Material
Contract;
(vi) any notice, report or other document filed with or otherwise
furnished, submitted or sent to any Governmental Body on behalf of any of the
Acquired Corporations in connection with the Merger or any of the other
Contemplated Transactions;
(vii) any material notice, report or other document received by
any of the Acquired Corporations from any Governmental Body;
(viii) any material correspondence between any of the Acquired
Corporations and any insurance carrier or insurance broker;
(ix) any non-privileged notice, document or other communication
sent by or on behalf of, or sent to, any of the Acquired Corporations relating
to any pending or threatened Legal Proceeding involving or affecting any of the
Acquired Corporations or any director or officer of any of the Acquired
Corporations; and
(x) at least 48 hours in advance of the filing of any periodic or
current report or schedule or proxy statement with the SEC, such periodic or
current report or schedule or proxy statement.
4.2 Operation of the Company's Business.
(a) During the Pre-Closing Period, unless Parent has given its prior
written consent: (i) the Company shall ensure that each of the Acquired
Corporations conducts its business and operations in the ordinary course and in
accordance with past practices; and (ii) the Company shall use reasonable
efforts to ensure that each of the Acquired Corporations (A) conducts its
business and operations in compliance with all applicable Legal Requirements and
the requirements of all Company Contracts that constitute Material Contracts,
(B) preserves intact its current business organization, (C) keeps available the
services of its current officers and other employees and (D) maintains its
relations and goodwill with suppliers, customers, landlords, creditors,
licensors, licensees, employees and other Persons having material business
relationships with the respective Acquired Corporations; (iii) the Company shall
keep in full force all insurance policies referred to in Section 2.19; (iv) the
Company shall cause to be provided all notices, assurances and support required
by any Company Contract relating to any Intellectual Property or Intellectual
Property Right in order to ensure that no condition under such Company Contract
occurs that could result in: (A) any transfer or disclosure by any Acquired
Corporation of any Company Source Code; or (B) a release from any escrow of any
Company Source Code that has been deposited or is required to be deposited in
escrow under the terms of such Company Contract; (v) the Company shall properly
withhold and remit to the appropriate Governmental Body all withholding Taxes;
and (vi) the Company shall promptly notify Parent in writing of: (A) any notice
or other written communication from any Person alleging that the Consent of such
Person is or may be required in connection with any of the Contemplated
Transactions; and (B) any Legal Proceeding or material claim that is commenced,
or, to the Company's Knowledge, threatened, against, relating to or involving or
otherwise affecting in any material respect any of the Acquired Corporations or,
to the Company's Knowledge, any director, officer or key employee of any of the
Acquired Corporations. The Company shall consult with Parent regarding the
Company's efforts to amend the agreements referenced in Section 4.4 and shall
obtain Parent's prior written approval before entering into any such amendment
(which consent shall not be unreasonably withheld, delayed or conditioned if the
terms of such amendment are reasonably satisfactory to Parent).
(b) During the Pre-Closing Period, without the prior written consent
of Parent (which consent, in the case of matters referred to in clauses "(vii)"
and "(ix)", shall not be unreasonably withheld, delayed or conditioned), the
Company shall not and shall not permit any of the other Acquired Corporations
to:
28
(i) declare, accrue, set aside or pay any dividend or make any
other distribution in respect of any shares of capital stock, or repurchase,
redeem or otherwise reacquire any shares of capital stock or other securities
(other than repurchases of Company Common Stock from employees pursuant to
restricted stock purchase agreements to the extent required by, and in
compliance with, Section 4.2(d));
(ii) sell, issue, grant or authorize the sale, issuance or grant
of: (A) any capital stock or other security; (B) any option, call, warrant or
right to acquire any capital stock or other security; or (C) any instrument
convertible into or exchangeable for any capital stock or other security, except
that the Company may issue shares of Company Common Stock upon the valid
exercise of Company Options outstanding as of the date of this Agreement;
(iii) amend or waive any of its rights under, or permit the
acceleration of the vesting under (other than as contemplated by Section 5.4),
any provision of (A) any of the Company's stock option plans, (B) any Company
Option or any agreement evidencing or relating to any outstanding stock option,
(C) any restricted stock purchase agreement or (D) any other Contract evidencing
or relating to any equity award (whether payable in cash or stock);
(iv) amend or permit the adoption of any amendment to its
certificate of incorporation or bylaws or other charter or organizational
documents, or effect or become a party to any merger, consolidation, share
exchange, business combination, amalgamation, recapitalization, reclassification
of shares, stock split, reverse stock split, division or subdivision of shares,
consolidation of shares or similar transaction;
(v) form any Subsidiary or acquire any equity interest or other
interest in any other Entity other than the purchase, in the ordinary course of
business consistent with past practices, of marketable securities that would be
classified as short-term investments on the Company's balance sheet;
(vi) make any capital expenditure (except a capital expenditure
that: (A) is in the ordinary course of business and consistent with past
practices; (B) does not exceed $30,000 individually; and (C) when added to all
other capital expenditures made on behalf of the Acquired Corporations since the
date of this Agreement, does not exceed $100,000 in the aggregate);
(vii) enter into or become bound by, or permit any of the assets
owned or used by it to become bound by, any Material Contract, or amend or
terminate, or waive or exercise any material right or remedy under, any Material
Contract (other than a Material Contract described in Part 4.2(b)(vii) of the
Disclosure Schedule);
(viii) enter into, amend or waive any right under any
Indemnification Contract;
(ix) acquire, lease or license any right or other asset from any
other Person or sell or otherwise dispose of, or lease or license, any right or
other asset to any other Person (except in each case for assets (that are not
material individually or in the aggregate) acquired, leased, licensed or
disposed of by the Company in the ordinary course of business and consistent
with past practices), or waive or relinquish any material right;
(x) other than in the ordinary course of business consistent with
past practices, write off as uncollectible, or establish any extraordinary
reserve with respect to, any receivable or other indebtedness;
(xi) make any pledge of any of its assets or permit any of its
assets to become subject to any Encumbrances, except for Permitted Encumbrances;
(xii) make a loan to any Person except for advances made to its
employees in the ordinary course of business consistent with past practice (A)
pursuant to the Company's policies in order to defray routine travel expenses or
(B) as commission advances pursuant to the Company's sales commission plans;
29
(xiii) without limiting the ability of the Acquired Corporations
to pay or accrue in accordance with applicable Legal Requirements its
obligations for payroll taxes incurred in the ordinary course of business and in
accordance with past practices, incur or guarantee any indebtedness in an amount
in excess of $3,500,000 in the aggregate (including amounts incurred or
guaranteed as of the date of this Agreement), except that if the Acquired
Corporations have reasonably incurred or guaranteed indebtedness in an amount in
excess of $3,250,000, Parent shall not unreasonably withhold, delay or condition
its consent to the Company incurring indebtedness in excess of $3,500,000 but in
no event to exceed $4,000,000;
(xiv) establish, adopt, enter into or amend (except as may be
required by applicable Legal Requirements) any Company Benefit Plan or Company
Benefit Agreement, pay any bonus or make any profit-sharing or similar payment
to, or increase the amount of the wages, salary, commissions, fringe benefits or
other compensation or remuneration payable to, any of its directors, officers or
other employees (except that the Company: (A) may grant routine, reasonable
salary increases to non-officer employees in the ordinary course of business and
in accordance with past practices in connection with the Company's customary
employee review process; and (B) may make customary bonus payments and profit
sharing payments consistent with past practices and in accordance with existing
bonus and profit sharing plans referred to in Part 2.17(a) of the Disclosure
Schedule);
(xv) hire any employee with an annual base salary greater than
$100,000, hire any employee with an annual base salary greater than that paid to
comparably situated (considering, among other things, title, experience and
geographic location of employment) employees of the Company as of the date of
this Agreement, hire any employee such that the total number of the Company's
employees exceeds 210, promote any employee except in order to fill a position
vacated after the date of this Agreement, or, except in the ordinary course of
business, terminate the employment of any employee listed on Schedule 6.6 or any
employee with an annual base salary greater than $50,000;
(xvi) except in the ordinary course of business consistent with
past practices or as required by applicable Legal Requirements (A) change any of
its pricing policies, product return policies, product maintenance polices,
service policies, product modification or upgrade policies, personnel policies
or other business policies or (B) change any of its methods of accounting or
accounting practices in any respect (other than as required by the rules and
regulations of the SEC or by U.S. GAAP);
(xvii) make any material Tax election;
(xviii) commence or settle any Legal Proceeding, other than
routine collection proceedings commenced in the ordinary course of business
consistent with past practices and involving less than $200,000 in the
aggregate;
(xix) purchase or renew any liability insurance of any nature;
(xx) enter into any material transaction or take any other
material action outside the ordinary course of business or inconsistent with
past practices;
(xxi) agree or commit to take any of the actions described in
clauses "(i)" through "(xx)" of this Section 4.2(b).
(c) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of: (i) the discovery by the Company of any event, condition,
fact or other circumstance that occurred or existed on or prior to the date of
this Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by the Company in this Agreement to the extent
that one or more of the conditions set forth in Section 6.1 would be reasonably
likely not to be satisfied as a result of such inaccuracy or the circumstances
giving rise to such inaccuracy (considered together with any other inaccuracies
in any representations or warranties made by the Company in this Agreement and
the circumstances giving rise thereto); (ii) the Company obtaining Knowledge of
any event, condition, fact or other circumstance that occurs, arises or exists
after the date of this Agreement and that would cause or constitute a material
inaccuracy in any representation or warranty made by the Company in this
Agreement, to the extent that one or more of the conditions set forth in Section
30
6.1 would be reasonably likely not to be satisfied as a result of such
inaccuracy or the circumstances giving rise to such inaccuracy (considered
together with any other inaccuracies in any representations or warranties made
by the Company in this Agreement and the circumstances giving rise thereto), if:
(A) such representation or warranty had been made as of the time of the
occurrence, existence or discovery of such event, condition, fact or other
circumstance; or (B) such event, condition, fact or other circumstance had
occurred, arisen or existed on or prior to the date of this Agreement; (iii) the
Company obtaining Knowledge of any material breach of any covenant or obligation
of the Company; and (iv) any event, condition, fact or other circumstance that
(considered together with any other circumstances) would reasonably be expected
to make the timely satisfaction of any of the conditions set forth in Section 6
or Section 7 impossible or unlikely or that (considered together with any other
circumstances) has had or would reasonably be expected to have a Company
Material Adverse Effect. No notification given to Parent pursuant to this
Section 4.2(c) shall limit or otherwise affect any of the representations,
warranties, covenants or obligations of the Company contained in this Agreement.
(d) The Company shall (to the extent directed by Parent in writing)
timely exercise in full any right or option it may have to repurchase shares of
its capital stock which is or becomes exercisable during the Pre-Closing Period,
if the applicable repurchase price is less than the Per Share Merger Price. The
Company shall use reasonable efforts to notify Parent in writing at least ten
days in advance of any such repurchase right or option becoming exercisable.
4.3 No Solicitation.
(a) The Company (1) shall not directly or indirectly take or permit to
be taken any action referred to in clause "(i)", "(ii)", "(iii)", "(iv)", "(v)"
or "(vi)" of this sentence, (2) shall ensure that no officer, director,
financial advisor, legal advisor or accounting advisor of or to any of the
Acquired Corporations directly or indirectly takes or permits to be taken any
action referred to in clause "(i)", "(ii)", "(iii)", "(iv)", "(v)" or "(vi)" of
this sentence and (3) shall use reasonable efforts to ensure that no
Representative of any of the Acquired Corporations directly or indirectly takes
any action referred to in clause "(i)", "(ii)", "(iii)", "(iv)", "(v)" or "(vi)"
of this sentence:
(i) solicit, initiate, encourage, knowingly induce or knowingly
facilitate the communication, making, submission or announcement of any
Acquisition Proposal or Acquisition Inquiry;
(ii) furnish any nonpublic information regarding any of the
Acquired Corporations in connection with or in response to an Acquisition
Proposal or Acquisition Inquiry;
(iii) engage in discussions or negotiations with any Person that
shall have made, submitted or announced (or on whose behalf there shall have
been made, submitted or announced) an Acquisition Proposal or Acquisition
Inquiry, or with any of such Person's Representatives, with respect to any such
Acquisition Proposal or Acquisition Inquiry;
(iv) release any Person from, or waive any provision of or right
under, any confidentiality, non-solicitation, no hire, "standstill" or similar
agreement to which any of the Acquired Corporations is a party or under which
any of the Acquired Corporations has any rights;
(v) approve, endorse or recommend any Acquisition Proposal; or
(vi) execute or enter into any letter of intent or similar
document or any Contract contemplating or otherwise relating to any Acquisition
Transaction (other than confidentiality agreements contemplated by this Section
4.3 and except as expressly permitted by Section 8.1(h));
provided, however, that, notwithstanding anything contained in this Section
4.3(a), prior to the adoption of this Agreement by the Required Stockholder Vote
(as defined in Section 2.24 above), the Company may take any of the actions
referred to in clauses (ii) and (iii) of this sentence in response to an
Acquisition Proposal that has been made by such Person (and not withdrawn) if:
(A) the Company Board of Directors (the "Company Board") determines in good
31
faith, after having consulted with the Company's outside legal counsel and the
Financial Advisor, that such Acquisition Proposal constitutes a Superior Offer
or is likely to lead to the submission to the Company of a Superior Offer by
such Person; (B) such Acquisition Proposal shall not have arisen directly or
indirectly from any breach of any of the provisions of this Section 4.3 and
neither the Company nor any Representative of any of the Acquired Corporations
shall have otherwise breached any of the provisions set forth in this Section
4.3 in connection with such Acquisition Proposal; (C) the Company Board
determines in good faith, after having consulted with the Company's outside
legal counsel, that such action is required in order for the Company Board to
comply with its fiduciary obligations to the Company's stockholders under
applicable Legal Requirements; (D) at least one business day prior to the
earlier of the furnishing of any such nonpublic information to, or the entering
into discussions or negotiations with, such Person, the Company gives Parent
written notice of the identity of such Person and of the Company's intention to
furnish nonpublic information to, or enter into discussions or negotiations
with, such Person, as the case may be; (E) the Company receives from such Person
an executed confidentiality agreement containing provisions at least as
favorable to the Company as those contained in the Confidentiality Agreement;
and (F) prior to furnishing any such nonpublic information to such Person, the
Company furnishes such nonpublic information to Parent. Without limiting the
generality of the foregoing, the Company acknowledges and agrees that, in the
event any officer, director, financial advisor, legal advisor or accounting
advisor of or to any of the Acquired Corporations (whether or not such Person is
purporting to act on behalf of any of the Acquired Corporations) takes any
action that, if taken by the Company, would constitute a breach of this Section
4.3 by the Company, the taking of such action by such Person shall be deemed to
constitute a breach of this Section 4.3 by the Company for purposes of this
Agreement.
(b) Nothing contained in this Agreement shall prevent the Company
Board from complying with Rule 14d-9 or Rule 14e-2 under the Exchange Act with
regard to an Acquisition Proposal (except that the Board shall not be permitted
to withdraw the Company Board Recommendation or modify the Company Board
Recommendation in a manner adverse to Parent except as specifically provided in
Section 5.2(c)).
(c) If the Company obtains Knowledge of an Acquisition Proposal or
Acquisition Inquiry at any time during the Pre-Closing Period, then the Company
shall promptly (and in no event later than one business day after obtaining such
Knowledge) notify Parent of such Acquisition Proposal or Acquisition Inquiry
(including the identity of the Person making or submitting such Acquisition
Proposal or Acquisition Inquiry, and the terms thereof). The Company shall keep
Parent informed with respect to the status and terms of any such Acquisition
Proposal or Acquisition Inquiry and any modification or proposed modification
thereto.
(d) The Company shall immediately cease and cause to be terminated any
existing discussions with any Person that relate to any Acquisition Proposal or
Acquisition Inquiry.
(e) To the extent reasonably requested by Parent, the Company shall
enforce or cause to be enforced each confidentiality, non-solicitation, no hire,
"standstill" or similar agreement to which any of the Acquired Corporations is a
party or under which any of the Acquired Corporations has any rights. The
Company shall, promptly following Parent's instruction that the Company do so,
instruct each Person that has executed a confidentiality or similar agreement in
connection with its consideration of a possible Acquisition Transaction or
equity investment to destroy (and certify as to the destruction of) or return to
the Acquired Corporations all confidential information heretofore furnished to
such Person by or on behalf of any of the Acquired Corporations; provided,
however, that notwithstanding anything to the contrary contained in this
Agreement, prior to the adoption of this Agreement by the Required Stockholder
Vote, the Company shall not be required to comply with this Section 4.3(e) if
(1) the Company Board makes a determination in good faith after having consulted
with the Company's outside legal counsel and the Financial Advisor that such
action is required in order for the Company Board to comply with its fiduciary
obligations to the Company's stockholders under applicable Legal Requirements
and (2) the Company notifies Parent of such determination within 24 hours after
the making of such determination.
4.4 Amendment of Contracts. The Company shall use its best efforts to
amend such distribution agreements identified by Parent, on terms reasonably
requested by Parent, on or prior to the Closing.
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SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 Proxy Statement.
(a) As promptly as practicable after the date of this Agreement, the
Company shall prepare, and Parent shall provide reasonable cooperation to the
Company in the preparation of, a proxy statement to be sent to the Company's
stockholders in connection with the Company Stockholders' Meeting (the "Proxy
Statement"). The Company shall: (i) cause the Proxy Statement to comply with the
rules and regulations promulgated by the SEC; (ii) provide Parent with a
reasonable opportunity to review and comment on drafts of the Proxy Statement;
(iii) promptly cause the Proxy Statement to be filed with the SEC; (iv) promptly
provide Parent with copies of all correspondence between the Company or any of
its Representatives, on the one hand, and the SEC or its staff, on the other
hand; (v) promptly notify Parent upon the receipt of any comments or requests
from the SEC or its staff with respect to the Proxy Statement; (vi) provide
Parent with a reasonable opportunity to review and comment on any subsequent
drafts of the Proxy Statement and any related correspondence and filings, and
include in the Proxy Statement and in any such correspondence and filings all
changes reasonably proposed by Parent; (vii) promptly respond to any comments or
requests of the SEC or its staff; and (viii) cause the Proxy Statement to be
mailed to the Company's stockholders as promptly as practicable following the
date of this Agreement. To the extent practicable, the Company and its outside
counsel shall permit Parent and its outside counsel to participate in all
communications with the SEC and its staff (including all meetings and telephone
conferences) relating to the Proxy Statement, this Agreement or any of the
Contemplated Transactions.
(b) If any event relating to any of the Acquired Corporations occurs,
or if the Company becomes aware of any information, that should be disclosed in
an amendment or supplement to the Proxy Statement, then the Company shall
promptly inform Parent of such event or information and shall, in accordance
with the procedures set forth in Section 5.1(a), (i) prepare and file with the
SEC such amendment or supplement as soon thereafter as is reasonably
practicable, and (ii) if appropriate, cause such amendment or supplement to be
mailed to the stockholders of the Company. If Parent becomes aware of any
information regarding Parent that is required to be disclosed in an amendment or
supplement to the Proxy Statement, then Parent shall promptly inform the Company
of such information.
(c) The Company shall ensure that (i) none of the information included
or incorporated by reference in the Proxy Statement (other than information
relating to Parent included in the Proxy Statement that was provided in writing
by Parent to the Company specifically for inclusion in the Proxy Statement)
will, at the time the Proxy Statement is mailed to the stockholders of the
Company or at the time of the Company Stockholders' Meeting (or any adjournment
or postponement thereof), 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 the light of the circumstances under
which they are made, not misleading and (ii) the Proxy Statement complies as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations of the SEC thereunder.
(d) Parent shall ensure that none of the information relating to
Parent that is provided in writing by Parent to the Company specifically for
inclusion in the Proxy Statement and that is included in the Proxy Statement
will, at the time the Proxy Statement is mailed to the stockholders of the
Company or at the time of the Company Stockholders' Meeting (or any adjournment
or postponement thereof), contain any untrue statement of a material fact or
omit to state any material fact required to be included in such information or
necessary in order to make the statements included in such information, in the
light of the circumstances under which they are made, not misleading.
5.2 Company Stockholders' Meeting.
(a) The Company shall take all action necessary under all applicable
Legal Requirements to call, give notice of and hold a meeting of the holders of
Company Common Stock to vote on the adoption of this Agreement (the "Company
Stockholders' Meeting"). The Company Stockholders' Meeting shall be held (on a
date selected by the Company in consultation with Parent) as promptly as
practicable after the date of this Agreement. The Company shall ensure that all
proxies solicited in connection with the Company Stockholders' Meeting are
33
solicited in compliance with all applicable Legal Requirements. Parent shall
cause any shares of Company Common Stock owned by Parent to be voted in favor of
the adoption of this Agreement.
(b) Subject to Section 5.2(c): (i) the Proxy Statement shall include a
statement to the effect that the board of directors of the Company (the "Company
Board") unanimously recommends that the Company's stockholders vote to adopt
this Agreement at the Company Stockholders' Meeting (such recommendation that
the Company's stockholders vote to adopt this Agreement being referred to as the
"Company Board Recommendation"); and (ii) the Company Board Recommendation shall
not be withdrawn or modified in a manner adverse to Parent, and no resolution by
the board of directors of the Company or any committee thereof to withdraw or
modify the Company Board Recommendation in a manner adverse to Parent shall be
adopted or proposed. For purposes of this Agreement, the Company Board
Recommendation shall be deemed to have been modified in a manner adverse to
Parent if the recommendation of the Company Board supporting the Company Board
Recommendation shall no longer be unanimous, or if any member of the Company
Board votes in favor of the withdrawal of the Company Board Recommendation. The
Proxy Statement shall include the opinion of the Financial Advisor referred to
in Section 2.27.
(c) Notwithstanding anything to the contrary contained in Section
5.2(b) (but subject to the other provisions of this Agreement), at any time
prior to the adoption of this Agreement by the Required Stockholder Vote, the
Company Board Recommendation may be withdrawn or modified in a manner adverse to
Parent if: (i) at least three business days prior to any meeting of the Company
Board at which the Company Board will consider and determine whether the Company
Board Recommendation should be withdrawn or modified in a manner adverse to
Parent, the Company delivers to Parent a written notice setting forth the time
and date of such meeting and the specific circumstances giving rise to the
meeting and giving rise to the Company Board's reconsideration of the Company
Board Recommendation, (ii) the Company Board determines in good faith, after
having consulted with the Company's outside legal counsel and the Financial
Advisor, that the withdrawal or modification of the Company Board Recommendation
is required in order for the Company Board to comply with its fiduciary
obligations to the Company's stockholders under applicable Legal Requirements,
(iii) there is not pending any Acquisition Proposal that arose or resulted,
directly or indirectly, from any breach of any of the provisions set forth in
Section 4.3.
(d) Subject to the right of the Company to terminate this Agreement in
accordance with Section 8.1(h), the Company's obligation to call, give notice of
and hold the Company Stockholders' Meeting in accordance with Section 5.2(a)
shall not be limited or otherwise affected by the commencement, disclosure,
announcement or submission of any Superior Offer or other Acquisition Proposal,
or by any withdrawal or modification of the Company Board Recommendation.
5.3 Regulatory Matters. Each party shall use reasonable efforts to
file or otherwise submit, as soon as practicable after the date of this
Agreement, all notices, reports and other documents required to be filed by such
party with or otherwise submitted by such party to any Governmental Body with
respect to the Merger and the other Contemplated Transactions, and to submit
promptly any additional information requested by any such Governmental Body.
Without limiting the generality of the foregoing, the Company and Parent shall,
promptly after the date of this Agreement, prepare and file any notification or
other document required to be filed in connection with the Merger under any
applicable foreign Legal Requirement relating to antitrust or competition
matters.
5.4 Stock Options and ESPP.
(a) Within five business days of the date hereof, the Company shall
prepare and submit to Parent for approval and, after approval by Parent, shall
promptly cause to be mailed to each holder of a Company Option or other "Award"
(as defined in the 2001 Plan), a notice that such holder's Company Option or
Award, as applicable, shall become fully vested and terminate at and as of the
Effective Time.
(b) Prior to the Closing, the Company shall take all actions that may
be necessary to ensure that: (i) the 2001 Plan is terminated effective as of the
Effective Time; (ii) all Company Options and Awards outstanding as of the
Effective Time are cancelled and extinguished at the Effective Time without any
conversion or assumption thereof; and (iii) holders of Company Options and
Awards shall have no rights with respect thereto following the Effective Time.
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(c) Prior to the Effective Time, if permitted pursuant to the terms of
the ESPP, the Company shall take all actions that may be necessary to: (i) cause
the exercise (as of the last business day prior to the Closing Date) of each
outstanding purchase right (if any) under the ESPP, and make any pro-rata
adjustments that may be necessary to reflect the shortened offering period but
otherwise cause such shortened offering period to be treated as a fully
effective and completed offering period for all purposes under the ESPP; and
(ii) provide that no further offering period or purchase period shall commence
under the ESPP after the Effective Time; provided, however, that any such
exercise of outstanding purchase rights, and the cessation of further offering
and purchase periods, shall be conditioned upon the consummation of the Merger.
On the last business day prior to the Closing Date, the Company shall apply the
funds credited as of such date under the ESPP (if any) within each participant's
payroll withholding account to the purchase of whole shares of Company Common
Stock in accordance with the terms of the ESPP. Each share of Company Common
Stock purchased under the ESPP as contemplated by the immediately preceding
sentence shall be automatically converted into the right to receive the Per
Share Merger Price on the same basis as all other shares of Company Common
Stock, except that each such share shall be automatically converted into the
right to receive the Per Share Merger Price without the issuance of a
certificate representing such share. Immediately prior to and effective as of
the Effective Time (and subject to the consummation of the Merger), the Company
shall terminate the ESPP.
5.5 Employees and Employee Benefits.
(a) Parent agrees that, subject to any necessary transition period and
subject to any applicable plan provisions and Legal Requirements, and except in
the case of a benefit normally covered by an insurance program not being covered
by insurance or in the case that any of the following would result in a
duplication of benefits: (i) all employees of the Acquired Corporations who
continue employment with Parent, the Surviving Corporation or any Subsidiary of
the Surviving Corporation after the Effective Time ("Continuing Employees")
shall be eligible to participate in Parent's health, vacation, 401(k) and
severance plans, to substantially the same extent as similarly situated,
newly-hired employees of Parent; and (ii) for purposes of determining a
Continuing Employee's eligibility to participate in such plans, such Continuing
Employee shall receive credit under such plans for his or her years of service
with the Acquired Corporations prior to the Effective Time. Nothing in this
Section 5.5(a) or elsewhere in this Agreement shall be construed to create a
right in any employee of any of the Acquired Corporations to employment with
Parent, the Surviving Corporation or any Subsidiary of the Surviving
Corporation, and the employment of each Continuing Employee shall be "at will"
employment. Except for Indemnified Persons (as defined in Section 5.6(a)) to the
extent of their respective rights pursuant to Section 5.6, no Company Associate
or Continuing Employee shall be deemed to be a third party beneficiary of this
Agreement.
(b) The Company shall not take or permit to be taken any action to
terminate any employee benefit plan sponsored by any of the Acquired
Corporations (or in which any of the Acquired Corporations participates) that
contains a cash or deferred arrangement intended to qualify under Section 401(k)
of the Code; provided, however, that if so directed in writing by Parent no
later than seven days prior to the Effective Time, the Company shall terminate,
effective no later than the day immediately prior to the Effective Time, any
such employee benefit plan.
(c) If the Company obtains knowledge of the possible resignation or
other possible termination of employment of any employee of the Company or any
of the other Acquired Corporations holding the title of director or above, then
the Company shall promptly notify Parent in writing of such possible resignation
or other possible termination of employment.
5.6 Indemnification of Officers and Directors.
(a) All rights to indemnification, advancement of expenses and
exculpation by the Company existing in favor of each individual who is an
officer or director of the Company as of the date of this Agreement (each such
individual, an "Indemnified Person") for his acts and omissions as a director or
officer of the Company occurring at or prior to the Effective Time, as provided
in the Company's certificate of incorporation or bylaws (as in effect as of the
date of this Agreement) or as provided in the Indemnification Contract between
the Company and such Indemnified Person (as in effect as of the date of this
35
Agreement) in the form disclosed by the Company to Parent prior to the date of
this Agreement, shall survive the Merger and shall continue in full force and
effect (to the fullest extent such rights to indemnification, advancement of
expenses and exculpation are available under and are consistent with Delaware
law and the law of the jurisdiction in which the Indemnified Person is employed
by the applicable Acquired Corporation). Parent shall, or shall cause the
Surviving Corporation to, honor and fulfill the obligations of the Surviving
Corporation in respect of such rights to indemnification, advancement of
expenses and exculpation.
(b) From the Effective Time until the sixth anniversary of the
Effective Time, Parent shall, or shall cause the Surviving Corporation to,
maintain in effect, for the benefit of the Indemnified Persons with respect to
their acts and omissions as directors and officers of the Company occurring
prior to the Effective Time, the Existing D&O Policies; provided, however, that
(i) Parent or the Surviving Corporation may substitute for the Existing D&O
Policies a policy or policies containing terms not materially less advantageous
to the Indemnified Persons, and (ii) neither Parent nor the Surviving
Corporation shall be required to pay total annual premiums for the Existing D&O
Policies (or for any substitute policies) that exceed, in the aggregate, an
amount equal to 200% of the annual premiums paid for the Existing D&O Policies
for the most recent policy year prior to the Effective Time (the lesser of such
amounts being referred to as the "Maximum Premium"). In the event the premiums
for the Existing D&O Policies (or any substitute policies) exceed the Maximum
Premium in the aggregate, Parent and the Surviving Corporation shall be entitled
to reduce the amount of coverage of the Existing D&O Policies (or any substitute
policies) to as much coverage as can be obtained for a premium equal to the
Maximum Premium. The provisions of this Section 5.6(b) shall be deemed to have
been satisfied if Parent or the Surviving Corporation obtains prepaid policies
that provide the Indemnified Persons with coverage not materially less
advantageous to them than the Existing D&O Policies for an aggregate period of
six years with respect to their acts and omissions as officers and directors of
the Company occurring prior to the Effective Time.
(c) Parent shall cause the Surviving Corporation to fulfill its
obligations under Sections 5.6(a) and 5.6(b) above. Parent shall not, and shall
not permit the Surviving Corporation to, merge into or consolidate with, or sell
all or substantially all of its assets to, any other Person unless the
resulting, surviving or acquiring (as the case may be) entity or Parent assumes
(by operation of law or otherwise) the obligations imposed by this Section 5.6.
5.7 Additional Agreements.
(a) Subject to Section 5.7(b), Parent and the Company shall use
reasonable efforts to cause to be taken all actions necessary to consummate the
Merger and make effective the other Contemplated Transactions. Without limiting
the generality of the foregoing, but subject to Section 5.7(b), each party to
this Agreement: (i) shall make all filings and other submissions (if any) and
give all notices (if any) required to be made and given by such party in
connection with the Merger and the other Contemplated Transactions; (ii) shall
use reasonable efforts to obtain each Consent (if any) required to be obtained
(pursuant to any applicable Legal Requirement or Contract, or otherwise) by such
party in connection with the Merger or any of the other Contemplated
Transactions; and (iii) shall use reasonable efforts to lift any injunction
prohibiting, or any other legal bar to, the Merger or any of the other
Contemplated Transactions. The Company and Parent shall provide each other with
a copy of each proposed filing with or other submission to any Governmental Body
relating to any of the Contemplated Transactions, and shall give each other a
reasonable time prior to making such filing or other submission in which to
review and comment on such proposed filing or other submission. The Company and
Parent shall each promptly deliver to the other a copy of each such filing or
other submission made, each notice given and each Consent obtained during the
Pre-Closing Period.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Parent shall not have any obligation under this Agreement: (i) to
dispose of or transfer or cause any of its Subsidiaries to dispose of or
transfer any assets, or to commit to cause any of the Acquired Corporations to
dispose of or transfer any assets; (ii) to discontinue or cause any of its
Subsidiaries to discontinue offering any product or service, or to commit to
cause any of the Acquired Corporations to discontinue offering any product or
service; (iii) to license or otherwise make available, or cause any of its
Subsidiaries to license or otherwise make available to any Person any
technology, software or other Intellectual Property or Intellectual Property
Right, or to commit to cause any of the Acquired Corporations to license or
otherwise make available to any Person any technology, software or other
Intellectual Property or Intellectual Property Right; (iv) to hold separate or
cause any of its Subsidiaries to hold separate any assets or operations (either
before or after the Closing Date), or to commit to cause any of the Acquired
Corporations to hold separate any assets or operations; or (v) to make or cause
any of its Subsidiaries to make any commitment (to any Governmental Body or
36
otherwise) regarding its future operations or the future operations of any of
the Acquired Corporations. Notwithstanding anything to the contrary contained in
this Agreement, Parent shall not have any obligation under this Agreement to
contest any Legal Proceeding or any order, writ, injunction, judgment or decree
relating to the Merger or any of the other Contemplated Transactions.
5.8 Disclosure. Without limiting any of the Company's obligations
under the Confidentiality Agreement, the Company shall not, and shall not permit
any of its Subsidiaries or any Representative of any of the Acquired
Corporations to, issue any press release or make any disclosure (including
communications to customers or employees of any of the Acquired Corporations not
consistent with content approved for such purposes by Parent) to the public or
otherwise regarding the Merger or any of the other Contemplated Transactions
unless: (a) Parent shall have approved such press release or disclosure in
writing; or (b) the Company shall have received the advice of its outside legal
counsel confirming that such disclosure is required by applicable Legal
Requirements and, at least 48 hours before such press release or disclosure is
issued or made, the Company advises Parent of, and consults with Parent
regarding, the text of such press release or disclosure.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions to be consummated at the Closing are
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
6.1 Accuracy of Representations.
(a) The representations and warranties of the Company contained in
this Agreement shall have been accurate in all respects as of the date of this
Agreement and shall be accurate in all respects as of the Closing Date as if
made on and as of the Closing Date (except for representations and warranties
expressly made only as of a specified date, which need be accurate in all
respects only as of the specified date); provided, however, that: (i) in
determining the accuracy of such representations and warranties for purposes of
this Section 6.1(a), (A) all materiality qualifications that are contained in
such representations and warranties shall be disregarded and (B) any update of
or modification to the Disclosure Schedule made or purported to have been made
on or after the date of this Agreement shall be disregarded; (ii) the condition
set forth in this Section 6.1(a) shall be deemed satisfied unless the
circumstances giving rise to all inaccuracies in such representations and
warranties (considered collectively) constitute a Company Material Adverse
Effect, or would reasonably be expected to have a Company Material Adverse
Effect; and (iii) nothing in this Section 6.1(a) shall be deemed to limit the
right of Parent to rely independently on the separate condition set forth in
Section 6.1(b) in refusing to consummate the Merger or any other transaction.
(b) Each of the representations and warranties of the Company
contained in Sections 2.3(a), 2.3(b), 2.3(c), 2.7(a), 2.22, 2.23, 2.24, 2.26 and
2.27 shall have been accurate in all material respects as of the date of this
Agreement and shall be accurate in all material respects as of the Closing Date
as if made on and as of the Closing Date (except for representations and
warranties expressly made only as of a specified date, which need be accurate in
all material respects only as of the specified date); provided, however, that:
(i) in determining the accuracy of such representations and warranties for
purposes of this Section 6.1(b), any update of or modification to the Disclosure
Schedule made or purported to have been made on or after the date of this
Agreement shall be disregarded; and (ii) nothing in this Section 6.1(b) shall be
deemed to limit the right of Parent to rely independently on the separate
condition set forth in Section 6.1(a) in refusing to consummate the Merger or
any other transaction.
6.2 Performance of Covenants. Each of the covenants and obligations in
this Agreement that the Company is required to comply with or to perform at or
prior to the Closing shall have been complied with and performed by the Company
in all material respects.
6.3 Stockholder Approval. This Agreement shall have been duly adopted
and approved by the Required Stockholder Vote.
37
6.4 Dissenting Shares. No more than 10% of the shares of Company
Common Stock outstanding as of the Closing Date shall be Dissenting Shares.
6.5 Agreements and Other Documents. Parent shall have received from
the Company, the following agreements and other documents, each of which shall
be in full force and effect:
(a) evidence satisfactory to Parent of the repurchase by the Company
of the shares, if any, of Company Common Stock required to be repurchased by the
Company pursuant to Section 4.2(d);
(b) written resignations in forms satisfactory to Parent, dated as of
the Closing Date and effective as of the Closing, executed by the officers and
directors of each of the Acquired Corporations; and
(c) a certificate executed by the Company's Chief Executive Officer
and Chief Financial Officer certifying that the conditions set forth in Sections
6.1, 6.2, 6.3, 6.4, 6.6, 6.7, 6.9, 6.10 and 6.11 have been duly satisfied.
6.6 Employees. None of the individuals on Schedule 6.6 shall be
Departing Employees For purposes of this Section 6.6, an individual shall be
deemed to be a "Departing Employee" if such individual (i) shall have ceased to
be employed by the Company or any Subsidiary of the Company, (ii) shall have
expressed an intention to decline to accept employment with Parent, (iii) shall
have expressed an intention to discontinue (prior to, at or after the Closing)
his or her employment with Parent or any Acquired Corporation or (iv) shall not
have countersigned an offer letter from Parent, or shall have countersigned an
offer letter from Parent but shall have failed to reaffirm his or her acceptance
of such offer letter if requested to do so by Parent (which request may be made
by Parent on not more than one occasion with respect to any particular
individual)
..
6.7 No Company Material Adverse Effect. Since the date of this
Agreement, there shall not have occurred any Company Material Adverse Effect,
and no event shall have occurred or circumstance shall exist that, in
combination with any other events that shall have occurred since the date of
this Agreement, or circumstances that may exist since the date of this
Agreement, would reasonably be expected to have a Company Material Adverse
Effect.
6.8 Regulatory Matters. Any Governmental Authorization required to be
obtained in order to consummate the Merger or any of the other Contemplated
Transactions under any Legal Requirement shall have been obtained and shall
remain in full force and effect, and no such Governmental Authorization or other
Consent obtained by Parent or any of the Acquired Corporations shall impose or
contain any term, limitation, condition or restriction that Parent determines in
good faith to be materially burdensome.
6.9 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger or
any of the other Contemplated Transactions shall have been issued by any court
of competent jurisdiction or other Governmental Body and remain in effect, and
there shall not be any Legal Requirement enacted or deemed applicable to the
Merger or any of the other Contemplated Transactions that makes consummation of
the Merger or any of the other Contemplated Transactions illegal.
6.10 No Governmental Proceedings Relating to Contemplated Transactions
or Right to Operate Business. There shall not be pending, and there shall not
have been threatened, any Legal Proceeding in which a Governmental Body is or
has threatened to become a party: (a) challenging or seeking to restrain or
prohibit the consummation of the Merger or any of the other Contemplated
Transactions; (b) relating to the Merger or any of the other Contemplated
Transactions and seeking to obtain from Parent or any of the Acquired
Corporations any damages or other relief that may be material to Parent or the
Acquired Corporations; (c) seeking to prohibit or limit in any material respect
Parent's ability to vote, transfer, receive dividends with respect to or
otherwise exercise ownership rights with respect to any of the stock of the
Surviving Corporation; (d) that could materially and adversely affect the right
or ability of Parent or any of the Acquired Corporations to own the assets or
operate the business of any of the Acquired Corporations; or (e) seeking to
compel any of the Acquired Corporations, Parent or any Subsidiary of Parent to
dispose of or hold separate any material assets.
38
6.11 Sarbanes-Oxley Certifications. Neither the chief executive
officer nor the chief financial officer of the Company shall have failed to
provide, with respect to any Company SEC Document filed (or required to be
filed) with the SEC on or after the date of this Agreement, any necessary
certification in the form required under Rule 13a-14 under the Exchange Act and
18 U.S.C. ss.1350.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY
The obligation of the Company to effect the Merger and consummate the
transactions to be consummated at the Closing are subject to the satisfaction,
at or prior to the Closing, of the following conditions:
7.1 Accuracy of Representations. The representations and warranties of
Parent and Merger Sub contained in this Agreement shall have been accurate in
all respects as of the date of this Agreement and shall be accurate as of the
Closing Date as if made on and as of the Closing Date (except for
representations and warranties expressly made only as of a specified date, which
need be accurate only as of the specified date); provided, however, that (i) in
determining the accuracy of such representations and warranties for purposes of
this Section 7.1, all materiality qualifications that are contained in such
representations and warranties shall be disregarded and (ii) the condition set
forth in this Section 7.1 shall be deemed satisfied unless the circumstances
giving rise to all inaccuracies in such representations and warranties has a
material adverse effect on the ability of Parent or Merger Sub to consummate the
Merger.
7.2 Performance of Covenants. The covenants and obligations in this
Agreement that Parent and Merger Sub are required to comply with or to perform
at or prior to the Closing shall have been complied with and performed in all
respects, except where the failure to so comply or perform would not reasonably
be expected to have a material adverse effect on the ability of Parent or Merger
Sub to consummate the Merger.
7.3 Stockholder Approval. This Agreement shall have been duly adopted
and approved by the Required Stockholder Vote.
7.4 Certificate. The Company shall have received a certificate
executed on behalf of Parent by an executive officer of Parent confirming that
the conditions set forth in Sections 7.1 and 7.2 have been duly satisfied.
7.5 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger or
any of the other Contemplated Transactions shall have been issued by any court
of competent jurisdiction or other Governmental Body and remain in effect, and
there shall not be any Legal Requirement enacted or deemed applicable to the
Merger or any of the other Contemplated Transactions that makes consummation of
the Merger or any of the other Contemplated Transactions illegal.
SECTION 8. TERMINATION
8.1 Termination. This Agreement may be terminated prior to the
Effective Time (whether before or after the adoption of this Agreement by the
Required Stockholder Vote):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated by April 2, 2006 (the "End Date"); provided, however, that a party
shall not be permitted to terminate this Agreement pursuant to this Section
8.1(b) if the failure to consummate the Merger by the End Date is attributable
to a failure on the part of such party to perform any covenant or obligation in
this Agreement that is required to be performed by such party at or prior to the
Effective Time;
(c) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger;
39
(d) by either Parent or the Company if: (i) the Company Stockholders'
Meeting (including any adjournments and postponements thereof) shall have been
held and the Company's stockholders shall have taken a vote on a proposal to
adopt this Agreement; and (ii) this Agreement shall not have been adopted and
approved at the Company Stockholders' Meeting (or shall not have been adopted
and approved at any adjournment or postponement thereof, as the case may be) by
the Required Stockholder Vote; provided, however, that: (A) a party shall not be
permitted to terminate this Agreement pursuant to this Section 8.1(d) if the
failure to have this Agreement adopted and approved by the Required Stockholder
Vote is attributable to a failure on the part of such party to perform any
covenant or obligation in this Agreement that is required to be performed by
such party at or prior to the Effective Time; and (B) the Company shall not be
permitted to terminate this Agreement pursuant to this Section 8.1(d) unless the
Company shall have made any payment required to be made to Parent pursuant to
Section 8.3(a) or shall have paid to Parent any fee required to be paid to
Parent pursuant to Section 8.3(c);
(e) by Parent if a Triggering Event shall have occurred;
(f) by Parent if: (i) any of the Company's representations and
warranties contained in this Agreement shall be inaccurate as of the date of
this Agreement, or shall have become inaccurate as of a date subsequent to the
date of this Agreement (as if made on and as of such subsequent date), such that
the condition set forth in Section 6.1(a) or Section 6.1(b) would not be
satisfied (it being understood that (A) in determining the accuracy of such
representations and warranties as of the date of this Agreement or as of any
subsequent date for purposes of this Section 8.1(f), any update of or
modification to the Disclosure Schedule made or purported to have been made on
or after the date of this Agreement shall be disregarded and (B) in determining
the accuracy of such representations and warranties as of the date of this
Agreement or any subsequent date for purposes of determining whether the
condition set forth in Section 6.1(a) would be satisfied, all materiality
qualifications that are contained in such representations and warranties shall
be disregarded); or (ii) any of the Company's covenants or obligations contained
in this Agreement shall have been breached such that the condition set forth in
Section 6.2(a) would not be satisfied; provided, however, that if an inaccuracy
in any of the Company's representations and warranties or a breach of a covenant
or obligation by the Company is curable by the Company within 20 days after the
date on which the Company receives notice of such inaccuracy or breach and the
Company is continuing to exercise reasonable efforts to cure such inaccuracy or
breach, then Parent may not terminate this Agreement under this Section 8.1(f)
on account of such inaccuracy or breach: (1) during the 20-day period commencing
on the date on which the Company receives notice of such inaccuracy or breach;
or (2) after such 20-day period if such inaccuracy or breach shall have been
cured during such 20-day period in a manner that does not result in a breach of
any covenant or obligation of the Company;
(g) by the Company if: (i) any of Parent's or Merger Sub's
representations and warranties contained in this Agreement shall be inaccurate
as of the date of this Agreement, or shall have become inaccurate as of a date
subsequent to the date of this Agreement (as if made on and as of such
subsequent date), such that the condition set forth in Section 7.1 would not be
satisfied (it being understood that, in determining the accuracy of such
representations and warranties as of the date of this Agreement or as of any
subsequent date for purposes of this Section 8.1(g), all materiality
qualifications that are contained in such representations and warranties shall
be disregarded); or (ii) any of Parent's covenants or obligations contained in
this Agreement shall have been breached such that the condition set forth in
Section 7.2 would not be satisfied; provided, however, that if an inaccuracy in
any of Parent's representations and warranties or a breach of a covenant or
obligation by Parent is curable by Parent within 20 days after the date of the
on which Parent receives notice of such inaccuracy or breach and Parent is
continuing to exercise reasonable efforts to cure such inaccuracy or breach,
then the Company may not terminate this Agreement under this Section 8.1(g) on
account of such inaccuracy or breach: (1) during the 20-day period commencing on
the date on which Parent receives notice of such inaccuracy or breach; or (2)
after such 20-day period if such inaccuracy or breach shall have been fully
cured during such 20-day period in a manner that does not result in a breach of
any covenant or obligation of Parent; or
(h) by the Company (at any time prior to the adoption of this
Agreement by the Required Stockholder Vote), in order to accept a Superior Offer
and enter into the Specified Definitive Acquisition Agreement (as defined below)
relating to such Superior Offer, if (i) such Superior Offer shall not have
arisen directly or indirectly from any breach of any of the provisions of
Section 4.3 and none of the Acquired Corporations, and no Representative of any
of the Acquired Corporations, shall have breached any of the provisions set
forth in Section 4.3 in connection with such Superior Offer, (ii) the Company
Board, after satisfying all of the requirements set forth in Section 5.2(c) in
connection with such Superior Offer, shall have authorized the Company to enter
40
into a binding, written, definitive acquisition agreement providing for the
consummation of the transaction contemplated by such Superior Offer (the
"Specified Definitive Acquisition Agreement"), (iii) the Company shall have
delivered to Parent a written notice (that includes a copy of the Specified
Definitive Acquisition Agreement as an attachment) containing the Company's
representation and warranty that (A) the Specified Definitive Acquisition
Agreement has been duly executed and delivered to the Company by the other party
thereto and the offer thereby made by such other party cannot be withdrawn by
such other party at any time during the period of five business days commencing
on the date of Parent's receipt of such notice, (B) the Company Board has
authorized the execution and delivery of the Specified Definitive Acquisition
Agreement on behalf of the Company and the termination of this Agreement
pursuant to this Section 8.1(h) and (C) the Company intends to enter into the
Specified Definitive Acquisition Agreement contemporaneously with the
termination of this Agreement pursuant to this Section 8.1(h), (iv) a period of
at least five business days shall have elapsed since the receipt by Parent of
such notice, and the Company shall have made its Representatives available
during such period for the purpose of engaging in negotiations with Parent
regarding a possible amendment to this Agreement or a possible alternative
transaction, (v) the Company shall have immediately advised Parent of any
modification proposed to be made to the Specified Definitive Acquisition
Agreement by the other party thereto (which shall result in a recommencement of
the five business day period set forth in clause "(iv)" above), (vi) any written
proposal by Parent to amend this Agreement or enter into an alternative
transaction shall have been considered by the Company Board in good faith, and
the Company Board shall have determined in good faith (after having consulted
with the Financial Advisor) that the terms of the proposed amended agreement of
merger (or other alternative transaction) are not as favorable to the Company's
stockholders, from a financial point of view, as the terms of the transaction
contemplated by the Specified Definitive Acquisition Agreement, as it may have
been modified to make such terms more favorable to the Company, (vii) the
Company shall have paid to Parent the fee required to be paid to Parent pursuant
to Section 8.3(d), and (viii) on the date five business days after Parent
receives the written notice referred to in clause "(iii)" of this Section
8.1(h), the Company shall have executed and delivered to the other party thereto
the Specified Definitive Acquisition Agreement (as it may have been modified to
make it more favorable to the Company), and the Specified Definitive Acquisition
Agreement (as it may have been so modified) shall have thereupon become fully
binding and effective (it being understood that if the Company validly
terminates this Agreement pursuant to this Section 8.1(h) by satisfying all of
the conditions set forth in clauses "(i)" through "(viii)" of this Section
8.1(h), then the termination of this Agreement shall be deemed to occur
contemporaneously with the execution and delivery of the Specified Acquisition
Agreement by the Company).
Notwithstanding anything to the contrary contained in this Agreement, the
Company may not terminate this Agreement pursuant to any subsection of this
Section 8.1 unless the Company Board shall have adopted a resolution
specifically recommending the termination of this Agreement pursuant to such
subsection.
8.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 8.1, this Agreement shall be of no further
force or effect; provided, however, that (i) this Section 8.2, Section 8.3 and
Section 9 (and the Confidentiality Agreement) shall survive the termination of
this Agreement and shall remain in full force and effect, and (ii) the
termination of this Agreement shall not relieve any party from any liability for
any inaccuracy in or breach of any representation, warranty, covenant,
obligation or other provision contained in this Agreement.
8.3 Expenses; Termination Fee.
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such fees and expenses,
whether or not the Merger is consummated; provided, however, that if this
Agreement is terminated by Parent or the Company pursuant to Section 8.1(d),
then the Company shall make a nonrefundable cash payment to Parent, at the time
specified in the next sentence, in an amount equal to the lesser of (i) $150,000
or (ii) the aggregate amount of all fees and expenses (including all attorneys'
fees, accountants' fees and filing fees) that have been paid or that may become
payable by or on behalf of Parent in connection with the preparation and
negotiation of this Agreement and otherwise in connection with the Merger and
the other Contemplated Transactions. In the case of termination of this
Agreement by the Company, any nonrefundable payment required to be made pursuant
to the proviso to the preceding sentence shall be made by the Company prior to
the time of such termination, and in the case of termination of this Agreement
41
by Parent, any nonrefundable payment required to be made pursuant to the proviso
to the preceding sentence shall be made by the Company within two business days
after such termination.
(b) If: (i) this Agreement is terminated by Parent or the Company
pursuant to Section 8.1(b); (ii) at or prior to the time of the termination of
this Agreement either (A) the Company Stockholders' Meeting shall not have been
held and completed or (B) an Acquisition Proposal shall have been commenced,
submitted or made; and (iii) on or prior to the day 180 days following the date
of the termination of this Agreement, an Acquisition Transaction is consummated
or a definitive agreement contemplating an Acquisition Transaction is executed,
then the Company shall pay to Parent, in cash at the time such Acquisition
Transaction is consummated, a nonrefundable fee in the amount of $500,000 (the
"Termination Fee").
(c) If this Agreement is terminated by Parent or the Company pursuant
to Section 8.1(d) and at or prior to the time of the termination of this
Agreement (i) the commencement, submission or making of an Acquisition Proposal
shall have been publicly disclosed or announced, (ii) such Acquisition Proposal
shall not have been publicly withdrawn as of the date five business days prior
to the date of the Company Stockholders' Meeting (as it may have been adjourned
or postponed) and (iii) on or prior to the day 180 days following the date of
the termination of this Agreement, an Acquisition Transaction is consummated or
a definitive agreement contemplating an Acquisition Transaction is executed;
then the Company shall pay to Parent, in cash at the earlier of the time the
Acquisition Transaction is consummated or a definitive agreement contemplating
an Acquisition Transaction is executed, the Termination Fee, provided, however,
that if Parent shall have previously received a nonrefundable payment from the
Company pursuant to Section 8.3(a), then the amount of the Termination Fee
payable pursuant to this sentence shall be reduced by the amount of such
nonrefundable payment.
(d) If this Agreement is terminated by Parent pursuant to Section
8.1(e) or by the Company pursuant to Section 8.1(h), then the Company shall pay
to Parent, in cash at the time specified in the next sentence, the Termination
Fee. In the case of termination of this Agreement by Parent pursuant to Section
8.1(e), the fee referred to in the preceding sentence shall be paid by the
Company within two business days after such termination, and in the case of
termination of this Agreement by the Company pursuant to Section 8.1(h), the fee
referred to in the preceding sentence shall be paid by the Company at or prior
to the time of such termination.
(e) If the Company fails to pay when due any amount payable under this
Section 8.3, then (i) the Company shall reimburse Parent for all reasonable
costs and expenses (including reasonable fees and disbursements of counsel)
incurred in connection with the collection of such overdue amount and the
enforcement by Parent of its rights under this Section 8.3, and (ii) the Company
shall pay to Parent interest on such overdue amount (for the period commencing
as of the date such overdue amount was originally required to be paid and ending
on the date such overdue amount is actually paid to Parent in full) at an annual
rate two percentage points above the "prime rate" (as announced by Bank of
America or any successor thereto) in effect on the date such overdue amount was
originally required to be paid.
SECTION 9. MISCELLANEOUS PROVISIONS
9.1 Amendment. This Agreement may be amended with the approval of the
respective boards of directors of the Company and Parent at any time (whether
before or after the Required Stockholder Vote has been obtained); provided,
however, that after the Required Stockholder Vote has been obtained, no
amendment shall be made which by law requires further approval of the
stockholders of the Company without the further approval of such stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
9.2 Waiver.
(a) No failure on the part of any party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any party
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
42
(b) No party shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
party; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
9.3 No Survival of Representations and Warranties. None of the
representations and warranties contained in this Agreement shall survive the
Merger.
9.4 Entire Agreement; Counterparts. This Agreement constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among or between any of the parties with respect to the
subject matter hereof and thereof; provided, however, that the Confidentiality
Agreement shall not be superseded by this Agreement and shall remain in full
force and effect. This Agreement may be executed in several counterparts, each
of which shall be deemed an original and all of which shall constitute one and
the same instrument.
9.5 Applicable Law; Jurisdiction. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws. In any action or suit between any of the parties arising out of or
relating to this Agreement or any of the transactions contemplated by this
Agreement each of the parties irrevocably and unconditionally consents and
submits to the exclusive jurisdiction and venue of the Court of Chancery (or to
the extent such court does not have subject matter jurisdiction, other state
courts) located in the State of Delaware.
9.6 Disclosure Schedule. The Disclosure Schedule shall be arranged in
separate parts corresponding to the numbered and lettered sections contained in
Section 2. The information disclosed in any numbered or lettered part of the
Disclosure Schedule shall be deemed to relate to and to qualify only the
particular representation or warranty set forth in the corresponding numbered or
lettered section in Section 2, and shall not be deemed to relate to or to
qualify any other representation or warranty; provided, however, that if it is
readily apparent, upon a reading of such information without any independent
knowledge on the part of the reader regarding such information, that such
information qualifies, and constitutes an exception to, another representation
and warranty contained in Section 2, then such information shall also be deemed
to qualify such other representation and warranty. For purposes of this
Agreement, each statement or other item of information set forth in the
Disclosure Schedule or in any update to the Disclosure Schedule shall be deemed
to be a representation and warranty made by the Company in Section 2.
9.7 Attorneys' Fees. In any action at law or suit in equity to enforce
this Agreement or the rights of any of the parties under this Agreement, the
prevailing party in such action or suit shall be entitled to receive a
reasonable sum for its attorneys' fees and all other reasonable costs and
expenses incurred in such action or suit.
9.8 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure solely to the benefit of, the parties hereto and their
respective successors and assigns; provided, however, that neither this
Agreement nor any rights under this Agreement may be assigned by any party
without the prior written consent of the other parties, and any attempted
assignment of this Agreement or any of such rights by a party without such
consent shall be void and of no effect. Nothing in this Agreement, express or
implied, is intended to or shall confer upon any employee or creditor of any
Acquired Corporation, or any other Person (other than (i) the parties hereto and
(ii) the Indemnified Persons (and their respective heirs and personal
representatives) to the extent of such Indemnified Persons' respective rights
pursuant to Section 5.6) any right, benefit or remedy of any nature.
9.9 Notices. All notices, requests, instructions or other documents or
communications to be given or delivered under this Agreement shall be in writing
and shall be deemed given or delivered (i) when sent if sent by facsimile
(provided that the fax is promptly confirmed by telephone confirmation thereof),
(ii) when delivered, if delivered personally to the intended recipient and (iii)
one business day following sending by overnight delivery via a national courier
service, and in each case, addressed to a party at the following address or
facsimile telephone number for such party (or to such other address or facsimile
telephone number as such party shall have specified in a written notice given to
the other parties hereto):
43
if to Parent or Merger Sub:
Synopsys, Inc.
700 East Middlefield Road
Mountain View, CA 94043
Attention: General Counsel
Facsimile: (650) 965-8637
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Timothy J. Moore, Esq.
Facsimile: (650) 849-7400
if to the Company:
HPL Technologies, Inc.
2033 Gateway Place, Suite 400
San Jose, California 95110
Attention: Chief Executive Officer
Facsimile: (408) 501-9299
with a copy to:
Heller Ehrman LLP
4350 La Jolla Village Drive, 7th Floor
San Diego, CA 92122-1246
Attention: Alan Jacobs, Esq.
Facsimile: (858) 450-8499
9.10 Cooperation. The Company agrees to cooperate fully with Parent
and to execute and deliver such further documents, certificates, agreements and
instruments and to take such other actions as may be reasonably requested by
Parent to evidence or reflect the Contemplated Transactions.
9.11 Non-Exclusivity. The respective rights and remedies of the
Company and Parent under this Agreement are not exclusive of or limited by any
other rights or remedies that they may have, whether at law, in equity, by
contract or otherwise, all of which shall be cumulative (and not alternative).
Without limiting the generality of the foregoing, the respective rights,
remedies, obligations and liabilities of the Company and Parent under this
Agreement are in addition to their respective rights, remedies, obligations and
liabilities under all applicable Legal Requirements.
9.12 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions of this
Agreement or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction. If a final judgment of a
court of competent jurisdiction declares that any term or provision of this
Agreement is invalid or unenforceable, the parties hereto agree that the court
making such determination shall have the power to limit such term or provision,
to delete specific words or phrases or to replace such term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be valid and enforceable as so modified. In the event such
court does not exercise the power granted to it in the prior sentence, the
parties hereto agree to replace such invalid or unenforceable term or provision
with a valid and enforceable term or provision that will achieve, to the extent
possible, the economic, business and other purposes of such invalid or
unenforceable term or provision.
44
9.13 Construction.
(a) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall include masculine
and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement to
"Sections," "Exhibits" and "Schedules" are intended to refer to Sections of this
Agreement and Exhibits and Schedules to this Agreement.
(e) The bold-faced headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
45
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
SYNOPSYS, INC.
By: /s/ Rex S. Jackson
-----------------------------------
Print Name: Rex S. Jackson
Print Title: Sr. Vice President, General Counsel
and Acting Chief Financial Officer
SNAP ACQUISITION, INC.
By: /s/ Rex S. Jackson
----------------------------------
Print Name: Rex S. Jackson
Print Title: President and CEO
HPL TECHNOLOGIES, INC.
By: /s/ Cary D. Vandenberg
--------------------------
Print Name: Cary D. Vandenberg
Print Title: President and Chief Executive Officer
46
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquired Corporations. "Acquired Corporations" shall mean the Company
and its Subsidiaries and the respective predecessors of the Company and its
Subsidiaries (including any Entity that shall have merged into the Company or
any Subsidiary of the Company).
Acquisition Inquiry. "Acquisition Inquiry" shall mean an inquiry,
indication of interest or request for information (other than an inquiry,
indication of interest or request for information made or submitted by Parent)
that would reasonably be expected to lead to an Acquisition Proposal.
Acquisition Proposal. "Acquisition Proposal" shall mean any offer,
proposal or indication of interest (other than an offer, proposal or indication
of interest made or submitted by Parent) contemplating or otherwise relating to
any Acquisition Transaction (it being understood that for the sole purpose of
Section 8.3(b) of the Agreement, the references to "15%" in the definition of
"Acquisition Transaction" shall be deemed instead to refer to "40%").
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction or series of transactions (other than the Merger and the
Contemplated Transactions) involving:
(a) any merger, consolidation, amalgamation, share exchange,
business combination, issuance of securities, acquisition of
securities, recapitalization, tender offer, exchange offer or other
similar transaction: (i) in which a Person or "group" (as defined in
the Exchange Act and the rules promulgated thereunder) of Persons
directly or indirectly acquires beneficial or record ownership of
securities representing more than 15% of the outstanding securities of
any class of voting securities of any of the Acquired Corporations; or
(ii) in which any Acquired Corporation issues securities representing
more than 15% of the outstanding securities of any class of voting
securities of such Acquired Corporation (other than a transaction in
which one or more Acquired Corporations issues securities to another
Entity that is an Acquired Corporation immediately prior to the
issuance of such securities); or
(b) any sale, lease, exchange, transfer, license, acquisition
or disposition of any business or businesses or assets that constitute
or account for (i) 15% or more of the consolidated net revenues of the
Acquired Corporations, consolidated net income of the Acquired
Corporations or consolidated book value of the assets of the Acquired
Corporations or (ii) 15% or more of the fair market value of the assets
of the Acquired Corporations;
provided, however, that, for the sole purpose of Section 8.3(b) and 8.3(c)of the
Agreement, the references to "15%" in this definition of "Acquisition
Transaction" shall be deemed instead to refer to "40%".
Agreement. "Agreement" shall mean the Agreement of Merger to which this
Exhibit A is attached, as it may be amended from time to time.
COBRA. "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.
Company Affiliate. "Company Affiliate" shall mean any Person under
common control with any of the Acquired Corporations within the meaning of
Sections 414(b), (c), (m) and (o) of the Code, and the regulations issued
thereunder.
1
Company Associate. "Company Associate" shall mean any current or former
employee, independent contractor, officer or director of any of the Acquired
Corporations or any Company Affiliate.
Company Benefit Agreement. "Company Benefit Agreement" shall mean each
management, employment, severance, consulting, relocation, repatriation or
expatriation agreement or other Contract between any of the Acquired
Corporations or any Company Affiliate and any Company Associate, other than any
such Contract with a Company Associate that is terminable "at will" without any
material obligation on the part of the applicable Acquired Corporation or
Company Affiliate to make any payments or provide any benefits in connection
with such termination, except for any payments of benefits accrued before such
termination.
Company Benefit Plan. "Company Benefit Plan" shall mean each
employment, consulting, salary, bonus, vacation, deferred compensation,
incentive compensation, stock purchase, stock option or other equity-based,
severance, termination, retention, change-in-control, death and disability
benefits, hospitalization, medical, life or other insurance, flexible benefits,
supplemental unemployment benefits, other welfare fringe benefits,
profit-sharing, pension or retirement plan, program, agreement or commitment and
each other employee benefit plan or arrangement, whether funded or unfunded,
including each Foreign Plan and each "employee benefit plan," within the meaning
of Section 3(3) of ERISA, sponsored, maintained, contributed to or required to
be contributed to by any of the Acquired Corporations for the benefit of any
Company Associate or with respect to which any of the Acquired Corporations has
or could incur any liability or obligation.
Company Common Stock. "Company Common Stock" shall mean the Common
Stock, $0.001 par value per share, of the Company.
Company Contract. "Company Contract" shall mean any Contract: (a) to
which any of the Acquired Corporations is a party; (b) by which any of the
Acquired Corporations or any asset of any of the Acquired Corporations is or may
become bound or under which any of the Acquired Corporations has, or may become
subject to, any obligation; or (c) under which any of the Acquired Corporations
has or may acquire any right or interest.
Company IP. "Company IP" shall mean (a) all Intellectual Property
Rights in the Company Software (including the Company Source Code) and (b) all
Intellectual Property Rights in which any of the Acquired Corporations has (or
purports to have) an ownership interest or an exclusive license or similar
exclusive right.
Company IP Contract. "Company IP Contract" shall mean any Contract to
which any of the Acquired Corporations is or was a party, or by which any of the
Acquired Corporations is or was bound or to which any Company IP is or was
subject, that contains any assignment or license of, or any covenant not to
assert or enforce, any Intellectual Property Right or that otherwise relates to
any Company IP or any Intellectual Property developed by, with or for any of the
Acquired Corporations.
Company Material Adverse Effect. "Company Material Adverse Effect"
shall mean any effect, change, event or circumstance (or any series or group of
related effects, changes, events and circumstances) that has or would reasonably
be expected to have a material adverse effect on (a) the business, financial
condition, capitalization, net assets (as defined in the next sentence),
operations or financial performance of the Acquired Corporations taken as a
whole, (b) the ability of the Company to consummate the Merger or any of the
other Contemplated Transactions or (c) Parent's ability to vote, transfer,
receive dividends with respect to or otherwise exercise ownership rights with
respect to any of the stock of the Surviving Corporation; provided, however,
that any effects resulting from (i) changes after the date of this Agreement in
the U.S. or global economy or capital markets in general that do not have a
materially disproportionate effect on the Acquired Corporations, (ii) changes
after the date of this Agreement that affect generally the industries in which
the Company participates but that do not have a materially disproportionate
effect on the Acquired Corporations, (iii) changes after the date of this
Agreement in applicable law or in U.S. GAAP, (iv) any decline in customer
orders, or any resignation of any employees (other than the employees listed on
Schedule 6.6), that is attributable to the announcement of the Merger, (v)
changes in the market price or trading volume of the Company Common Stock
(provided that the underlying causes of such changes may qualify as "Company
Material Adverse Effects"), (vi) failure(s) by the Company to meet internal
operating projections or forecasts, or published revenue or earnings predictions
(provided that shortfalls in financial results which result in such missed
projections or forecasts and the underlying causes of such shortfalls may
qualify as "Company Material Adverse Effects"), and (vii) any effects resulting
from any Legal Proceeding against the Company by the stockholders of the Company
2
challenging or seeking to restrain or prohibit the consummation of the Merger or
any of the other Contemplated Transactions, shall not constitute a Company
Material Adverse Effect. For purposes of the preceding sentence, "net assets"
means the aggregate fair market value of the assets (including cash, cash
equivalents, short-term investments and Intellectual Property) of the Acquired
Corporations minus the amount of the liabilities (accrued, contingent or
otherwise) of the Acquired Corporations.
Company Software. "Company Software" shall mean any software (including
firmware and other software embedded in hardware devices) owned, developed (or
currently being developed), marketed, distributed, licensed or sold by any of
the Acquired Corporations at any time (other than (a) third-party software
licensed to any of the Acquired Corporations solely for internal use on a
non-exclusive basis and (b) third-party software resold by any Acquired
Corporation without any change or modification by any Acquired Corporation that
is not incorporated into any software owned or developed (or currently being
developed) by any Acquired Corporation) and shall include each version of the
software products known as Odyssey, Cell Designer, YIELD Projector, Testchip,
Testchip Advantage, Recipe Management and Editing, YIELDirector and DSSA Sentry.
Company Source Code. "Company Source Code" shall mean the
human-readable source code version of any Company Software, including all
calculation formulae embodied in the Company Software, descriptions or details
of any algorithms embodied in the Company Software and all annotations,
commentary, instructions, specifications (including design, functional and other
technical specifications), programmer notes (technical or otherwise), logic
diagrams, flowcharts, input and output layouts, field descriptions, sort
sequences, data dictionaries and file layouts relating to any Company Software.
Confidentiality Agreement. "Confidentiality Agreement" shall mean the
Nondisclosure Agreement dated April 6, 2005 between the Company and Parent.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contemplated Transactions. "Contemplated Transactions" shall mean the
Merger and the other transactions and actions contemplated by this Agreement.
Contract. "Contract" shall mean any legally binding written, oral or
implied agreement, contract, subcontract, lease, instrument, note, option,
warranty, purchase order, license, sublicense, insurance policy, benefit plan or
commitment or undertaking of any nature.
Disclosure Schedule. "Disclosure Schedule" shall mean the disclosure
schedule that has been prepared by the Company in accordance with the
requirements of Section 9.6 of the Agreement and that has been delivered by the
Company to Parent on the date of the Agreement.
DOL. "DOL" shall mean the United States Department of Labor.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
mortgage, security interest, encumbrance, claim, infringement, interference,
option, right of first refusal, preemptive right, community property interest,
restriction or other encumbrance of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any company
limited by shares, limited liability company or joint stock company), firm,
society or other enterprise, association, organization or entity.
ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
3
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
Foreign Plan. "Foreign Plan" shall mean (a) any plan, program, policy,
practice, Contract or other arrangement mandated by a Governmental Body outside
the United States to which any of the Acquired Corporations is required to
contribute or under which any of the Acquired Corporations has or may have any
liability, (b) any Company Benefit Plan that is subject to any of the Legal
Requirements of any jurisdiction outside the United States and (c) any Company
Benefit Plan that covers or has covered any Company Associate whose services are
or have been performed primarily outside of the United States.
Governmental Authorization. "Governmental Authorization" shall mean any
permit, license, certificate, franchise, permission, variance, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement.
Governmental Body. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal, foreign
or other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, ministry, fund, foundation, center, organization,
unit, body or Entity and any court or other tribunal).
Intellectual Property. "Intellectual Property" shall mean algorithms,
application programmers' interfaces (APIs), apparatus, databases, data and
results from simulations or tests, design rules, diagrams, formulae, GDSII
files, inventions (whether or not patentable), know-how, logos, marks (including
brand names, product names, logos and slogans), methods, network configurations
and architectures, processes, proprietary information, protocols, schematics,
simulation methods or techniques, specifications, software, software code (in
any form, including source code and executable or object code), software
development tools, subroutines, techniques, test vectors, user interfaces,
uniform resource locators (URLs), web sites, works of authorship and other forms
of technology (whether or not embodied in any tangible form and including all
tangible embodiments of the foregoing, such as instruction manuals, laboratory
notebooks, prototypes, samples, studies and summaries).
Intellectual Property Rights. "Intellectual Property Rights" shall mean
all rights of the following types, which may exist or be created under the laws
of any jurisdiction in the world: (a) rights associated with works of
authorship, including exclusive exploitation rights, copyrights, moral rights
and mask works; (b) Trademark and trade name rights and similar rights; (c)
trade secret rights; (d) Patent and industrial property rights; (e) other
proprietary rights in Intellectual Property; and (f) rights in or relating to
registrations, renewals, extensions, combinations, divisions, and reissues of,
and applications for, any of the rights referred to in clauses "(a)" through
"(e)" above.
IRS. "IRS" shall mean the United States Internal Revenue Service.
Knowledge. "Knowledge" shall mean, when used with respect to the
Company, the actual knowledge of any officer or director of the Company; and,
when used with respect to Parent, the actual knowledge of any officer or
director of Parent.
Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought or conducted or heard by or
before any court or other Governmental Body or any arbitrator or arbitration
panel.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body (or under the
authority of the NASDAQ National Market).
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Made Available. "Made Available" shall mean that the information
referred to (i) has been actually delivered to Parent or to its outside legal
counsel or presented for review to Parent or legal counsel at the offices of the
Company or (ii) with respect to any information expressly contemplated by this
Agreement to be delivered or actually delivered to Parent or to its outside
legal counsel during the Pre-Closing Period only.
Malicious Code. "Malicious Code" shall mean any "back door," "drop dead
device," "time bomb," "Trojan horse," "virus," or "worm" (as such terms are
commonly understood in the software industry) or any other code designed or
intended to have, or capable of performing, any of the following functions: (i)
disrupting, disabling, harming or otherwise impeding in any manner the operation
of, or providing unauthorized access to, a computer system or network or other
device on which such code is stored or installed; or (ii) damaging or destroying
any data or file without the user's consent. For avoidance of doubt, "bugs" and
other unintentional defects or errors in a software program are not considered
Malicious Code and features of a software program that allow the user thereof to
intentionally interrupt, suspend or cease the operation of the program (e.g.,
the "Esc" key or simultaneously pressing the "Ctrl", "Alt" and "Delete" keys)
are not considered Malicious Code.
Merger Consideration. "Merger Consideration" shall mean the cash
consideration that a holder of shares of Company Common Stock who does not
perfect his, her or its appraisal rights under the DGCL is entitled to receive
in exchange for such shares of Company Common Stock pursuant to Section 1.5.
Parent Common Stock. "Parent Common Stock" shall mean the Common
Stock, $0.01 par value per share, of Parent.
Patents. "Patents" shall mean patents and patent applications in any
jurisdiction in the world.
Person. "Person" shall mean any individual, Entity or Governmental
Body.
Permitted Encumbrance. "Permitted Encumbrance" shall mean (A) statutory
liens for taxes that are not yet due and payable or liens for taxes being
contested in good faith by any appropriate proceedings for which adequate
reserves have been established on the Year-End Balance Sheet; (B) statutory
liens to secure obligations to landlords, lessors or renters under leases or
rental agreements that have not been breached; (C) deposits or pledges made in
connection with, or to secure payment of, workers' compensation, unemployment
insurance or similar programs mandated by applicable Legal Requirements; (D)
statutory liens in favor of carriers, warehousemen, mechanics and materialmen,
to secure claims for labor, materials or supplies and other like liens; (E)
liens in favor of customs and revenue authorities arising as a matter of Legal
Requirements to secure payments of customs duties in connection with the
importation of goods; (F) non-exclusive object code licenses of software by the
any Acquired Corporation or any reseller or distributor of any Acquired
Corporation in the ordinary course of its business consistent with past
practice; and (G) Encumbrances set forth in that certain Loan and Security
Agreement dated July 21, 2005 by and between the Company and Silicon Valley
Bank; and (H) Encumbrances that do not materially interfere with the use,
operation or transfer of, or any of the benefits of ownership of, the property
subject thereto.
Registered IP. "Registered IP" shall mean all Intellectual Property
Rights that are registered, filed or issued by, with or under the authority of
any Governmental Body, including all patents, registered copyrights, registered
mask works and registered Trademarks and all applications for any of the
foregoing.
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
Securities Act. "Securities Act" shall mean the Securities Act of 1933,
as amended.
Subsidiary. An Entity shall be deemed to be a "Subsidiary" of another
Person if such Person directly or indirectly owns or purports to own,
beneficially or of record, (a) an amount of voting securities of other interests
in such Entity that is sufficient to enable such Person to elect at least a
majority of the members of such Entity's board of directors or other governing
body, or (b) at least 50% of the outstanding equity, beneficial or financial
interests or such Entity.
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Superior Offer. "Superior Offer" shall mean an unsolicited, bona fide
written offer made by a third party to purchase at least 75% of the outstanding
shares of Company Common Stock or assets of the Acquired Corporations, taken as
a whole, on terms that the Company Board determines, in its good faith judgment,
after having consulted with the Financial Advisor, to be (a) more favorable to
the Company's stockholders from a financial point of view than the terms of the
Merger and (b) reasonably likely to be consummated if such offer were to be
accepted by the Company; provided, however, that any such offer shall not be
deemed to be a "Superior Offer" if any financing is required to consummate the
transaction contemplated by such offer and either (i) such financing is not
committed or (ii) the Company Board has not determined that such financing is
likely to be obtained by such third party.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, estimated tax,
unemployment tax, national health insurance tax, excise tax, ad valorem tax,
transfer tax, stamp tax, sales tax, use tax, property tax, business tax,
withholding tax or payroll tax), levy, assessment, tariff, duty (including any
customs duty), deficiency or fee, and any related charge or amount (including
any fine, penalty, addition to tax or interest), imposed, assessed or collected
by or under the authority of any Governmental Body.
Tax Return. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
Trademarks. "Trademarks" shall mean trademarks and service marks
(whether registered or unregistered), including applications therefor, in any
jurisdiction in the world.
Triggering Event. A "Triggering Event" shall be deemed to have occurred
if: (i) the Company Board shall have failed to recommend unanimously that the
Company's stockholders vote to adopt the Agreement or the Company Board shall
have withdrawn or modified in a manner adverse to Parent the Company Board
Recommendation; (ii) the Company shall have failed to include in the Proxy
Statement the Company Board Recommendation or a statement to the effect that the
Company has determined and believes that the Merger is advisable and fair to and
in the best interests of the Company's stockholders; (iii) the Company Board
fail to reaffirm publicly the Company Board Recommendation, or fails to reaffirm
its determination that the Merger is advisable and fair to and in the best
interests of the Company's stockholders, in each case within five business days
after Parent requests in writing that such recommendation or determination be
reaffirmed publicly; (iv) the Company Board or any committee thereof shall have
approved, endorsed or recommended any Acquisition Proposal; (v) the Company
shall have executed any letter of intent, memorandum of understanding or similar
document or Contract relating to any Acquisition Proposal other than as
expressly permitted in Section 4.3(a) of the Agreement; (vi) a tender or
exchange offer relating to securities of the Company shall have been commenced
and the Company shall not have sent to its security holders, within ten business
days after the commencement of such tender or exchange offer, a statement
disclosing that the Company recommends rejection of such tender or exchange
offer; or (vii) an Acquisition Proposal has arisen directly or indirectly from
any breach of any of the provisions of Section 4.3, or any of the Acquired
Corporations or any Representative of any of the Acquired Corporations shall
have otherwise materially and willfully breached any of the provisions set forth
in Section 4.3 in connection with an Acquisition Proposal.
6
ANNEX B
Opinion of SVB Alliant
i.
Board of Directors
HPL Technologies, Inc.
2033 Gateway Place, Suite 400
San Jose, California 95110
Ladies and Gentlemen:
We understand that Synopsys, Inc., a Delaware corporation ("Buyer"), Snap
Acquisition Sub, Inc., a Delaware corporation and wholly-owned subsidiary of
Buyer ("Merger Sub") and HPL Technologies, Inc., a Delaware corporation ("HPL")
propose to enter into an Agreement of Merger, substantially in the form of the
draft dated September 28, 2005 (the "Agreement"), whereby, among other things,
Merger Sub shall be merged with and into the Company (the "Transaction"), the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation.
The Agreement provides that, at the effective time of the Transaction, each
issued and outstanding share of common stock, $0.001 par value, of HPL
(collectively, the "Shares") (other than shares owned by Buyer, Merger Sub or
any other wholly-owned subsidiary of Buyer or shares which are held by
stockholders exercising dissenters' rights pursuant to Section 262 of the
Delaware General Corporations Law) will be converted into the right to receive
$0.30 in cash (the "Purchase Price"). We also understand that the terms and
conditions of the Transaction are more fully detailed in the Agreement.
You have requested our opinion as to whether the Purchase Price is fair, from a
financial point of view, to the HPL stockholders. For purposes of the opinion
set forth herein, we have:
(a) Discussed the past and current operations, financial condition, and
prospects for HPL with senior executives of HPL;
(b) Discussed with the senior executives of HPL the strategic objectives of
the Transaction;
(c) Reviewed certain financial statements and other financial and operating
data concerning HPL prepared by HPL management and its representatives;
(d) Analyzed certain financial projections for HPL prepared by HPL
management;
(e) Compared the financial performance of HPL with that of certain other
comparable publicly-traded companies and the prices paid for securities
of those publicly-traded companies;
(f) Reviewed the financial terms, to the extent publicly available, of
certain merger and acquisition transactions involving companies we
believe to be comparable in whole or in part to HPL;
(g) Assessed the value of HPL using a discounted cash flow analysis of
projected future cash flows and rejected the use of that analysis;
(h) Reviewed HPL's trading history and relative stock price performance;
(i) Reviewed the Agreement and certain related documents and discussed the
proposed terms of the Transaction with senior executives of HPL;
(j) Reviewed with HPL management HPL's anticipated operating expenses, the
potential for default under HPL's third-party secured line of credit,
other cash needs and liquidity constraints, including the ability of HPL
to secure alternative sources of financing; and
1
(k) Performed such other financial studies, analyses and investigations and
reviewed such other information and factors as we have deemed
appropriate.
In our review and analysis and in formulating our opinion, we have relied upon
and assumed, without independent verification, the accuracy and completeness of
all of the financial and other information publicly available or furnished or
otherwise communicated to us. With respect to the financial projections of HPL,
we have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the future financial
performance of HPL. The financial and other information regarding HPL reviewed
by or discussed with SVB Alliant in connection with the rendering of this
opinion was limited to publicly available information and that provided by HPL's
management, and certain discussions with HPL regarding HPL's financial condition
and future prospects as well as the strategic objectives of the Transaction,
respectively.
We have assumed that the Transaction will be consummated in a timely fashion in
accordance with the terms set forth in the Agreement. We have not made any
independent valuation or appraisal of any of HPL's assets or liabilities
(including any derivative or off-balance sheet assets or liabilities), nor have
we been furnished with any such appraisals. We have relied on HPL and its legal
counsel as to all legal and tax matters. Our opinion is necessarily based on the
economic, market, and other conditions in effect on, and the information made
available to us as of, the date hereof. Any change in such conditions or
information would require a reevaluation of this opinion. SVB Alliant has not
assumed any obligation or responsibility to update, revise, or reaffirm this
opinion based on such changes occurring after the date hereof. We express no
opinion as to the price at which HPL common stock will trade at any time.
In formulating our opinion and without limiting the generality of the foregoing,
SVB Alliant also relied on (i) the fact that HPL's decision to enter into the
Agreement was preceded by (a) a nine month engagement to discuss financing
opportunities and (b) a concurrent five month process during which merger and
financing proposals were solicited by or on behalf of HPL from potential parties
which included parties that HPL believed were logical merger partners or
minority investors, and (ii) HPL's assessment that the Transaction represents
the only currently available transaction to HPL that would provide the cash
necessary to enable HPL to fund its ongoing operations to avoid foreclosure on
its assets by existing creditors.
In formulating our opinion and without limiting the generality of the foregoing,
SVB Alliant has assumed that (i) HPL would be unable to secure alternative
financing in sufficient time to provide working capital to continue operations
and avoid actions that would severely impair its future prospects, (ii) HPL
would not be able to pay its obligations as they became due or continue its
operations in the absence of consummation of the Transaction and (iii) even with
drastic measures there would be no assurance that such measures would provide
anything more than a temporary solution to HPL's working capital deficit leading
HPL ultimately to seek protection from creditors pursuant to a bankruptcy
proceeding, a reasonably possible outcome of which would produce no value to
HPL's stockholders.
Our opinion addresses only the fairness of the Purchase Price, from a financial
point of view, and we do not express any views on any other terms of the
proposed Transaction or the business or economic bases underlying the Agreement.
SVB Alliant has acted as financial advisor to the Board of Directors of the
Company in connection with this transaction and will receive a fee for our
services, a significant portion of which is contingent upon the consummation of
the transaction. In addition, HPL has agreed to indemnify us for certain
liabilities that may arise out of the rendering of this opinion. As part of SVB
Alliant's investment banking services, we are regularly engaged in the valuation
of businesses and their securities in connection with mergers, acquisitions,
divestitures, and private placements. We have been engaged to render the
financial opinion expressed herein and we will earn a fee upon delivery of this
opinion. SVB Alliant and its affiliates have provided, and may in the future
provide, financial advisory and financing services for HPL for which we have
received or would expect to receive customary fees for the rendering of these
services. As of the date hereof, Silicon Valley Bank, a subsidiary of Silicon
Valley Financial Group, parent company of SVB Alliant, has a loan in the amount
of $3.0 million, of which $2.0 million is drawn, extended to HPL. It is our
understanding that proceeds from the Transaction would be used in part to pay
off any then-outstanding amounts of such loan.
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SVB Alliant's advisory services and this opinion are provided for the
information and assistance of the Board of Directors of HPL in connection with
its consideration of the Transaction contemplated by the Agreement. This opinion
is not intended to be and does not constitute a recommendation to any HPL
stockholder as to how such stockholder should vote with respect to the
Transaction.
Based upon and subject to the foregoing, we are of the opinion that the Purchase
Price is fair, from a financial point of view, to the HPL stockholders.
Very truly yours,
/s/ Richard T. Dalton
---------------------
SVB Alliant
3
ANNEX C
Form of Voting Agreement
i.
VOTING AGREEMENT
THIS VOTING AGREEMENT ("Agreement") is entered into as of October 2,
2005, by and between SYNOPSYS, INC., a Delaware corporation ("Parent"), and
____________________ ("Stockholder").
RECITALS
A. Stockholder is a holder of record and the "beneficial owner"
(within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934) of
certain shares of common stock of HPL Technologies, Inc., a Delaware corporation
(the "Company").
B. Parent, Snap Acquisition, Inc., a Delaware corporation
("Acquisition Sub"), and the Company are entering into an Agreement of Merger of
even date herewith (the "Merger Agreement") which provides (subject to the
conditions set forth therein) for the merger of Acquisition Sub into the Company
(the "Merger").
C. In the Merger, each outstanding share of common stock of the
Company is to be converted into the right to receive $0.30 in cash.
D. Stockholder is entering into this Agreement in order to induce
Parent to enter into the Merger Agreement.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. CERTAIN DEFINITIONS
For purposes of this Agreement:
(a) "Company Common Stock" shall mean the common stock, par value
$0.001 per share, of the Company.
(b) Stockholder shall be deemed to "Own" or to have acquired
"Ownership" of a security if Stockholder: (i) is the record owner of such
security; or (ii) is the "beneficial owner" (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934) of such security.
(c) "Person" shall mean any (i) individual, (ii) corporation, limited
liability company, partnership or other entity, or (iii) governmental authority.
(d) "Proxy Expiration Date" shall mean the earlier of (i) the date
upon which the Merger Agreement is terminated, or (ii) the date upon which the
Merger becomes effective.
(e) "Subject Securities" shall mean: (i) all securities of the Company
(including all shares of Company Common Stock and all options, warrants and
other rights to acquire shares of Company Common Stock) Owned by Stockholder as
of the date of this Agreement; and (ii) all additional securities of the Company
(including all additional shares of Company Common Stock and all additional
options, warrants and other rights to acquire shares of Company Common Stock) of
which Stockholder acquires Ownership during the period from the date of this
Agreement through the Proxy Expiration Date.
(f) "Subject Shares" shall mean: (i) all shares of Company Common
Stock Owned by Stockholder as of the date of this Agreement; (ii) all additional
shares of Company Common Stock of which Stockholder acquires Ownership during
the period from the date of this Agreement through the Proxy Expiration Date;
and (iii) all securities into which any of the shares of Company Common Stock
described in clause "(i)" or clause "(ii)" above are exchanged or converted.
1
(g) A Person shall be deemed to have a effected a "Transfer" of a
security if such Person directly or indirectly: (i) sells, pledges, encumbers,
grants an option with respect to, transfers or disposes of such security or any
interest in such security to any Person other than Parent; (ii) enters into an
agreement or commitment contemplating the possible sale of, pledge of,
encumbrance of, grant of an option with respect to, transfer of or disposition
of such security or any interest therein to any Person other than Parent; or
(iii) reduces such Person's beneficial ownership of, interest in or risk
relating to such security. The exercise of an option to purchase shares of
Company Common Stock is not a Transfer for purposes of this Agreement.
(h) Capitalized terms used but not otherwise defined in this Agreement
have the meanings assigned to such terms in the Merger Agreement.
SECTION 2. TRANSFER OF SUBJECT SECURITIES AND VOTING RIGHTS
2.1 Restriction on Transfer of Subject Securities. Subject to Section
2.3, during the period from the date of this Agreement through the Proxy
Expiration Date, Stockholder shall not, directly or indirectly, cause or permit
any Transfer of any of the Subject Securities to be effected.
2.2 Restriction on Transfer of Voting Rights. During the period from
the date of this Agreement through the Proxy Expiration Date, Stockholder shall
ensure that: (a) none of the Subject Securities is deposited into a voting
trust; and (b) no proxy is granted, and no voting agreement or similar agreement
is entered into, with respect to any of the Subject Securities.
2.3 Permitted Transfers. Section 2.1 shall not prohibit a transfer of
Subject Securities by Stockholder (a) if Stockholder is an individual (i) to any
member of Stockholder's immediate family, or to a trust for the benefit of
Stockholder or any member of Stockholder's immediate family, or (ii) upon the
death of Stockholder, or (b) if Stockholder is a partnership or limited
liability company, to one or more partners or members of Stockholder or to an
affiliated corporation under common control with Stockholder; provided, however,
that a transfer referred to in this sentence shall be permitted only if, as a
precondition to such transfer, the transferee agrees in a writing, reasonably
satisfactory in form and substance to Parent, to be bound by all of the terms of
this Agreement.
SECTION 3. VOTING OF SHARES
3.1 Voting Covenant. Stockholder hereby agrees that, prior to the
Proxy Expiration Date, at any meeting of the stockholders of the Company,
however called, and in any written action by consent of stockholders of the
Company, unless otherwise directed in writing by Parent, Stockholder shall cause
the Subject Securities to be voted:
(a) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the adoption and approval of the Merger
Agreement and the terms thereof, in favor of each of the other actions
contemplated by the Merger Agreement and in favor of any action in furtherance
of any of the foregoing;
(b) against any action or agreement that would result in a breach
of any representation, warranty, covenant or obligation of the Company in the
Merger Agreement; and
(c) against the following actions (other than the Merger and the
transactions contemplated by the Merger Agreement): (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or any subsidiary of the Company; (B) any
sale, lease, sublease, license, sublicense or transfer of a material portion of
the rights or other assets of the Company or any subsidiary of the Company; (C)
any reorganization, recapitalization, dissolution or liquidation of the Company
or any subsidiary of the Company; (D) any change in a majority of the board of
directors of the Company; (E) any amendment to the Company's certificate of
incorporation or bylaws; (F) any material change in the capitalization of the
Company or the Company's corporate structure; and (G) any other action which is
2
intended, or would reasonably be expected, to impede, interfere with, delay,
postpone, discourage or adversely affect the Merger or any of the other
transactions contemplated by the Merger Agreement or this Agreement.
Prior to the Proxy Expiration Date, Stockholder shall not enter into any
agreement or understanding with any Person to vote or give instructions in any
manner inconsistent with clause "(a)", clause "(b)" or clause "(c)" of the
preceding sentence.
3.2 PROXY; FURTHER ASSURANCES.
(a) Contemporaneously with the execution of this Agreement: (i)
Stockholder shall deliver to Parent a proxy in the form attached to this
Agreement as Exhibit A, which shall be irrevocable to the fullest extent
permitted by law (at all times prior to the Proxy Expiration Date) with respect
to the shares referred to therein (the "Proxy"); and (ii) Stockholder shall
cause to be delivered to Parent an additional proxy (in the form attached hereto
as Exhibit A) executed on behalf of the record owner of any outstanding shares
of Company Common Stock that are owned beneficially (within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934), but not of record, by
Stockholder.
(b) Stockholder shall not enter into any tender, voting or other such
agreement, or grant a proxy or power of attorney, with respect to the Subject
Shares that is inconsistent with this Agreement or otherwise take any other
action with respect to the Subject Shares that would in any way restrict, limit
or interfere with the performance of Stockholder's obligations hereunder or the
transactions contemplated hereby.
SECTION 4. WAIVER OF APPRAISAL RIGHTS
Stockholder hereby irrevocably and unconditionally waives, and agrees
to cause to be waived and to prevent the exercise of, any rights of appraisal,
any dissenters' rights and any similar rights relating to the Merger or any
related transaction that Stockholder or any other Person may have by virtue of,
or with respect to, any shares of Company Common Stock Owned by Stockholder.
SECTION 5. EPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder hereby represents and warrants to Parent as follows:
5.1 Authorization, etc. Stockholder has the absolute and unrestricted
right, power, authority and capacity to execute and deliver this Agreement and
the Proxy and to perform Stockholder's obligations hereunder and thereunder.
This Agreement and the Proxy have been duly executed and delivered by
Stockholder and constitute legal, valid and binding obligations of Stockholder,
enforceable against Stockholder in accordance with their terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies. If Stockholder is a corporation, then Stockholder
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it was organized. If Stockholder is a general
or limited partnership, then Stockholder is a partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it was organized. If Stockholder is a limited liability company, then
Stockholder is a limited liability company duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it was organized.
5.2 No Conflicts or Consents.
(a) The execution and delivery of this Agreement and the Proxy by
Stockholder do not, and the performance of this Agreement and the Proxy by
Stockholder will not: (i) conflict with or violate any law, rule, regulation,
order, decree or judgment applicable to Stockholder; or (ii) result in either
(A) any breach of or default under any Contract to which Stockholder is a party
or (B) the creation of any encumbrance or restriction on any of the Subject
Securities, in either case, which would prevent Stockholder from complying with
the obligations set forth in Section 3.1.
(b) The execution and delivery of this Agreement and the Proxy by
Stockholder do not, and the performance of this Agreement and the Proxy by
3
Stockholder will not, require any consent or approval of any Person. The
execution and delivery of any additional proxy pursuant to Section 3.2(a)(ii)
with respect to any shares of Company Common Stock that are owned beneficially
but not of record by Stockholder do not, and the performance of any such
additional proxy will not, require any consent or approval of any Person.
5.3 Title to Securities. As of the date of this Agreement: (a)
Stockholder holds of record (free and clear of any encumbrances or restrictions)
the number of outstanding shares of Company Common Stock set forth under the
heading "Shares Held of Record" on the signature page hereof; (b) Stockholder
holds (free and clear of any encumbrances or restrictions) the options, warrants
and other rights to acquire shares of Company Common Stock set forth under the
heading "Options and Other Rights" on the signature page hereof; (c) Stockholder
Owns the additional securities of the Company set forth under the heading
"Additional Securities Beneficially Owned" on the signature page hereof; and (d)
Stockholder does not directly or indirectly Own any shares of capital stock or
other securities of the Company, or any option, warrant or other right to
acquire (by purchase, conversion or otherwise) any shares of capital stock or
other securities of the Company, other than the shares and options, warrants and
other rights set forth on the signature page hereof.
5.4 Accuracy of Representations. The representations and warranties
contained in this Agreement are accurate in all respects as of the date of this
Agreement, and will be accurate in all respects at all times through and
including the Proxy Expiration Date as if made as of any such time or date.
SECTION 6. ADDITIONAL COVENANTS OF STOCKHOLDER
6.1 Stockholder Information. Stockholder hereby agrees to permit the
Company, Parent and Acquisition Sub to publish and disclose in the Proxy
Statement Stockholder's identity and ownership of shares of Company Common Stock
and the nature of Stockholder's commitments, arrangements and understandings
under this Agreement.
6.2 Further Assurances. From time to time and without additional
consideration, Stockholder shall (at Stockholder's sole expense) execute and
deliver, or cause to be executed and delivered, such additional transfers,
assignments, endorsements, proxies, consents and other instruments, and shall
(at Stockholder's sole expense) take such further actions, as Parent may request
for the purpose of carrying out and furthering the intent of this Agreement.
SECTION 7. MISCELLANEOUS
7.1 Survival of Representations, Warranties and Agreements. All
representations, warranties, covenants and agreements made by Stockholder in
this Agreement shall survive the Proxy Expiration Date.
7.2 Expenses. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such costs and expenses.
7.3 Notices. Any notice or other communication required or permitted
to be delivered to either party under this Agreement shall be in writing and
shall be deemed properly delivered, given and received when received at the
address or facsimile telephone number set forth beneath the name of such party
below (or at such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other party):
if to Stockholder:
at the address set forth on the signature page hereof; and
if to Parent:
Synopsys, Inc.
700 East Middlefield Road
Mountain View, CA 94043
Attn: General Counsel
Fax: (650) 965-8637
4
7.4 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. In the event such court does
not exercise the power granted to it in the prior sentence, the parties hereto
agree to replace such invalid or unenforceable term or provision with a valid
and enforceable term or provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid or unenforceable term.
7.5 Entire Agreement. This Agreement, the Proxy and any other
documents delivered by the parties in connection herewith constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings between the
parties with respect thereto. No addition to or modification of any provision of
this Agreement shall be binding upon either party unless made in writing and
signed by both parties.
7.6 Assignment; Binding Effect. Except as provided herein, neither
this Agreement nor any of the interests or obligations hereunder may be assigned
or delegated by Stockholder, and any attempted or purported assignment or
delegation of any of such interests or obligations shall be void. Subject to the
preceding sentence, this Agreement shall be binding upon Stockholder and
Stockholder's heirs, estate, executors and personal representatives (as
applicable) and Stockholder's successors and assigns, and shall inure to the
benefit of Parent and its successors and assigns. Without limiting any of the
restrictions set forth in Section 2 or Section 5.1 or elsewhere in this
Agreement, this Agreement shall be binding upon any Person to whom any Subject
Securities are transferred. Nothing in this Agreement is intended to confer on
any Person (other than Parent and its successors and assigns) any rights or
remedies of any nature.
7.7 Independence of Obligations. The covenants and obligations of
Stockholder set forth in this Agreement shall be construed as independent of any
other agreement or arrangement between Stockholder, on the one hand, and the
Company or Parent, on the other. The existence of any claim or cause of action
by Stockholder against the Company or Parent shall not constitute a defense to
the enforcement of any of such covenants or obligations against Stockholder.
7.8 Specific Performance. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement or the
Proxy were not performed in accordance with its specific terms or were otherwise
breached. Stockholder agrees that, in the event of any breach or threatened
breach by Stockholder of any covenant or obligation contained in this Agreement
or in the Proxy, Parent shall be entitled (in addition to any other remedy that
may be available to it, including monetary damages) to seek and obtain (a) a
decree or order of specific performance to enforce the observance and
performance of such covenant or obligation, and (b) an injunction restraining
such breach or threatened breach. Stockholder further agrees that neither Parent
nor any other Person shall be required to obtain, furnish or post any bond or
similar instrument in connection with or as a condition to obtaining any remedy
referred to in this Section 7.8, and Stockholder irrevocably waives any right he
or it may have to require the obtaining, furnishing or posting of any such bond
or similar instrument.
7.9 Non-Exclusivity. The rights and remedies of Parent under this
Agreement are not exclusive of or limited by any other rights or remedies which
it may have, whether at law, in equity, by contract or otherwise, all of which
shall be cumulative (and not alternative). Without limiting the generality of
the foregoing, the rights and remedies of Parent under this Agreement, and the
obligations and liabilities of Stockholder under this Agreement, are in addition
to their respective rights, remedies, obligations and liabilities under common
law requirements and under all applicable statutes, rules and regulations.
Nothing in this Agreement shall limit any of Stockholder's obligations, or the
rights or remedies of Parent, under any Affiliate Agreement between Parent and
Stockholder; and nothing in any such Affiliate Agreement shall limit any of
Stockholder's obligations, or any of the rights or remedies of Parent, under
this Agreement.
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7.10 Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
In any action between the parties arising out of or relating to this Agreement
or any of the transactions contemplated by this Agreement each of the parties
irrevocably and unconditionally consents and submits to the jurisdiction and
venue of the state and federal courts located in the Northern District of
California and the State of Delaware.
(b) STOCKHOLDER IRREVOCABLY WAIVES THE RIGHT TO A JURY TRIAL IN
CONNECTION WITH ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT OR THE PROXY OR
THE ENFORCEMENT OF ANY PROVISION OF THIS AGREEMENT OR THE PROXY.
7.11 Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
7.12 Captions. The captions contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
7.13 Attorneys' Fees. If any legal action or other legal proceeding
relating to this Agreement or the enforcement of any provision of this Agreement
is brought against Stockholder, the prevailing party shall be entitled to
recover reasonable attorneys' fees, costs and disbursements (in addition to any
other relief to which the prevailing party may be entitled).
7.14 Waiver. No failure on the part of Parent to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of
Parent in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy. Parent shall not be deemed to have waived any claim
available to Parent arising out of this Agreement, or any power, right,
privilege or remedy of Parent under this Agreement, unless the waiver of such
claim, power, right, privilege or remedy is expressly set forth in a written
instrument duly executed and delivered on behalf of Parent; and any such waiver
shall not be applicable or have any effect except in the specific instance in
which it is given.
7.15 Termination. This Agreement shall terminate on the Proxy
Expiration Date.
7.16 Construction.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
(b) The parties agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
6
IN WITNESS WHEREOF, Parent and Stockholder have caused this Agreement
to be executed as of the date first written above.
SYNOPSYS, INC.
____________________________________________________
By
____________________________________________________
Title
STOCKHOLDER
____________________________________________________
Signature
____________________________________________________
Printed Name
Address: ___________________________
___________________________
___________________________
Facsimile: ___________________________
Additional Securities
Shares Held of Record Options and Other Rights Beneficially Owned
- --------------------- ----------------------- ----------------------
7
EXHIBIT A
FORM OF IRREVOCABLE PROXY
The undersigned stockholder (the "Stockholder") of HPL TECHNOLOGIES,
INC., a Delaware corporation (the "Company"), hereby irrevocably (to the fullest
extent permitted by law) appoints and constitutes REX S. JACKSON, RANDY TINSLEY
and SYNOPSYS, INC., a Delaware corporation ("Parent"), and each of them, the
attorneys and proxies of the Stockholder, with full power of substitution and
resubstitution, to the full extent of the Stockholder's rights with respect to
(i) the outstanding shares of capital stock of the Company owned of record by
the Stockholder as of the date of this proxy, which shares are specified on the
final page of this proxy, and (ii) any and all other shares of capital stock of
the Company which the Stockholder may acquire on or after the date hereof. (The
shares of the capital stock of the Company referred to in clauses "(i)" and
"(ii)" of the immediately preceding sentence are collectively referred to as the
"Shares.") Upon the execution hereof, all prior proxies given by the Stockholder
with respect to any of the Shares are hereby revoked, and the Stockholder agrees
that no subsequent proxies will be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is granted
in connection with, and as security for, the Voting Agreement, dated as of the
date hereof, between Parent and the Stockholder (the "Voting Agreement"), and is
granted in consideration of Parent entering into the Agreement of Merger, dated
as of the date hereof, among Parent, Snap Acquisition, Inc. a wholly-owned
subsidiary of Parent, and the Company (the "Merger Agreement"). This proxy will
terminate on the Proxy Expiration Date (as defined in the Voting Agreement).
The attorneys and proxies named above will be empowered, and may
exercise this proxy, to vote the Shares at any time until the earlier to occur
of the valid termination of the Merger Agreement or the effective time of the
merger contemplated thereby (the "Merger") at any meeting of the stockholders of
the Company, however called, and in connection with any written action by
consent of stockholders of the Company:
(i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the adoption and approval of the
Merger Agreement and the terms thereof, in favor of each of the other
actions contemplated by the Merger Agreement and in favor of any action
in furtherance of any of the foregoing; and
(ii) against any action or agreement that would result in a
breach of any representation, warranty, covenant or obligation of the
Company in the Merger Agreement; and
(iii) against the following actions (other than the Merger and
the other transactions contemplated by the Merger Agreement): (A) any
extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or any subsidiary of
the Company; (B) any sale, lease, sublease, license, sublicense or
transfer of a material portion of the rights or other assets of the
Company or any subsidiary of the Company; (C) any reorganization,
recapitalization, dissolution or liquidation of the Company or any
subsidiary of the Company; (D) any change in a majority of the board of
directors of the Company; (E) any amendment to the Company's
certificate of incorporation or bylaws; (F) any material change in the
capitalization of the Company or the Company's corporate structure; and
(G) any other action which is intended, or would reasonably be expected
to impede, interfere with, delay, postpone, discourage or adversely
affect the Merger or any of the other transactions contemplated by the
Merger Agreement or the Voting Agreement.
The Stockholder may vote the Shares on all other matters not referred
to in this proxy, and the attorneys and proxies named above may not exercise
this proxy with respect to such other matters.
This proxy shall be binding upon the heirs, estate, executors, personal
representatives, successors and assigns of the Stockholder (including any
transferee of any of the Shares).
Any term or provision of this proxy that is invalid or unenforceable in
any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction. If the final judgment of a court of competent
1
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Stockholder agrees that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this proxy shall be enforceable as so modified. In the event such court does not
exercise the power granted to it in the prior sentence, the parties hereto agree
to replace such invalid or unenforceable term or provision with a valid and
enforceable term or provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid or unenforceable term.
Dated: October 2, 2005
STOCKHOLDER
-------------------------------------------
Signature
-------------------------------------------
Printed Name
Number of shares of
common stock of the
Company owned of
record as of the
date of this proxy:
-------------------------------------------
2
ANNEX D
Appraisal Rights
i.
DELAWARE GENERAL CORPORATION LAW
SECTION 262
APPRAISAL RIGHTS
ss. 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 ss.
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 stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one 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 ss. 251 (other than a merger effected
pursuant to ss. 251(g) of this title), ss. 252, ss. 254, ss. 257, ss. 258, ss.
263 or ss. 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 and to vote at the
meeting of stockholders to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. 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 subsection (f) of ss.
251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
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
ss.ss. 251, 252, 254, 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 designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. 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 subparagraphs a. and b. of this
paragraph; 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 subparagraphs a., b. and c. of this paragraph.
1
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under ss. 253 of this title is not owned
by the parent corporation 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 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 such meeting with respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) hereof 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. 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
ss. 228 or ss. 253 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. 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 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
2
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file 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 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) 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) hereof,
whichever is later.
(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 determining the stockholders entitled to an
appraisal, the Court shall appraise the shares, determining their fair value
exclusive of any element of value arising from the accomplishment or expectation
of the merger or consolidation, together with a fair rate of interest, if any,
to be paid upon the amount determined to be the fair value. In determining such
fair value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the pendency of the
proceeding. 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, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder 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. Interest may be simple or
compound, as the Court may direct. 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.
3
(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.
(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.
4
PROXY CARD
HPL Technologies, Inc.
Proxy Solicited by the Board of Directors
for the Special Meeting of Stockholders
to be Held December 6, 2005
The undersigned hereby appoints Cary D. Vandenberg and Michael P. Scarpelli or
any one of them with full power of substitution, proxies to vote at the Special
Meeting of Stockholders (the "Special Meeting") of HPL Technologies, Inc. (the
"Company") to be held on December 6, 2005, at 10:00 a.m. PST, at the Doubletree
Hotel, 2050 Gateway Place, San Jose, California 95110, and at any adjournment
thereof, hereby revoking any proxies heretofore given, to vote all shares of
Common Stock of the Company held or owned by the undersigned as directed on the
reverse side of this proxy card, and in their discretion upon such other matters
as may come before the meeting. If no choice is specified, the proxy will be
voted (i) for adoption of the Agreement of Merger, dated as of October 2, 2005,
by and among Synopsys, Inc., Snap Acquisition, Inc. and the Company, as it may
be amended from time to time, as set forth in proposal 1; (ii) for the
discretion to vote to adjourn the Special Meeting, if necessary, to another time
or place for the purpose of soliciting additional proxies, as set forth in
proposal 2; and (iii) according to the discretion of the proxy holders on any
other matters that may properly come before the meeting or any postponement or
adjournment thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" ALL MATTERS
SET FORTH BELOW.
1. To adopt the Agreement of Merger, dated as of October 2, 2005, by and
among Synopsys, Inc., Snap Acquisition, Inc. and HPL Technologies, Inc., as it
may be amended from time to time.
___ For ___ Against ___ Abstain
2. To approve the discretion to vote to adjourn the Special Meeting, if
necessary, to another time or place for the purpose of soliciting additional
proxies.
___ For ___ Against ___ Abstain
3. IN THEIR DISCRETION, ON SUCH OTHER MATTERS AS MY PROPERLY COME BEFORE THE
MEETING AND ADJOURNMENT(S) THEREOF.
The Board recommends that you vote "FOR" the above proposals. This
proxy, when properly executed, will be voted in the manner directed above. WHEN
NO CHOICE IS INDICATED, THIS PROXY WILL BE VOTED FOR EACH OF THE ABOVE
PROPOSALS. This proxy may be revoked by the undersigned at any time, prior to
the time it is voted by any of the means described in the accompanying proxy
statement.
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Signature(s) of Stockholder(s)
Date and sign exactly as name(s) appear(s) on
this proxy. If signing for estates, trusts,
corporations or other entities, title or
capacity should be stated. If shares are held
jointly, each holder should sign.
Date:___________, 2005
PLEASE COMPLETE, DATE AND SIGN THIS PROXY
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.