e424b3
File
Pursuant to Rule 424(b)(3)
File No.: 333-159722
MERGER
PROPOSAL
YOUR VOTE IS VERY IMPORTANT
Dear Stockholder:
On May 20, 2009, Data Domain, Inc., referred to as Data
Domain, and NetApp, Inc., referred to as NetApp, announced a
business combination in which a direct, wholly owned subsidiary
of NetApp will merge with Data Domain, with Data Domain
continuing as the interim surviving entity, and, immediately
thereafter, subject to certain conditions, Data Domain will
merge with a second direct, wholly owned subsidiary of NetApp,
with such subsidiary continuing as the final surviving entity.
On June 3, 2009, NetApp and Data Domain amended the
original merger agreement to reflect the terms described in this
proxy statement/prospectus. The first merger is referred to
herein as the first-step merger, the second merger is referred
to herein as the second-step merger, and together such mergers
are referred to herein as the merger. If the first-step merger
is completed, you will have the right to receive $16.45 in cash,
without interest and less any applicable withholding, referred
to as the cash consideration, subject to adjustment, and a
number of shares of NetApp common stock equal to the exchange
ratio, referred to as the stock consideration, and together with
the cash consideration, referred to as the merger consideration,
for each outstanding share of common stock of Data Domain that
you hold immediately prior to the first-step merger.
The exchange ratio is equal to (i) 0.7783 shares of
NetApp common stock if the closing average (as described below)
is less than $17.41, (ii) 0.6370 shares of NetApp
common stock if the closing average is greater than $21.27, and
(iii) that fraction of a share of NetApp common stock
(rounded to the nearest ten thousandth) equal to the quotient
obtained by dividing $13.55 by the closing average, if the
closing average is (A) less than or equal to $21.27 and
(B) greater than or equal to $17.41. The closing average
means the average of the closing sales prices for NetApp common
stock (rounded to the nearest one-hundredth of a cent) as
reported on the NASDAQ Global Select Market for the 10 most
recent consecutive trading days ending on the third trading day
immediately prior to the closing of the first-step merger. Data
Domain stockholders may contact Innisfree M&A Incorporated,
Data Domains information agent, toll free at
(888) 750-5834,
and banks or brokers may call collect at
(212) 750-5833,
for information regarding the approximate merger consideration
payable in connection with the first-step merger based on
information available as of the date of inquiry. In addition, on
the third trading day preceding the date of the special meeting
of the Data Domain stockholders described below, NetApp and Data
Domain will issue a joint press release announcing the aggregate
merger consideration that would be payable to the Data Domain
stockholders, assuming that the merger closed on the date of the
special meeting. If the first-step merger closes after the date
of the special meeting, stockholders may not know on the date of
the special meeting the actual value of the merger
consideration. As further described in this proxy
statement/prospectus, the determination of whether the merger
will qualify as a tax-free reorganization will depend primarily
upon the value of NetApp common stock on the last business day
preceding the closing. Stockholders will not know on the date of
the special meeting whether the merger will qualify as a
tax-free reorganization or will be a fully taxable transaction.
The parties anticipate that the first-step merger will close on
the date of the special meeting. Depending upon the closing
average, NetApp may issue between 44,765,433 and
54,695,347 shares of its common stock to the Data Domain
stockholders, in which case Data Domain stockholders will own
between 12 and 14% of NetApps outstanding common
stock, based on the number of shares of NetApp common stock
outstanding as of June 26, 2009. As further described in
this proxy statement/prospectus, under certain conditions,
NetApp may elect to reduce, or be required to reduce, the stock
consideration, and in the event of such a reduction, NetApp will
be required to increase the cash consideration. In connection
with the closing of the first-step merger, NetApp will issue
another press release confirming the aggregate merger
consideration payable to the Data Domain stockholders and
announcing whether the merger qualifies as a tax-free
reorganization or is a fully taxable transaction.
If the closing average is less than $17.41, the value of the
merger consideration will be less than the aggregate $30.00
value of the merger consideration on June 3, 2009, the date
on which the revised terms of the merger were announced. If the
closing average is greater than $21.27, the value of the merger
consideration will be greater than the aggregate $30.00 value of
the merger consideration on June 3, 2009. The following
table shows the closing sale prices of NetApp common stock and
Data Domain common stock as reported on the NASDAQ Global Select
Market on June 2, 2009, the last trading day before the
revised terms of the merger were announced, and on July 1,
2009, the last trading day before the distribution of the
enclosed proxy statement/prospectus for which data was
available. This table also shows the implied value of the merger
consideration proposed for each share of Data Domain common
stock, which was calculated by adding to $16.45, or the cash
consideration, the product obtained by multiplying the closing
price of NetApp common stock on those dates by the implied
exchange ratio for the stock consideration that would apply if
the closing average were equal to such closing price on such
dates.
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Implied Value of
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One Share of
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NetApp
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Data Domain
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Data Domain
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Common Stock
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Common Stock
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Common Stock
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June 2, 2009
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$
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19.34
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$
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31.58
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$
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30.00
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July 1, 2009
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$
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19.97
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$
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33.49
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$
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30.00
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The market prices of both NetApp common stock and Data Domain
common stock will fluctuate before the merger. You should obtain
current stock price quotations for NetApp common stock and Data
Domain common stock. NetApp common stock is quoted on the NASDAQ
Global Select Market under the symbol NTAP. Data
Domain common stock is quoted on the NASDAQ Global Select Market
under the symbol DDUP.
We cannot complete the merger unless Data Domains
stockholders adopt the merger agreement, the proposal to adopt
the merger agreement being referred to in the proxy
statement/prospectus as the merger proposal. Data Domain will
hold a special meeting of its stockholders to vote on the merger
proposal at 2421 Mission College Blvd., Santa Clara, CA
95054 at 9 a.m., local time, on August 14, 2009.
Your vote is important. The market price of NetApp common
stock will continue to fluctuate following the date of the
stockholder vote on the merger proposal at the special meeting.
Consequently, at the time of the stockholder vote, the value of
the stock consideration will not yet be determined. Regardless
of whether you plan to attend the special meeting, please take
the time to vote your shares in accordance with the instructions
contained in this proxy statement/prospectus. Failing to vote
will have the same effect as voting against the merger proposal.
You will also have an opportunity to vote to approve the
adjournment or postponement of the special meeting, if
necessary, to solicit additional proxies in favor of the
approval of the merger proposal, referred to as the adjournment
proposal.
The Data Domain board of directors unanimously recommends
that Data Domain stockholders vote FOR approval of
the merger proposal and FOR the adjournment
proposal.
This proxy statement/prospectus describes the special meeting,
the merger proposal and the adjournment proposal, the documents
related to each proposal, and other related matters. Please
carefully read this entire proxy statement/prospectus, including
Risk Factors beginning on page 15, for a
discussion of the risks relating to the merger proposal. You
also can obtain information about NetApp and Data Domain from
documents that each of us has filed with the Securities and
Exchange Commission.
By Order of the Board of Directors
Sincerely,
Frank Slootman
President and Chief Executive
Officer
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the NetApp
common stock to be issued under this proxy statement/prospectus
or determined if this proxy statement/prospectus is accurate or
adequate. Any representation to the contrary is a criminal
offense.
The date of this proxy statement/prospectus is July 2,
2009, and it is first being mailed or otherwise delivered to
Data Domain stockholders on or about July 7, 2009.
DATA
DOMAIN, INC.
2421 Mission College Blvd.
Santa Clara, CA 95054
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
July 2,
2009
To the Stockholders of Data Domain, Inc.:
Data Domain, Inc., or Data Domain, will hold a special meeting
of stockholders at 2421 Mission College Blvd., Santa Clara,
CA 95054 at 9 a.m., local time, on August 14, 2009 to
consider and vote upon the following proposals:
1. To adopt the Agreement and Plan of Merger, dated as of
May 20, 2009, as amended on June 3, 2009, by and among
NetApp, Kentucky Merger Sub One Corporation, Derby Merger Sub
Two LLC and Data Domain, as the agreement may be amended from
time to time, which proposal is referred to as the merger
proposal; and
2. To approve the adjournment or postponement of the
special meeting, if necessary, to solicit additional proxies, in
the event that there are not sufficient votes at the time of the
special meeting to approve the merger proposal, which proposal
is referred to as the adjournment proposal.
The Data Domain board of directors has fixed the close of
business on June 17, 2009 as the record date for the
special meeting. Only Data Domain stockholders of record at that
time are entitled to notice of, and to vote at, the special
meeting, or any adjournment or postponement of the special
meeting. In order for the merger proposal to be approved, the
holders of at least a majority of the Data Domain shares
outstanding and entitled to vote thereon must vote in favor of
approval of the merger proposal. In the event that a quorum is
not present in person or represented by proxy at the special
meeting, the chairman of the meeting may adjourn the meeting to
another place, date or time. If a quorum is present in person or
represented by proxy at the special meeting, approval of the
adjournment proposal requires the affirmative vote of the
majority of the outstanding shares that are present in person or
represented by proxy and entitled to vote at the special meeting.
Regardless of whether you plan to attend the special meeting,
please submit your proxy with voting instructions. Please vote
as soon as possible. If you hold stock in your name as a
stockholder of record, please vote your shares by
(i) completing, signing, dating and returning the enclosed
proxy card, (ii) using the telephone number on your proxy
card, or (iii) using the Internet voting instructions on
your proxy card. If you hold your stock in street
name through a bank, broker, or other nominee, please
direct your bank, broker, or other nominee to vote in accordance
with the instructions you have received from your bank, broker,
or other nominee. This will not prevent you from voting in
person, but it will help to secure a quorum and avoid additional
solicitation costs. Any holder of Data Domain common stock who
is present at the special meeting may vote in person instead of
by proxy, thereby canceling any previous proxy. In any event, a
proxy may be revoked in writing at any time before the special
meeting in the manner described in the accompanying document.
The Data Domain board of directors has unanimously approved
the merger proposal and unanimously recommends that Data Domain
stockholders vote FOR approval of the merger
proposal and FOR approval of the adjournment
proposal.
BY ORDER OF THE BOARD OF DIRECTORS,
Sincerely,
Frank Slootman
President and Chief Executive Officer
July 2, 2009
YOUR VOTE IS IMPORTANT.
PLEASE VOTE YOUR SHARES PROMPTLY, REGARDLESS OF WHETHER
YOU PLAN TO ATTEND THE SPECIAL MEETING.
REFERENCES
TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business
and financial information about NetApp and Data Domain from
documents that are not included in or delivered with this
document. You can obtain documents incorporated by reference in
this proxy statement/prospectus, other than certain exhibits to
those documents, or filed as exhibits to the registration
statement of which this proxy statement/prospectus is a part, by
requesting them in writing or by telephone from the appropriate
company at the following addresses:
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NetApp, Inc.
495 East Java Drive
Sunnyvale, CA 94089
Attention: Investor Relations
Telephone:
(408) 822-7098
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Data Domain, Inc.
2421 Mission College Blvd.
Santa Clara, CA 95054
Attention: Investor Relations
Telephone: (408) 980-4909
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You will not be charged for any of these documents that
you request. Data Domain stockholders requesting documents
should do so by August 7, 2009 (which is five business days
prior to the date of the special meeting) to ensure that they
receive them before the special meeting.
See Where You Can Find More Information on
page 98.
ABOUT
THIS PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus, which forms a part of a
registration statement on
Form S-4
filed with the Securities and Exchange Commission, referred to
as the SEC, by NetApp, constitutes a prospectus of NetApp under
Section 5 of the Securities Act of 1933, as amended,
referred to as the Securities Act, with respect to the shares of
NetApp common stock to be issued to Data Domain stockholders in
connection with the merger. This document also constitutes a
proxy statement under Section 14(a) of the Securities
Exchange Act of 1934, as amended, referred to as the Exchange
Act, and the rules thereunder, and a notice of meeting with
respect to the special meeting of Data Domain stockholders to
consider and vote upon the merger proposal and the adjournment
proposal.
Except as otherwise provided herein, all descriptions of and
calculations made under the terms of the merger agreement and
the transactions contemplated by the merger agreement, including
the merger, assume that no Data Domain stockholders exercise
appraisal rights under Delaware law.
To facilitate the reading of this proxy statement/prospectus, in
referring to we, us and other first
person declarations, we are referring to both NetApp and Data
Domain or, in some instances, the combined company as it would
exist following the completion of the merger.
QUESTIONS
AND ANSWERS ABOUT VOTING PROCEDURES FOR THE
DATA DOMAIN SPECIAL MEETING
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Q: |
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Why am I receiving this proxy statement/prospectus? |
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NetApp, Inc., referred to as NetApp, has agreed to acquire Data
Domain, Inc., referred to as Data Domain, by means of a merger
of Data Domain with a subsidiary of NetApp. Please see
Data Domain Proposal 1 The Merger
beginning on page 26 and The Merger Agreement
beginning on page 55 for a description of the merger and
the merger agreement. A copy of the merger agreement is attached
to this proxy statement/prospectus as Appendix A. |
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To complete the merger, Data Domain stockholders must vote to
approve the merger proposal. Data Domain will hold a special
meeting of stockholders to obtain this approval. You will also
be given an opportunity to vote to approve the adjournment or
postponement of the special meeting, if necessary, to solicit
additional proxies in favor of the merger proposal, referred to
as the adjournment proposal. |
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What will happen in the merger? |
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As the first step in the transaction, a direct, wholly owned
subsidiary of NetApp will merge with Data Domain, with Data
Domain continuing as the surviving entity, and as a direct,
wholly owned subsidiary of NetApp. Immediately thereafter,
provided that certain conditions described below are satisfied,
Data Domain will merge with a second direct, wholly owned
subsidiary of NetApp, with such second subsidiary continuing as
the surviving corporation. The first merger is referred to
herein as the first-step merger and the second merger is
referred to herein as the second-step merger. If the second-step
merger occurs, the first-step merger and the second-step merger
together are referred to herein as the merger. If the
second-step merger does not occur, references herein to the
merger shall mean the first-step merger. Upon completion of the
first-step merger, Data Domain common stock will cease trading
on the NASDAQ Global Select Market, and Data Domain common
stockholders will be entitled to receive the merger
consideration for each outstanding share of Data Domain common
stock held immediately prior to the first-step merger. |
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What will Data Domain stockholders receive in the merger? |
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In the merger, subject to the possible adjustments to the cash
consideration and the stock consideration described below, each
Data Domain stockholder will have a right to receive a cash
amount of $16.45, without interest and less any applicable
withholding, plus a number of shares of NetApp common stock
equal to the exchange ratio for each outstanding share of Data
Domain common stock. The exchange ratio will depend on the
closing average of NetApp common stock. The closing average is
the average of the closing sales prices for NetApp common stock
as reported on the NASDAQ Global Select Market for the 10 most
recent consecutive trading days ending on the third trading day
immediately prior to the closing of the first-step merger. |
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The exchange ratio is equal to (i) 0.7783 shares of
NetApp common stock if the closing average is less than $17.41,
(ii) 0.6370 shares of NetApp common stock if the
closing average is greater than $21.27, and (iii) that
fraction of a share of NetApp common stock equal to the quotient
obtained by dividing $13.55 by the closing average, if the
closing average is (A) less than or equal to $21.27 and
(B) greater than or equal to $17.41. |
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For example, if the closing average of NetApp common stock is
$16.00, a holder of 100 shares of Data Domain common stock
will receive $1,645 in cash and 77 shares of NetApp common
stock (i.e., 100 x $16.45 = $1,645 in cash and 100 x 0.7783 =
77 shares of common stock), plus cash equal to the value of
the fractional share of NetApp common stock to which such holder
would otherwise be entitled. |
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If the closing average of NetApp common stock is $18.00, a
holder of 100 shares of Data Domain common stock will
receive $1,645 in cash and 75 shares of NetApp common stock
(i.e., 100 x $16.45 = $1,645 in cash and 100 x ($13.55/$18.00) =
75 shares of common stock), plus cash equal to the value of
the fractional share of NetApp common stock to which such holder
would otherwise be entitled. |
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Finally, if the closing average of NetApp common stock is
$22.00, a holder of 100 shares of Data Domain common stock
will receive $1,645 in cash and 63 shares of NetApp common
stock (i.e., 100 x $16.45 = $1,645 in cash and 100 x 0.6370 =
63 shares of common stock), plus cash equal to the value of
the fractional share of NetApp common stock to which such holder
would otherwise be entitled. |
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The range of outcomes is illustrated by the following graph: |
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Stockholders of Data Domain should bear in mind, however, that
under the merger agreement, if the exchange ratio is greater
than or equal to 0.7006 and less than 0.7783, NetApp, in its
sole discretion may reduce the number of shares of NetApp common
stock you will receive and proportionately increase the amount
of cash you will receive. However, NetApp may not reduce the
amount of stock consideration and increase the cash
consideration to the extent that it would reasonably be expected
to cause the merger to fail to qualify as a tax-free
reorganization under the Internal Revenue Code, except as may be
required as described herein. |
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If the aggregate amount of the stock consideration issuable in
the merger (including the stock consideration issuable to
holders of Data Domain options and restricted stock units) would
exceed 19.5% of the outstanding shares of NetApp common stock
immediately prior to the effective time of the first-step
merger, the stock consideration will be decreased to the minimum
extent necessary so that no more than 19.5% of the outstanding
shares of NetApp common stock will be issued in the merger (with
such percentage measured immediately prior to the effective time
of the first-step merger). In such event, the cash consideration
will be increased by an amount equal to the product of
(a) the amount of the reduction in the stock consideration
multiplied by (b) the closing average. In the event that
the stock consideration is decreased in accordance with this
paragraph, the merger may fail to qualify as a tax-free
reorganization under the Internal Revenue Code. |
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Data Domain stockholders may contact Innisfree M&A
Incorporated, Data Domains information agent, toll free at
(888) 750-5834,
and banks or brokers may call collect at
(212) 750-5833,
for information regarding the approximate merger consideration
payable in connection with the merger. In addition, on the third
trading day preceding the date of the special meeting of the
Data Domain stockholders, NetApp and Data Domain will issue a
joint press release announcing the aggregate merger
consideration that would be payable to the Data Domain
stockholders, assuming that the merger closed on the date of the
special meeting. However, there can be no assurance that the
merger will close on the date of the special meeting of the
stockholders. As such, the assumptions in the joint press
release may differ from the actual merger consideration payable
in the merger at the closing. Further, the determination of
whether the merger will qualify as a tax-free reorganization
will depend upon the value of NetApp common stock on the last
business day preceding the closing. Stockholders will not know
on the date of the special meeting whether the merger will
qualify as a tax-free reorganization or will be a fully taxable
transaction. The parties anticipate that the first-step merger
will close on the date of the special meeting. In connection
with the closing of the first-step merger, NetApp will issue
another press release confirming the aggregate merger
consideration payable to the Data Domain stockholders and
announcing whether the merger qualifies as a tax-free
reorganization or is a fully taxable transaction. |
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What do I need to do now? |
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After you have carefully read this proxy statement/prospectus
and have decided how you wish to vote your shares, please vote
your shares promptly. If you hold stock in your name as a
stockholder of record, please vote your shares by
(i) completing, signing, dating and returning the enclosed
proxy card, (ii) using the telephone number on your proxy
card or (iii) using the Internet voting instructions on
your proxy card. If you have Internet access, you are encouraged
to record your vote via the Internet. |
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If you hold your stock in street name through a
bank, broker or other nominee, you must direct your bank, broker
or other nominee to vote in accordance with the instructions you
have received from your bank, broker or other nominee.
Submitting your proxy card or directing your bank, broker or
other nominee to vote your shares will ensure that your shares
are represented and voted at the special meeting. |
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Why is my vote important? |
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If you do not vote by proxy or vote in person at the special
meeting, it will be more difficult for us to obtain the
necessary quorum to hold the special meeting. In addition, your
failure to vote, by proxy or in person, or failure to instruct
your broker, will have the same effect as a vote against the
merger proposal. The merger proposal must be approved by the
holders of a majority of the outstanding shares of Data Domain
common stock entitled to vote at the special meeting. In the
event that a quorum is not present in person or represented by
proxy at the special meeting, the chairman of the meeting may
adjourn the meeting to another place, date or time. Approval of
the adjournment proposal requires the affirmative vote of the
majority of the outstanding shares that are present in person or
represented by proxy and entitled to vote at the special
meeting. The Data Domain board of directors unanimously
recommends that you vote to approve the merger proposal and the
adjournment proposal. |
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If my shares of common stock are held in street name by my
broker, will my broker automatically vote my shares for me? |
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No. Your broker cannot vote your shares without
instructions from you. You should instruct your broker as to how
to vote your shares, following the directions your broker
provides to you. Please check the voting form used by your
broker. |
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What if I abstain from voting or fail to instruct my
broker? |
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If you abstain from voting, the abstention will be counted
toward a quorum at the special meeting, but it will have the
same effect as a vote against the merger proposal and against
the adjournment proposal. If you fail to instruct your broker, a
broker non-vote, those shares would be counted
towards a quorum at the special meeting, but the shares would
not be considered entitled vote, and thus it will have the same
effect as a vote against the merger proposal, but it will have
no effect on the adjournment proposal. |
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Can I attend the special meeting and vote my shares in
person? |
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Yes. All stockholders, including stockholders of record and
stockholders who hold their shares through banks, brokers,
nominees or any other holder of record, are invited to attend
the special meeting. Holders of record of Data Domain common
stock can vote in person at the special meeting. If you are not
a stockholder of record, you must obtain a proxy, executed in
your favor, from the record holder of your shares, such as a
broker, bank or other nominee, to be able to vote in person at
the special meeting. If you plan to attend the special meeting,
you must hold your shares in your own name or have a letter from
the record holder of your shares confirming your ownership, and
you must bring a form of personal photo identification with you
to be admitted. Data Domain reserves the right to refuse
admittance to anyone without proper proof of share ownership or
without proper photo identification. |
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Can I change my vote? |
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Yes. You may revoke any proxy at any time before it is voted by
signing and returning a proxy card with a later date, delivering
a written revocation letter to the Data Domain Corporate
Secretary, or by attending the special meeting in person,
notifying the Corporate Secretary and voting by ballot at the
special meeting. The Data Domain Corporate Secretarys
mailing address is 2421 Mission College Blvd., Santa Clara,
CA 95054. |
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Any stockholder entitled to vote in person at the special
meeting may vote in person regardless of whether a proxy has
been previously given, but the mere presence (without notifying
the Data Domain Corporate Secretary) of a stockholder at the
special meeting will not constitute revocation of a previously
given proxy. |
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If I am a Data Domain stockholder, should I send in my Data
Domain stock certificates now? |
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No. You should not send in your Data Domain stock
certificates at this time. After the merger is completed, NetApp
will send you instructions for exchanging Data Domain stock
certificates for the merger consideration. Unless Data Domain
stockholders specifically request to receive NetApp stock
certificates, the shares of NetApp stock they receive in the
merger will be issued in book-entry form. |
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Is the merger subject to the approval of stockholders of
NetApp? |
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No. NetApp is not required to obtain the approval of its
stockholders with respect to the merger proposal. |
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When do you expect to complete the merger? |
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Data Domain currently expects to complete the merger within
60 to 120 days following May 20, 2009, the date
on which the merger agreement was initially executed. However,
there can be no assurance as to when, or if, the merger will
occur. Data Domain must first obtain the approval of Data Domain
stockholders at the special meeting and the necessary regulatory
approvals. |
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What are the material U.S. tax consequences of the merger? |
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The U.S. tax consequences of the merger depend on whether the
second-step merger occurs. The second-step merger will occur
only if Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel to NetApp, and Fenwick & West
LLP, counsel to Data Domain, deliver opinions to the effect that
the first-step merger and the second-step merger together will
qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended, or the Code. The tax opinions are conditioned upon
receipt of customary written representations from NetApp and
Data Domain, including representations that the stock
consideration, valued as of the last business day immediately
prior to the closing date of the first-step merger, will
constitute at least 40% of the total consideration paid or
payable to Data Domain stockholders in the first-step merger,
referred to as the continuity of interest test. The tax opinions
will be delivered, if at all, on the closing date of the
first-step merger. |
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Whether the continuity of interest test will be satisfied
depends primarily upon the market value of the NetApp common
stock immediately before the first-step merger. Other relevant
factors may include (i) whether the stock consideration is
required to be decreased, and the cash consideration
correspondingly increased, so that the aggregate amount of stock
consideration issuable in the merger (including the stock
consideration issuable to the holders of Data Domain options and
restricted stock units) will not exceed 19.5% of the outstanding
shares of NetApp common stock immediately prior to the
first-step merger, as more fully described above, (ii) the
potential payment of cash to Data Domain stockholders properly
exercising appraisal rights under Delaware law, and
(iii) the amount of cash paid in the merger in lieu of the
issuance of fractional shares of NetApp common stock. No
assurances can be given that the continuity of interest test
will be met. As a result, in deciding whether to approve the
merger, you should consider the possibility that it may be
taxable to you because the continuity of interest test is not
satisfied and the second-step merger does not occur. You will
not be entitled to change your vote in the event that the merger
is taxable. In connection with the closing of the first-step
merger, NetApp will issue a press release announcing whether the
merger qualifies as a tax-free reorganization or is a fully
taxable transaction. |
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If the second-step merger occurs and the merger qualifies as a
reorganization, a U.S. holder of Data Domain common stock
receiving NetApp common stock and cash in exchange for Data
Domain common stock in the merger generally will recognize gain
equal to the lesser of (i) the amount of cash received by
the U.S. holder (excluding any cash received in lieu of
fractional shares) and (ii) the excess of the amount
realized by the U.S. holder over the U.S. holders
tax basis in the Data Domain common stock. The amount
realized by the U.S. holder will equal the sum of the fair
market value of the NetApp common stock and the amount of cash
(including any cash received in lieu of fractional shares)
received by the U.S. holder. Losses will not be permitted to be
recognized. Realized gain or loss must be calculated separately
for each identifiable block of shares (i.e., shares |
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acquired at different times and prices) exchanged in the merger,
and a loss realized on the exchange of one block cannot be used
to offset a gain recognized on the exchange of another block. |
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If the second-step merger does not occur, the exchange of Data
Domain common stock for NetApp common stock and cash in the
first-step merger will be a fully taxable transaction in which a
U.S. holder generally will recognize gain or loss equal to the
difference between the amount realized (as defined
above) and the U.S. holders tax basis in the Data Domain
common stock. Gain or loss must be calculated separately for
each identifiable block of shares (i.e., shares acquired at
different times and prices) exchanged in the first-step merger. |
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Please see Material U.S. Federal Income Tax Consequences
of the Merger beginning on page 75. |
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Whom should I call with questions? |
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If you need any assistance in completing your proxy card or have
questions regarding the special meeting, you may call Innisfree
M&A Incorporated, Data Domains proxy solicitor, at
(888) 750-5834 (toll-free) if you are a stockholder or (212)
750-5833 (collect) if you are a bank or broker. |
vii
SUMMARY
This summary highlights material information from this proxy
statement/prospectus. It may not contain all of the information
that is important to you. Data Domain urges you to read
carefully the entire proxy statement/prospectus and the other
documents to which we refer to fully understand the merger and
the related transactions. See Where You Can Find More
Information on page 98. Each item in this summary
refers to the page of this proxy statement/prospectus on which
that subject is discussed in more detail.
Following the first-step merger, for each share of Data
Domain common stock held by them, Data Domain stockholders will
have a right to receive a cash amount of $16.45, without
interest and less any required withholding under United States
federal, state, or local law or under foreign law, plus a number
of validly issued, fully paid and non-assessable shares of
NetApp common stock equal to the exchange ratio. The exchange
ratio is equal to (i) 0.7783 shares of NetApp common
stock if the closing average (as described below) is less than
$17.41, (ii) 0.6370 shares of NetApp common stock if
the closing average is greater than $21.27, and (iii) that
fraction of a share of NetApp common stock equal to the quotient
obtained by dividing $13.55 by the closing average, if the
closing average is (A) less than or equal to $21.27 and
(B) greater than or equal to $17.41. The closing average
means the average of the closing sales prices for NetApp common
stock as reported on the NASDAQ Global Select Market for the 10
most recent consecutive trading days ending on the third trading
day immediately prior to the closing of the first-step merger.
Under certain conditions, NetApp may elect to reduce, or may be
required to reduce, the stock consideration, and, in the event
of such a reduction, NetApp will be required to increase the
cash consideration. See The Merger Agreement
Per Share Merger Consideration. Data Domain stockholders
may contact Innisfree M&A Incorporated, Data Domains
information agent, toll free at
(888) 750-5834,
and banks or brokers can call collect at
(212) 750-5833,
for information regarding the merger consideration to be
received upon exchange of each share of Data Domain common stock
in connection with the merger. In addition, on the third trading
day preceding the date of the special meeting of the Data Domain
stockholders, NetApp and Data Domain will issue a joint press
release announcing the aggregate merger consideration that would
be payable to the Data Domain stockholders, assuming that the
merger closed on the date of the special meeting. However, there
can be no assurance that the merger will close on the date of
the special meeting of the stockholders. As such, the
assumptions in the joint press release may differ from the
actual merger consideration payable in the merger at the
closing. Further, the determination of whether the merger will
qualify as a tax-free reorganization will depend upon the value
of NetApp common stock on the last business day preceding the
closing. Stockholders will not know on the date of the special
meeting whether the merger will qualify as a tax-free
reorganization or will be a fully taxable transaction. The
parties anticipate that the first-step merger will close on the
date of the special meeting. In connection with the closing of
the first-step merger, NetApp will issue another press release
confirming the aggregate merger consideration payable to the
Data Domain stockholders and announcing whether the merger
qualifies as a tax-free reorganization or is a fully taxable
transaction.
On May 20, 2009, NetApp entered into an Agreement and Plan
of Merger, referred to as the original merger agreement, by and
among NetApp, Kentucky Merger Sub One Corporation, a wholly
owned subsidiary of NetApp, referred to as Merger Sub One, Derby
Merger Sub Two LLC, a wholly owned subsidiary of NetApp,
referred to as Merger Sub Two, and Data Domain, pursuant to
which for each share of Data Domain common stock held by them,
Data Domain stockholders would have had a right to receive a
cash amount of $11.45 plus a number of validly issued, fully
paid and non-assessable shares of NetApp common stock equal to
an exchange ratio of (i) 0.833 shares of NetApp common
stock if the closing average was less than $16.26,
(ii) 0.682 shares of NetApp common stock if the
closing average was greater than $19.88, and (iii) that
fraction of a share of NetApp common stock equal to the quotient
obtained by dividing $13.55 by the closing average, if the
closing average was (A) less than or equal to $19.88 and
(B) greater than or equal to $16.26. On June 3, 2009,
NetApp and Data Domain amended the original merger agreement to
reflect the terms described in this proxy statement/prospectus.
The merger agreement provides for the acquisition of Data Domain
by NetApp by means of a merger of Merger Sub One with and into
Data Domain, referred to as the first-step merger, with Data
Domain as the interim surviving entity. Immediately thereafter,
subject to certain conditions, Data Domain, as the interim
surviving entity, will merge with and into Merger Sub Two,
referred to as the second-step merger, with Merger Sub Two as
the final surviving entity. Unless otherwise
1
specified herein, the second-step merger, taken together with
the first-step merger, is referred to in this proxy
statement/prospectus as the merger. As a result of the
first-step merger, Data Domain will become a wholly owned
subsidiary of NetApp. See Material U.S. Federal Income Tax
Consequences of the Merger for an explanation of the
two-step merger structure. Based on NetApps stock trading
price as of June 2, 2009, the aggregate value of the
consideration payable in connection with the merger, is
$1.9 billion on a fully diluted basis (net of cash on Data
Domains balance sheet). The aggregate value of the
consideration payable at closing is subject to change, as
further described in this proxy statement/prospectus.
Each share of Data Domain common stock issued and outstanding
immediately prior to the effective time of the merger will be
cancelled and extinguished and automatically converted into the
right to receive a cash amount of $16.45, or the cash
consideration, without interest and less any required
withholding under United States federal, state, local or foreign
law, plus a number of validly issued, fully paid and
non-assessable shares of NetApp common stock equal to the
exchange ratio, referred to as the stock consideration, and
together with the cash consideration, the merger consideration.
The merger agreement is included as Appendix A to this
proxy statement/prospectus.
What
Holders of Data Domain Stock Options and Other Equity-Based
Awards Will Receive (page 56)
Each of the vested and unvested options to purchase shares of
Data Domain common stock that is outstanding at the effective
time of the first-step merger will be assumed and converted into
an option to acquire shares of NetApp common stock, subject to
the option exchange ratio, at the effective time of the merger,
and will otherwise be subject to the terms and conditions of
such award prior to the completion of the first-step merger,
including vesting and exercisability.
Each of Data Domains restricted stock units outstanding at
the effective time of the first-step merger will be assumed and
converted into a restricted stock unit representing the right to
receive the merger consideration payable for shares underlying
each assumed and converted Data Domain restricted stock unit.
The assumed and converted restricted stock units will otherwise
be subject to the same terms and conditions, including vesting
restrictions, applicable to such Data Domain restricted stock
units prior to the effective time of the first-step merger.
Each of Data Domains unvested shares of restricted stock
outstanding at the effective time of the first-step merger will
be assumed and converted into the right to receive the merger
consideration payable for such shares. The merger consideration
payable for such unvested shares of restricted stock will be
subject to the same terms and conditions, including vesting
restrictions, applicable to such shares of Data Domain
restricted stock prior to the effective time of the first-step
merger.
Material
U.S. Federal Income Tax Consequences of the Merger to Data
Domain Stockholders (page 75)
The U.S. tax consequences of the merger depend on whether
the second-step merger occurs. The second-step merger will occur
only if Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel to NetApp, and Fenwick & West
LLP, counsel to Data Domain, deliver tax opinions to the effect
that the merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code. The tax
opinions are conditioned upon receipt of customary written
representations from NetApp and Data Domain, including
representations that continuity of interest test will be
satisfied, requiring that the stock consideration constitute at
least 40% of the total consideration paid or payable to Data
Domain stockholders in the first-step merger. The tax opinions
will be delivered, if at all, on the closing date of the
first-step merger.
Whether the continuity of interest test will be satisfied
depends primarily upon the market value of the NetApp common
stock immediately before the first-step merger. Other relevant
factors may include (i) whether the stock consideration is
required to be decreased, and the cash consideration
correspondingly increased, so that the aggregate amount of stock
consideration issuable in the merger (including the stock
consideration issuable to the holders of Data Domain options and
restricted stock units) will not exceed 19.5% of the outstanding
shares of NetApp common stock immediately prior to the
first-step merger, as more fully described above, (ii) the
potential payment of cash to Data Domain stockholders properly
exercising appraisal rights under Delaware law, and
(iii) the amount of cash paid in the merger in lieu of the
issuance of fractional shares of NetApp common stock. No
assurances can be given that the continuity of interest test
will be met. As a result, in deciding whether to approve the
merger, you should consider the possibility that the it may be
taxable to you because the continuity of interest test is not
satisfied and the second-step merger does not occur. You will
not be entitled to change your vote in the event that
2
the merger is taxable. In connection with the closing of the
first-step merger, NetApp will issue a press release announcing
whether the merger qualifies as a tax-free reorganization or is
a fully taxable transaction.
If the second-step merger occurs and the merger qualifies as a
reorganization, a U.S. holder of Data Domain common stock
receiving NetApp common stock and cash in exchange for such Data
Domain common stock in the merger generally will recognize gain
equal to the lesser of (i) the amount of cash received by
the U.S. holder (excluding any cash received in lieu of
fractional shares) and (ii) the excess of the amount
realized by the U.S. holder over the
U.S. holders tax basis in the Data Domain common
stock. The amount realized by the U.S. holder
will equal the sum of the fair market value of the NetApp common
stock and the amount of cash (including any cash received in
lieu of fractional shares) received by the U.S. holder.
Losses will not be permitted to be recognized. Realized gain or
loss must be calculated separately for each identifiable block
of shares (i.e., shares acquired at different times and prices)
exchanged in the merger, and a loss realized on the exchange of
one block cannot be used to offset a gain recognized on the
exchange of another block. Any gain recognized by a
U.S. holder of Data Domain common stock generally will be
long-term capital gain if the U.S. holders holding
period of the Data Domain common stock is more than one year,
and short-term capital gain if the U.S. holders
holding period is one year or less, at the time of the
first-step merger. Long-term capital gains of individuals are
eligible for reduced rates of taxation.
If the second-step merger does not occur, the exchange of Data
Domain common stock for NetApp common stock and cash in the
first-step merger will be a fully taxable transaction in which a
U.S. holder generally will recognize gain or loss equal to
the difference between the amount realized (as
defined above) and the U.S. holders tax basis in the
Data Domain common stock. Gain or loss must be calculated
separately for each identifiable block of shares (i.e., shares
acquired at different times and prices) exchanged in the
first-step merger. Any gain or loss recognized by a
U.S. holder of Data Domain common stock generally will be
long-term capital gain or loss if the U.S. holders
holding period of the Data Domain common stock is more than one
year, and short-term capital gain or loss if the
U.S. holders holding period is one year or less, at
the time of the first-step merger. Long-term capital gains of
individuals are eligible for reduced rates of taxation. The
deductibility of capital losses is subject to limitations.
The U.S. federal income tax consequences described above
may not apply to all holders of Data Domain common stock. Your
tax consequences will depend on your individual situation.
Accordingly, NetApp and Data Domain strongly urge you to consult
with your tax advisor for a full understanding of the particular
tax consequences of the merger to you.
Comparative
Market Prices and Dividends (page 96)
NetApp common stock trades on the NASDAQ Global Select Market
under the symbol NTAP, and Data Domain common stock
trades on the NASDAQ Global Select Market under the symbol
DDUP. The following table shows the closing sale
prices of NetApp common stock and Data Domain common stock as
reported on the NASDAQ Global Select Market on June 2,
2009, the last trading day before the signing of the amended
merger agreement, and on July 1, 2009, the last trading day
before the distribution of this proxy statement/prospectus for
which data was available. This table also shows the implied
value of the merger consideration proposed for each share of
Data Domain common stock, which was calculated by adding to
$16.45, or the cash consideration, the product obtained by
multiplying the closing price of a share of NetApp common stock
on those dates by the implied exchange ratio for the stock
consideration that would apply if the closing average were equal
to the closing sale price on those dates.
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Implied Value of
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One Share of
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NetApp
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Data Domain
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Data Domain
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Common Stock
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Common Stock
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Common Stock
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June 2, 2009
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$
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19.34
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31.58
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30.00
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July 1, 2009
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$
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19.97
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33.49
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30.00
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The market price of NetApp common stock and Data Domain
common stock will fluctuate prior to the closing of the
first-step merger. You should obtain current market quotations
for the shares.
3
The Data
Domain Board of Directors Unanimously Recommends that Data
Domain Stockholders Vote FOR the Proposals
(pages 26 and 97)
The Data Domain board of directors believes that the merger is
in the best interests of Data Domain and its stockholders and
has unanimously approved the merger and the merger agreement.
The Data Domain board of directors unanimously recommends that
Data Domain stockholders vote FOR the merger
proposal and FOR the adjournment proposal.
Qatalyst
Partners Provided an Opinion to the Data Domain Board of
Directors (page 41)
As financial advisor to Data Domain, on May 20, 2009,
Qatalyst Partners LP, which is referred to herein as Qatalyst,
rendered to the Data Domain board of directors its opinion that,
as of such date and based upon and subject to the various
assumptions, qualifications and limitations set forth in its
opinion, the merger consideration to be received by the holders
of shares of Data Domain common stock, other than affiliates who
have executed voting agreements, pursuant to the original merger
agreement was fair, from a financial point of view, to such
holders. Qatalysts opinion was based on the terms of the
original merger agreement, and the Data Domain board of
directors has not requested that Qatalyst provide an additional
or revised opinion reflecting the terms of the merger agreement,
as amended on June 3, 2009. Qatalysts opinion was
rendered to the Data Domain board of directors prior to the
announcement of EMCs tender offer. Thus, the impact of
EMCs offer on Qatalysts view, as of the date of the
amendment to the original merger agreement, as to the fairness,
from a financial point of view, of the merger consideration to
be received by the holders of shares of Data Domain common stock
pursuant to the amendment to the original merger agreement
cannot be presumed, and such view could be different than its
view, as of the date of the original merger agreement, as to the
fairness, from a financial point of view, of the original merger
consideration to be received by the holders of shares of Data
Domain common stock pursuant to the original merger agreement.
The full text of the written opinion of Qatalyst, dated
May 20, 2009, is attached hereto as Appendix D and is
incorporated by reference herein. The opinion sets forth, among
other things, the assumptions made, procedures followed, matters
considered and limitations and qualifications of the review
undertaken by Qatalyst in rendering its opinion. You should read
the opinion carefully in its entirety. Qatalysts opinion
was provided to the Data Domain board of directors and addresses
only the fairness, from a financial point of view, of the merger
consideration to be received by the holders of shares of Data
Domain common stock pursuant to the original merger agreement as
of the date of the opinion. It does not address any other aspect
of the transaction and does not constitute a recommendation to
the stockholders of Data Domain as to how to vote with respect
to the merger proposal or act on any other matter.
Data
Domains Officers and Directors Have Financial Interests in
the Merger That Differ From Your Interests
(page 47)
Data Domains executive officers and directors have
interests in the merger that are different from those of other
Data Domain stockholders. As of the record date, all directors
and executive officers of Data Domain, together with their
affiliates, beneficially owned approximately 23.6% of the
outstanding shares of Data Domain common stock, which includes
shares of common stock and shares of restricted stock that will
vest within 60 days of the record date, shares underlying
vested options and options that will vest within 60 days of
the record date, and shares issuable upon settlement of
restricted stock units and that will be issuable within
60 days of such date. Additionally, certain executive
officers and the non-employee directors of Data Domain will be
entitled to additional benefits as a result of the completion of
the merger or upon certain events following the completion of
the merger.
Directors
and Executive Officers of Data Domain Have Agreed to Vote in
Favor of the Merger Proposal (page 72)
In connection with the execution of the merger agreement,
directors and executive officers of Data Domain and certain of
their affiliates entered into voting agreements pursuant to
which they have agreed to vote all shares of Data Domain common
stock owned by them in favor of the merger proposal. As of the
record date these directors, executive officers and affiliates
owned shares representing approximately 20.6% of Data
Domains issued and outstanding common stock. They have
also agreed to comply with certain restrictions on the
disposition of their
4
shares, subject to the terms and conditions contained in the
voting agreements. Pursuant to their terms, these voting
agreements will terminate concurrently with any termination of
the merger agreement.
The form of voting agreement is included as Appendix B to
this proxy statement/prospectus.
Holders
of Data Domain Common Stock Are Entitled to Appraisal Rights
(page 51)
Under the Delaware General Corporation Law, referred to as the
DGCL, holders of Data Domain common stock who do not vote for
the approval of the first-step merger proposal have the right to
seek appraisal of the fair value of their shares as determined
by the Delaware Court of Chancery if the merger is completed,
but only if they comply with all requirements of Delaware law,
which are summarized in this proxy statement/prospectus. This
appraisal amount could be more than, the same as, or less than
the amount a Data Domain stockholder would be entitled to
receive under the merger agreement. Any holder of Data Domain
common stock intending to exercise appraisal rights, among other
things, must submit a written demand for appraisal to Data
Domain prior to the vote on the approval of the merger proposal
and must not vote or otherwise submit a proxy in favor of
approval of the merger proposal. Failure to follow exactly the
procedures specified under Delaware law will result in the loss
of appraisal rights. Because of the complexity of the Delaware
law relating to appraisal rights, if you are considering
exercising your appraisal right, Data Domain encourages you to
seek the advice of your own legal counsel.
A copy of Section 262 of the DGCL is also included as
Appendix C to this proxy statement/prospectus.
Conditions
That Must Be Satisfied or Waived for the Merger to Occur
(page 67)
Currently, NetApp and Data Domain expect to complete the
first-step merger within 60 to 120 days following May 20,
2009, the date on which the merger agreement was initially
executed. As more fully described in this proxy
statement/prospectus and in the merger agreement, the completion
of the first-step merger depends on a number of conditions being
satisfied or, where legally permissible, waived. These
conditions include, among others, approval of the merger
proposal by Data Domain stockholders, the expiration or
termination of the applicable
Hart-Scott-Rodino
waiting period, the receipt of all required regulatory approvals.
Neither NetApp nor Data Domain can be certain when, or if, the
conditions to the merger will be satisfied or waived, or that
the merger will be completed.
Termination
of the Merger Agreement (page 69)
Either NetApp or Data Domain may terminate the merger agreement
under certain circumstances, which would prevent the merger from
being completed.
Termination
Fee (page 71)
A termination fee of $57,000,000 may be payable by Data Domain
to NetApp upon the termination of the merger agreement under
several circumstances.
Regulatory
Approvals Required for the Merger (page 53)
NetApp and Data Domain have agreed to use reasonable best
efforts to obtain as promptly as practicable all regulatory
approvals that are required to complete the transactions
contemplated in the merger agreement. This includes filing all
required notices to governmental authorities, including the
required filings with the Department of Justice and the Federal
Trade Commission pursuant to the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, referred to
herein as the HSR Act. NetApp and Data Domain are not permitted
to complete the merger until the applicable waiting periods
under the HSR Act have expired or been terminated. On July 2,
2009, the Federal Trade Commission granted early termination of
the HSR waiting period. Although neither NetApp nor Data Domain
know of any reason why regulatory approvals would not be
obtained in a timely manner, NetApp and Data Domain cannot be
certain when, or if, the approvals will be obtained.
5
Board of
Directors and Management of NetApp following Completion of the
Merger (page 51)
The directors of Data Domain and its subsidiaries will resign in
connection with the first-step merger. The composition of
NetApps board of directors and management is not
anticipated to change in connection with the completion of the
first-step merger, although it is possible that following the
first-step merger, one or more members of Data Domains
management may be asked to join NetApps board of directors
and/or
management.
The
Rights of Data Domain Stockholders will Change as a Result of
the Merger (page 90)
The rights of Data Domain stockholders will change as a result
of the merger due to differences in NetApps and Data
Domains governing documents. This proxy
statement/prospectus contains a summary description of
stockholder rights under each of the NetApp and Data Domain
governing documents and describes the material differences
between them.
Data
Domain will Hold its Special Meeting on August 14, 2009
(page 21)
The special meeting will be held on August 14, 2009 at
9 a.m., local time, at 2421 Mission College Blvd.,
Santa Clara, CA 95054. At the special meeting, Data Domain
stockholders will be asked to:
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Adopt the merger agreement; and
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Approve the adjournment or postponement of the special meeting,
if necessary, to solicit additional proxies, in the event that
there are not sufficient votes at the time of the special
meeting to adopt the merger agreement.
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Record Date. Only holders of record at the
close of business on June 17, 2009 will be entitled to vote
at the special meeting. Each share of Data Domain common stock
is entitled to vote. As of the record date,
62,885,090 shares of Data Domain common stock were
outstanding, held by approximately 114 registered holders.
Required Vote. Approval of the merger proposal
requires the affirmative vote of the holders of a majority of
the outstanding shares of Data Domain common stock entitled to
vote at the special meeting. Because approval of the merger
proposal is based on the affirmative vote of a majority of
shares outstanding, a Data Domain stockholders failure to
vote, abstention or failure to instruct a broker, a broker
non-vote, will have the same effect as a vote against the
merger proposal.
In the event that a quorum is not present in person or
represented by proxy at the special meeting, the chairman of the
meeting may adjourn the meeting to another place, date or time.
If a quorum is present in person or represented by proxy at the
special meeting, approval of the adjournment proposal requires
the affirmative vote of the majority of the outstanding shares
that are present in person or represented by proxy and entitled
to vote at the special meeting. A Data Domain stockholders
abstention will have the same effect as a vote against the
adjournment proposal. A broker non-vote will have no effect on
the adjournment proposal.
Information
about the Companies (page 25)
NetApp,
Inc.
NetApp, a Delaware corporation, was established in 1992. NetApp
is a leading provider of storage and data management solutions.
NetApp common stock is traded on the NASDAQ Global Select Market
under the symbol NTAP. The principal executive
offices of NetApp are located at 495 East Java Drive, Sunnyvale,
CA 94089, and its telephone number is
(408) 822-6000.
Additional information about NetApp and its subsidiaries is
included in documents incorporated by reference in this proxy
statement/prospectus. See Where You Can Find More
Information beginning on page 98.
Kentucky
Merger Sub One Corporation
Kentucky Merger Sub One Corporation, a wholly owned subsidiary
of NetApp, was formed solely for the purpose of completing the
merger. Kentucky Merger Sub One Corporation has not carried on
any activities to date, except for activities incidental to its
formation and activities undertaken in connection with the
transactions
6
contemplated by the merger agreement. The principal executive
offices of Kentucky Merger Sub One Corporation are located at
495 East Java Drive, Sunnyvale, CA 94089, and its telephone
number is
(408) 822-6000.
Derby
Merger Sub Two LLC
Derby Merger Sub Two LLC, a wholly owned subsidiary of NetApp,
was formed solely for the purpose of completing the merger.
Derby Merger Sub Two LLC has not carried on any activities to
date, except for activities incidental to its formation and
activities undertaken in connection with the transactions
contemplated by the merger agreement. The principal executive
offices of Derby Merger Sub Two LLC are located at 495 East Java
Drive, Sunnyvale, CA 94089, and its telephone number is
(408) 822-6000.
Data
Domain, Inc.
Data Domain, a Delaware corporation, was incorporated in
Delaware in October 2001. Data Domain is a leading provider of
storage solutions for backup and archive applications based on
deduplication technology.
Data Domain common stock is traded on the NASDAQ Global Select
Market under the symbol DDUP. The principal
executive offices of Data Domain are located at 2421 Mission
College Blvd., Santa Clara, CA 95054, and its telephone
number is
(408) 980-4800.
Additional information about Data Domain and its subsidiaries is
included in documents incorporated by reference in this proxy
statement/prospectus. See Where You Can Find More
Information beginning on page 98.
7
SELECTED
CONSOLIDATED HISTORICAL FINANCIAL DATA OF NETAPP
The tables below present selected consolidated financial data of
NetApp prepared in accordance with U.S. generally accepted
accounting principles, or GAAP. The data below are only a
summary and should be read in conjunction with NetApps
consolidated financial statements and accompanying notes, as
well as NetApps managements discussion and analysis
of financial condition and results of operations, all of which
can be found in publicly available documents, including those
incorporated by reference in this proxy statement/prospectus.
For a complete list of documents incorporated by reference in
this proxy statement/prospectus, see Where You Can Find
More Information beginning on page 98.
NetApp derived the consolidated statements of operations data
for the years ended April 24, 2009, April 25, 2008 and
April 27, 2007, and the consolidated balance sheet data as
of April 24, 2009 and April 25, 2008, from its audited
consolidated financial statements incorporated by reference in
this proxy statement/prospectus. NetApp derived the consolidated
statement of operations data for the year ended April 28,
2006 and April 29, 2005, and the consolidated balance sheet
data as of April 27, 2007, April 28, 2006 and
April 29, 2005, from its audited consolidated financial
statements not included or incorporated by reference in this
proxy statement/prospectus. NetApps historical results are
not necessarily indicative of the results to be expected in the
future.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
April 24,
|
|
|
April 25,
|
|
|
April 27,
|
|
|
April 28,
|
|
|
April 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues(1)
|
|
$
|
3,406,393
|
|
|
$
|
3,303,167
|
|
|
$
|
2,804,282
|
|
|
$
|
2,066,456
|
|
|
$
|
1,598,131
|
|
Total cost of revenue
|
|
|
1,416,478
|
|
|
|
1,289,791
|
|
|
|
1,099,782
|
|
|
|
809,995
|
|
|
|
623,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,989,915
|
|
|
|
2,013,376
|
|
|
|
1,704,500
|
|
|
|
1,256,461
|
|
|
|
975,048
|
|
Total operating expenses
|
|
|
1,942,740
|
|
|
|
1,699,776
|
|
|
|
1,403,258
|
|
|
|
948,170
|
|
|
|
721,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
47,175
|
|
|
|
313,600
|
|
|
|
301,242
|
|
|
|
308,291
|
|
|
|
253,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income(1)
|
|
$
|
86,545
|
|
|
$
|
309,738
|
|
|
$
|
297,735
|
|
|
$
|
266,452
|
|
|
$
|
225,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share, basic
|
|
$
|
0.26
|
|
|
$
|
0.88
|
|
|
$
|
0.80
|
|
|
$
|
0.72
|
|
|
$
|
0.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share, diluted
|
|
$
|
0.26
|
|
|
$
|
0.86
|
|
|
$
|
0.77
|
|
|
$
|
0.69
|
|
|
$
|
0.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in basic net income per share calculation
|
|
|
330,279
|
|
|
|
351,676
|
|
|
|
371,204
|
|
|
|
371,061
|
|
|
|
361,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in diluted net income per share calculation
|
|
|
334,575
|
|
|
|
361,090
|
|
|
|
388,454
|
|
|
|
388,381
|
|
|
|
380,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 24,
|
|
|
April 25,
|
|
|
April 27,
|
|
|
April 28,
|
|
|
April 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Cash and cash equivalents and short-term investments
|
|
$
|
2,604,206
|
|
|
$
|
1,164,390
|
|
|
$
|
1,308,781
|
|
|
$
|
1,322,892
|
|
|
$
|
1,169,965
|
|
Working capital
|
|
|
1,759,459
|
|
|
|
653,331
|
|
|
|
1,053,256
|
|
|
|
1,116,047
|
|
|
|
1,055,700
|
|
Total assets
|
|
|
5,472,819
|
|
|
|
4,070,988
|
|
|
|
3,658,478
|
|
|
|
3,260,965
|
|
|
|
2,372,647
|
|
Short-term debt
|
|
|
|
|
|
|
|
|
|
|
85,110
|
|
|
|
166,211
|
|
|
|
|
|
Long-term debt and other long-term obligations
|
|
|
1,429,499
|
|
|
|
318,658
|
|
|
|
9,487
|
|
|
|
138,200
|
|
|
|
4,474
|
|
Total stockholders equity
|
|
|
1,662,346
|
|
|
|
1,700,339
|
|
|
|
1,989,021
|
|
|
|
1,923,453
|
|
|
|
1,660,804
|
|
|
|
|
(1) |
|
Net revenues and net income for the fiscal year ended
April 24, 2009 included a GSA settlement of $128,715. Net
income for fiscal 2006 included an income tax expense of $22,500
related to the American Jobs Creation Act and the repatriation
of foreign subsidiary earnings back to the U.S. |
8
SELECTED
CONSOLIDATED HISTORICAL FINANCIAL DATA OF DATA DOMAIN
The tables below present selected consolidated financial data of
Data Domain prepared in accordance with GAAP. The data below are
only a summary and should be read in conjunction with Data
Domains consolidated financial statements and accompanying
notes, as well as Data Domains managements
discussion and analysis of financial condition and results of
operations, all of which can be found in publicly available
documents, including those incorporated by reference in this
proxy statement/prospectus. The unaudited consolidated financial
statements have been prepared on the same basis as the audited
consolidated financial statements and include, in the opinion of
management, all adjustments, which include only normal recurring
adjustments that management considers necessary for the fair
presentation of the financial information set forth in those
statements. Historical results are not necessarily indicative of
future results. For a complete list of documents incorporated by
reference in this proxy statement/prospectus, see Where
You Can Find More Information beginning on page 98.
The consolidated statements of operations data for the three
months ended March 31, 2009 and 2008, and the consolidated
balance sheet data as of March 31, 2009 are derived from
the unaudited consolidated financial statements of Data Domain
and the related notes thereto that are incorporated by reference
into this proxy statement/prospectus. The consolidated statement
of operations data for the fiscal years ended December 31,
2008, 2007 and 2006, and the consolidated balance sheet data as
of December 31, 2008 and 2007 are derived from the audited
consolidated financial statements of Data Domain and the related
notes thereto that are incorporated by reference into this proxy
statement/prospectus. The consolidated statements of operations
data for the fiscal years ended December 31, 2005 and 2004,
and the consolidated balance sheet data as of December 31,
2006 and 2005 are derived from audited consolidated financial
statements not included, or incorporated by reference, in this
proxy statement/prospectus. The consolidated balance sheet data
as of December 31, 2004 are derived from unaudited
consolidated financial statements not included, or incorporated
by reference, into this proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
79,036
|
|
|
$
|
52,615
|
|
|
$
|
274,085
|
|
|
$
|
123,622
|
|
|
$
|
46,434
|
|
|
$
|
8,121
|
|
|
$
|
779
|
|
Total cost of revenue
|
|
|
22,831
|
|
|
|
13,806
|
|
|
|
76,180
|
|
|
|
35,901
|
|
|
|
14,523
|
|
|
|
5,170
|
|
|
|
1,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
|
|
|
56,205
|
|
|
|
38,809
|
|
|
|
197,905
|
|
|
|
87,721
|
|
|
|
31,911
|
|
|
|
2,951
|
|
|
|
(645
|
)
|
Total operating expenses
|
|
|
54,083
|
|
|
|
37,574
|
|
|
|
181,095
|
|
|
|
94,910
|
|
|
|
36,449
|
|
|
|
16,984
|
|
|
|
9,370
|
|
Operating income (loss)
|
|
|
2,122
|
|
|
|
1,235
|
|
|
|
16,810
|
|
|
|
(7,189
|
)
|
|
|
(4,538
|
)
|
|
|
(14,033
|
)
|
|
|
(10,015
|
)
|
Net income (loss)
|
|
$
|
1,250
|
|
|
$
|
2,741
|
|
|
$
|
21,593
|
|
|
$
|
(3,660
|
)
|
|
$
|
(4,026
|
)
|
|
$
|
(13,783
|
)
|
|
$
|
(9,828
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share, basic
|
|
$
|
0.02
|
|
|
$
|
0.05
|
|
|
$
|
0.37
|
|
|
$
|
(0.12
|
)
|
|
$
|
(0.56
|
)
|
|
$
|
(2.38
|
)
|
|
$
|
(2.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share, diluted
|
|
$
|
0.02
|
|
|
$
|
0.04
|
|
|
$
|
0.33
|
|
|
$
|
(0.12
|
)
|
|
$
|
(0.56
|
)
|
|
$
|
(2.38
|
)
|
|
$
|
(2.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing basic net income (loss) per share
|
|
|
60,157
|
|
|
|
56,414
|
|
|
|
58,254
|
|
|
|
31,482
|
|
|
|
7,128
|
|
|
|
5,801
|
|
|
|
4,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing diluted net income (loss) per share
|
|
|
65,739
|
|
|
|
65,378
|
|
|
|
65,814
|
|
|
|
31,482
|
|
|
|
7,128
|
|
|
|
5,801
|
|
|
|
4,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents and short-term investments
|
|
$
|
246,852
|
|
|
$
|
233,892
|
|
|
$
|
207,136
|
|
|
$
|
11,857
|
|
|
$
|
12,505
|
|
|
$
|
9,358
|
|
Working capital
|
|
|
248,058
|
|
|
|
232,996
|
|
|
|
203,688
|
|
|
|
12,856
|
|
|
|
9,692
|
|
|
|
8,233
|
|
Total assets
|
|
|
400,713
|
|
|
|
386,981
|
|
|
|
261,364
|
|
|
|
30,913
|
|
|
|
18,896
|
|
|
|
11,394
|
|
Other liabilities
|
|
|
2,058
|
|
|
|
2,910
|
|
|
|
594
|
|
|
|
3,319
|
|
|
|
|
|
|
|
|
|
Mandatorily redeemable convertible preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,514
|
|
|
|
41,309
|
|
|
|
26,273
|
|
Common stock and additional paid-in capital
|
|
|
308,619
|
|
|
|
295,564
|
|
|
|
248,078
|
|
|
|
3,049
|
|
|
|
1,542
|
|
|
|
1,293
|
|
Total stockholders equity (deficit)
|
|
|
289,748
|
|
|
|
276,884
|
|
|
|
207,862
|
|
|
|
(33,566
|
)
|
|
|
(31,037
|
)
|
|
|
(17,516
|
)
|
10
SELECTED
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following selected unaudited pro forma condensed combined
financial data was prepared using the purchase method of
accounting. The NetApp and Data Domain selected unaudited pro
forma condensed combined balance sheet data assume that the
merger of NetApp and Data Domain took place on April 24,
2009, and combines the NetApp historical consolidated balance
sheet at April 24, 2009 with Data Domains historical
consolidated balance sheet at March 31, 2009. The NetApp
and Data Domain selected unaudited pro forma condensed combined
statement of operations data assume that the merger of NetApp
and Data Domain took place as of April 26, 2008. The
selected unaudited pro forma condensed combined statement of
operations data for the fiscal year ended April 24, 2009
combines NetApps historical consolidated statement of
income for the fiscal year then ended with Data Domains
results of operations for the twelve months ended March 31,
2009.
The selected unaudited pro forma condensed combined financial
data is presented for illustrative purposes only and is not
necessarily indicative of the combined financial position or
results of operations of future periods or the results that
actually would have been realized had the entities been a single
entity during these periods. The selected unaudited pro forma
condensed combined financial data as of and for the fiscal year
ended April 24, 2009 is derived from the unaudited pro
forma condensed combined financial statements included elsewhere
in this proxy statement/prospectus and should be read in
conjunction with those statements and the related notes. See
Unaudited Pro Forma Condensed Combined Financial
Statements.
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
Ended
|
|
|
|
April 24,
|
|
|
|
2009
|
|
|
|
(In thousands,
|
|
|
|
except per share amounts)
|
|
|
Selected Unaudited Pro Forma Condensed Combined Statement of
Operations Data:
|
|
|
|
|
Net revenues
|
|
$
|
3,706,899
|
|
Gross profit
|
|
|
2,160,066
|
|
Loss before income taxes
|
|
|
(22,306
|
)
|
Net income
|
|
|
51,628
|
|
Net income per share: basic
|
|
$
|
0.14
|
|
Net income per share: diluted
|
|
$
|
0.14
|
|
Weighted average number of shares used in computing net income
per share:
|
|
|
|
|
Basic
|
|
|
374,485
|
|
Diluted
|
|
|
381,194
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
April 24,
|
|
|
|
2009
|
|
|
Selected Unaudited Pro Forma Condensed Combined Balance Sheet
Data:
|
|
|
|
|
Cash and cash equivalents and short-term investments
|
|
$
|
1,800,024
|
|
Working capital
|
|
|
967,848
|
|
Total assets
|
|
|
6,703,341
|
|
Long-term debt and other long-term obligations
|
|
|
1,575,248
|
|
Stockholders equity
|
|
|
2,656,333
|
|
11
COMPARATIVE
HISTORICAL AND PRO FORMA PER SHARE DATA
The following table shows historical information about
NetApps and Data Domains respective income per share
and book value per share, and similar information reflecting the
merger, referred to as pro forma information. As NetApp has a
fiscal year ending on the last Friday in April and Data Domain
has a fiscal year ending on December 31, the unaudited pro
forma condensed combined balance sheet combines the historical
balances of NetApp as of April 24, 2009 with the historical
balances of Data Domain as of March 31, 2009, plus pro
forma adjustments as if the merger had occurred on April 26,
2008. In addition, the unaudited pro forma condensed combined
statement of operations combines the historical results of
NetApp for the year ended April 24, 2009 with the
historical results of Data Domain for the twelve months ended
March 31, 2009, plus pro forma adjustments as if the merger
had occurred on April 26, 2008. Data Domains data has
been calculated by combining its reported interim data for each
quarter within the respective period.
NetApp is required to account for the merger using the purchase
method of accounting under GAAP, for accounting and financial
reporting purposes. Under the purchase method of accounting, the
assets acquired and liabilities assumed from Data Domain as of
the completion of the merger will be recorded at their
respective fair values and added to those of NetApp. Any excess
of the purchase price over the fair value of assets acquired and
liabilities assumed will be recorded as goodwill. The
consolidated financial statements of NetApp issued after the
merger will reflect these fair values and will not be restated
retroactively to reflect the historical financial position or
results of operations of Data Domain.
The pro forma financial information includes estimates of the
purchase price and adjustments to record certain assets and
liabilities of Data Domain at their respective fair values.
These pro forma adjustments are subject to updates as additional
information becomes available and as additional analyses are
performed. Certain other assets and liabilities of Data Domain
will also be subject to adjustment to their respective fair
values. Pending more detailed analyses, no pro forma adjustments
are included for those assets and liabilities, including
additional intangible assets that may be identified. Any change
in the fair value of the net assets of Data Domain will change
the amount of the purchase price allocable to goodwill.
Additionally, changes to Data Domains stockholders
equity, including net income through the date the merger is
completed, will change the amount of goodwill recorded. The
final adjustments may differ materially from the pro forma
adjustments reflected in this proxy statement/prospectus.
NetApp also anticipates that the merger will provide it with
financial benefits that include, with respect to the combined
entity, revenue and operating expense synergies, but these
financial benefits are not reflected in the pro forma
information. Accordingly, the pro forma information does not
attempt to predict or suggest future results. It also does not
necessarily reflect what the historical results of NetApp would
have been had NetApp and Data Domain been combined during the
periods presented.
The information in the following table is based on historical
financial information and related notes for Data Domain and
NetApp, as well as the unaudited pro forma condensed combined
financial statements. You should read the summary financial
information provided in the following table together with
historical financial information and related notes. The
historical financial information of Data Domain and NetApp is
also incorporated by reference into this proxy
statement/prospectus. See Where You Can Find More
Information beginning on page 98 for a description of
where you can find this historical information. Neither NetApp
nor Data Domain has declared dividends on its common stock
during the last three fiscal years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NetApp
|
|
|
Data Domain(1)
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
|
|
Twelve Months
|
|
|
|
Fiscal Year
|
|
|
Ended
|
|
|
Twelve Months
|
|
|
Ended
|
|
|
|
Ended
|
|
|
April 24, 2009
|
|
|
Ended
|
|
|
March 31, 2009
|
|
|
|
April 24, 2009
|
|
|
Pro Forma
|
|
|
March 31, 2009
|
|
|
Pro Forma
|
|
|
|
Historical
|
|
|
Combined
|
|
|
Historical
|
|
|
Combined Equivalent(2)
|
|
|
Income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.26
|
|
|
$
|
0.14
|
|
|
$
|
0.34
|
|
|
$
|
0.10
|
|
Diluted
|
|
$
|
0.26
|
|
|
$
|
0.14
|
|
|
$
|
0.30
|
|
|
$
|
0.10
|
|
Book value per share at period end
|
|
$
|
5.00
|
|
|
$
|
7.06
|
|
|
$
|
4.78
|
|
|
$
|
4.96
|
|
12
|
|
|
(1) |
|
Data Domain book value per share is stockholders equity
divided by total shares outstanding reduced by shares subject to
repurchase. |
|
(2) |
|
The pro forma Data Domain equivalent per share amounts were
calculated by applying an exchange ratio of 0.7026 as described
in Note 4 to the Unaudited Pro Forma Condensed Combined
Financial Statements, to the pro forma combined net income and
book value per share. The exchange ratio used in this pro forma
table reflects the value of the per share merger consideration,
exclusive of the cash portion of $16.45, of $14.00 divided by
the value of a share of NetApp common stock of $19.92 (as of
June 11, 2009), with each of the numerator and denominator
calculated based on the average of the closing price for NetApp
common stock for the 10 trading day period ended June 8,
2009. The final ratio of the per share merger consideration to
the value of a share of NetApp common stock will vary based on
the trading price of NetApp common stock. |
13
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical information, this proxy
statement/prospectus contains or incorporates by reference
certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are not historical facts but instead
represent NetApps beliefs and expectations regarding
future events, many of which are, by their nature, inherently
uncertain and outside NetApps control. Forward-looking
statements include statements preceded by, followed by, or
including the words could, would,
should, may, will,
target, plan, believe,
expect, intend, anticipate,
estimate, project,
potential, possible,
objective, outlook,
probably, seek, strategy and
other similar expressions. In particular, the forward-looking
statements contained in this proxy statement/prospectus include,
but are not limited to, statements regarding:
|
|
|
|
|
the expected financial condition, results of operations,
earnings outlook and prospects of NetApp, Data Domain and the
combined company;
|
|
|
|
the expected benefits and synergies of the merger;
|
|
|
|
the likelihood that NetApp and Data Domain will receive the
regulatory approvals required to complete the merger;
|
|
|
|
NetApps expectation that customers will continue to adopt
deduplication technology;
|
|
|
|
the expectation that the acquisition of Data Domain will
complement NetApps storage and data management business;
|
|
|
|
the expectation that the merger will allow NetApp to capture a
greater share of the capacity optimized disk market;
|
|
|
|
the expectation that the merger will result in increased
operational efficiency and create opportunities for cost
reduction through the elimination of redundant overhead expenses
and public company costs; and
|
|
|
|
the expectation that the second-step merger will occur.
|
The forward-looking statements contained or incorporated by
reference herein are subject to certain risks and uncertainties
that may cause actual results to differ materially from those
reflected in the forward-looking statements. Such risk and
uncertainties include those set forth on page 15 under the
heading Risk Factors, as well as, among others, the
following:
|
|
|
|
|
the expenses of the merger being greater than anticipated,
including as a result of unexpected factors or events and
unanticipated tax consequences of the merger;
|
|
|
|
the exposure to litigation, including the possibility that
litigation relating to the merger agreement and related
transactions could delay or impede the completion of the merger;
|
|
|
|
the integration of Data Domains business and operations
with those of NetApp taking longer than anticipated, being
costlier than anticipated and having unanticipated adverse
results relating to Data Domains or NetApps existing
businesses; and
|
|
|
|
the anticipated cost savings and other synergies of the merger
taking longer to be realized or failing to be achieved in their
entirety, and attrition in key client, partner and other
relationships relating to the merger greater than expected.
|
You are cautioned not to place undue reliance on the
forward-looking statements contained herein, which speak only as
of the date of this proxy statement/prospectus or the date of
any document incorporated by reference in this document. Except
to the extent required by applicable law or regulation, neither
NetApp nor Data Domain undertakes any obligation to update these
forward-looking statements to reflect events or circumstances
after the date of this proxy statement/prospectus or to reflect
the occurrence of unanticipated events.
All subsequent written and oral forward-looking statements
concerning the merger or other matters addressed in this proxy
statement/prospectus and attributable to NetApp or Data Domain
or any person acting on their behalf are expressly qualified in
their entirety by the preceding cautionary statement.
14
RISK
FACTORS
In addition to the other information included in and
incorporated by reference into this proxy statement/prospectus,
including the matters addressed in the section entitled
Cautionary Statement Regarding Forward-Looking
Statements beginning on page 14, you should carefully
consider the following risk factors before deciding whether to
vote for approval of the merger proposal and the adjournment
proposal. In addition, you should read and consider the risks
associated with the business of NetApp and the business of Data
Domain because these risks will also affect the combined
company. These risks can be found in NetApps Annual Report
on
Form 10-K,
as filed with the SEC on June 16, 2009, and Data
Domains Annual Report on
Form 10-K
and
Form 10-K/A,
as filed with the SEC on March 13, 2009 and April 30,
2009, respectively, each of which is incorporated herein by
reference. You should also read and consider the other
information in this proxy statement/prospectus and the other
documents incorporated by reference into this proxy
statement/prospectus. See the section entitled Where You
Can Find More Information beginning on page 98.
Risks
Relating to the Merger
The
consideration that you will receive in the merger depends upon
the price of NetApps common stock at the closing of the
first-step merger and may fall below $30 per share of Data
Domain stock.
At the closing of the first-step merger, each share of Data
Domain common stock will be converted into the right to receive
a cash payment of $16.45, plus a fraction of a share of NetApp
common stock equal to the exchange ratio. The exchange ratio is
based on the closing average of NetApp common stock and, within
a certain range of possible closing averages, will result in the
right to receive NetApp common stock with a market value of
$13.55 per share of Data Domain stock, or a total merger
consideration of $30 per share. Under the terms of the merger
agreement, the exchange ratio will be calculated as follows:
|
|
|
|
|
if the closing average is less than $17.41, then the exchange
ratio will be 0.7783;
|
|
|
|
if the closing average is greater than $21.27, then the exchange
ratio will be 0.6370; and
|
|
|
|
if the closing average is less than or equal to $21.27 and
greater than or equal to $17.41, then the exchange ratio will be
calculated as the fraction obtained by dividing $13.55 by the
closing average.
|
As a result of the collar mechanism described above, if the
closing average (as described in the second paragraph of the
section entitled Summary beginning on page 1)
is less than $17.41, then for each share of Data Domain stock
you own, you will receive less than $13.55 worth of NetApp
common stock, resulting in a total merger consideration of less
than $30 per share.
The
market price of NetApps common stock may decline as a
result of the merger.
The market price of NetApps common stock may decline as a
result of the merger for a number of reasons, including:
|
|
|
|
|
the integration of Data Domain by NetApp may be unsuccessful;
|
|
|
|
NetApp may not achieve the perceived benefits of the merger as
rapidly as, or to the extent, anticipated by financial or
industry analysts; or
|
|
|
|
the effect of the merger on NetApps financial results may
not be consistent with the expectations of financial or industry
analysts.
|
These factors are, to some extent, beyond NetApps control.
In addition, for Data Domain stockholders who hold their shares
in certificated form, there will be a time period between the
effective time of the merger and the time when Data Domain
stockholders actually receive book-entry shares evidencing
NetApp common stock. Until book-entry shares are received, Data
Domain stockholders will not be able to sell their shares of
NetApp common stock in the open market and, thus, will not be
able to avoid losses resulting from any decline in the market
price of NetApp common stock during this period.
15
The
failure of NetApp to operate and manage the combined company
effectively could have a material adverse effect on
NetApps business, financial condition and operating
results.
NetApp will need to meet significant challenges to realize the
expected benefits and synergies of the merger. These challenges
include:
|
|
|
|
|
integrating the management teams, strategies, cultures,
technologies and operations of the two companies;
|
|
|
|
retaining and assimilating the key personnel of each company;
|
|
|
|
retaining existing Data Domain customers; and
|
|
|
|
creating uniform standards, controls, procedures, policies and
information systems.
|
The accomplishment of these post-merger objectives will involve
considerable risk, including:
|
|
|
|
|
the potential disruption of each companys ongoing business
and distraction of their respective management teams;
|
|
|
|
the difficulty of incorporating acquired technology and rights
into NetApps operations;
|
|
|
|
unanticipated expenses related to the integration;
|
|
|
|
potential unknown liabilities associated with the
merger; and
|
|
|
|
managing the risks related to Data Domains business as
described in Data Domains Annual Report on
Form 10-K
for the period ending December 31, 2008, as amended, that
may continue to impact the business following the merger.
|
NetApp and Data Domain have operated and, until the completion
of the merger, will continue to operate, independently. It is
possible that the integration process could result in the loss
of the technical skills and management expertise of key
employees, the disruption of each companys ongoing
businesses or inconsistencies in standards, controls, procedures
and policies due to possible cultural conflicts or differences
of opinions on technical decisions and product roadmaps that
adversely affect NetApps ability to maintain relationships
with customers, suppliers and employees or to achieve the
anticipated benefits of the merger.
Even if NetApp is able to integrate the Data Domain business
operations successfully, this integration may not result in the
realization of the full benefits of synergies, cost savings,
innovation and operational efficiencies that may be possible
from this integration, and these benefits may not be achieved
within a reasonable period of time.
The
merger may be a fully taxable transaction for U.S. federal
income tax purposes.
The U.S. tax consequences of the merger depend on whether
it meets the requirements of Section 368(a) of the Code,
including the continuity of interest test, which will be
satisfied if the stock consideration, valued as of the last
business day immediately prior to the closing date of the
merger, constitutes at least 40% of the total consideration paid
or payable to Data Domain stockholders in the
first-step
merger. Whether the continuity of interest test will be
satisfied depends primarily upon the market value of the NetApp
common stock immediately before the
first-step
merger and the extent to which NetApp is required to substitute
cash for stock at the closing pursuant to the terms of merger
agreement. No assurances can be given that the continuity of
interest test will be met. If the test is not met, the
second-step merger will not occur, and the merger will be a
fully taxable transaction. In deciding whether to approve the
merger, you should consider the possibility that the merger may
be fully taxable to you, because you will not be entitled to
change your vote in that event.
Failure
to retain key employees could diminish the anticipated benefits
of the merger.
The success of the merger will depend in part on the retention
of personnel critical to the business and operations of the
combined company due to, for example, their technical skills or
management expertise. Employees may experience uncertainty about
their future role with Data Domain and NetApp until strategies
with regard to these employees are announced or executed. If
Data Domain and NetApp are unable to retain personnel, including
Data Domains key management, technical and sales
personnel, who are critical to the successful integration and
future operations of the companies, Data Domain and NetApp could
face disruptions in their operations, loss of existing
customers, loss of key information, expertise or know-how, and
unanticipated additional recruitment and training costs. In
addition, the loss of key personnel could diminish the
anticipated benefits of the merger.
16
Uncertainty
regarding the merger may cause customers, suppliers or strategic
partners to delay or defer decisions concerning NetApp and Data
Domain and adversely affect each companys ability to
attract and retain key employees.
The merger will happen only if stated conditions are met,
including the approval of the merger proposal by Data
Domains stockholders, the receipt of regulatory approvals,
and the absence of any material adverse effect in the business
of Data Domain or NetApp. Many of the conditions are outside the
control of Data Domain and NetApp, and both parties also have
stated rights to terminate the merger agreement. Accordingly,
there may be uncertainty regarding the completion of the merger.
This uncertainty may cause customers, suppliers or strategic
partners to delay or defer decisions concerning Data Domain or
NetApp, which could negatively affect their respective
businesses. Any delay or deferral of those decisions or changes
in existing agreements could have a material adverse effect on
the respective businesses of Data Domain and NetApp, regardless
of whether the merger is ultimately completed. Moreover,
diversion of management focus and resources from the
day-to-day
operation of the business to matters relating to the merger
could have a material adverse effect on each companys
business, regardless of whether the merger is completed. Current
and prospective employees of each company may experience
uncertainty about their future roles with the combined company.
This may adversely affect each companys ability to attract
and retain key management, sales, marketing and technical
personnel.
The
market price of NetApp common stock after the merger may be
affected by factors different from those affecting the shares of
Data Domain or NetApp currently.
The businesses of NetApp and Data Domain differ in important
respects and, accordingly, the results of operations of the
combined company and the market price of the combined
companys shares of common stock may be affected by factors
different from those currently affecting the independent results
of operations of NetApp and Data Domain. For a discussion of the
businesses of NetApp and Data Domain and of certain factors to
consider in connection with those businesses, see the documents
incorporated by reference in this proxy statement/prospectus and
referred to under Where You Can Find More
Information beginning on page 98.
The
merger may go forward in certain circumstances even if NetApp or
Data Domain suffers a material adverse effect.
In general, either party can refuse to complete the merger if a
material adverse effect (as defined below under the
heading The Merger Agreement Material Adverse
Effect) occurs with regard to the other party before the
closing. However, neither party may refuse to complete the
merger on that basis as a result of any fact, circumstance,
change or effect resulting from:
|
|
|
|
|
changes in the general economic conditions in the United States
or any other country or region in the world, or changes in
conditions in the global economy generally, to the extent that
they do not have a disproportionate impact on NetApp or Data
Domain relative to other companies and operating in the same
industries in which NetApp or Data Domain operates;
|
|
|
|
changes in general conditions in the industries in which NetApp
or Data Domain operates, to the extent that they do not have a
disproportionate impact on NetApp or Data Domain relative to
other companies operating in the same industries in which NetApp
or Data Domain, as a operates;
|
|
|
|
changes in generally accepted accounting principles or other
accounting standards, or the interpretation of such principles
or standards by a third party, applicable federal, state, local,
municipal, foreign or other law or regulatory conditions, or the
interpretation of such law or regulations by a third party;
|
|
|
|
any failure to take any action or the taking of any specific
action by NetApp or Data Domain taken with the prior written
consent or written direction of the other party;
|
|
|
|
the taking of any specific action expressly required by the
merger agreement;
|
|
|
|
acts of war, armed hostilities or terrorism, to the extent that
they do not have a disproportionate impact on NetApp or Data
Domain relative to other companies operating in the same
industries in which NetApp or Data Domain operates;
|
17
|
|
|
|
|
changes in the trading price or trading volume of NetApps
or Data Domains common stock, in and of itself, provided
that the exception described in this bullet shall not in any way
prevent or otherwise affect a determination that any fact,
circumstance, change or effect that has resulted in, or
contributed to, a material adverse effect;
|
|
|
|
the public announcement of the merger agreement or pendency of
the merger, including any loss of employees, provided that the
exception described in this bullet shall not apply to any fact,
circumstance, change or effect related to or caused by any legal
proceedings resulting from the announcement and pendency of the
merger and the transactions contemplated by the merger agreement;
|
|
|
|
any failure of NetApp or Data Domain to meet any public or
internal estimates or expectations of revenue, earnings or other
financial performance or results of operations for any period,
or failure to meet any internal budgets, plans, or forecasts of
revenues, earnings or other financial performance or results of
operations (it being understood that any underlying cause of any
such failure may be deemed to constitute, in and of itself, a
material adverse effect and may be taken into consideration when
determining whether a material adverse effect has
occurred); or
|
|
|
|
stockholder class action, derivative litigation or other legal
proceedings made or brought by any of the current or former
stockholders of NetApp or Data Domain against NetApp or Data
Domain arising out of the merger or any other transactions
contemplated by the merger agreement.
|
If adverse changes occur but NetApp and Data Domain must still
complete the merger, NetApps stock price may suffer. This
in turn may reduce the value of the merger to Data Domain
stockholders.
Data
Domain stockholders will have a reduced ownership and voting
interest after the merger and will exercise less influence over
management.
Data Domain stockholders currently have the right to vote in the
election of the board of directors of Data Domain and on other
matters affecting Data Domain. When the merger occurs, each Data
Domain stockholder that receives shares of NetApp common stock
will become a stockholder of NetApp with a percentage ownership
of the combined company that is much smaller than the
stockholders percentage ownership of Data Domain. It is
expected that the former stockholders of Data Domain as a group
will own less than 15% of the outstanding shares of NetApp
immediately after the completion of merger. Because of this,
Data Domains stockholders will have less influence on the
management and policies of NetApp than they now have on the
management and policies of Data Domain.
The
merger agreement limits Data Domains ability to pursue
alternatives to the merger.
The merger agreement contains no shop provisions
that, subject to limited exceptions, limit Data Domains
ability to discuss, facilitate or commit to competing
third-party proposals, including, but not limited to, EMCs
cash tender offer to the Data Domain stockholders, to acquire
all or a significant part of Data Domain, as well as a
termination fee that is payable by Data Domain under certain
circumstances. These provisions might discourage other potential
competing acquirors that might have an interest in acquiring all
or a significant part of Data Domain from considering or
proposing that acquisition even if it were prepared to pay
consideration with a higher per share market price than that
proposed in the merger or might result in a potential competing
acquiror proposing to pay a lower per share price to acquire
Data Domain than it might otherwise have proposed to pay.
The
merger is subject to the receipt of consents and approvals from
regulatory authorities that may impose conditions that could
have an adverse effect on NetApp or, if not obtained, could
prevent completion of the merger.
Before the merger may be completed, various approvals or
consents must be obtained from various regulatory and other
authorities. While NetApp and Data Domain believe that they will
receive the requisite regulatory approvals from these
governmental authorities, there can be no assurance of this. If
such approvals are not obtained, the merger will not be
completed. In addition, these governmental authorities may
impose conditions on the completion of the merger or require
changes to the terms of the merger. Although NetApp and Data
Domain do not currently expect that any such conditions or
changes would be imposed, there can be no assurance that they
will not be, and such conditions or changes could have the
effect of delaying completion of the merger or imposing
additional costs on or limiting the revenues of NetApp following
the merger, any of which might have a material
18
adverse effect on NetApp following the merger. For a full
description of the regulatory clearances, consents and approvals
required for the merger, please see Data Domain
Proposal 1 The Merger Regulatory
Approvals Required for the Merger beginning on
page 53.
Failure
to complete the merger could negatively affect Data
Domains stock price and its future business and
operations.
If the merger is not completed for any reason, Data Domain may
be subject to a number of material risks, including the
following:
|
|
|
|
|
Data Domain may be required under certain circumstances to pay
NetApp a termination fee of $57.0 million;
|
|
|
|
the price of Data Domains common stock may
decline; and
|
|
|
|
costs related to the merger, such as financial advisory, legal,
accounting and printing fees, must be paid even if the merger is
not completed.
|
If the merger agreement is terminated, Data Domain may be unable
to pursue another business combination transaction on terms as
favorable as those set forth in the merger agreement, or at all.
This could limit Data Domains ability to pursue its
strategic goals.
NetApp
and Data Domain may waive one or more of the conditions of the
merger without re-soliciting stockholder approval for the
merger.
Each of the conditions to NetApps and Data Domains
obligations to complete the merger may be waived, in whole or in
part, to the extent permitted by applicable law, by agreement of
NetApp and Data Domain, if the condition is a condition to both
NetApps and Data Domains obligation to complete the
merger, or by the party for which such condition is a condition
of its obligation to complete the merger. The boards of
directors of NetApp and Data Domain may evaluate the materiality
of any such waiver to determine whether amendment of this proxy
statement/prospectus and re-solicitation of proxies are
necessary. NetApp and Data Domain, however, generally do not
expect any such waiver to be significant enough to require
re-solicitation of stockholders. In the event that any such
waiver is not determined to be significant enough to require
re-solicitation of stockholders, the companies will have the
discretion to complete the merger without seeking further
stockholder approval.
If
Data Domain stockholders sell the NetApp common stock received
in the merger, they could cause a decline in the market price of
NetApp common stock.
NetApps issuance of common stock in the merger will be
registered with the SEC. As a result, those shares will be
immediately available for resale in the public market. The
maximum number of shares of NetApp common stock to be issued to
Data Domain stockholders in connection with the merger and
immediately available for resale will equal approximately 14% of
the number of outstanding shares of NetApp common stock
currently in the public market. Data Domain stockholders may
sell the stock they receive commencing immediately after the
merger. If this occurs, or if other holders of NetApp common
stock sell significant amounts of NetApp common stock
immediately after the merger is completed, the market price of
NetApp common stock may decline.
A
shift or decline in the demand for deduplication technology
could substantially reduce the anticipated benefits of the
merger.
NetApp expects that customers will continue to adopt
deduplication technology and that the acquisition of Data Domain
will result in certain market synergies. However, if customer
demand in the deduplication market decreases or is less than
expected, or if customer preferences shift to a new or different
technology, then NetApp may not realize all of the anticipated
benefits of the merger.
Although
NetApp has traditionally used a single operating system,
NetApps ability to realize the expected benefits of the
merger will depend upon its ability to successfully operate the
Data Domain operating system as a separate
platform.
NetApp currently runs a single platform, Data ONTAP, and expects
to run the Data Domain operating system as a separate platform.
Running two platforms could require significant investments of
time and financial resources. If NetApp is unable to effectively
maintain and support both platforms or otherwise adjust its
infrastructure and
19
processes to accommodate the parallel operation of both
platforms in a timely manner, then the strategic benefits of the
merger may not be realized or could be significantly reduced.
Failure
to achieve significant cost synergies could harm NetApps
business and operating results.
NetApp anticipates that the merger will result in cost synergies
associated with combining facilities, IT infrastructure,
and certain functions such as finance, human resources and
administrative services. However, differences between the two
companies operations could cause unforeseen delays in the
integration process, result in lower savings than originally
anticipated, or both, which could adversely affect NetApps
business and operating results.
20
THE DATA
DOMAIN SPECIAL MEETING
This section contains information about the special meeting of
Data Domain stockholders that has been called to consider and
approve the merger proposal and the adjournment proposal.
Together with this proxy statement/prospectus, Data Domain is
also sending you a notice of the special meeting and a form of
proxy that is solicited by the Data Domain board of directors.
Time,
Date and Place
The special meeting will be held on August 14, 2009 at
9 a.m., local time, at 2421 Mission College Blvd.,
Santa Clara, CA 95054.
Matters
to Be Considered
The purpose of the special meeting is to vote on the following
proposals:
1. To adopt the Agreement and Plan of Merger, dated as of
May 20, 2009, as amended on June 3, 2009, by and among
NetApp, Kentucky Merger Sub One Corporation, Derby Merger Sub
Two LLC and Data Domain, as the agreement may be amended from
time to time, which proposal is referred to as the merger
proposal; and
2. To approve the adjournment or postponement of the
special meeting, if necessary, to solicit additional proxies, in
the event that there are not sufficient votes at the time of the
special meeting to approve the merger proposal, which proposal
is referred to as the adjournment proposal.
Proxies
Each copy of this proxy statement/prospectus mailed to holders
of Data Domain common stock is accompanied by a form of proxy
with instructions for voting. If you hold stock in your name as
a stockholder of record, you should vote your shares by
(i) completing, signing, dating and returning the enclosed
proxy card, (ii) using the telephone number on your proxy
card or (iii) using the Internet voting instructions on
your proxy card to ensure that your vote is counted at the
special meeting, or at any adjournment or postponement of the
special meeting, regardless of whether you plan to attend the
special meeting.
If you hold your stock in street name through a
bank, broker or other nominee, you must direct your bank, broker
or other nominee to vote in accordance with the instructions you
have received from your bank, broker or other nominee.
If you hold stock in your name as a stockholder of record, you
may revoke any proxy at any time before it is voted by signing
and returning a proxy card with a later date, delivering a
written revocation letter to Data Domains Secretary, or by
attending the special meeting in person, notifying Data
Domains Corporate Secretary, and voting by ballot at the
special meeting.
Any stockholder entitled to vote in person at the special
meeting may vote in person regardless of whether a proxy has
been previously given, but the mere presence (without notifying
Data Domains Corporate Secretary) of a stockholder at the
special meeting will not constitute revocation of a previously
given proxy.
Written notices of revocation and other communications about
revoking your proxy should be addressed to:
Data Domain, Inc.
2421 Mission College Blvd.
Santa Clara, CA 95054
Attention: Corporate Secretary
If your shares are held in street name by a bank,
broker or other nominee, you should follow the instructions of
your bank, broker or other nominee regarding the revocation of
proxies.
According to the Data Domain amended and restated bylaws,
business to be conducted at a special meeting of stockholders
may only be brought before the meeting by or at the direction of
the Data Domain board of directors, or by any Data Domain
stockholder who is entitled to vote at the meeting and who
complies with the notice provisions set forth in the Data Domain
amended and restated bylaws. No matters other than the matters
described in this document are anticipated to be presented for
action at the special meeting or at any adjournment or
postponement of the special meeting.
21
Data Domain stockholders should not send Data Domain stock
certificates with their proxy cards. After the merger is
completed, NetApp will mail to holders of Data Domain common
stock a transmittal form with instructions on how to exchange
their Data Domain stock certificates for the merger
consideration.
Solicitation
of Proxies
Since many Data Domain stockholders may be unable to attend the
special meeting, Data Domains board of directors is
soliciting proxies to be voted at the special meeting to give
each stockholder an opportunity to vote on all matters scheduled
to come before the meeting and set forth in this proxy
statement/prospectus. Data Domains board of directors is
asking stockholders to designate Frank Slootman and Michael P.
Scarpelli, or any one of them, as their proxies.
NetApp will pay the costs of printing and mailing this proxy
statement/prospectus to Data Domains stockholders, and
Data Domain will pay all other costs incurred by it in
connection with the solicitation of proxies from its
stockholders on behalf of its board of directors, including the
entire cost of soliciting proxies from you. In addition to
solicitation of proxies by mail, Data Domain will request that
banks, brokers, and other record holders send proxies and proxy
material to the beneficial owners of Data Domain common stock
and secure their voting instructions. Data Domain will reimburse
the record holders for their reasonable expenses in taking those
actions. Data Domain has also made arrangements with Innisfree
M&A Incorporated to assist it in soliciting proxies and has
agreed to pay them $50,000 plus reasonable expenses for these
services over a three month period. Data Domain has agreed to
indemnify Innisfree M&A Incorporated for claims related to
these services. If necessary, Data Domain may use several of its
directors, executive officers and employees, who will not be
specially compensated, to solicit proxies from Data Domain
stockholders, either personally or by telephone, facsimile,
letter or other electronic means.
Record
Date
The close of business on June 17, 2009 has been fixed as
the record date for determining the Data Domain stockholders
entitled to receive notice of and to vote at the special
meeting. At that time, 62,885,090 shares of Data Domain
common stock were outstanding, held by approximately 114
registered holders.
Voting
Rights and Vote Required
The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of Data Domain common stock
entitled to vote is necessary to constitute a quorum at the
special meeting. Abstentions will be counted for the purpose of
determining whether a quorum is present.
Approval of the merger proposal requires the affirmative vote of
the holders of a majority of the outstanding shares of Data
Domain common stock entitled to vote at the special meeting. You
are entitled to one vote for each share of Data Domain common
stock you hold as of the record date.
Because the affirmative vote of the holders of a majority of the
outstanding shares of Data Domain common stock entitled to vote
at the special meeting is needed to approve the merger proposal,
the failure to vote by proxy or in person will have the same
effect as a vote against the approval of the merger proposal.
Abstentions and broker non-votes will also have the same effect
as a vote against the approval of the merger proposal.
Accordingly, the Data Domain board of directors urges Data
Domain stockholders to promptly vote by (i) completing,
signing, dating and returning the enclosed proxy card,
(ii) using the telephone number on your proxy card, or
(iii) using the Internet voting instructions on your proxy
card, or, if you hold your stock in street name
through a bank, broker or other nominee, by following the voting
instructions of your bank, broker or other nominee.
Approval of the adjournment proposal requires the affirmative
vote of the holders of a majority of the shares entitled to vote
and present in person or by proxy. Because approval of this
proposal requires the affirmative vote of a majority of shares
present in person or by proxy, abstentions will have the same
effect as a vote against this proposal. However, the failure to
vote, either by proxy or in person, and broker non-votes, will
have no effect on the adjournment proposal.
Stockholders may vote at the meeting by ballot. Votes cast at
the meeting, in person or by proxy, will be tallied by Innisfree
M&A Incorporated, Data Domains proxy solicitor.
22
As of the record date, directors and executive officers of Data
Domain, and their affiliates, had the right to vote
12,949,507 shares of Data Domain common stock, or 20.6% of
the outstanding Data Domain common stock at that date. Data
Domain currently expects that each of these individuals will
vote their shares of Data Domain common stock in favor of the
proposals to be presented at the special meeting. Certain
executive officers of Data Domain and their affiliates,
collectively holding 12,449,507 shares of Data Domain
common stock, or 19.8% of the outstanding Data Domain common
stock as of the record date have entered voting agreements with
NetApp. Pursuant to the voting agreements, these officers have
agreed to vote such shares of Data Domain common stock in favor
of the approval of the merger proposal, and have granted a proxy
to NetApp to vote the shares in such manner.
Recommendation
of the Data Domain Board of Directors
The Data Domain board of directors has unanimously approved and
adopted the merger agreement and the transactions contemplated
thereby. The Data Domain board of directors determined that the
merger agreement and the transactions contemplated thereby are
advisable and in the best interests of Data Domain and its
stockholders and unanimously recommends that you vote
FOR approval of the merger proposal and
FOR approval of the adjournment proposal. See
Data Domain Proposal 1 The
Merger Data Domains Reasons for the Merger;
Recommendation of the Data Domain Board of Directors on
page 38 for a more detailed discussion of the Data Domain
board of directors recommendation.
Attending
the Meeting
All holders of Data Domain common stock, including stockholders
of record and stockholders who hold their shares through banks,
brokers, nominees or any other holder of record, are invited to
attend the special meeting. Stockholders of record can vote in
person at the special meeting. If you are not a stockholder of
record, you must obtain a proxy executed in your favor, from the
record holder of your shares, such as a broker, bank or other
nominee, to be able to vote in person at the special meeting. If
you plan to attend the special meeting, you must hold your
shares in your own name or have a letter from the record holder
of your shares confirming your ownership and you must bring a
form of personal photo identification with you in order to be
admitted. Data Domain reserves the right to refuse admittance to
anyone without proper proof of share ownership and without
proper photo identification.
Voting By
Telephone or Via the Internet
In addition to voting by proxy or in person at the special
meeting, Data Domain stockholders that hold their shares as the
stockholder of record also may vote their shares by using the
telephone number on the proxy card or using the Internet voting
instructions on the proxy card. Data Domain stockholders that
hold their shares in street name through a bank,
broker or other nominee may also vote their shares by following
the telephone or Internet voting instructions provided by the
bank, broker or other nominee. If you have access to the
Internet, you are encouraged to vote via the Internet.
Adjournments
and Postponements
Although it is not currently expected, the special meeting may
be adjourned for the purpose of soliciting additional proxies if
Data Domain has not received sufficient votes to approve the
merger proposal at the special meeting of stockholders. Any
adjournments may be made without notice, other than an
announcement at the special meeting, by approval of the
affirmative vote of holders of at least a majority of shares of
Data Domain common stock who are present in person or
represented by proxy at the special meeting. Any adjournment of
the special meeting for the purpose of soliciting additional
proxies will allow stockholders who have already sent in their
proxies to revoke them at any time prior to their use.
At any time prior to convening the special meeting, Data
Domains board of directors may postpone the special
meeting for any reason without the approval of Data Domain
stockholders. If postponed, Data Domain will provide notice of
the new meeting date as required by law. Although it is not
currently expected, Data Domains board of directors may
postpone the special meeting for the purpose of soliciting
additional proxies if Data Domain has not received sufficient
proxies to constitute a quorum or sufficient votes for adoption
of the merger agreement. Similar to adjournments, any
postponement of the special meeting for the purpose of
soliciting additional proxies will allow stockholders who have
already sent in their proxies to revoke them at any time prior
to their use.
23
Appraisal
Rights
Under Delaware law, Data Domain stockholders are entitled to
appraisal rights in connection with the merger. Failure to take
any of the steps required under Delaware law on a timely basis
may result in the loss of these appraisal rights, as more fully
described in Data Domain Proposal 1 The
Merger Appraisal Rights beginning on
page 51.
Other
Matters
As of the date of this proxy statement/prospectus, the Data
Domain board of directors does not know of any other business to
be presented for consideration at the special meeting. If other
matters properly come before the special meeting, the persons
named in the accompanying form of proxy intend to vote on such
matters based on their best judgment and they intend to vote the
shares as the Data Domain board of directors may recommend.
Questions
and Additional Information
Data Domain stockholders who would like additional copies,
without charge, of this proxy statement/prospectus or have
additional questions about the merger, including the procedures
for voting their shares of Data Domain common stock, should
contact:
Data Domain,
Inc.
2421 Mission College Blvd.
Santa Clara, CA 95054
Attention: Investor Relations
Telephone:
(408) 980-4909
or Data Domains solicitation agent:
Innisfree M&A Incorporated
501 Madison Avenue,
20th
Floor
New York, NY 10022
Stockholders Call Toll-Free at:
(888) 750-5834
Banks and Brokers Call Collect at:
(212) 750-5833
24
INFORMATION
ABOUT THE COMPANIES
NetApp,
Inc.
NetApp is a supplier of enterprise storage and data management
software and hardware products and services. NetApp provides
solutions to help global enterprises meet major information
technology challenges such as managing storage growth, assuring
secure and timely information access, protecting data and
controlling costs by providing innovative solutions that
simplify the complexity associated with managing corporate data.
NetApp was incorporated in 1992 and shipped the worlds
first networked storage appliance a year later. Since then,
NetApp has brought to market many significant innovations and
industry firsts in storage and data management.
NetApp common stock is traded on the NASDAQ Global Select Market
under the symbol NTAP. The principal executive
offices of NetApp are located at 495 East Java Drive, Sunnyvale,
CA 94089, and its telephone number is
(408) 822-6000.
On May 22, 2009, NetApp commenced an option exchange
program pursuant to which employees of NetApp (other than
executive officers and directors) who hold certain options to
purchase shares of NetApps common stock are being given
the opportunity to exchange such options for restricted stock
units. The option exchange program was approved by NetApps
stockholders on April 21, 2009. Unless extended by NetApp,
the option exchange offer will expire on June 19, 2009. For
more information, please see NetApps tender offer
statement on Schedule TO, as filed with the SEC on
May 22, 2009, as may be amended from time to time.
Additional information about NetApp and its subsidiaries is
included in documents incorporated by reference in this
document. See Where You Can Find More Information
beginning on page 98.
Kentucky
Merger Sub One Corporation
Kentucky Merger Sub One Corporation, a wholly owned subsidiary
of NetApp, was formed solely for the purpose of completing the
merger. Kentucky Merger Sub One has not carried on any
activities to date, except for activities incidental to its
formation and activities undertaken in connection with the
transactions contemplated by the merger agreement. The principal
executive offices of Kentucky Merger Sub One Corporation are
located at 495 East Java Drive, Sunnyvale, CA 94089, and
its telephone number is
(408) 822-6000.
Derby
Merger Sub Two LLC
Derby Merger Sub Two LLC, a wholly owned subsidiary of NetApp,
was formed solely for the purpose of completing the merger.
Derby Merger Sub Two has not carried on any activities to date,
except for activities incidental to its formation and activities
undertaken in connection with the transactions contemplated by
the merger agreement. The principal executive offices of Derby
Merger Sub Two LLC are located at 495 East Java Drive,
Sunnyvale, CA 94089, and its telephone number is
(408) 822-6000.
Data
Domain, Inc.
Data Domain, a Delaware corporation, was incorporated in
Delaware in October 2001. Data Domain is a leading provider of
storage solutions for backup and archive applications based on
deduplication technology. Data Domain deduplication storage
systems are designed to deliver reliable, efficient and
cost-effective solutions that enable enterprises of all sizes to
manage, retain and protect their data.
Data Domain common stock is traded on the NASDAQ Global Select
Market under the symbol DDUP. The principal
executive offices of Data Domain are located at 2421 Mission
College Blvd., Santa Clara, CA 95054 and its telephone
number is
(408) 980-4800.
Additional information about Data Domain and its subsidiaries is
included in documents incorporated by reference in this proxy
statement/prospectus. See Where You Can Find More
Information beginning on page 98. Data Domain also plans
to file a proxy statement for its 2009 annual meeting of
stockholders with the SEC. The annual meeting is expected to be
held on July 2, 2009, and the purpose of the meeting is to
reelect three members of Data Domains board of directors
and to ratify Data Domains independent registered public
accounting firm for the fiscal year ending December 31,
2009.
25
DATA
DOMAIN PROPOSAL 1 THE MERGER
The stockholders of Data Domain are being asked to adopt the
Agreement and Plan of Merger, dated as of May 20, 2009, as
amended on June 3, 2009, by and among NetApp, Inc.,
Kentucky Merger Sub One Corporation, Derby Merger Sub Two LLC
and Data Domain, as the agreement may be amended from time to
time. This proposal is referred to as the merger proposal.
Background
of the Merger
Since 2006, Frank Slootman, President and Chief Executive
Officer of Data Domain, and Daniel J. Warmenhoven, Chairman and
Chief Executive Officer of NetApp, have from time to time had
informal discussions regarding their respective businesses and
the data storage industry in general.
Goldman Sachs & Co., or Goldman Sachs, had served as
co-managing underwriters in Data Domains initial public
offering in June 2007. In November 2008, prior to the engagement
of Goldman Sachs by NetApp, a representative of Goldman Sachs
arranged for a meeting between Messrs. Slootman and
Warmenhoven to discuss the possibility of a business combination
involving NetApp and Data Domain.
On November 4, 2008, Messrs. Slootman and Warmenhoven
and a representative of Goldman Sachs met to discuss the merits
of a potential business combination involving NetApp and Data
Domain. Messrs. Slootman and Warmenhoven agreed that
although there was value in a potential business combination,
considering current market conditions and trading prices of the
stock of the respective companies, such a business combination
was not feasible at that time. Messrs. Slootman and
Warmenhoven agreed that no further discussions of a potential
business combination involving NetApp and Data Domain would
occur for the foreseeable future.
In early 2009, Mr. Slootman and a representative of Goldman
Sachs had ongoing discussions of potential strategic
transactions involving Data Domain. A representative of Goldman
Sachs arranged for a meeting on March 17, 2009, between
Mr. Slootman and Thomas Georgens, President and Chief
Operating Officer of NetApp to discuss potential strategic
opportunities involving NetApp and Data Domain.
On March 17, 2009, Messrs. Slootman and Georgens and a
representative of Goldman Sachs met to discuss potential
strategic opportunities involving NetApp and Data Domain.
Mr. Georgens inquired as to whether Data Domain would be
interested in a potential business combination with NetApp at
that time. Mr. Slootman agreed to discuss such a potential
business combination with members of the Data Domain board of
directors.
On March 17, 2009, Mr. Slootman briefed Aneel Bhusri,
Chairman of the Data Domain board of directors, and some of the
other members of the Data Domain board of directors on his
discussions with Mr. Georgens regarding a potential
business combination with NetApp. The members of the Data Domain
board of directors agreed to open a dialogue with NetApp
regarding a potential business combination dependent upon the
value of the consideration offered by NetApp.
On March 18, 2009, Mr. Slootman telephoned
Mr. Georgens to inform him that Data Domain was receptive
to a potential business combination with NetApp, but that
further discussions would be dependent upon the value of the
consideration offered by NetApp to the Data Domain stockholders.
On March 24, 2009, Mr. Slootman, Michael P. Scarpelli,
Senior Vice President and Chief Financial Officer of Data
Domain, Mr. Georgens and Steven J. Gomo, Executive Vice
President and Chief Financial Officer of NetApp, met to discuss
a potential business combination involving NetApp and Data
Domain. After discussing the potential synergies, cultural fit
and strategic benefits of a potential business combination
involving NetApp and Data Domain, the parties expressed their
respective continued interests in further exploring such a
business combination.
On March 26, 2009, the Data Domain board of directors held
a meeting to discuss a potential business combination with
NetApp. Mr. Slootman reviewed the conversation he and
Mr. Scarpelli had with Messrs. Georgens and Gomo
regarding a potential proposal from NetApp to acquire Data
Domain. Mr. Slootman proposed hiring Qatalyst Partners LP,
or Qatalyst, as Data Domains financial advisor to advise
the Data Domain board of directors regarding the evaluation of a
potential NetApp proposal and other strategic alternatives for
Data Domain. Mr. Slootman noted that Goldman Sachs had been
previously engaged by NetApp to serve as its financial advisor.
The Data Domain board of directors approved the engagement of
Qatalyst as Data Domains financial advisor.
26
Mr. Slootman also reviewed potential benefits and synergies
from a potential business combination with NetApp.
Representatives of Fenwick & West LLP, or
Fenwick & West, Data Domains legal counsel, then
reviewed considerations regarding the Data Domain board of
directors fiduciary duties in the context of such a
potential business combination. Representatives of Qatalyst led
a discussion regarding current macro economic market conditions,
recent strategic developments in the technology sector,
potential deal structures, processes and other issues to
consider in such a potential business combination. The Data
Domain board of directors expressed concerns regarding the
potential harm to Data Domains business relating to any
uncertainty perceived by its current or future customers should
they learn of discussions regarding a potential business
combination involving Data Domain and the ability of Data
Domains competition to take advantage of any such
perceived uncertainty. At the conclusion of the meeting, the
Data Domain board of directors confirmed that it had not been
seeking a sale of Data Domain, however should NetApp elect to
proceed with an offer it would merit further consideration.
On March 27, 2009, NetApp and Goldman Sachs executed an
engagement letter for Goldman Sachs to act as NetApps
financial advisor.
On April 1, 2009, the NetApp board of directors met to
discuss the potential business combination between NetApp and
Data Domain.
On April 2, 2009, Messrs. Slootman and Warmenhoven met
to further discuss the opportunities and strategic benefits of a
potential business combination involving NetApp and Data Domain.
Mr. Warmenhoven indicated his interest in Data
Domains business and his respect for the long-term value
of Data Domain as an enterprise. Mr. Warmenhoven indicated
that NetApp was serious about making an offer for Data Domain
and that the value of the consideration that NetApp would offer
would reflect NetApps commitment to securing such a
potential business combination with Data Domain. Later that day
representatives of Qatalyst had a call with Mr. Warmenhoven
in which he informed them that the NetApp board of directors had
authorized him to move forward with discussions regarding a
potential business combination with Data Domain and the parties
discussed the potential timing of a potential business
combination.
On April 3, 2009, Messrs. Warmenhoven and Bhusri met
to discuss the strategic rationale and benefits of a potential
business combination involving NetApp and Data Domain. Both
parties reiterated their interest in considering such a
potential business combination. Mr. Bhusri indicated that
the amount and certainty of the value of the consideration to be
delivered to the Data Domain stockholders at closing was a
priority of the Data Domain board of directors given the general
economic uncertainty and volatile stock market conditions over
the past several months. Mr. Bhusri indicated that the Data
Domain board of directors intended to continue operating Data
Domain as an independent entity absent a potential business
combination at a sufficient value and therefore he expressed
concern over the risks to Data Domains business if
competitors or customers became aware of discussions regarding a
business combination involving Data Domain. Mr. Warmenhoven
informed Mr. Bhusri that NetApp intended to place
discussions of a potential business combination with Data Domain
on hold temporarily. Mr. Bhusri agreed that the parties
should not move forward at all until such time as both of the
parties were in a position to move forward expeditiously.
On April 6, 2009, Mr. Slootman met with a
representative of Company A to discuss the terms of a proposed
commercial relationship that was being negotiated. The
representative of Company A indicated that Company A might be
interested in a business combination involving Data Domain and
asked Mr. Slootman when a discussion of such a potential
business combination would be appropriate. Mr. Slootman
informed the representative of Company A that such a discussion
should happen sooner rather than later. After this meeting, the
parties continued to discuss the proposed commercial
relationship, but no representatives of Company A contacted
Mr. Slootman or any other representatives of Data Domain
regarding a business combination involving Data Domain and
Company A.
On April 9, 2009, the Data Domain board of directors met to
further discuss the potential business combination with NetApp.
Mr. Bhusri reviewed the status of discussions with
Mr. Warmenhoven regarding NetApps potential interest
in pursuing a business combination, but noted that no offer or
specific terms had been proposed to date and that NetApp did not
wish to engage in further conversations regarding a business
combination for the time being and likely would not be in a
position to reengage in such discussions until near the end of
NetApps fiscal quarter. Mr. Slootman reviewed his
discussion with the representative of Company A. Representatives
of Qatalyst summarized their conversations with
Mr. Warmenhoven regarding the potential business
combination with NetApp.
27
Representatives of Fenwick & West reviewed the Data
Domain board of directors fiduciary duties and commented
on legal considerations in the event Data Domain were to receive
an offer from NetApp. At the conclusion of the meeting, the Data
Domain board of directors confirmed that it was not seeking a
sale of Data Domain absent a potential business combination
involving sufficient value. However, the Data Domain board of
directors acknowledged that should NetApp elect to proceed with
an offer that provided for significant value to Data
Domains stockholders a transaction with NetApp would merit
further consideration. The Data Domain board of directors
further determined that Data Domain would not initiate any
further discussions with NetApp or any other parties at this
time.
On April 14, 2009, the NetApp board of directors held a
meeting to discuss a potential business combination with Data
Domain. Certain members of management presented the board of
directors with a market analysis, as well as evaluations of the
potential market opportunities and Data Domains valuation
and discounted cash flows. Following discussion among the NetApp
board of directors and management, the NetApp board of directors
authorized NetApp management to approach Data Domain with an
offer to acquire Data Domain, subject to the parameters
discussed and approved by the NetApp board of directors.
On April 21, 2009, the Data Domain board of directors held
a meeting, during which it discussed, among other matters,
trends in the data storage market and potential consolidation in
the data storage market. Mr. Slootman reviewed the
opportunities and challenges of remaining an independent entity
in the current and foreseeable market environment in light of
the storage market trends toward vertically integrated product
offerings, noting that Data Domain may need to consider
strategic alternatives or partnerships in the future to provide
a more complete product offering in order to grow and remain
competitive in the marketplace.
On April 22, 2009, Data Domain and Qatalyst executed an
engagement letter for Qatalyst to act as Data Domains
financial advisor.
On April 24, 2009, Mr. Warmenhoven contacted
Mr. Slootman to arrange a meeting to reinitiate discussions
about a potential business combination involving NetApp and Data
Domain.
On April 27, 2009, Fenwick & West provided a
mutual non-disclosure agreement to Wilson Sonsini
Goodrich & Rosati P.C., or Wilson Sonsini,
NetApps legal counsel, which, after some discussions
between respective counsel, was executed later that day by Data
Domain and NetApp.
On April 27, 2009, Messrs. Slootman, Bhusri,
Warmenhoven and Georgens met to further discuss a potential
business combination involving NetApp and Data Domain.
Messrs. Warmenhoven and Georgens presented a written
summary of proposed terms for the potential transaction,
including, among other items, consideration consisting of a mix
of $7.00 to $8.00 per share in cash and 0.805 shares of
NetApp common stock per share of Data Domain common stock,
representing an implied value of $22.00 to $23.00 per share. The
proposed terms also provided for a limited period of exclusivity
for discussions with NetApp. Messrs. Slootman and Bhusri
indicated that an exclusivity agreement was not acceptable to
Data Domain, but that they would discuss the other aspects of
the proposal with the Data Domain board of directors.
Mr. Warmenhoven informed Mr. Bhusri of the potential
for a role on the NetApp board of directors for Mr. Bhusri
and a role in the management of NetApp for Mr. Slootman.
On April 28, 2009, the Data Domain board of directors met
to discuss the status of the potential business combination with
NetApp. Mr. Slootman reviewed the discussions that occurred
with Messrs. Warmenhoven and Georgens regarding
NetApps interest in a business combination with Data
Domain and the written terms that were proposed by NetApp,
including the proposed per share consideration. Mr. Bhusri
informed the Data Domain board of directors of the potential for
a role on the NetApp board of directors for Mr. Bhusri and
a role in the management of NetApp for Mr. Slootman. A
discussion then ensued among the Data Domain board of directors,
Qatalyst and Fenwick & West regarding the NetApp proposal
and potential responses thereto. Representatives of
Fenwick & West reviewed the Data Domain board of
directors fiduciary duties, the various processes the Data
Domain board of directors might adopt and discussed potential
responses to the offer from NetApp. Given the recent
fluctuations of the trading prices of the respective
companies stock and fluctuations in the market indices
generally, the Data Domain board of directors determined that
establishing a collar mechanism around any portion of the stock
consideration was important to providing some protection for the
value to be received to the Data Domain stockholders in the
event that the market price of NetApps common stock price
fluctuated within a given range
28
between signing and closing of the proposed transaction. The
Data Domain board of directors also expressed concerns regarding
the timing of a potential business combination and the certainty
of closing such a transaction once a definitive agreement was
signed. Of particular concern was the negative impact of any
uncertainty to Data Domains business perceived by its
current or future customers and the ability of Data
Domains competition to take advantage of any such
uncertainty. The Data Domain board of directors considered the
heightened risk of these harms to Data Domains business if
any of Data Domains competitors were contacted regarding a
potential strategic transaction. The Data Domain board of
directors agreed that Mr. Bhusri would talk to
Mr. Warmenhoven regarding NetApps offer, specifically
to seek to increase the amount of total consideration in the
potential transaction, to increase the cash component of the mix
of consideration and to provide further protection from
fluctuations in NetApps stock price between signing and
closing of the potential transaction. The Data Domain board of
directors also instructed representatives of Qatalyst to contact
representatives of NetApp to seek favorable financial terms
consistent with the objectives they provided to Mr. Bhusri.
Following the meeting of the Data Domain board of directors on
April 28, 2009, Mr. Bhusri called Mr. Warmenhoven
to discuss the potential business combination with NetApp.
Mr. Bhusri indicated that the Data Domain board of
directors was interested in pursuing a potential business
combination with NetApp, however, they believed enhanced
financial terms would be necessary for discussions to continue.
Mr. Bhusri also informed Mr. Warmenhoven that the Data
Domain board of directors thought the cash component of the mix
of consideration should be increased and that the Data Domain
board of directors wanted down-side protection around the stock
component of the consideration to protect the value to the Data
Domain stockholders in the event that the market price of
NetApps common stock price fluctuated between signing and
closing of the proposed transaction. Mr. Bhusri reiterated
that Data Domain could not agree to an exclusive negotiating
period for NetApp. Mr. Warmenhoven said that he would
review this information with the NetApp board of directors.
On April 28, 2009 Fenwick & West provided a form
of standstill agreement to Wilson Sonsini that provided that
NetApp would not acquire shares of Data Domain, subject to
limited exceptions.
On April 29, 2009, representatives of Qatalyst had a call
with representatives of Goldman Sachs seeking a proposal with
enhanced financial terms along the lines described above.
On May 1, 2009, Messrs. Slootman and Georgens met to
further discuss the potential market, customer, product and cost
synergies that could be achieved through a business combination
of NetApp and Data Domain, the corporate culture of the two
companies and how the companies would fit together and generally
discussed the business of their respective companies.
Messrs. Slootman and Georgens did not negotiate or discuss
the substantive terms of the proposed business combination at
this meeting.
On May 1, 2009, the NetApp board of directors held a
meeting to further discuss the potential acquisition of Data
Domain. The board of directors discussed with management the
status of negotiations with Data Domain and NetApps
strategy with respect to the transaction. The NetApp board of
directors then authorized management to present Data Domain with
a revised offer, subject to the parameters discussed and
approved by the board of directors.
On May 4, 2009, Mr. Warmenhoven called Mr. Bhusri
and indicated that NetApp would increase the proposed aggregate
consideration to Data Domain stockholders in the business
combination to $24.00 per share, comprised of $6.00 in cash and
$18.00 dollars worth of shares of NetApp common stock for each
share of Data Domain common stock, with a symmetrical 7.5%
collar on the stock portion of the consideration so that Data
Domain stockholders would receive a fixed amount of
consideration in the event that the market price of
NetApps common stock price fluctuated within that range
between signing and closing of the proposed transaction.
Mr. Bhusri informed Mr. Warmenhoven that while the
Data Domain board of directors was interested in the potential
business combination with NetApp, there were still several
issues with the offer that needed to be resolved before the
parties could move forward, including an increase in the
aggregate consideration, the need for a greater portion of the
aggregate consideration to be provided in cash and for a wider
collar to be placed around the stock component of the
consideration. On that same day, Mr. Slootman and
Mr. Georgens also discussed NetApps revised proposal.
Mr. Slootman also indicated that amount of the aggregate
consideration, price certainty and protection against
fluctuations NetApps common stock price were important to
Data Domain and that the terms of any business combination
involving Data Domain should include an increase in the
aggregate consideration, an increased amount of cash and an
appropriate collar on the stock portion of the consideration.
Also on May 4, 2009, a
29
representative of Qatalyst discussed the details of Data
Domains views regarding the financial terms of a potential
business combination involving Data Domain and NetApp with a
representative of Goldman Sachs.
On May 5, 2009, Mr. Warmenhoven emailed a revised
written summary of proposed terms of the potential business
combination with NetApp to Mr. Bhusri. The revised offer
consisted of $24.00 per share in aggregate consideration,
comprised of $9.50 per share in cash and $14.50 worth of shares
of NetApp common stock for each share of Data Domain common
stock, with a symmetrical 7.5% collar on the stock portion of
the consideration.
On May 6, 2009, the Data Domain board of directors held a
meeting at which it had an extensive discussion with Qatalyst
and Fenwick & West regarding, among other matters,
NetApps original offer, NetApps subsequent offers
and the current offer of $24.00 per share (consisting of $9.50
per share in cash and $14.50 per share in NetApp common stock,
with a 7.5% symmetrical collar around the stock portion of the
consideration), NetApps desire to sign a merger agreement
for any potential transaction by May 20, 2009 (the
scheduled date for the announcement of NetApps fiscal
fourth quarter results) and other parties that may potentially
be interested in a strategic transaction with Data Domain.
Representatives of Fenwick & West reviewed the
fiduciary duties of the Data Domain board of directors and the
various processes the Data Domain board of directors might
adopt. The Data Domain board of directors considered conducting
a market check prior to the signing of a merger agreement with
NetApp only if it could be conducted in a manner that did not
jeopardize securing a firm proposal from NetApp and did not
disrupt Data Domains relationships with its current and
future customers during the process. However, the Data Domain
board of directors ultimately determined that it was not clear
that Data Domain could come to mutually agreeable terms
regarding a business combination with NetApp and therefore such
a market check would involve a high degree of risk to Data
Domains customer relationships. The Data Domain board of
directors authorized Mr. Bhusri and representatives of
Qatalyst to propose a counteroffer to NetApp seeking a higher
price of $26.00 per share in the aggregate and wider collar of
15% around the stock portion of the consideration.
After the Data Domain board of directors meeting on May 6,
2009, Mr. Bhusri called Mr. Warmenhoven to make a
counter proposal at a higher price of $26.00 in aggregate
consideration per share. After further negotiation, the parties
tentatively agreed on $25.00 in aggregate consideration per
share, with the remaining financial terms to be negotiated the
following day at a meeting that included Mr. Bhusri,
representatives of Qatalyst, Messrs. Georgens and Gomo,
J.R. Ahn, Vice President, Corporate Development of NetApp, and
representatives of Goldman Sachs.
On May 6, 2009, representatives of Qatalyst contacted
representatives of Goldman Sachs to discuss the revised terms of
the proposed transaction.
On May 7, 2009, Data Domain and NetApp executed a revised
mutual non-disclosure agreement that contained a
standstill provision with respect to shares of Data
Domain common stock.
On May 7, 2009, Mr. Bhusri, representatives of
Qatalyst, Messrs. Georgens, Gomo and Ahn, and
representatives of Goldman Sachs met to discuss the detailed
financial terms of the proposed business combination between
NetApp and Data Domain. The parties agreed to a mix of
consideration consisting of $11.00 per share in cash and $14.00
per share in NetApp common stock. The parties also agreed to a
10% symmetrical collar so that Data Domain stockholders would
receive a fixed amount of consideration in the event that the
market price of NetApps common stock price fluctuated
within a that range between signing and closing of the proposed
transaction.
On May 7, 2009, Mr. Slootman, David L. Schneider,
Senior Vice President Worldwide Sales of Data Domain,
Mr. Georgens and Robert E. Salmon, Executive Vice
President, Field Operations of NetApp, met to get acquainted and
discuss potential product sales synergies to be derived from a
business combination between NetApp and Data Domain.
On May 7, 2009, a member of the board of directors of EMC,
a competitor of Data Domain, contacted Mr. Slootman. The
EMC board member sought to arrange a meeting between
Mr. Slootman and the Chief Executive Officer of EMC to
share with them EMCs vision for the future.
Mr. Slootman asked for more specific information on the
nature of the meeting, but the board member of EMC did not
provide any further detail.
On May 7, 2009, the Data Domain board of directors held a
meeting to further discuss the potential business combination
with NetApp. At this meeting, Mr. Bhusri reviewed for the
Data Domain board of directors his discussion with
Mr. Warmenhoven regarding valuation and informed the Data
Domain board of directors that they
30
had negotiated an increase in NetApps offer from $24.00 to
$25.00 per share in aggregate consideration, consisting of
$11.00 per share in cash and $14.00 per share in NetApp common
stock, with a 10% symmetrical collar around the value of the
stock portion of the consideration. The Data Domain board of
directors then discussed with representatives of Qatalyst the
negotiations regarding the collar mechanism around the value of
the stock portion of the consideration, the progression of the
proposed terms from NetApp and the value of the current NetApp
proposal. Mr. Slootman reviewed for the Data Domain board
of directors the call he received from a director of EMC asking
whether Mr. Slootman would be available to meet with the
Chief Executive Officer of EMC. The Data Domain board of
directors engaged in an extensive discussion regarding the
NetApp offer and the whether to call other companies, including
competitors, that could be candidates for a strategic
transaction prior to signing a definitive merger agreement with
NetApp. The Data Domain board of directors expressed further
concerns regarding the high risk of potential harm to Data
Domains business relating to any uncertainty perceived by
its current or future customers should they learn of discussions
regarding a business combination involving Data Domain prior to
the announcement of a definitive agreement and the ability of
Data Domains competition to take advantage of any such
perceived uncertainty. The Data Domain board of directors
further evaluated the heightened risk of these harms to Data
Domains business if any of Data Domains competitors
were contacted regarding a potential strategic transaction.
Representatives of Fenwick & West then discussed the
fiduciary duties of the Data Domain board of directors and the
various processes the Data Domain board of directors might
adopt. The Data Domain board of directors was concerned that
initiating a market check at this time could jeopardize securing
a firm agreement from NetApp and could disrupt Data
Domains relationships with its current and future
customers during the process. The Data Domain board of directors
determined that Data Domain should move forward with the
potential business combination with NetApp without contacting
other companies that might be candidates for a strategic
transaction with Data Domain, but that the Data Domain board of
directors would continue to evaluate this strategy and consider
the matter further based upon the progress and terms of the
potential business combination with NetApp.
On May 7, 2009, with the authorization of the Data Domain
board of directors, Mr. Bhusri called Mr. Warmenhoven
to inform him of the conversation between the EMC board member
and Mr. Slootman earlier that day.
On May 8, 2009, Wilson Sonsini delivered an initial draft
of the merger agreement to Data Domain and Fenwick &
West. Also on May 8, 2009, Fenwick & West granted
access to an online data room containing Data Domain due
diligence materials to representatives of NetApp, Wilson Sonsini
and Goldman Sachs.
On May 8, 2009, the Chief Executive Officer of EMC
contacted Mr. Slootman via email to request a meeting the
next time that the Chief Executive Officer was in the
San Francisco Bay Area and suggested proposed dates.
Mr. Slootman agreed via email to such dates, resulting in a
meeting being scheduled on May 27, 2009.
On May 9, 2009, Messrs, Scarpelli and Slootman and Robert
Specker, Vice President, In-house Counsel to Data Domain
provided financial and business due diligence on Data Domain to
representatives of NetApp and Goldman Sachs.
Between May 9 and May 20, 2009, Messrs. Warmenhoven,
Georgens and Gomo, other executive officers of NetApp, and other
employees of NetApp met numerous times with Messrs. Bhusri,
Slootman, Scarpelli and Specker, other executive officers and
employees of Data Domain to discuss various aspects of the
potential business combination. During this period, NetApp and
its advisors reviewed due diligence materials relating to Data
Domain made available to NetApp in an online data room,
requested and reviewed additional materials relating to Data
Domain and engaged in due diligence discussions with their
counterparts.
On May 11, 2009, the Data Domain board of directors met to
further discuss, among other matters, the potential business
combination with NetApp. Mr. Slootman informed the Data
Domain board of directors that the Chief Executive Officer of
EMC had contacted him to schedule a meeting and, based upon the
availability of the Chief Executive Officer of EMC, the meeting
had been scheduled for May 27, 2009. A representative of
Qatalyst reviewed a discussion with Mr. Warmenhoven in
which Mr. Warmenhoven had reiterated NetApps position
that NetApp would not engage in a bidding contest if additional
parties emerged seeking to acquire Data Domain. Representatives
of Fenwick & West reviewed key terms of the initial
draft of the merger agreement, including the omission of the
ability of Data Domain to accept such a superior proposal and
terminate the merger agreement with NetApp and the Data Domain
board of directors ability to change its recommendation in
favor of the proposed
31
business combination with NetApp for any reason consistent with
its fiduciary duties and NetApps initial request of a
termination fee of 5.00% of the transaction value, and then
discussed the fiduciary duties of the Data Domain board of
directors and the various processes the Data Domain board of
directors might adopt. The Data Domain board of directors and
its advisors determined that in the negotiations with NetApp,
Data Domain would insist on a process that would permit a
superior proposal from a third party to surface after the
signing of the merger agreement with NetApp and for the Data
Domain board of directors to consider and accept such a superior
proposal and terminate the merger agreement with NetApp, the
Data Domain board of directors ability to change its
recommendation in favor of the proposed business combination
with NetApp for any reason consistent with its fiduciary duties
and an amount of the termination fee that would not be
preclusive of a superior proposal. The Data Domain board of
directors reaffirmed the priority of its objectives of retaining
the compelling valuation of the proposed business combination
with NetApp, obtaining deal certainty with respect to the
proposed business combination with NetApp and not exposing Data
Domains business and customers to uncertainty and risk.
The Data Domain board of directors and its advisors discussed
the fact that NetApps board of directors would be meeting
on May 13, 2009, and that it would be important to assess
NetApps continued resolve to pursue a deal with Data
Domain before deciding whether to taking any action relative to
soliciting the interest of other parties with respect to a
strategic transaction with Data Domain. In the interim, the Data
Domain board of directors determined that Data Domain should
move forward with the due diligence and other aspects of the
potential business combination with NetApp.
On May 12, 2009, Fenwick & West delivered
proposed revisions to the draft merger agreement to NetApp and
Wilson Sonsini. Between May 12 and May 20, 2009, in
addition to continuing their due diligence investigations of
each other, NetApp and Data Domain, along with their respective
legal and financial advisors, negotiated the terms of the merger
agreement.
On May 12 and 13, 2009, Messrs. Warmenhoven, Georgens, Gomo
and Ahn, other employees of NetApp and representatives of
Goldman Sachs met with Messrs. Slootman, Scarpelli and
Specker, other employees of Data Domain and representatives of
Qatalyst to discuss specific functional areas of diligence with
respect to Data Domain and the potential business combination
between NetApp and Data Domain, including financial, sales and
marketing, human resources, services, product, supply chain and
manufacturing, information technologies and facilities, and
legal and intellectual property.
On May 13, 2009, the Data Domain board of directors held a
meeting at which it discussed with representatives of Qatalyst
the current financial terms of the transaction, the significant
premiums the proposed business combination from NetApp provided
and the likelihood that another party would offer more value to
the Data Domain stockholders. The Data Domain board of directors
engaged in further extensive discussions regarding the NetApp
offer. The Data Domain board of directors reviewed the value of
the NetApp offer, the significant premiums implied by the offer,
the current economic conditions and stock market volatility. The
Data Domain board of directors confirmed the desire to avoid the
downside risk of further economic and stock market uncertainties
by securing the attractive deal value reflected in the proposed
business combination with NetApp, while obtaining protection of
this deal value with the cash component of the offer and the
collar around the stock portion of the consideration.
Representatives of Fenwick & West discussed key terms
of the merger agreement and the fiduciary duties of the Data
Domain board of directors. The Data Domain board of directors
discussed with representatives of Fenwick & West the legal
issues surrounding its decision of whether to contact other
companies, including competitors, that could be candidates for a
strategic transaction with Data Domain prior to signing a
definitive merger agreement with NetApp in light of the
applicable merger agreement terms proposed by NetApp. The Data
Domain board of directors expressed further concerns regarding
the potential harm to Data Domains business relating to
any uncertainty perceived by its current or future customers
should they learn of discussions regarding a business
combination involving Data Domain prior to the announcement of a
definitive agreement and the ability of Data Domains
competition to take advantage of any such perceived uncertainty.
The Data Domain board of directors acknowledged the heightened
risk of these harms to Data Domains business if any of
Data Domains competitors were contacted regarding a
potential strategic transaction. The Data Domain board of
directors was concerned that initiating a market check at this
time could jeopardize securing the proposed business combination
with NetApp. The Data Domain board of directors also expressed
concerns regarding additional delay and uncertainty associated
with soliciting the interest of other parties with respect to a
strategic transaction with Data Domain. The Data Domain board of
directors determined that Data Domain should move forward with
the potential
32
business combination with NetApp without contacting other
companies and reaffirmed its commitment to insisting on merger
agreement terms that would not unduly preclude the possibility
of Data Domain receiving and implementing a superior proposal
after the signing of a merger agreement with NetApp.
On May 13, 2009, the NetApp board of directors held a
meeting to discuss the progress of the potential acquisition of
Data Domain. Members of NetApps management team were
present to update the board of directors on work completed to
date, initial findings from the due diligence process and next
steps. The board of directors reviewed with management the
preliminary terms of the potential transaction and discussed at
length the stand-alone prospects of the potential transaction as
well as expected net synergies. Following such discussion, the
members of the board of directors authorized management to
continue with its diligence review and discussions with Data
Domain regarding a potential transaction.
On May 14, 2009, Messrs. Warmenhoven, Georgens, Gomo
and Ahn, other employees of NetApp and representatives of
Goldman Sachs met with Messrs. Bhusri, Slootman, Scarpelli
and Specker, and representatives of Qatalyst to discuss due
diligence of NetApp with respect to the potential business
combination between NetApp and Data Domain. Between May 14 and
May 19, 2009, representatives of NetApp and its advisors
met with representatives of Data Domain and its advisors to
engage in further due diligence discussions regarding the
potential business combination between NetApp and Data Domain.
On May 14, 2009, Messrs. Bhusri and Warmenhoven met to
discuss the terms of the proposed merger agreement.
Mr. Bhusri indicated that, among other items, the Data
Domain board of directors considered it important that the
merger agreement allow for a process by which other parties
could submit offers for alternate strategic transactions after
the signing of a definitive merger agreement and that the Data
Domain board of directors maintain the ability to consider such
offers presented to it after the signing of a merger agreement
with NetApp consistent with its fiduciary duties. Specifically,
the Data Domain board of directors insisted on the ability to
change its recommendation in favor of the proposed business
combination with NetApp for any reason consistent with its
fiduciary duties, a right to terminate the merger agreement
after receipt of an alternative offer with respect to a
strategic transaction that it determines to be a superior
proposal and that the termination fee proposed by NetApp be
reduced. Mr. Warmenhoven also mentioned to Mr. Bhusri
that NetApp was currently conducting a search for a new member
of its board of directors of Directors and suggested that
Mr. Bhusri consider participating in the search process.
Both parties agreed that no determinations would be made with
respect to Mr. Bhusris consideration for a position
on the NetApp board of directors until after completion of the
business combination between Data Domain and NetApp. On the same
day, representatives of Qatalyst met with Mr. Warmenhoven
to underscore the views that Mr. Bhusri had communicated
regarding the deal protection terms of the merger agreement.
Also on May 14, 2009, Wilson Sonsini delivered an initial
draft of the form of voting agreement to Fenwick &
West.
On May 16, 2009, the Data Domain board of directors met to
further discuss the potential business combination with NetApp.
Representatives of Qatalyst reviewed due diligence that had been
conducted on NetApp with respect to, among other matters,
NetApps recent financial results and outlook.
Representatives of Fenwick & West then led a
discussion regarding the voting agreements that were requested
from officers, directors and associated funds and the status of
the previous days negotiations on key terms of the merger
agreement. Representatives of Fenwick & West informed
the Data Domain board of directors that NetApp agreed to include
a process that would permit a superior proposal from a third
party to surface after the signing of the merger agreement with
NetApp and for the Data Domain board of directors to consider
and accept such a superior proposal and terminate the merger
agreement with NetApp and had proposed a termination fee of
4.50% of the transaction value, and the impact of the outcome of
these negotiations on the Data Domain board of directors
fiduciary duties. The Data Domain board of directors discussed
the fact that NetApp still appeared to be committed to the
transaction. The Data Domain board of directors reaffirmed its
commitment to the need for a provision of the merger agreement
that provided for the Data Domain board of directors
ability to change its recommendation in favor of the proposed
business combination with NetApp for any reason consistent with
its fiduciary duties and agreeing to an amount of the
termination fee that would not be preclusive of a superior
proposal. At the conclusion of this meeting, the Data Domain
board of directors reiterated its commitment to continue
negotiating the potential business combination with NetApp.
33
On May 17, 2009, Fenwick & West delivered
proposed revisions to the draft form of voting agreement to
Wilson Sonsini. Between May 18 and May 20, 2009, NetApp,
Data Domain and certain parties that were asked to sign the
voting agreements, along with their respective legal advisors,
negotiated the terms of the form of voting agreement.
On May 16 and 17, 2009, Mr. Slootman exchanged emails with
Mr. Georgens regarding whether NetApp would be providing
offer letters to any Data Domain employees prior to the signing
of a merger agreement. No such offer letters were provided to
any Data Domain employees by NetApp prior to the signing of the
merger agreement.
On May 18, 2009, Messrs. Schneider and Warmenhoven,
James Lau, Co-Founder, Chief Strategy Officer and Executive Vice
President of NetApp and David Hitz, Co-Founder and Executive
Vice President of NetApp, met to get acquainted and discuss
potential synergies to be derived from a business combination
between NetApp and Data Domain.
On May 18, 2009, the Data Domain board of directors held a
meeting to further discuss the potential business combination
with NetApp. At this meeting, Mr. Bhusri and
representatives of Fenwick & West reviewed for the
Data Domain board of directors the results of the negotiations
that had taken place earlier that day between Mr. Slootman,
representatives of Fenwick & West, Mr. Georgens,
in-house attorneys for NetApp and representatives of Wilson
Sonsini. Specifically, they noted that as a result of the
negotiations the merger agreement would now provide for the Data
Domain board of directors ability to change its
recommendation in favor of the proposed business combination
with NetApp for any reason consistent with its fiduciary duties,
a right to terminate the merger agreement after receipt of an
alternative offer with respect to a strategic transaction that
the Data Domain board of directors determines to be a superior
proposal and the amount of the termination fee had been reduced
to 3.25% of the transaction value. Representatives of Qatalyst
reviewed the stock and cash components of the consideration to
be received by the Data Domain stockholders proposed by NetApp,
and other financial terms of the proposed merger. At the
conclusion of this meeting, the Data Domain board of directors
reiterated its commitment to finalize the terms of the potential
business combination with NetApp.
On May 19, 2009, several conversations occurred among
representatives of Qatalyst and Goldman Sachs and
Mr. Bhusri and Mr. Georgens to discuss the exchange
ratio, collar mechanics and final mix of consideration. As a
result of these meetings and conference calls, the parties
agreed to use the closing stock price of NetApp common stock on
May 19, 2009 of $18.07 in order to calculate the stock
exchange ratio for the basis for the 10% symmetrical collar on
the stock portion of the consideration that will provide
adjustments to maintain the $25 per share merger consideration
for variations in NetApps stock price of up to 10% in
either direction between signing and closing of the merger,
thereby providing downside protection for Data Domain
stockholders if NetApps stock declines by up to 10% while
maintaining the upside potential if NetApps stock
increases in value by more than 10%. The parties also agreed
that the cash portion of the merger consideration would be
increased from $11.00 to $11.45 and the stock portion of the
merger consideration would be decreased from $14.00 to $13.55.
On May 19, 2009, the NetApp board of directors held a
meeting to further discuss the potential business combination
with Data Domain. Representatives of Wilson Sonsini reviewed the
board of directors fiduciary duty obligations in the
context of the potential acquisition, and the board of directors
took note of the significant legal and financial due diligence
that had been conducted over the past several weeks, including
the analyses and various detailed models prepared by Goldman
Sachs. Next, the board of directors reviewed the key terms of
the merger agreement and engaged in extensive discussions in
this regard. Representatives of Goldman Sachs then provided a
summary of the potential transaction, presented various detailed
financial analyses, and provided a review of its fairness
opinion, which concluded that the merger consideration was fair
to NetApp from a financial point of view. The members of the
board of directors made inquiry of management and its advisors
in this regard, and further discussion then ensured. At the
conclusion of the meeting, the board of directors unanimously
approved the acquisition of Data Domain, the merger agreement
and related matters.
On May 20, 2009, the Data Domain board of directors held a
meeting at which the proposed business combination with NetApp
was further discussed and considered for final approval. At this
meeting, Mr. Bhusri updated the Data Domain board of
directors on the current status of negotiations with NetApp.
Representatives of Fenwick & West reviewed in detail
with the Data Domain board of directors the outcome of further
negotiations and the terms of the merger agreement and related
agreements, as well as the fiduciary duties of the Data Domain
board
34
of directors. Mr. Slootman reviewed an analysis of
strengths, weaknesses, opportunities and challenges of Data
Domain remaining as a stand alone company. Representatives of
Qatalyst presented to the Data Domain board of directors its
financial analysis of the proposed transaction and delivered to
the Data Domain board of directors its oral opinion,
subsequently confirmed in writing as of May 20, 2009, that,
as of that date the consideration to be received by holders of
shares of Data Domain common stock, other than affiliates who
had executed voting agreements, pursuant to the original merger
agreement, was fair, from a financial point of view, to such
holders. The full text of the written opinion of Qatalyst, dated
May 20, 2009, which sets forth, among other things, the
assumptions made, procedures followed, matters considered and
limitations and qualifications of the review undertaken by
Qatalyst in rendering its opinion, is attached hereto as
Appendix D. Following the presentations, and after further
review and discussion, the Data Domain board of directors
unanimously voted to approve the merger, the merger agreement
and related matters and resolved to recommend that Data Domain
stockholders adopt the merger agreement, which was subsequently
filed with the SEC as an exhibit to Data Domains Current
Report on Form
8-K filed on
May 21, 2009.
Following the adjournment of the meeting of the Data Domain
board of directors on May 20, 2009, the parties signed the
merger agreement. The signing of the merger agreement was
publicly announced later that day, following the closing of
trading on the NASDAQ Global Select Market.
On May 20, 2009, after the announcement of the signing of
the merger agreement, Mr. Slootman contacted the Chief
Executive Officer of EMC to cancel the meeting previously
scheduled for May 27, 2009.
Additional
Background to the Merger
On various occasions after the announcement of the signing of
the merger agreement on May 20, 2009 and through
June 1, 2009, individual representatives of EMC and members
of the board of directors of EMC contacted individual
representatives of Data Domain and members of the Data Domain
board of directors regarding an alternative acquisition proposal
from EMC. None of the representatives of Data Domain or members
of the Data Domain board of directors responded to such
inquiries other than to inform the respective representatives of
EMC and members of the board of directors of EMC that they could
not discuss the matter since they were bound by the
non-solicitation provisions of the merger agreement.
On June 1, 2009, EMC announced an unsolicited $30.00 per
share all cash tender offer to the stockholders of Data Domain.
EMC sent a letter to Mr. Slootman that same day regarding
the cash tender offer to the stockholders of Data Domain and
enclosed a proposed form of merger agreement.
On June 1, 2009, the Data Domain board of directors held a
meeting at which EMCs announcement of a cash tender offer
to the stockholders of Data Domain and the proposed business
combination with NetApp were discussed. Representatives of
Qatalyst and Fenwick & West reviewed the terms of
EMCs cash tender offer. After further review and
discussion, the Data Domain board of directors determined (after
consultation with Qatalyst and Fenwick & West) that
EMCs announcement of a $30.00 per share all cash tender
offer to the stockholders of Data Domain was reasonably likely
to lead to a Superior Proposal (as that term is defined in the
merger agreement). In accordance with the merger agreement, Data
Domain then informed NetApp of this determination and of Data
Domains intent to contact EMC and offer to enter into
discussions if EMC entered into a nondisclosure and standstill
agreement as required by the merger agreement.
On June 2, 2009, EMC formally commenced a $30.00 per share
all cash tender offer to the stockholders of Data Domain. Unless
extended by EMC, the tender offer expires at midnight, New York
City time, on Monday June 29, 2009.
On June 2, 2009, Mr. Warmenhoven called
Mr. Bhusri to inform him that NetApp would be willing to
increase the aggregate consideration in the proposed business
combination with Data Domain from $25.00 to $30.00, and
maintaining the 10% symmetrical collar around the value of the
stock portion of the consideration.
On June 2, 2009, the Data Domain board of directors held a
meeting at which both EMCs cash tender offer to the
stockholders of Data Domain and the proposed business
combination with NetApp were discussed. At this meeting,
Mr. Bhusri updated the Data Domain board of directors on
the revised proposal from NetApp to increase the aggregate
consideration from $25.00 to $30.00. Representatives of Qatalyst
and Fenwick & West reviewed the
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terms of EMCs cash tender offer to the stockholders of
Data Domain. In addition, the Data Domain board of directors
discussed potential additional terms it might seek in connection
with the revised oral proposal from NetApp and determined to
review and seek to negotiate the terms of the revised proposal
from NetApp once they were received.
On June 2, 2009, a representative of Qatalyst called
Mr. Gomo to discuss the financial terms of NetApps
revised proposal regarding the proposed business combination
involving Data Domain and NetApp and proposed additional terms
that would enhance the proposal from Data Domains point of
view.
Late in the evening on June 2, 2009, Mr. Georgens
delivered a letter to Messrs. Bhusri and Slootman
containing the financial terms of the revised proposal regarding
the proposed business combination involving Data Domain and
NetApp, which provided for $30.00 per share in aggregate
consideration, consisting of $16.45 per share in cash and $13.55
per share in NetApp stock, with a 10% symmetrical collar around
the value of the stock portion of the consideration, based upon
the closing stock price of NetApp common stock on June 2, 2009
of $19.34. At this time, Mr. Georgens also delivered to
Messrs. Bhusri and Slootman an initial draft of the
amendment to the original merger agreement to effect this
revised proposal.
On June 2, 2009, the NetApp board of directors held a
meeting to discuss EMCs announcement of an all cash tender
offer and the business combination with Data Domain.
Representatives of Wilson Sonsini and Goldman Sachs reviewed the
key terms of EMCs cash tender offer to the stockholders of
Data Domain. Next, representatives of Goldman Sachs provided a
summary of potential responses and presented various detailed
financial analyses associated with these responses. Then, the
NetApp board of directors reviewed the key terms of a potential
response and engaged in extensive discussion in this regard.
Representatives of Goldman Sachs have provided a fairness
opinion to the NetApp board of directors, which concluded that
the revised proposal which provided for $30.00 per share in
aggregate consideration, consisting of $16.45 per share in cash
and $13.55 per share in NetApp stock, with a 10% symmetrical
collar around the value of the stock portion of the
consideration was fair to NetApp from a financial point of view.
The NetApp board of directors unanimously approved the terms of
NetApps revised proposal and approved the amendment to the
original merger agreement and related matters.
Following receipt of the revised proposal from NetApp,
representatives of Qatalyst and Goldman Sachs discussed the
financial terms of NetApps revised proposal regarding the
proposed business combination involving Data Domain and NetApp
and continued to request additional terms that would enhance the
proposal from Data Domains point of view.
On the morning of June 3, 2009, the Data Domain board of
directors held a meeting at which both EMCs cash tender
offer to the stockholders of Data Domain and the revised
financial terms of the proposed business combination with NetApp
were discussed. At this meeting, representatives of
Fenwick & West and Qatalyst updated the Data Domain
board of directors on the terms of the revised proposal
regarding the proposed business combination with NetApp and the
related amendment to the merger agreement, including the fact
that the stock portion of the merger consideration has a 10%
symmetrical collar around the closing stock price of NetApp
common stock on June 2, 2009 (the last trading day prior to
the Data Domain board of directors approval of the
amendment to the merger agreement) of $19.34 that will provide
adjustments to maintain the $30.00 per share merger
consideration for variations in NetApps stock price of up
to 10% in either direction between signing and closing of the
proposed business combination involving Data Domain and NetApp,
thereby providing downside protection for the Data Domain
stockholders if the NetApp common stock price declines by up to
10% while maintaining a portion of the upside potential if the
NetApp common stock price increases in value by more than 10%.
After further review and discussion, the Data Domain board of
directors unanimously determined that the revised terms of
NetApps proposal were advisable, fair to and in the best
interests of Data Domains stockholders and voted to
approve the amendment to the original merger agreement, which
was filed with the SEC as an exhibit to Data Domains
Current Report on
Form 8-K
filed later that day. The Data Domain board of directors further
considered and discussed EMCs cash tender offer to the
stockholders of Data Domain and, after consultation with
Qatalyst and Fenwick & West, the Data Domain board of
directors reaffirmed its determination that EMCs $30.00
per share all cash tender offer to the stockholders of Data
Domain was reasonably likely to lead to a Superior Proposal (as
that term is defined in the merger agreement). Later that day,
the parties executed the amendment to the
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merger agreement and Data Domain issued a press release
announcing the execution of the amendment to the merger
agreement.
On June 3, 2009, a representative of Fenwick &
West delivered to a representative of Skadden, Arps, Slate,
Meagher & Flom LLP, legal counsel to EMC, a form of
mutual non-disclosure agreement that contained a
standstill provision with respect to shares of Data
Domain common stock, which, under the original merger agreement,
is a pre-condition to Data Domains discussions or
negotiations with a third party, such as EMC, with respect to a
potential Superior Proposal (as that term is defined in the
merger agreement). Later in the day, EMC issued a press release
reaffirming its $30.00 per share tender offer for all Data
Domain shares. As of June 16, 2009, EMC had not executed a
non-disclosure agreement that contains a standstill
provision with Data Domain and therefore Data Domain is still
prohibited from discussing or negotiating the terms of
EMCs cash tender offer with EMC by the terms of the merger
agreement with NetApp.
On June 4, 2009, NetApp and Data Domain filed the proxy
statement/prospectus with the SEC.
In addition, the Data Domain board of directors held meetings on
June 4, 5, 8, 11, 14, 17 and 22 and July 1, 2009, to
discuss the proposed business combination with NetApp,
EMCs cash tender offer and related matters. The Data
Domain board of directors consulted with representatives of
Fenwick & West and Qatalyst during the discussions at each
of these meetings.
On June 12, 2009, the Police & Fire Retirement System
of the City of Detroit, or PFRS Detroit, filed a lawsuit in
Delaware Chancery Court against the Data Domain board of
directors and NetApp alleging that the Data Domain board of
directors breached its fiduciary duties in connection with the
proposed business combination with NetApp and that NetApp aided
and abetted such breach. PFRS Detroit seeks unspecified damages,
preliminary and permanent injunctive relief against the proposed
business combination with NetApp, and costs and attorneys
fees.
On June 15, 2009, Data Domain filed a Schedule 14D-9 with
the SEC in which the Data Domain board of directors recommended
that the Data Domain stockholders reject EMCs cash tender
offer and in which the Data Domain board of directors reaffirmed
its unanimous recommendation that the Data Domain stockholders
vote to approve the adoption of the merger agreement with NetApp.
On June 17, 2009, NetApp and Data Domain filed an amendment
to the proxy statement/prospectus with the SEC in which the Data
Domain board of directors recommended that the Data Domain
stockholders reject EMCs cash tender offer and in which
the Data Domain board of directors reaffirmed its unanimous
recommendation that the Data Domain stockholders vote to approve
the adoption of the merger agreement with NetApp.
On June 18, 2009, Data Domain filed an amendment the
Schedule 14D-9
with the SEC in which the Data Domain board of directors
recommended that the Data Domain stockholders reject EMCs
cash tender offer and in which the Data Domain board of
directors reaffirmed its unanimous recommendation that the Data
Domain stockholders vote to approve the adoption of the merger
agreement with NetApp.
On June 19, 2009, David Kluger filed a lawsuit in the
Superior Court of the State of California, County of
Santa Clara, against the Data Domain board of directors,
Data Domain, NetApp and two NetApp subsidiaries alleging that
the Data Domain board of directors breached its fiduciary duties
in connection with the potential business combination with
NetApp and that Data Domain and NetApp aided and abetted such
breach. Mr. Kluger seeks, on behalf of an alleged class of
the Data Domain stockholders, unspecified damages and other
monetary relief, preliminary and permanent injunctive relief
against the potential business combination with NetApp, and
costs and attorneys fees.
On June 26, 2009, the Delaware Chancery Court granted PFRS
Detroits motion for expedited proceedings, scheduling a
hearing on PFRS Detroits motion for a preliminary
injunction of the proposed business combination with NetApp for
10:00 a.m. on August 13, 2009.
Also on June 26, 2009, EMC issued a press release
announcing that it had extended the expiration date of
EMCs cash tender offer until 12:00 midnight, New York
City time, on July 10, 2009.
On July 2, 2009, the Federal Trade Commission granted early
termination of the HSR waiting period.
37
Data
Domains Reasons for the Merger; Recommendation of the Data
Domain Board of Directors
In the course of reaching its decision to approve the merger,
adopt the merger agreement and recommend that Data Domain
stockholders vote FOR the adoption of the merger
agreement, the Data Domain board of directors consulted with
senior management, legal counsel and its financial advisor. The
Data Domain board of directors also consulted with outside legal
counsel regarding its fiduciary duties, legal due diligence
matters and the terms of the merger agreement and related
agreements. The following discussion includes all material
reasons and factors considered by the Data Domain board of
directors in making its recommendation, but is not, and is not
intended to be, exhaustive:
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Merger Consideration. The Data Domain board of
directors considered the following with respect to the merger
consideration to be received by the Data Domain stockholders:
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that our stockholders will receive merger consideration of
$30.00 per share consisting of $16.45 per share in cash and
$13.55 per share in NetApp stock upon the completion of the
merger (assuming NetApps common stock price remains within
the 10% symmetrical collar discussed below), as compared to the
uncertain future long-term value to our stockholders that might
be realized if we remained independent;
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the fact that the cash portion of the merger consideration will
provide liquidity and certainty of value to our stockholders;
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the fact that the stock portion of the merger consideration has
a 10% symmetrical collar around the closing stock price of
NetApp common stock on June 2, 2009 (the last trading day
prior to the Data Domain board of directors approval of
the Merger) of $19.34 that will provide adjustments to maintain
the $30.00 per share merger consideration for variations in
NetApps stock price of up to 10% in either direction
between signing and closing of the merger, thereby providing
downside protection for Data Domain stockholders if
NetApps stock declines by up to 10% while maintaining a
portion of the upside potential if NetApps stock increases
in value by more than 10%;
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the fact that the $30.00 per share value of the consideration
for Data Domain common stock in the merger (assuming
NetApps stock price remains within the 10% collar
discussed above) represents significant premiums to our
stockholders of approximately 115% premium over the average
closing price of our common stock on The NASDAQ Global Select
Market over the 60 trading day period ending on May 19,
2009 (the last trading day prior to the Data Domain board of
directors approval of the merger) and a 72% premium over
the closing price of our common stock on The NASDAQ Global
Select Market on May 19, 2009 (the last trading day prior
to the Data Domain board of directors approval of the
merger) and the levels of those premiums as compared to the
premiums in other comparable merger transactions; and
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the then current financial market conditions and the recent and
historical market prices of Data Domain common stock, including
the market price performance of Data Domain common stock
relative to those of other industry participants. See
Comparative Market Prices and Dividends for
information about our common stock prices over the past two
years.
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Synergy between NetApp and Data Domain. The
Data Domain board of directors considered NetApps
prospects following the closing of the merger. NetApps
sales and distribution channels and international reach to offer
the Data Domain product line to more customers, accelerating
growth and market adoption. The Data Domain board of directors
believed that the combination of the two companies would
increase the value of NetApp and thereby the value of the NetApp
common stock that Data Domain stockholders would receive in the
merger.
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Review of Prospects in Remaining
Independent. The Data Domain board of directors
considered the possibility of continuing to operate Data Domain
as an independent public company. The Data Domain board of
directors also considered the perceived risks and uncertainties
of remaining an independent public company, the range of
possible values to its stockholders arising from this
alternative and the timing and uncertainty of successfully
accomplishing meaningful growth under Data Domains
strategic plan. The Data
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Domain board of directors assessment was that pursuit of a
growth strategy as an independent company was not reasonably
likely to create greater value for the Data Domain stockholders
than the merger, after discounting for the elapse of time and
considering the factors reviewed below. In considering the
alternative of pursuing growth as an independent company, the
Data Domain board of directors considered the following factors:
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increased competition, especially from competitors with greater
name recognition, more resources, financial and otherwise,
broader product offerings and more vertically integrated product
offerings than Data Domain;
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Data Domains slowing growth rates and the challenge of
expanding beyond its core deduplication product offerings in the
context of enterprise customers and large data centers
increasing requests for a broader suite of data storage products
and services;
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the increasing preference of enterprises to consolidate vendors
and use one vendor for all of its data center needs instead of
using multiple vendors that offer best-of-breed products
independently;
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customer concern regarding Data Domains relatively small
size compared to its competitors due to the critical nature of
its storage products in customer data centers; and
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the time and risk involved in integrating new management members
and key employees if Data Domain were successful in recruiting
new management and key employees.
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Economic Conditions. The Data Domain board of
directors considered the fact that the United States economy, in
general, appears to be in a downturn. This turmoil and
uncertainty could adversely affect the demand for Data
Domains products and services. In addition, because Data
Domains sales are primarily to corporate customers, Data
Domains business depends on general economic and business
conditions.
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Opinion of Qatalyst Partners LP. The Data
Domain board of directors considered the financial presentation
of Qatalyst and the opinion of Qatalyst, dated May 20,
2009, that, as of the date of the opinion, and subject to and
based on the assumptions made, procedures followed, matters
considered and limitations and qualifications of the review
undertaken in such opinion, the merger consideration to be
received by holders of shares of Data Domain common stock, other
than affiliates who have executed voting agreements, pursuant to
the original merger agreement was fair, from a financial point
of view, to such holders, as more fully described in the section
entitled Data Domain Proposal 1 The
Merger Opinion of Qatalyst Partners LP on
page 41. Qatalysts opinion was based on the terms of
the original merger agreement, and the Data Domain board of
directors has not requested that Qatalyst provide an additional
or revised opinion reflecting the terms of the merger agreement,
as amended on June 3, 2009. Qatalysts opinion was
rendered to the Data Domain board of directors prior to the
announcement of EMCs tender offer. Thus, the impact of
EMCs offer on Qatalysts view, as of the date of the
amendment to the original merger agreement, as to the fairness,
from a financial point of view, of the merger consideration to
be received by the holders of shares of Data Domain common stock
pursuant to the amendment to the original merger agreement
cannot be presumed, and such view could be different than its
view, as of the date of the original merger agreement, as to the
fairness, from a financial point of view, of the original merger
consideration to be received by the holders of shares of Data
Domain common stock pursuant to the original merger agreement.
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Likelihood and Timing of Closing. The Data
Domain board of directors considered the likelihood that the
proposed acquisition would be completed on a timely basis, in
light of:
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the customary closing conditions included in the merger
agreement;
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the fact that the merger does not need to be approved by foreign
anti-trust authorities;
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the available cash resources of NetApp to pay the cash portion
of the merger consideration without the need for outside
financing and the representation that NetApp made in the merger
agreement to that effect; and
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the fact that the merger does not need to be approved by
NetApps stockholders and the representation that NetApp
made in the merger agreement to that effect.
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Terms of the Merger Agreement. The Data Domain
board of directors considered the terms and conditions of the
merger agreement and the course of negotiations thereof,
including:
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the limited conditions to NetApps obligation to complete
the merger, including the absence of a financing condition or
vote of NetApps stockholders and limited ability of NetApp
to terminate the merger agreement under clearly defined
circumstances;
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the structure of the transaction as a merger, requiring approval
by Data Domains stockholders, which would result in
detailed public disclosure and a period of time prior to
completion of the merger during which an unsolicited superior
proposal, if any, could be brought forth;
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the ability of the Data Domain board of directors, under certain
circumstances, to furnish information to and conduct
negotiations with a third party, if the Data Domain board of
directors determines in good faith (after consultation with its
financial advisor and its outside legal counsel) that
(A) the third party has made an acquisition proposal that
either constitutes or is reasonably likely to lead to a superior
proposal and (B) the failure to take such action is
reasonably likely to result in a breach of its fiduciary duties
to the Data Domain stockholders;
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the ability of the Data Domain board of directors, under certain
circumstances, to change its recommendation that the Data Domain
stockholders adopt the merger agreement if the Data Domain board
of directors determines in good faith (after consultation with
its outside counsel) that the failure to change its
recommendation is reasonably likely to be a breach of its
fiduciary duties to the Data Domain stockholders;
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the ability of Data Domain to terminate the merger agreement in
order to accept a superior proposal, subject to certain
conditions and payment to NetApp of $57.0 million,
representing approximately 2.7% of the total equity value of the
proposed transaction at the time of the execution of the merger
agreement;
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the belief of the Data Domain board of directors that the
termination fee is within the range of reasonable termination
fees provided for in comparable transactions and is not a
significant deterrent to possible competing offers; and
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that Data Domains stockholders will be entitled to
appraisal rights under Delaware law.
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NetApps Reputation. The Data Domain
board of directors considered the business reputation of NetApp
and its management and the substantial financial resources of
NetApp, which the Data Domain board of directors believed
supported the conclusion that the merger could be completed
relatively quickly and in an orderly manner.
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In the course of its deliberations, the Data Domain board of
directors also considered a variety of risks and factors
weighing against the merger, including:
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Risks of Announcement and Completion. The Data
Domain board of directors considered:
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the risks and contingencies related to the announcement of the
merger, including our ability to retain key employees and
maintain our relationships with customers, commercial partners
and third parties;
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the conditions to NetApps obligation to complete the
merger and the right of NetApp to terminate the merger agreement
under certain circumstances; and
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the risks and costs to Data Domain if the merger is not
completed, including the diversion of management and employee
attention, potential employee attrition, the potential impact on
our stock price and the effect on our business relationships.
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Limitations on Data Domains
Business. The Data Domain board of directors
considered the potential limitations on Data Domains
pursuit of business opportunities due to pre-closing covenants
in the merger agreement whereby Data Domain agreed that it will
carry on its business in the ordinary course of business
consistent with past practice, and subject to specified
exceptions, will not take certain actions related to the conduct
of its business without the prior written consent of NetApp.
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Absence of Pre-Signing Solicitation. The Data
Domain board of directors considered the absence of contacting
other companies or other effort to solicit interest from other
potential buyers that might be a likely candidates for a
strategic transaction with Data Domain prior to the execution
and delivery of the merger agreement.
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Potential Taxable Transaction. The Data Domain
board of directors considered that the merger agreement allows
for NetApp to increase the cash portion of the merger
consideration in the event that the issuance of additional
shares of its common stock would require NetApp to obtain a vote
of its stockholders to approve the issuance and that a decline
in the value of the NetApp common stock or an increase in the
cash portion could result in the stock portion of the merger
consideration being taxable to the Data Domain stockholders.
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Stockholder Vote. The Data Domain board of
directors considered the requirement that, unless the merger
agreement is earlier terminated by Data Domain as a result of a
receipt of a superior proposal, Data Domain must submit the
merger agreement for adoption by Data Domains stockholders
even if the Data Domain board of directors withdraws its
recommendation of the merger.
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Voting Agreements. The Data Domain board of
directors considered that the directors, executive officers and
affiliated entities holding shares that represent approximately
20.6% of Data Domain outstanding common stock as of May 20,
2009, would be entering into voting agreements to vote in favor
of the merger and that even if the Data Domain board of
directors changed its recommendation to vote against the merger
under circumstances in which Data Domain is not entitled to
terminate the merger agreement, those directors, executive
officers and affiliated entities would still be required to
approve the merger proposal.
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Termination Fee and Other Alternative
Acquirers. The Data Domain board of directors
considered the possibility that the $57.0 million
termination fee payable to NetApp under clearly defined
circumstances might discourage a competing proposal to acquire
Data Domain or reduce the price of any such proposal.
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Interests of Directors and Officers. The Data
Domain board of directors considered the interests that certain
of our directors and executive officers have with respect to the
merger in addition to their interests as Data Domain
stockholders generally, as described in Data Domain
Proposal 1 The Merger Data Domain
Officers and Directors Have Financial Interests in the
Merger on page 47.
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The preceding discussion of the information and factors
considered by the Data Domain board of directors is intended to
be illustrative and not exhaustive. In light of the variety of
factors considered in connection with its evaluation of the
merger and the complexity of these matters, the Data Domain
board of directors did not find it practicable to, and did not,
quantify or otherwise attempt to assign relative weights to the
various factors considered in reaching its determination, and
individual directors may have given different weight to
different factors. In addition, the Data Domain board of
directors did not reach any specific conclusion with respect to
any of the factors or reasons considered. Instead, the Data
Domain board of directors conducted an overall analysis of the
factors and reasons described above and determined that, in the
aggregate, the potential benefits considered outweighed the
potential risks or possible negative consequences of approving
the merger, adopting the merger agreement and recommending that
Data Domain stockholders vote FOR the adoption of
the merger agreement.
Opinion
of Qatalyst Partners LP
Data Domain retained Qatalyst to act as its financial advisor in
connection with a potential transaction involving Data Domain.
Data Domain selected Qatalyst to act as its financial advisor
based on Qatalysts qualifications, expertise, reputation
and knowledge of the business and affairs of Data Domain. As
financial advisor to Data Domain, on May 20, 2009, Qatalyst
rendered to the Data Domain board of directors its written
opinion that, as of such date and based upon and subject to the
various assumptions, limitations and qualifications set forth in
its opinion, the merger consideration to be received by the
holders of shares of Data Domain common stock, other than
affiliates who have executed voting agreements, pursuant to the
original merger agreement was fair, from a financial point of
view, to such holders.
The full text of Qatalysts written opinion, dated
May 20, 2009, to the board of directors of Data Domain is
attached hereto as Appendix D and is incorporated by
reference herein. The opinion sets forth, among other things,
the assumptions made, procedures followed, matters considered
and limitations and
41
qualifications of the review undertaken by Qatalyst in
rendering its opinion. You should read the entire opinion
carefully in its entirety. Qatalysts opinion was provided
to the Data Domain board of directors and addressed only the
fairness, from a financial point of view, of the merger
consideration to be received by the holders of shares of Data
Domain common stock, other than affiliates who have executed
voting agreements, pursuant to the original merger agreement as
of the date of the opinion. It did not address any other aspect
of the transaction and does not constitute a recommendation to
the stockholders of Data Domain as to how to vote or act on any
matter with respect to the merger. The summary of
Qatalysts opinion set forth herein is qualified in its
entirety by reference to the full text of the opinion.
In arriving at its opinion, Qatalyst reviewed the original
merger agreement and certain publicly available financial
statements and other business and financial information of Data
Domain and NetApp. Qatalyst also reviewed certain financial
projections and operating data prepared by the management of
Data Domain (the Data Domain Projections) and by the
management of NetApp (the NetApp Projections) and
reviewed information relating to certain strategic, financial
and operational benefits anticipated from the merger, prepared
by the managements of Data Domain and NetApp, respectively.
Additionally, Qatalyst discussed the past and current operations
and financial condition and the prospects of Data Domain and
NetApp, including information relating to certain strategic,
financial and operational benefits anticipated from the merger,
with senior executives of Data Domain and NetApp. Qatalyst also
reviewed the historical market prices and trading activity for
Data Domain common stock and NetApp common stock and compared
the financial performance of Data Domain and the prices and
trading activity of Data Domain common stock with that of
certain other selected publicly-traded companies and their
securities. In addition, Qatalyst reviewed the financial terms,
to the extent publicly available, of selected acquisition
transactions and performed such other analyses, reviewed such
other information and considered such other factors as it deemed
appropriate.
In arriving at its opinion, Qatalyst assumed and relied upon,
without independent verification, the accuracy and completeness
of the information that was publicly available or supplied or
otherwise made available to, or discussed with, it by Data
Domain and NetApp. With respect to the Data Domain Projections
and the NetApp Projections, including information relating to
certain strategic, financial and operational benefits
anticipated from the merger and other matters covered thereby,
Qatalyst was advised by the management of Data Domain and
NetApp, respectively, and Qatalyst assumed, that they had been
reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of Data
Domain and NetApp, respectively, of the future financial
performance of Data Domain and NetApp, respectively. Qatalyst
assumed that the merger would be completed in accordance with
the terms set forth in the original merger agreement, without
any modification or delay. In addition, Qatalyst assumed that in
connection with the receipt of all the necessary approvals of
the proposed merger, no delays, limitations, conditions or
restrictions would be imposed that would have an adverse effect
on Data Domain, NetApp or the contemplated benefits expected to
be derived in the proposed merger. Qatalyst also assumed that
the merger would qualify as a tax-free reorganization under the
Internal Revenue Code of 1986, as amended. Qatalyst did not make
any independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Data Domain or NetApp,
nor was it furnished with any such evaluation or appraisal. In
addition, Qatalyst relied, without independent verification,
upon the assessments of the managements of Data Domain and
NetApp as to (i) the existing and future technology and
products of Data Domain and NetApp and the risks associated with
such technology and products, (ii) their ability to
integrate the businesses of Data Domain and NetApp and
(iii) their ability to retain key employees of Data Domain
and NetApp. In arriving at its opinion, Qatalyst was not
authorized to solicit, and did not solicit, interest from any
party with respect to an acquisition, business combination or
other extraordinary transaction involving Data Domain.
Qatalysts opinion has been approved by its opinion
committee in accordance with its standard practice.
Qatalysts opinion does not constitute a recommendation to
any holder of shares of Data Domain common stock as to how to
vote with respect to the merger and does not in any manner
address the prices at which Data Domain common stock or NetApp
common stock will trade at any time. Qatalysts opinion was
necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available
to it as of, the date the opinion was delivered. Events
occurring after the date of the opinion may affect
Qatalysts opinion and the assumptions used in preparing
it, and Qatalyst has not assumed any obligation to update,
revise or reaffirm its opinion. Qatalysts opinion did not
address the underlying business decision of Data Domain to
engage in the
42
merger, or the relative merits of the merger as compared to any
strategic alternatives that may have been available to Data
Domain. Qatalysts opinion was limited to the fairness,
from a financial point of view, of the merger consideration to
be received by the holders of shares of Data Domain common
stock, other than affiliates who have executed voting
agreements, pursuant to the original merger agreement and
Qatalyst expressed no opinion with respect to the fairness of
the amount or nature of the compensation to any of Data
Domains officers, directors or employees, or any class of
such persons, relative to such merger consideration.
The following is a summary of the material analyses performed by
Qatalyst in connection with its opinion dated May 20, 2009.
The analyses described below must be considered as a whole;
considering any portion of such analyses and of the factor
considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying
Qatalysts opinion. Except as otherwise noted, for purposes
of its analyses, Qatalyst utilized equity research analyst
projections for both Data Domain and NetApp, or the street
projections, and the Data Domain Projections (which consisted of
two sets of projections, denoted as Management Case 1 and
Management Case 2 herein) for Data Domain.
Illustrative Discounted Cash Flow
Analysis. Qatalyst performed an illustrative
discounted cash flow analysis, which is designed to imply a
value of a company by calculating the net present value of
estimated future cash flows of the company. Qatalyst calculated
ranges of implied equity values per share for Data Domain based
on discounted cash flow analyses utilizing the Data Domain
Projections for the fiscal years 2009 through 2013. Qatalyst
computed the unlevered free cash flows for Data Domain for the
years 2009 through 2013 and calculated the terminal value based
on the year 2013 unlevered free cash flow by applying a range of
perpetual growth rates ranging from 3.0% to 5.0%. These values
were then discounted to present values using cost of equity
ranging from 12.0% to 15.0%. Qatalyst then applied a range of
dilution factors from 5.0% to 10.0% to illustrate the terminal
value dilution to current stockholders due to projected equity
compensation grants by Data Domain. Based on the calculations
set forth above, this analysis implied a range for Data Domain
common stock of approximately $18.70 to $29.22 per share based
on Management Case 1 and approximately $12.96 to $19.43 per
share based on Management Case 2, in each case, net of Data
Domains cash, in each case, including Data Domains
net cash balance.
Selected Company Analysis. Qatalyst performed
a selected company analysis, which attempts to provide an
implied value of a company by comparing it to selected
publicly-traded companies. Qatalyst compared selected financial
information and public markets multiples for Data Domain with
publicly available information and public market multiples for
selected technology ecosystems companies and data management
companies. The companies used in this comparison included those
companies listed below:
Technology Ecosystems Companies:
|
|
|
|
|
Microsoft Corporation
|
|
|
|
International Business Machines Corporation
|
|
|
|
Cisco Systems, Inc.
|
|
|
|
Oracle Corporation
|
|
|
|
Hewlett-Packard Company
|
|
|
|
EMC Corporation
|
|
|
|
Dell Inc.
|
|
|
|
VMware, Inc.
|
Data Management Companies:
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|
|
Symantec Corporation
|
|
|
|
Citrix Systems, Inc.
|
|
|
|
F5 Networks, Inc.
|
43
|
|
|
|
|
Open Text Corporation
|
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|
|
Riverbed Technology, Inc.
|
|
|
|
CommVault Systems, Inc.
|
|
|
|
3Par Inc.
|
|
|
|
Netezza Corporation
|
Based upon equity research analyst estimates for calendar year
2009 and the Data Domain Projections and using the closing
prices as of May 19, 2009 for shares of the selected
companies, Qatalyst calculated the following ratios for each of
these companies:
|
|
|
|
|
the enterprise value divided by the estimated revenue for
calendar year 2009;
|
|
|
|
the enterprise value divided by the estimated revenue for
calendar year 2010;
|
|
|
|
the closing stock price divided by the estimated earnings per
share for calendar year 2009; and
|
|
|
|
the closing stock price divided by the estimated earnings per
share for calendar year 2010.
|
Based on the analysis of the relevant ratios for each of the
selected companies, Qatalyst selected representative ranges of
financial multiples of the selected companies and applied these
ranges of multiples to the relevant Data Domain statistic. Based
on the calculations set forth above, this analysis implied a
range for Data Domain common stock of approximately $11.34 to
$22.43 based on street projections, approximately $12.69 to
$24.24 based on Management Case 1 and approximately $10.25 to
$20.38 based on Management Case 2.
No company included in the selected company analysis is
identical to Data Domain. In evaluating the selected companies,
Qatalyst made judgments and assumptions with regard to industry
performance, general business, economic, market and financial
conditions and other matters. Many of these matters are beyond
the control of Data Domain, such as the impact of competition on
the business of Data Domain and the industry in general,
industry growth and the absence of any material adverse change
in the financial condition and prospects of Data Domain or the
industry or in the financial markets in general. Mathematical
analysis, such as determining the arithmetic mean or median, or
the high or low, is not in itself a meaningful method of using
selected company data.
44
Selected Transaction Analysis. Qatalyst
performed a selected transaction analysis, which is designed to
imply a value of a company based on publicly available financial
terms of selected transactions that share some characteristics
with the merger. Qatalyst compared the multiples paid in
(i) 10 transactions from June 2005 through April 2009
involving public and private companies in the hardware/systems
industry and (ii) 14 transactions from July 2003
through January 2009 involving public companies in the software
industry. These transactions are listed below:
|
|
|
Target
|
|
Acquiror
|
|
Hardware/Systems Companies
|
|
|
Sun Microsystems, Inc.
|
|
Oracle Corporation
|
Foundry Networks, Inc.
|
|
Brocade Communications Systems, Inc.
|
LeftHand Networks
|
|
Hewlett-Packard Company
|
Diligent Technologies
|
|
International Business Machines Corporation
|
XIV
|
|
International Business Machines Corporation
|
EqualLogic, Inc.
|
|
Dell Inc.
|
McDATA Corporation
|
|
Brocade Communications Systems, Inc.
|
Advanced Digital Information Corporation
|
|
Quantum Corporation
|
Maxtor Corporation
|
|
Seagate Technology
|
Storage Technology Corporation
|
|
Sun Microsystems, Inc.
|
|
|
|
Software Companies
|
|
|
Interwoven, Inc.
|
|
Autonomy Corporation plc
|
BladeLogic, Inc.
|
|
BMC Software, Inc.
|
BEA Systems, Inc.
|
|
Oracle Corporation
|
Opsware Inc.
|
|
Hewlett-Packard Company
|
WebEx Communications, Inc.
|
|
Cisco Systems, Inc.
|
Altiris, Inc.
|
|
Symantec Corporation
|
Internet Security Systems, Inc.
|
|
International Business Machines Corporation
|
FileNet Corporation
|
|
International Business Machines Corporation
|
Mercury Interactive Corporation
|
|
Hewlett-Packard Company
|
RSA Security Inc.
|
|
EMC Corporation
|
MicroMuse Inc.
|
|
International Business Machines Corporation
|
Veritas Software Corporation
|
|
Symantec Corporation
|
Documentum, Inc.
|
|
EMC Corporation
|
Legato Systems, Inc.
|
|
EMC Corporation
|
For each of the transactions listed above, Qatalyst calculated
the following ratios:
|
|
|
|
|
the ratio of the enterprise value to the estimated next twelve
months revenue; and
|
|
|
|
the estimated next twelve months price to earnings multiple.
|
Based on the analysis of the relevant metrics for each
transaction noted above, Qatalyst selected representative ranges
of multiples of the transactions and applied these ranges of
multiples to the relevant Data Domain financial statistic. Based
on the calculations set forth above, this analysis implied a
range for Data Domain common stock of approximately $15.96 to
$25.96 based on street projections, approximately $17.50 to
$27.05 based on Management Case 1 and approximately $14.26 to
$25.96 based on Management Case 2.
No company or transaction utilized in the selected transactions
analysis is identical to Data Domain, NetApp or the merger. In
evaluating the selected transactions, Qatalyst made judgments
and assumptions with regard to general business, market and
financial conditions and other matters, many of which are beyond
the control of Data Domain and NetApp, such as the impact of
competition on the business of Data Domain, NetApp or the
industry generally, industry growth and the absence of any
adverse material change in the financial condition of Data
Domain, NetApp or the industry or in the financial markets in
general, which could affect the public trading value of the
companies and the aggregate value of the transactions to which
they are being compared.
Qatalyst also performed and considered various other financial
statistics in connection with its opinion dated May 20,
2009 as set forth below.
Future Trading Analysis. Qatalyst performed an
illustrative analysis of the implied present value of the future
price per share of Data Domain common stock on a stand-alone
basis, which is designed to provide an
45
indication of the present value of a theoretical future value of
a companys equity as a function of its estimated future
earnings and assumed price to future earnings per share
multiple. For this analysis, Qatalyst used the street
projections for calendar year 2010 only and the Data Domain
Projections for Management Case 1 and Management Case 2 for
calendar years 2010 and 2011. Qatalyst first calculated the
implied value per share of Data Domain common stock for calendar
year 2010 with respect to the street projections and each of
calendar years 2010 and 2011 with respect to Management Case 1
and Management Case 2 by applying a representative range of
public market price to forward earnings per share multiples to
earnings per share estimates for Data Domain. Qatalyst then
discounted these values using a cost of equity of 13.5%. Based
on the calculations set forth above, this analysis implied a
range for Data Domain common stock of approximately $15.81 to
$19.76 per share based on street projections, approximately
$17.09 to $25.10 per share based on Management Case 1 and
approximately $12.04 to $15.69 per share based on Management
Case 2.
Contribution Analysis. Qatalyst reviewed
estimated 2009 and 2010 operating and financial information
based on the street projections for Data Domain and NetApp. Such
operating and financial information included, among other
things, revenues, gross profits, operating profits and net
income. Qatalyst analyzed the relative potential financial
contribution of Data Domain to the combined company following
completion of the merger, the implied equity ownership
determined by valuing such contributions and the implied value
per share. Based on the calculations set forth above, this
analysis implied a range for Data Domain common stock of
approximately $9.64 to $14.07 per share.
Premia Paid Statistics. Qatalyst reviewed the
premia paid in selected domestic public company cash and
cash/stock mix transactions that have been completed or are
pending since 2003 in which the target company was a
publicly-traded technology company and the transaction value was
greater than $500 million. Qatalyst selected a
representative range of implied premia (representing the 25th
percentile and 75th percentile) and applied this range of premia
to the price of Data Domain common stock of $17.43 as of
May 19, 2009, which implied a range for Data Domain common
stock of approximately $20.36 to $24.16 per share.
Equity Research Analyst Price Targets
Statistics. Qatalyst reviewed and analyzed the
price targets for Data Domain common stock prepared and
published by equity research analysts during the period from
April 23, 2009 through April 28, 2009. These targets
reflect each analysts estimate of the future public market
trading price of Data Domain common stock and are not discounted
to reflect present values.
Qatalyst noted that the range of undiscounted equity research
analyst price targets of Data Domain common stock was between
$11.00 and $24.00 per share. Qatalyst further calculated that
using a cost of equity of 13.5% and a discount period of one
year, the present value of the equity research analyst price
target range for Data Domain common stock was approximately
$9.69 to $21.15 per share.
The public market trading price targets published by equity
research analysts do not necessarily reflect current market
trading prices for Data Domain common stock and these estimates
are subject to uncertainties, including the future financial
performance of Data Domain and future financial market
conditions.
Miscellaneous
In connection with the review of the transaction by the Data
Domain board of directors, Qatalyst performed a variety of
financial and comparative analyses for purposes of rendering its
opinion. The preparation of a financial opinion is a complex
process and is not necessarily susceptible to a partial analysis
or summary description. In arriving at its opinion, Qatalyst
considered the results of all of its analyses as a whole and did
not attribute any particular weight to any analysis or factor it
considered. Qatalyst believes that selecting any portion of its
analyses, without considering all analyses as a whole, would
create an incomplete view of the process underlying its analyses
and opinion. In addition, Qatalyst 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
valuations resulting from any particular analysis described
above should not be taken to be Qatalysts view of the
actual value of Data Domain or NetApp. In performing its
analyses, Qatalyst made numerous assumptions with respect to
industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond
the control of Data Domain and NetApp. Any estimates contained
in
46
Qatalysts 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.
Qatalyst conducted the analyses described above solely as part
of its analysis of the fairness of the merger consideration
pursuant to the original merger agreement, from a financial
point of view, to holders of shares of Data Domain common stock,
other than affiliates who have executed voting agreements, and
in connection with the delivery of its opinion to the Data
Domain board of directors. These analyses do not purport to be
appraisals or to reflect the prices at which shares of Data
Domain common stock might actually trade.
Qatalysts opinion and its presentation to the Data Domain
board of directors was one of many factors taken into
consideration by the Data Domain board of directors in deciding
to approve the merger agreement. Consequently, the analyses as
described above should not be viewed as determinative of the
opinion of the Data Domain board of directors with respect to
the merger consideration or of whether the Data Domain board of
directors would have been willing to agree to a different merger
consideration. The merger consideration was determined through
arms-length negotiations between Data Domain and NetApp
and was approved by the Data Domain board of directors. Qatalyst
provided advice to Data Domain during these negotiations.
Qatalyst did not, however, recommend any specific merger
consideration to Data Domain or that any specific merger
consideration constituted the only appropriate merger
consideration for the merger.
Qatalyst provides investment banking and other services to a
wide range of corporations and individuals, domestically and
offshore, from which conflicting interests or duties may arise.
In the ordinary course of these activities, affiliates of
Qatalyst may at any time hold long or short positions, and may
trade or otherwise effect transactions in debt or equity
securities or loans of Data Domain, NetApp or their respective
affiliates. During the two year period prior to the date of
Qatalysts opinion, no material relationship existed
between Qatalyst and its affiliates and Data Domain or NetApp
pursuant to which compensation was received by Qatalyst or its
affiliates; however Qatalyst and its affiliates may in the
future provide investment banking and other financial services
to Data Domain and NetApp and their respective affiliates for
which they would expect to receive compensation.
Under the terms of its engagement letter, Qatalyst provided Data
Domain with financial advisory services in connection with the
transaction for which it will be paid a fee based on the size of
the transaction which would be approximately $17 million
(all numbers herein based on an assumed closing date of
June 23, 2009), a portion of which became payable upon
execution of the engagement letter, a portion of which became
payable upon delivery of its opinion and approximately
$15.9 million, or 93.5%, of which is contingent upon, and
will become payable upon, completion of the merger. Data Domain
has also agreed to reimburse Qatalyst for its expenses incurred
in performing its services. In addition, Data Domain has agreed
to indemnify Qatalyst and its affiliates, their respective
members, directors, officers, partners, agents and employees and
any person controlling Qatalyst or any of its affiliates against
certain liabilities and expenses related to or arising out of
Qatalysts engagement.
Data
Domain Officers and Directors Have Financial Interests in the
Merger
In considering the recommendation of the Data Domain board of
directors that you vote to approve the merger proposal, you
should be aware that Data Domains executive officers and
directors have financial interests in the merger that are
different from, or in addition to, those of Data Domains
stockholders generally and that are described below. The members
of Data Domains board of directors were aware of and
considered these interests, among other matters, in evaluating
and negotiating the merger agreement, and in recommending to the
stockholders that the merger agreement be approved and adopted.
For purposes of all of the Data Domain and NetApp agreements and
plans described below, the completion of the transactions
contemplated by the merger agreement will constitute a change in
control.
Equity
Compensation Awards
The merger agreement provides that, upon completion of the
merger, each Data Domain option to purchase shares of Data
Domain common stock will be assumed and converted, based on the
option exchange ratio, into an option to purchase NetApp common
stock subject to the same vesting restrictions and other terms
and conditions of such Data Domain option. The merger agreement
also provides that, upon completion of the merger, each then
outstanding restricted stock unit or share of restricted stock
of Data Domain will be assumed and converted into the
47
right to receive the merger consideration, but will otherwise be
subject to the same vesting restrictions and other terms and
conditions of the Data Domain awards. Please see The
Merger Agreement Treatment of Data Domain Stock
Options and Other Equity-Based Awards beginning on
page 56 for a detailed discussion of the treatment of
equity-based awards.
Our executive officers, Frank Slootman, Michael P. Scarpelli,
David L. Schneider, Daniel R. McGee and Nick Bacica, are
participants in the Data Domain Management Change in Control
Plan, which provides for vesting acceleration of their equity
awards upon an involuntary termination (without cause or
voluntary resignation for good reason) following a change in
control of Data Domain. Pursuant to the Data Domain Management
Change in Control Plan, upon such an involuntary termination
following a change in control of Data Domain, 50% (or 100% in
the case of Mr. Slootman) of their then unvested equity
awards will immediately vest.
Pursuant to agreements with the non-employee directors of Data
Domain, namely Aneel Bhusri, Ronald Bernal, Ronald Codd, Reed
Hundt, Kai Li, Jeffrey Miller and Scott Sandell, certain of
their awards of Data Domain stock options and restricted stock
will fully vest as a result of the completion of the merger.
Upon completion of the merger, the directors of Data Domain will
cease to be directors. The following table identifies, for each
of Messrs. Bhusri, Bernal, Codd, Hundt, Li, Miller and
Sandell (A) the number of unvested options to acquire
shares of Data Domain common stock (at exercise prices ranging
from $1.00 to $8.90) that would vest upon completion of the
merger and the corresponding value representing the difference
between the exercise price and the assumed share price of $30.00
multiplied by the number of shares accelerated, and (B) the
number of shares of unvested Data Domain restricted stock that
would vest upon completion of the merger, and the corresponding
value of shares accelerated based on the assumed share price of
$30.00, assuming a closing date of August 31, 2009:
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested Data
|
|
|
|
|
|
|
Unvested Data
|
|
|
|
|
|
Domain
|
|
|
Value of
|
|
|
|
Domain
|
|
|
Value of
|
|
|
Restricted Stock
|
|
|
Accelerated
|
|
|
|
Options Vesting
|
|
|
Accelerated Option
|
|
|
Vesting Upon
|
|
|
Restricted Stock
|
|
|
|
Upon Completion of
|
|
|
Vesting Assuming
|
|
|
Completion of the
|
|
|
Vesting Assuming
|
|
Name
|
|
the Merger
|
|
|
$30 Share Price
|
|
|
Merger
|
|
|
$30 Share Price
|
|
|
Mr. Bernal
|
|
|
39,584
|
|
|
$
|
835,222
|
|
|
|
|
|
|
$
|
|
|
Mr. Bhusri
|
|
|
39,584
|
|
|
|
835,222
|
|
|
|
|
|
|
|
|
|
Mr. Codd
|
|
|
58,334
|
|
|
|
1,691,686
|
|
|
|
|
|
|
|
|
|
Mr. Hundt
|
|
|
79,167
|
|
|
|
1,670,423
|
|
|
|
|
|
|
|
|
|
Mr. Li
|
|
|
|
|
|
|
|
|
|
|
83,997
|
|
|
|
2,519,910
|
|
Mr. Miller
|
|
|
|
|
|
|
|
|
|
|
58,334
|
|
|
|
1,750,020
|
|
Mr. Sandell
|
|
|
39,584
|
|
|
|
835,222
|
|
|
|
|
|
|
|
|
|
Severance
Benefits in Certain Employment Agreements
Each of Mr. Slootman, Mr. Scarpelli,
Mr. Schneider, Mr. McGee and Mr. Bacica are party
to employment agreements that provide for severance benefits in
the event their employment is terminated for any reason other
than cause or permanent disability, provided they sign a general
release of claims. In the event Mr. Slootmans
employment is terminated for any reason other than cause or
permanent disability, he would be entitled to receive continued
cash severance payments equal to his base salary for a period of
six months. In addition, the stock options granted to
Mr. Slootman prior to 2007 provide that if
Mr. Slootmans employment is terminated for any reason
other than cause or disability, he will receive 6 months of
additional vesting. In the event Mr. Scarpellis
employment is terminated for any reason other than cause or
permanent disability, he would be entitled to receive continued
cash severance payments equal to his base salary for a period of
three months and reimbursement for the premiums paid for
continued health coverage through COBRA for up to three months;
however, if such termination occurs within 12 months following a
change in control of Data Domain, the cash severance will
instead be a lump sum equal to six months of his base salary and
50% of his target bonus in effect at the time of termination.
Each of the employment agreements for Mr. Schneider,
Mr. McGee and Mr. Bacica provide that in the event
they are terminated for any reason other than cause or permanent
disability, they would be entitled to receive continued cash
severance payments equal to their base salary for a period of
three months and reimbursement for the premiums paid for
continued health insurance through COBRA for up to three months.
48
The information for each of Mr. Slootman,
Mr. Scarpelli, Mr. Schneider, Mr. McGee and
Mr. Bacica regarding vesting acceleration and severance
payments in the event their employment is terminated for certain
reasons, as of June 1, 2009 assuming a share price of
$30.00 per share, is set forth in the table below.
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Termination
|
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Termination
|
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|
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Other Than
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Other Than
|
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|
|
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for Cause or
|
|
|
for Cause or
|
|
|
Resignation
|
|
|
|
|
|
Disability
|
|
|
Disability
|
|
|
for Good
|
|
|
|
|
|
Prior to
|
|
|
After a
|
|
|
Reason After
|
|
|
|
|
|
Change in
|
|
|
Change in
|
|
|
a Change in
|
|
Name
|
|
Benefit
|
|
Control
|
|
|
Control
|
|
|
Control
|
|
|
Frank Slootman
|
|
Severance
|
|
$
|
175,000
|
|
|
$
|
175,000
|
|
|
$
|
|
|
|
|
Option Acceleration
|
|
|
1,306,958
|
|
|
|
17,130,958
|
|
|
|
17,130,958
|
|
|
|
RSU Acceleration
|
|
|
|
|
|
|
1,500,000
|
|
|
|
1,500,000
|
|
|
|
COBRA Premiums
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Value
|
|
|
1,481,958
|
|
|
|
18,805,958
|
|
|
|
18,630,958
|
|
Michael P. Scarpelli
|
|
Severance
|
|
|
72,500
|
|
|
|
217,500
|
|
|
|
|
|
|
|
Option Acceleration
|
|
|
|
|
|
|
4,365,385
|
|
|
|
4,365,385
|
|
|
|
RSU Acceleration
|
|
|
|
|
|
|
375,000
|
|
|
|
375,000
|
|
|
|
COBRA Premiums
|
|
|
5,141
|
|
|
|
5,141
|
|
|
|
|
|
|
|
Total Value
|
|
|
77,641
|
|
|
|
4,963,026
|
|
|
|
4,740,385
|
|
David L. Schneider
|
|
Severance
|
|
|
61,250
|
|
|
|
61,250
|
|
|
|
|
|
|
|
Option Acceleration
|
|
|
|
|
|
|
1,947,852
|
|
|
|
1,947,852
|
|
|
|
RSU Acceleration
|
|
|
|
|
|
|
350,010
|
|
|
|
350,010
|
|
|
|
COBRA Premiums
|
|
|
5,141
|
|
|
|
5,141
|
|
|
|
|
|
|
|
Total Value
|
|
|
66,391
|
|
|
|
2,364,253
|
|
|
|
2,297,862
|
|
Daniel R. McGee
|
|
Severance
|
|
|
68,750
|
|
|
|
68,750
|
|
|
|
|
|
|
|
Option Acceleration
|
|
|
|
|
|
|
2,019,069
|
|
|
|
2,019,069
|
|
|
|
RSU Acceleration
|
|
|
|
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
COBRA Premiums
|
|
|
3,544
|
|
|
|
3,544
|
|
|
|
|
|
|
|
Total Value
|
|
|
72,294
|
|
|
|
2,391,363
|
|
|
|
2,319,069
|
|
Nick Bacica
|
|
Severance
|
|
|
62,500
|
|
|
|
62,500
|
|
|
|
|
|
|
|
Option Acceleration
|
|
|
|
|
|
|
1,071,700
|
|
|
|
1,071,700
|
|
|
|
RSU Acceleration
|
|
|
|
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
COBRA Premiums
|
|
|
3,544
|
|
|
|
3,544
|
|
|
|
|
|
|
|
Total Value
|
|
|
66,044
|
|
|
|
1,437,744
|
|
|
|
1,371,700
|
|
Protection
of Data Domain Directors and Officers Against
Claims
NetApp has agreed to cause the surviving entity in the merger to
indemnify and hold harmless each present and former director and
officer of Data Domain and its subsidiaries from liability for
matters arising at or prior to the completion of the merger to
the fullest extent provided by applicable law. NetApp also has
agreed that it will maintain in place existing indemnification
and exculpation rights in favor of Data Domains and its
subsidiaries directors and officers for six years after
the merger, and that it will enter into a policy of
directors and officers liability insurance coverage
providing at least equivalent insurance coverage of Data
Domains and its subsidiaries directors and officers
for six years following completion of the merger, except that
NetApp is not required to incur annual premium expenses in
excess of two hundred percent (200%) of the amount paid by Data
Domain for coverage for its last fiscal year.
49
NetApps
Reasons for the Merger
NetApps board of directors approved the merger agreement
at a special meeting held on June 2, 2009, and determined
that the merger agreement and the merger are in the best
interests of NetApp and its stockholders. At a special meeting
on June 2, 2009, the board of directors approved an
amendment to the merger agreement and determined that the merger
agreement, as amended, and the merger are in the best interests
to NetApp and its stockholders. In reaching this decision,
NetApps board of directors considered the financial
performance and condition, business operations and prospects of
each of NetApp, Data Domain and the combined company, the terms
and conditions of the merger agreement and the ancillary
documents, the results of the due diligence investigation
conducted by NetApps management, accountants and legal
counsel, and the analysis of NetApps legal and financial
advisors.
NetApps board of directors also considered a number of
potential benefits of the merger, including those listed below:
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the acquisition of Data Domain is expected to complement
NetApps storage and data management business, and maximize
growth of the combined company and market adoption of NetApp and
Data Domain product offerings;
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the merger will permit NetApp to enhance product offerings to
international markets and a greater number of enterprise
customers;
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the merger will expand NetApps product portfolio,
including the addition of multi-vendor disk-based backup
solutions currently offered in the Data Domain product line;
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the merger will provide NetApps resellers with access to
an industry-leading deduplication solution for disk-based backup
solutions and channel partners with a more robust partner
program;
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the merger will allow NetApp to capture a greater share of the
capacity optimized disk market;
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the merger advances NetApps ability to enable customers to
adopt disk-based backup in any storage environment; and
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the merger is expected to increase operational efficiency and
create opportunities for cost reduction through the elimination
of redundant overhead expenses and public company costs.
|
NetApps board of directors also considered a number of
potentially negative factors, including those listed below:
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the risk that the value of the Data Domain business could
decline after the execution of the merger agreement,
particularly in light of the fact that the merger consideration
would not be adjusted to reflect declines in the market price of
Data Domain common stock;
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the risk that the potential benefits of the merger would not be
realized fully as a result of challenges the companies might
face in integrating their technology, personnel and operations,
as well as general industry-wide or economic conditions or other
factors;
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the risk that, if the merger is not completed, NetApps
management would have devoted substantial time and resources to
the combination at the expense of attending to and growing
NetApps business or other business opportunities;
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the risk associated with the additional demands that the
acquisition of Data Domain would place on NetApp and its
management, including the potential disruption of NetApps
ongoing business as NetApps management and employees are
required to dedicate significant time and effort in order to
integrate the two companies systems, cultures, processes,
controls and two separate client experiences; and
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the risk that the potential growth, perceived synergies and
anticipated opportunities considered by NetApps board of
directors will not be achieved through the completion of the
merger.
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The foregoing list comprises the material factors considered by
NetApps board of directors in its consideration of the
merger and intended to be a summary rather than an exhaustive
list. In view of the variety and complexity of factors and
information considered, NetApps board of directors did not
find it practicable to, and did
50
not, make specific assessments of, quantify or otherwise assign
relative weights to the specific factors considered in reaching
its decision. Rather, the decision was made after consideration
of all of the factors as a whole. In addition, individual
members of NetApps board of directors may have given
different weight to different factors.
Board of
Directors and Management of NetApp Following Completion of the
Merger
Upon completion of the merger, the current directors and
officers of NetApp are expected to continue in their current
positions. Information about the current NetApp directors and
executive officers can be found in the documents listed under
the heading NetApp SEC Filings in the section
entitled Where You Can Find More Information
beginning on page 98.
Public
Trading Markets
NetApps common stock trades on the NASDAQ Global Select
Market under the symbol NTAP. Data Domains
common stock trades on the NASDAQ Global Select Market under the
symbol DDUP. Upon completion of the merger, Data
Domain common stock will be delisted from the NASDAQ Global
Select Market and deregistered under the Exchange Act. The newly
issued NetApp common stock issuable pursuant to the merger
agreement will be listed on the NASDAQ Global Select Market. The
shares of NetApp common stock to be issued in connection with
the merger will be freely transferable under the Securities Act.
NetApps
Dividend Policy
NetApp has never paid cash dividends on its capital stock.
NetApp currently anticipates retaining all available funds, if
any, to finance internal growth and product development as well
as other possible management initiatives, including stock
repurchases and acquisitions. Payment of dividends in the future
will depend upon NetApps earnings and financial condition
and such other factors as the directors may consider or deem
appropriate at the time.
Appraisal
Rights
Under Section 262 of the DGCL, any holder of Data Domain
common stock who does not wish to accept the merger
consideration may elect to exercise appraisal rights in lieu of
receiving the merger consideration. A stockholder who exercises
appraisal rights may petition the Delaware Court of Chancery to
determine the fair value of his, her or its shares,
exclusive of any element of value arising from the
accomplishment or expectation of the first-step merger, and
receive payment of fair value in cash, together with interest,
if any. However, the stockholder must comply with the provisions
of Section 262 of the DGCL.
The following discussion is a summary of the law pertaining to
appraisal rights under the DGCL. The full text of
Section 262 of the DGCL is attached to this proxy
statement/prospectus as Appendix C. All references in
Section 262 of the DGCL and in this summary to a
stockholder are to the record holder of the shares
of Data Domain common stock who exercises appraisal rights.
Under Section 262 of the DGCL, when a merger is submitted
for approval at a meeting of stockholders, as in the case of the
merger agreement, the company, 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 of the DGCL. This proxy
statement/prospectus constitutes the required notice, and the
applicable statutory provisions are attached to this proxy
statement/prospectus as Appendix C. This summary of
appraisal rights is not a complete summary of the law pertaining
to appraisal rights under the DGCL and is qualified in its
entirety by the text of Section 262 of the DGCL attached as
Appendix C. Any holder of Data Domain common stock who
wishes to exercise appraisal rights or who wishes to preserve
the right to do so should review the following discussion and
Appendix C carefully. Failure to comply with the procedures
of Section 262 of the DGCL in a timely and proper manner
will result in the loss of appraisal rights. A stockholder who
loses his, her or its appraisal rights, will be entitled to
receive the merger consideration described in the merger
agreement.
51
Stockholders wishing to exercise the right to seek an appraisal
of their shares must do ALL of the following:
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the stockholder must not vote in favor of the proposal to adopt
the merger agreement. Because a proxy that does not contain
voting instructions will, unless revoked, be voted in favor of
the proposal, a stockholder who votes by proxy and who wishes to
exercise appraisal rights must vote against the proposal,
abstain or not vote its shares;
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the stockholder must deliver to Data Domain a written demand for
appraisal before the vote on the merger agreement at the special
meeting;
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the stockholder must continuously hold the shares from the date
of making the demand through the effective time of the
first-step merger. A stockholder will lose appraisal rights if
the stockholder transfers the shares before the effective time
of the merger; and
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the stockholder or the surviving company must file a petition in
the Delaware Court of Chancery requesting a determination of the
fair value of the shares within 120 days after the
effective time of the first-step merger. The surviving company
is under no obligation to file any petition and has no intention
of doing so.
|
Voting, in person or by proxy, against, abstaining from voting
on or failing to vote on the proposal to adopt the merger
agreement will not constitute a written demand for appraisal as
required by Section 262 of the DGCL. The written demand for
appraisal must be in addition to and separate from any proxy or
vote.
Only a holder of record of shares of Data Domain common stock
issued and outstanding immediately prior to the effective time
of the first-step merger may assert appraisal rights for the
shares of stock registered in that holders name. A demand
for appraisal must be executed by or on behalf of the
stockholder of record, fully and correctly, as the
stockholders name appears on the stock certificates. The
demand must reasonably inform Data Domain of the identity of the
stockholder and that the stockholder intends to demand appraisal
of his, her or its common stock. STOCKHOLDERS WHO HOLD THEIR
SHARES IN BROKERAGE ACCOUNTS OR OTHER NOMINEE FORMS, AND
WHO WISH TO EXERCISE APPRAISAL RIGHTS, SHOULD CONSULT WITH THEIR
BROKERS TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE NOMINEE
HOLDER TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. A PERSON
HAVING A BENEFICIAL INTEREST IN SHARES 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 PROPERLY AND
IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT APPRAISAL
RIGHTS.
A stockholder who elects to exercise appraisal rights under
Section 262 of the DGCL should mail or deliver a written
demand to:
Data Domain, Inc.
2421 Mission College Blvd.
Santa Clara, CA 95054
Attention: Corporate Secretary
If the merger is completed, NetApp will give written notice of
the effective time of the merger within 10 days after the
effective time to each former Data Domain stockholder who did
not vote in favor of the merger proposal and who made a written
demand for appraisal in accordance with Section 262 of the
DGCL. Within 120 days after the effective time of the
merger, but not later, either the surviving company or any
dissenting stockholder who has complied with the requirements of
Section 262 of the DGCL may file a petition in the Delaware
Court of Chancery demanding a determination of the value of the
shares of Data Domain common stock held by all dissenting
stockholders. The surviving company is under no obligation to
file any petition and has no intention of doing so. Stockholders
who desire to have their shares appraised should initiate any
petitions necessary for the perfection of their appraisal rights
within the time periods and in the manner prescribed in
Section 262 of the DGCL.
Within 120 days after the effective time of the first-step
merger, any stockholder who, to that point in time, has complied
with the provisions of Section 262 of the DGCL, may receive
from the surviving company, upon written request, a statement
setting forth the aggregate number of shares not voted in favor
of the merger proposal and with
52
respect to which Data Domain has received demands for appraisal,
and the aggregate number of holders of those shares. The
surviving company must mail this statement to the stockholder
within the later of 10 days of receipt of the request or
10 days after expiration of the period for delivery of
demands for appraisal.
If any party files a petition for appraisal in a timely manner,
the Delaware Court of Chancery will determine which stockholders
are entitled to appraisal rights and may require the
stockholders demanding appraisal who hold certificated shares to
submit their stock certificates to the court for notation of the
pendency of the appraisal proceedings and any stockholder who
fails to comply with this direction may be dismissed from the
proceedings. The Delaware Court of Chancery will thereafter
determine the fair value of the shares of Data Domain common
stock held by dissenting stockholders, exclusive of any element
of value arising from the accomplishment or expectation of the
merger, but together with interest, if any, to be paid on the
amount determined to be fair value.
In determining the fair value, the Delaware Court of Chancery
will take into account all relevant factors. The Delaware
Supreme Court has stated that proof of value by any
techniques or methods that 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, in cases of unfair dealing, may or may not be
a dissenters exclusive remedy. If no party files a
petition for appraisal in a timely manner, then stockholders
will lose the right to an appraisal, and will instead receive
the merger consideration described in the merger agreement. The
fair value of their shares as determined under Section 262
of the DGCL could be greater than, the same as, or less than the
merger consideration. An opinion of an investment banking firm
as to the fairness from a financial point of view of the
consideration payable in a merger is not an opinion as to, and
does not in any manner address, fair value under
Section 262 of the DGCL.
The Delaware Court of Chancery will determine the costs of the
appraisal proceeding and will allocate those costs to the
parties as the Delaware Court of Chancery determines to be
equitable under the circumstances. Upon application of a
stockholder, the Delaware Court of Chancery may order all or a
portion of the expenses incurred by any stockholder in
connection with the appraisal proceeding, including reasonable
attorneys fees and the fees and expenses of experts, to be
charged pro rata against the value of all shares entitled to
appraisal.
Any stockholder who has duly demanded an appraisal in compliance
with Section 262 of the DGCL may not, after the effective
time of the first-step merger, vote the shares subject to the
demand for any purpose or receive any dividends or other
distributions on those shares, except dividends or other
distributions payable to holders of record of shares as of a
record date prior to the effective time of the first-step merger.
Any stockholder may withdraw a demand for appraisal and accept
the merger consideration by delivering a written withdrawal of
the demand for appraisal to the surviving company, except that
any attempt to withdraw made more than 60 days after the
effective time of the first-step merger will require written
approval of the surviving company, and no appraisal proceeding
in the Delaware Court of Chancery will be dismissed as to any
stockholder without the approval of the Delaware Court of
Chancery, and may be conditioned on the terms the Delaware Court
of Chancery deems just. If the stockholder fails to perfect,
successfully withdraws or loses the appraisal right, the
stockholders shares will be converted into the right to
receive the merger consideration.
Failure to follow the steps required by Section 262 of
the DGCL for perfecting appraisal rights may result in the loss
of appraisal rights. In that event, you will be entitled to
receive the consideration for your dissenting shares in
accordance with the merger agreement. In view of the complexity
of the provisions of Section 262 of the DGCL, if you are a
Data Domain stockholder and are considering exercising your
appraisal rights under the DGCL, you should consult your own
legal advisor.
Regulatory
Approvals Required for the Merger
NetApp and Data Domain have agreed to use reasonable best
efforts to obtain as promptly as practicable all regulatory
approvals that are required to complete the transactions
contemplated in the merger agreement. This includes filing all
required notices to governmental authorities, including the
required filings with the Department of Justice, or the DOJ, and
the Federal Trade Commission, or the FTC, pursuant to the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, referred to
herein as the HSR Act. NetApp and Data Domain have
53
completed, or will complete, the filing of the applications to
obtain the applicable regulatory approvals. NetApp and Data
Domain are not permitted to complete the merger until the
applicable waiting periods under the HSR Act have expired or
been terminated.
Based upon an examination of information available relating to
the businesses in which the companies are engaged, NetApp and
Data Domain believe that the completion of the merger will not
violate any U.S. antitrust laws. However, either the DOJ or
FTC could open an investigation of the merger that could extend
the statutory waiting period, and could also challenge or seek
to block the merger under the antitrust laws, as it deems
necessary or desirable in the public interest, before or after
the statutory waiting period, and even after completion of the
merger. State attorneys general in the various states in which
NetApp and Data Domain operate may also open an investigation of
the merger. In addition, in some jurisdictions, a competitor,
customer or other third party could initiate a private action
under the antitrust laws challenging or seeking to enjoin the
merger, before or after completion of the merger. NetApp and
Data Domain cannot be sure that a challenge to the merger will
not be made or that, if a challenge is made, NetApp and Data
Domain will prevail.
On July 2, 2009, the Federal Trade Commission granted early
termination of the HSR waiting period.
54
THE
MERGER AGREEMENT
The following description describes the material terms of the
merger agreement. This description of the merger agreement is
qualified in its entirety by reference to the full text of the
merger agreement which is attached as Appendix A to this
proxy statement/prospectus and is incorporated herein by
reference. The merger agreement has been included to provide you
with information regarding its terms. NetApp and Data Domain
encourage you to read the entire merger agreement. The merger
agreement is not intended to provide any other factual
information about NetApp or Data Domain. Such information can be
found elsewhere in this proxy statement/prospectus and in the
other public filings each of NetApp and Data Domain makes with
the Securities and Exchange Commission, which are available
without charge at www.sec.gov.
The
Merger
Each of the Data Domain board of directors and NetApp board of
directors has approved the merger agreement, as amended, which
provides for the merger of Kentucky Merger Sub One Corporation
with and into Data Domain, with Data Domain, as a wholly owned
subsidiary of NetApp, remaining as the interim
surviving entity, immediately followed (subject to the
satisfaction of certain conditions described below) by the
merger of the interim surviving entity with and into
Derby Merger Sub Two LLC, with Derby Merger Sub Two LLC
remaining as the surviving entity. The second step will occur
only if Wilson Sonsini Goodrich & Rosati, Professional
Corporation and Fenwick & West LLP deliver tax
opinions at the closing, as further described below. The
first-step merger and the second-step merger are referred to
collectively as the merger unless otherwise indicated herein.
Per Share
Merger Consideration
Each share of Data Domain common stock issued and outstanding
immediately prior to the effective time of the first-step merger
will be converted into the right to receive (a) $16.45 per
share in cash, without interest and less any required
withholding under United States federal, state, local or foreign
law, referred to as the cash consideration, plus (b) a
number of validly issued, fully paid and non-assessable shares
of NetApp common stock equal to the following exchange ratio,
which shares are referred to as the stock consideration:
(i) 0.7783 shares of NetApp common stock if the
closing average (as defined below) is less than $17.41;
(ii) 0.6370 shares of NetApp common stock if the
closing average is greater than $21.27; and
(iii) that fraction of a share of NetApp common stock
(rounded to the nearest ten thousandth) equal to the quotient
obtained by dividing $13.55 by the closing average, if the
closing average is (A) less than or equal to $21.27 and
(B) greater than or equal to $17.41.
The closing average is the average of the closing prices for
NetApp common stock, rounded to the nearest one-hundredth of a
cent, on the NASDAQ Global Select Market for the 10 most recent
consecutive trading days ending on the third trading day
immediately prior to the effective time of the first-step
merger. Data Domain stockholders may contact Innisfree M&A
Incorporated, Data Domains information agent, toll free at
(888) 750-5834,
and banks or brokers may call collect at
(212) 750-5833,
for information regarding the merger consideration payable in
connection with the merger based on information available as of
the date of inquiry.
In the event that the exchange ratio is greater than or equal to
0.7006 and less than 0.7783, NetApp, in its sole discretion, may
(a) reduce the stock consideration by such amount as NetApp
may determine and (b) increase the cash consideration by an
amount equal to the product of (i) the amount of such
reduction in the stock consideration multiplied by (ii) the
closing average. However, NetApp may not reduce the amount of
the stock consideration and increase the cash consideration to
the extent that it would reasonably be expected to cause the
merger to fail to qualify as a tax-free reorganization under the
Internal Revenue Code, except as may be required as described
below.
If the aggregate amount of the stock consideration issuable in
the merger (including the stock consideration issuable to
holders of Data Domain options and restricted stock units) would
exceed 19.5% of the outstanding shares of NetApp common stock
immediately prior to the effective time of the first-step
merger, the stock consideration will be decreased to the minimum
extent necessary so that no more than 19.5% of the outstanding
shares of NetApp common stock will be issued in the merger (with
such percentage measured immediately prior to
55
the effective time of the first-step merger). In such event, the
cash consideration will be increased by an amount equal to the
product of (a) the amount of the reduction in the stock
consideration multiplied by (b) the closing average. In the
event that the stock consideration is decreased in accordance
with this paragraph, the merger may fail to qualify as a
tax-free reorganization under the Internal Revenue Code. In
addition, on the third trading day preceding the date of the
special meeting of the Data Domain stockholders, NetApp and Data
Domain will issue a joint press release announcing the aggregate
merger consideration that would be payable to the Data Domain
stockholders, assuming that the merger closed on the date of the
special meeting. However, there can be no assurance that the
merger will close on the date of the special meeting of the
stockholders. As such, the assumptions in the joint press
release may differ from the actual merger consideration payable
in the merger at the closing. Further, the determination of
whether the merger will qualify as a tax-free reorganization
will depend upon the value of NetApp common stock on the last
business day preceding the closing. If the first-step merger
closes after the date of the special meeting, stockholders will
not know on the date of the special meeting whether the merger
will qualify as a tax-free reorganization or will be a fully
taxable transaction. The parties anticipate that the first-step
merger will close on the date of the special meeting. In
connection with the closing of the first-step merger, NetApp
will issue another press release confirming the aggregate merger
consideration payable to the Data Domain stockholders and
announcing whether the merger qualifies as a tax-free
reorganization or is a fully taxable transaction.
The stock consideration will be adjusted appropriately to
reflect the effect of any stock split, reverse stock split,
stock dividend (including any dividend or distribution of
securities convertible into shares of NetApps common
stock), reorganization, recapitalization, reclassification or
other similar change with respect to NetApps common stock
having a record date on or after May 20, 2009, the date the
original merger agreement was signed, but before the completion
of the first-step merger. No fractional shares of NetApp common
stock will be issued in the first-step merger. Instead, each
Data Domain stockholder otherwise entitled to a fraction of a
share of NetApp common stock (after aggregating all fractional
shares of NetApp common stock issuable to such stockholder) will
be entitled to receive in cash the dollar amount (rounded to the
nearest whole cent), without interest, determined by multiplying
such fraction by the closing price of a share of NetApp common
stock as reported on the NASDAQ Global Select Market on the
trading day immediately prior to the date the first-step merger
is completed.
As a result of the first-step merger, each share of common stock
of Kentucky Merger Sub One issued and outstanding immediately
prior to the effective time of the first-step merger will be
converted into common stock of the interim surviving
entity. If the second-step merger occurs, each share of common
stock of the interim surviving entity issued and
outstanding immediately prior to the effective time of the
second-step merger will be converted into membership interests
of Merger Sub Two.
Treatment
of Data Domain Stock Options and Other Equity-Based
Awards
Data
Domain Stock Options
Each outstanding option to acquire Data Domain common stock
granted under Data Domains stock incentive plans will be
assumed and converted automatically at the effective time of the
first-step merger into an option to purchase NetApp common stock
and will continue to be governed by the terms of the applicable
Data Domain stock plan and related grant agreement under which
it was granted, except that:
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The number of shares of NetApp common stock subject to each
converted Data Domain stock option will equal the product,
rounded down to the nearest whole share of NetApp common stock,
of (A) the number of shares of Data Domain common stock
previously subject to the Data Domain stock option and
(B) the option exchange ratio, which is the sum of
(X) the exchange ratio for the stock consideration payable
to Data Domain stockholders in the merger (which will be a
number greater than or equal to 0.6370 shares and less than
or equal to 0.7783 shares of NetApp common stock) and
(Y) a fraction (represented as a decimal) whose numerator
is the cash consideration and whose denominator is the closing
average as defined herein; and
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The exercise price of NetApp common stock subject to each
converted Data Domain stock option will equal the exercise price
for each share of Data Domain common stock previously subject to
the Data Domain option, divided by the option exchange ratio,
rounded up to the nearest cent.
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Data
Domain Restricted Stock Units and Restricted
Shares
Each of Data Domains restricted stock units outstanding at
the effective time of the first-step merger will be assumed and
converted into a restricted stock unit representing the right to
receive the merger consideration payable for shares underlying
each assumed and converted restricted stock unit. The assumed
and converted restricted stock units will otherwise be payable
or distributable in accordance with the same terms and
conditions of the agreements and the applicable Data Domain
stock plans, including vesting restrictions, that applied to
such Data Domain restricted stock units immediately prior to the
effective time of the first-step merger.
Each of Data Domains unvested shares of restricted stock
outstanding at the effective time of the first-step merger will
be assumed and converted into the right to receive the merger
consideration payable for such shares. The merger consideration
payable for such unvested shares of restricted stock will
otherwise be payable or distributable in accordance with the
terms and conditions, including vesting restrictions that
applied to such shares of Data Domain restricted stock
immediately prior to the effective time of the first-step merger.
NetApp has agreed to file a
Form S-8
registration statement within two business days of the effective
time of the first-step merger with the SEC to the extent
eligible to register the NetApp common stock subject to the
assumed and converted stock options and restricted stock units.
Completion
of the Merger
The merger agreement requires the parties to complete the merger
after all of the conditions to the completion of the merger
contained in the merger agreement are satisfied or waived,
including the adoption of the merger agreement by the
stockholders of Data Domain. The first-step 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 by NetApp, Kentucky Merger Sub One and Data
Domain and specified in the certificate of merger. The
second-step merger will become effective, if at all, at the time
of filing of a certificate of merger with the Secretary of State
of the State of Delaware. Because the completion of the merger
is subject to the receipt of governmental and regulatory
approvals and the satisfaction of other conditions, the exact
timing of the completion of the merger cannot be predicted.
Conversion
of Shares; Exchange of Certificates
The merger agreement provides that NetApp will select a
reputable bank or trust company, reasonably acceptable to Data
Domain, to act as the exchange agent. The merger agreement
provides that on or prior to the date of completion of the
first-step merger, NetApp will deposit with the exchange agent a
sufficient amount of cash to make the payment of the cash
consideration, a sufficient number of shares of NetApp common
stock to provide for the issuance of the stock consideration,
and a sufficient amount of cash to make payments in lieu of
fractional shares and any dividends or distributions to which
holders of Data Domain common stock are entitled pursuant to the
terms of the merger agreement. The exchange agent will be
entitled to deduct and withhold from the cash amounts payable to
any Data Domain stockholder the amounts it is required to deduct
and withhold under any federal, state, local or foreign tax law.
If the exchange agent withholds any amounts, these amounts will
be treated for all purposes of the merger as having been paid to
the stockholders from whom they were withheld.
The merger agreement contemplates that, promptly following the
completion of the first-step merger, the exchange agent will
mail to each record holder of Data Domain common stock
immediately prior to the completion of the first-step merger a
letter of transmittal and instructions for surrendering and
exchanging the record holders Data Domain stock
certificates. The merger agreement provides that, upon surrender
of a Data Domain common stock certificate for exchange to the
exchange agent (or upon receipt of an appropriate agents
message in the case of book-entry shares), together with a duly
signed and completed letter of transmittal, and such other
documents as the exchange agent or NetApp may reasonably
require, the holder of the Data Domain stock certificate will be
entitled to receive the following:
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the number of shares of NetApp common stock calculated based on
the exchange ratio (which, at NetApps election, may be in
book-entry form unless a physical stock certificate is requested
or is otherwise required by applicable law);
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the per share cash amount payable for each share of Data Domain
common stock;
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cash in lieu of any fractional share of NetApp common
stock; and
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cash in respect of any dividends or other distributions declared
or made by NetApp after the date of the merger agreement.
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After the completion of the first-step merger, all holders of
certificates representing shares of Data Domain common stock
that were outstanding immediately prior to the completion of the
first-step merger will cease to have any rights as stockholders
of Data Domain, other than the right to receive the merger
consideration (or, in the alternative, the appraisal rights
described under the heading Data Domain
Proposal 1 The Merger Appraisal
Rights, if so elected) and any rights to dividends or
other distributions. In addition, no transfer of Data Domain
common stock after the completion of the first-step merger will
be registered on the stock transfer books of Data Domain.
If any Data Domain stock certificate has been lost, stolen or
destroyed, the exchange agent will issue in exchange for such
lost, stolen or destroyed stock certificate the merger
consideration upon the delivery of an affidavit by the owner of
such stock certificate claiming that such stock certificate has
been lost, stolen or destroyed. However, NetApp
and/or the
exchange agent may, in its discretion and as a condition to the
payment of cash or the issuance of any shares of NetApp common
stock in exchange therefor, also require the owner of such lost,
stolen or destroyed stock certificate to deliver a bond as
indemnity against any claim that may be made with respect to
that stock certificate against NetApp, the interim
surviving entity, the surviving entity or the exchange agent.
Stock certificates should not be surrendered for exchange by
Data Domain stockholders before the completion of the first-step
merger and should be sent only pursuant to instructions set
forth in the letters of transmittal, which the merger agreement
provides will be mailed to Data Domain stockholders promptly
following the completion of the first-step merger. In all cases,
the cash payments, shares of NetApp common stock and cash in
lieu of fractional shares will be delivered only in accordance
with the procedures set forth in the letter of transmittal.
Representations
and Warranties
In the merger agreement, Data Domain, NetApp, Kentucky Merger
Sub One Corporation and Derby Merger Sub Two LLC each made
representations and warranties relating to, among other things:
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organization and standing;
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corporate power and authority to enter into and perform its
obligations under, and enforceability of, the merger agreement;
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the absence of conflicts with organizational documents, other
contracts and applicable laws;
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required regulatory filings and consents and approvals of
governmental entities;
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capitalization;
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documents filed with the SEC and other governmental authorities;
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financial statements and controls;
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the absence of undisclosed liabilities;
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the absence of certain changes since a recent balance sheet date
(in the case of NetApp and Data Domain only);
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the absence of litigation and orders; and
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brokers fees.
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In the merger agreement, NetApp, Kentucky Merger Sub One
Corporation and Derby Merger Sub Two LLC also each made
representations and warranties relating to:
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their not owning any shares of Data Domain common stock; and
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available funding.
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In the merger agreement, Data Domain also made representations
and warranties relating to:
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subsidiaries;
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compliance with laws and orders;
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permits;
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material contracts;
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tax matters;
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employee benefits;
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labor matters;
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real property;
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environmental matters;
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assets and personal property;
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intellectual property;
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insurance;
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the absence of transactions with related parties;
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state anti-takeover statutes; and
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receipt by the Data Domain board of directors of an opinion from
Qatalyst Partners LP.
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Material
Adverse Effect
Several of the representations, warranties, covenants, closing
conditions and termination provisions in the merger agreement
use the phrase material adverse effect. The merger
agreement provides that material adverse effect
means, with respect to either NetApp or Data Domain, as the case
may be, any fact, circumstance, change or effect that,
individually or when taken together with all other such facts,
circumstances, changes or effects that exist at the date of
determination of the occurrence of the material adverse effect
that:
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is or would reasonably be expected to have a material adverse
effect on the business, operations, financial condition or
results of operations of NetApp or Data Domain, as applicable,
taken as a whole; or
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is or would reasonably be expected to have a material adverse
effect on NetApps or Data Domains ability, as
applicable, to complete the merger in accordance with the terms
of the merger agreement and applicable law.
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The merger agreement provides, however, that none of the
following (by themselves or when taken with any other fact,
circumstance, change or effect) will be deemed to constitute, or
be taken into account in determining whether there has occurred
or could reasonably be expected to occur, a material adverse
effect on NetApp or Data Domain, as applicable:
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changes in the general economic conditions in the United States
or any other country or region in the world, or changes in
conditions in the global economy generally, to the extent that
they do not have a disproportionate impact on NetApp or Data
Domain relative to other companies and operating in the same
industries in which NetApp or Data Domain operates;
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changes in general conditions in the industries in which NetApp
or Data Domain operates, to the extent that they do not have a
disproportionate impact on NetApp or Data Domain relative to
other companies operating in the same industries in which NetApp
or Data Domain operates;
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changes in generally accepted accounting principles or other
accounting standards, or the interpretation of such principles
or standards by a third party, applicable federal, state, local,
municipal, foreign or other law or regulatory conditions, or the
interpretation of such law or regulations by a third party;
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any failure to take any action or the taking of any specific
action by NetApp or Data Domain taken with the prior written
consent or written direction of the other party;
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the taking of any specific action expressly required by the
merger agreement;
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acts of war, armed hostilities or terrorism, to the extent that
they do not have a disproportionate impact on NetApp or Data
Domain relative to other companies operating in the same
industries in which NetApp or Data Domain operates;
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changes in the trading price or trading volume of NetApps
or Data Domains common stock, in and of itself, provided
that the exception described in this bullet shall not in any way
prevent or otherwise affect a determination that any fact,
circumstance, change or effect that has resulted in, or
contributed to, a material adverse effect;
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the public announcement of the merger agreement or pendency of
the merger, including any loss of employees, provided that the
exception described in this bullet shall not apply to any fact,
circumstance, change or effect related to or caused by any legal
proceedings resulting from the announcement and pendency of the
merger and the transactions contemplated by the merger agreement;
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any failure of NetApp or Data Domain to meet any public or
internal estimates or expectations of revenue, earnings or other
financial performance or results of operations for any period,
or failure to meet any internal budgets, plans, or forecasts of
revenues, earnings or other financial performance or results of
operations (it being understood that any underlying cause of any
such failure may be deemed to constitute, in and of itself, a
material adverse effect and may be taken into consideration when
determining whether a material adverse effect has
occurred); or
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stockholder class action, derivative litigation or other legal
proceedings made or brought by any of the current or former
stockholders of NetApp or Data Domain against NetApp or Data
Domain arising out of the merger or any other transactions
contemplated by the merger agreement.
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Covenants;
Conduct of Business Prior to the Merger
Interim
Conduct of Data Domains Business
Data Domain has undertaken customary covenants that place
restrictions on it and its subsidiaries until the effective time
of the first-step merger. In general, Data Domain agreed to
(1) carry on its business in the ordinary course in all
material respects in substantially the same manner as previously
conducted and in material compliance with all applicable laws
and (2) use commercially reasonable efforts consistent with
its past practices to (A) preserve intact its present
business organization, (B) keep available the services of
its present officers and employees and (C) preserve its
relationships with customers, suppliers, distributors,
licensors, licensees and others with which it has significant
business dealings.
Data Domain further agreed that, except (a) as expressly
contemplated or permitted by the merger agreement, (b) as
specifically set forth in Data Domains disclosure schedule
that was delivered to NetApp on May 20, 2009, (c) as
required by applicable law or the terms of any Data Domain
employee benefit plan, or (d) with NetApps prior
written consent, Data Domain will not, and will not permit any
of its subsidiaries to, among other things, undertake the
following actions:
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amend its certificate of incorporation or bylaws;
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authorize for issuance, issue, sell, deliver or agree or commit
to issue, sell or deliver securities of Data Domain or any of
its subsidiaries, except for the issuance and sale of capital
stock pursuant to outstanding stock awards, the issuance of
shares pursuant to the Data Domain 2007 Employee Stock Purchase
Plan and the issuance of up to 250,000 restricted stock units
granted in the ordinary course of business after the date of the
merger agreement;
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acquire, redeem, or amend any securities of Data Domain or any
of its subsidiaries, except to the extent that such acquisition
or redemption is pursuant to the terms of any employee benefit
plan or any agreement subject to any such employee benefit plan;
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other than dividends or distributions made by any direct or
indirect wholly owned subsidiary of Data Domain to Data Domain
or one of its subsidiaries, set any record or payment dates for
the payment of any dividends or distributions on capital stock,
split, combine or reclassify any shares of capital stock,
declare, set aside or pay any dividend or other distribution in
respect of any shares of capital stock, or make any other
actual, constructive or deemed distribution in respect of the
shares of capital stock;
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propose or adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of Data Domain or any
of its subsidiaries;
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(i) except to or from subsidiaries of Data Domain, incur or
assume any indebtedness or issue any debt securities, assume or
guarantee the obligations of any other person or acquire or make
any capital contributions to or investments in any other person,
(ii) except for advances made in the ordinary course of
business consistent with past practice, make any loans or
advances to employees of Data Domain or any of its subsidiaries,
or (iii) mortgage or pledge any of its or its subsidiaries
assets, tangible or intangible, or create or suffer to exist any
lien, subject to certain exceptions;
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(i) except as may be required by applicable law or the
terms of any employee benefit plan in effect at the time of the
merger agreement, enter into, adopt, amend, modify or terminate
any employee benefit plan in any material respect,
(ii) except for certain limited increases made in the
ordinary course of business, increase or decrease the
compensation or fringe benefits of any employee or director of
Data Domain or any of its subsidiaries, pay any bonus or special
remuneration to any employee, consultant, independent contractor
or director, or pay any benefit not required by any employee
benefit plan, or (iii) amend the targets or the goals of
the 2009 Executive Bonus Plan;
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forgive any loans to any employees, officers or directors of
Data Domain or any of its subsidiaries, or any of their
respective affiliates;
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make any deposits or contributions to or fund the compensation
or benefits under the employee benefit plans or contracts
subject to the employee benefit plans, other than as required
pursuant to the terms of the employee benefit plans or any
contracts subject to the employee benefit plans in effect as of
the date of the merger agreement;
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enter into, amend, or extend any collective bargaining agreement
or similar contract;
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(i) acquire, lease or license any property or assets with a
fair market value in excess of $5,000,000 in the aggregate per
fiscal quarter, except transactions required pursuant to
existing contracts, or (ii) sell, lease, license or dispose
of any property or assets with a net book value in excess of
$100,000 in any individual transaction, except
(A) transactions required pursuant to existing contracts or
(B) transactions in the ordinary course of business
consistent with past practice;
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except as may be required as a result of a change in applicable
laws or in the generally accepted accounting principles (as
applied in the United States), make any change in any of the
accounting principles or practices used by Data Domain;
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make or change any tax election, settle or compromise any
material United States federal, state, local or foreign tax
liability, change any material tax accounting method, or consent
to any extension or waiver of any limitation period with respect
to any claim or assessment for material taxes;
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enter into or amend any licenses of Data Domain intellectual
property, except, in the ordinary course of business, to
customers, or for non-exclusive in-bound licenses for
commercially available technology, in each case in the ordinary
course of business consistent with past practice;
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grant any exclusive rights with respect to any Data Domain
intellectual property, divest any Data Domain intellectual
property, or materially modify Data Domains warranty
terms, except if such divestiture, amendment or modification
individually or in the aggregate, is not material to Data Domain
or any of its subsidiaries;
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authorize, incur or commit to incur any capital expenditures
that do not exceed $5,000,000 in the aggregate per fiscal
quarter, other than pursuant to existing contracts as in effect
as of the date of the merger agreement;
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settle or compromise any pending or threatened legal proceeding
or pay, discharge or satisfy or agree to pay, discharge or
satisfy any claim, liability or obligation, unless such
settlement has been reserved for in, or incurred since the date
of, the Data Domain balance sheet, is covered by existing
insurance policies or such payment does not exceed $200,000 in
the aggregate;
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except as required by applicable laws or the generally accepted
accounting principles (as applied in the United States), revalue
in any material respect any of its properties or assets
including writing-off accounts receivable;
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other than in the ordinary course of business consistent with
past practice, enter into, renew, extend or terminate any
material contract or make any material amendment or change in
any such material contract;
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enter into any lease or sublease of material real property
(whether as a lessor, sublessor, lessee or sublessee) with a
term that exceeds six (6) months; (ii) modify, amend
or exercise any right to renew any lease or sublease of real
property; or (iii) make application for the opening,
relocation or closing of any, or open, relocate or close any,
branch office or other real property;
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make any representations or issue any communications to current
or former employee, independent contractor or director that are
inconsistent with the merger agreement or the transactions
contemplated thereby, including any representations regarding
offers of employment from NetApp, any subsidiary of NetApp, or
the surviving entity;
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enter into a contract to do any of the foregoing or make any
arrangement or understanding with respect to any of the
foregoing; or
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take any action which would materially impair Data Domains
ability to complete the transactions contemplated by the merger
agreement or materially delay the completion of the merger and
the other transactions contemplated by the merger agreement.
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Interim
Conduct of NetApps Business
NetApp has agreed that, unless approved by Data Domain in
writing in advance, neither NetApp nor any of its subsidiaries
will acquire or agree to acquire any other entity to the extent
that such acquisition would reasonably be expected to
(i) impair the ability of NetApp, Merger Sub One, Merger
Sub Two and Data Domain to complete the merger or
(ii) delay the completion of the merger in any material
respect.
Other
Covenants
The merger agreement also contains covenants relating to the
preparation of this proxy statement/prospectus and the holding
of the annual and special meeting of Data Domain stockholders,
the granting of access to information of the other company and
the coordination of public announcements with respect to the
transactions contemplated by the merger agreement, cooperation
regarding regulatory filings, employee matters, efforts to
develop and use commercially reasonable efforts to implement any
reasonable remediation plan requested by NetApp with respect to
any open source materials used by Data Domain in its products
and other matters as described further below.
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Limitation
on the Solicitation, Negotiation and Discussion of Other
Acquisition Proposals by Data Domain
Data Domain also has agreed that neither it nor its subsidiaries
will, and that they will not authorize or permit their
respective directors, officers, or other employees, controlled
affiliates, advisors or other agents to, directly or indirectly:
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solicit, initiate or knowingly encourage or facilitate or
knowingly induce any inquiry with respect to, or the making,
submission or announcement of, an acquisition
proposal or an acquisition transaction (each
as defined below);
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furnish to any person any non-public information relating to
Data Domain or any of its subsidiaries, or afford access to the
business properties, assets, books or records of Data Domain or
any of its subsidiaries to any person or entity, or take any
other action in a manner that is intended or would reasonably be
expected to assist or facilitate any inquiries or the making of
any proposal that constitutes or could lead to an acquisition
proposal or an acquisition transaction;
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participate or engage in discussions or negotiations with any
person with respect to an acquisition proposal or an acquisition
transaction;
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approve, endorse or recommend an acquisition proposal or an
acquisition transaction;
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enter into any letter of intent, memorandum of understanding or
other agreement contemplating or otherwise relating to an
acquisition proposal or acquisition transaction;
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terminate, amend or waive any material rights under (or fail to
enforce by seeking an injunction or by seeking to specifically
enforce the material terms of) any confidentiality or
standstill or other similar agreement between Data
Domain or any of its subsidiaries and any other person;
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take any action to exempt any person from applicable
anti-takeover laws; or
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agree with a third party to do any of the foregoing, or propose
to third parties, including Data Domain stockholders, to do any
of the foregoing.
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As used in the merger agreement, an acquisition
proposal is any indication of interest, offer or proposal
relating to an acquisition transaction (as defined below) from
any person other than NetApp or any of its affiliates.
As used in the merger agreement, an acquisition
transaction is any transaction or series of related
transactions (other than a transaction with NetApp or any of its
affiliates) involving:
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any direct or indirect purchase or other acquisition by any
person or group from Data Domain of 15% or more of Data
Domains total outstanding equity interests or voting
securities, or any tender offer or exchange offer that, if
completed, would result in any person or group beneficially
owning 15% or more of Data Domains outstanding equity
interests or voting securities;
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any direct or indirect purchase or other acquisition of 50% or
more of any class of equity or other voting securities of one or
more of Data Domains subsidiaries that, individually or in
the aggregate, generate or constitute 15% or more of Data
Domains consolidated net revenues or net income (for the
12-month
period ending on the last day of Data Domains most
recently completed fiscal year) or assets (measured by the
lesser of book value or fair market value thereof as of the date
of such transaction), which are referred to as significant
subsidiaries;
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any merger, consolidation, business combination, liquidation,
dissolution, recapitalization, reorganization or other similar
transaction involving Data Domain or one or more of its
significant subsidiaries, pursuant to which Data Domains
stockholders (as a group) or the stockholders of such
significant subsidiary would hold less than 85% of the equity
interests in or voting securities of the surviving or resulting
entity of such transaction;
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any direct or indirect sale, transfer or disposition of assets
(other than in the ordinary course of business) of Data Domain
or one or more of its significant subsidiaries; or
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any combination of the foregoing that results in one of the
effects in the first two bullets above.
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Data Domain and its subsidiaries have also agreed:
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to cease any and all existing activities, discussions or
negotiations with respect to any acquisition proposal or
acquisition transaction;
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to notify NetApp promptly (but no later than 48 hours)
after it receives any acquisition proposal, any request for
information that would reasonably be expected to lead to an
acquisition proposal, or any inquiry with respect to, or which
would reasonably be expected to lead to, an acquisition
proposal, and to provide NetApp with the material terms and
conditions of the acquisition proposal, request or inquiry, as
well as all related agreements, commitment letters and other
documents relating thereto, and the identity of the person or
group making any such acquisition proposal, request or inquiry;
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to keep NetApp reasonably informed of the status and any changes
in the material terms and conditions of any such acquisition
proposal or request; and
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to provide NetApp with at least 24 hours prior written
notice (or any shorter period of advance notice provided to
members of Data Domains board of directors) of a meeting
of its board of directors (or any committee thereof) at which
the board of directors (or any committee thereof) is reasonably
expected to consider an acquisition proposal or acquisition
transaction.
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Exception
to the Limitation on the Negotiation and Discussion by Data
Domain of Other Acquisition Proposals
However, prior to obtaining approval of the merger proposal from
its stockholders, Data Domain may engage and participate in
discussions and negotiations with respect to an unsolicited,
written acquisition proposal, and furnish non-public information
regarding Data Domain to the party making such acquisition
proposal if:
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the Data Domain board of directors determines in good faith,
after consultation with its financial advisor and outside legal
counsel, that the acquisition proposal either constitutes or is
reasonably likely to lead to a superior proposal (as
defined below) and the failure to take such action is reasonably
likely to result in a breach of the Data Domain board of
directors fiduciary duties to the Data Domain stockholders
under Delaware law;
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none of Data Domain, any of its subsidiaries or any of their
respective directors, officers or other employees, controlled
affiliates, advisors or agents, collectively referred to as
representatives, have breached or violated in any material
respect, with respect to such acquisition proposal or any other
acquisition proposal, the restrictions on solicitation of other
offers;
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Data Domain has first entered into a confidentiality and
standstill agreement with the party making the
acquisition proposal on terms no less favorable to Data Domain
than those contained in the Data Domains confidentiality
agreement with NetApp, and with standstill
provisions that do not include a sunset,
fall-away or other similar exception that would
result in the standstill provisions applicable to
such other party becoming inapplicable at any time prior to the
valid termination of the merger agreement;
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Data Domain provides NetApps Chief Executive Officer with
at least 24 hours prior written notice of its intent to
participate in discussions or furnish non-public information
regarding Data Domain with respect to such acquisition proposal
(including disclosing the identity of the party making the
acquisition proposal and the material terms and conditions of
such acquisition proposal); and
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Data Domain contemporaneously provides NetApp with any
non-public information provided to the party making such
acquisition proposal, to the extent that such information has
not been previously furnished or made available by Data Domain
to NetApp.
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Reasonable
Best Efforts of Data Domain to Obtain the Required Stockholder
Vote
Data Domain has agreed to hold a meeting of its stockholders as
promptly as practicable following the date of the merger
agreement (which shall be within 45 days following the date
that this proxy statement/prospectus is first disseminated to
Data Domain stockholders) for the purpose of obtaining
stockholder approval of the merger
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proposal. Data Domain will use its reasonable best efforts to
solicit proxies from its stockholders to obtain such approval.
Unless the merger agreement is terminated, Data Domain has
agreed to submit the merger agreement to a stockholder vote even
if its board of directors no longer recommends approval of the
merger proposal.
Data
Domain Board Recommendation of the Merger
Pursuant to the merger agreement, Data Domains board of
directors is required to recommend that Data Domains
stockholders adopt the merger agreement at the special meeting
in accordance with the applicable provisions of Delaware law.
Moreover, except as described in the merger agreement and as set
forth below under the headings Board Recommendation Change
for Superior Proposal and Board Recommendation
Change in the Absence of a Superior Proposal, neither Data
Domains board of directors nor any committee thereof is
permitted to (i) withhold, withdraw, amend or modify the
board of directors recommendation or (ii) approve,
endorse or recommend any indication of interest, offer or
proposal relating to an acquisition proposal from any person
other than NetApp or its affiliates or any agreement pursuant to
which any such acquisition proposal would be completed. Any of
the actions listed above is referred to as a board
recommendation change. However, notwithstanding the foregoing,
stop, look and listen communications by Data
Domains board of directors to Data Domain stockholders
pursuant to
Rule 14d-9(f)
of the Exchange Act will not be deemed to be a board
recommendation change if such communications are accompanied by
a statement of Data Domains board of directors expressly
and publicly reaffirming the board recommendation in connection
with such statement or disclosure.
Board
Recommendation Change for Superior Proposal
Notwithstanding the foregoing, prior to obtaining approval of
the merger proposal from the Data Domain stockholders, Data
Domains board of directors may effect a board
recommendation change if all of the following conditions have
been met:
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Data Domains board of directors has received an
unsolicited acquisition proposal in writing after May 20,
2009;
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neither Data Domain nor any of its subsidiaries nor any of their
respective representatives has materially breached any of the
non-solicitation provisions of the merger agreement in
connection with the acquisition proposal (or in connection with
any other acquisition proposal made by any other person) (as
described in The Merger Agreement Limitation
on the Solicitation, Negotiation and Discussion of Other
Acquisition Proposals by Data Domain);
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Data Domains board of directors has determined in good
faith (after consultation with its financial advisor and its
outside legal counsel) that such acquisition proposal
constitutes a superior proposal (as defined below) and, in light
of such superior proposal, the failure to effect the board
recommendation change is reasonably likely to be breach of the
board of directors fiduciary duties to Data Domains
stockholders under Delaware law;
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Data Domains board of directors has given NetApp at least
five business days prior written notice of the superior
proposal, which notice must include the identity of the persons
making the superior proposal, all of the material terms and
conditions of the superior proposal, copies of the superior
proposal as well as related agreements and material documents
(if available in written form), a statement that Data
Domains board of directors intends to effect a board
recommendation change in response to such superior proposal, and
an opportunity for NetApp to meet with Data Domains board
of directors, financial advisors and outside legal counsel at
such times as NetApp may reasonably request for the purpose of
enabling NetApp and Data Domain to discuss in good faith any
modifications to the terms and conditions of the merger
agreement that NetApp may propose in response to the superior
proposal; and
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after such five business day period and any extensions thereof
and, if requested by NetApp, meetings with NetApp and its
financial advisors and legal counsel during such period,
(i) NetApp has not made a proposal at least as favorable or
more favorable to Data Domains stockholders as such
acquisition proposal and (ii) Data Domains board of
directors has determined in good faith (after consultation with
its financial advisor its outside legal counsel) that such
acquisition proposal continues to constitute a superior proposal
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and, in light of such superior proposal and after good faith
consideration of all proposals by NetApp, the failure to effect
such board recommendation change is reasonably likely to
constitute a breach of the board of directors fiduciary
duties to Data Domains stockholders under Delaware law.
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As used in the merger agreement, the term superior
proposal means any unsolicited written offer or proposal
(that has not been withdrawn) for a transaction or a series of
related transactions providing for the acquisition of all of
Data Domains outstanding voting securities, where Data
Domains board of directors has determined in good faith
(after consultation with its financial advisor and its outside
legal counsel) that such proposal is more favorable to Data
Domains stockholders than the merger described in this
proxy statement/prospectus. Any such determination by Data
Domains board of directors must take into consideration of
all factors it deems to be relevant, including, but not limited
to, (i) all relevant financial considerations, including
conditions in the financial and credit markets, (ii) the
identity of the person or persons making such offer or proposal
and their sources of financing, (iii) the anticipated
timing, conditions and prospects for completion of the
transaction contemplated by such offer or proposal,
(iv) the other terms and conditions of such offer or
proposal and the implications thereof to Data Domain, including
relevant legal, regulatory and other aspects of such offer or
proposal deemed relevant by Data Domains board of
directors, and (v) any proposal made by NetApp in
connection therewith or response thereto.
Board
Recommendation Change in the Absence of a Superior
Proposal
Prior to obtaining approval of the merger proposal from Data
Domains stockholders, Data Domains board of
directors may effect a board recommendation change for a reason
unrelated to an acquisition proposal if the conditions set forth
below have been satisfied:
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Data Domains board of directors has determined in good
faith (after consultation with its outside legal counsel) that
the failure to make a board recommendation change is reasonably
likely to be a breach of the board of directors fiduciary
duties to Data Domains stockholders under Delaware law;
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Data Domains board of directors has given NetApp at least
five business days prior written notice that Data Domains
board of directors intends to effect such board recommendation
change and the opportunity to meet with Data Domains board
of directors and the Companys financial advisors and
outside legal counsel at such times as NetApp may reasonably
request for the purpose of enabling NetApp and Data Domain to
discuss in good faith (i) the basis and rationale for
proposing to effect such board recommendation change,
and/or
(ii) possible modifications of the terms and conditions of
the merger agreement in such a manner that would obviate the
need for Data Domains board of directors to effect such
board recommendation change; and
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after such five business day period and, if requested by NetApp,
meetings with NetApp and its financial advisors and legal
counsel during such period, Data Domains board of
directors has determined in good faith (after consultation with
its outside legal counsel) that the failure to effect such board
recommendation change is reasonably likely to result in a breach
of its fiduciary duties to Data Domains stockholders under
Delaware law.
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Employee
Matters
NetApp has agreed to provide Data Domain employees who are
offered and accept employment with NetApp or any subsidiary
after the merger with substantially similar types and levels of
benefits as those provided to similarly situated NetApp
employees. Until such employees are enrolled in comparable
NetApp employee benefit plans, NetApp has agreed to continue to
maintain the Data Domain plans providing health, dental, vision,
accidental death or disability and life insurance coverage.
NetApp has agreed, to the extent any Data Domain employee
becomes eligible to participate in employee benefit plans of
NetApp or any affiliate following the merger:
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generally to recognize each employees service with Data
Domain prior to the completion of the merger for purposes of
eligibility and vesting credits, except under defined benefit
pension plans or to the extent it would result in a duplication
of these benefits;
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to cause any exclusion for pre-existing conditions or
eligibility waiting periods under any NetApp health plans to be
waived, to the extent the employee (and their eligible
dependents) was not subject to such pre-existing conditions and
eligibility waiting periods under comparable Data Domain plans
as of the time immediately before the completion of the
merger; and
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to provide each employee with credit for any deductibles paid
under any Data Domain plan that provides medical, dental or
vision benefits in the plan year in effect as of the closing of
the merger for purposes of satisfying any applicable deductible
or
out-of-pocket
requirements under any NetApp medical, dental or vision plans to
the same extent that such expenses were recognized under the
comparable Data Domain plan.
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The merger agreement provides that prior to the effective time
of the merger the Data Domain 401(k) plan shall be terminated
unless NetApp provides prior notice that such plan will instead
be continued and assumed by NetApp. Prior to the effective time
of the merger, the Data Domain employee stock purchase plan will
be terminated.
Indemnification
and Insurance
The merger agreement provides that NetApp will honor and fulfill
in all respects the obligations of Data Domain and its
subsidiaries with respect to the indemnification of Data Domain
and its subsidiaries directors and officers under their
certificates of incorporation, bylaws and indemnification
agreements effective as of the date of the merger agreement. The
merger agreement also provides that, upon completion of the
merger, NetApp will cause the surviving entity to indemnify and
hold harmless, and provide advancement of expenses to, all past
and present officers and directors of NetApp and its
subsidiaries against all losses or liabilities incurred in their
capacities as such to the fullest extent permitted by applicable
laws.
The merger agreement provides that NetApp shall maintain in
effect Data Domains current directors and
officers liability insurance for a period of six
(6) years, NetApp may substitute the policies of NetApp or
the surviving entity, so long as the policies are no less
favorable in the aggregate to the directors and officers of Data
Domain than Data Domains current policy. Additionally,
NetApp is not required to incur annual premium expenses in
excess of two hundred percent (200%) of the amount paid by Data
Domain for coverage for its last fiscal year. Prior to the
effective time, Data Domain may also obtain a prepaid
tail directors and officers liability
insurance policy with a claims period of six years following the
effective time of the merger.
Conditions
to Complete the Merger
Conditions
to the Obligations of NetApp and Data Domain
The respective obligations of Data Domain and NetApp to complete
the first-step merger are subject to the satisfaction or waiver
of certain conditions, including:
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the effectiveness of the registration statement of which this
proxy statement/prospectus is a part with respect to the NetApp
common stock to be issued in the merger under the Securities Act
and the absence of any stop order or proceedings initiated or
threatened by the SEC for that purpose;
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the approval of the merger proposal by Data Domain stockholders;
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the expiration or termination of all applicable waiting periods
under the HSR Act;
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the approval of the listing of the NetApp common stock to be
issued in the merger on the NASDAQ Global Select Market, subject
to official notice of issuance; and
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the absence of any order, decree or injunction, or the threat of
any order decree or injunction, by any court or other
governmental entity or other law that prohibits or makes illegal
completion of the transactions contemplated by the merger
agreement.
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Conditions
to the Obligations of NetApp
The merger agreement provides that the obligations of NetApp,
Merger Sub One and Merger Sub Two to complete the first-step
merger are subject to the satisfaction or waiver of each of the
following conditions:
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the accuracy in all respects as of May 20, 2009 and the
closing date of certain representations and warranties made by
Data Domain in the merger agreement, relating to corporate
organization, authorization to enter into the merger agreement,
required consents, and inapplicability of state anti-takeover
statutes;
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the accuracy in all respects as of May 20, 2009 and the
closing date of certain representations and warranties made by
Data Domain in the merger agreement, relating to Data
Domains capitalization, other than inaccuracies in such
representations and warranties (i) that would not result in
the issuance or payment of an aggregate value of merger
consideration and consideration allocated to Data Domain stock
options, restricted stock and restricted stock units equal to or
in excess of 101% of the aggregate value of the merger
consideration otherwise issuable and payable and consideration
allocated to Data Domain stock options, restricted stock and
restricted stock units in the absence of such inaccuracies or
(ii) that would not result in the issuance of shares of
NetApp common stock equal to or in excess of 19.5% of the shares
of NetApp common stock outstanding as of immediately prior to
the effective time of the merger;
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the accuracy in all respects as of May 20, 2009 and the
closing date of the remaining representations and warranties not
qualified by material adverse effect made by Data
Domain in the merger agreement, provided that inaccuracies in
such representations and warranties will be disregarded to the
extent that such inaccuracies, individually or in the aggregate,
do not constitute, and would not reasonably be expected to have
or result in, a material adverse effect on Data Domain;
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the accuracy in all respects as of May 20, 2009 and the
closing date of the remaining representations and warranties
qualified by material adverse effect made by Data
Domain in the merger agreement;
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Data Domains performance, in all material respects, of all
of its obligations and compliance, in all material respects,
with all of its covenants or other agreements set forth in the
merger agreement that are required to be performed or complied
with by Data Domain at or prior to the effective time of the
first-step merger;
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no material adverse effect with respect to Data Domain having
occurred since May 20, 2009 that is continuing;
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Data Domains chief executive officer and chief financial
officer having delivered to NetApp a certificate confirming that
certain conditions have been satisfied; and
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there are no pending legal proceedings brought by a governmental
body seeking to restrain or prohibit the completion of any of
the transactions contemplated by the merger agreement or the
voting agreements, or the performance of any of the transactions
contemplated by the merger agreement or the voting agreements,
or seeking to prohibit or impose any limitations on the
ownership or operation by NetApp or any of its subsidiaries of
all or any portion of Data Domains businesses or assets,
or compelling NetApp or Data Domain or any of their subsidiaries
to dispose of or hold separate any portion of Data Domains
businesses or assets.
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Conditions
to the Obligations of Data Domain
The merger agreement provides that the obligations of Data
Domain to complete the first-step merger are subject to the
satisfaction or waiver of each of the following conditions:
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the accuracy in all respects as of the May 20, 2009 and the
effective time of the merger of certain representations and
warranties made by NetApp in the merger agreement, including
those relating to corporate organization, authorization to enter
into the merger agreement, and required consents;
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the accuracy in all respects as of May 20, 2009 and the
effective time of the merger of the remaining representations
and warranties not qualified by material adverse
effect made by NetApp in the merger agreement, provided
that inaccuracies in such representations and warranties will be
disregarded to the
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extent that such inaccuracies, individually or in the aggregate,
do not constitute, and would not reasonably be expected to have
or result in, a material adverse effect on NetApp;
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the accuracy in all respects as of May 20, 2009 and the
effective time of the merger of the remaining representations
and warranties qualified by material adverse effect
made by NetApp in the merger agreement;
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NetApps performance of or compliance with, in all material
respects, all of its agreements and covenants set forth in the
merger agreement that are required to be performed or complied
with by NetApp at or prior to the effective time of the
first-step merger;
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no material adverse effect with respect to NetApp having
occurred since May 20, 2009 that is continuing; and
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NetApps chief executive officer and chief financial
officer having delivered to Data Domain a certificate confirming
that certain conditions have been satisfied.
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Termination
of the Merger Agreement
The merger agreement provides that, at any time prior to the
completion of the first-step merger, NetApp and Data Domain may
terminate the merger agreement by mutual written consent.
The merger agreement also provides that, at any time prior to
the completion of the first-step merger, either NetApp or Data
Domain may terminate the merger agreement if:
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the merger has not been completed by December 31, 2009,
provided that if the failure to complete the merger by
December 31, 2009 is due solely to the failure to satisfy
certain closing conditions relating to the expiration or
termination of applicable waiting periods under the HSR Act,
orders, decrees or injunctions by any court or other
governmental entity relating to the merger, or legal proceedings
brought by a governmental body seeking to restrain or prohibit
the completion of any of the transactions contemplated by the
merger agreement, then the right to terminate the merger
agreement under this provision will not be available until
March 30, 2010;
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a court or governmental body has enacted or issued a law or a
final and non-appealable order prohibiting the completion of the
merger or any other transaction contemplated by the merger
agreement or otherwise rendering the merger illegal; or
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the Data Domain special stockholder meeting (including any
adjournments and postponements thereof) has been held, a final
vote on the approval of the merger proposal has been taken and
Data Domains stockholders do not approve the merger
proposal;
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provided that in each instance, the right to terminate the
merger agreement shall not be available to a company whose
action or failure to act has been the cause of any of the
conditions to the merger not being satisfied.
NetApps
Termination Rights
The merger agreement further provides that NetApp may terminate
the merger agreement at any time prior to the completion of the
first-step merger, either before or after the requisite approval
of Data Domains stockholders has been obtained, if:
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any of the following events have occurred (which are each
referred to as a Data Domain triggering event):
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Data Domain (and, in the case of (A), any of its representatives
or subsidiaries) breaches or violates in any material respect
the provisions of the merger agreement relating to
(A) prohibitions on the solicitation of other acquisition
proposals (other than an inadvertent breach that does not result
in an acquisition proposal), (B) Data Domains
obligation to hold a meeting of its stockholders for the purpose
of obtaining stockholder approval of the merger proposal, or
(C) Data Domains obligations in connection with its
board of directors recommendation that the Data Domain
stockholders adopt the merger agreement, which collectively are
referred to as the first Data Domain triggering event;
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the Data Domain board of directors or a committee of the board
of directors makes a board recommendation change;
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Data Domain fails to include in this proxy statement/prospectus
its board of directors recommendation in favor of the
adoption of the merger agreement;
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a tender or exchange offer relating to Data Domain common stock
is commenced and (A) Data Domain does not issue a public
statement (and make applicable SEC filings), within 10 business
days, reaffirming the Data Domain board of directors
recommendation of the merger and recommending rejection of the
tender or exchange offer or (B) at any time after such 10
business day period, Data Domain issues a press release or files
a
Schedule 14D-9
with the SEC relating to the tender or exchange offer that fails
to reaffirm its board of directors recommendation of the
merger and recommendation to reject the tender or exchange
offer; or
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the Data Domain board of directors fails to reaffirm its
recommendation in favor of the adoption of the merger agreement
within 10 business days after NetApp requests such a
reaffirmation;
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subject to certain limitations, there are inaccuracies of any
representation or warranty made by Data Domain in the merger
agreement, provided that if any inaccuracy is curable, NetApp
may not terminate the merger agreement under this provision
unless the inaccuracy remains uncured for a period of
30 days following notice thereof; or
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subject to certain limitations, Data Domain has breached any of
its covenants and obligations under the merger agreement,
provided that if any breach is curable, NetApp may not terminate
the merger agreement under this provision unless the breach
remains uncured for a period of 30 days following notice
thereof.
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Data
Domains Termination Rights
The merger agreement provides that Data Domain may terminate the
merger agreement at any time prior to the completion of the
first-step merger, either before or after the requisite approval
of Data Domains stockholders has been obtained, if:
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subject to certain limitations, there are inaccuracies of any
representation or warranty made by NetApp in the merger
agreement, provided that if any inaccuracy is curable, Data
Domain may not terminate the merger agreement under this
provision unless the inaccuracy remains uncured for a period of
30 days following notice thereof; or
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subject to certain limitations, NetApp has breached any of its
covenants and obligations under the merger agreement, provided
that if any breach is curable, Data Domain may not terminate the
merger agreement under this provision unless the breach remains
uncured for a period of 30 days following notice thereof.
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Finally, the merger agreement provides that Data Domain may
terminate the merger agreement at any time prior to Data
Domains special stockholder meeting, if all of the
following conditions are satisfied, referred to as the superior
proposal termination event:
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Data Domain has received an unsolicited, written acquisition
proposal and Data Domains board of directors determines in
good faith, after consultation with its financial advisor and
outside legal counsel, that such acquisition proposal
constitutes a superior proposal (as described in Data Domain
Proposal 1 The Merger Data
Domains Reasons for the Merger; Recommendation of the Data
Domain Board of Directors);
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neither Data Domain nor any of its subsidiaries nor any of their
respective representatives has materially breached or violated
any of the non-solicitation provisions of the merger agreement
with such superior proposal or in connection with any other
acquisition proposal made by any other person;
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Data Domains board of directors has determined in good
faith (after consultation with its financial advisor and its
outside legal counsel) that, in light of the superior proposal,
the failure to terminate the merger agreement is reasonably
likely to be a breach of the board of directors fiduciary
duties to Data Domains stockholders under Delaware law;
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Data Domains board of directors has given NetApp at least
five business days prior written notice of the superior
proposal, which notice must include the identity of the persons
making the superior proposal, all of the material terms and
conditions of the superior proposal, copies of the superior
proposal as well as related agreements and material documents
(if available in written form), a statement that Data
Domains board of directors intends to terminate the merger
agreement in response to such superior proposal, and an
opportunity for NetApp to meet with Data Domains board of
directors, financial advisors and outside legal counsel at such
times as NetApp may reasonably request for the purpose of
enabling NetApp and Data Domain to discuss in good faith any
modifications to the terms and conditions of the merger
agreement that NetApp may propose in response to the superior
proposal;
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after such five business day period and any extensions thereof
and, if requested by NetApp, meetings with NetApp and its
financial advisors and legal counsel during such period,
(i) NetApp has not made a proposal at least as favorable or
more favorable to Data Domains stockholders as such
acquisition proposal and (ii) Data Domains board of
directors has determined in good faith (after consultation with
its financial advisor its outside legal counsel) that, in light
of such superior proposal and after good faith consideration of
all proposals by NetApp, the failure to terminate the merger
agreement is reasonably likely to constitute a breach of the
board of directors fiduciary duties to Data Domains
stockholders under Delaware law; and
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concurrently with the termination of the merger agreement, Data
Domain enters into a definitive agreement for the superior
proposal and pays NetApp a fee of $57.0 million.
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Expenses
and Termination Fees
The merger agreement provides that except as provided below, all
fees and expenses incurred in connection with the merger
agreement and the merger will be paid by the party incurring
such expenses.
The merger agreement provides that Data Domain will pay NetApp a
termination fee of $57.0 million if any one of the
following events occur:
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(A) an acquisition proposal is publicly announced or
otherwise becomes generally publicly known after the date of the
merger agreement and prior to the date of the Data Domain
special stockholder meeting, (B) the merger agreement is
terminated by Data Domain or NetApp under the provision of the
merger agreement permitting such termination in the event that
the stockholders of Data Domain have voted not to adopt the
merger agreement (or the merger agreement is terminated by Data
Domain after such vote for any other reason), and
(C) within twelve months following the termination of the
merger agreement, Data Domain either closes a specified
acquisition transaction (as defined below) or enters into a
letter of intent, memorandum of understanding or other agreement
with any third party providing for a specified acquisition
transaction and such specified acquisition transaction or any
other specified acquisition transaction is subsequently
completed (whether or not such transaction is completed within
twelve months following the termination of the merger agreement);
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(A) an acquisition proposal is publicly announced or
otherwise becomes publicly known after May 20, 2009 and
prior to the date of the Data Domain special stockholder
meeting, (B) the merger agreement is terminated by Data
Domain or NetApp under the provision of the merger agreement
permitting such termination in the event that the merger is not
completed by December 31, 2009 (or by NetApp at such later
date as described in The Merger Agreement
Termination of the Merger Agreement), and (C) within
twelve months following the termination of the merger agreement,
Data Domain either closes a specified acquisition transaction or
enters into a letter of intent, memorandum of understanding or
other agreement with any third party providing for a specified
acquisition transaction and such specified acquisition
transaction or any other specified acquisition transaction is
subsequently completed (whether or not such transaction is
completed within twelve months following the termination of the
merger agreement);
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(A) the merger agreement is terminated by NetApp as a
result of a Data Domain triggering event, or (B) the merger
agreement is terminated due to a failure of Data Domain to
obtain stockholder approval of the merger proposal and such
termination is preceded by a Data Domain triggering event (other
than the first Data
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Domain triggering event) (as defined in The Merger
Agreement Termination of the Merger
Agreement NetApps Termination Rights); or
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the merger agreement is terminated pursuant to a superior
proposal termination event (as described in The Merger
Agreement Termination of the Merger
Agreement Data Domains Termination
Rights).
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A specified acquisition transaction has the same
meaning as an acquisition transaction except all
references to 15% or 85% are replaced by
50%.
In addition, the merger agreement provides that if the merger
agreement is terminated by either NetApp or Data Domain after
the Data Domain special stockholder meeting (including any
adjournments and postponements thereof) has been held, a final
vote on the approval of the merger proposal has been taken and
Data Domains stockholders do not approve the merger
proposal, Data Domain will pay NetApp all of NetApps
out-of-pocket
fees and expenses incurred by NetApp and its affiliates on or
prior to the valid termination of the merger agreement in
connection with the transactions contemplated by the merger
agreement, but in no event more than $3 million.
If NetApp receives the $57.0 million termination fee, such
fee will be considered liquidated damages for any and all losses
or damages suffered or incurred by NetApp or its affiliates in
connection with the merger agreement or the merger (including
the abandonment of the merger), and neither NetApp nor any of
its affiliates will be entitled to bring any other claim, action
or proceeding against Data Domain or any of its affiliates
arising from the merger agreement or the merger (including the
abandonment of the merger).
Amendment
and Waiver
The merger agreement provides that the parties may amend the
merger agreement by written instrument signed by each of the
parties to the agreement. However, following approval of the
merger proposal by Data Domains stockholders, any
amendment that would require the approval of Data Domains
stockholders may not be made without such approval.
The merger agreement also provides that, at any time before
completion of the first-step merger, any party to the merger
agreement may:
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extend the time for the performance of any of the obligations or
other acts of the other parties to the merger agreement;
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waive any inaccuracies in the representations and warranties
made to such party contained in the merger agreement or in any
document delivered pursuant to the merger agreement; and
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waive compliance with any of the agreements or conditions for
the benefit of such party contained in the merger agreement.
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The parties will disclose any material amendments or waivers to
the merger agreement on a current report on
Form 8-K.
In addition, NetApp and Data Domain will issue a joint press
release concurrently with the filing of the
Form 8-K
to notify stockholders promptly upon the occurrence of a
material amendment or waiver to the merger agreement.
VOTING
AGREEMENTS
Voting
Agreements
As a condition and inducement to NetApps willingness to
enter into the merger agreement, NetApp has entered into voting
agreements with each of the beneficial owners of Data
Domains common stock listed on the table below. According
to the terms of such voting agreements, each party has agreed to
vote (or to cause the holder of record of such shares to so
vote) and has granted NetApp an irrevocable proxy to vote such
partys beneficially owned shares (i) in favor of the
merger proposal, (ii) against any proposal made in
opposition to or in competition with the merger or that would
result in a breach of the merger agreement, and
(iii) against certain other proposed business transactions
that would interfere with the merger, including transactions
that would result in any other
72
merger, the sale, lease or transfer of any significant part of
the assets of Data Domain or its subsidiaries or any material
change in Data Domains capitalization.
Subject to certain exceptions described in the voting
agreements, the parties to the voting agreements have agreed not
to sell, pledge, encumber, assign, grant options with respect
to, transfer, tender or dispose of the shares of Data Domain
common stock beneficially owned by such parties or to enter into
any agreement related to any of the foregoing transactions.
Subject to certain exceptions described in the voting
agreements, each of the parties to the voting agreements has
made representations and warranties to NetApp regarding, among
other things, such partys power and authority to enter
into the voting agreement and deliver the proxy, such
partys unencumbered beneficial ownership of the shares of
Data Domain common stock subject to the voting agreement, and
such partys sole voting power and sole power of
disposition with respect to such shares of common stock.
The voting agreements will terminate at the earliest to occur of
(i) the valid termination of the merger agreement,
(ii) the date on which Data Domain has received the
affirmative vote of the holders of a majority of the outstanding
shares of Data Domains common stock, voting together as a
single class, in favor of the merger proposal, or (iii) the
date on which the parties to the voting agreements have agreed
in writing to terminate such agreements.
As of May 22, 2009, the stockholders listed below together
owned 12,544,004 shares of Data Domain common stock, or
approximately 20.0% of the voting power of Data Domain common
stock. In addition, such stockholders hold Data Domain stock
awards to purchase an additional 4,628,797 shares of Data
Domain common stock.
73
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Number of
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Number of
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Shares of
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Shares of
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Common Stock
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Common Stock
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Issuable Upon
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Issuable Upon
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Number of
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Exercise of
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Settlement of
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Shares of
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Outstanding
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Restricted
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Parties to the Voting Agreement
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Common Stock
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Options
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Stock Units
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NEA Partners 10, L.P.
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31,977
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Scott D. Sandell
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115,000
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Nick Bacica
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160,000
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20,000
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New Enterprise Associates 10, L.P.
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8,637,152
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SHV Profit Sharing Plan FBO Ronald D. Bernal, Wells Fargo Bank,
Trustee
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25,650
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Ronald E. F. Codd
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100,000
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115,000
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Aneel Bhusri
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382,749
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115,000
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Bernal Family Trust U/D/T/11/3/95, Ronald Daniel
Bernal and Pamela Mayer Bernal, Trustees
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125,966
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Charles Ross Partners Investment Fund Number 29
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761
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The Codd Revocable Trust Dated 3/06/98, Ronald E. and Susan T.
Codd, Trustees
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10,000
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Frank Slootman
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1,602
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2,284,990
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50,000
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J. Miller 2007 Grantor Retained Annuity Trust
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112,100
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(1)
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Jeffrey A. Miller
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15,000
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K. Miller 2007 Grantor Retained Annuity Trust
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112,100
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(1)
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Kai Li
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659,956
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(2)
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215,000
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Michael P. Scarpelli
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137,554
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449,596
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25,000
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Miller Living Trust
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6,496
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Reed E. Hundt
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30,000
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195,000
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Ronald D. Bernal
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115,000
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Daniel R. McGee
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2,006
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394,984
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20,000
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David L. Schneider
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49,366
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315,893
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23,334
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Greylock XI Principals LLC
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195,948
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Greylock XI Limited Partnership
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1,712,529
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Greylock XI-A Limited Partnership
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47,819
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Schneider 2001 Living Trust, David & Barbara Schneider
Trustees, August 31, 2001
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162,273
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Includes 37,500 shares of restricted stock. |
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Includes 94,997 shares of restricted stock. |
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ACCOUNTING
TREATMENT
The merger will be accounted for using the purchase method of
accounting as a purchase of a business, as that
phrase is used under U.S. generally accepted accounting
principles, for accounting and financial reporting purposes.
Under the purchase method of accounting, the assets acquired
(including identifiable intangible assets) and liabilities
assumed (including executory contracts and other commitments)
from Data Domain as of the acquisition date (i.e., the
completion of the merger) will be recorded at their respective
fair values and added to those of NetApp. Any excess of purchase
price over the fair value of assets acquired and liabilities
assumed will be recorded as goodwill. The consolidated financial
statements of NetApp issued after the merger will reflect these
fair values and will not be restated retroactively to reflect
the historical financial position or results of operations of
Data Domain.
MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following summary represents the opinion of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, counsel
to NetApp, and Fenwick & West LLP, counsel to Data
Domain, with respect to the material U.S. federal income
tax consequences of the merger to U.S. holders of Data
Domain common stock who hold their stock as capital assets
(generally, for investment).
The summary is based on the Internal Revenue Code of 1986, as
amended, or the Code, the Treasury regulations issued under the
Code, and administrative rulings and court decisions in effect
as of the date of this proxy statement/prospectus, all of which
are subject to change at any time, possibly with retroactive
effect. For purposes of this discussion, the term
U.S. holder means:
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a citizen or resident of the United States;
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a corporation (including any entity treated as a corporation for
U.S. federal income tax purposes) created or organized
under the laws of the United States or any of its political
subdivisions;
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a trust that (i) is subject to the supervision of a court
within the United States and the control of one or more
U.S. persons or (ii) has a valid election in effect
under applicable U.S. Treasury regulations to be treated as
a U.S. person; or
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an estate that is subject to U.S. federal income tax on its
income regardless of its source.
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A
non-U.S. holder
means a beneficial owner of Data Domain common stock (other than
a partnership) that is not a U.S. holder. If a partnership
(including any entity or arrangement, domestic or foreign,
treated as a partnership for U.S. federal income tax
purposes) holds Data Domain common stock, the tax treatment of a
partner will generally depend on the status of the partners and
the activities of the partnership. If a holder is a partner in a
partnership holding Data Domain common stock, the holder should
consult its tax advisors.
This summary is not a complete description of all the tax
consequences of the merger and, in particular, may not address
U.S. federal income tax considerations applicable to
holders of Data Domain common stock who are subject to special
treatment under U.S. federal income tax law (including, for
example,
non-U.S. holders,
certain former citizens or residents of the United States,
financial institutions, dealers in securities, insurance
companies or tax-exempt entities, holders who acquired Data
Domain common stock pursuant to the exercise of an employee
stock option or right or otherwise as compensation, holders who
hold Data Domain restricted stock, holders exercising
dissenters rights or appraisal rights, and holders who
hold Data Domain common stock as part of a hedge, straddle,
constructive sale or conversion transaction). This summary does
not address the tax consequences of any transaction other than
the merger, whether or not such transaction is in connection
with the merger. This summary does not address the tax
consequences to any person who actually or constructively owns
5% or more of Data Domain common stock. Also, this summary does
not address U.S. federal income tax considerations
applicable to holders of options to purchase Data Domain common
stock, or holders of debt instruments convertible into Data
Domain common stock. In addition, no information is provided
with respect to the tax consequences of the merger under
applicable state, local or
non-U.S. laws
or under estate, gift, excise or other non-income tax laws.
75
The U.S. tax consequences of the merger depend on whether
the second-step merger occurs. The second-step merger will occur
only if Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel to NetApp, and Fenwick & West
LLP, counsel to Data Domain, deliver tax opinions to the effect
that the merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code. The tax
opinions are conditioned upon receipt of customary written
representations from NetApp and Data Domain, including
representations that continuity of interest test will be
satisfied, requiring that the Stock Consideration constitute at
least 40% of the total consideration paid or payable to Data
Domain stockholders in the first-step merger. The tax opinions
will be delivered, if at all, on the closing date of the
first-step merger.
Whether the continuity of interest test will be satisfied
depends primarily upon the market value of the NetApp common
stock immediately before the
first-step
merger. Other relevant factors may include (i) whether the
stock consideration is required to be decreased, and the cash
consideration correspondingly increased, so that the aggregate
amount of stock consideration issuable in the merger (including
the stock consideration issuable to the holders of Data Domain
options and restricted stock units) will not exceed 19.5% of the
outstanding shares of NetApp common stock immediately prior to
the first-step merger, as more fully described above,
(ii) the potential payment of cash to Data Domain
stockholders properly exercising appraisal rights under Delaware
law, and (iii) the amount of cash paid in the merger in
lieu of the issuance of fractional shares of NetApp common
stock. No assurances can be given that the continuity of
interest test will be met. As a result, in deciding whether to
approve the merger, you should consider the possibility that it
may be taxable to you because the continuity of interest test is
not satisfied and the second-step merger does not occur. You
will not be entitled to change your vote in the event that the
merger is taxable. In connection with the closing of the
first-step merger, NetApp will issue a press release announcing
whether the merger qualifies as a tax-free reorganization or is
a fully taxable transaction.
Neither the tax opinions nor the discussion that follows is
binding on the Internal Revenue Service, referred to as the IRS,
or the courts. The parties do not intend to request a ruling
from the IRS with respect to the merger. Accordingly, there can
be no assurance that the IRS will not challenge the discussion
below or the conclusions expressed in the tax opinions if they
are delivered, or that a court will not sustain such a challenge.
U.S.
Federal Income Tax Consequences to U.S. Holders If the Merger is
a Reorganization
If the second-step merger occurs and the merger qualifies as a
reorganization within the meaning of Section 368(a) of the
Code, a U.S. holder of Data Domain common stock receiving
NetApp common stock and cash in exchange for such Data Domain
common stock in the merger generally will recognize gain equal
to the lesser of (i) the amount of cash received by the
U.S. holder (excluding any cash received in lieu of
fractional shares) and (ii) the excess of the amount
realized by the U.S. holder over the
U.S. holders tax basis in the Data Domain common
stock (generally the purchase price paid by the U.S. holder
to acquire such stock). The amount realized by the
U.S. holder will equal the sum of the fair market value of
the NetApp common stock and the amount of cash (including any
cash received in lieu of fractional shares) received by the
U.S. holder. Losses will not be permitted to be recognized
by U.S. holders of Data Domain common stock in the merger,
except in connection with the receipt of cash in lieu of
fractional shares, as discussed below. Any gain recognized by a
U.S. holder of Data Domain common stock generally will be
long-term capital gain if the U.S. holders holding
period of the Data Domain common stock is more than one year,
and short-term capital gain if the U.S. holders
holding period is one year or less, at the time of the
first-step merger. Long-term capital gains of individuals are
eligible for reduced rates of taxation.
The aggregate tax basis of the NetApp common stock received
(including fractional shares deemed received and redeemed as
described below) will be equal to the aggregate tax basis of the
Data Domain common stock surrendered, reduced by the amount of
cash the U.S. holder of Data Domain common stock received
(excluding any cash received in lieu of fractional shares), and
increased by the amount of gain that the U.S. holder of
Data Domain common stock recognizes, but excluding any gain or
loss from the deemed receipt and redemption of fractional shares
described below. The holding period of NetApp common stock
received by a U.S. holder of Data Domain common stock in
the merger will include the holding period of the
U.S. holders Data Domain common stock.
For a U.S. holder who acquired different blocks of Data
Domain common stock at different times and at different prices,
realized gain or loss generally must be calculated separately
for each identifiable block of shares exchanged in the merger,
and a loss realized on the exchange of one block of shares
cannot be used to offset a gain
76
recognized on the exchange of another block of shares. If a
U.S. holder has differing bases or holding periods in
respect of shares of Data Domain common stock, the
U.S. holder should consult its tax advisor prior to the
exchange with regard to identifying the bases or holding periods
of the particular shares of NetApp common stock received in the
merger.
Cash received by a U.S. holder of Data Domain common stock
in lieu of fractional shares generally will be treated as if the
U.S. holder received the fractional shares in the merger
and then received the cash in redemption of the fractional
shares. The U.S. holder generally should recognize capital
gain or loss equal to the difference between the amount of the
cash received in lieu of fractional shares and the portion of
the U.S. holders tax basis allocable to the
fractional shares.
U.S. holders of shares of Data Domain common stock
receiving NetApp common stock and cash in the merger will be
required to retain records pertaining to the merger.
U.S. holders who owned at least 5% (by vote or value) of
the total outstanding Data Domain common stock before the
first-step merger or whose tax basis in the Data Domain common
stock surrendered pursuant to the first-step merger equals or
exceeds $1 million are subject to certain reporting
requirements with respect to the merger. U.S. holders are
urged to consult with their tax advisors with respect to these
and other reporting requirements applicable to the merger.
U.S.
Federal Income Tax Consequences to U.S. Holders If the
Second-Step Merger Does Not Occur
If the second-step merger does not occur, the exchange of Data
Domain common stock for NetApp common stock and cash in the
first-step merger will be a fully taxable transaction in which a
U.S. holder generally will recognize gain or loss equal to
the difference between the amount realized (as
defined above) and the U.S. holders tax basis in the
Data Domain common stock. Gain or loss must be calculated
separately for each identifiable block of shares (i.e., shares
acquired at different times and prices) exchanged in the
first-step merger. Any gain or loss recognized by a
U.S. holder of Data Domain common stock generally will be
long-term capital gain or loss if the U.S. holders
holding period of the Data Domain common stock is more than one
year, and short-term capital gain or loss if the
U.S. holders holding period is one year or less, at
the time of the first-step merger. Long-term capital gains of
individuals are eligible for reduced rates of taxation. The
deductibility of capital losses is subject to limitations. The
aggregate tax basis of a Data Domain stockholder in the NetApp
common stock received in the first-step merger will equal its
fair market value at the time of the closing, and the holding
period for the NetApp common stock will begin the day after the
closing.
Backup
Withholding
Backup withholding may apply with respect to the consideration
received by a holder of Data Domain common stock in the
first-step merger unless the holder is a corporation or comes
within certain other exempt categories and, when required,
demonstrates this fact, or provides a correct taxpayer
identification number (typically by completing and signing an
IRS
Form W-9),
certifies as to no loss of exemption from backup withholding and
that such holder is a U.S. person (including a
U.S. resident alien) and otherwise complies with applicable
requirements of the backup withholding rules. Further, a holder
of Data Domain common stock who does not provide NetApp (or the
exchange agent) with its correct taxpayer identification number
may be subject to penalties imposed by the IRS. Any amounts
withheld under the backup withholding rules may be allowed as a
refund or a credit against the holders federal income tax
liability, provided that the holder timely furnishes certain
required information to the IRS.
The foregoing discussion of U.S. federal income tax
consequences is not intended to constitute a complete
description of all tax consequences relating to the merger. The
tax consequences of the merger to a holder of Data Domain common
stock will depend upon the facts of a holders particular
situation. Because individual circumstances may differ, holders
of Data Domain common stock are urged to consult with their own
tax advisor regarding the applicability of the rules discussed
above and the particular tax effects of the merger, including
the application of state, local and foreign tax laws, and, in
the case of
non-U.S. holders,
possible eligibility for benefits under applicable income tax
treaties. NetApp will issue a press release announcing whether
the merger qualifies as a tax-free reorganization in connection
with the closing of the first-step merger.
77
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Introduction
to Unaudited Pro Forma Condensed Combined Financial
Statements
On May 20, 2009, NetApp entered into an Agreement and Plan
of Merger, referred to as the merger agreement, by and among
NetApp, Kentucky Merger Sub One Corporation, a wholly owned
subsidiary of NetApp, referred to as Merger Sub One, Derby
Merger Sub Two LLC, a wholly owned subsidiary of NetApp,
referred to as Merger Sub Two, and Data Domain. On June 3,
2009, NetApp and Data Domain amended the original merger
agreement to reflect the terms described in this proxy
statement/prospectus. The merger agreement provides for the
acquisition of Data Domain by NetApp by means of a merger of
Merger Sub One with and into Data Domain, referred to as the
first-step merger, with Data Domain as the interim surviving
entity, immediately followed by a merger of Data Domain, as the
interim surviving entity, with and into Merger Sub Two, referred
to as the second-step merger, with Merger Sub Two as the final
surviving entity.
The following unaudited pro forma condensed combined financial
statements are based on the historical consolidated financial
statements of NetApp and Data Domain after giving effect to the
acquisition of Data Domain by NetApp using the purchase method
of accounting in accordance with Statement of Financial
Accounting Standards (SFAS) No. 141(R), Business
Combinations, and applying the assumptions and adjustments
described in the accompanying notes. The unaudited pro forma
condensed combined balance sheet is presented as if the merger
had occurred on April 24, 2009. The unaudited pro forma
condensed combined statement of operations for the twelve months
ended April 24, 2009 is presented as if the merger had
occurred on April 26, 2008. The preliminary estimate of
purchase consideration is calculated as if the acquisition had
taken place on June 11, 2009. You should read this
information in conjunction with the:
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accompanying notes to the unaudited pro forma condensed combined
financial statements;
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separate audited historical consolidated financial statements of
NetApp as of and for the fiscal year ended April 24, 2009,
included in NetApps annual report on Form
10-K for the
fiscal year ended April 24, 2009, incorporated by reference
into this proxy statement/prospectus;
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separate unaudited historical condensed consolidated financial
statements of Data Domain as of and for the three months ended
March 31, 2009 included in Data Domains quarterly
report on
Form 10-Q
incorporated by reference into this proxy
statement/prospectus; and
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separate audited historical consolidated financial statements of
Data Domain as of and for the year ended December 31, 2008,
included in Data Domains annual report on
Form 10-K
for the year ended December 31, 2008, incorporated by
reference into this proxy statement/prospectus.
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As NetApp has a fiscal year ending on the last Friday in April
and Data Domain has a fiscal year ending on December 31,
the unaudited pro forma condensed combined balance sheet
combines the historical balances of NetApp as of April 24,
2009 with the historical balances of Data Domain as of
March 31, 2009, plus pro forma adjustments. In addition,
the unaudited pro forma condensed combined statement of
operations combines the historical results of NetApp for the
fiscal year ended April 24, 2009 with the historical
results of Data Domain for the twelve months ended
March 31, 2009 plus pro forma adjustments. Data
Domains historical results have been calculated by
combining its reported interim data for each quarter within the
respective period.
For ease of reference, the unaudited pro forma condensed
combined financial statements use NetApps period-end date
and no adjustments were made to Data Domains reported
information for the different quarter-end date. The pro forma
condensed combined financial statements are presented for
illustrative purposes only and are not necessarily indicative of
the financial position or results of operations that would have
been realized if the merger had been completed on the dates
indicated, nor is it indicative of future operating results or
financial position. The pro forma adjustments are based upon
available information and certain assumptions that NetApp
believes are reasonable.
The unaudited pro forma condensed combined financial statements
do not reflect any cost savings, operating synergies or revenue
enhancements that the combined company may achieve as a result
of the merger or the costs to
78
integrate the operations of NetApp and Data Domain or the costs
necessary to achieve these cost savings, operating synergies and
revenue enhancements.
Pursuant to the purchase method of accounting, the estimated
preliminary purchase price, calculated as described in
Notes 4 and 5 to the unaudited pro forma condensed combined
financial statements, has been preliminarily allocated to assets
acquired and liabilities assumed based on their respective fair
values. NetApps management has determined the preliminary
fair value of the intangible assets and tangible assets acquired
and liabilities assumed at the pro forma combined balance sheet
date. Any differences between the fair value of the
consideration issued and the fair value of the assets acquired
and liabilities assumed is recorded as goodwill. Since these
unaudited pro forma condensed combined financial statements have
been prepared based on preliminary estimates of purchase
consideration and fair values, the actual amounts recorded may
differ materially from the information presented. The estimation
and allocations of purchase consideration are subject to change
pending changes in the market value of NetApp common stock and
further review of the fair value of the assets acquired and
liabilities assumed. Additionally, the fair value of assets
acquired and liabilities assumed may be materially impacted by
the results of Data Domains operations up to the date of
completion of the merger. A final determination of these
estimated fair values will be based on the actual net tangible
and intangible assets of Data Domain that will exist on the date
of completion of the merger.
There were no significant intercompany transactions between
NetApp and Data Domain as of the dates and for the periods of
these pro forma condensed combined financial statements.
These unaudited pro forma condensed combined financial
statements should be read in conjunction with the historical
consolidated financial statements and notes thereto of NetApp
and Data Domain and other financial information pertaining to
NetApp and Data Domain including each companys
managements discussion and analysis of financial condition
and results of operations and risk factors incorporated by
reference or included herein. For a complete list of documents
incorporated by reference in this proxy statement/prospectus,
see Where You Can Find More Information beginning on
page 98.
79
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
|
|
|
|
|
|
|
NetApp
|
|
|
Data Domain
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
April 24, 2009
|
|
|
March 31, 2009
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,494,153
|
|
|
$
|
119,167
|
|
|
$
|
(1,051,034
|
)(a)
|
|
$
|
562,286
|
|
Short-term investments
|
|
|
1,110,053
|
|
|
|
127,685
|
|
|
|
|
|
|
|
1,237,738
|
|
Accounts receivable, net of allowances
|
|
|
446,537
|
|
|
|
60,563
|
|
|
|
|
|
|
|
507,100
|
|
Inventories
|
|
|
61,104
|
|
|
|
4,051
|
|
|
|
1,500
|
(b)
|
|
|
66,655
|
|
Prepaid expenses and other assets
|
|
|
119,887
|
|
|
|
4,737
|
|
|
|
|
|
|
|
124,624
|
|
Short-term deferred income taxes
|
|
|
207,050
|
|
|
|
8,517
|
|
|
|
|
|
|
|
215,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
3,438,784
|
|
|
|
324,720
|
|
|
|
(1,049,534
|
)
|
|
|
2,713,970
|
|
Property and equipment, net
|
|
|
807,923
|
|
|
|
39,333
|
|
|
|
|
|
|
|
847,256
|
|
Goodwill
|
|
|
680,986
|
|
|
|
|
|
|
|
1,463,671
|
(c)
|
|
|
2,144,657
|
|
Intangible assets, net
|
|
|
45,744
|
|
|
|
100
|
|
|
|
418,900
|
(d)
|
|
|
464,744
|
|
Long-term investments and restricted cash
|
|
|
127,317
|
|
|
|
30,931
|
|
|
|
(3,228
|
)(e)
|
|
|
155,020
|
|
Long-term deferred income taxes and other assets
|
|
|
372,065
|
|
|
|
5,629
|
|
|
|
|
|
|
|
377,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,472,819
|
|
|
$
|
400,713
|
|
|
$
|
829,809
|
|
|
$
|
6,703,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
137,826
|
|
|
$
|
10,804
|
|
|
$
|
|
|
|
$
|
148,630
|
|
Accrued compensation and related benefits
|
|
|
204,168
|
|
|
|
11,692
|
|
|
|
1,072
|
(f)
|
|
|
216,932
|
|
Other accrued liabilities
|
|
|
190,315
|
|
|
|
8,267
|
|
|
|
|
|
|
|
198,582
|
|
Accrual for GSA settlement
|
|
|
128,715
|
|
|
|
|
|
|
|
|
|
|
|
128,715
|
|
Income taxes payable
|
|
|
4,732
|
|
|
|
2,150
|
|
|
|
|
|
|
|
6,882
|
|
Deferred revenue
|
|
|
1,013,569
|
|
|
|
43,749
|
|
|
|
(10,937
|
)(g)
|
|
|
1,046,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,679,325
|
|
|
|
76,662
|
|
|
|
(9,865
|
)
|
|
|
1,746,122
|
|
1.75% convertible senior notes due 2013
|
|
|
1,265,000
|
|
|
|
|
|
|
|
|
|
|
|
1,265,000
|
|
Other long-term obligations
|
|
|
164,499
|
|
|
|
2,318
|
|
|
|
143,431
|
(h)
|
|
|
310,248
|
|
Long-term deferred revenue
|
|
|
701,649
|
|
|
|
31,985
|
|
|
|
(7,996
|
)(g)
|
|
|
725,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,810,473
|
|
|
|
110,965
|
|
|
|
125,570
|
|
|
|
4,047,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
437
|
|
|
|
|
|
|
|
44
|
(i)
|
|
|
481
|
|
Additional paid-in capital
|
|
|
2,971,995
|
|
|
|
308,619
|
|
|
|
701,324
|
(j)
|
|
|
3,981,938
|
|
Treasury stock at cost
|
|
|
(2,927,376
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,927,376
|
)
|
Retained earnings (deficit)
|
|
|
1,622,448
|
|
|
|
(17,420
|
)
|
|
|
1,420
|
(k)
|
|
|
1,606,448
|
|
Accumulated other comprehensive income (loss)
|
|
|
(5,158
|
)
|
|
|
(1,451
|
)
|
|
|
1,451
|
(l)
|
|
|
(5,158
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,662,346
|
|
|
|
289,748
|
|
|
|
704,239
|
|
|
|
2,656,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
5,472,819
|
|
|
$
|
400,713
|
|
|
$
|
829,809
|
|
|
$
|
6,703,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the unaudited pro forma condensed
combined financial statements, which are an integral part of
these statements. The pro forma adjustments are explained in
Note 6, Pro Forma Adjustments.
80
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
|
|
|
|
|
|
|
NetApp
|
|
|
Data Domain
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
Twelve Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
April 24, 2009
|
|
|
March 31, 2009
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
2,152,657
|
|
|
$
|
251,413
|
|
|
$
|
60
|
(m)
|
|
$
|
2,404,130
|
|
Software entitlements and maintenance
|
|
|
618,352
|
|
|
|
|
|
|
|
44,785
|
(m)
|
|
|
663,137
|
|
Service
|
|
|
764,099
|
|
|
|
|
|
|
|
4,248
|
(m)
|
|
|
768,347
|
|
Support and service
|
|
|
|
|
|
|
49,033
|
|
|
|
(49,033
|
)(m)
|
|
|
|
|
Ratable product and related support and services
|
|
|
|
|
|
|
60
|
|
|
|
(60
|
)(m)
|
|
|
|
|
GSA Settlement
|
|
|
(128,715
|
)
|
|
|
|
|
|
|
|
|
|
|
(128,715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
3,406,393
|
|
|
|
300,506
|
|
|
|
|
|
|
|
3,706,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product
|
|
|
1,007,642
|
|
|
|
67,112
|
|
|
|
45,154
|
(m),(n)
|
|
|
1,119,908
|
|
Cost of software entitlements and maintenance
|
|
|
9,179
|
|
|
|
|
|
|
|
15,724
|
(m)
|
|
|
24,903
|
|
Cost of service
|
|
|
399,657
|
|
|
|
|
|
|
|
2,365
|
(m)
|
|
|
402,022
|
|
Cost of support and services
|
|
|
|
|
|
|
18,089
|
|
|
|
(18,089
|
)(m)
|
|
|
|
|
Cost of ratable product and related support and services
|
|
|
|
|
|
|
4
|
|
|
|
(4
|
)(m)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
1,416,478
|
|
|
|
85,205
|
|
|
|
45,150
|
|
|
|
1,546,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,989,915
|
|
|
|
215,301
|
|
|
|
(45,150
|
)
|
|
|
2,160,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
1,186,141
|
|
|
|
125,311
|
|
|
|
36,600
|
(o)
|
|
|
1,348,052
|
|
Research and development
|
|
|
498,495
|
|
|
|
46,514
|
|
|
|
|
|
|
|
545,009
|
|
General and administrative
|
|
|
203,698
|
|
|
|
25,779
|
|
|
|
|
|
|
|
229,477
|
|
Restructuring charges
|
|
|
54,406
|
|
|
|
|
|
|
|
|
|
|
|
54,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
1,942,740
|
|
|
|
197,604
|
|
|
|
36,600
|
|
|
|
2,176,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
47,175
|
|
|
|
17,697
|
|
|
|
(81,750
|
)
|
|
|
(16,878
|
)
|
Other Income (Expenses), Net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
57,610
|
|
|
|
5,134
|
|
|
|
(5,582
|
)(p)
|
|
|
57,162
|
|
Interest expense
|
|
|
(26,865
|
)
|
|
|
|
|
|
|
|
|
|
|
(26,865
|
)
|
Loss on investments, net
|
|
|
(29,571
|
)
|
|
|
|
|
|
|
|
|
|
|
(29,571
|
)
|
Other expense, net
|
|
|
(3,520
|
)
|
|
|
(2,634
|
)
|
|
|
|
|
|
|
(6,154
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net
|
|
|
(2,346
|
)
|
|
|
2,500
|
|
|
|
(5,582
|
)
|
|
|
(5,428
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
44,829
|
|
|
|
20,197
|
|
|
|
(87,332
|
)
|
|
|
(22,306
|
)
|
Provision (benefit) for income taxes
|
|
|
(41,716
|
)
|
|
|
95
|
|
|
|
(32,313
|
)(q)
|
|
|
(73,934
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
86,545
|
|
|
$
|
20,102
|
|
|
$
|
(55,019
|
)
|
|
$
|
51,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.26
|
|
|
$
|
0.34
|
|
|
|
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.26
|
|
|
$
|
0.30
|
|
|
|
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Used in Net Income per Share Calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
330,279
|
|
|
|
59,129
|
|
|
|
(14,923
|
)(r)
|
|
|
374,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
334,575
|
|
|
|
66,270
|
|
|
|
(19,651
|
)(s)
|
|
|
381,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the unaudited pro forma condensed
combined financial statements, which are an integral part of
these statements. The pro forma adjustments are explained in
Note 6, Pro Forma Adjustments.
81
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
|
|
1.
|
Description
of Transaction
|
On May 20, 2009, NetApp entered into an Agreement and Plan
of Merger, referred to as the merger agreement, by and among
NetApp, Kentucky Merger Sub One Corporation, a wholly owned
subsidiary of NetApp, referred to as Merger Sub One, Derby
Merger Sub Two LLC, a wholly owned subsidiary of NetApp,
referred to as Merger Sub Two, and Data Domain. On June 3,
2009, NetApp and Data Domain amended the original merger
agreement to reflect the terms described in this proxy
statement/prospectus. The merger agreement provides for the
acquisition of Data Domain by NetApp by means of a merger of
Merger Sub One with and into Data Domain, referred to as the
first-step merger, with Data Domain as the interim surviving
entity, immediately followed by a merger of Data Domain, as the
interim surviving entity, with and into Merger Sub Two, referred
to as the second-step merger, with Merger Sub Two as the final
surviving entity.
Upon the completion of the first-step merger, Data Domain will
become a wholly owned subsidiary of NetApp, and each share of
Data Domain common stock issued and outstanding immediately
prior to the completion of the first-step merger, will be
cancelled and converted into the right to receive, subject to
adjustment as described below, a combination of $16.45 in cash,
or the cash consideration, without interest and less any
required withholding, and a certain number of shares of NetApp
common stock, or the stock consideration, and together with the
cash consideration, the merger consideration. The number of
shares of NetApp Common Stock issuable in exchange for Data
Domain common stock will be determined by dividing $13.55 by the
closing average, defined as the average closing price of NetApp
common stock on the NASDAQ Global Select Market for the 10
consecutive trading days ending on the third trading day
immediately prior to the closing date of the first-step merger;
provided, that if the closing average is less than $17.41, each
share of Data Domain common stock will be exchangeable for
0.7783 shares of NetApp common stock and if the closing
average is greater than $21.27, each share of Data Domain common
stock will be exchangeable for 0.637 shares of NetApp
common stock. In the event that the exchange ratio is greater
than or equal to 0.7006 and less than 0.7783, NetApp, in its
sole discretion, may (a) reduce the stock consideration by
such amount as NetApp may determine and (b) increase the
cash consideration by an amount equal to the product of
(i) the amount of such reduction in the stock consideration
multiplied by (ii) the closing average. However, NetApp may
not reduce the amount of the stock consideration and increase
the cash consideration as described in the immediately preceding
sentence to the extent that it would reasonably be expected to
cause the merger to fail to qualify as a tax-free reorganization
under the Internal Revenue Code. In addition, if the aggregate
amount of the stock consideration issuable in the merger
(including the stock consideration issuable to holders of Data
Domain options and restricted stock units) would exceed 19.5% of
the outstanding shares of NetApp common stock immediately prior
to the effective time of the first-step merger, the stock
consideration will be decreased to the minimum extent necessary
so that no more than 19.5% of the outstanding shares of NetApp
common stock will be issued in the merger (with such percentage
measured immediately prior to the effective time of the
first-step merger). In such event, the cash consideration will
be increased by an amount equal to the product of (a) the
amount of the reduction in the stock consideration multiplied by
(b) the closing average. In the event that the stock
consideration is decreased in accordance with the immediately
preceding sentence, the merger may fail to qualify as a tax-free
reorganization under the Internal Revenue Code.
Upon the completion of the first-step merger, each outstanding
Data Domain stock option, whether or not then vested and
exercisable, will be assumed and converted by NetApp. In
accordance with its terms and the requirements of applicable
law, each option shall (i) be converted into an option to
acquire that number of shares of NetApp common stock equal to
the product obtained by multiplying (x) the number of
shares of Data Domain common stock subject to such option, by
(y) the option exchange ratio, rounded down to the nearest
whole share, and (ii) have an exercise price per share
equal to the quotient obtained by dividing (x) the per
share exercise price of Data Domain common stock subject to such
option, by (y) the option exchange ratio, rounded up to the
nearest cent. The option exchange ratio is calculated as the sum
of (x) the stock consideration to be received pursuant to
the merger agreement for a share of Data Domain common stock
plus (y) the quotient obtained by dividing (1) the
cash consideration to be received pursuant to the merger
agreement for a share of Data Domain common stock, by
(2) the average closing sales prices of NetApps
common stock, rounded to the nearest one-hundredth of a cent,
for the ten most recent consecutive trading days ending on the
third trading day immediately prior to the effective time of the
82
merger. Each assumed and converted option shall otherwise be
subject to the same terms and conditions (including as to
vesting and exercisability) as were applicable to the option
immediately prior to the completion of the first-step merger.
Each of Data Domains unvested restricted stock units and
shares of restricted stock outstanding at the effective time of
the first-step merger shall be assumed and converted into
restricted stock units or shares of restricted stock, as
applicable, representing the right to receive merger
consideration payable for shares of Data Domain underlying each
assumed and converted restricted stock unit or restricted share,
as applicable. Each assumed and converted restricted stock unit
and share of restricted stock shall otherwise be subject to the
same terms and conditions, including vesting restrictions, as
were applicable to such award immediately prior to the
completion of the first-step merger.
The merger is subject to Data Domain stockholder approval and
regulatory approvals and other usual and customary closing
conditions. The merger is expected to be completed within 60 to
120 days following May 20, 2009, the date when the
original merger agreement was signed.
The unaudited pro forma condensed combined financial statements
were prepared in accordance with Securities and Exchange
Commission
Regulation S-X
Article 11, using the purchase method of accounting based
on Statement of Financial Accounting Standard (SFAS)
No. 141R, Business Combinations, which NetApp adopted on
April 25, 2009, and are based on the historical financial
statements of NetApp and Data Domain after giving effect to the
cash to be paid and the stock to be issued by NetApp to
consummate the acquisition, as well as certain reclassifications
and pro forma adjustments. As NetApp has a fiscal year ending on
the last Friday in April and Data Domain has a fiscal year
ending on December 31, the unaudited pro forma condensed
combined balance sheet combines the historical balances of
NetApp as of April 24, 2009 with the historical balances of
Data Domain as of March 31, 2009, plus pro forma
adjustments. In addition, the unaudited pro forma condensed
combined statement of operations combines the historical results
of NetApp for the year ended April 24, 2009 with the
historical results of Data Domain for the twelve months ended
March 31, 2009, plus pro forma adjustments. Data
Domains historical results have been calculated by
combining its reported interim data for each quarter within the
respective period. For ease of reference, these pro forma
statements use NetApps respective period end dates. In
addition, no adjustments were made to Data Domains
reported information for its respective historical three-month
periods included in the unaudited pro forma condensed combined
financial statements. Certain reclassifications have been made
to the historical financial statements of Data Domain to conform
with NetApps presentation, primarily related to the
presentation of revenues and the associated cost of revenues.
The unaudited pro forma condensed combined balance sheet is
presented as if the merger had occurred on April 24, 2009.
The unaudited pro forma condensed combined statement of
operations for the twelve months ended April 24, 2009 is
presented as if the merger had occurred on April 26, 2008.
The preliminary estimate of purchase consideration is calculated
as if the acquisition had taken place on June 11, 2009.
SFAS No. 141R requires, among other things, that most
assets acquired and liabilities assumed be recognized at their
fair values, as determined in accordance with
SFAS No. 157, Fair Value Measurements, as of the
acquisition date and that the fair value of acquired in-process
research and development be recorded on the balance sheet
regardless of the likelihood of success as of the acquisition
date. In addition, SFAS No. 141R establishes that the
consideration transferred be measured at the closing date of the
merger at the then-current market price, which may be different
than the amount of consideration assumed in these unaudited pro
forma condensed combined financial statements.
SFAS No. 157, as amended, defines the term fair
value and sets forth the valuation requirements for any
asset or liability measured at fair value, expands related
disclosure requirements and specifies a hierarchy of valuation
techniques based on the nature of the inputs used to develop the
fair value measures. Fair value is defined in
SFAS No. 157, as amended, as the price that
would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants
at the measurement date. This is an exit price concept for
the valuation of the asset or liability. In addition, market
participants are assumed to be buyers and sellers in the
principal (or the most advantageous) market for the asset or
liability. Fair value measurements for an asset assume the
highest and best use by these market participants. As a result
of these standards, NetApp may be required to
83
record assets which are not intended to be used or sold
and/or to
value assets at fair value measures that do not reflect
NetApps intended use of those assets. Many of these fair
value measurements can be highly subjective and it is also
possible that other professionals, applying reasonable judgment
to the same facts and circumstances, could develop and support a
range of alternative estimated amounts.
Under the purchase method of accounting, the assets acquired and
liabilities assumed will be recorded as of the completion of the
merger, primarily at their respective fair values and added to
those of NetApp. Financial statements and reported results of
operations of NetApp issued after completion of the merger will
reflect these values, but will not be retroactively restated to
reflect the historical financial position or results of
operations of Data Domain.
Under SFAS No. 141R, acquisition-related transaction
costs (i.e., advisory, legal, valuation, other professional
fees) and certain acquisition-related restructuring charges
impacting the target company are expensed in the period in which
the costs are incurred. Total advisory, legal, regulatory and
valuation costs expected to be incurred by NetApp are estimated
to be approximately $14 million to $18 million. An
estimated $16 million of these transaction costs have been
reflected in the unaudited pro forma condensed combined balance
sheet; however, these costs have been excluded from the
unaudited pro forma condensed combined statement of operations.
The transaction costs for Data Domain are estimated to be
$18 million. Data Domains expenses and cash outflows
have not been reflected in the unaudited pro forma condensed
combined balance sheet and statement of operations.
Upon completion of the merger, NetApp will further review Data
Domains accounting policies. As a result of that review,
it may become necessary to harmonize the combined entitys
financial statements to conform to those accounting policies
that are determined to be more appropriate for the combined
entity.
|
|
4.
|
Preliminary
Estimate of Consideration Expected to be Transferred
|
The following is a preliminary estimate of consideration
expected to be transferred to effect the acquisition of Data
Domain.
|
|
|
|
|
Purchase Price:
|
|
(In thousands)
|
|
|
Cash
|
|
$
|
1,035,034
|
|
Common stock
|
|
|
880,593
|
|
Assumed and converted stock options
|
|
|
241,501
|
|
Assumed and converted restricted stock units
|
|
|
41,089
|
|
|
|
|
|
|
Total purchase price
|
|
|
2,198,217
|
|
|
|
|
|
|
Portion of assumed stock options and restricted stock units that
are unearned or otherwise subject to future service requirements
and therefore will be expensed in the financial statements
prospectively rather than included in the purchase accounting
|
|
|
(153,196
|
)
|
|
|
|
|
|
Net purchase price
|
|
$
|
2,045,021
|
|
|
|
|
|
|
The preliminary estimate of merger consideration is calculated
as if the acquisition had taken place on June 11, 2009,
based upon NetApps closing common stock price of $19.92.
As described in Note 1. Description of Transaction, the
total purchase price can change based on the average closing
price for NetApp common stock prior to closing.
The cash consideration is calculated by multiplying the
estimated outstanding common shares of Data Domain as of
June 11, 2009 of approximately 63 million by the
agreed cash consideration amount of $16.45 per share.
The stock consideration has been calculated using an exchange
ratio of .7026 NetApp shares per Data Domain share. The exchange
ratio has been calculated as $13.55 divided by the average
closing price for NetApp common stock for the 10 business days
from May 26, 2009 to June 8, 2009 of $19.286. The
stock consideration has been
84
determined by multiplying the resulting approximately
44 million NetApp shares to be issued to Data Domain
stockholders with the closing price on June 11, 2009 of
$19.92.
Based on the option exchange ratio in the agreement Data
Domains outstanding options have been assumed and
converted into approximately 19 million NetApp options
using an exchange ratio of 1.5555 NetApp options per Data
Domain option. The fair value of the assumed and converted
options have been estimated using a Black-Scholes valuation
model with the following weighted-average assumptions:
volatility of 47.58%; risk-free interest rate of 0.50% to 3.05%,
average expected remaining life of 2.1 years and dividend
yield of zero.
Based on the same exchange ratio as described above for Common
Stock, Data Domains outstanding restricted stock units and
restricted stock awards have been assumed and converted into
approximately 1 million NetApp restricted stock units. Upon
vesting, the holders will receive $16.45 in cash per unit and
NetApp shares based on a conversion ratio of .7026. The fair
value of the assumed and converted restricted stock units has
been estimated using the closing price of NetApps common
stock as of June 11, 2009.
The expense associated with the portion of the assumed and
converted stock options and restricted stock units that are
subject to future service requirements and therefore not
included in the purchase accounting have not been included in
the pro forma statement of operations.
|
|
5.
|
Estimate
of Assets to be Acquired and Liabilities to be Assumed
|
The following is a preliminary estimate of the assets to be
acquired and the liabilities to be assumed by NetApp in the
merger, reconciled to the estimate of the consideration expected
to be transferred:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Net tangible assets acquired
|
|
$
|
289,648
|
|
Other asset/liability adjustments related to:
|
|
|
|
|
Inventory(a)
|
|
|
1,500
|
|
Deferred revenue(b)
|
|
|
18,933
|
|
Other(c)
|
|
|
(4,300
|
)
|
Acquired intangibles(d)
|
|
|
419,000
|
|
Deferred tax liability(e)
|
|
|
(143,431
|
)
|
Goodwill(f)
|
|
|
1,463,671
|
|
Contingencies(g)
|
|
|
|
|
|
|
|
|
|
Total preliminary estimated purchase price
|
|
$
|
2,045,021
|
|
|
|
|
|
|
|
|
|
a) |
|
As of the effective date of the merger, inventories are required
to be measured at fair value. NetApp does not have detailed
information at this time as to the specific finished goods on
hand, evaluation units, or the specific types and nature of raw
materials and supplies. The preliminary fair values adjustment
to inventory is $1.5 million primarily to the finished
goods inventory and evaluation units of Data Domain. |
|
b) |
|
Data Domains deferred revenue relates primarily to support
and service obligations, which are deferred and recognized
ratably over the term of each agreement. The preliminary fair
values have been estimated based on preliminary assumptions and
will be updated upon the closing of the acquisition. |
|
c) |
|
Other relates to certain assets that will not be assumed by
NetApp and an additional liability for cash settlement of earned
restricted stock units. |
|
d) |
|
As of the effective date of the merger, identifiable intangible
assets are required to be measured at fair value and these
acquired assets could include assets that are not intended to be
used or sold or that are intended to be used in a manner other
than their highest and best use. For purposes of these unaudited
pro forma condensed combined financial statements, it is assumed
that all assets will be used and that all assets will be used in
a manner that represents the highest and best use of those
assets. |
|
|
|
Under the HSR Act and other relevant laws and regulations, there
are significant limitations regarding what NetApp can learn
about the specifics of the Data Domain intangible assets.
Obtaining the necessary information to complete the valuation of
such intangible assets could take several months. As a result,
the final |
85
|
|
|
|
|
determination of the values of such intangible assets will
differ from these preliminary valuations and the differences
could be material. As of the completion of the acquisition,
NetApp will update the preliminary valuation of the acquired
intangible assets. |
|
|
|
The identifiable intangible assets acquired are as follows: |
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
Estimated
|
|
Acquired Intangible Assets:
|
|
Fair Value
|
|
|
Useful Life
|
|
|
|
(in thousands)
|
|
|
Existing technology
|
|
$
|
217,000
|
|
|
|
5 years
|
|
In-process research and development
|
|
|
17,500
|
|
|
|
5 years
|
|
Existing customer relationships
|
|
|
147,500
|
|
|
|
5 years
|
|
Trade name
|
|
|
35,500
|
|
|
|
5 years
|
|
Backlog
|
|
|
1,500
|
|
|
|
1 year
|
|
|
|
|
|
|
|
|
|
|
Total acquired intangible assets
|
|
$
|
419,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Existing technology acquired primarily consists of
Data Domains data invulnerability architecture,
stream-informed segment layout architecture, replication
technology and global compression. For the purposes of these pro
forma financial statements it is assumed that these assets will
be amortized using the straight line method over an estimated
useful life of 5 years.
|
|
|
|
In-process research and development relates to
R&D projects that as of the acquisition date have not been
completed. Acquired in-process research and development assets
are initially recognized at fair value and are classified as
indefinite-lived assets until the successful completion or
abandonment of the associated research and development efforts.
Accordingly, during the development period after the acquisition
date, these assets will not be amortized into earnings; instead
these assets will be subject to periodic impairment testing.
Upon successful completion of the development process for an
acquired in-process research and development project,
determination as to the useful life of the asset will be made;
at that point in time, the asset would then be considered a
finite-lived intangible asset and NetApp would begin to amortize
the asset into earnings. For the purposes of these pro forma
financial statements it is assumed that it will take
approximately 6 months to complete the on-going projects
and that the acquired asset then will be amortized using the
straight line method over an estimated useful life of
5 years.
|
|
|
|
Existing customer relationships consists of Data
Domains contractual relationships and customer loyalty
especially related to their resellers, value added resellers,
distributors and direct end customers. For the purposes of these
pro forma financial statements it is assumed that these assets
will be amortized using the straight line method over an
estimated useful life of 5 years.
|
|
|
|
Trade name primarily relates to the Data Domain
brand and their various registered product names. For the
purposes of these pro forma financial statements it is assumed
that these assets will be amortized using the straight line
method over an estimated useful life of 5 years.
|
|
|
|
Backlog relates to Data Domains backlog as of
the date of the acquisition. It is expected that this asset will
be amortized within the first year after the acquisition.
|
|
e) |
|
To record the net deferred tax liability associated with the
estimated fair value adjustment of assets to be acquired and
liabilities to be assumed, offset by the deferred tax asset
associated with assumed stock options and restricted stock
units, recorded at an estimated 37% weighted average statutory
tax rate in the jurisdictions where the fair value adjustments
may occur, primarily the United States of America. |
|
f) |
|
Goodwill is calculated as the difference between the preliminary
acquisition date fair value of the consideration expected to be
transferred and the values assigned to the assets acquired and
liabilities assumed. Goodwill is not amortized. |
|
g) |
|
As of the effective date of the merger, except as specifically
excluded, contingencies are required to be measured at fair
value, if the acquisition-date fair value of the asset or
liability arising from a contingency can be determined. NetApp
has currently not identified any pre-acquisition contingencies
where a liability is probable and the amount of the liability
can be reasonably estimated. If information becomes available
prior to the end of the purchase price measurement period, which
would indicate that a liability which existed at the |
86
|
|
|
|
|
acquisition date, is probable and the amount can be reasonably
estimated, such items will be included in the purchase price
allocation and result in additional goodwill. |
|
|
|
In addition, Data Domain has recorded provisions for uncertain
tax positions. Income taxes are exceptions to both the
recognition and fair value measurement principles of SFAS
No. 141R, as amended, and continue to be accounted for
under the guidance of SFAS No. 109, Accounting for
Income Taxes (SFAS 109), as amended, and related
interpretative guidance. As such, the combined company would
continue to account for the Data Domain uncertain tax positions
using Interpretation No. 48, Accounting for Uncertainty
in Income Taxes an interpretation of FASB Statement
No. 109 (FIN 48). NetApp has currently not
identified any basis for modifying Data Domains current
application of these standards. Therefore, for the purpose of
these unaudited pro forma condensed combined financial
statements, NetApp has not adjusted the Data Domain recorded
book values for uncertain tax positions. This assessment is
preliminary and subject to change. |
This note should be read in conjunction with Note 1.
Description of Transaction; Note 2. Basis of
Presentation; Note 4. Estimate of Consideration
Expected to be Transferred; and Note 5. Estimate of
Assets to be Acquired and Liabilities to be Assumed.
Adjustments included in the column under the heading Pro
Forma Adjustments represent the following:
a) To record the cash portion of the merger consideration
estimated to be $1,035.0 million, as well as the estimated
transaction costs of NetApp of approximately $16.0 million.
b) To adjust acquired inventory to an estimate of fair
value. NetApps cost of sales will reflect the increased
valuation of Data Domains inventory as the acquired
inventory is sold, which for purposes of these unaudited pro
forma condensed combined financial statements is assumed will
occur within the first year post-acquisition. There is no
continuing impact of the acquired inventory adjustment on the
combined operating results and as such is not included in the
unaudited pro forma condensed combined statement of operations.
c) To record goodwill as a result of the merger.
d) To record intangible assets acquired as a result of the
merger and eliminate historical Data Domain intangible assets,
as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Eliminate Data Domains historical intangible assets
|
|
$
|
(100
|
)
|
Estimated fair value of intangible assets acquired
|
|
|
419,000
|
|
|
|
|
|
|
Total
|
|
$
|
418,900
|
|
|
|
|
|
|
e) To adjust the fair value of Data Domains long-term
investments and restricted cash.
f) To record the earned portion of assumed restricted stock
units that will be settled in cash.
g) To adjust the carrying value of deferred revenue to the
estimated fair value and write-off deferred revenue where no
legal performance obligation exists subsequent to the closing of
the merger.
h) To record the net deferred tax liability associated with
the estimated fair value adjustment of assets to be acquired and
liabilities to be assumed, offset by the deferred tax asset
associated with assumed stock options and restricted stock
units, recorded at an estimated 37% weighted average statutory
tax rate in the jurisdictions where the fair value adjustments
may occur, primarily the United States of America.
i) To adjust for the par value of the additional NetApp
common shares issued as part of the merger.
87
j) To record the common shares issued as a portion of the
merger consideration, at fair value less par, and to eliminate
Data Domains additional paid-in capital, as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Eliminate Data Domain additional paid in capital
|
|
$
|
(308,619
|
)
|
Issuance of NetApp common stock, par value
|
|
|
(44
|
)
|
Issuance of NetApp common stock
|
|
|
880,593
|
|
Additional Data Domain stock options assumed by NetApp
|
|
|
241,501
|
|
Additional Data Domain restricted stock units assumed and
converted by NetApp
|
|
|
41,089
|
|
Portion of assumed stock options and restricted stock units that
are unearned or otherwise subject to future service requirements
and therefore will be expensed in the financial statements
prospectively rather than included in the purchase accounting
|
|
|
(153,196
|
)
|
|
|
|
|
|
Total
|
|
$
|
701,324
|
|
|
|
|
|
|
k) To eliminate Data Domains accumulated deficit of
$17.4 million, and to reflect NetApps estimated
transaction costs of approximately $16.0 million.
l) To eliminate Data Domains accumulated other
comprehensive loss.
m) To reclassify certain Data Domain historical revenue and
cost of revenue amounts to conform to NetApp reporting
methodology.
n) Related to the amortization of purchased existing
technologies and in-process research and development included as
a part of the cost of sales for the product revenue stream.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization for
|
|
|
|
|
|
|
|
|
|
Twelve Months
|
|
|
|
Estimated
|
|
|
Expected
|
|
|
Ended April 24,
|
|
Acquired Intangible Assets:
|
|
Value
|
|
|
Life
|
|
|
2009
|
|
|
Existing technologies
|
|
$
|
217,000
|
|
|
|
5 years
|
|
|
$
|
43,400
|
|
In process research and development
|
|
$
|
17,500
|
|
|
|
5 years
|
|
|
$
|
1,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
234,500
|
|
|
|
|
|
|
$
|
45,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For purposes of these pro forma financials, it is assumed that
it will take 6 months to complete the acquired in-process
research and development projects at which time the fair value
will be amortized on a straight line basis over an estimated
useful life of 5 years
o) To record the amortization of other acquired intangible
assets included as a component of sales and marketing operating
expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization for
|
|
|
|
|
|
|
|
|
|
Twelve Months
|
|
|
|
Estimated
|
|
|
Expected
|
|
|
Ended April 24,
|
|
Acquired Intangible Assets:
|
|
Value
|
|
|
Life
|
|
|
2009
|
|
|
Existing customer relationships
|
|
$
|
147,500
|
|
|
|
5 years
|
|
|
$
|
29,500
|
|
Trade name
|
|
|
35,500
|
|
|
|
5 years
|
|
|
|
7,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amortization
|
|
$
|
183,000
|
|
|
|
|
|
|
$
|
36,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Since there is no continuing impact of the amortization of
backlog on the combined operating results, the amortization of
backlog has not been included in the unaudited pro forma
condensed combined statement of operations.
88
p) To adjust for the assumed reduction in interest income
due to reduced cash balances as a result of the cash
consideration issued as part of the merger.
|
|
|
|
|
|
|
|
|
|
|
Reduction for
|
|
|
|
|
|
|
Twelve Months
|
|
|
|
|
|
|
Ended April 24,
|
|
|
|
|
Assumed Interest Income Reduction
|
|
2009
|
|
|
|
|
|
Reduction in interest income based on approximately
$1,051.0 million of cash used at an effective weighted
average interest rate of 0.53% for the twelve months ended
April 24, 2009
|
|
$
|
5,582
|
|
|
|
|
|
The effective interest rate has been determined based on the
actual interest recognized during the presented twelve-and
nine-month periods.
q) To record the impact of the provision (benefit) for
income taxes due to the merger.
Additional Tax Provision (Benefit) related to the Pro Forma
Adjustments
|
|
|
|
|
|
|
For the Twelve
|
|
|
|
Months Ended
|
|
|
|
April 24, 2009
|
|
|
Total impact of pro forma adjustments
|
|
$
|
(87,332
|
)
|
Tax rate (1)
|
|
|
37
|
%
|
|
|
|
|
|
Tax (benefit) of pro forma adjustments
|
|
$
|
(32,313
|
)
|
|
|
|
|
|
|
|
|
(1) |
|
Represents an estimate of the weighted-average statutory tax
rates in the jurisdictions primarily the United States of
America where the fair value adjustments may occur. |
r) Related to the number of additional shares of common
stock issued in relation to the merger based on the closing
price of NetApp common stock as of June 11, 2009, the
merger closing date assuming that the shares had been issued as
of April 26, 2008.
s) Related to the additional diluted impact of the stock
options and restricted stock units assumed upon closing of the
merger. The diluted impact has been estimated using the treasury
method assuming the shares for the twelve months ended
April 24, 2009 would be bought back at the closing price of
NetApps shares at June 11, 2009.
89
COMPARISON
OF STOCKHOLDERS RIGHTS
NetApp and Data Domain are both incorporated under Delaware law.
Any differences, therefore, between the rights of NetApp
stockholders and Data Domain stockholders are due to differences
in each companys respective certificate of incorporation,
bylaws and agreements, if any, defining the rights of
securityholders. Upon completion of the merger, Data Domain
stockholders, other than those who elect to exercise their
statutory appraisal rights, will exchange their shares of Data
Domain common stock for cash and shares of NetApp common stock,
at which time they will become stockholders of NetApp and their
rights as stockholders will be governed by NetApps
certificate of incorporation and bylaws.
The summary below highlights certain material differences
between the rights of holders of NetApp common stock and the
rights of holders of Data Domain common stock. The summary does
not purport to be a complete description of the differences. The
certificates of incorporation and bylaws of NetApp and Data
Domain are subject to amendment in accordance with their
respective terms. Copies of the governing corporate instruments
are available, without charge, to any person, including any
beneficial owner to whom this proxy statement/prospectus is
delivered, by following the instructions listed under
Where You Can Find More Information beginning on
page 98.
In addition to rights under Data Domains certificate of
incorporation and bylaws, certain Data Domain stockholders have
rights under that certain Amended and Restated Investors
Rights Agreement, as amended, by and among Data Domain and the
investors listed on Schedule A thereto (the rights
agreement). The rights agreement, which provides for
demand, piggy back and short-form registration
rights, will terminate automatically upon the completion of the
merger. A copy of the rights agreement is filed as an exhibit to
Data Domains Registration Statement on
Form S-1,
which was initially filed with the SEC on March 30, 2007,
the November 2007 amendments thereto are filed as exhibits to
Data Domains Registration Statement on
Form S-1,
which was initially filed with the SEC on November 1, 2007.
90
|
|
|
NetApp
|
|
Data Domain
|
|
|
|
AUTHORIZED CAPITAL STOCK
|
|
|
|
NetApp is authorized to issue two classes of stock to be
designated common stock, consisting of 885,000,000 shares,
par value $0.001 per share, and preferred stock, consisting of
5,000,000 shares, par value $0.001 per share.
|
|
Data Domain is authorized to issue two classes of stock to be
designated common stock, consisting of 300,000,000 shares,
par value $0.0001 per share, and preferred stock, consisting of
20,000,000 shares, par value $0.0001 per share.
|
|
|
|
NetApps preferred stock may be issued from time to time in
one or more series, without further stockholder approval.
NetApps board of directors is authorized to fix or alter
the rights, preferences, privileges and restrictions granted to
or imposed upon each series of preferred stock, and the number
of shares constituting any such series and the designation
thereof. The rights, privileges, preferences and restrictions of
any such additional series may be subordinated to, pari passu
with, or senior to the rights, preferences and restrictions of
any present or future class or series of preferred stock or
common stock.
|
|
Data Domains board of directors is authorized, without
further stockholder approval, to provide for the issuance of
preferred stock in series, and, by filing a certificate pursuant
to the applicable provisions of Delaware law, to establish from
time to time the number of shares to be included in the series
and to fix the designation, powers, preferences and rights of
each of these series and any qualifications, limitations or
restrictions thereof.
|
|
|
|
NetApps board of directors is also authorized to increase
or decrease the number of shares of any series of preferred
stock prior or subsequent to the issue of that series, but not
below the number of shares of such series then outstanding. If
the board of directors decreases the number of shares of any
series in such manner, the shares constituting such decrease
will resume the status they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
|
|
The number of authorized shares of preferred stock may be
increased or decreased (but not below the number of shares
thereof then outstanding) by the affirmative vote of the holders
of a majority of the voting power of all of the outstanding
shares of Data Domains capital stock entitled to vote
thereon, without a vote of the holders of the preferred stock,
or of any series thereof, subject to certain exceptions.
|
91
AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
Under Delaware law, an amendment to the certificate of
incorporation requires (i) the approval of the board of
directors, (ii) the approval of the holders of a majority
of the outstanding stock entitled to vote upon the proposed
amendment, and (iii) the approval of the holders of a
majority of the outstanding stock of each class entitled to vote
thereon as a class.
|
|
|
|
|
|
NetApp reserves the right to amend, alter, change or repeal any
provision contained in its certificate of incorporation.
Notwithstanding the foregoing, the affirmative vote of the
holders of at least 66 and 2/3% of NetApps outstanding
voting stock entitled to vote at an election of directors is
required to amend certain provisions of the certificate of
incorporation, including provisions relating to (i) the
amendment of the bylaws, (ii) the number and election of
directors, (iii) stockholder meetings, (iv) the
indemnification of officers and directors, and (v) the
requirements for amending the certificate of incorporation.
|
|
Data Domain reserves the right to amend or repeal any provision
contained in its certificate of incorporation in the manner
prescribed by Delaware law. In addition to any vote of the
holders of any class or series of Data Domains stock
required by law or by the certificate of incorporation, the
affirmative vote of the holders of a majority of the voting
power of all of the then outstanding shares of Data
Domains capital stock entitled to vote generally in the
election of directors, voting together as a single class, shall
be required to amend or repeal the provisions of the certificate
of incorporation.
|
|
|
|
|
|
However, any amendment or repeal of the provisions of the
certificate of incorporation relating to (i) the election of
directors, (ii) the liability of directors, (iii) the amendment
of Data Domains bylaws, or (iv) the amendment of Data
Domains certificate of incorporation will require the
affirmative vote of the holders of at least two-thirds of the
voting power of all of the then outstanding shares of Data
Domains capital stock entitled to vote generally in the
election of directors, voting together as a single class.
|
AMENDMENT
TO BYLAWS
Under Delaware law, bylaws may be adopted, amended or repealed
by the stockholders entitled to vote, and by the board of
directors if the corporations certificate of incorporation
confers the power to adopt, amend or repeal the
corporations bylaws upon the directors.
|
|
|
|
|
|
NetApps certificate of incorporation authorizes the board
of directors to make, repeal, alter, amend and rescind any or
all of NetApps bylaws.
|
|
Data Domains certificate of incorporation authorizes the
board of directors to adopt, amend or repeal any or all of Data
Domains bylaws.
|
|
|
|
The certificate of incorporation also provides that the bylaws
may be amended by the affirmative vote of the holders of at
least 66 and 2/3% of the outstanding shares of NetApps
voting stock entitled to vote at an election of directors.
|
|
In addition, the certificate of incorporation authorizes Data
Domains stockholders to adopt, amend or repeal the bylaws,
provided that, in addition to any vote of the holders of any
class or series of Data Domains stock required by law or
by the certificate of incorporation, the affirmative vote of the
holders of at least two-thirds of the voting power of all of the
then-outstanding shares of Data Domains capital stock
entitled to vote generally in the election of directors, voting
together as a single class, is required for any adoption,
amendment or repeal of the bylaws.
|
92
SPECIAL
MEETING OF STOCKHOLDERS
|
|
|
|
|
|
NetApps certificate of incorporation provides that special
meetings of the stockholders may only be called by NetApps
chief executive officer, president, chairman of the board, or a
majority of the members of the board of directors.
|
|
Special meetings of Data Domains stockholders may be
called only by (i) the board of directors, (ii) the chairman of
the board, or (iii) the chief executive officer.
|
STOCKHOLDER
ACTION
Action by
Written Consent without a Meeting
|
|
|
|
|
|
NetApps certificate of incorporation and bylaws provide
that NetApps stockholders may only take action by meetings
held pursuant to NetApps certificate of incorporation and
bylaws and may not take any action by written consent without a
meeting.
|
|
Data Domains certificate of incorporation provides that
any action required or permitted to be taken by Data
Domains stockholders must be effected at a duly called
annual or special meeting of stockholders and may not be
effected by written consent.
|
Quorum
|
|
|
|
|
|
NetApps bylaws provide that the holders of a majority of
the stock issued and outstanding and entitled to vote at a
meeting of the stockholders, present in person or represented by
proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except as
otherwise provided by statute or by NetApps certificate of
incorporation.
|
|
Data Domains bylaws provide that the holders of a majority
of the voting power of the outstanding shares entitled to vote
generally in the election of directors, represented in person or
by proxy, shall constitute a quorum at a meeting of
stockholders, except that when specified business is to be voted
on by a class or series voting separately as a class or series,
the holders of a majority of the voting power of the shares of
that class or series shall constitute a quorum for the
transaction of such business for the purposes of taking action
on the specified business.
|
STOCKHOLDER
PROPOSALS AND NOMINATIONS
|
|
|
|
|
|
|
|
|
With respect proposals relating
to the election of directors, NetApps bylaws state that
nominations by stockholders must be preceded by notification in
writing received by the secretary of the corporation not less
than 120 days prior to any meeting of stockholders called
for the election of directors. Such notification shall contain
the written consent of each proposed nominee to serve as a
director if so elected and the following information as to each
proposed nominee and as to each person, acting alone or in
conjunction with one or more other persons as a partnership,
limited partnership, syndicate or other group, who participates
or is expected to participate in making such nomination or in
organizing, directing or financing such nomination or
solicitation of proxies to vote for the nominee:
the name, age,
residence, address, and business address of each proposed
nominee and of each
|
|
Data Domains bylaws provide
that nominations of persons for election to the board of
directors and proposals of business to be transacted by the
stockholders may be made at an annual meeting of stockholders by
any stockholder of record who was a stockholder of record at the
time of the giving of the notice provided for below who is
entitled to vote at the meeting and who has complied with the
notice provisions of the bylaws.
To
be timely, a stockholders notice must be delivered to Data
Domains secretary at the companys principal
executive offices not less than forty-five (45) or more than
seventy-five (75) days prior to the first anniversary of the
date on which Data Domain first mailed its proxy materials for
the preceding years annual meeting of stockholders,
provided that if no proxy materials were mailed by Data Domain
in connection with the preceding years
|
93
|
|
|
NetApp
|
|
Data Domain
|
|
|
|
|
|
such person;
the
principal occupation or employment, the name, type of business
and address of the corporation or other organization in which
such employment is carried on of each proposed nominee and of
each such person;
|
|
annual meeting, or if the date of the annual meeting is
advanced more than thirty (30) days prior to or delayed by more
than thirty (30) days after the anniversary of the preceding
years annual meeting, notice by the stockholder will be
timely only if it is so delivered not later than the close of
business on the later of (x) the 90th day prior to such
annual meeting or (y) the 10th day following the day on
which public announcement of the date of the meeting is first
made.
|
|
|
|
the amount of
NetApps stock owned beneficially, either directly or
indirectly, by each proposed nominee and each such person;
and
a description of any
arrangement or understanding of each proposed nominee and of
each such person with each other or any other person regarding
future employment or any future transaction to which NetApp will
or may be a party.
With
respect to stockholder proposals other than for the election of
directors, the stockholder must have given timely notice thereof
in writing to NetApps secretary. To be timely, a
stockholders notice must be delivered to or mailed and
received at NetApps principal executive offices not less
than 120 days prior to the date of the meeting. A
stockholders notice to the secretary shall set forth as to
each matter the stockholder proposes to bring before the meeting
(a) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such
business at the meeting, (b) the name and address, as they
appear on NetApps books, of the stockholder proposing such
business, and the name and address of the beneficial owner, if
any, on whose behalf the proposal is made, (c) the class
and number of NetApps shares that are owned beneficially
and of record by such stockholder of record and by the
beneficial owner, if any, on whose behalf of the proposal is
made and (d) any material interest of such stockholder of
record and the beneficial owner, if any, on whose behalf the
proposal is made in such business.
|
|
For
nominations or other business to be properly brought before an
annual meeting by a stockholder, (i) the stockholder must have
given timely notice thereof in writing to Data Domains
Corporate Secretary as described above, (ii) the proposed
business must be a proper matter for stockholder action under
the Delaware law, (iii) if the stockholder, or the beneficial
owner on whose behalf a proposal or nomination is made, has
provided Data Domain with a stockholders
notice (as described below), the stockholder or beneficial
owner must, in the case of a proposal, have delivered prior to
the meeting a proxy statement and form of proxy to holders of at
least the percentage of Data Domains voting shares
required under applicable law to carry a proposal, or, in the
case of a nomination or nominations, have delivered prior to the
meeting a proxy statement and form of proxy to holders of a
percentage of Data Domains voting shares reasonably
believed by the stockholder or beneficial holder to be
sufficient to elect the nominee or nominees proposed to be
nominated by the stockholder, and must, in either case, have
included in the materials the solicitation notice and (iv) if
the related solicitation notice has not been timely provided,
the stockholder or beneficial owner proposing the business or
nomination must not have solicited a number of proxies
sufficient to have required the delivery of such a solicitation
notice.
The
stockholders notice must set forth (a) as to
each person whom the stockholder proposes to nominate for
election or re- election as a director all information relating
to the person as would be required to be disclosed in
solicitations of proxies for the election of the nominees as
directors pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, and the persons written
consent to serve as a director if elected; (b) as to any other
business that the stockholder proposes to bring before the
meeting, a brief description of the business, the reasons for
conducting the business at the meeting and any material interest
in the business of the stockholder and the beneficial owner, if
any, on whose behalf the proposal is made; and (c) as to the
stockholder giving the notice and the beneficial owner, if any,
on whose behalf the nomination or proposal is made (i) the name
and address of the stockholder, as they appear on Data
|
94
|
|
|
NetApp
|
|
Data Domain
|
|
|
|
|
Domains books, and of the beneficial owner, (ii) the
class and number of Data Domains shares that are owned
beneficially and of record by the stockholder and such
beneficial owner, and (iii) whether either the stockholder or
beneficial owner intends to deliver a proxy statement and form
of proxy to holders of, in the case of a proposal, at least the
percentage of the Data Domains voting shares required
under applicable law to carry the proposal or, in the case of a
nomination or nominations, a sufficient number of holders of
Data Domains voting shares to elect the nominee or
nominees.
|
BOARD OF
DIRECTORS
Number of Directors
|
|
|
|
|
|
NetApps certificate of incorporation provides that the number of directors is to be determined by resolution of the board of directors.
NetApps bylaws provide that the number of directors constituting the whole board is to be determined by resolution of the board of directors, provided that no decrease in the number of directors shall have the effect of shortening the term of an incumbent director.
|
|
Subject to the rights of the
holders of any series of preferred stock to elect additional
directors under specified circumstances, Data Domains
certificate of incorporation and bylaws provide that the number
of directors shall be fixed from time to time exclusively by the
board of directors pursuant to a resolution adopted by a
majority of the authorized number of directors, including
vacancies, and may not be fixed by any other persons.
|
|
|
|
|
|
Data Domains bylaws
authorize the board of directors to fix the number of directors,
subject to certain exceptions that are not applicable at the
present time.
|
Classification
|
|
|
|
|
|
NetApp does not have a classified board of directors.
|
|
Subject to specified exceptions, Data Domains board of
directors shall be divided into three classes: Class I,
Class II and Class III, and each director shall serve for a
term ending on the third annual meeting of stockholders
following the annual meeting of stockholders at which such
director was elected.
|
Removal
|
|
|
|
|
|
NetApps bylaws provide that any director or the entire
board of directors may be removed, with or without cause, by the
holders of a majority of NetApps shares entitled to vote
at an election of directors.
|
|
Subject to the rights of the holders of any series of preferred
stock then outstanding, any director, or the entire board of
directors, may be removed from office at any time, but only for
cause and only by the affirmative vote of the holders of a
majority of the voting power of all of the then-outstanding
shares of Data Domains capital stock entitled to vote
generally in the election of directors, voting together as a
single class.
|
95
Special
Meeting of the Board
|
|
|
|
|
|
NetApps bylaws provide that a special meeting of the board
of directors may be called by the chairman of the board or the
chief executive officer on 12 hours notice to each
director. In addition, special meetings of the board of
directors may be called by the chief executive officer or
secretary in the same manner and with the same notice on the
written request of a majority of the members of the board of
directors, unless the board of directors consists of only one
director, in which case special rules apply. A written waiver of
notice, signed by the person entitled thereto, whether before or
after the time of the meeting stated therein, shall be deemed
equivalent to notice.
|
|
Data Domains bylaws provide that special meetings of the
board directors shall be called at the request of the chairman
of the board, the chief executive officer or a majority of the
number of directors necessary to constitute a quorum.
|
COMPARATIVE
MARKET PRICES AND DIVIDENDS
NetApp and Data Domain common stock trades on the NASDAQ Global
Select Market. The following table sets forth the high and low
sales prices of shares of NetApp and Data Domain common stock as
reported on the NASDAQ Global Select Market.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NetApp Common Stock
|
|
High
|
|
|
Low
|
|
|
Data Domain Common Stock
|
|
High
|
|
|
Low
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
Quarter ended April 27, 2007
|
|
$
|
40.62
|
|
|
$
|
34.69
|
|
|
Quarter ended June 30, 2007 (beginning on June 27,
2007)
|
|
$
|
25.40
|
|
|
$
|
19.94
|
|
Quarter ended July 27, 2007
|
|
|
39.08
|
|
|
|
28.50
|
|
|
Quarter ended September 30, 2007
|
|
|
32.73
|
|
|
|
21.47
|
|
Quarter ended October 26, 2007
|
|
|
32.38
|
|
|
|
22.51
|
|
|
Quarter ended December 31, 2007
|
|
|
41.14
|
|
|
|
23.86
|
|
2008
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
Quarter ended January 25, 2008
|
|
|
32.08
|
|
|
|
19.58
|
|
|
Quarter ended March 31, 2008
|
|
|
26.49
|
|
|
|
18.93
|
|
Quarter ended April 25, 2008
|
|
|
24.03
|
|
|
|
19.00
|
|
|
Quarter ended June 30, 2008
|
|
|
25.16
|
|
|
|
20.00
|
|
Quarter ended July 25, 2008
|
|
|
27.49
|
|
|
|
21.32
|
|
|
Quarter ended September 30, 2008
|
|
|
23.93
|
|
|
|
19.30
|
|
Quarter ended October 24, 2008
|
|
|
26.78
|
|
|
|
11.51
|
|
|
Quarter ended December 31, 2008
|
|
|
22.46
|
|
|
|
14.83
|
|
2009
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
Quarter ended January 23, 2009
|
|
|
15.69
|
|
|
|
10.39
|
|
|
Quarter ended March 31, 2009
|
|
|
19.61
|
|
|
|
10.25
|
|
Quarter ended April 24, 2009
|
|
|
19.36
|
|
|
|
12.39
|
|
|
Quarter ending June 30, 2009
(through July 1, 2009)
|
|
|
34.35
|
|
|
|
11.73
|
|
Quarter ending July 31, 2009
(through July 1, 2009)
|
|
|
20.95
|
|
|
|
16.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
NetApps fiscal year ends on the last Friday of April. |
|
(2) |
|
Data Domain began trading on the NASDAQ Global Select Market on
June 27, 2007. |
Neither NetApp nor Data Domain has declared dividends on its
common stock during the last three fiscal years.
On May 19, 2009, the last full trading day before the
initial public announcement of the potential merger, the high
and low sales prices of shares of NetApp common stock as
reported on the NASDAQ Global Select Market were $18.48 and
$17.35, respectively. On June 2, 2009, the last full
trading day before the public announcement of the revised terms
of the merger, the high and low sales prices of shares of NetApp
common stock as reported on the NASDAQ Global Select Market were
$20.16 and $19.20, respectively. On July 1, 2009, the last
full trading
96
day before the date of this proxy statement/prospectus, the high
and low sale prices of shares of NetApp common stock as reported
on the NASDAQ Global Select Market were $19.95 and $19.56,
respectively.
On May 19, 2009, the last full trading day before the
initial public announcement of the potential merger, the high
and low sales prices of shares of Data Domain common stock as
reported on the NASDAQ Global Select Market were $17.53 and
$16.77, respectively. On June 2, 2009, the last full
trading day before the public announcement of the revised terms
of the merger, the high and low sales prices of shares of Data
Domain common stock as reported on the NASDAQ Global Select
Market were $31.74 and $30.80, respectively. On July 1,
2009, the last full trading day for which data was available
before the date of this proxy statement/prospectus, the high and
low sales prices of shares of Data Domain common stock as
reported on the NASDAQ Global Select Market were $33.59 and
$33.22, respectively.
As of July 1, 2009, the last date prior to printing this
document for which it was practicable to obtain this
information, there were approximately 943 registered holders of
NetApp common stock and approximately 111 registered
holders of Data Domain common stock.
NetApp stockholders and Data Domain stockholders are advised to
obtain current market quotations for NetApp common stock and
Data Domain common stock. The market price of NetApp common
stock and Data Domain common stock will fluctuate between the
date of this document and the completion of the merger. No
assurance can be given concerning the market price of NetApp
common stock or Data Domain common stock before or after the
effective date of the merger.
DATA
DOMAIN PROPOSAL 2 POSSIBLE ADJOURNMENT OR
POSTPONEMENT OF THE
DATA DOMAIN SPECIAL MEETING
In this proposal, we are asking you to authorize the holder of
any proxy solicited by Data Domains board of directors to
vote in favor of granting discretionary authority to the proxy
or attorney-in-fact to adjourn or postpone the special meeting
to another time and place for the purpose of soliciting
additional proxies. If our stockholders approve the adjournment
proposal, we could adjourn or postpone the special meeting and
any adjourned or postponed session of the special meeting and
use the additional time to solicit additional proxies, including
the solicitation of proxies from our stockholders that have
previously voted.
If at the special meeting the number of shares of our common
stock represented and voting in favor of adoption of the merger
agreement is not sufficient to adopt the merger agreement, we
may postpone or move to adjourn the special meeting in order to
enable Data Domains board of directors to solicit
additional proxies in respect of such proposal. In the event of
a motion to adjourn the special meeting, we will ask our
stockholders to vote only upon the adjournment proposal, and not
the proposal regarding the adoption of the merger agreement.
Failure of the adjournment proposal to pass will not affect the
ability of the holder of any proxy solicited by us to adjourn
the special meeting in the event that a sufficient number of
shares of our common stock are not represented at the special
meeting to establish a quorum, or for any other lawful purpose.
Accordingly, the Data Domain board of directors unanimously
recommends that Data Domain stockholders vote FOR
Proposal 2.
LEGAL
MATTERS
The validity of the NetApp common stock to be issued in
connection with the merger will be passed upon for NetApp by
Wilson Sonsini Goodrich & Rosati, Professional
Corporation. Wilson Sonsini Goodrich & Rosati,
Professional Corporation and Fenwick & West LLP, on
behalf of Data Domain, will pass upon certain legal matters with
respect to the tax consequences of the merger.
EXPERTS
The consolidated financial statements and the related
consolidated financial statement schedule incorporated by
reference in the proxy statement/prospectus by reference from
NetApps Annual Report on Form 10-K for the
97
fiscal year ended April 24, 2009, and the effectiveness of
NetApps internal control over financial reporting have
been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their reports,
which are incorporated herein by reference (which report on the
consolidated financial statements and the related consolidated
financial statement schedule expresses an unqualified opinion
and includes an explanatory paragraph regarding NetApps
adoption of FIN 48, Accounting for Uncertainty in Income
Taxes- an interpretation of FASB Statement No. 109). Such
financial statements and financial statement schedule have been
so incorporated, in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
The consolidated financial statements of Data Domain, Inc.
appearing in Data Domain, Inc.s Annual Report on
Form 10-K
for the year ended December 31, 2008, including the
schedule appearing therein, and the effectiveness of Data
Domain, Inc.s internal control over financial reporting as
of December 31, 2008, have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their reports thereon included
therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in
reliance upon such reports given on the authority of such firm
as experts in accounting and auditing.
OTHER
MATTERS
As of the date of this proxy statement/prospectus, the Data
Domain board of directors does not know of any other business to
be presented for consideration at the special meeting. If other
matters properly come before the special meeting, the persons
named in the accompanying form of proxy intend to vote on any
other matters based on their best judgment, and they intend to
vote the shares as the Data Domain board of directors may
recommend.
DATA
DOMAIN STOCKHOLDER PROPOSALS
Data Domain will hold a 2010 annual meeting of stockholders only
if the merger is not completed. If it is determined that the
merger will not be completed as contemplated by the merger
agreement, and stockholder proposals for inclusion in Data
Domains proxy statement and form of proxy relating to its
annual meeting of stockholders to be held in 2010 must be
received by Data Domains Corporate Secretary at Data
Domains principal executive offices no later than
February 18, 2010. Stockholders wishing to bring a proposal
before the annual meeting to be held in 2010 (but not include it
in the proxy materials) must provide written notice of such
proposal to Data Domains Corporate Secretary at 2421
Mission College Blvd., Santa Clara, CA 95054, between
April 2, 2010 and May 4, 2010.
WHERE YOU
CAN FIND MORE INFORMATION
NetApp has filed with the SEC a registration statement under the
Securities Act that registers the distribution to Data Domain
stockholders of the shares of NetApp common stock to be issued
in connection with the merger. The registration statement,
including the attached exhibits and schedules, contains
additional relevant information about NetApp and NetApp common
stock. The rules and regulations of the SEC allow NetApp to omit
certain information included in the registration statement from
this proxy statement/prospectus.
You may read and copy this information at the Public Reference
Room of the SEC at 100 F Street, NE, Room 1580,
Washington, D.C. 20549. You may obtain information on the
operation of the SECs Public Reference Room by calling the
SEC at
1-800-SEC-0330.
The SEC also maintains an internet website that contains
reports, proxy statements and other information about issuers,
like NetApp and Data Domain, who file electronically with the
SEC. The address of the site is
http://www.sec.gov.
The reports and other information filed by NetApp with the SEC
are also available at NetApps website at
http://www.netapp.com.
The reports and other information filed by Data Domain with the
SEC are also available at Data Domains website at
http://www.datadomain.com.
The web addresses of the SEC, NetApp, and Data Domain are
included as inactive textual references only. Except as
specifically incorporated by reference in this proxy
statement/prospectus, information on those web sites is not part
of this proxy statement/prospectus.
98
Incorporation
by Reference
The SEC allows NetApp and Data Domain to incorporate by
reference information in this proxy statement/prospectus. This
means that NetApp and Data Domain can disclose important
information to you by referring you to another document filed
separately with the SEC. The information incorporated by
reference is considered to be a part of this proxy
statement/prospectus, except for any information that is
superseded by information that is included directly in this
proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the
documents listed below that NetApp and Data Domain previously
filed with the SEC, as well as the annexes to this proxy
statement/prospectus. They contain important information about
the companies and their financial condition.
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NetApp SEC Filings
(SEC File
No. 0-27130;
CIK No. 0001002047)
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Period or Date Filed
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Annual Report on
Form 10-K
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Year ended April 24, 2009
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Current Reports on
Form 8-K
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April 30, 2009; May 20, 2009 (with respect to information that
was filed and not furnished) May 21, 2009; June 3, 2009;
and June 26, 2009
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Registration Statement
No. 000-27130
on
Form 8-A,
describing NetApps common stock
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November 1, 1995
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Data Domain SEC Filings
(SEC File
No. 001-33517;
CIK No. 0001391984)
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Period or Date Filed
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Annual Report on
Form 10-K,
as amended on
Form 10-K/A
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Year ended December 31, 2008
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Quarterly Report on
Form 10-Q
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Quarter ended March 31, 2009
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Current Reports on
Form 8-K
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February 3, 2009; May 21, 2009; June 3, 2009; June 4,
2009; and June 15, 2009
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In addition, NetApp and Data Domain also incorporate by
reference additional documents that either company files with
the SEC under Sections 13(a), 13(c), 14 and 15(d) of the
Exchange Act between the date of this proxy statement/prospectus
and the date of the Data Domain special meeting. These documents
include periodic reports, such as Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K,
as well as proxy statements.
NetApp has supplied all information contained or incorporated by
reference in this proxy statement/prospectus relating to NetApp,
and Data Domain has supplied all information relating to Data
Domain.
Documents incorporated by reference are available from NetApp
and Data Domain without charge, excluding any exhibits to those
documents unless the exhibit is specifically incorporated by
reference as an exhibit in this proxy statement/prospectus. You
can obtain documents incorporated by reference in this proxy
statement/prospectus or filed as exhibits to the registration
statement of which this proxy/statement prospectus is a part by
requesting them in writing or by telephone from the appropriate
company at the following addresses:
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NetApp, Inc.
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Data Domain, Inc.
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NetApp, Inc.
495 East Java Drive
Sunnyvale, CA 94089
Investor Relations
Telephone:
(408) 822-7098
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Data Domain, Inc.
2421 Mission College Blvd.
Santa Clara, CA 95054
Investor Relations
Telephone: (408) 980-4909
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Data Domain stockholders requesting documents should do so
by August 7, 2009 (which is five business days prior to the
special meeting) in order to ensure you receive them before the
special meeting. You will not be charged for any of these
documents that you request. If you request any incorporated
documents from NetApp or Data Domain, they will be mailed to you
by first-class mail, or another equally prompt means, within one
business day after receipt of your request.
99
Neither NetApp nor Data Domain has authorized anyone to give
any information or make any representation about the merger or
the companies that is different from, or in addition to, that
contained in this proxy statement/prospectus or in any of the
materials that have been incorporated by reference in this proxy
statement/prospectus. Therefore, if anyone does give you
information of this sort, you should not rely on it. If you are
in a jurisdiction where offers to exchange or sell, or
solicitations of offers to exchange or purchase, the securities
offered by this proxy statement/prospectus or the solicitation
of proxies is unlawful, or if you are a person to whom it is
unlawful to direct these types of activities, then the offer
presented in this proxy statement/prospectus does not extend to
you. The information contained herein speaks only as of the date
of this proxy statement/prospectus unless the information
specifically indicates that another date applies.
This proxy statement/prospectus contains a description of the
representations and warranties that each of NetApp and Data
Domain made to the other in the merger agreement.
Representations and warranties made by NetApp, Data Domain and
other applicable parties are also set forth in contracts and
other documents (including the merger agreement) that are
attached or filed as exhibits to this proxy statement/prospectus
or are incorporated by reference into this proxy
statement/prospectus. These representations and warranties were
made as of specific dates, may be subject to important
qualifications and limitations agreed to between the parties in
connection with negotiating the terms of the merger agreement,
and may have been included in the agreement for the purpose of
allocating risk between the parties rather than to establish
matters as facts. These materials are included or incorporated
by reference only to provide you with information regarding the
terms and conditions of the agreements, and not to provide any
other factual information regarding Data Domain, NetApp or their
respective businesses. Accordingly, the representations and
warranties and other provisions of the merger agreement should
not be read alone, but instead should be read only in
conjunction with the other information provided elsewhere in
this proxy statement/prospectus or incorporated by reference
into this proxy statement/prospectus.
100
APPENDIX A
AMENDMENT
NO. 1 TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 1 (this Amendment) to
that certain Agreement and Plan of Merger (the Merger
Agreement) by and among NetApp, Inc., a Delaware
corporation (Parent), Kentucky Merger Sub One
Corporation, a Delaware corporation and a direct, wholly-owned
subsidiary of Parent (Merger Sub One), Derby
Merger Sub Two LLC, a Delaware limited liability company and a
direct, wholly-owned subsidiary of Parent (Merger
Sub Two and together with Merger Sub One, the
Merger Subs), and Data Domain, Inc., a
Delaware corporation (the Company) is made
and entered into as of June 3, 2009 by and among Parent,
Merger Sub One, Merger Sub Two and the Company. All capitalized
terms that are used in this Amendment but not defined in this
Amendment shall have the respective meanings ascribed thereto in
the Merger Agreement.
WHEREAS, on June 1, 2009, the Company received an
unsolicited acquisition proposal from EMC Corporation and EMC
Corporation commenced a tender offer to acquire all outstanding
shares of Company Common Stock;
WHEREAS, on June 2, 2009, Parent offered to amend the
Merger Agreement on the terms set forth herein;
WHEREAS, each of the respective Board of Directors of Parent,
the Merger Subs and the Company has approved this Amendment and
the transactions contemplated hereby, and deems it advisable and
in the best interests of their respective stockholders to enter
into this Amendment and consummate the transactions contemplated
hereby pursuant to which, among other things, and as a single
integrated transaction, Merger Sub One will be merged with and
into the Company (the First Step Merger or
the Merger) in accordance with the applicable
provisions of the General Corporation Law of the State of
Delaware (the DGCL), the Company will
continue as the surviving corporation of the First Step Merger
and each share of the Company Common Stock outstanding
immediately prior to the Effective Time will be cancelled and
converted into the right to receive the consideration set forth
herein, all upon the terms and subject to the conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties, covenants and agreements set
forth herein, as well as other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged and
accepted, and intending to be legally bound hereby, Parent, the
Merger Subs and the Company hereby agree as follows:
1. Amendments to Section 1.1(cc).
Section 1.1(cc) of the Merger Agreement is hereby amended
and restated in its entirety and replaced with the following:
(cc) Exchange Ratio shall mean, subject
to adjustment pursuant to Section 2.7(b)(i) and
Section 2.7(b)(ii):
A1-1
(i) 0.7783 shares of Parent Common Stock if the
Closing Average is less than $17.41;
(ii) 0.6370 shares of Parent Common Stock if the
Closing Average is greater than $21.27; and
(iii) that fraction of shares of Parent Common Stock
(rounded to the nearest ten thousandth) equal to the quotient
obtained by dividing $13.55 by the Closing Average, if the
Closing Average is (A) less than or equal to $21.27 and
(B) greater than or equal to $17.41.
2. Amendment to Section 2.7(b)(i).
Section 2.7(b)(i) of the Merger Agreement is hereby amended
and restated in its entirety and replace with the following:
(i) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than
any Dissenting Company Shares), including any Company Restricted
Stock that shall have ceased, as a result of or immediately
prior to the Effective Time, to be unvested or subject to a
repurchase option, risk of forfeiture or other condition
pursuant to the terms of such Company Stock Award or other
agreement governing such Company Restricted Stock (which shall
include any vesting as a result of any termination of employment
or transaction contemplated by employee agreements and any
resignation delivered pursuant to Section 6.13)
shall be canceled and extinguished and automatically converted
into the right to receive a combination of (A) $16.45 in
cash, without interest (such per share cash amount being
referred to herein as the Cash Consideration)
plus (B) a number of validly issued, fully paid and
nonassessable shares of Parent Common Stock equal to the
Exchange Ratio (such per share amount being referred to herein
as the Stock Consideration) upon the
surrender of the certificate representing such share of Company
Common Stock (or the receipt of an agents message in the
case of Book-Entry Shares) in the manner set forth in
Section 2.9 (or in the case of a lost, stolen or
destroyed certificate, upon delivery of an affidavit (and bond,
if required) in the manner set forth in
Section 2.11). Notwithstanding the foregoing
sentence, if the Exchange Ratio is (A) greater than or
equal to 0.7006, and (B) less than 0.7783, then Parent, in
its sole discretion and subject to the following sentence, may
reduce the Stock Consideration by such amount as Parent may
determine. If Parent elects to reduce the amount of the Stock
Consideration pursuant to the preceding sentence, then the Cash
Consideration shall be increased by an amount equal to the
product of (A) the amount of such reduction in the Stock
Consideration pursuant to the preceding sentence multiplied by
(B) the Closing Average. For all purposes of and under this
Agreement, the term Merger Consideration shall mean
the Cash Consideration plus the Stock Consideration, each as
adjusted by this Section 2.7(b)(i) and
Section 2.7(b)(ii) together with any cash payable
under Section 2.7(b)(iv) with respect to each share
of Company Common Stock in lieu of a fractional share of Parent
Common Stock otherwise issuable pursuant hereto.
A1-2
3. Additional Representations and Warranties of the
Company. The Company hereby represents and warrants to
Parent, Merger Sub One and Merger Sub Two as follows (each of
which representations and warranties shall be deemed, for all
purposes of and under the Merger Agreement, to form a part of
Section 3.2 of the Merger Agreement):
(a) Corporate Approvals.
(i) The Company has all requisite corporate power and
authority to execute and deliver this Amendment, to perform its
obligations under the Agreement (as amended by this Amendment),
and subject to obtaining the Requisite Merger Approval, to
consummate the transactions contemplated by the Agreement (as
amended by this Amendment). The execution and delivery of this
Amendment by the Company, the performance by the Company of its
obligations under the Agreement (as amended by this Amendment),
and the consummation by the Company of the transactions
contemplated by the Agreement (as amended by this Amendment)
have been duly authorized by all necessary corporate action on
the part of the Company other than, in the case of the
consummation of the Merger, (i) the filing with the SEC of
a proxy statement with respect to and obtaining the Requisite
Merger Approval and (ii) the filing of the Certificate of
Merger as required by the DGCL, and no additional corporate or
other actions or proceedings on the part of the Company are
necessary to authorize this Amendment or the consummation of the
transactions contemplated by the Agreement (as amended by this
Amendment). This Amendment has been duly executed and delivered
by the Company and, assuming the due authorization, execution
and delivery by Parent, Merger Sub One and Merger Sub Two,
constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms, except that such enforceability may be limited by
applicable bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers),
reorganization, moratorium and other similar laws affecting or
relating to creditors rights generally and is subject to general
principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(ii) At a meeting duly called and held on June 3,
2009, the Company Board unanimously (i) determined that the
Agreement (as amended by this Amendment) is advisable,
(ii) determined that the Agreement (as amended by this
Amendment) is fair to, and in the best interests of, the
Companys stockholders, (iii) approved the execution
and delivery of this Amendment by the Company, the performance
by the Company of its covenants and obligations set forth in the
Agreement (as amended by this Amendment) and the consummation of
the Merger and the transactions contemplated by the Agreement
(as amended by this Amendment) upon the terms and conditions set
forth in the Agreement (as amended by this Amendment), and
(iv) resolved to recommend that the stockholders of the
Company approve the Merger Proposal at the Company Stockholder
Meeting. As of the date hereof, the Company Board has not
rescinded or modified in any way the foregoing determinations
and actions.
A1-3
4. Additional Representations and Warranties of Parent
and the Merger Subs. Each of Parent, Merger Sub One and
Merger Sub Two hereby represents and warrants to the Company as
follows (each of which representations and warranties shall be
deemed, for all purposes of and under the Merger Agreement, to
form a part of Section 4.2 of the Merger Agreement):
(a) Corporate Approvals.
(i) Each of Parent, Merger Sub One and Merger Sub Two has
all requisite corporate power and authority to execute and
deliver this Amendment and to consummate the transactions
contemplated by the Agreement (as amended by this Amendment) and
to perform its obligations under the Agreement (as amended by
this Amendment). The execution and delivery of this Amendment by
Parent, Merger Sub One and Merger Sub Two, the performance by
Parent, Merger Sub One and Merger Sub Two of their respective
obligations under the Agreement (as amended by this Amendment),
and, assuming the accuracy in all respects of the
representations and warranties of the Company set forth in
Section 3.4 and the compliance in all respects by
the Company with the restrictions set forth in
Section 5.2(b), the consummation by Parent, Merger
Sub One and Merger Sub Two of the transactions contemplated by
the Agreement (as amended by this Amendment) have been duly
authorized by all necessary corporate action on the part of
Parent, Merger Sub One and Merger Sub Two and no additional
corporate or other actions or proceedings (including a vote of
Parents stockholders) on the part of Parent, Merger Sub
One or Merger Sub Two are necessary to authorize this Amendment
or the consummation of the transactions contemplated by the
Agreement (as amended by this Amendment). This Amendment has
been duly executed and delivered by each of Parent, Merger Sub
One and Merger Sub Two and, assuming the due authorization,
execution and delivery by the Company, constitutes a legal,
valid and binding obligation of each of Parent, Merger Sub One
and Merger Sub Two, enforceable against each of them in
accordance with its terms, except that such enforceability may
be limited by applicable bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium and other similar laws affecting or
relating to creditors rights generally and is subject to general
principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(iii) At a meeting duly called and held on June 2,
2009, the Parent Board unanimously (i) determined that the
Agreement (as amended by this Amendment) is advisable,
(ii) determined that the Agreement (as amended by this
Amendment) is fair to, and in the best interests of, the
stockholders of Parent, and (iii) approved this Amendment
and the transactions contemplated by the Agreement (as amended
by this Amendment). As of the date hereof, the Parent Board has
not rescinded or modified in any way the foregoing
determinations and actions. Pursuant to action taken by written
consent on June 2, 2009, the board of directors of Merger
Sub One unanimously (i) determined that the Agreement (as
amended by this Amendment) is advisable, (ii) determined
that the Agreement (as amended by this Amendment) is fair to,
and in the best interests of, the sole
A1-4
stockholder of Merger Sub One, and (iii) approved this
Amendment and the transactions contemplated by the Agreement (as
amended by this Amendment). As of the date hereof, the board of
directors of Merger Sub One has not rescinded or modified in any
way the foregoing determinations and actions. Pursuant to action
taken by written consent on June 2, 2009, the board of
managers of Merger Sub Two unanimously (i) determined that
the Agreement (as amended by this Amendment) is advisable,
(ii) determined that the Agreement (as amended by this
Amendment) is fair to, and in the best interests of, the
stockholder of Merger Sub Two, and (iii) approved this
Amendment and the transactions contemplated by the Agreement (as
amended by this Amendment). As of the date hereof, the board of
managers of Merger Sub Two has not rescinded or modified in any
way the foregoing determinations and actions.
5. Merger Agreement References. The parties hereto
hereby agree that all references to the Agreement
set forth in the Merger Agreement (including, without
limitation, in the representations and warranties of the parties
set forth therein) shall be deemed to be references to the
Merger Agreement as amended by this Amendment.
6. Full Force and Effect. Except as expressly
amended or modified hereby, the Merger Agreement and the
agreements, documents, instruments and certificates among the
parties hereto as contemplated by, or referred to, in the Merger
Agreement shall remain in full force and effect without any
amendment or other modification thereto.
7. Counterparts. This Amendment may be executed in
one or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and
delivered to the other party, it being understood that all
parties need not sign the same counterpart.
[Remainder
of Page Intentionally Left Blank]
A1-5
IN WITNESS WHEREOF, the undersigned have caused this Amendment
to be executed by their respective duly authorized officers to
be effective as of the date first above written.
NETAPP, INC.
Name: Steven J. Gomo
DATA DOMAIN, INC.
Name: Frank Slootman
KENTUCKY MERGER SUB ONE CORPORATION
Name: Andrew Kryder
DERBY MERGER SUB TWO LLC
Name: Andrew Kryder
A1-6
Execution
Copy
AGREEMENT
AND PLAN OF MERGER
BY AND AMONG
NETAPP, INC.
KENTUCKY MERGER SUB ONE CORPORATION
DERBY MERGER SUB TWO LLC
AND
DATA DOMAIN, INC.
Dated as of May 20, 2009
TABLE OF
CONTENTS
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Page
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ARTICLE I DEFINITIONS & INTERPRETATIONS
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A-1
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1.1
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Certain Definitions
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A-1
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1.2
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Additional Definitions
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A-8
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1.3
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Certain Interpretations
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A-10
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ARTICLE II THE MERGER
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A-11
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2.1
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The Merger
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A-11
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2.2
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The Closing
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A-11
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2.3
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Effective Time of First Step Merger and Second Step Merger
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A-11
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2.4
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Effect of the First Step Merger and Second Step Merger
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A-11
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2.5
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Organizational Documents
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A-12
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2.6
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Directors and Officers
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A-12
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2.7
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Effect of First Step Merger on Capital Stock of Constituent
Corporations
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A-13
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2.8
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Company Stock Awards
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A-14
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2.9
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Exchange Fund; Exchange of Shares
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A-15
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2.10
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No Further Ownership Rights in Company Common Stock
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A-17
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2.11
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Lost, Stolen or Destroyed Certificates
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A-17
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2.12
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Tax Treatment
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A-17
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2.13
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Taking of Necessary Further Action
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A-17
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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A-18
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3.1
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Organization and Standing
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A-18
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3.2
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Corporate Approvals
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A-18
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3.3
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Non-contravention; Required Consents
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A-19
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3.4
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Capitalization
|
|
|
A-19
|
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3.5
|
|
Subsidiaries
|
|
|
A-20
|
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3.6
|
|
SEC Reports; Other Reports
|
|
|
A-21
|
|
3.7
|
|
Financial Statements and Controls
|
|
|
A-22
|
|
3.8
|
|
No Undisclosed Liabilities
|
|
|
A-23
|
|
3.9
|
|
Absence of Certain Changes
|
|
|
A-23
|
|
3.10
|
|
Compliance with Laws and Orders
|
|
|
A-24
|
|
3.11
|
|
Permits
|
|
|
A-24
|
|
3.12
|
|
Litigation; Orders; Regulatory Agreements
|
|
|
A-24
|
|
3.13
|
|
Material Contracts
|
|
|
A-25
|
|
3.14
|
|
Taxes
|
|
|
A-27
|
|
3.15
|
|
Employee Benefits
|
|
|
A-28
|
|
3.16
|
|
Labor Matters
|
|
|
A-30
|
|
3.17
|
|
Real Property
|
|
|
A-31
|
|
3.18
|
|
Environmental Matters
|
|
|
A-31
|
|
3.19
|
|
Assets; Personal Property
|
|
|
A-31
|
|
3.20
|
|
Intellectual Property
|
|
|
A-31
|
|
3.21
|
|
Insurance
|
|
|
A-34
|
|
3.22
|
|
Related Party Transactions
|
|
|
A-34
|
|
3.23
|
|
State Anti-Takeover Statutes
|
|
|
A-34
|
|
3.24
|
|
Brokers
|
|
|
A-34
|
|
3.25
|
|
Opinion of Financial Advisor
|
|
|
A-34
|
|
A-i
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|
|
|
|
|
|
|
|
|
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Page
|
|
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND THE
MERGER SUBS
|
|
|
A-34
|
|
4.1
|
|
Organization and Standing
|
|
|
A-34
|
|
4.2
|
|
Corporate Approvals
|
|
|
A-35
|
|
4.3
|
|
Non-contravention; Required Consents
|
|
|
A-35
|
|
4.4
|
|
Capitalization
|
|
|
A-36
|
|
4.5
|
|
SEC Reports; Other Reports
|
|
|
A-36
|
|
4.6
|
|
Financial Statements and Controls
|
|
|
A-37
|
|
4.7
|
|
No Undisclosed Liabilities
|
|
|
A-38
|
|
4.8
|
|
Absence of Certain Changes
|
|
|
A-38
|
|
4.9
|
|
Litigation; Orders
|
|
|
A-38
|
|
4.10
|
|
Ownership of Company Capital Stock
|
|
|
A-38
|
|
4.11
|
|
Brokers
|
|
|
A-38
|
|
4.12
|
|
Financing
|
|
|
A-38
|
|
|
|
|
|
|
ARTICLE V INTERIM CONDUCT OF BUSINESS
|
|
|
A-38
|
|
5.1
|
|
Affirmative Obligations of the Company
|
|
|
A-38
|
|
5.2
|
|
Negative Obligations of the Company
|
|
|
A-38
|
|
5.3
|
|
Negative Obligations of Parent
|
|
|
A-41
|
|
|
|
|
|
|
ARTICLE VI ADDITIONAL AGREEMENTS
|
|
|
A-41
|
|
6.1
|
|
No Solicitation
|
|
|
A-41
|
|
6.2
|
|
Reasonable Best Efforts to Complete
|
|
|
A-43
|
|
6.3
|
|
Regulatory Filings
|
|
|
A-44
|
|
6.4
|
|
Anti-Takeover Laws
|
|
|
A-45
|
|
6.5
|
|
Registration Statement; Proxy Statement/Prospectus
|
|
|
A-45
|
|
6.6
|
|
Company Stockholder Meeting
|
|
|
A-46
|
|
6.7
|
|
Company Board Recommendation
|
|
|
A-47
|
|
6.8
|
|
Access; Notice and Consultation
|
|
|
A-49
|
|
6.9
|
|
Confidentiality
|
|
|
A-50
|
|
6.10
|
|
Public Disclosure
|
|
|
A-50
|
|
6.11
|
|
Employee Matters
|
|
|
A-50
|
|
6.12
|
|
Directors and Officers Indemnification and Insurance
|
|
|
A-51
|
|
6.13
|
|
Resignation of Officers and Directors of Company Subsidiaries
|
|
|
A-52
|
|
6.14
|
|
Section 16 Resolutions
|
|
|
A-52
|
|
6.15
|
|
Nasdaq Listing
|
|
|
A-53
|
|
6.16
|
|
Registration Statements for Assumed Options and Other Awards
|
|
|
A-53
|
|
6.17
|
|
Obligations of the Merger Subs
|
|
|
A-53
|
|
6.18
|
|
Tax Matters
|
|
|
A-53
|
|
6.19
|
|
Open Source Materials
|
|
|
A-53
|
|
|
|
|
|
|
ARTICLE VII CONDITIONS TO THE MERGER
|
|
|
A-54
|
|
7.1
|
|
Conditions to Each Partys Obligations to Effect the Merger
|
|
|
A-54
|
|
7.2
|
|
Additional Conditions to the Obligations of Parent and the
Merger Subs
|
|
|
A-54
|
|
7.3
|
|
Additional Conditions to the Obligations of the Company
|
|
|
A-55
|
|
|
|
|
|
|
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER
|
|
|
A-56
|
|
8.1
|
|
Termination
|
|
|
A-56
|
|
A-ii
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
8.2
|
|
Notice of Termination; Effect of Termination
|
|
|
A-59
|
|
8.3
|
|
Fees and Expenses
|
|
|
A-59
|
|
8.4
|
|
Amendment
|
|
|
A-60
|
|
8.5
|
|
Extension; Waiver
|
|
|
A-61
|
|
|
|
|
|
|
ARTICLE IX GENERAL PROVISIONS
|
|
|
A-61
|
|
9.1
|
|
Survival of Representations, Warranties and Covenants
|
|
|
A-61
|
|
9.2
|
|
Notices
|
|
|
A-61
|
|
9.3
|
|
Assignment
|
|
|
A-62
|
|
9.4
|
|
Entire Agreement
|
|
|
A-62
|
|
9.5
|
|
Third Party Beneficiaries
|
|
|
A-62
|
|
9.6
|
|
Severability
|
|
|
A-62
|
|
9.7
|
|
Other Remedies
|
|
|
A-62
|
|
9.8
|
|
Governing Law
|
|
|
A-62
|
|
9.9
|
|
Specific Performance
|
|
|
A-63
|
|
9.10
|
|
Consent to Jurisdiction
|
|
|
A-63
|
|
9.11
|
|
Waiver Of Jury Trial
|
|
|
A-63
|
|
9.12
|
|
Counterparts
|
|
|
A-63
|
|
|
|
|
|
|
EXHIBITS
|
|
|
|
|
Exhibit A Voting Agreement
|
|
|
A-65
|
|
A-iii
AGREEMENT
AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this
Agreement) is made and entered into as of
May 20, 2009 by and among NetApp, Inc., a Delaware
corporation (Parent), Kentucky Merger Sub One
Corporation, a Delaware corporation and a direct, wholly-owned
subsidiary of Parent (Merger Sub One), Derby
Merger Sub Two LLC, a Delaware limited liability company and a
direct, wholly-owned subsidiary of Parent (Merger Sub
Two and together with Merger Sub One, the
Merger Subs), and Data Domain, Inc., a
Delaware corporation (the Company). All
capitalized terms that are used in this Agreement shall have the
respective meanings ascribed thereto in Article I.
WITNESSETH:
WHEREAS, each of the respective Board of Directors of Parent,
the Merger Subs and the Company has approved this Agreement and
the transactions contemplated hereby, and deems it advisable and
in the best interests of their respective stockholders to enter
into this Agreement and consummate the transactions contemplated
hereby pursuant to which, among other things, and as a single
integrated transaction, Merger Sub One will be merged with and
into the Company (the First Step Merger or
the Merger) in accordance with the applicable
provisions of the General Corporation Law of the State of
Delaware (the DGCL), the Company will
continue as the surviving corporation of the First Step Merger
and each share of the Company Common Stock outstanding
immediately prior to the Effective Time will be cancelled and
converted into the right to receive the consideration set forth
herein, all upon the terms and subject to the conditions set
forth in this Agreement.
WHEREAS, immediately following the First Step Merger,
(i) if the opinions described in Section 6.18
of this Agreement have been delivered, Parent will cause the
Company to merge with and into Merger Sub Two, with Merger Sub
Two continuing as the surviving entity (the Second Step
Merger and, taken together with the First Step Merger,
the Merger; provided that, if the Second Step
Merger occurs, the Second Step Merger shall be included in the
meaning of the term the Merger) and
(ii) if the opinions described in Section 6.18
of this Agreement have not been delivered, then the Second Step
Merger shall not occur.
WHEREAS, for U.S. federal income tax purposes, it is
intended that (i) if the Second Step Merger occurs, the
Merger will qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended, and that this Agreement will be, and is
hereby, adopted as a plan of reorganization within the meaning
of Treasury Regulations
Section 1.368-2(g)
and (ii) if the Second Step Merger does not occur, the
First Step Merger will be treated as a taxable transaction.
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to the willingness
of Parent and the Merger Subs to enter into this Agreement,
certain stockholders of the Company, in their respective
capacities as stockholders of the Company, are entering into
Voting Agreements with Parent substantially in the form attached
hereto as Exhibit A (each, a Voting
Agreement and collectively, the Voting
Agreements).
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties, covenants and agreements set
forth herein, as well as other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged and
accepted, and intending to be legally bound hereby, Parent, the
Merger Subs and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS &
INTERPRETATIONS
1.1 Certain Definitions. For all
purposes of and under this Agreement, the following capitalized
terms shall have the following respective meanings:
(a) Acquisition
Proposal shall mean any indication of
interest, offer or proposal relating to an Acquisition
Transaction from any Person other than Parent or any of its
Affiliates.
A-1
(b) Acquisition
Transaction shall mean any transaction or
series of related transactions (other than a transaction with
Parent or any of its Affiliates) involving:
(i) any direct or indirect purchase or other acquisition by
any Person or group (as defined in or under
Section 13(d) of the Exchange Act) from the Company of
fifteen percent (15%) or more of the total outstanding equity
interests in or voting securities of the Company, or any tender
offer or exchange offer that, if consummated, would result in
any Person or group (as defined in or under
Section 13(d) of the Exchange Act) beneficially owning
fifteen percent (15%) or more of the total outstanding equity
interests in or voting securities of the Company;
(ii) any direct or indirect purchase or other acquisition
of fifty percent (50%) or more of any class of equity or other
voting securities of one or more direct or indirect Subsidiaries
of the Company, the business(es) of which, individually or in
the aggregate, generate or constitute (as applicable) fifteen
percent (15%) or more of the consolidated net revenues or net
income (for the twelve month period ending on the last day of
the Companys most recently completed fiscal year) or
assets (measured by the lesser of book value or fair market
value thereof as of the date of such transaction) of the Company
and its Subsidiaries, taken as a whole;
(iii) any merger, consolidation, business combination,
liquidation, dissolution, recapitalization, reorganization or
other similar transaction involving the Company or one or more
of its Subsidiaries, the business(es) of which, individually or
in the aggregate, generate or constitute (as applicable) fifteen
percent (15%) or more of the consolidated net revenues or net
income (for the twelve-month period ending on the last day of
the Companys most recently completed fiscal year) or
assets (measured by the lesser of book value or fair market
value thereof as of the date of such transaction) of the Company
and its Subsidiaries, taken as a whole, pursuant to which the
stockholders of the Company (as a group) or such Subsidiary or
Subsidiaries, as applicable, immediately preceding such
transaction hold less than eighty-five percent (85%) of the
equity interests in or voting securities of the surviving or
resulting entity of such transaction;
(iv) any direct or indirect sale, transfer or disposition
of assets (other than in the ordinary course of business) of the
Company or one or more of its Subsidiaries, the business(es) of
which, individually or in the aggregate, generate or constitute
(as applicable) fifteen percent (15%) or more of the
consolidated net revenues or net income (for the twelve month
period ending on the last day of the Companys most
recently completed fiscal year) or assets (measured by the
lesser of book value or fair market value thereof as of the date
of such transaction) of the Company and its Subsidiaries, taken
as a whole; or
(v) any combination of the foregoing transactions that
results in one of the effects referenced in clause (i) or
(ii) above.
(c) Affiliate shall mean, with
respect to any Person, any other Person which directly or
indirectly controls, is controlled by or is under common control
with such Person. For purposes of the immediately preceding
sentence, the term control (including, with
correlative meanings, the terms controlling,
controlled by and under common control
with), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such
Person, whether through ownership of voting securities, by
contract or otherwise; provided, however, that for the
avoidance of doubt, neither Artis Capital Management nor any
affiliated entity thereof will be considered an Affiliate of the
Company for purposes of this Agreement.
(d) Business Day shall mean any
day, other than a Saturday, Sunday or any day which is a legal
holiday under the laws of the State of California or is a day on
which banking institutions located in the State of California
are authorized or required by Law or other governmental action
to close.
(e) Closing Average shall mean
the average of the closing sales prices for Parent Common Stock,
rounded to the nearest one-hundredth of a cent, on the Nasdaq
for the ten (10) most recent consecutive trading days
ending on the third (3rd) trading day immediately prior to the
date on which the Effective Time occurs.
(f) Code shall mean the Internal
Revenue Code of 1986, as amended, or any successor statute.
A-2
(g) Company Balance Sheet shall
mean the consolidated balance sheet of the Company and its
Subsidiaries as of December 31, 2008 set forth in the
Company
Form 10-K.
(h) Company Board shall mean the
board of directors of the Company.
(i) Company Capital Stock shall
mean the Company Common Stock and the Company Preferred Stock.
(j) Company Common Stock shall
mean the Common Stock, par value $0.0001 per share, of the
Company.
(k) Company ESPP shall mean the
Company 2007 Employee Stock Purchase Plan.
(l) Company
Form 10-Q
shall mean the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended March 31, 2009 (as filed
with the SEC on May 5, 2009).
(m) Company Intellectual Property
shall mean any and all Intellectual Property Rights that are
owned or purported to be owned by the Company or any of its
Subsidiaries.
(n) Company Intellectual Property
Agreements means the In-Licenses and the
Out-Licenses, collectively.
(o) Company Option shall mean an
option to purchase shares of Company Common Stock outstanding
under any of the Company Option Plans.
(p) Company Option Plans shall
mean the Company 2002 Stock Plan and the Company 2007 Equity
Incentive Plan.
(q) Company Preferred Stock shall
mean the Preferred Stock, par value $0.0001 per share, of
the Company.
(r) Company Registered Intellectual
Property means all Registered Intellectual
Property owned by, or filed in the name of, the Company or its
Subsidiaries.
(s) Company Restricted Stock Units
shall mean an award of restricted stock units outstanding
under any of the Company Option Plans.
(t) Company Stock Awards shall
mean Company Options, Company Restricted Stock (as defined
below) and Company Restricted Stock Units.
(u) Company Source Code means
Source Code with respect to the Company Products.
(v) Contract shall mean any
legally binding contract, subcontract, agreement, note, bond,
mortgage, indenture, lease, sublease, license, sublicense, or
other instrument, commitment, arrangement or understanding of
any kind or character, whether oral or in writing, in any such
case which is executory in nature and has outstanding
performance obligations or under which any liabilities of any
kind or nature may exist.
(w) Delaware Law shall mean the
DGCL and any other applicable Law of the State of Delaware.
(x) Designated Employees shall
mean each employee of the Company or its Subsidiary who
(i) receives and accepts an offer of employment from Parent
or any of its Subsidiaries, or the Final Surviving Entity prior
to the Closing and (ii) is an employee of the Parent or any
of its Subsidiaries, or the Final Surviving Entity immediately
following the Closing.
(y) Environmental Law shall mean
any and all applicable Laws relating to the protection of the
environment (including ambient air, surface water, groundwater
or land) or human health as affected by the environment or
Hazardous Substances or otherwise relating to the production,
use, emission, storage, treatment, transportation, recycling,
disposal, discharge, release or other handling of any Hazardous
Substances or any products or wastes containing any Hazardous
Substances including any Laws related to product take-back or
content requirements, or the investigation,
clean-up or
other remediation or analysis of Hazardous Substances, including
the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, the Resource Recovery and Conservation
Act of 1976, the Federal Water Pollution Control Act, the Clean
Air
A-3
Act, the Hazardous Materials Transportation Act, the Clean Water
Act, European Union Directive
2002/96/EC
on waste electrical and electronic equipment (WEEE
Directive) and European Union Directive
2002/95/EC
on the restriction on the use of hazardous substances
(EU RoHS Directive) and the Administrative
Measure on the Control of Pollution Caused by Electronic
Information Products (China RoHS), and laws
of similar import, all as amended at any time.
(z) ERISA shall mean the Employee
Retirement Income Security Act of 1974, as amended, and the
rules and regulations promulgated thereunder, or any successor
statue, rules and regulations thereto.
(aa) ERISA Affiliate shall mean
any other trade or business (whether or not incorporated) which
would be treated as a single employer with the Company or any of
its Subsidiaries under Section 414 of the Code.
(bb) Exchange Act shall mean the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder, or any successor statute,
rules and regulations thereto.
(cc) Exchange Ratio shall mean,
subject to adjustment pursuant to Section 2.7(b)(i)
and Section 2.7(b)(ii):
(i) 0.833 shares of Parent Common Stock if the Closing
Average is less than $16.26;
(ii) 0.682 shares of Parent Common Stock if the
Closing Average is greater than $19.88; and
(iii) that fraction of shares of Parent Common Stock
(rounded to the nearest ten thousandth) equal to the quotient
obtained by dividing $13.55 by the Closing Average, if the
Closing Average is (A) less than or equal to $19.88 and
(B) greater than or equal to $16.26.
(dd) GAAP shall mean generally
accepted accounting principles, as applied in the United States.
(ee) Governmental Authority shall
mean any government, any governmental or regulatory entity or
body, department, commission, board, agency, instrumentality or
self-regulatory organization (including Nasdaq), arbitrator or
arbitration panel, and any court, tribunal or judicial body, in
each case whether federal, state, county, provincial or local,
and whether domestic or foreign.
(ff) Hazardous Substance shall
mean any substance, material or waste that is characterized or
regulated under any Environmental Law as hazardous,
pollutant, contaminant,
toxic or words of similar meaning or effect,
including petroleum and petroleum products, polychlorinated
biphenyls and asbestos, excluding however, materials that would
otherwise be deemed to be Hazardous Substances that are
contained in products typically used for office or janitorial
purposes that are properly and safely maintained in accordance
with Environmental Laws.
(gg) HSR Act shall mean the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder, or any successor
statute, rules and regulations thereto.
(hh) Intellectual Property Rights
means rights in any or all of the following: (i) patents
and applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and
continuations-in-part
thereof (Patents); (ii) copyrights,
copyright registrations and applications therefor, and all other
rights corresponding thereto including moral and economic rights
of authors and inventors, however denominated
(Copyrights); (iii) industrial designs
and any registrations and applications therefor; (iv) trade
names, logos, common law trademarks and service marks, trademark
and service mark registrations and applications therefor
(Trademarks); (v) domain names, domain
name registrations and applications therefor; (vi) trade
secrets (including, those trade secrets defined in the Uniform
Trade Secrets Act and under corresponding foreign statutory and
common law), proprietary business, technical and know-how
information, and non-public and confidential information
(Trade Secrets); and (vii) any similar
or equivalent rights to any of the foregoing (anywhere in the
world).
(ii) IRS shall mean the United
States Internal Revenue Service or any successor thereto.
(jj) International Employee Plans
shall mean each Employee Plan that has been established, adopted
or maintained by the Company or any of its Subsidiaries, or with
respect to which the Company or any of its Subsidiaries will or
may have any liabilities with respect to any Foreign Employees.
A-4
(kk) Knowledge of the Company,
with respect to any matter in question, shall mean the actual
knowledge of any of the directors and executive officers of the
Company and those officers of the Company set forth on
Schedule 1.1.
(ll) Law shall mean any and all
applicable federal, state, provincial, local, municipal, foreign
or other law, statute, treaty, constitution, principle of common
law, resolution, ordinance, code, edict, decree, directive,
guidance, order, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into
effect by or under the authority of any Governmental Authority.
(mm) Legal Proceeding shall mean
any action, suit, litigation, arbitration, criminal prosecution
or other legal proceeding pending before any Governmental
Authority.
(nn) Lien shall mean any lien,
pledge, hypothecation, charge, mortgage, security interest,
encumbrance, claim, option, right of first refusal, preemptive
right, community property interest or other legal restriction of
any nature (including any restriction on the voting of any
security, any restriction on the transfer of any security or
other asset, any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset).
(oo) Loan shall mean any
extension of credit (including any commitment to extend credit).
(pp) Material Adverse Effect
shall mean, with respect to any Person, any fact, circumstance,
change or effect (each, an Effect) that,
individually or when taken together with all other Effects that
exist at the date of determination of the occurrence of the
Material Adverse Effect, (x) is or would reasonably be
expected to have a material adverse effect on the business,
operations, financial condition or results of operations of such
Person and its Subsidiaries, taken as a whole or (y) is or
would reasonably be expected to have a material adverse effect
on such Persons ability to consummate the Merger in
accordance with the terms hereof and applicable Law;
provided, however, that no Effects (by themselves or when
aggregated with any other Effects) to the extent proximately
resulting from the following shall be deemed to be or constitute
a Material Adverse Effect, and no Effects to the
extent proximately resulting from the following (by themselves
or when aggregated with any other Effects) shall be taken into
account when determining whether a Material Adverse
Effect has occurred or would reasonably be expected to
occur:
(i) changes in general economic conditions in the United
States or any other country or region in the world, or changes
in conditions in the global economy generally (to the extent
that such Effects do not have a disproportionate impact on such
Person and its Subsidiaries, taken as a whole, relative to other
companies and operating in the same industries in which such
Person operates);
(ii) changes in general conditions in the industries in
which such Person and its subsidiaries operate (to the extent
that such Effects do not have a disproportionate impact on such
Person and its Subsidiaries, taken as a whole, relative to other
companies operating in the same industries in which such Person
operates);
(iii) changes in GAAP or other accounting standards (or the
interpretation thereof by a third party), Law or regulatory
conditions (or the interpretation thereof by a third party);
(iv) any failure to take any action or the taking of any
specific action at the written direction, or with the prior
written consent, of Parent (in the case of the Company) or the
Company (in the case of Parent, Merger Sub One or Merger Sub
Two);
(v) the taking of any specific action expressly required by
this Agreement;
(vi) acts of war, armed hostilities or terrorism (to the
extent that such Effects do not have a disproportionate impact
on such Person and its Subsidiaries, taken as a whole, relative
to other companies operating in the same industries in which
such Person operates);
(vii) changes in the trading price or trading volume of
such Persons common stock, in and of itself; provided,
however, that the exception set forth in this
clause (vii) shall not in any way prevent or otherwise
affect a determination that any Effect underlying such change
has resulted in, or contributed to, a Material Adverse Effect;
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(viii) Effects primarily resulting from the announcement
and pendency of the Merger and the transactions contemplated by
this Agreement (including any loss of employees); provided,
however, that the exception set forth in this
clause (viii) shall not apply to any Effects related to or
caused by any Legal Proceedings resulting from the announcement
and pendency of the Merger and the transactions contemplated by
this Agreement;
(ix) any failure by any Person to meet any public estimates
or expectations of such Persons revenue, earnings or other
financial performance or results of operations for any period,
or any failure by such Person to meet any internal budgets,
plans or forecasts of its revenues, earnings or other financial
performance or results of operations (it being understood that
any underlying cause of any such failure may be deemed to
constitute, in and of itself, a Material Adverse Effect and may
be taken into consideration when determining whether a Material
Adverse Effect has occurred); or
(x) stockholder class action, derivative litigation or
other Legal Proceedings made or brought by any of the current or
former stockholders of such Person (on their own behalf or on
behalf of such Person) against such Person arising out of the
Merger or any other transactions contemplated by this Agreement.
(qq) Nasdaq shall mean the Nasdaq
Global Select Market, any successor stock exchange operated by
The NASDAQ Stock Market LLC or any successor thereto.
(rr) Open Source License shall
mean any license, including, the GNU General Public License
(GPL), GNU Lesser General Public License (LGPL), Mozilla Public
License (MPL), BSD licenses, the Artistic License, the Netscape
Public License, the Sun Community Source License (SCSL,) the Sun
Industry Standards License (SISL) and the Apache License,
requiring software to be disclosed or distributed as free
software, open source software or in source
code form or redistributable at no charge.
(ss) Option Exchange Ratio shall
mean the sum of (x) the Stock Consideration plus
(y) the quotient obtained by dividing (1) the Cash
Consideration, by (2) the Closing Average.
(tt) Order shall mean any
judgment, decision, decree, injunction, ruling, writ, assessment
or order of any Governmental Authority that is binding on any
Person or its property under applicable Laws.
(uu) Parent Board shall mean the
board of directors of Parent.
(vv) Parent Common Stock shall
mean the Common Stock, par value $0.001 per share, of
Parent.
(ww) Parent
Form 10-Q
shall mean Parents Quarterly Report on
Form 10-Q
for the quarterly period ended January 23, 2009 (as filed
with the SEC on March 2, 2009.
(xx) Parent Options shall mean an
option to purchase shares of Parent Common Stock outstanding
under any of the Parent option plans.
(yy) Parent Restricted Stock
shall mean a share of Parent Common Stock outstanding under any
of the Parent option plans that is subject to forfeiture or
repurchase by Parent.
(zz) Parent Restricted Stock
Units shall mean an award of restricted stock
units outstanding under any of the Parent option plans.
(aaa) Permitted Liens shall mean any
or all of the following: (i) Liens disclosed on the
consolidated balance sheet of such Person included in the most
recent annual or quarterly report filed by such Person with the
SEC prior to the date of this Agreement, (ii) Liens for
Taxes and other similar governmental charges and assessments
which 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 to the extent required
by GAAP; (iii) Liens of landlords and liens of carriers,
warehousemen, mechanics and materialmen and other like Liens
arising in the ordinary course of business;
(iv) undetermined or inchoate Liens, charges and privileges
and any statutory Liens, licenses, charges, adverse claims,
security interests or encumbrances of any nature whatsoever and
claimed or held by any Governmental Authority; (v) security
given in the ordinary course of business to any public utility,
Governmental Authority or other statutory or public authority
(vi) defects, imperfections or irregularities in title,
covenants, easements and
rights-of-way
(unrecorded and of record) and other similar
A-6
Liens (or other Encumbrances of any type) on zoning, building
and other similar codes or restrictions, in each case that do
not adversely affect in any material respect the current use of
the applicable property owned, leased, used or held for use by
the Company or any of its Subsidiaries; (vii) pledges or
deposits to secure obligations under workers compensation
laws or similar legislation; (viii) Liens imposed by
applicable Law (other than Tax law); (ix) Liens imposed on
the underlying fee interest in leased property that are not
caused by the Company or any of its Subsidiaries; and
(x) non-exclusive licenses granted by the Company or its
Subsidiaries in the ordinary course of business.
(bbb) Person shall mean any
individual, corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including
any limited liability company or joint stock company), firm or
other enterprise, association, organization, entity or
Governmental Authority.
(ccc) Registered Intellectual
Property means Intellectual Property Rights that
have been registered, applied for, filed, certified or otherwise
perfected, issued, or recorded with or by any Governmental
Authority, including any quasi-public legal authority.
(ddd) Representatives shall mean,
with respect to any Person, any directors, officers, employees,
controlled Affiliates and any investment bankers, attorneys,
advisors, representatives or other agents of such Person.
(eee) Sarbanes-Oxley Act shall
mean the Sarbanes-Oxley Act of 2002 or any successor thereto.
(fff) SEC shall mean the United
States Securities and Exchange Commission or any successor
thereto.
(ggg) Securities Act shall mean
the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, or any successor statute,
rules or regulations thereto.
(hhh) Source Code means computer
software code, in form other than object code form, including
related programmer comments and annotations, help text, data and
data structures, instructions and procedural, object-oriented
and other code, which may be printed out or displayed in human
readable form.
(iii) Subsidiary of any Person
shall mean (i) a corporation more than fifty percent (50%)
of the combined voting power of the outstanding voting stock of
which is owned, directly or indirectly, by such Person or by one
of more other Subsidiaries of such Person or by such Person and
one or more other Subsidiaries thereof, (ii) a partnership
of which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries
thereof, directly or indirectly, is the general partner and has
the power to direct the policies, management and affairs of such
partnership, (iii) a limited liability company of which
such Person or one or more other Subsidiaries of such Person or
such Person and one or more other Subsidiaries thereof, directly
or indirectly, is the managing member and has the power to
direct the policies, management and affairs of such company or
(iv) any other Person (other than a corporation,
partnership or limited liability company) in which such Person,
or one or more other Subsidiaries of such Person or such Person
and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to
direct the policies, management and affairs thereof.
(jjj) Superior Proposal shall
mean any unsolicited written offer or proposal (that has not
been withdrawn) for a transaction or a series of related
transactions providing for the acquisition of all of the
outstanding voting securities of the Company which the Company
Board shall have determined in good faith (after consultation
with its financial advisor and its outside legal counsel) is
more favorable to the Companys stockholders (in their
capacity as such) than the Merger, in each case taking into
consideration, in addition to any other factors determined by
the Company Board to be relevant, (i) all financial
considerations relevant thereto, including conditions in the
financial and credit markets, (ii) the identity of the
Person(s) making such offer or proposal and the parties
providing any of the financing for the transaction contemplated
thereby, and the prior history of such Person(s) and sources of
financing in connection with the consummation or failure to
consummate similar transactions, (iii) the anticipated
timing, conditions and prospects for completion of the
transaction contemplated by such offer or proposal,
(iv) the other terms and conditions of such offer or
proposal and the implications thereof on the Company, including
relevant legal, regulatory and other aspects of
A-7
such offer or proposal deemed relevant by the Company Board, and
(v) any proposal made by Parent in connection therewith or
response thereto.
(kkk) Tax shall mean (i) any and
all U.S. federal, state, local and
non-U.S. taxes,
including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture,
employment, escheat, excise and property taxes, together with
all interest, penalties and additions imposed with respect to
such amounts, (ii) any liability for the payment of any
amounts of the type described in clause (i) as a result of
being or having been a member of an affiliated, consolidated,
combined, unitary or similar group for any period (including any
liability under Treasury
Regulation Section 1.1502-6
or any comparable provision of foreign, state or local law, and
including any arrangement for group or consortium relief or
similar arrangement) and (iii) any liability for the
payment of any amounts of the type described in clause (i)
or (ii) as a result of any express or implied obligation to
indemnify any other Person or as a result of any obligations
under any agreements or arrangements with any other Person with
respect to such amounts and including any liability for taxes of
a predecessor or transferor or otherwise by operation of Law.
(lll) Tax Returns shall mean all
returns, declarations, reports, estimates, statements and other
documents filed or required to be filed in respect of any Taxes,
including any attachments, addenda or amendments thereto.
(mmm) WARN shall mean the Worker
Adjustment and Retraining Notification Act or any similar state
or local law, including any similar law of a
non-U.S. jurisdiction.
1.2 Additional Definitions. The
following capitalized terms shall have the respective meanings
ascribed thereto in the respective sections of this Agreement
set forth opposite each of the capitalized terms below:
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Section
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Term
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Reference
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401(k) Plan
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6.11(a)
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Agreement
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Preamble
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Antitrust Approval
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7.1(c)
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Annual Meeting
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6.6(b)
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Assets
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3.19
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Assumed Option
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2.8(a)
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Assumed Restricted Stock Unit
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2.8(b)
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Book-Entry Shares
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2.9(b)(i)
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Capitalization Date
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3.4(a)
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Cash Consideration
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2.7(b)(i)
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Certificate
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2.9(b)(i)
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Certificate of Merger
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2.3(a)
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Closing
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2.2
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Closing Date
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2.2
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Collective Bargaining Agreements
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3.16(a)
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Company
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Preamble
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Company Board Recommendation
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6.7(a)
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Company Board Recommendation Change
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6.7(a)
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Company Capitalization Representation
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7.2(a)(ii)
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Company Disclosure Schedule
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Article III
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Company
Form 10-K
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3.1(b)
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Company Insiders
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6.14
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Company Products
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3.20(a)
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Company Restricted Stock
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2.8(c)
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Company SEC Reports
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3.6(a)
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Company Securities
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3.4(c)
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A-8
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Section
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Term
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Reference
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Company Stockholder Meeting
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6.6(a)
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Confidentiality Agreement
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6.9
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Consent
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3.3(b)
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Copyrights
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1.1(hh)
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D&O Insurance
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6.12(b)
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Delaware Secretary of State
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2.3(a)
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DGCL
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Recitals
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Dissenting Company Shares
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2.7(b)(v)
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Effect
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1.1(qq)
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Effective Time
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2.3(a)
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Employee Plans
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3.15(a)
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Exchange Agent
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2.9(a)(i)
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Exchange Fund
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2.9(a)(ii)
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Final Surviving Entity
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2.1(b)
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First Step Merger
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Recitals
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Foreign Employees
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3.15(j)
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In-Licenses
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3.20(d)
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Indemnified Parties
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6.12(a)
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Merger
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Recitals
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Interim Surviving Corporation
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2.1(a)
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Key Employee Offer Letters
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Recitals
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Leased Real Property
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3.17
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Leases
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3.17
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Material Contract
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3.13(a)
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Maximum Annual Premium
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6.12(b)
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Merger
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Recitals
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Merger Consideration
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2.7(b)(i)
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Merger Proposal
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6.6(a)
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Merger Sub One
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Preamble
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Merger Sub Two
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Preamble
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Merger Subs
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Preamble
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Open Source Materials
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3.20(l)
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Out-Licenses
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3.20(d)
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Parent
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Preamble
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Parent Balance Sheet
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4.7
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Parent Capitalization Date
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4.4(a)
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Parent Disclosure Schedule
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Article IV
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Parent Expenses
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8.3(b)(v)
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Parent
Form 10-K
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4.1(b)
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Parent SEC Reports
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4.5(a)
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Patents
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1.1(hh)
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Permits
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3.11
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Proxy Statement/Prospectus
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6.5(a)
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Qualifying Amendment
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6.5(c)
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Registration Statement
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6.5(a)
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Regulation M-A
Filing
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6.5(d)
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Requisite Merger Approval
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3.2(c)
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Section
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Term
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Reference
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RoHS Directive
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1.1(z)
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Second Step Merger
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Recitals
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Specified Company Representations
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7.2(a)(i)
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Specified Parent Representations
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7.3(a)(i)
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Stock Consideration
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2.7(b)(i)
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Stock Threshold
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2.7(b)(ii)
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Subsidiary Securities
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3.5(d)
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Tail Policy
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6.12(b)
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Termination Date
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8.1(b)
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Termination Fee Amount
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8.3(b)(i)
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Total Stock Amount
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2.7(b)(ii)
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Trade Secrets
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1.1(hh)
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Trademarks
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1.1(hh)
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Voting Agreement(s)
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Recitals
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WEEE Directive
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1.1(y)
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1.3 Certain Interpretations.
(a) Unless otherwise indicated, all references herein to
Sections, Articles, Annexes, Exhibits or Schedules, shall be
deemed to refer to Sections, Articles, Annexes, Exhibits or
Schedules of or to this Agreement, as applicable.
(b) Unless otherwise indicated, the words
include, includes and
including, when used herein, shall be deemed in each
case to be followed by the words without limitation.
(c) As used in this Agreement, the word extent
and the phrase to the extent shall mean the degree
to which a subject or other thing extends, and such word or
phrase shall not mean simply if.
(d) As used in this Agreement, the singular or plural
number shall be deemed to include the other whenever the context
so requires.
(e) Unless otherwise indicated, all references herein to
dollars or $ shall mean and refer to
U.S. denominated dollars.
(f) References to deliver, furnish
or made available shall mean that such documents or
information referenced shall have been delivered to Parent or
its Representatives or contained in the Companys
electronic data room for Project Anaconda (maintained by
Fenwick & West LLP) as of 5:00 p.m. (Pacific
time) on May 19, 2009.
(g) Unless otherwise indicated or the context otherwise
requires, when reference is made herein to a Person, such
reference shall be deemed to include all direct and indirect
Subsidiaries of such Person.
(h) Unless otherwise indicated or the context otherwise
requires, all references herein to the Subsidiaries of a Person
shall be deemed to include all direct and indirect Subsidiaries
of such Person.
(i) The table of contents and headings set forth in this
Agreement are for convenience of reference purposes only and
shall not affect or be deemed to affect in any way the meaning
or interpretation of this Agreement or any term or provision
hereof.
(j) The parties hereto agree that they have been
represented by counsel during the negotiation and execution of
this Agreement and, therefore, waive the application of any Law,
holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party
drafting such agreement or document.
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ARTICLE II
THE MERGER
2.1 The Merger.
(a) Upon the terms and subject to the conditions set forth
in this Agreement and the applicable provisions of the DGCL, at
the Effective Time, Merger Sub One shall be merged with and into
the Company in the First Step Merger, the separate corporate
existence of Merger Sub One shall thereupon cease and the
Company shall continue as the surviving corporation of the First
Step Merger and as a wholly-owned Subsidiary of Parent. The
Company, as the surviving corporation of the First Step Merger,
is referred to herein as the Interim Surviving
Corporation.
(b) If the tax opinions described in
Section 6.18 of this Agreement have been delivered,
then, as part of a single integrated plan, immediately following
the Effective Time, upon the terms and subject to the conditions
set forth in this Agreement and the applicable provisions of the
DGCL, the Interim Surviving Corporation shall be merged with and
into Merger Sub Two in the Second Step Merger, the separate
corporate existence of the Interim Surviving Corporation shall
thereupon cease and Merger Sub Two shall continue as the
surviving entity of the Second Step Merger and as a wholly-owned
Subsidiary of Parent. Merger Sub Two, as the surviving entity of
the Second Step Merger, is referred to herein as the
Final Surviving Entity.
(c) If the tax opinions described in
Section 6.18 of this Agreement are not delivered,
then the Second Step Merger shall not occur and the Company
shall be considered the Final Surviving Entity for
all purposes of, and under, this Agreement.
2.2 The Closing. The consummation
of the Merger shall take place at a closing (the
Closing) to occur at the offices of Wilson
Sonsini Goodrich & Rosati, Professional Corporation,
650 Page Mill Road, Palo Alto, CA, 94304, on a date and at
a time to be agreed upon by Parent, Merger Sub One, Merger Sub
Two and the Company, which date shall be no later than the
second (2nd) Business Day after the satisfaction or waiver (to
the extent permitted hereunder) of the last to be satisfied or
waived of the conditions set forth in Article VII
(other than those conditions that by their terms are to be
satisfied at the Closing, but subject to the satisfaction or
waiver (to the extent permitted hereunder) of such conditions),
or at such other location, date and time as Parent and the
Company shall mutually agree upon in writing (the date upon
which the Closing shall actually occur pursuant hereto being
referred to herein as the Closing Date).
2.3 Effective Time of First Step Merger and Second
Step Merger.
(a) Upon the terms and subject to the conditions set forth
in this Agreement, at the Closing, Parent, Merger Sub One and
the Company shall cause the First Step Merger to be consummated
under the DGCL by filing a certificate of merger in customary
form and substance (the Certificate of
Merger) with the Secretary of State of the State of
Delaware (the Delaware Secretary of State) in
accordance with the applicable provisions of the DGCL (the time
of such filing and acceptance by the Delaware Secretary of
State, or such later time as may be agreed in writing by Parent,
Merger Sub One and the Company and specified in the Certificate
of Merger, being referred to herein as the Effective
Time).
(b) Immediately after the Effective Time, if the Second
Step Merger is to occur, Parent shall cause the Second Step
Merger to be consummated under the DGCL by filing a certificate
of merger in customary form and substance with the Secretary of
State of the State of Delaware in accordance with the applicable
provisions of the DGCL.
2.4 Effect of the First Step Merger and Second Step
Merger.
(a) At the Effective Time, the effect of the First Step
Merger shall be as provided in this Agreement and the applicable
provisions of the DGCL. Without limiting the generality of the
foregoing (and subject thereto), at the Effective Time, all of
the property, rights, privileges, powers and franchises of the
Company and Merger Sub One shall vest in the Interim Surviving
Corporation, and all debts, liabilities and duties of the
Company and Merger Sub One shall become the debts, liabilities
and duties of the Interim Surviving Corporation.
(b) If the Second Step Merger is to occur, at the effective
time of the Second Step Merger, the effect of the Second Step
Merger shall be as provided in the applicable provisions of the
DGCL. Without limiting the generality of the foregoing (and
subject thereto), at the effective time of the Second Step
Merger, except as otherwise agreed to
A-11
pursuant to the terms of this Agreement, all of the property,
rights, privileges, powers and franchises of the Interim
Surviving Corporation shall vest in Merger Sub Two as the
surviving entity in the Second Step Merger, and all debts,
liabilities and duties of the Interim Surviving Corporation
shall become the debts, liabilities and duties of Merger Sub Two
as the surviving entity in the Second Step Merger.
2.5 Organizational Documents.
(a) Interim Surviving Corporation.
(i) At the Effective Time, the Certificate of Incorporation
of the Company shall be amended and restated in its entirety to
read identically to the Certificate of Incorporation of Merger
Sub One as in effect immediately prior to the Effective Time,
and such amended and restated Certificate of Incorporation shall
become the Certificate of Incorporation of the Interim Surviving
Corporation until thereafter amended in accordance with the
applicable provisions of the DGCL and such Certificate of
Incorporation; provided, however, that at the Effective
Time the Certificate of Incorporation of the Interim Surviving
Corporation shall be amended so that the name of the Interim
Surviving Corporation shall be Data Domain.
(ii) At the Effective Time, the Bylaws of Merger Sub One as
in effect immediately prior to the Effective Time shall become
the Bylaws of the Interim Surviving Corporation until thereafter
amended in accordance with the applicable provisions of the
DGCL, the Certificate of Incorporation of the Interim Surviving
Corporation and such Bylaws.
(b) Final Surviving Entity.
(i) Unless otherwise determined by Parent prior to the
Effective Time, if the Second Step Merger is to occur, the
Certificate of Formation of Merger Sub Two as in effect
immediately prior to the effective time of the Second Step
Merger shall be the Certificate of Formation of the Final
Surviving Entity in the Second Step Merger until thereafter
amended in accordance with the applicable provisions of the DGCL
and such Certificate of Formation; provided, however,
that at the effective time of the Second Step Merger, the
Certificate of Formation of the Final Surviving Entity shall be
amended so that the name of the Final Surviving Entity shall be
Data Domain.
(ii) Unless otherwise determined by Parent prior to the
Effective Time, if the Second Step Merger is to occur, the
Limited Liability Company Agreement of Merger Sub Two as in
effect immediately prior to the effective time of the Second
Step Merger shall be the Limited Liability Company Agreement of
the Final Surviving Entity until thereafter amended in
accordance with the applicable provisions of the DGCL, the
Certificate of Formation of the Final Surviving Entity and such
Limited Liability Company Agreement provided, however,
that at the effective time of the Second Step Merger, the
appropriate section of such Limited Liability Company Agreement
shall be amended and restated in its entirety to read as
follows: The name of this limited liability company is
Data Domain LLC.
2.6 Directors and Officers.
(a) Interim Surviving
Corporation. At the Effective Time, the
directors of Merger Sub One immediately prior to the Effective
Time shall become the directors of the Interim Surviving
Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Interim Surviving
Corporation until their respective successors are duly elected
or appointed and qualified. At the Effective Time, the officers
of Merger Sub One immediately prior to the Effective Time shall
become the officers of the Interim Surviving Corporation, each
to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Interim Surviving Corporation
until their respective successors are duly appointed.
(b) Final Surviving Entity. At the
effective time of the Second Step Merger, if it occurs, the
directors of the Interim Surviving Corporation shall become the
managers of the Final Surviving Entity, each to hold the office
in accordance with the Certificate of Formation and Limited
Liability Company Agreement of the Final Surviving Entity until
their respective successors are duly elected and qualified. At
the effective time of the Second Step Merger, if it occurs, the
officers of the Interim Surviving Corporation immediately prior
to the effective time of the Second Step Merger shall become the
officers of the Final Surviving Entity, each to hold office in
accordance with the Certificate of Formation and Limited
Liability Company Act of the Final Surviving Entity until their
respective successors are duly appointed.
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2.7 Effect of First Step Merger on Capital Stock of
Constituent Corporations. Upon the terms and
subject to the conditions set forth in this Agreement, at the
Effective Time, by virtue of the First Step Merger and without
any action on the part of Parent, Merger Sub One, the Company,
or the holders of any shares of Company Common Stock:
(a) Merger Sub One Capital
Stock. Each share of common stock, par value
$0.01 per share, of Merger Sub One issued and outstanding
immediately prior to the Effective Time shall be converted into
one validly issued, fully paid and nonassessable share of common
stock of the Interim Surviving Corporation, whereupon each
certificate evidencing ownership of such shares of common stock
of Merger Sub One shall thereafter evidence ownership of shares
of common stock of the Interim Surviving Corporation.
(b) Company Capital Stock.
(i) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than
any Dissenting Company Shares), including any Company Restricted
Stock that shall have ceased, as a result of or immediately
prior to the Effective Time, to be unvested or subject to a
repurchase option, risk of forfeiture or other condition
pursuant to the terms of such Company Stock Award or other
agreement governing such Company Restricted Stock (which shall
include any vesting as a result of any termination of employment
or transaction contemplated by employee agreements and any
resignation delivered pursuant to Section 6.13)
shall be canceled and extinguished and automatically converted
into the right to receive a combination of (A) $11.45 in
cash, without interest (such per share cash amount being
referred to herein as the Cash Consideration)
plus (B) a number of validly issued, fully paid and
nonassessable shares of Parent Common Stock equal to the
Exchange Ratio (such per share amount being referred to herein
as the Stock Consideration) upon the
surrender of the certificate representing such share of Company
Common Stock (or the receipt of an agents message in the
case of Book-Entry Shares) in the manner set forth in
Section 2.9 (or in the case of a lost, stolen or
destroyed certificate, upon delivery of an affidavit (and bond,
if required) in the manner set forth in
Section 2.11). Notwithstanding the foregoing
sentence, if the Exchange Ratio is (A) greater than or
equal to 0.750, and (B) less than 0.833, then Parent, in
its sole discretion and subject to the following sentence, may
reduce the Stock Consideration by such amount as Parent may
determine. If Parent elects to reduce the amount of the Stock
Consideration pursuant to the preceding sentence, then the Cash
Consideration shall be increased by an amount equal to the
product of (A) the amount of such reduction in the Stock
Consideration pursuant to the preceding sentence multiplied by
(B) the Closing Average. For all purposes of and under this
Agreement, the term Merger Consideration
shall mean the Cash Consideration plus the Stock
Consideration, each as adjusted by this
Section 2.7(b)(i) and Section 2.7(b)(ii)
together with any cash payable under
Section 2.7(b)(iv) with respect to each share of
Company Common Stock in lieu of a fractional share of Parent
Common Stock otherwise issuable pursuant hereto.
(ii) Notwithstanding anything in this Agreement to the
contrary, to the extent that the sum of (A) the aggregate
number of shares of Parent Common Stock issuable pursuant to
Section 2.7(b)(i) plus (B) the maximum number
of shares of Parent Common Stock issuable upon the exercise of
all Assumed Options and the vesting of all Assumed Restricted
Stock Units (the sum of the amounts in clauses (A) and (B),
the Total Stock Amount) would be equal to or
greater than nineteen and one-half percent (19.5%)of the shares
of Parent Common Stock outstanding as of immediately prior to
the Effective Time (such amount, the Stock
Threshold), the Stock Consideration shall be decreased
to the minimum extent necessary, such that the Total Stock
Amount shall not exceed the Stock Threshold. In such event, the
Cash Consideration shall be increased by an amount equal to the
product of (A) the amount of such reduction in the Stock
Consideration pursuant to the preceding sentence multiplied by
(B) the Closing Average.
(iii) Notwithstanding anything to the contrary set forth in
this Agreement, (A) the Stock Consideration shall be
adjusted appropriately to reflect fully the effect of any stock
split, reverse stock split, stock dividend (including any
dividend or distribution of securities convertible into shares
of Parent Common Stock), reorganization, recapitalization,
reclassification or other like change with respect to Parent
Common Stock having a record date on or after the date hereof
and prior to the Effective Time, and (B) the Cash
Consideration and the Stock Consideration shall be adjusted
appropriately to reflect fully the effect of any stock split,
reverse
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stock split, stock dividend (including any dividend or
distribution of securities convertible into shares of Company
Common Stock), reorganization, recapitalization,
reclassification or other like change with respect to Company
Common Stock having a record date on or after the date hereof
and prior to the Effective Time (it being understood and agreed
that the inclusion of this clause (B) shall not be deemed
to amend or modify the restrictions set forth in
Article V).
(iv) No fraction of a share of Parent Common Stock will be
issued by virtue of the First Step Merger or pursuant to this
Agreement, and in lieu thereof each holder of record of shares
of Company Common Stock who would otherwise be entitled to a
fraction of a share of Parent Common Stock (after aggregating
all fractional shares of Parent Common Stock that otherwise
would be received by such holder of record) shall be entitled to
receive from Parent, upon surrender of such holders
Certificate(s) in the manner set forth in
Section 2.9, an amount of cash (rounded to the
nearest whole cent), without interest, equal to the product of
such fraction multiplied by the closing price of Parent Common
Stock as reported on Nasdaq on the trading day immediately
preceding the Closing Date, rounded to the nearest one-tenth of
a cent.
(v) Notwithstanding anything to the contrary set forth in
this Agreement, upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time, by virtue of the
First Step Merger and without any action on the part of Parent,
Merger Sub One, the Company, or the holders of any shares of
Company Common Stock, each share of Company Common Stock owned
by Parent, any Subsidiary of Parent, the Company or any of its
Subsidiaries of the Company, in each case as of immediately
prior to the Effective Time, shall be cancelled and extinguished
without any conversion thereof or consideration paid therefor.
(vi) Notwithstanding anything to the contrary set forth in
this Agreement, all shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time and held by
a stockholder who shall have neither voted in favor of the First
Step Merger nor consented thereto in writing and who shall have
properly and validly exercised such stockholders statutory
rights of appraisal in respect of such shares of Company Common
Stock in accordance with Section 262 of the DGCL
(Dissenting Company Shares) shall not be
converted into, or represent the right to receive, the Merger
Consideration pursuant to this
Section 2.7. Any such stockholder shall
be entitled to receive payment of the appraised value of such
Dissenting Company Shares in accordance with the provisions of
Section 262 of the DGCL; provided, however, that
notwithstanding the foregoing, all Dissenting Company Shares
held by a stockholder who shall have failed to perfect or who
shall have effectively withdrawn or lost such stockholders
statutory right to appraisal of such Dissenting Company Shares
under such Section 262 of the DGCL shall thereupon be
deemed to have been converted into, and to have become
exchangeable for, the right to receive the Merger Consideration,
without any interest thereon, upon surrender of the certificate
or certificates that formerly evidenced such shares of Company
Common Stock in the manner set forth in Section 2.9.
The Company shall give Parent (x) prompt notice of any
written demands for appraisal received by the Company,
withdrawals of such demands, and any other instruments served
pursuant to Section 262 of the DGCL and received by the
Company in respect of Dissenting Company Shares and (y) the
opportunity and right (at Parents election) to direct and
control all negotiations and proceedings with respect to demands
for appraisal under the DGCL in respect of Dissenting Company
Shares. The Company shall not, except with the prior written
consent of Parent or as required by an Order of a Governmental
Authority of competent jurisdiction, voluntarily make any
payment with respect to any demands for appraisal or settle or
offer to settle any such demands for payment in respect of
Dissenting Company Shares.
2.8 Company Stock Awards.
(a) At the Effective Time, each Company Option that is
outstanding immediately prior to the Effective Time, whether or
not then vested or exercisable (each, an Assumed
Option), shall be assumed by Parent. In accordance
with its terms and subject to the requirements of
Section 422 of the Code, each Assumed Option shall
(i) be converted into an option to acquire that number of
shares of Parent Common Stock equal to the product obtained by
multiplying (x) the number of shares of Company Common
Stock subject to such Company Option, and (y) the Option
Exchange Ratio, rounded down to the nearest whole share of
Parent Common Stock, and (ii) have an exercise price per
share equal to the quotient obtained by dividing (x) the
per share exercise price of Company Common Stock subject to such
Assumed Option, by (y) the Option Exchange Ratio (which
price per share shall be
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rounded up to the nearest whole cent). Each Assumed Option shall
otherwise be subject to the same terms and conditions (including
as to vesting and exercisability) as were applicable under the
respective Company Option immediately prior to the Effective
Time. It is the intention of the parties that each Assumed
Option that qualified as an incentive stock option (as defined
in Section 422 of the Code) shall continue to so qualify,
to the maximum extent permissible, following the Effective Time.
(b) At the Effective Time, each Company Restricted Stock
Unit that is outstanding immediately prior to the Effective Time
shall be converted by Parent in accordance with its terms into a
restricted stock unit (each, an Assumed Restricted
Stock Unit) to acquire an amount of Merger
Consideration equal to the product obtained by multiplying
(x) the number of shares of Company Common Stock subject to
such Company Restricted Stock Unit, and (y) the Merger
Consideration. Each Assumed Restricted Stock Unit shall
otherwise be subject to the same terms and conditions as were
applicable under the respective Company Restricted Stock Unit
immediately prior to the Effective Time, including, without
limitation, that the right to receive Merger Consideration
payable with respect to the Assumed Restricted Stock Unit
following the Effective Time will be subject to the same vesting
restrictions that were applicable to the Company Restricted
Stock Unit immediately prior to the Effective Time.
(c) The payout of the Stock Consideration and the Cash
Consideration pursuant to Section 2.7(b) in exchange
for shares of Company Common Stock that constitute unvested
restricted stock or are otherwise subject to a right of
repurchase or redemption by the Company (the Company
Restricted Stock) issued and outstanding immediately
prior to the Effective Time shall be subject to the same
restrictions and vesting arrangements that were applicable to
such shares of unvested Company Common Stock immediately prior
to or at the Effective Time, subject to the terms of the
applicable agreement governing such shares.
(d) Prior to the Closing, and subject to prior review and
approval by Parent (which approval shall not be unreasonably
withheld or delayed), the Company shall use its reasonable best
efforts to take all actions necessary to effect the transactions
anticipated by this Section 2.8 under all Contracts
relating to Company Options, Restricted Stock Units and Company
Restricted Stock including specifically obtaining any required
consents and delivering all required notices.
2.9 Exchange Fund; Exchange of Shares.
(a) Exchange Fund.
(i) Parent shall appoint a bank or trust company reasonably
acceptable to the Company to act as the exchange agent for the
Merger (the Exchange Agent) pursuant to an
agreement reasonably acceptable to the Company entered into
prior to the date on which Parent and the Company disseminate
the Proxy Statement/Prospectus.
(ii) At or prior to the Closing, Parent shall deposit (or
cause to be deposited) with the Exchange Agent, for the benefit
of the holders of shares of Company Common Stock, for exchange
in accordance with the terms and conditions of this
Article II, the following:
(A) a number of shares of Parent Common Stock sufficient to
issue the Stock Consideration issuable pursuant to
Section 2.7(b)(i);
(B) cash in an amount sufficient to pay the Cash
Consideration payable pursuant to
Section 2.7(b)(i); and
(C) cash in an amount sufficient to make all requisite
payments of cash in lieu of fractional shares payable pursuant
to Section 2.7(b)(iv) and any dividends or other
distributions which holders of shares of Company Common Stock
may be entitled pursuant to Section 2.9(c).
All shares of Parent Common Stock and cash deposited with the
Exchange Agent pursuant hereto shall hereinafter be referred to
as the Exchange Fund. Pursuant to irrevocable
instructions, the Exchange Agent shall promptly deliver the
Merger Consideration from the Exchange Fund to the former
Company stockholders who are entitled thereto pursuant to
Section 2.7.
(b) Exchange Procedures.
(i) Promptly following the Effective Time, Parent and
Merger Sub One shall cause the Exchange Agent to mail to each
holder of record (as of immediately prior to the Effective Time)
of a certificate that represented
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outstanding shares of Company Common Stock as of immediately
prior to the Effective Time (a Certificate),
and each holder of record of uncertificated shares of Company
Common Stock represented by book-entry shares
(Book-Entry Shares) as of immediately prior
to the Effective Time, (A) a letter of transmittal in
customary form (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange
Agent), and (B) instructions for use in effecting the
surrender of Certificates (or Book-Entry Shares) in exchange for
the Merger Consideration issuable and payable in respect thereof
(in accordance with Section 2.7(b)) and any
dividends or other distributions to which such holders is
entitled to receive pursuant to Section 2.9(c).
(ii) Upon surrender of Certificates for cancellation to the
Exchange Agent (or upon receipt of an appropriate agents
message in the case of Book-Entry Shares), together with a
letter of transmittal, properly completed and validly executed
in accordance with the instructions thereto, the holders of such
Certificates and Book-Entry Shares shall be entitled to receive
in exchange therefor (A) the number of whole shares of
Parent Common Stock (after taking into account all Certificates
surrendered by such holder of record) to which such holder is
entitled pursuant to Section 2.7(b) (which, at the
election of Parent, may be in uncertificated book entry form
unless a physical certificate is requested by the holder of
record or is otherwise required by applicable Law), (B) the
cash amounts such holders are entitled to receive pursuant to
Section 2.7(b), (C) the cash payable in lieu of
fractional shares of Parent Common Stock such holder is entitled
to receive pursuant to Section 2.7(b)(iv), and
(D) any dividends or distributions to which such holders
are entitled pursuant to Section 2.9(c), and any
Certificates or Book-Entry Shares so surrendered shall forthwith
be canceled. The Exchange Agent shall accept such Certificates
and Book-Entry Shares upon compliance with such reasonable terms
and conditions as the Exchange Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange
practices. No interest shall be paid or accrued for the benefit
of holders of the Certificates or Book-Entry Shares on any cash
amounts payable upon the surrender of such Certificates or
Book-Entry Shares pursuant to this Section 2.9.
Until so surrendered, outstanding Certificates and Book-Entry
Shares shall be deemed, from and after the Effective Time, to
evidence only the right to receive the Merger Consideration
issuable and payable in respect thereof and any dividends or
distributions payable or issuable in respect thereof pursuant to
Section 2.9(c). Exchange of Book-Entry Shares shall
be effected in accordance with the customary procedures in
respect of shares represented by book entry on the stock ledger
of the Company.
(c) Dividends and Other
Distributions. No dividends or other
distributions declared or made after the date hereof with
respect to Parent Common Stock with a record date after the
Effective Time, and no payment in lieu of fractional shares
pursuant to Section 2.7(b)(iv), will be paid to the
holders of any unsurrendered Certificates or Book-Entry Shares
with respect to the shares of Parent Common Stock represented
thereby until the holders of record of such Certificates or
Book-Entry Shares shall surrender such Certificates or
Book-Entry Shares in accordance with the terms of
Section 2.9(b). Subject to applicable Law, promptly
following the surrender of any such Certificates, the Exchange
Agent shall deliver to the record holders thereof, without
interest, any dividends or other distributions with a record
date after the Effective Time and theretofore paid with respect
to such whole shares of Parent Common Stock and, at the
appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time and a
payment date subsequent to such surrender payable with respect
to such whole shares of Parent Common Stock.
(d) Transfers of Ownership. In the
event that shares of Parent Common Stock are to be issued in a
name other than that in which the Certificates or Book-Entry
Shares surrendered in exchange therefor are registered
(including as a result of a transfer of ownership of shares of
Company Common Stock that has not been registered in the stock
transfer books or ledger of the Company), it will be a condition
of the issuance of such shares of Parent Common Stock that the
Certificates so surrendered, if applicable, are properly
endorsed and otherwise in proper form for surrender and transfer
and the Person requesting such payment has paid to Parent (or
any agent designated by Parent) any transfer or other Taxes
required by reason of the issuance of shares of Parent Common
Stock in any name other than that of the registered holder of
the Certificates or Book-Entry Shares surrendered, or
established to the satisfaction of Parent (or any agent
designated by Parent) that such transfer or other Taxes have
been paid or are otherwise not payable.
(e) Required Withholding. Each of
the Exchange Agent, Parent and the Final Surviving Entity shall
be entitled to deduct and withhold from any consideration
payable or otherwise deliverable pursuant to this Agreement
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to any holder or former holder of shares of Company Common Stock
such amounts that are required to be deducted or withheld
therefrom under United States federal or state, local or foreign
Tax law. Parent shall timely pay the amounts withheld to the
appropriate Tax authority. To the extent that such amounts are
so deducted or withheld and paid out to the appropriate Tax
authority, 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.
(f) No Liability. Notwithstanding
anything to the contrary set forth in this Agreement, none of
the Exchange Agent, Parent, the Interim Surviving Corporation,
the Final Surviving Entity or any other party hereto shall be
liable to a holder of shares of Parent Common Stock or Company
Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or
similar Laws.
(g) Termination of Exchange
Fund. At the request of Parent, any portion
of the Exchange Fund which remains undistributed or unclaimed on
the date that is six (6) months immediately following the
Effective Time shall be delivered to Parent, and any holders of
the Certificates who have not theretofore surrendered
Certificates in compliance with this Section 2.9
shall thereafter look only to Parent for issuance or payment of
the Merger Consideration issuable and payable in respect thereto
pursuant to Section 2.7(b) and issuance and payment
of any dividends or other distributions payable or issuable in
respect thereof pursuant to Section 2.9(c).
2.10 No Further Ownership Rights in Company Common
Stock. Subject to the provisions of
Section 2.7, from and after the Effective Time, all
shares of Company Common Stock shall no longer be outstanding
and shall automatically be cancelled, retired and cease to
exist, and each holder of a Certificate theretofore representing
any shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive the
Merger Consideration issuable and payable in respect thereof
pursuant to Section 2.7(b) and any dividends or
other distributions issuable or payable in respect thereof
pursuant to Section 2.9(c) upon the surrender
thereof in accordance with the provisions of
Section 2.9. The Merger Consideration issued or paid
upon the surrender for exchange of shares of Company Common
Stock in accordance with the terms hereof (including any
dividends or other distributions paid or issued in respect
thereof pursuant to Section 2.9(c)), shall be deemed
to have been issued or paid in full satisfaction of all rights
pertaining to such shares of Company Common Stock, and there
shall be no further registration of transfers on the records of
the Interim Surviving Corporation of shares of Company Common
Stock which were outstanding immediately prior to the Effective
Time other than transfers to reflect, in accordance with
customary settlement procedures, trades effected prior to the
Effective Time. If, after the Effective Time, Certificates or
Book-Entry Shares are presented to Parent, the Interim Surviving
Corporation or the Final Surviving Entity for any reason, they
shall be canceled and exchanged as provided in this
Article II.
2.11 Lost, Stolen or Destroyed
Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, the
Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Certificates, upon the making of an affidavit of that
fact by the holder thereof, the Merger Consideration that is
issuable and payable in respect thereof pursuant to
Section 2.7(b) and any dividends or distributions
issuable or payable in respect thereof pursuant to
Section 2.9(c); provided, however, that
Parent
and/or the
Exchange Agent may, in its discretion and as a condition
precedent to the issuance thereof, require the owners of such
lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct (consistent with market
practice) as an indemnity against any claim that may be made
against Parent, the Interim Surviving Corporation, the Final
Surviving Entity or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
2.12 Tax Treatment. If the Second
Step Merger occurs, (a) the Merger is intended to
constitute a reorganization within the meaning of
Section 368(a) of the Code, and (b) Parent and the
Company intend that the First Step Merger and the Second Step
Merger will constitute integrated steps in a single plan
of reorganization within the meaning of Treas. Reg.
§1.368-2(g) and 1.368-3, which plan of reorganization the
parties adopt by executing this Agreement. If the Second Step
Merger does not occur, then the First Step Merger is intended to
constitute a taxable transaction for U.S. federal income
tax purposes.
2.13 Taking of Necessary Further
Action. If, at any time after the Effective
Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Interim Surviving
Corporation or the Final Surviving Entity with full right, title
and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Merger Sub One, the
directors and officers of the Company and Merger Sub One shall
take all such lawful and necessary action. If, at any time after
the effective time of the Second Step Merger, if it
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occurs, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Final
Surviving Entity with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of
the Interim Surviving Corporation and Merger Sub Two, the
directors and officers of the Interim Surviving Corporation and
Merger Sub Two shall take all such lawful and necessary action.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except (i) as disclosed in the Company SEC Reports filed
with the SEC from and after March 13, 2009 and prior to the
date hereof (other than as set forth in the forward-looking
statements or as set forth in the risk factors contained
therein) or (ii) as set forth in the disclosure letter
delivered by the Company to Parent dated as of the date hereof
(the Company Disclosure Schedule), which
identifies by reference to, or has been grouped under a heading
referring to, a specific section of this Agreement and
constitutes an exception hereto and disclosure made pursuant to
any section of the Company Disclosure Schedule shall be deemed
to be disclosed against each of the other sections of this
Agreement to the extent the applicability of the disclosure to
such other section is readily apparent from the disclosure made
(without reference to the underlying documents referenced
therein), the Company hereby represents and warrants to Parent,
Merger Sub One and Merger Sub Two as follows:
3.1 Organization and Standing.
(a) The Company is a corporation duly organized, validly
existing and in good standing under Delaware Law. The Company
has the requisite corporate power and authority to carry on its
respective business as it is presently being conducted and to
own, lease or operate its respective properties and assets.
(b) The Company is duly qualified to do business and is in
good standing in each jurisdiction where the character of its
properties owned or leased or the nature of its activities make
such qualification necessary (to the extent the good
standing concept is applicable in the case of any
jurisdiction outside the United States), except where the
failure to be so qualified or in good standing would not,
individually or in the aggregate, have a Material Adverse Effect
on the Company. The copies of the certificate of incorporation
and bylaws of the Company that are filed as exhibits to the
Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 (the
Company
Form 10-K)
are complete and correct copies thereof as in effect on the date
hereof, and (b) all actions taken by written consent and
all minutes (or, in the case of draft minutes or written
consents, the most recent drafts thereof) of all meetings of the
stockholders, the Company Board and each committee of the
Company Board since the Companys initial public offering
on June 26, 2007. The Company is not in violation of its
certificate of incorporation or bylaws, and the Company has not
violated its certificate of incorporation or bylaws since the
Companys initial public offering on June 26, 2007.
3.2 Corporate Approvals.
(a) The Company has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its
obligations hereunder, and subject to obtaining the Requisite
Merger Approval, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the
Company, the performance by the Company of its obligations
hereunder, and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Company other
than, in the case of the consummation of the Merger,
(i) the filing with the SEC of a proxy statement with
respect to and obtaining the Requisite Merger Approval and
(ii) the filing of the Certificate of Merger as required by
the DGCL, and no additional corporate or other actions or
proceedings on the part of the Company are necessary to
authorize this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization,
execution and delivery by Parent, Merger Sub One and Merger Sub
Two, constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms, except that such enforceability may be limited by
applicable bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers),
reorganization, moratorium and other similar laws affecting or
relating to creditors rights generally and is subject to general
principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
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(b) At a meeting duly called and held on May 20, 2009,
the Company Board unanimously (i) determined that this
Agreement is advisable, (ii) determined that this Agreement
is fair to, and in the best interests of, the Companys
stockholders, (iii) approved the execution and delivery of
this Agreement by the Company, the performance by the Company of
its covenants and obligations set forth herein and the
consummation of the Merger and the transactions contemplated
hereby upon the terms and conditions set forth herein, and
(iv) resolved to recommend that the stockholders of the
Company approve the Merger Proposal at the Company Stockholder
Meeting. As of the date hereof, the Company Board has not
rescinded or modified in any way the foregoing determinations
and actions.
(c) Assuming that the representations of Parent and the
Merger Subs set forth in Section 4.8 are accurate,
the affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock, voting together as a
class, in favor of the Merger Proposal (the Requisite
Merger Approval) is the only vote of the holders of
any class or series of Company Capital Stock necessary (under
applicable Laws or otherwise) to adopt this Agreement and
consummate the Merger.
3.3 Non-contravention; Required Consents.
(a) The execution, delivery or performance by the Company
of this Agreement, the consummation by the Company of the Merger
and the compliance by the Company with any of the terms hereof
do not and will not (i) violate or conflict with any
provision of the certificate of incorporation or bylaws of the
Company or other equivalent charter documents of any of the
Companys Subsidiaries, (ii) subject to obtaining such
Consents set forth in Section 3.3(a)(ii) of the
Company Disclosure Schedule, violate, conflict with, or result
in the breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under,
or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration
under, any Material Contract, (iii) subject to obtaining
the Requisite Merger Approval, violate or conflict with any Law
or Order applicable to the Company or any of its Subsidiaries or
by which any of their properties or assets are bound or
(iv) result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries,
except, in the case of each of clauses (ii), (iii) and
(iv) above, for such violations, conflicts, breaches,
defaults, terminations, accelerations or Liens which would not,
individually or in the aggregate, have a Material Adverse Effect
on the Company.
(b) No consent, approval, Order or authorization of, or
filing or registration with, or notification to (any of the
foregoing being a Consent), any Governmental
Authority is required on the part of the Company or any of its
Subsidiaries in connection with the execution, delivery and
performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated
hereby, except (i) applicable requirements, if any, of the
Securities Act, the Exchange Act, state securities laws, the
rules and regulations of Nasdaq, (ii) the filing and
recordation of the Certificate of Merger with the Secretary of
State of the State of Delaware, (iii) compliance with any
applicable requirements of the HSR Act and any applicable
foreign antitrust, competition or merger control laws and
(iv) such other Consents, the failure of which to obtain
would not, individually or in the aggregate, be reasonably
expected to have a material adverse effect on the ability of
Parent and the Company to consummate the Merger.
3.4 Capitalization.
(a) The authorized capital stock of the Company consists of
(i) 300,000,000 (Three Hundred Million) shares of Company
Common Stock, and (ii) 20,000,000 (Twenty Million) shares
of Company Preferred Stock. As of the close of business on
May 19, 2009 (the Capitalization Date):
(A) 61,539,064 (Sixty-One Million Five Hundred Thirty-Nine
Thousand Sixty-Four) shares of Company Common Stock were issued
and outstanding, of which 456,753 (Four Hundred Fifty-Six
Thousand Seven Hundred Fifty-Three) were unvested and subject to
a right of repurchase as of such date, (B) no shares of
Company Preferred Stock were issued and outstanding and
(C) there were no shares of Company Capital Stock held by
the Company as treasury shares. As of the close of business on
the Capitalization Date, with respect to the Company Option
Plans, there were outstanding Company Options or Company
Restricted Stock Units to purchase or otherwise acquire
14,231,414 (Fourteen Million Two Hundred Thirty-One Thousand
Four Hundred Fourteen) shares of Company Common Stock, of which
5,495,939 (Five Million Four Hundred Ninety-Five Thousand Nine
Hundred Thirty-Nine) were exercisable or vested as of such date
and, since such date, the Company has not granted, committed to
grant or otherwise created or assumed any obligation with
respect to any Company Options or Company Restricted Stock,
other than as permitted by
A-19
Section 5.2(b). Since the close of business on the
Capitalization Date, the Company has not issued or authorized
the issuance of any shares of Company Capital Stock other than
pursuant to the exercise of Company Options or the settlement of
Company Restricted Stock Units granted under a Company Option
Plan in compliance with the terms of this Agreement. All
outstanding shares of Company Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable
and free of any preemptive rights.
(b) The Company has reserved 6,606,629 (Six Million Six
Hundred Six Thousand Six Hundred Twenty-Nine) shares of Company
Common Stock for issuance under the Company Option Plans. The
exercise price of each Company Option is no less than the fair
market value of a share of Company Common Stock on the date of
grant of such Company Option. All grants of Company Options,
Company Restricted Stock Units and shares of Company Restricted
Stock were validly issued and properly approved by the Company
Board in accordance with all applicable Laws and the Company
Option Plans and have been properly accounted for in accordance
with GAAP on the Companys audited financial statements.
(c) Except as set forth in this Section 3.4,
there are (i) no outstanding shares of capital stock of, or
other equity or voting interest in, the Company, (ii) no
outstanding securities of the Company convertible into or
exchangeable for shares of capital stock of, or other equity or
voting interest in, the Company, (iii) no outstanding
options, warrants, rights or other commitments or agreements to
acquire from the Company, or that obligates the Company to
issue, any capital stock of, or other equity or voting interest
in, or any securities convertible into or exchangeable for
shares of capital stock of, or other equity or voting interest
in, the Company, (iv) no obligations of the Company to
grant, extend or enter into any subscription, warrant, right,
convertible or exchangeable security or other similar agreement
or commitment relating to any capital stock of, or other equity
or voting interest (including any voting debt) in, the Company
(the items in clauses (i), (ii), (iii) and (iv),
together with the capital stock of the Company, being referred
to collectively as Company Securities) and
(v) no other obligations by the Company or any of its
Subsidiaries to make any payments based on the price or value of
any Company Securities. There are no outstanding agreements of
any kind which obligate the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any Company
Securities. The Company has made available with respect to each
outstanding Company Option, as of the Capitalization Date, the
name of the holder of such option, the number of shares of
Company Common Stock issuable upon the exercise of such option,
the exercise price of such option (and whether such option is
subject to Section 409A of the Code), the date on which
such option was granted, the vesting schedule for such option
(including any acceleration provisions with respect thereto),
including the extent unvested and vested to date, and whether
such option is intended to qualify as an incentive stock option
as defined in Section 422 of the Code. The Company has made
available with respect to each holder of Company Restricted
Stock, as of the Capitalization Date, the name of the holder of
such award, the number of shares of Company Restricted Stock
held by such holder, the repurchase price of such Company
Restricted Stock, the date on which such Company Restricted
Stock was purchased or granted, the applicable vesting schedule
pursuant to which the Companys right of repurchase or
forfeiture lapses, and the extent to which such Company right of
repurchase or forfeiture has lapsed as of the date hereof. The
Company has made available with respect to each holder of
Company Restricted Stock Unit, as of the Capitalization Date,
the name of the holder of such award, the number of shares of
Company Restricted Stock Unit held by such holder, the date on
which such Company Restricted Stock Unit was granted and the
applicable vesting schedule. There are no commitments or
agreements of any character to which the Company is bound
obligating Company to waive its right of repurchase or
forfeiture with respect to any Company Restricted Stock or
Company Restricted Stock Unit as a result of the Merger (whether
alone or upon the occurrence of any additional or subsequent
events).
(d) Neither the Company nor any of its Subsidiaries is a
party to any agreement restricting the transfer of the voting
of, requiring registration of, or granting any preemptive
rights, anti-dilutive rights or rights of first refusal or
similar rights with respect to any securities of the Company.
3.5 Subsidiaries.
(a) A complete and accurate list of the name and
jurisdiction of organization of each Subsidiary of the Company
is set forth in Exhibit 21.1 to the Company
Form 10-K.
Except for the Subsidiaries, securities and other interests held
in a fiduciary capacity and beneficially owned by third parties,
the Company does not own, directly or indirectly, any capital
stock of, or other equity or voting interest in, any Person.
A-20
(b) Each of the Companys Subsidiaries is duly
organized, validly existing and in good standing under the laws
of the jurisdiction of its respective organization (to the
extent the good standing concept is applicable in
the case of any jurisdiction outside the United States), except
where the failure to be so organized, existing or in good
standing would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. Each of the
Companys Subsidiaries has the requisite corporate or other
applicable power and authority to carry on its respective
business as it is presently being conducted and to own, lease or
operate its respective properties and assets except where the
failure to be in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Each
of the Companys Subsidiaries is duly qualified to do
business and is in good standing in each jurisdiction where the
character of its properties owned or leased or the nature of its
activities make such qualification necessary (to the extent the
good standing concept is applicable in the case of
any jurisdiction outside the United States), except where the
failure to be so qualified or in good standing would not,
individually or in the aggregate, have a Material Adverse Effect
on the Company. The Company has delivered or made available to
Parent complete and correct copies of (a) the certificate
of incorporation and bylaws or other equivalent charter
documents, as amended to date, of each of the Companys
Subsidiaries and (b) all actions taken by written consent
and all minutes (or, in the case of draft minutes or written
consents, the most recent drafts thereof) of all meetings of the
stockholders, the board or other equivalent governing body and
each committee of the board or other equivalent governing body
of each of the Companys Subsidiaries since the
Companys initial public offering on June 26, 2007.
None of the Companys Subsidiaries is in violation of its
certificate of incorporation, bylaws or other applicable charter
governing documents.
(c) All of the outstanding capital stock of, or other
equity or voting interest in, each Subsidiary of the Company
(i) have been duly authorized and validly issued and are
fully paid, nonassessable and are free of preemptive rights and
(ii) are owned, directly or indirectly, by the Company,
free and clear of all Liens and free of any other restriction
(including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other equity or
voting interest) that would prevent the operation by the Final
Surviving Entity of such Subsidiarys business in
substantially the same manner as such businesses are presently
conducted.
(d) There are no outstanding (i) securities of the
Company or any of its Subsidiaries convertible into or
exchangeable for shares of capital stock of, or other equity or
voting interests in, any Subsidiary of the Company,
(ii) options, warrants, rights or other commitments or
agreements to acquire from the Company or any of its
Subsidiaries, or that obligate the Company or any of its
Subsidiaries to issue, any capital stock of, or other equity or
voting interest in, or any securities convertible into or
exchangeable for shares of capital stock of, or other equity or
voting interest in, any Subsidiary of the Company,
(iii) obligations of the Company to grant, extend or enter
into any subscription, warrant, right, convertible or
exchangeable security or other similar agreement or commitment
relating to any capital stock of, or other equity or voting
interest (including any voting debt) in, any Subsidiary of the
Company (the items in clauses (i), (ii) and (iii),
together with the capital stock of the Subsidiaries of the
Company, being referred to collectively as Subsidiary
Securities) or (iv) other obligations by the
Company or any of its Subsidiaries to make any payments based on
the price or value of any Subsidiary Securities. There are no
outstanding agreements of any kind which obligate the Company or
any of its Subsidiaries to repurchase, redeem or otherwise
acquire any outstanding Subsidiary Securities.
3.6 SEC Reports; Other Reports.
(a) The Company has filed or furnished all forms, reports
and documents with the SEC that have been required to be filed
or furnished by it under applicable Laws since the
Companys initial public offering on June 26, 2007
(all such forms, reports and documents, the Company SEC
Reports). Each Company SEC Report (or, if amended or
superseded by a filing prior to the date of this Agreement, on
the date of such amended or superseding filing) complied as of
its filing date, in all material respects as to the form of the
applicable requirements of the Securities Act or the Exchange
Act, as the case may be, each as in effect on the date such
Company SEC Report was filed. True and correct copies of all
Company SEC Reports filed prior to the date hereof, whether or
not required under applicable Laws, have been furnished to
Parent or are publicly available in the Electronic Data
Gathering, Analysis and Retrieval (EDGAR) database of the SEC.
As of its filing date (or, if amended or superseded by a filing
prior to the date of this Agreement, on the date of such amended
or superseding filing), each Company SEC Report did not contain
any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were
made, not misleading. None of the
A-21
Companys Subsidiaries is required to file any forms,
reports or other documents with the SEC. No executive officer of
the Company has failed to make the certifications required of
him or her under Section 302 or 906 of the Sarbanes-Oxley
Act with respect to any Company SEC Report, except as disclosed
in certifications filed with the Company SEC Reports. Neither
the Company nor any of its executive officers has received
notice from any Governmental Authority challenging or
questioning the accuracy, completeness, form or manner of filing
of such certifications. As of the date of this Agreement, there
are no outstanding written comments from the SEC with respect to
any of the Company SEC Reports.
(b) The Company and each of its Subsidiaries have timely
filed all reports, registrations and statements, together with
any amendments required to be made with respect thereto, that
they were required to file since the Companys initial
public offering on June 26, 2007, with any Governmental
Authority (other than the SEC) and have paid all fees and
assessments due and payable in connection therewith except as
would not reasonably be expected to have a Material Adverse
Effect on the Company. Neither the Company nor any of its
executive officers has received notice from any Governmental
Authority challenging or questioning the accuracy, completeness,
form or manner of filing of such certifications.
3.7 Financial Statements and Controls.
(a) The consolidated financial statements of the Company
and its Subsidiaries filed in or furnished with the Company SEC
Reports complied in all material respects with all applicable
accounting requirements and the published rules and regulations
of the SEC with respect thereto and they have been prepared in
accordance with GAAP consistently applied during the periods and
at the dates involved (except as may be indicated in the notes
thereto and, in the case of unaudited interim financial
statements, as may be permitted by the SEC for Quarterly Reports
on
Form 10-Q),
and fairly present in all material respects the consolidated
financial position of the Company and its Subsidiaries as of the
dates thereof and the consolidated results of operations and
cash flows for the periods then ended, subject, in the case of
unaudited interim financial statements, to normal and year-end
audit adjustments as permitted by GAAP and the applicable rules
and regulations of the SEC and any other adjustments expressly
described therein, including the notes thereto.
(b) The Company has established, and maintains, adheres to
and enforces a system of internal accounting controls which are
effective in providing reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements in accordance with GAAP, including policies
and procedures that (i) require the maintenance of records
that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the Company,
(ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and
expenditures of the Company are being made only in accordance
with appropriate authorizations of management and the Company
Board and (iii) provide reasonable assurance that
prevention or timely detection of unauthorized acquisition, use
or disposition of the assets of the Company that could have a
material effect on the Companys financial statements.
Except as disclosed in Company SEC Reports filed with the SEC
from and after the filing of the Company
10-K,
neither the Company nor any of its Subsidiaries (including any
employee thereof) nor, to the Knowledge of the Company, the
Companys independent auditors has identified or been made
aware of (A) any significant deficiency or material
weakness (as defined in
Rule 13a-15-15(f)
promulgated under the Exchange Act) in the system of internal
accounting controls utilized by the Company, (B) any fraud,
whether or not material, that involves the Companys
management or other employees who have a role in the preparation
of financial statements or the internal accounting controls
utilized by the Company or (C) any claim or allegation
regarding any of clauses (A) and (B).
(c) The Company has established and maintains disclosure
controls and procedures (as such terms are defined in
Rule 13a-15(e)
or
Rule 15d-15(e)
promulgated under the Exchange Act) to ensure that information
required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
SECs rules and forms and is accumulated and communicated
to the Companys management to allow timely decisions
regarding required disclosure.
(d) Neither the Company nor any of its Subsidiaries is a
party to, or has any commitment to become a party to, any joint
venture, partnership agreement or any similar Contract
(including any Contract relating to any transaction, arrangement
or relationship between or among the Company or any of its
Subsidiaries, on the one hand, and any unconsolidated affiliate,
including any structured finance, special purpose or limited
purpose entity or Person, on
A-22
the other hand (such as any arrangement described in
Section 303(a)(4) of
Regulation S-K
of the SEC)) where the purpose or effect of such arrangement is
to avoid disclosure of any material transaction involving the
Company or any its Subsidiaries in the Companys
consolidated financial statements.
(e) Neither the Company nor any of its Subsidiaries nor, to
the Companys Knowledge, any director, officer, employee,
auditor, accountant, consultant or representative of the Company
or any of its Subsidiaries has received or otherwise had or
obtained Knowledge of any substantive material written
complaint, allegation, assertion or claim that the Company or
any of its Subsidiaries has engaged in questionable accounting
or auditing practices. No current or former attorney
representing the Company or any of its Subsidiaries has reported
to the Company Board or any committee thereof or to any director
or executive officer of the Company (i) evidence of a
material violation of securities laws or (ii) breach of
fiduciary duty or similar violation by the Company or any of its
officers, directors, employees or agents.
(f) To the Companys Knowledge, no employee of the
Company or any of its Subsidiaries has provided or is providing
information to any law enforcement agency regarding the
commission or possible commission of any crime or the violation
or possible violation of any applicable Laws of the type
described in Section 806 of the Sarbanes-Oxley Act by the
Company or any of its Subsidiaries. Neither the Company nor any
of its Subsidiaries nor, to the Knowledge of the Company, any
director, officer, employee, contractor, subcontractor or agent
of the Company or any such Subsidiary has discharged, demoted,
suspended, threatened, harassed or in any other manner
discriminated against an employee of the Company or any of its
Subsidiaries in the terms and conditions of employment because
of any lawful act of such employee described in Section 806
of the Sarbanes-Oxley Act.
(g) The Company is in compliance in all material respects
with all effective provisions of the Sarbanes-Oxley Act that
apply to the Company and the applicable listing and corporate
governance rules of Nasdaq.
3.8 No Undisclosed
Liabilities. Neither the Company nor any of
its Subsidiaries has any liabilities (whether accrued, absolute,
contingent, matured, unmatured or otherwise), other than
(a) liabilities reflected or otherwise reserved against in
the Company Balance Sheet as filed with the Company
Form 10-Q,
(b) liabilities incurred after the date of the Company
Balance Sheet in the ordinary course of business consistent with
past practice, (c) liabilities contemplated by this
Agreement, or (d) liabilities that, individually or in the
aggregate, would not have a Material Adverse Effect on the
Company.
3.9 Absence of Certain Changes.
(a) Since the date of the Company Balance Sheet through the
date of this Agreement, there has not been or occurred:
(i) any Material Adverse Effect on the Company;
(ii) any split, combination or reclassification of any
shares of capital stock, declaration, setting aside or paying of
any dividend or other distribution (whether in cash, shares or
property or any combination thereof) in respect of any shares of
capital stock of the Company or any Subsidiary other than cash
dividends made by any wholly owned Subsidiary of the Company to
the Company or one of its Subsidiaries;
(iii) any damage, destruction or other casualty loss
(whether or not covered by insurance) with respect to any assets
that, individually or in the aggregate, are material to the
Company and its Subsidiaries, taken as a whole;
(iv) any change in any method of accounting or accounting
principles or practice, or Tax election, by the Company or any
of its Subsidiaries, except for any such change required by
reason of a change in GAAP or regulatory accounting principles;
(v) any amendment of the Companys or any
Subsidiarys certificate of incorporation or bylaws or
other charter documents;
(vi) any acquisition, redemption or amendment of any
Company Securities or Subsidiary Securities, other than any
acquisition or redemption permitted by the terms of the Company
Stock Award or the Company Options Plans;
A-23
(vii) (i) any incurrence or assumption of any
long-term or short-term debt for borrowed money or issuance of
any debt securities by the Company or any of its Subsidiaries
except for short-term debt incurred to fund operations of the
business or owed to the Company or any of its wholly-owned
Subsidiaries, in each case, in the ordinary course of business,
(ii) any assumption, guarantee or endorsement of the
obligations of any other Person (except direct or indirect
wholly-owned Subsidiaries of the Company) by the Company or any
of its Subsidiaries, (iii) any loan, advance or capital
contribution to, or other investment in, any other Person by the
Company or any of its Subsidiaries (other than loans or advances
to employees or direct or indirect loans, advances or capital
contributions to indirect wholly-owned Subsidiaries, in each
case in the ordinary course of business consistent with past
practice) or (iv) any mortgage or pledge of the
Companys or any of its Subsidiaries assets, tangible or
intangible, or any creation of any Lien (other than a Permitted
Lien) thereupon;
(viii) any plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any
of its Subsidiaries (other than among wholly-owned Subsidiaries
of the Company and other than the Merger);
(ix) commencement or settlement of any material Legal
Proceeding by the Company or any of its Subsidiaries, the
commencement, settlement, notice or, to the Knowledge of the
Company, written threat of any material Legal Proceeding against
the Company or any of its Subsidiaries or relating to any of
their businesses, properties or assets;
(x) any entry into, adoption, change or termination of any
collective bargaining agreement or similar Contract with a
union, trade union, works council, or other labor relations
entity by the Company or any of its Subsidiaries;
(xi) any material claims or matters raised by any
individual, Governmental Authority, or any union, trade union,
works council, or other labor relations entity regarding,
claiming or alleging labor trouble, wrongful discharge or any
other unlawful employment or labor practice or action with
respect to the Company or any of its Subsidiaries; or
(xii) any granting by the Company or any of its
Subsidiaries of any increase in compensation or fringe benefits,
except for normal increases of cash compensation in the ordinary
course of business consistent with past practice to any current
or future employees, independent contractors or directors (other
than to directors or officers of the Company or any of its
Subsidiaries), or any payment by the Company or any of its
Subsidiaries of any bonus, incentive compensation, or similar
payment, except for bonuses made in the ordinary course of
business consistent with past practice (other than to directors
or executive officers of the Company), or any granting by the
Company or any of its Subsidiaries of any increase in severance
or termination pay or any entry by the Company or any of its
Subsidiaries into any Employee Plan or indemnification agreement
or any agreement the benefits of which are contingent or the
terms of which are materially altered upon the occurrence of a
transaction involving the Company of the nature contemplated
hereby (other than offer letters and employment agreements
entered into in the ordinary course of business consistent with
past practice with employees, independent contractors or
directors who are not officers and, in the case of employees
located in the United States, are terminable at will
without the Company or its Subsidiaries incurring any material
liability or obligation).
3.10 Compliance with Laws and
Orders. The Company and its Subsidiaries are
in compliance in all respects with all applicable Laws and
Orders, except as would not have a Material Adverse Effect on
the Company.
3.11 Permits. The Company and its
Subsidiaries have, and are in compliance with the terms of, all
material permits, licenses, authorizations, consents, approvals
and franchises from Governmental Authorities required to conduct
their businesses as currently conducted
(Permits), and no suspension or cancellation
of any such Permits is pending or, to the Knowledge of the
Company, threatened, except for such noncompliance, suspension
or cancellation that would not have, individually or in the
aggregate, a Material Adverse Effect on the Company.
3.12 Litigation; Orders; Regulatory
Agreements.
(a) There is no Legal Proceeding pending or, to the
Knowledge of the Company, threatened (i) against the
Company, any of its Subsidiaries or any of their respective
properties that (A) involves, or would be reasonably
A-24
expected to involve, damages or settlement payments in excess of
$1,000,000 (in the aggregate with all other Legal Proceedings),
(B) seeks material injunctive relief that would reasonably
be expected to have a material adverse effect on the Company,
(C) seeks to impose any legal restraint on or prohibition
against or otherwise limit, in each case in a manner that would
reasonably be expected to result in a material adverse effect
upon, Parent or the Final Surviving Entitys ability to
operate the business of the Company and its Subsidiaries
substantially as it was operated immediately prior to the date
of this Agreement, or (D) would, individually or in the
aggregate with all other pending or threatened Legal Proceedings
that the Company has Knowledge of, be reasonably expected to
have a Material Adverse Effect on the Company, or
(ii) against any current or former director or officer of
the Company or any of its Subsidiaries (in their respective
capacities as such).
(b) Neither the Company nor any of its Subsidiaries is
subject to any outstanding Order, except for Orders that would
not, individually or in the aggregate, be material to the
Company and its Subsidiaries, taken as a whole.
3.13 Material Contracts.
(a) For purposes of this Agreement, a Material
Contract shall mean the Company Intellectual Property
Agreements and all of the following Contracts to and by which
the Company or any of its Subsidiaries is a party or is bound:
(i) any employment, independent contractor or consulting
Contract (in each case, under which the Company has continuing
obligations as of the date hereof) with any employee,
independent contractor or director of the Company or its
Subsidiaries or member of the Company Board other than Contracts
with contractors or consultants that can be terminated without
material penalty upon notice of ninety (90) days or less or
offer letters and employment agreements entered into in the
ordinary course of business consistent with past practice with
employees, independent contractors or directors who are not
officers and are terminable at will without the
Company or its Subsidiaries incurring any material liability or
obligation;
(ii) any Contract or plan, including the Company Stock
Plans or any stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be
accelerated, by the consummation of the transactions
contemplated hereby or the value of any of the benefits of which
will be calculated on the basis of any of the transactions
contemplated by this Agreement, except for benefits or value
attributable solely to the increase in the value of the Company
Common Stock as a result of any of the transactions contemplated
by this Agreement;
(iii) any Contract providing for indemnification or any
guaranty by or on the part of the Company or any its
Subsidiaries (in each case, under which the Company or its
Subsidiaries has continuing obligations as of the date hereof),
other than (A) any guaranty by the Company of any of its
Subsidiarys obligations or (B) any Contract entered
into in connection with the development, distribution, resale,
sale, license or provision of any services or hardware or
software products of the Company or any of its Subsidiaries or
in any inbound license or services agreement, in each case,
entered into in the ordinary course of business;
(iv) any Contract containing any covenant (A) limiting
the right of the Company or any of its Subsidiaries to engage in
any line of business, to make use of any material technology
owned by the Company or any of its Subsidiaries or Company
Intellectual Property or to compete with any Person in any line
of business, prohibiting the Company or any of its Subsidiaries
(or, after the Closing Date, Parent or the Final Surviving
Entity or any of their respective Subsidiaries) from engaging in
business with any Person or levying a fine, charge or other
payment for doing so or otherwise prohibiting or limiting the
right of the Company or its Subsidiaries to distribute or offer
any products or services or to purchase or otherwise obtain any
software components, parts or subassemblies; or
(B) granting any exclusive rights to a third party, in each
case other than any such Contracts that (x) may be
cancelled without material liability to the Company or its
Subsidiaries upon notice of ninety (90) days or less or
(y) are not, individually or in the aggregate, material to
the Company and its Subsidiaries, taken as a whole;
(v) any Contract (A) relating to the disposition or
acquisition by the Company or any of its Subsidiaries after the
date of this Agreement of a material amount of assets other than
in the ordinary course of business or (B) pursuant to which
the Company or any of its Subsidiaries will acquire any material
ownership interest in any other Person or other business
enterprise other than the Companys Subsidiaries;
A-25
(vi) Contracts, if any, for (A) the top ten
(10) distributors for each of the past four
(4) complete calendar quarters (as measured by unaudited
quarterly bookings identified in the Companys sales force
automation tools), (B) the top fifteen (15) reseller
for each of the past four (4) complete calendar quarters
(as measured by unaudited quarterly bookings identified in the
Companys sales force automation tools), and (C) the
top ten (10) direct customers for the past four
(4) complete calendar quarters (as measured by unaudited
quarterly bookings identified in the Companys sales force
automation tools), in each case excluding quotes and purchase
orders with such distributors, resellers, and customers;
(vii) any Contract providing for the development by any
third party of any material Company Intellectual Property for or
on behalf of the Company or its Subsidiaries, and which may not
be canceled without material liability to the Company or its
Subsidiaries upon notice of one hundred eighty (180) days
or less;
(viii) containing any obligation to provide support or
maintenance for the Company Products outside of the ordinary
course of business consistent with past practice, other than
those Contracts obligations that are terminable by the Company
or any of its Subsidiaries on no more than ninety (90) days
notice without material liability or financial obligation to the
Company or its Subsidiaries;
(ix) any Contract authorizing another Person to provide
support or maintenance to the Companys customers on behalf
of the Company, or any of its Subsidiaries, other than Contracts
with distributors or resellers that are obligated to provide
such support or maintenance;
(x) any Contract with any third party to manufacture or
reproduce any Company Products or any Contract to sell or
distribute any Company Products, other than Contracts with
customers, distributors, resellers or sales representatives
entered into in the ordinary course of business;
(xi) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other Contracts relating to
the borrowing of money or extension of credit, other than
accounts receivables and payables in the ordinary course of
business consistent with past practice;
(xii) any settlement Contract, other than (A) releases
immaterial in nature or amount entered into with former
employees or independent contractors of the Company in the
ordinary course of business or (B) settlement agreements
for cash only (which has been paid or is reserved for on the
Balance Sheet) and does not exceed $200,000 as to such
settlement;
(xiii) any Contract which grants any right of first
refusal, right of first offer or similar right with respect to
any material assets, rights or properties of the Company or any
of its Subsidiaries;
(xiv) any Contract which limits the payment of dividends by
the Company or any of its Subsidiaries;
(xv) any Contract which relates to a joint venture,
partnership, limited liability company agreement, revenue
sharing or other similar agreement requiring the sharing of
revenues or joint venture;
(xvi) any Contract which relates to an acquisition,
divestiture, merger or similar transaction and which contains
any material obligations (including indemnification,
earn-out or other contingent obligations) that are
still in effect;
(xvii) any Collective Bargaining Agreement or similar
Contract;
(xviii) any Contract pursuant to which the Company or any
of its Subsidiaries is bound to or has committed to provide any
product or service to any third party on a most favored nation
(MFN) basis or similar pricing basis;
(xix) any Contract entered into directly between the
Company or any of its Subsidiaries, on the one hand, and a
United States federal Governmental Authority, on the other hand,
pursuant to which the Company or any of its Subsidiaries
provided or provides any Company Products to such United States
federal Governmental Authority, other than sales of Company
Products to United States federal Governmental Authorities
pursuant to purchase orders without any further written
agreement;
(xx) any other Contract that provides for payment
obligations by the Company or any of its Subsidiaries of
$1,000,000 or more in any individual fiscal year that is not
terminable by the Company or its Subsidiaries
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upon notice of ninety (90) days or less without material
liability to the Company or its Subsidiary and is not disclosed
pursuant to clauses (i) through (xxi) above; and
(xxi) any other Contract not listed in
Section 3.13(a)(i) (xx) above that would be a
material contract (as such term is defined in
Item 601(b)(10) of
Regulation S-K
of the SEC) with respect to the Company and its Subsidiaries.
(b) Section 3.13 of the Company Disclosure
Schedule contains a complete and accurate list, as of the date
hereof, of all Material Contracts.
(c) Each Material Contract is valid and binding on the
Company (and/or each such Subsidiary of the Company party
thereto) and is in full force and effect, and neither the
Company nor any of its Subsidiaries party thereto, nor, to the
Knowledge of the Company, any other party thereto, is in breach
of, or default under, any such Material Contract, and no event
has occurred that with notice or lapse of time or both would
constitute such a breach or default thereunder by the Company or
any of its Subsidiaries, or, to the Knowledge of the Company,
any other party thereto, except for such failures to be in full
force and effect and such breaches and defaults that would not,
individually or in the aggregate, have a Material Adverse Effect
on the Company.
3.14 Taxes.
(a) All material Tax Returns required by applicable Laws to
be filed by or on behalf of the Company or any of its
Subsidiaries have been filed in substantial accordance with all
applicable laws, and all such Tax Returns are true, correct and
complete in all material respects.
(b) The Company and each of its Subsidiaries has paid (or
has had paid on its behalf) or has withheld and remitted to the
appropriate Governmental Authority all material Taxes (including
income Taxes, withholding Taxes and estimated Taxes) due and
payable without regard to whether such Taxes have been assessed.
The Company has established an adequate accrual for all material
Taxes (including Taxes that are not yet due or payable) through
the end of the last period for which the Company and its
Subsidiaries ordinarily record items on their respective books.
The Company has identified all uncertain tax positions contained
in all Tax Returns filed by the Company or any of its
Subsidiaries, and has established adequate reserves and made any
appropriate disclosures in the most recent consolidated
financial statements of the Company and its Subsidiaries
included in the Company SEC Reports filed prior to the date of
this Agreement in accordance with the requirements of Financial
Interpretation No. 48 of FASB Statement No. 109. The
Company has made available to Parent complete and accurate
copies of all income, franchise,
non-U.S. and
other material Tax Returns, and any amendments thereto, filed by
or on behalf of the Company or any of its Subsidiaries or any
member of a group of corporations including the Company or any
of its Subsidiaries for any taxable years commencing after
January 1, 2004.
(c) There are no Liens on the assets of the Company or any
of its Subsidiaries relating or attributable to material Taxes,
other than Permitted Liens.
(d) There are no Legal Proceedings pending, or to the
Knowledge of the Company, threatened against or with respect to
the Company or any of its Subsidiaries with respect to any
material Tax, and none of the Company or any of its Subsidiaries
knows of any audit or investigation with respect to any
liability of the Company or any of its Subsidiaries for material
Taxes, and there are no agreements, arrangements, waivers or
objections in effect to extend the period of limitations for the
assessment or collection of any material Tax for which the
Company or any of its Subsidiaries may be liable.
(e) Neither the Company nor any of its Subsidiaries has
executed any closing agreement pursuant to Section 7121 of
the Code or any predecessor provision thereof, or any similar
Laws.
(f) Neither the Company nor any of its Subsidiaries has any
liability for material Taxes of any Person (other than the
Company or any of its Subsidiaries) under Treasury Regulations
Section 1.1502-6
(or any similar provision of state, local or
non-U.S. law,
including any arrangement for group or consortium relief or
similar arrangement) as a transferee or successor, by operation
of law, by contract or otherwise.
(g) No written claim has been made by any appropriate
Governmental Authority that the Company or any of its
Subsidiaries is or may be subject to any taxation by a
jurisdiction in which it does not file Tax Returns.
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(h) Neither the Company nor any of its Subsidiaries has
participated or engaged in any transaction that constitutes a
listed transaction as such term is defined in
Treasury Regulations
Section 1.6011-4(b)(2).
(i) Neither the Company nor any of its Subsidiaries has
agreed or is required to make any material adjustments pursuant
to Section 481(a) of the Code or any similar Laws by reason
of a change in accounting method initiated by it or any other
relevant party.
(j) The Company and its Subsidiaries will not be required
to include any material item of income in, or exclude any
material item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a
result of (i) any installment sale or open transaction
disposition made on or prior to the Closing Date, (ii) any
prepaid amount received on or prior to the Closing Date or
(iii) any deferred intercompany gain or excess loss account
under Treasury Regulations under Section 1502 of the Code
(or any similar Laws) in connection with a transaction
consummated prior to the Closing.
(k) (i) There is no contract, agreement, plan or
arrangement to which the Company or any of its Subsidiaries is a
party, including the provisions of this Agreement, covering any
employee, consultant or director of the Company or any of its
Subsidiaries, which, individually or collectively, could give
rise to the payment of any amount that would not be deductible
pursuant to Sections 280G, 404 or 162(m) of the Code; and
(ii) each nonqualified deferred compensation plan subject
to Section 409A of the Code complies in all material
respects with Section 409A of the Code and all applicable
guidance issued thereunder. Neither the Company nor any of its
Subsidiaries is a party to any agreement which would require the
payment to any current or former employee, consultant or
director of an amount necessary to
gross-up
such individual for any penalty tax under Section 409A of
the Code.
(l) The Company and its Subsidiaries have delivered or made
available to Parent complete and accurate copies of all letter
rulings, technical advice memoranda, and similar documents
issued since January 1, 2004, by a Governmental Authority
relating to U.S. federal, state, local or
non-U.S. Taxes
due from or with respect to the Company or any of its
Subsidiaries.
(m) The Company and each of its Subsidiaries is in
compliance with all terms and conditions of (i) any
material exemptions from taxation, Tax holidays, reduction in
Tax rate or similar Tax relief and (ii) other material
financial grants, subsidies or similar incentives granted by a
Governmental Authority, whether or not relating to Taxes.
(n) Neither the Company nor any of its Subsidiaries is
subject to Tax in any country other than its country of
incorporation or formation by virtue of having a permanent
establishment or place of business in that country.
(o) The Company and its Subsidiaries are in compliance in
all material respects with all applicable transfer pricing laws
and regulations, including the execution and maintenance of
contemporaneous documentation substantiating the transfer
pricing practices and methodology of the Company and its
Subsidiaries. The prices for any property or services (or for
the use of any property) provided by or to the Company or any of
its Subsidiaries are arms length prices for purposes of
all applicable transfer pricing laws, including Treasury
Regulations promulgated under Section 482 of the Code.
(p) Section 3.14(p) of the Company Disclosure
Schedule contains a complete and accurate list of each
Subsidiary for which an election has been made pursuant to
Section 7701 of the Code and the Treasury regulations
thereunder to be treated other than its default classification
for U.S. Federal income tax purposes.
(q) Neither the Company nor any of its Subsidiaries has
been a distributing corporation or a controlled corporation in a
transaction intended to be governed by Section 355 of the
Code.
3.15 Employee Benefits.
(a) Section 3.15(a)(i) and
Section 3.15(a)(ii) of the Company Disclosure
Schedule, respectively, set forth a complete and accurate list,
as of the date hereof, of (i) all material employee
benefit plans (as defined in Section 3(3) of ERISA),
whether or not subject to ERISA and (ii) all other
employment, independent contractor and consulting agreements
(except for offer letters providing for at-will employment that
do not provide for severance, acceleration or post-termination
benefits), repatriation and expatriation agreements, visas, work
permits, as well as
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all material bonus, stock option, stock purchase or other
equity-based, benefit, incentive compensation, profit sharing,
savings, retirement (including early retirement and supplemental
retirement), disability, insurance, vacation, incentive,
deferred compensation, termination, retention, change of control
and other similar fringe, welfare or other employee benefit
plans, programs, agreements, contracts, policies or arrangements
(whether or not in writing) maintained or contributed to for the
benefit of any current or former employee, independent
contractor or director of the Company or any of its Subsidiaries
or with respect to which the Company or any of its Subsidiaries
has any material liability or obligation (together the
Employee Plans). With respect to each
Employee Plan, the Company has made available to Parent complete
and accurate copies of, to the extent applicable, (A) the
most recent annual report on Form 5500 required to have
been filed for each Employee Plan, including any required
schedules thereto; (B) the most recent determination
letter, if any, from the IRS for any Employee Plan that is
intended to qualify under Section 401(a) of the Code;
(C) the plan documents and summary plan descriptions, or a
written description of the terms of any Employee Plan that is
not in writing; and (D) any related trust agreements,
insurance contracts, insurance policies or other documents of
any funding arrangements.
(b) Neither the Company, any of the Companys
Subsidiaries nor any of their respective ERISA Affiliates has
ever maintained, participated in or contributed to (or been
obligated to contribute to) (i) an Employee Plan which was
ever subject to Section 412 of the Code or Title IV of
ERISA, (ii) a multiemployer plan (as defined in
Section 4001(a)(3) of ERISA), (iii) a multiple
employer plan as defined in ERISA or the Code, or
(iv) a funded welfare plan within the meaning
of Section 419 of the Code. No Employee Plan provides
material welfare benefits that are not fully insured through an
insurance contract.
(c) Each Employee Plan has been maintained, operated and
administered in compliance in all material respects with its
terms and with all applicable Laws, including the applicable
provisions of ERISA and the Code. There are no material
International Employee Plans that involve material liability to
the Company or its Subsidiaries. Each Employee Plan can be
amended, terminated or otherwise discontinued following the
Effective Time without material liability to Parent, the Company
or any of its Subsidiaries (other than ordinary administration
expenses). No International Employee Plan has material unfunded
liabilities, that as of the Closing, will not be offset by
insurance or fully accrued.
(d) Except as required by Laws or the terms of any Employee
Plans, neither the Company nor any of its Subsidiaries has
announced any intent (whether or not binding) to amend in any
material respect or establish any new Employee Plan or to
increase materially any benefits under any Employee Plan.
(e) There are no Legal Proceedings pending or, to the
Knowledge of the Company, threatened on behalf of or against any
Employee Plan, the assets of any trust under any Employee Plan,
or the plan sponsor, plan administrator or any fiduciary or any
Employee Plan, other than routine claims for benefits that have
been or are being handled through an administrative claims
procedure.
(f) None of the Company, any of its Subsidiaries, or, to
the Knowledge of the Company, any of their respective directors,
officers, employees or agents has, with respect to any
Employee Plan, engaged in or been a party to any non-exempt
prohibited transaction, as such term is defined in
Section 4975 of the Code or Section 406 of ERISA,
which could reasonably be expected to result in the imposition
of a penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code.
(g) No Employee Plan provides post-termination welfare
benefits to former employees of the Company or its ERISA
Affiliates, other than pursuant to Section 4980B of the
Code or any similar Laws.
(h) Each Employee Plan that is intended to be
qualified under Section 401 of the Code either
has received a favorable determination letter from the IRS to
such effect, or has applied (or has time remaining in which to
apply) to the IRS for such a determination letter, and nothing
has occurred since the date of such determination letter that
would reasonably be expected to materially and adversely affect
the qualified status of any such Employee Plan.
(i) Neither the execution or delivery of this Agreement nor
the consummation of the transactions contemplated by this
Agreement will, either alone or in conjunction with any other
event, (i) result in any material payment or benefit
becoming due or payable, or required to be provided, to any
director, employee or independent contractor of the Company or
any of its Subsidiaries, (ii) materially increase the
amount or value of any benefit or compensation otherwise payable
or required to be provided to any such director, employee or
independent
A-29
contractor, or (iii) result in the acceleration of the time
of payment, vesting or funding of any such benefit or
compensation. There is no contract, agreement, plan or
arrangement to which the Company or any of its Subsidiaries is a
party or by which it is bound to compensate any current or
former employee or other disqualified individual for excise
taxes which may be required pursuant to Section 4999 of the
Code.
(j) All Contracts of employment or for services with any
employee of the Company or any of it Subsidiaries who provide
services outside the United States (Foreign
Employees), or with any director, independent
contractor or consultant of or to the Company or any of its
Subsidiaries, can be terminated by three (3) months notice
or less given at any time without giving rise to any material
claim for damages, severance pay, or compensation (other than a
statutory redundancy payment required by applicable Laws).
3.16 Labor Matters.
(a) Neither the Company nor any of its Subsidiaries is a
party to any Contract or arrangement between or applying to, one
or more employees, independent contractors or directors and a
union, trade union, works council, group of employees,
independent contractors or directors or any other
labor-relations body or entity, for collective bargaining or
other negotiation, consultation, or other employment-related
purposes or reflecting the outcome of such collective bargaining
or negotiation or consultation with respect to their respective
employees, independent contractors or directors with any labor
organization, union, group, association, works council or other
labor-relations body or entity, or is bound by any equivalent
national or sectoral agreement (Collective Bargaining
Agreements), and no such agreement is currently being
negotiated by the Company or any of its Subsidiaries. The
consummation of the transactions contemplated by this Agreement
will not entitle any third party (including any union, trade
union, works council, group of employees or any other
labor-relations body or entity) to any payments under any
Collective Bargaining Agreement or require the Company or any of
its Subsidiaries to consult with any union, trade union, works
council, group of employees or any other labor-relations body or
entity. To the Knowledge of the Company, there are no activities
or proceedings by any labor organization, union, group or
association or representative thereof to organize any such
employees, independent contractors or directors. There are no
material lockouts, strikes, slowdowns, work stoppages, concerted
refusals to work overtime, or, to the Knowledge of the Company,
threats thereof by or with respect to any employees nor have
there been any such lockouts, strikes, slowdowns, work
stoppages, or concerted refusals to work over time. The Company
and its Subsidiaries are not, nor have they been, a party to any
redundancy agreements (including social plans or job protection
plans). There are no material actions, suits, claims, labor
disputes or grievances pending or threatened or reasonably
anticipated relating to any labor matters involving any
employee, independent contractor or director, including charges
of unfair labor practices. Neither the Company nor any of its
Subsidiaries has engaged in any unfair labor practices within
the meaning of the National Labor Relations Act or any similar
state or local law, including any similar law of a
non-U.S. jurisdiction.
(b) The Company and each of its Subsidiaries is in
compliance in all material respects with all applicable federal,
state and local laws, rules and regulations, and, to the
Companys Knowledge, foreign laws, rules and regulations,
respecting employment, employment practices, terms and
conditions of employment, worker classification, tax
withholding, prohibited discrimination, equal employment, fair
employment practices, meal and rest periods, immigration status,
employee safety and health, wages (including overtime wages),
compensation, and hours of work, and in each case, with respect
to employees, independent contractors or directors: (i) has
withheld and reported all amounts required by law or by
agreement to be withheld and reported in all material respects
with respect to wages, salaries and other payments to employees,
independent contractors or directors, (ii) is not
materially liable for any arrears of wages, severance pay or any
Taxes or any penalty for failure to comply with any of the
foregoing, and (iii) is not materially liable for any
payment to any trust or other fund governed by or maintained by
or on behalf of any Governmental Authority, with respect to
unemployment compensation benefits, social security or other
benefits or obligations for employees (other than routine
payments to be made in the normal course of business and
consistent with past practice). Neither the Company nor any
Subsidiary is party to a conciliation agreement, consent decree
or other agreement or Order with any Governmental Authority with
respect to employment practices. The services provided by each
employee or director in the U.S. is terminable at the will
of the Company and its Subsidiaries and any such termination
would result in no liability to the Company or any Subsidiary.
Neither the Company nor any of its Subsidiaries has any material
liability with respect to any misclassification of: (i) any
Person as an independent contractor rather than as an employee,
(ii) any employee leased from another employer, or
(iii) any employee currently or formerly classified as
exempt from overtime wages.
A-30
(c) Neither the Company nor and Subsidiary has taken any
action which would constitute a plant closing or
mass layoff within the meaning of WARN, issued any
notification of a plant closing or mass layoff required by WARN,
or incurred any liability or obligation under WARN that remains
unsatisfied. No terminations prior to the Closing would trigger
any notice or other obligations under WARN.
3.17 Real Property. The Company
and its Subsidiaries do not own any real property.
Section 3.17(a) of the Company Disclosure Schedule
contains a complete and accurate list, as of the date hereof, of
all of the existing material leases, subleases or other
agreements (collectively, the Leases) under
which the Company or any of its Subsidiaries uses or occupies or
has the right to use or occupy, now or in the future, any real
property (such property, the Leased Real
Property). The Company has heretofore made available
to Parent true, correct and complete copies of all Leases
(including all material modifications and amendments thereto).
The Company
and/or its
Subsidiaries have and own valid leasehold estates in the Leased
Real Property, free and clear of all Liens other than Permitted
Liens. Section 3.17(b) of the Company Disclosure
Schedule contains a complete and accurate list, as of the date
hereof, of all of the existing Leases granting to any Person,
other than the Company or any of its Subsidiaries, any right to
use or occupy, now or in the future, any of the Leased Real
Property. The Leases are each in full force and effect in
accordance with their respective terms (except as such
enforceability may be subject to laws of general application
relating to bankruptcy, insolvency, reorganization, moratorium
or other laws relating to creditors rights generally, the relief
of debtors and rules of law governing specific performance,
injunctive relief, or other equitable remedies). Neither the
Company nor any of its Subsidiaries (i) is in material
breach of or default under, or has received written notice of
any material breach of or default under, any material Lease and
(ii) to the Knowledge of the Company, no event has occurred
that with notice or lapse of time or both would constitute a
material breach or default thereunder by the Company or any of
its Subsidiaries or any other party thereto, except, in the case
of clause (i) and (ii), as would reasonably be expected to
result in a Material Adverse Effect on the Company.
3.18 Environmental
Matters. Neither the Company nor any of its
Subsidiaries: (i) has received any written notice or other
communication of any alleged material claim, material violation
of or material liability under any Environmental Law which has
not heretofore been cured or for which there is any remaining
material liability; (ii) has disposed of, emitted,
discharged, handled, stored, transported, used or released any
Hazardous Substances, distributed, sold or otherwise placed on
the market Hazardous Substances or any product containing
Hazardous Substances, arranged for the disposal, discharge,
storage or release of any Hazardous Substances, or exposed any
employee or other individual to any Hazardous Substances so as
to give rise to any material liability or material corrective or
remedial obligation under any Environmental Laws; (iii) has
entered into any agreement that may require it to guarantee,
reimburse, pledge, defend, hold harmless or indemnify any other
party with respect to material liabilities arising out of
Environmental Laws or the Hazardous Substances related
activities of the Company or its Subsidiaries To the
Companys Knowledge, there are no Hazardous Substances in,
on, or under any properties owned, leased or used at any time by
the Company or each of its Subsidiaries such as could give rise
to any material liability or material corrective or remedial
obligation of the Company or any of its Subsidiaries under any
Environmental Laws.
3.19 Assets; Personal
Property. The machinery, equipment,
furniture, fixtures and other tangible personal property and
assets owned, leased or used by the Company or any of its
Subsidiaries (the Assets) are, in the aggregate,
sufficient and adequate to carry on their respective businesses
in all material respects as presently conducted, and the Company
and its Subsidiaries are in possession of and have good title
to, or valid leasehold interests in or valid rights under
contract to use, such Assets that are material to the Company
and its Subsidiaries, taken as a whole, free and clear of all
Liens (other than Permitted Liens), except for defects in title
that would not result in a Material Adverse Effect on, the
Company. Nothing in this Section 3.19 will be deemed
to be a representation or warranty by the Company with respect
to any intellectual property or Intellectual Property Right.
3.20 Intellectual Property.
(a) Section 3.20(a)(i) and
Section 3.20(a)(ii) of the Company Disclosure
Schedule contain, respectively, a complete and accurate list of
(i) all products and services currently marketed, sold or
distributed by the Company or its Subsidiaries or which have
been marketed, sold, or distributed by the Company or its
Subsidiaries in the two years prior to the date hereof and
(ii) all products and service offerings that, based on the
Companys product
A-31
roadmap as of the date of this Agreement, are in development as
of the date hereof and that the Company expects or intends to
make available commercially within six (6) months after the
date hereof (such products described in clauses (i) and
(ii), the Company Products).
(b) Section 3.20(b) of the Company Disclosure
Schedule contains a complete and accurate list of each item of
Company Registered Intellectual Property and for each such item,
(i) the name of the applicant/registrant, inventor/author
and current owner, (ii) the jurisdiction where the
application/registration is located, (iii) the application
or registration number, (iv) the filing date and the
issuance/registration/grant date, (v) the prosecution
status thereof, and (vi) in the case of domain name
registrations the named owner, and the registrar or equivalent
Person with whom that domain name is registered.
(c) In each case in which the Company or any of its
Subsidiaries has acquired ownership of any Registered
Intellectual Property from another Person, the Company or one of
its Subsidiaries has recorded or had recorded each such
acquisition with the U.S. Patent and Trademark Office, the
U.S. Copyright Office, the appropriate domain name
registrar or their respective equivalents in the applicable
jurisdiction, as the case may be, in each case in accordance
with applicable laws.
(d) Section 3.20(d) of the Company Disclosure
Schedule contains a complete and accurate list of all Contracts
(i) under which the Company or any of its Subsidiaries is
granted the right to use or a license with respect to,
Intellectual Property Rights or technology of a third Person,
other than (A) non-exclusive trademark licenses or
(B) licenses or services Contracts for commercially
available software in binary form or available on an application
service provider, software as a service or similar
basis (1) that is available for a cost of not more than
$150,000 for a subscription or a perpetual license for a single
user or work station (or $500,000 in the aggregate for all users
or work stations), (2) that is used by the Company but not
incorporated into any Company Products, and (3) that has
not been customized by the licensor for use by Company or
(C) licenses for any Open Source Materials
(In-Licenses), or (ii) under which the
Company or any of its Subsidiaries has licensed to others the
right to use or agreed to transfer to others any of the Company
Intellectual Property or rights with respect thereto, other than
pursuant to Contracts with (A) any customer, dealer, sales
representative, reseller or distributor or (B) any
commercial partner for the evaluation, certification or testing
of Company Products in each case, entered into in the ordinary
course of business (Out-Licenses). To the
Knowledge of the Company, no third parties to any Company
Intellectual Property Agreements are in material breach thereof.
There are no pending material disputes regarding the scope of
such Company Intellectual Property Agreements, performance of
the parties thereto, or with respect to payments made or
received thereunder. All Company Intellectual Property
Agreements are valid, binding and in full force and effect and
will continue in full force any effect for the benefit of the
Company following, and survive, the execution of this Agreement
and the consummation of the transactions contemplated by this
Agreement.
(e) No event has occurred, and, to the Knowledge of the
Company, no circumstance or condition exists, that (with or
without notice or lapse of time, or both) will, or would
reasonably be expected to, nor will the consummation of the
transactions contemplated by this Agreement result in the
disclosure or delivery by the Company, any of its Subsidiaries
or any Person acting on their behalf to any Person of any
Company Source Code. Other than any Contract with customers,
resellers and distributors of the Company or its Subsidiaries
who are beneficiaries of any escrow arrangement with the Company
or its Subsidiaries, Section 3.20(e) of the Company
Disclosure Schedule identifies each Contract pursuant to which
the Company or a Subsidiary has deposited, or is or may be
required to deposit, with an escrow agent or any other Person,
any Company Source Code.
(f) No government funding, facilities or resources of a
Governmental Authority or university were used in the
development of any Company Products or Company Intellectual
Property, and no rights have been granted to any Governmental
Authority or university with respect to any Company Products or
under any Company Intellectual Property other than pursuant to
the sale or license of the Company Products under terms
substantially similar to the commercial rights granted by the
Company and its Subsidiaries to commercial end users of the
Company Products in the ordinary course of business.
(g) The Company and its Subsidiaries own all right, title
and interest in all material Company Intellectual Property, free
and clear of all Liens other than Permitted Liens.
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(h) The Company and each of its Subsidiaries has taken
reasonable and appropriate steps to protect and preserve the
confidentiality of the Trade Secrets that comprise any material
part of the Company Intellectual Property, and to the Knowledge
of the Company, there are no unauthorized uses, disclosures or
infringements of any such Trade Secrets by any Person. To the
Knowledge of the Company, all use and disclosure by the Company
or any of its Subsidiaries of Trade Secrets owned by another
Person have been pursuant to the terms of a written agreement
with such Person or was otherwise lawful. Without limiting the
foregoing, the Company and its Subsidiaries have and use
reasonable efforts to enforce a policy requiring
(i) employees to execute a confidentiality and assignment
agreement substantially in the Companys standard form
previously provided to Parent, and (ii) and consultants and
contractors to execute a confidentiality and assignment
agreement in favor of the Company pursuant to terms
substantially similar to the terms of the Companys
standard forms of agreements previously made available to Parent.
(i) To the Knowledge of the Company, no Person or any of
such Persons products or services or other operation of
such Persons business is infringing upon or otherwise
violating in any material respect any material Company
Intellectual Property, and neither the Company nor any of its
Subsidiaries have asserted or threatened in writing any claim
against any Person alleging the same.
(j) To the Knowledge of the Company, neither the Company
nor any Company Subsidiary, nor any of their respective
businesses, operations or products or services is infringing or
violating the Intellectual Property Rights of any third Person
in any material respect. Prior to the Companys initial
public offering on June 26, 2007, neither the Company nor
any of its Subsidiaries has received written notice of any
material suit, claim, action, investigation or proceeding made,
conducted or brought by a third Person against the Company or
any of its Subsidiaries alleging that the Company or any of its
Subsidiaries or any of its or their then-current products or
services or other operation of the Companys or its
Subsidiaries business infringed or violated the
Intellectual Property Rights of any third Person that was not
otherwise disclosed in the Companys
Form S-1
filed in connection with the Companys initial public
offering. Since the Companys initial public offering on
June 26, 2007, neither the Company nor any of its
Subsidiaries has received written notice of any suit, claim,
action, investigation or proceeding made, conducted or brought
by a third Person against the Company or any of its
Subsidiaries, and, to the Knowledge of the Company, no such
suit, claim, action, investigation or proceeding has been filed
or threatened, alleging that the Company or any of its
Subsidiaries or any of its or their current products or services
or other operation of the Companys or its
Subsidiaries business infringes or violates the
Intellectual Property Rights of any third Person, nor does the
Company have any Knowledge of any facts or circumstances that
could reasonably be expected to give rise to such suit or claim.
As of the date hereof, there is no pending or, to the Knowledge
of the Company, threatened claim challenging the validity or
enforceability of, or contesting the Companys or any of
its Subsidiaries rights with respect to, any of the
Company Intellectual Property. The Company and its Subsidiaries
are not subject to any Order that restricts or impairs the use
of any Company Intellectual Property in any material respect.
(k) Neither this Agreement nor the transactions
contemplated by this Agreement, including the assignment to
Parent by operation of law or otherwise of any Material
Contracts to which the Company or any of its Subsidiaries is a
party, will result in (i) Parent or any of its Affiliates
(other than Company) or the Company granting to any third party
any right to or with respect to any material Intellectual
Property Right owned by, or licensed to, any of them, that would
not otherwise be granted in the absence of this Agreement or the
transaction contemplated hereby, (ii) Parent or any of its
Affiliates (other than Company) or the Company being bound by,
or subject to, any non-compete or other material restriction on
the operation or scope of its businesses, or (iii) Parent
or any of its Affiliates (other than Company) or the Company
being obligated to pay any royalties or other material amounts
to any third party in excess of those payable by any of them,
respectively, in the absence of this Agreement or the
transaction contemplated hereby.
(l) Section 3.20(l) of the Company Disclosure
Schedule contains a complete and accurate list of all software
that is distributed as open source software or under
a similar licensing or distribution model (collectively,
Open Source Materials) (including the GNU
General Public License and the LGPL) that is incorporated into a
Company Product. In no case does such, or any other, use or
distribution of open source software give rise to any rights in
any third parties under any Company Intellectual Property, or
obligations for the Company or its Subsidiaries with respect to
any Company Intellectual Property, including any obligation to
disclose or distribute any Company
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Source Code, to license any Company Intellectual Property for
the purpose of making derivative works or to distribute any
Company Intellectual Property or Company Product without charge.
3.21 Insurance. Each material
insurance policy of the Company and its Subsidiaries is in full
force and effect, no notice of cancellation has been received
with respect thereto, and there is no existing default or event
which, with the giving of notice or lapse of time or both, would
constitute a default, by any insured thereunder, except for such
defaults that would not, individually or in the aggregate,
result in a Material Adverse Effect on the Company. There is no
material claim pending under any of such policies as to which
coverage has been denied or disputed by the underwriters of such
policies.
3.22 Related Party
Transactions. Except (a) as set forth in
any Company SEC Report filed prior to the date hereof and
(b) for compensation or other employment arrangements in
the ordinary course, there are no transactions, agreements,
arrangements or understandings between the Company or any of its
Subsidiaries, on the one hand, and any Affiliate (including any
officer or director) thereof, but not including any wholly owned
Subsidiary of the Company, on the other hand.
3.23 State Anti-Takeover
Statutes. Assuming that the representations
of Parent and the Merger Subs set forth in
Section 4.8 are accurate, the Company Board has
taken all necessary actions so that the restrictions on business
combinations set forth in Section 203 of the DGCL are not
applicable to this Agreement and the Merger or the Voting
Agreements. To the Knowledge of the Company, no other state
takeover statute or similar statute or regulation applies to or
purports to apply to the Merger or the Voting Agreements.
3.24 Brokers. Except for Qatalyst
Partners LP (a true and correct copy of whose engagement letter
has been made available to Parent), there is no investment
banker, broker, finder, agent or other Person that has been
retained by or is authorized to act on behalf of the Company or
any of its Subsidiaries who is entitled to any financial
advisors brokerage, finders or any other fee or
commission in connection with the transactions contemplated by
this Agreement.
3.25 Opinion of Financial
Advisor. The Company has received the opinion
of Qatalyst Partners LP to the effect that as of the date of
this Agreement and based upon and subject to the matters set
forth in such opinion, the Merger Consideration to be received
by holders of shares of Company Common Stock pursuant to this
Agreement is fair, from a financial point of view, to such
holders and such opinion has not been withdrawn, revoked or
modified in any respect.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF
PARENT AND
THE MERGER SUBS
Except (i) as disclosed in the Parent SEC Reports filed
with the SEC from and after April 24, 2008 and prior to the
date hereof (other than as set forth in the forward-looking
statements or as set forth in the risk factors contained
therein) or (ii) as set forth in the disclosure letter
delivered by Parent to the Company dated as of the date hereof
(the Parent Disclosure Schedule), which
identifies by reference to, or has been grouped under a heading
referring to, a specific section of this Agreement and
constitutes an exception hereto and disclosure made pursuant to
any section of the Parent Disclosure Schedule shall be deemed to
be disclosed against each of the other sections of this
Agreement to the extent the applicability of the disclosure to
such other section is readily apparent from the disclosure made
(without reference to the underlying documents referenced
therein) and Parent, Merger Sub One and Merger Sub Two hereby
represent and warrant to the Company as follows:
4.1 Organization and Standing.
(a) Each of Parent, Merger Sub One and Merger Sub Two is
duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate,
limited liability or other power and authority to conduct its
business as it is presently being conducted and to own, lease or
operate its respective properties and assets.
(b) Each of Parent, Merger Sub One and Merger Sub Two is
duly qualified to do business and is in good standing in each
jurisdiction where the character of its properties owned or
leased or the nature of its activities make such
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qualification necessary, except where the failure to be so
qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. The copies
of the certificate of incorporation and bylaws of Parent that
are filed as exhibits to Parents Annual Report on
Form 10-K
for the fiscal year ended April 25, 2008 (the
Parent
Form 10-K),
as amended by Parents Current Report on
Form 8-K
filed with the SEC on April 6, 2009, are complete and
correct copies thereof as in effect on the date hereof. Parent
has delivered or made available to the Company complete and
correct copies of the certificate of incorporation and bylaws
(or other equivalent charter documents, as applicable) of Merger
Sub One and Merger Sub Two. Parent, Merger Sub One and Merger
Sub Two are not in violation of its certificate of
incorporation, bylaws or other equivalent charter documents, as
applicable.
4.2 Corporate Approvals.
(a) Each of Parent, Merger Sub One and Merger Sub Two has
all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby and to perform its obligations hereunder.
The execution and delivery of this Agreement by Parent, Merger
Sub One and Merger Sub Two, the performance by Parent, Merger
Sub One and Merger Sub Two of their respective obligations
hereunder, and, assuming the accuracy in all respects of the
representations and warranties of the Company set forth in
Section 3.4 and the compliance in all respects by
the Company with the restrictions set forth in
Section 5.2(b), the consummation by Parent, Merger
Sub One and Merger Sub Two of the transactions contemplated
hereby have been duly authorized by all necessary corporate
action on the part of Parent, Merger Sub One and Merger Sub Two
and no additional corporate or other actions or proceedings
(including a vote of Parents stockholders) on the part of
Parent, Merger Sub One or Merger Sub Two are necessary to
authorize this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent, Merger Sub One and Merger Sub Two
and, assuming the due authorization, execution and delivery by
the Company, constitutes a legal, valid and binding obligation
of each of Parent, Merger Sub One and Merger Sub Two,
enforceable against each of them in accordance with its terms,
except that such enforceability may be limited by applicable
bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium
and other similar laws affecting or relating to creditors rights
generally and is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding
in equity or at law).
(b) At a meeting duly called and held on May 19, 2009,
the Parent Board unanimously (i) determined that this
Agreement is advisable, (ii) determined that this Agreement
is fair to, and in the best interests of, the stockholders of
Parent, and (iii) approved this Agreement and the
transactions contemplated hereby. As of the date hereof, the
Parent Board has not rescinded or modified in any way the
foregoing determinations and actions. Pursuant to action taken
by written consent on May 19, 2009, the board of directors
of Merger Sub One unanimously (i) determined that this
Agreement is advisable, (ii) determined that this Agreement
is fair to, and in the best interests of, the sole stockholder
of Merger Sub One, and (iii) approved this Agreement and
the transactions contemplated hereby. As of the date hereof, the
board of directors of Merger Sub One has not rescinded or
modified in any way the foregoing determinations and actions.
Pursuant to action taken by written consent on May 19,
2009, the board of managers of Merger Sub Two unanimously
(i) determined that this Agreement is advisable,
(ii) determined that this Agreement is fair to, and in the
best interests of, the stockholder of Merger Sub Two, and
(iii) approved this Agreement and the transactions
contemplated hereby. As of the date hereof, the board of
managers of Merger Sub Two has not rescinded or modified in any
way the foregoing determinations and actions.
4.3 Non-contravention; Required Consents.
(a) The execution, delivery or performance by Parent,
Merger Sub One and Merger Sub Two of this Agreement, the
consummation by Parent, Merger Sub One and Merger Sub Two of the
transactions contemplated hereby and the compliance by Parent,
Merger Sub One and Merger Sub Two with any of the terms hereof
do not and will not (i) violate or conflict with any
provision of the certificate of incorporation, bylaws or other
equivalent constituent documents (as applicable) of Parent,
Merger Sub One or Merger Sub Two, (ii) violate, conflict
with, or result in the breach of or constitute a default (or an
event which with notice or lapse of time or both would become a
default) under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination
or acceleration under, any Contract to which Parent or any of
its Subsidiaries is a party or by which Parent, any of its
Subsidiaries or any of their properties or assets are bound,
(iii) assuming compliance with the matters referred to in
Section 4.3(b), violate or conflict with any Law or
Order applicable to Parent or any of its
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Subsidiaries or by which any of their properties or assets are
bound or (iv) result in the creation of any Lien upon any
of the properties or assets of Parent or any of its
Subsidiaries, except, in the case of each of clauses (ii),
(iii) and (iv) above, for such violations, conflicts,
breaches, defaults, terminations, accelerations or Liens which
would not, individually or in the aggregate, be material to
Parent and its Subsidiaries, taken as a whole.
(b) No consent of any Governmental Authority is required on
the part of Parent, Merger Sub One, Merger Sub Two or any of
their Affiliates in connection with the execution, delivery and
performance by Parent, Merger Sub One or Merger Sub Two of this
Agreement and the consummation by Parent, Merger Sub One or
Merger Sub Two of the transactions contemplated hereby, except
(i) applicable requirements, if any, of the Securities Act,
the Exchange Act, state securities laws, the rules and
regulations of Nasdaq (ii) the filing and recordation of
the Certificate of Merger with the Secretary of State of the
State of Delaware and the filing of the certificate of merger
for the Second Step Merger with the Secretary of State of the
State of Delaware, (iii) compliance with any applicable
requirements of the HSR Act and any applicable foreign
antitrust, competition or merger control laws, (iv) the
filing of a Notification of Listing of Additional Shares (or
such other form as may be required by Nasdaq) with Nasdaq with
respect to the shares of the Parent Common Stock to be issued in
the Merger, and (v) such other Consents, the failure of
which to obtain would not, individually or in the aggregate, be
reasonably expected to have a material adverse effect on the
ability of Parent and the Company to consummate the Merger.
4.4 Capitalization.
(a) The authorized capital stock of Parent consists of
(i) 885,000,000 (Eight Hundred Eighty-Five Million) shares
of Parent Common Stock, and (ii) 5,000,000 (Five Million)
shares of Parent Preferred Stock, par value $0.001 per
share. As of the close of business on May 15, 2009 (the
Parent Capitalization Date):
(i) 332,757,557 (Three Hundred Thirty-Two Million, Seven
Hundred Fifty-Seven Thousand, Five Hundred Fifty-Seven) shares
of Parent Common Stock were issued and outstanding, (ii) no
shares of Parent Preferred Stock were issued and outstanding,
and (iii) 104,325,286 (One Hundred Four Million, Three
Hundred Twenty-Five Thousand, Two Hundred Eighty-Six) shares of
Parent Common Stock held by Parent as treasury shares. As of the
close of business on the Parent Capitalization Date, with
respect to Parent option plans, there were outstanding Parent
Options, Parent Restricted Stock Units and Parent Restricted
Stock to purchase or otherwise acquire 70,594,546 (Seventy
Million, Five Hundred Ninety-Four Thousand, Five Hundred
Forty-Six) shares of Parent Common Stock. All outstanding shares
of Parent Common Stock are, and all shares of capital stock of
Parent which may be issued as contemplated or permitted by this
Agreement will be, when issued, duly authorized, validly issued,
fully paid, nonassessable and free of any preemptive rights.
(b) Except as set forth in this Section 4.4, as
of the close of business on April 24, 2009, there were
(i) no outstanding shares of capital stock of, or other
equity or voting interest in, Parent, (ii) no outstanding
securities of Parent convertible into or exchangeable for shares
of capital stock of, or other equity or voting interest in,
Parent, (iii) no outstanding options, warrants, rights or
other commitments or agreements to acquire from Parent, or that
obligates Parent to issue, any capital stock of, or other equity
or voting interest in, or any securities convertible into or
exchangeable for shares of capital stock of, or other equity or
voting interest in, Parent, (iv) no obligations of Parent
to grant, extend or enter into any subscription, warrant, right,
convertible or exchangeable security or other similar agreement
or commitment relating to any capital stock of, or other equity
or voting interest (including any voting debt) in, Parent and
(v) no other obligations by Parent or any of its
Subsidiaries to make any payments based on the price or value of
any securities of Parent. There are no outstanding agreements of
any kind which obligate Parent or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any securities of
Parent, except as disclosed in the Parent SEC Reports from and
after the filing of the Parent Form-10K.
(c) All outstanding shares of Parent Common Stock are, and
all shares of capital stock of Parent which may be issued as
contemplated or permitted by this Agreement will be, when
issued, duly authorized, validly issued, fully paid and
nonassessable.
4.5 SEC Reports; Other Reports.
(a) Parent has filed or furnished all forms, reports and
documents with the SEC that have been required to be filed or
furnished by it under applicable Laws since January 1, 2006
(all such forms, reports and documents, the Parent SEC
Reports). Each Parent SEC Report complied, or will
comply, as the case may be, as of its filing date,
A-36
in all material respects with the applicable requirements of the
Securities Act or the Exchange Act, as the case may be, each as
in effect on the date such Parent SEC Report was filed. True and
correct copies of all Parent SEC Reports filed prior to the date
hereof, whether or not required under applicable Laws, have been
furnished to the Company or are publicly available in the
Electronic Data Gathering, Analysis and Retrieval (EDGAR)
database of the SEC. As of its filing date (or, if amended or
superseded by a filing prior to the date of this Agreement, on
the date of such amended or superseding filing), each Parent SEC
Report did not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances
under which they were made, not misleading. None of
Parents Subsidiaries is required to file any forms,
reports or other documents with the SEC. No executive officer of
Parent has failed to make the certifications required of him or
her under Section 302 or 906 of the Sarbanes-Oxley Act with
respect to any Parent SEC Report, except as disclosed in
certifications filed with the Parent SEC Reports. Neither Parent
nor any of its executive officers has received notice from any
Governmental Authority challenging or questioning the accuracy,
completeness, form or manner of filing of such certifications.
As of the date of this Agreement, there are no outstanding
written comments from the SEC with respect to any of the Parent
SEC Reports.
(b) Parent and each of its Subsidiaries have timely filed
all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they
were required to file since January 1, 2006 with any
Governmental Authority (other than the SEC) and have paid all
fees and assessments due and payable in connection therewith,
except as would not reasonably be expected to have a Material
Adverse Effect on Parent. Neither Parent nor any of its
executive officers has received notice from any Governmental
Authority challenging or questioning the accuracy, completeness,
form, or manner of filing of such certifications.
4.6 Financial Statements and Controls.
(a) The consolidated financial statements of Parent and its
Subsidiaries filed in or furnished with the Parent SEC Reports
complied in all material respects with all applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto and they have been prepared in accordance
with GAAP consistently applied during the periods and at the
dates involved (except as may be indicated in the notes thereto
and, in the case of unaudited interim financial statements, as
may be permitted by the SEC for Quarterly Reports on
Form 10-Q),
and fairly present in all material respects the consolidated
financial position of Parent and its Subsidiaries as of the
dates thereof and the consolidated results of operations and
cash flows for the periods then ended, subject, in the case of
unaudited interim financial statements, to normal and year-end
audit adjustments as permitted by GAAP and the applicable rules
and regulations of the SEC and any other adjustments expressly
described therein, including the notes thereto.
(b) Parent has established, and maintains and enforces, a
system of internal accounting controls which are effective in
providing reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
in accordance with GAAP, including policies and procedures that
(i) require the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and
dispositions of the assets of Parent, (ii) provide
reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with
GAAP, and that receipts and expenditures of Parent are being
made only in accordance with appropriate authorizations of
management and the Parent Board and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the assets of
Parent and its Subsidiaries that could have a material effect on
Parents financial statements. Except as disclosed in
Parent SEC Reports filed with the SEC from and after the filing
of the Parent Form-10K, neither Parent nor any of its
Subsidiaries nor Parents independent auditors has
identified or been made aware of (A) any significant
deficiency or material weakness (as defined in
Rule 13a-15(f)
promulgated under the Exchange Act) in the system of internal
accounting controls utilized by Parent, (B) any fraud,
whether or not material, that involves Parents management
or other employees who have a role in the preparation of
financial statements or the internal accounting controls
utilized by Parent or (C) any claim or allegation regarding
clauses (A) and (B).
(c) Parent has established and maintains disclosure
controls and procedures (as such terms are defined in
Rule 13a-15(e)
or
Rule 15d-15(e)
promulgated under the Exchange Act) to ensure that information
required to be disclosed by Parent in the reports that it files
or submits under the Exchange Act is recorded, processed,
summarized
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and reported within the time periods specified in the SECs
rules and forms and is accumulated and communicated to
Parents management to allow timely decisions regarding
required disclosure.
4.7 No Undisclosed Liabilities.
Neither Parent nor any of its Subsidiaries has any liabilities
(whether accrued, absolute, contingent, matured, unmatured or
otherwise ), other than (a) liabilities reflected or
otherwise reserved against in the balance sheet of Parent set
forth in the Parent
Form 10-Q
(the Parent Balance Sheet),
(b) liabilities incurred after the date of the Parent
Balance Sheet in the ordinary course of business consistent with
past practice, (c) liabilities contemplated by this
Agreement, or (d) liabilities that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent.
4.8 Absence of Certain Changes.
Since the date of the Parent Balance Sheet through the date of
this Agreement, there has not been or occurred any Material
Adverse Effect on Parent.
4.9 Litigation; Orders. There is
no Legal Proceeding pending or, to the Knowledge of Parent,
threatened, against Parent, any of its Subsidiaries or any of
their respective properties that would, individually or in the
aggregate, be material to Parent and its Subsidiaries, taken as
a whole. Neither Parent nor any of its Subsidiaries is subject
to any outstanding Order, except for Orders that would not,
individually or in the aggregate, be material to Parent and its
Subsidiaries, taken as a whole.
4.10 Ownership of Company Capital
Stock. Prior to the date hereof (and without
giving effect the execution and delivery of the Voting
Agreements), neither Parent, Merger Sub One nor Merger Sub Two,
alone or together with any other Person, was at any time during
the last three (3) years an interested
shareholder within the meaning of Section 203 of the
DGCL.
4.11 Brokers. Except for Goldman,
Sachs & Co., there is no investment banker, broker,
finder, agent or other Person that has been retained by or is
authorized to act on behalf of Parent or any of its Subsidiaries
who is entitled to any financial advisors, brokerage,
finders or other similar fee or commission in connection
with the transactions contemplated by this Agreement.
4.12 Financing. Parent has, and
will have available to it upon the consummation of the Merger,
without the need for outside financing, sufficient funds to
consummate the transactions contemplated hereby, including
payment in full of the Cash Consideration.
ARTICLE V
INTERIM
CONDUCT OF BUSINESS
5.1 Affirmative Obligations of the
Company. Except (a) as expressly
contemplated or permitted by this Agreement, (b) as set
forth in Section 5.1 or Section 5.2 of
the Company Disclosure Schedule, (c) as required by
applicable Law, or (d) as approved in advance by Parent in
writing, at all times during the period commencing with the
execution and delivery of this Agreement and continuing until
the earlier to occur of the termination of this Agreement
pursuant to Article VIII and the Effective Time,
each of the Company and each of its Subsidiaries shall
(i) carry on its business in the ordinary course in all
material respects in substantially the same manner as heretofore
conducted and in material compliance with all applicable Laws
and (ii) use commercially reasonable efforts, consistent
with its past practices and policies, to (A) preserve
intact its present business organization, (B) keep
available the services of its present officers and employees and
(C) preserve its relationships with customers, suppliers,
distributors, licensors, licensees and others with which it has
significant business dealings.
5.2 Negative Obligations of the
Company. Except (i) as expressly
contemplated or permitted by this Agreement, (ii) as set
forth in Section 5.1 or Section 5.2 of
the Company Disclosure Schedule, (iii) as required by
applicable Law or the terms of any Employee Plan (copies of
which have been provided to Parent), or (iv) as approved in
advance by Parent in writing, at all times during the period
commencing with the execution and delivery of this Agreement and
continuing until the earlier to occur of the termination of this
Agreement pursuant to
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Article VIII and the Effective Time, the Company
shall not do any of the following and shall not permit its
Subsidiaries to do any of the following:
(a) amend, or propose to adopt any amendments to, its
certificate of incorporation or bylaws or comparable
organizational documents;
(b) authorize for issuance, issue, sell, deliver or agree
or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any Company
Securities or any Subsidiary Securities, except for (i) the
issuance and sale of shares of Company Common Stock pursuant to
Company Stock Awards outstanding prior to the date hereof,
(ii) the issuance of shares pursuant to the Company ESPP
and (iii) Company Restricted Stock Units to purchase up to
an aggregate of 250,000 shares of Company Common Stock
granted in the ordinary course of business after the date of
this Agreement;
(c) acquire or redeem, directly or indirectly, or amend any
Company Securities or Subsidiary Securities, except to the
extent that such acquisition or redemption is pursuant to the
terms of any Employee Plan (as then in effect) or any agreement
subject to any such Employee Plan;
(d) other than dividends or distributions made by any
direct or indirect wholly-owned Subsidiary of the Company to the
Company or one of its Subsidiaries, set any record or payment
dates for the payment of any dividends or distributions on
capital stock, split, combine or reclassify any shares of
capital stock, declare, set aside or pay any dividend or other
distribution (whether in cash, shares or property or any
combination thereof) in respect of any shares of capital stock,
or make any other actual, constructive or deemed distribution in
respect of the shares of capital stock;
(e) propose or adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any
of its Subsidiaries;
(f) (i) incur or assume any long-term or short-term
indebtedness for borrowed money or issue any debt securities,
except for loans or advances to or from direct or indirect
wholly-owned Subsidiaries, (ii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other
Person except with respect to obligations of direct or indirect
wholly-owned Subsidiaries of the Company, (iii) except for
advances made in the ordinary course of business consistent with
past practice, make any loans or advances to employees of the
Company or any of its Subsidiaries, (iv) acquire, or make
any capital contributions to or investments in any other Person
(other than direct or indirect wholly-owned Subsidiaries of the
Company), by purchase or other acquisition of stock or other
equity interests (other than in a fiduciary capacity in the
ordinary course of business consistent with past practice),
whether by merger, consolidation, asset purchase or other
business combination, or by formation of any joint venture or
other business organization or by contributions to capital; or
(v) mortgage or pledge any of its or its Subsidiaries
assets, tangible or intangible, or create or suffer to exist any
Lien (other than Permitted Liens) thereupon;
(g) except as may be required by applicable Law or the
terms of any Employee Plan, including the Company 2009 Executive
Bonus Plan, as in effect on the date hereof (copies of which
have been provided to Parent), enter into, adopt, amend
(including an amendment to provide for the acceleration of
vesting), modify or terminate any Employee Plan in any material
respect, or increase or decrease the compensation or fringe
benefits of any employee or director of the Company or any of
its Subsidiaries (except for normal increases of cash
compensation in the ordinary course of business consistent with
past practice to any current or future employees below the rank
of Vice President or whose base salary does not exceed
$200,000 per annum), pay any bonus or special remuneration
(whether in cash, equity or otherwise) to any employee,
consultant, independent contractor or director (other than
bonuses made in the ordinary course of business consistent with
past practice with respect to employees who are not executive
officers or directors of the Company), or pay any benefit not
required by any Employee Plan as in effect as of the date hereof
or amend the targets or the goals of the 2009 Executive Bonus
Plan;
(h) forgive any Loans to any employees, officers or
directors of the Company or any of its Subsidiaries, or any of
their respective Affiliates;
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(i) make any deposits or contributions of cash or other
property to, or take any other action to fund, or in any other
way secure the payment of compensation or benefits under the
Employee Plans or Contracts subject to the Employee Plans, other
than deposits and contributions that are required pursuant to
the terms of the Employee Plans or any Contracts subject to the
Employee Plans in effect as of the date hereof;
(j) enter into, amend, or extend any Collective Bargaining
Agreement or similar Contract;
(k) (1) acquire, lease (as lessee) or license (as
licensee) any property or assets with a fair market value in
excess of $5,000,000 in the aggregate per fiscal quarter, except
transactions required pursuant to existing Contracts as in
effect on the date hereof; or (2) sell, lease (as lessor),
license (as licensor) or dispose of any property or assets with
a net book value in excess of $100,000 in any individual
transaction, except (A) transactions required pursuant to
existing Contracts as in effect on the date hereof or
(B) transactions in the ordinary course of business
consistent with past practice;
(l) except as may be required as a result of a change in
applicable Laws or in GAAP, make any change in any of the
accounting principles or practices used by it;
(m) (i) make or change any Tax election that,
individually or in the aggregate, would be reasonably expected
to adversely affect in any material respect the Tax liability or
Tax attributes of the Company or any of its Subsidiaries,
(ii) change any material Tax accounting method,
(iii) settle or compromise any material U.S. federal,
state, local or
non-U.S. Tax
liability or (iv) consent to any extension or waiver of any
limitation period with respect to any claim or assessment for
material Taxes;
(n) enter into any Company Intellectual Property Agreement
or amend any Company Intellectual Property Agreements or grant
any release or relinquishment of any rights under any Company
Intellectual Property Agreements, except (i) to customers
and (ii) non-exclusive in-bound licenses for commercially
available technology, in each case in the ordinary course of
business consistent with past practice;
(o) grant any exclusive rights with respect to any Company
Intellectual Property, divest any Company Intellectual Property,
except if such divestiture or divestures, individually or in the
aggregate, are not material to the Company, or materially modify
the Companys standard warranty terms for Company Products
or services or amend or modify any product or service warranty
in any manner that is likely to be materially adverse to the
Company or any of its Subsidiaries;
(p) authorize, incur or commit to incur any capital
expenditure(s) (including any property or assets acquired
pursuant to Section 5.2(k)) which do not exceed
$5,000,000 in the aggregate per fiscal quarter, other than
pursuant to existing Contracts as in effect on the date hereof;
(q) settle or compromise any pending or threatened Legal
Proceeding or pay, discharge or satisfy or agree to pay,
discharge or satisfy any claim, liability or obligation
(absolute or accrued, asserted or unasserted, contingent or
otherwise), other than the settlement, compromise, payment,
discharge or satisfaction of Legal Proceedings, claims and other
liabilities that (i) are reflected or reserved against in
full in the Balance Sheet or incurred since the date of the
Balance Sheet in the ordinary course of business consistent with
past practice, (ii) are covered by existing insurance
policies, or (iii) otherwise do not involve the payment of
money in excess of $200,000 in the aggregate, in each case where
the settlement, compromise, discharge or satisfaction of which
does not include any obligation (other than the payment of money
not in excess of $200,000 in the aggregate above the amounts
reflected or reserved in the Balance Sheet in respect of such
Legal Proceeding) to be performed by the Company or its
Subsidiaries following the Effective Time;
(r) except as required by applicable Laws or GAAP, revalue
in any material respect any of its properties or assets
including writing-off accounts receivable;
(s) other than in the ordinary course of business
consistent with past practice, (i) enter into, renew,
extend or terminate (other the termination of a Material
Contract pursuant to its terms as in effect as of the date
hereof) any Material Contract (or any Contract that would have
been a Material Contract if it had been in effect on the date
hereof); or (ii) make any material amendment or change in
any such Material Contract;
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(t) (i) enter into any lease or sublease of material
real property (whether as a lessor, sublessor, lessee or
sublessee) with a term that exceeds six (6) months;
(ii) modify, amend or exercise any right to renew any lease
or sublease of real property; or (iii) make application for
the opening, relocation or closing of any, or open, relocate or
close any, branch office or other real property;
(u) make any representations or issue any communications to
current or former employee, independent contractor or director
that are inconsistent with this Agreement or the transactions
contemplated thereby, including any representations regarding
offers of employment from Parent, any Subsidiary of the Parent,
or the Final Surviving Entity;
(v) enter into a Contract to do any of the foregoing or
make any formal or informal arrangement or understanding,
whether or not binding, with respect to any of the
foregoing; or
(w) take any action which would (i) materially impair
the Companys ability to consummate the transactions
contemplated by this Agreement in accordance with the terms
hereof and applicable Law or (ii) materially delay the
consummation of the Merger and the other transactions
contemplated by this Agreement.
5.3 Negative Obligations of
Parent. Except as approved in advance by the
Company in writing, neither Parent nor any of its Subsidiaries
shall, directly or indirectly, acquire or agree to acquire
(whether by merger, consolidation, stock or asset purchase,
tender or exchange offer, recapitalization, reorganization or
any other form of transaction) any other Person if and to the
extent that such transaction would reasonably be expected to
(a) impair the ability of the parties hereto to consummate
the Merger, or (b) delay the consummation of the Merger in
any material respect.
ARTICLE VI
ADDITIONAL
AGREEMENTS
6.1 No Solicitation.
(a) The Company and its Subsidiaries shall, and shall cause
each of their respective Representatives to, immediately cease
any and all existing activities, discussions or negotiations
with any Persons conducted heretofore with respect to any
Acquisition Proposal or Acquisition Transaction.
(b) At all times during the period commencing with the
execution and delivery of this Agreement and continuing until
the earlier to occur of the termination of this Agreement
pursuant to Article VIII and the Effective Time, the
Company shall not, the Company shall cause its Subsidiaries not
to, and the Company shall not authorize or permit any of its,
any of its Subsidiaries or any of their respective
Representatives to, directly or indirectly:
(i) solicit, initiate or knowingly encourage or facilitate
or knowingly induce any inquiry with respect to, or the making,
submission or announcement of, an Acquisition Proposal or an
Acquisition Transaction;
(ii) subject to Section 6.1(c), furnish to any
Person (other than Parent, Merger Sub One, Merger Sub Two or any
designees of Parent or the Merger Subs) any non-public
information relating to the Company or any of its Subsidiaries,
or afford access to the business, properties, assets, books or
records of the Company or any of its Subsidiaries to any Person
(other than Parent, Merger Sub One, Merger Sub Two or any
designees of Parent or the Merger Subs), or take any other
action, in each case in a manner that is intended or would be
reasonably expected to assist or facilitate any inquiries or the
making of any proposal that constitutes or could lead to an
Acquisition Proposal or an Acquisition Transaction;
(iii) subject to Section 6.1(c), participate or
engage in discussions or negotiations with any Person with
respect to an Acquisition Proposal or an Acquisition Transaction;
(iv) approve, endorse or recommend an Acquisition Proposal
or an Acquisition Transaction;
(v) enter into any letter of intent, memorandum of
understanding or other Contract contemplating or otherwise
relating to an Acquisition Proposal or an Acquisition
Transaction (other than a confidentiality and
standstill agreement pursuant to and in accordance
with Section 6.1(c)); or
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(vi) terminate, amend or waive any material rights under
(or fail to enforce by seeking an injunction or by seeking to
specifically enforce the material terms of) any confidentiality
or standstill or other similar agreement between the
Company or any of its Subsidiaries and any other Person;
(vii) take any action to exempt any Person, other than
Parent and the Merger Subs, from DGCL Section 203 or any
other applicable anti-takeover Laws; or
(viii) agree with a third party to do any of the foregoing,
or propose to third parties (including Company stockholders) to
do any of the foregoing other than pursuant to
Section 6.1(c), Section 6.7(b) or
Section 8.1(h) in accordance with the terms thereof.
(c) Notwithstanding the foregoing terms of
Section 6.1(b) or any other provision in this
Agreement, at any time prior to obtaining the Requisite Merger
Approval, the Company Board may, directly or indirectly through
advisors, agents or other intermediaries, (x) engage
or participate in discussions or negotiations with any Person
that has made (and not withdrawn) an unsolicited Acquisition
Proposal in writing after the date hereof,
and/or
(y) furnish or make available to any Person that has made
(and not withdrawn) an unsolicited Acquisition Proposal in
writing after the date hereof, any non-public information
relating to the Company or any of its Subsidiaries; provided,
however, the Company may take any action contemplated by the
foregoing clauses (x) or (y) if and only if all of the
following conditions have been satisfied prior to taking such
action (and continue to be satisfied at all times during which
any of the foregoing actions are being taken):
(i) the Company Board shall have determined in good faith
(after consultation with its financial advisor and its outside
legal counsel) that (A) such Acquisition Proposal either
constitutes or is reasonably likely to lead to a Superior
Proposal and (B) the failure to take such action is
reasonably likely to result in a breach of its fiduciary duties
to the Companys stockholders under Delaware Law;
(ii) none of the Company, any of its Subsidiaries or any of
their respective Representatives shall have breached or violated
in any material respect the terms of this
Section 6.1 (other than those terms set forth in
Section 6.1(f)) in connection with such Acquisition
Proposal or in connection with any other Acquisition Proposal
made by any Person (or any Affiliate or agent thereof) making
such Acquisition Proposal;
(iii) the Company shall have entered into a confidentiality
and standstill agreement with such Person,
(A) the terms of which are no less favorable to the Company
than those contained in the Confidentiality Agreement and
(B) the standstill provisions of which do not
include a sunset, fall-away or other
similar exception that would result in the
standstill provisions becoming inapplicable at any
time prior to the valid termination of this Agreement in
accordance with its terms;
(iv) the Company shall have given Parents Chief
Executive Officer at least twenty-four (24) hours prior
written notice of (x) its intent to take the action
permitted by this Section 6.1(c) and (y) the
identity of the Person(s) making the Acquisition Proposal
forming the basis for taking the action permitted by this
Section 6.1(c), and (z) all of the material
terms and conditions of such Acquisition Proposal (and if such
Acquisition Proposal is in written form, prior to taking any
action with respect to such Person, the Company shall have given
Parent a copy of such Acquisition Proposal and all related
agreements, commitment letters and other material documents
constituting such Acquisition Proposal provided or otherwise
furnished by the Person(s) making such Acquisition Proposal in
connection therewith); and
(v) prior to or contemporaneously with furnishing any
non-public information to such Person, the Company shall have
furnished or made available such non-public information to
Parent (to the extent such information has not been previously
furnished or made available by the Company to Parent).
(d) Without limiting the generality of the foregoing,
Parent, Merger Sub One, Merger Sub Two and the Company
acknowledge and hereby agree that any action taken by any
Representative of the Company or any of its Subsidiaries that
would be a breach of the restrictions set forth in this
Section 6.1 if taken by the Company shall be deemed
to be a breach of this Section 6.1 by the Company
for all purposes of and under this Agreement.
(e) In addition to the obligations of the Company set forth
in Section 6.1(c), the Company shall promptly, and
in all cases within forty-eight (48) hours of its receipt,
advise Parent in writing of the receipt by the Company, any of
its Subsidiaries or any of their respective Representatives of
(i) any Acquisition Proposal, (ii) any request for
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information that would reasonably be expected to lead to an
Acquisition Proposal, or (iii) any inquiry with respect to,
or which would reasonably be expected to lead to, any
Acquisition Proposal, the material terms and conditions of such
Acquisition Proposal, request or inquiry (and all related
agreements, commitment letters and other documents constituting
or relating to such Acquisition Proposal or otherwise furnished
by the Person(s) making such Acquisition Proposal in connection
therewith), and the identity of the Person or group making any
such Acquisition Proposal, request or inquiry. At all times from
and after the Companys, any of its Subsidiaries or
any of their respective Representatives receipt thereof,
the Company shall keep Parent reasonably informed of the status
and material terms and conditions (including all amendments or
proposed amendments) of any such Acquisition Proposal, request
or inquiry.
(f) The Company shall provide Parent with at least
twenty-four (24) hours prior written notice (or any shorter
period of advance notice provided to members of the Company
Board) of a meeting of the Company Board (or any committee
thereof) at which the Company Board (or any committee thereof)
is reasonably expected to consider an Acquisition Proposal or
Acquisition Transaction.
6.2 Reasonable Best Efforts to Complete.
(a) Upon the terms and subject to the provisions set forth
in this Agreement, each of Parent, Merger Sub One, Merger Sub
Two and the Company shall use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to
be done, and to assist and cooperate with the other party or
parties hereto in doing, all things reasonably necessary, proper
or advisable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by
this Agreement, including by:
(i) using its reasonable best efforts to cause the
conditions to the Merger set forth in Article VII to
be satisfied or fulfilled;
(ii) using its reasonable best efforts to obtain all
necessary or appropriate consents, waivers and approvals, and to
provide all necessary notices, under Material Contracts so as to
maintain and preserve the benefits under such Contracts
following the consummation of the transactions contemplated by
this Agreement, provided that in the event that the other
parties to any such Contract, including any lessor or licensor
of any Leased Real Property, conditions its grant of a consent,
waiver or approval (including by threatening to exercise a
recapture or other termination right) upon the
payment of a consent fee, profit sharing payment or
other consideration, including increased rent payments or other
payments under the Contract, the Company shall not make or
commit to make any such payment or provide any such
consideration without Parents prior written consent;
(iii) making all necessary registrations, declarations and
filings with Governmental Authorities in connection with this
Agreement and the consummation of the transactions contemplated
hereby, and obtaining all necessary actions or non-actions,
waivers, clearances, consents, approvals, orders and
authorizations from Governmental Authorities (including the
Antitrust Approval) in connection with this Agreement and the
consummation of the transactions contemplated hereby;
(iv) executing and delivering any additional mutually
acceptable instruments mutually deemed necessary to consummate
the transactions contemplated by, and to fully carry out the
purposes of, this Agreement; and
(v) assisting the other parties in (A) making all
necessary registrations, declarations and filings with
Governmental Authorities in connection with this Agreement and
the consummation of the transactions contemplated hereby,
including by providing such information regarding itself, its
Affiliates and their respective operations as may be requested
in connection with a filing by it or any of its Subsidiaries,
(B) obtaining all necessary actions or non-actions,
waivers, clearances, consents, approvals, orders and
authorizations from Governmental Authorities (including the
Antitrust Approval) in connection with this Agreement and the
consummation of the transactions contemplated hereby, and
(C) delivering any additional mutually acceptable
instruments mutually deemed required to be made, obtained or
delivered to consummate the transactions contemplated by this
Agreement.
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(b) Notwithstanding anything to the contrary set forth in
this Agreement, nothing in this Section 6.2 or
elsewhere in this Agreement shall be deemed to require Parent or
the Company or any Subsidiary thereof to (i) litigate or
otherwise contest any administrative or judicial action or
proceeding that may be brought in connection with the
transactions contemplated by this Agreement or (ii) agree
to any divesture by itself or any of its Affiliates of shares of
capital stock or of any business, assets or property, or the
imposition of any limitation on the ability of any of them to
conduct their business or to own or exercise control of such
assets, properties and stock.
6.3 Regulatory Filings.
(a) Without limiting the generality of the provisions of
Section 6.2 and to the extent required by applicable
Laws, as promptly as practicable following the execution and
delivery of this Agreement, each of Parent and the Company shall
make or submit all applications, notices, petitions and filings,
file or submit all documentation, and use their respective
reasonable best efforts to obtain as promptly as practicable all
clearances, permits, consents, approvals and authorizations of
all Governmental Authorities, in each case which are necessary
or advisable to consummate the transactions contemplated by this
Agreement as promptly as practicable and to comply with the
terms and conditions of all such clearances, permits, consents,
approvals and authorizations of all Governmental Authorities.
The Company and Parent shall have the right to review in
advance, and to the extent practicable each will consult the
other on, in each case subject to applicable Laws and Orders,
all the documentation and information relating to either party
and any of its respective Subsidiaries, that appears in any
application, notice, petition, filing and documentation made
with, or written materials submitted to, any third party or any
Governmental Authority in connection with the transactions
contemplated by this Agreement. In exercising the foregoing
right, each of the parties hereto shall act reasonably and as
promptly as practicable. Parent and the Company shall promptly
advise each other upon receiving any communication from any
Governmental Authority whose clearance, consent or approval is
required to consummate the transactions contemplated by this
Agreement which causes such party to believe that there is a
reasonable likelihood that any clearance, consent or approval
required in order to consummate the transactions contemplated by
this Agreement will not be obtained or that the receipt of any
such clearance, consent or approval will be materially delayed
or conditioned.
(b) Each of Parent and the Company shall promptly
(i) cooperate and coordinate with the other in the making
and submitting the applications, notices, petitions and filings
contemplated by this Section 6.3, (ii) subject
to applicable Laws and Orders, supply the other with any
information that may be required in order to effectuate such
applications, notices, petitions and filings, and
(iii) supply any additional information that may be
required or reasonably requested by any Governmental Authority
in connection with such applications, notices, petitions and
filings. Subject to applicable Laws and Orders, each party
hereto shall (A) promptly inform the other party hereto of
any communication from any Governmental Authority regarding any
of the transactions contemplated by this Agreement,
(B) permit the other party hereto the opportunity to review
in advance all the information relating to Parent and its
Subsidiaries or the Company and its Subsidiaries, as the case
may be, that appears in any application, notice, petition or
filing made with, or written materials submitted to, any third
party and/or
any Governmental Authority in connection with the transactions
contemplated hereby, (C) not participate in any substantive
meeting or discussion with any Governmental Authority in respect
of any filing, investigation, or inquiry concerning the
transactions contemplated hereby unless and until such party has
consulted with the other party, and, to the extent permitted by
such Governmental Authority, gives the other party the
opportunity to attend such meeting or discussion, and
(D) furnish the other party with copies of all
correspondences, filings, and written communications between
them and their Subsidiaries and representatives, on the one
hand, and any Governmental Authority or its respective staff, on
the other hand, with respect to the transactions contemplated
hereby. Each party hereto shall promptly inform the other party
or parties hereto, as the case may be, of any communication from
any Governmental Authority regarding any of the transactions
contemplated by this Agreement. If any party hereto or Affiliate
thereof receives a request for additional information or
documentary material from any such Governmental Authority with
respect to the transactions contemplated by this Agreement, then
such party shall use its reasonable best efforts to make, or
cause to be made, as soon as reasonably practicable and after
consultation with the other party, an appropriate response in
compliance with such request.
(c) Notwithstanding anything to the contrary set forth in
this Agreement, nothing in this Section 6.3 or
elsewhere in this Agreement shall be deemed to require Parent or
the Company or any Subsidiary thereof to (i) litigate or
otherwise contest any administrative or judicial action or
proceeding that may be brought in
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connection with the transactions contemplated by this Agreement
or (ii) agree to any divestiture by itself or any of its
Affiliates of shares of capital stock or of any business, assets
or property, or the imposition of any limitation on the ability
of any of them to conduct their business or to own or exercise
control of such assets, properties and stock.
6.4 Anti-Takeover Laws. In the
event that any state anti-takeover or other similar statute or
regulation is or becomes applicable to this Agreement or any of
the transactions contemplated by this Agreement, the Company, at
the direction of the Company Board, and Parent, at the direction
of the Parent Board, each shall use its reasonable best efforts
to provide that the transactions contemplated by this Agreement
may be consummated as promptly as practicable on the terms and
subject to the provisions set forth in this Agreement, and
otherwise to minimize the effect of such statute or regulation
on this Agreement and the transactions contemplated hereby.
6.5 Registration Statement; Proxy
Statement/Prospectus.
(a) As promptly as practicable after the execution and
delivery of this Agreement, Parent and the Company shall
prepare, and Parent shall file with the SEC, a Registration
Statement on
Form S-4
in connection with the issuance of shares of Parent Common Stock
in the Merger (as may be amended or supplemented from time to
time, the Registration Statement). The
Registration Statement shall include (i) a prospectus for
the issuance of shares of Parent Common Stock in the Merger, and
(ii) a proxy statement of the Company for use in connection
with the solicitation of proxies for the Merger Proposal to be
considered at the Company Stockholder Meeting (as may be amended
or supplemented from time to time, the Proxy
Statement/Prospectus). Each of Parent and the Company
shall use its reasonable best efforts to have the Registration
Statement declared effective by the SEC under the Securities Act
as promptly as practicable after such filing with the SEC and to
keep the Registration Statement effective through the Closing in
order to consummate the Merger and the other transactions
contemplated by this Agreement. Without limiting the generality
of the foregoing, each of the Company and Parent shall, and
shall cause its respective representatives to, fully cooperate
with the other party hereto and its respective representatives
in the preparation of the Registration Statement and the Proxy
Statement/Prospectus, and shall furnish the other party hereto
with all information concerning it and its Affiliates as the
other party hereto may deem reasonably necessary or advisable in
connection with the preparation of the Registration Statement
and the Proxy Statement/Prospectus, and any amendment or
supplement thereto, and each of Parent and the Company shall
provide the other party hereto with a reasonable opportunity to
review and comment thereon. As promptly as practicable after the
Registration Statement is declared effective by the SEC, Parent
and the Company shall cause the Proxy Statement/Prospectus to be
disseminated to the stockholders of the Company.
(b) Unless the Company Board shall have effected a Company
Board Recommendation Change in compliance with the terms and
conditions set forth in this Agreement, the Proxy
Statement/Prospectus shall include the Company Board
Recommendation.
(c) Except as otherwise set forth in this Agreement or as
may be required by applicable Law or Order, neither Parent nor
the Company shall effect any amendment or supplement (including
by incorporation by reference) to the Proxy Statement/Prospectus
or the Registration Statement without the prior consent of the
other party (which consent shall not be unreasonably withheld,
delayed or conditioned); provided, however, that the
Company, in connection with a Company Board Recommendation
Change pursuant to and in accordance with
Section 6.7, may amend or supplement the proxy
statement for the Company pursuant to a Qualifying Amendment to
effect such change, and in such event, the right of approval set
forth in this Section 6.5(c) shall apply only with
respect to such information relating to the other party or its
business, financial condition or results of operations, and
shall be subject to the Companys right to have the
deliberations and conclusions of the Company Board accurately
described. A Qualifying Amendment means an
amendment or supplement to the proxy statement for the Company
if and solely to the extent that it contains (i) a Company
Board Recommendation Change, (ii) a statement of the
reasons of the Company Board for making such Company Board
Recommendation Change, and (iii) additional information the
Company determines, in its sole discretion, to be reasonably
related to the foregoing.
(d) The Registration Statement and the Proxy
Statement/Prospectus shall comply in all material respects as to
form and substance with the requirements of the Securities Act
and the Exchange Act. Without limiting the generality of the
foregoing, the information supplied or to be supplied by any
party hereto for inclusion or incorporation by reference in the
Registration Statement shall not, at the time the Registration
Statement is filed with the SEC or declared effective by the SEC
or at the Effective Time, contain any untrue statement of a
material
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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 were made, not
misleading. The information supplied or to be supplied by any
party hereto for inclusion or incorporation by reference in the
Proxy Statement/Prospectus shall not, at the time the
Registration Statement is declared effective, on the date the
Proxy Statement/Prospectus (or any amendment thereof or
supplement thereto) is first mailed to stockholders, or at the
time of the Company Stockholder Meeting, 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 were made, not misleading. The information supplied
or to be supplied by or on behalf of either party hereto for
inclusion in any filing pursuant to Rule 165 and
Rule 425 under the Securities Act or
Rule 14a-12
under the Exchange Act (each, a
Regulation M-A
Filing) shall not, at the time any such
Regulation M-A
Filing is filed with the SEC, 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 were
made, not misleading. Without limiting the generality of the
foregoing, prior to the Effective Time, Parent and the Company
shall notify each other as promptly as practicable upon becoming
aware of any event or circumstance which should be described in
an amendment of, or supplement to, the Registration Statement,
Proxy Statement/Prospectus or any
Regulation M-A
Filing so that any such document would not include any
misstatement of material fact or omit to state any material fact
necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, and as
promptly as practicable thereafter, an appropriate amendment or
supplement describing such information shall be promptly filed
with the SEC and, to the extent required by applicable Law or
the SEC, disseminated to the stockholders of Parent
and/or the
Company. Parent and the Company shall each notify the other as
promptly as practicable after the receipt by it of any written
or oral comments of the SEC or its staff on, or of any written
or oral request by the SEC or its staff for amendments or
supplements to, the Registration Statement, the Proxy
Statement/Prospectus or any
Regulation M-A
Filing, and shall promptly supply the other with copies of all
correspondence between it or any of its representatives and the
SEC or its staff with respect to any of the foregoing filings.
Prior to filing the Registration Statement or mailing the Proxy
Statement/Prospectus to stockholders (or filing or mailing any
amendment thereof or supplement thereto), each of Parent and the
Company, as the case may be, (i) shall provide the other
party with a reasonable opportunity to review and comment on
such document or response, (ii) shall include in such
document or response all comments reasonably and timely proposed
by such other party and (iii) shall not file or mail such
document or respond to the SEC prior to receiving such other
partys approval, which approval shall not be unreasonably
withheld, conditioned or delayed.
(e) Parent and the Company shall make any necessary filings
with respect to the Merger under the Securities Act and the
Exchange Act. In addition, prior to the Effective Time, Parent
shall use reasonable best efforts to obtain all regulatory
approvals needed to ensure that the Parent Common Stock to be
issued in the Merger will be registered (to the extent
required), qualified or exempt from registration or
qualification under any applicable federal or state securities
or Blue Sky Laws.
6.6 Company Stockholder Meeting.
(a) The Company shall establish a record date for, call,
give notice of, convene, hold, and take a vote of stockholders
on the adoption of this Agreement in accordance with the DGCL
(the Merger Proposal) at a meeting of the
Companys stockholders (the Company Stockholder
Meeting) as promptly as practicable following the date
hereof (which shall be within forty five (45) days
following the date on which the Proxy Statement/Prospectus is
first disseminated to Companys stockholders unless Parent
shall otherwise consent to a different date). The Company shall
use its reasonable best efforts to solicit proxies from the
Companys stockholders and, unless the Company Board has
effected a Company Board Recommendation Change pursuant to and
in accordance with the terms of Section 6.7, the
Company Board shall use its reasonable best efforts to obtain
the Requisite Merger Approval at the Company Stockholder Meeting
or any postponement or adjournment thereof. Subject to the terms
and provisions of Section 6.6(b) (if applicable),
the Company shall not propose for consideration or submit for a
vote any matters (including any Acquisition Proposals or
Acquisition Transactions) at the Company Stockholder Meeting (or
an adjournment of the Company Stockholder Meeting, if permitted
hereunder) other than the Merger Proposal without the prior
written consent of Parent. Notwithstanding anything to the
contrary set forth in this Agreement, the Company shall submit
this Agreement to the Companys stockholders for approval
at the Company
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Stockholder Meeting, and the Companys obligations under
this Section 6.6 shall not be terminated,
superseded, limited, modified or otherwise affected by the
commencement, disclosure, announcement or submission to the
Company of any Acquisition Proposal or Acquisition Transaction,
or by any Company Board Recommendation Change (whether or not in
compliance with the terms hereof). For the avoidance of doubt,
the Company shall not be required to hold the Company
Stockholder Meeting if this Agreement is validly terminated in
accordance with Section 8.1.
(b) The Company shall not establish a record date for,
call, give notice of, convene or hold any meeting of the
Companys stockholders unless and until the Company
Stockholder Meeting has been held, a vote of the Companys
stockholders has been taken on the Merger Proposal and the
Company Stockholder Meeting has been adjourned; provided,
however, that notwithstanding the foregoing or anything to
the contrary set forth in this Agreement, the Company may
establish a record date for, call, give notice of, convene and
hold its annual meeting of stockholders for 2009 (the
Annual Meeting) and shall use commercially
reasonable efforts to hold the Annual Meeting within thirteen
(13) calendar months from the date of its annual meeting of
stockholders for 2008. At the Annual Meeting, (x) the
Company may submit to a vote of its stockholders (i) the
election of directors to the Company Board and (ii) the
ratification of its independent public accounting firm, and
(y) the Company shall not propose for consideration or
submit for a vote any matters other than those set forth in the
previous sentence and such other matters which the Company is
legally required to submit to a vote of its stockholders at the
Annual Meeting. Parent and the Company shall cooperate in good
faith to determine whether the Merger Proposal shall be
considered at the Annual Meeting in lieu of a special meeting,
and in such event, the terms and provisions of
Section 6.6(a) shall be qualified by the terms and
provisions of this Section 6.6(b).
(c) Notwithstanding anything to the contrary set forth in
this Agreement, the Company may adjourn or postpone the Company
Stockholder Meeting solely (i) if as of the time for which
the Company Stockholder Meeting is originally scheduled (as set
forth in the Proxy Statement/Prospectus) there are insufficient
shares of Company Common Stock represented (either in person or
by proxy) to constitute a quorum necessary to conduct the
business of the Company Stockholder Meeting, (ii) for up to
ten (10) Business Days, if the Company Board shall have
determined in good faith (after consultation with its outside
legal counsel) that it is necessary or appropriate to postpone
or adjourn the Company Stockholder Meeting in order to
(A) give Company Stockholder sufficient time to evaluate
any information or disclosure that the Company has sent to
Company Stockholders or otherwise made available to Company
Stockholders by issuing a press release, filing materials with
the SEC or otherwise (including in connection with any Company
Board Recommendation Change) or (B) to enable the
additional time to solicit proxies from Company Stockholders,
(iii) if the Company is required to postpone or adjourn the
Company Stockholder Meeting by applicable Law, Order or a
request from the SEC or its staff, or (iv) with the prior
written consent of Parent.
6.7 Company Board Recommendation.
(a) Subject to the terms of this Section 6.7,
the Company Board shall recommend that the Companys
stockholders adopt this Agreement in accordance with the
applicable provisions of the DGCL (the Company Board
Recommendation) at the Company Stockholder Meeting.
Neither the Company Board nor any committee thereof shall
(x) withhold, withdraw, amend or modify, or publicly
propose to withhold, withdraw, amend or modify the Company Board
Recommendation or (y) approve, endorse or recommend, or
publicly propose to approve, endorse or recommend any
Acquisition Proposal or agreement pursuant to which an
Acquisition Transaction would be consummated (any of the actions
referred to in the preceding clauses (x) and (y) being
a Company Board Recommendation Change);
provided, however that a stop, look and
listen communication by the Company Board to the Company
Stockholders pursuant to
Rule 14d-9(f)
of the Exchange Act shall not be deemed to be a Company Board
Recommendation Change if it is accompanied by a statement of the
Company Board expressly and publicly reaffirming the Company
Board Recommendation in connection with such statement or
disclosure.
(b) Notwithstanding the foregoing terms of this
Section 6.7, at any time prior to receipt of the
Requisite Merger Approval, the Company Board may effect a
Company Board Recommendation Change (and disclose to the
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Company Stockholders that the Company Board has effected a
Company Board Recommendation Change) if the conditions set forth
below have been satisfied prior to effecting such Company Board
Recommendation Change:
(i) the Company Board shall have received an unsolicited
Acquisition Proposal (which has not been withdrawn) in writing
after the date hereof;
(ii) none of the Company, any of its Subsidiaries or any of
their respective Representatives shall have breached or violated
in any material respect the terms of Section 6.1 in
connection with such Acquisition Proposal or in connection with
any other Acquisition Proposal made or submitted by any Person
(or any Affiliate or agent thereof) making such Acquisition
Proposal;
(iii) the Company Board shall have determined in good faith
(after consultation with its financial advisor and its outside
legal counsel) that (A) such Acquisition Proposal
constitutes a Superior Proposal and (B) in light of such
Superior Proposal, the failure to make a Company Board
Recommendation Change is reasonably likely to be a breach of its
fiduciary duties to the Companys stockholders under
Delaware Law;
(iv) the Company Board shall have given Parent at least
five (5) Business Days prior written notice (1) of the
identity of the Person(s) making such Superior Proposal and all
of the material terms and conditions of such Superior Proposal
(and if such Superior Proposal is in written form, a copy of
such Superior Proposal and all related agreements, commitment
letters and other material documents provided or otherwise
furnished by the Person(s) making such Superior Proposal in
connection therewith) (it being agreed that in the event that,
after commencement of such five (5) Business Day period,
there is any material revision to the terms of a Superior
Proposal, including any revision in price, the five
(5) Business Day period shall be extended to ensure that at
least five (5) Business Days remains in such period
subsequent to the time the Company notifies Parent of any such
material revision), and (2) that the Company Board intends
to effect a Company Board Recommendation Change in response to
such Superior Proposal and the opportunity to meet with the
Company Board and the Companys financial advisors and
outside legal counsel at such times as Parent may reasonably
request for the purpose of enabling Parent and the Company to
discuss in good faith this Agreement and the terms and
conditions hereof, and any modifications of the terms and
conditions of this Agreement that Parent may propose in response
thereto; and
(v) after the foregoing five (5) Business Day period
and any extensions thereof and, if requested by Parent, meetings
with Parent and its financial advisors and legal counsel during
such period, (A) Parent shall not have made a proposal at
least as favorable or more favorable to the Companys
stockholders as such Acquisition Proposal and (B) the
Company Board shall have determined in good faith (after
consultation with its financial advisor its outside legal
counsel) that (1) such Acquisition Proposal continues to
constitute a Superior Proposal, and (2) in light of such
Superior Proposal and after good faith consideration of all
proposals by Parent, the failure to effect such Company Board
Recommendation Change is reasonably likely to be a breach of its
fiduciary duties to the Companys stockholders under
Delaware Law.
(c) Notwithstanding the foregoing terms of this
Section 6.7, at any time prior to receipt of the
Requisite Merger Approval, the Company Board may effect a
Company Board Recommendation Change (and disclose to the Company
Stockholders that the Company Board has effected a Company Board
Recommendation Change) for a reason unrelated to an Acquisition
Proposal (it being understood and agreed that any Company Board
Recommendation Change proposed to be made in relation to an
Acquisition Proposal may only be made pursuant to and in
accordance with the terms of Section 6.7(b)) if the
conditions set forth below have been satisfied prior to
effecting such Company Board Recommendation Change:
(i) the Company Board shall have determined in good faith
(after consultation with its outside legal counsel) that the
failure to make a Company Board Recommendation Change is
reasonably likely to be a breach of its fiduciary duties to the
Companys stockholders under Delaware Law;
(ii) the Company Board shall have given Parent at least
five (5) Business Days prior written notice that the
Company Board intends to effect such Company Board
Recommendation Change and the opportunity to meet with the
Company Board and the Companys financial advisors and
outside legal counsel at such times as Parent may reasonably
request for the purpose of enabling Parent and the Company to
discuss in good faith (A) the Company Boards basis
and rationale for proposing to effect such Company Board
Recommendation
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Change,
and/or
(B) possible modifications of the terms and conditions of
this Agreement in such a manner that would obviate the need for
the Company Board to effect such Company Board Recommendation
Change; and
(iii) after the foregoing five (5) Business Day period
and, if requested by Parent, meetings with Parent and its
financial advisors and legal counsel during such period, the
Company Board shall have determined in good faith (after
consultation with its outside legal counsel), that the failure
to effect such Company Board Recommendation Change is reasonably
likely to be a breach of its fiduciary duties to the
Companys stockholders under Delaware Law.
(d) Nothing in this Agreement shall prohibit the Company
Board from taking and disclosing to the Companys
stockholders a position contemplated by
Rule 14e-2(a)
under the Exchange Act or complying with the provisions of
Rule 14d-9
promulgated under the Exchange Act; provided, however,
that (i) any such statement or other disclosure shall be
subject to the terms and conditions of this Agreement, including
the provisions of Article VIII, and (ii) any
such statement or disclosure (other than a stop, look and
listen communication of the type contemplated by
Rule 14d-9(f)
under the Exchange Act, and within the time period contemplated
by
Rule 14d-9(f)(3))
shall be deemed to be a Company Board Recommendation Change
unless it is accompanied by a statement of the Company Board
expressly and publicly reaffirming the Company Board
Recommendation in connection with such statement or disclosure.
6.8 Access; Notice and Consultation.
(a) Subject to any restrictions imposed under applicable
Laws, at all times during the period commencing with the
execution and delivery of this Agreement and continuing until
the earlier to occur of the termination of this Agreement
pursuant to Article VIII and the Effective Time, the
Company shall afford Parent and its accountants, legal counsel
and other representatives reasonable access at reasonable times
and during normal business hours, upon reasonable notice, to any
assets, properties, contracts, books, records and personnel of
the Company and its Subsidiaries as Parent may reasonably
request. Notwithstanding the foregoing, the Company and its
Subsidiaries shall not be required to provide access to or
disclose information where such access or disclosure would
reasonably be likely to jeopardize any attorney-client
privilege, work product doctrine or other applicable privilege
applicable to such documents or information of the Company or
any of its Subsidiaries; provided, however, that in such
circumstances the parties shall use reasonable best efforts to
make appropriate substitute disclosure arrangements that would
not so jeopardize such privilege; provided, however, that
nothing in this Section 6.8(a) or elsewhere in this
Agreement shall be construed to require the Company or its
Representatives to prepare any reports, analyses, appraisals,
opinions or other information. Any investigation conducted
pursuant to the access contemplated by this
Section 6.8(a) shall be conducted in a manner that
does not unreasonably interfere with the conduct of the business
of the Company and its Subsidiaries or create a risk of damage
or destruction to any property or assets of the Company or any
of its Subsidiaries.
(b) Subject to any restrictions imposed under applicable
Laws, at times during the period commencing with the execution
and delivery of this Agreement and continuing until the earlier
to occur of the termination of this Agreement pursuant to
Article VIII and the Effective Time, Parent shall
make available its Chief Executive Officer and Chief Financial
Officer to discuss Parents business and operations with
the executive officers of the Company at reasonable times and
upon reasonable request and notice from the Company.
(c) At all times during the period commencing with the
execution and delivery of this Agreement and continuing until
the earlier to occur of the termination of this Agreement
pursuant to Article VIII and the Effective Time,
each of Parent and the Company shall promptly notify the other
upon obtaining Knowledge that any representation or warranty
made by such party in this Agreement has become untrue or
inaccurate in any material respect or that such party has
breached or failed to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with
or satisfied by such party under this Agreement.
(d) At all times during the period commencing with the
execution and delivery of this Agreement and continuing until
the earlier to occur of the termination of this Agreement
pursuant to Article VIII and the Effective Time, the
Company shall promptly advise Parent in writing of any
litigation commenced after the date hereof against the Company
or any of its directors or executive officers by any
Companys stockholders (on their own behalf or on behalf of
the Company) relating to this Agreement or the transactions
contemplated hereby and shall
A-49
keep Parent reasonably informed regarding any such litigation.
The Company shall give Parent the opportunity to consult with
the Company regarding the defense or settlement of any such
stockholder litigation and shall consider Parents views
with respect to such stockholder litigation.
(e) At all times during the period commencing with the
execution and delivery of this Agreement and continuing until
the earlier to occur of the termination of this Agreement
pursuant to Article VIII and the Effective Time, the
Company shall, and shall cause its Subsidiaries to, make
available to Parent a copy of each annual and quarterly report
on 10-K or
10-Q (as
applicable), and each registration statement and other document,
proposed to be filed by the Company with the SEC during such
period a reasonable period of time prior to the filing of such
reports or registration statements (and in any event, at least
two (2) Business Days prior to the filing thereof with the
SEC).
(f) Notwithstanding anything to the contrary set forth in
this Agreement, no information obtained pursuant to the access
granted or notification provided pursuant to this
Section 6.8 shall be deemed to (i) amend or
otherwise modify in any respect any representation or warranty
of the party hereto providing such access or notice,
(ii) impair or otherwise prejudice in any manner rights of
the party receiving such access or notice to rely upon the
conditions to the obligations of such party to consummate the
transactions contemplated by this Agreement, or
(iii) impair or otherwise limit the remedies available to
the party receiving such access or notice. The terms and
conditions of the Confidentiality Agreement shall apply to any
information acquired or provided pursuant to this
Section 6.8.
6.9 Confidentiality. Parent,
Merger Sub One, Merger Sub Two and the Company hereby
acknowledge that Parent and the Company have previously executed
a Mutual Nondisclosure Agreement, dated as of May 7, 2009
(the Confidentiality Agreement), which will
continue in full force and effect in accordance with its terms.
6.10 Public Disclosure. Except
with regard to any press releases or public statements made or
proposed to be made by the Company pursuant to
Section 6.7, each of Parent and the Company shall
consult with the other before issuing any press release or
making any public announcement or statement with respect to this
Agreement or the transactions contemplated hereby, and shall not
issue any such press release or make any such public
announcement or statement without the prior written consent of
the other party hereto, which consent shall not be unreasonably
withheld, delayed or conditioned; provided, however, that
either Parent or the Company may, without the prior consent of
the other party hereto, issue any such press release or make any
such public announcement or statement as may be required by Law
or the rules and regulations of the Nasdaq if such party first
notifies and (if practicable) consults with the other regarding
the timing and substance of such public announcement or
statement.
6.11 Employee Matters.
(a) From and after the enrollment of Designated Employees
in the employee benefit plans, programs and policies of Parent,
Parent shall provide the Designated Employees with substantially
similar types and levels of benefits as those provided to
similarly situated employees of Parent. Effective as of the day
immediately preceding the Closing Date, each of the Company and
any ERISA Affiliate shall terminate any and all Employee Plans
intended to include a Code Section 401(k) arrangement
(each, a 401(k) Plan) (unless Parent provides
written notice to the Company that such 401(k) Plans shall not
be terminated). Unless Parent provides such written notice to
the Company, no later than five (5) Business Days prior to
the Closing Date, the Company shall provide Parent with evidence
that such Employee Plan(s) have been terminated (effective as of
the day immediately preceding the Closing Date) pursuant to
resolutions of the Company Board or such Affiliate, as the case
may be. The form and substance of such resolutions shall be
subject to the reasonable review and approval of Parent. The
Company also shall take such other actions reasonably necessary
in furtherance of terminating such Employee Plan(s) as Parent
may reasonably require. In the event that termination of a
401(k) Plan would reasonably be anticipated to trigger
liquidation charges, surrender charges or other fees then the
Company shall take such actions as are necessary to reasonably
estimate the amount of such charges
and/or fees
and provide such estimate in writing to Parent no later than
fifteen (15) calendar days prior to the Closing Date. If,
in accordance with this Section 6.11, Parent
requests in writing that the Company not terminate any 401(k)
Plan, the Company shall take such actions as Parent may
reasonably require in furtherance of the assumption of any such
401(k) Plan by Parent, including by adopting such amendments as
Parent may deem necessary or advisable in connection with such
assumption, provided, however,
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Parent provides written notice to the Company of such actions
(identifying each action) no later than three (3) Business
Days prior to the Closing Date.
(b) From and after the Effective Time, and to the extent
permitted by applicable Law, Parent shall, or shall cause the
Final Surviving Entity to, recognize the prior service with the
Company or its Subsidiaries of each Designated Employee in
connection with all employee benefit plans, programs or policies
of Parent or its Affiliates in which Designated Employees are
eligible to participate following the Effective Time for
purposes of eligibility and vesting and determination of level
of benefits (but not for purposes of benefit accruals under any
defined benefit pension plan or to the extent that such
recognition would result in duplication of benefits). From and
after the Effective Time, Parent shall, or shall cause the Final
Surviving Entity to, (i) cause any pre-existing conditions
or limitations and eligibility waiting periods under any group
health plans of Parent or its Affiliates to be waived with
respect to Designated Employees and their eligible dependents to
the extent such Designated Employees and their eligible
dependents were not subject to such preexisting conditions and
limitations and eligibility waiting periods under the comparable
Employee Plans as of the time immediately preceding the Closing,
and (ii) provide each Designated Employee with credit for
any deductibles paid under any Employee Plan that provides
medical, dental or vision benefits in the plan year in effect as
of the Closing Date in satisfying any applicable deductible or
out of pocket requirements under any medical, dental or vision
plans of Parent, the Final Surviving Entity or its Subsidiaries
that such employees are eligible to participate in after the
Effective Time to the same extent that such expenses were
recognized under the comparable Employee Plan. The provisions of
this Section 6.11(b) are not intended to confer upon
any person other than the parties hereto any rights or remedies
hereunder, and nothing herein shall be deemed to amend any
Employee Plan to reflect the terms of this
Section 6.11(b). Notwithstanding the foregoing,
Parent shall continue to sponsor or maintain, as the case may
be, the employee benefit plans programs or policies of the
Company that provide health, dental, vision, accidental death or
disability and life insurance coverage for the benefit of
Designated Employees until such Designated Employees are
enrolled in such employee benefit plans, programs or policies of
Parent. Nothing contained in this Section 6.11 shall
in any way alter the at-will employment of any
U.S. employees of the Company or any of its Subsidiaries.
(c) Prior to the Effective Time, the Company ESPP shall be
terminated. The Company shall take all actions necessary
pursuant to the terms of the Company ESPP in order to shorten
each currently ongoing offering period that extends beyond the
Effective Time such that a new purchase date for such offering
shall occur prior to the Effective Time. Prior to the Effective
Time, and subject to the reasonable review and approval by
Parent, the Company shall take all actions reasonably necessary
give effect to the transactions contemplated by this
Section 6.11(c).
6.12 Directors and Officers Indemnification and
Insurance.
(a) The Final Surviving Entity and its Subsidiaries shall
(and Parent shall cause the Final Surviving Entity and its
Subsidiaries to) honor and fulfill in all respects the
obligations of the Company and its Subsidiaries under
(i) the certificate of incorporation and bylaws (or other
similar organizational documents) of the Company and its
Subsidiaries as in effect on the date hereof and (ii) any
and all agreements for indemnification, exculpation of liability
and/or
advancement of expenses in effect as of the date hereof between
the Company or any of its Subsidiaries and any of their
respective current or former directors and officers and any
person who becomes a director or officer of the Company or any
of its Subsidiaries prior to the Effective Time (the
Indemnified Parties). In addition, for a
period of six (6) years following the Effective Time, the
Final Surviving Entity and its Subsidiaries shall (and Parent
shall cause the Final Surviving Entity and its Subsidiaries to)
cause the certificate of formation (and other similar
organizational documents) of the Final Surviving Entity and its
Subsidiaries to contain provisions with respect to
indemnification, exculpation from liability and the advancement
of expenses that are at least as favorable as the
indemnification, exculpation from liability and advancement of
expense provisions set forth in the certificate of incorporation
and bylaws (or other similar organizational documents) of the
Company and its Subsidiaries as of the date hereof, and during
such six (6) year period, such provisions shall not be
amended, repealed or otherwise modified in any manner that would
adversely affect the rights thereunder of individuals who were
covered by such provisions, except as required by applicable Law
or Order.
(b) For a period of six (6) years after the Effective
Time, Parent and the Final Surviving Entity shall maintain in
effect the Companys current directors and
officers liability insurance (D&O
Insurance) in respect of acts or
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omissions occurring or existing at or prior to the Effective
Time, provided, however, that Parent and the Final
Surviving Entity may, at their option, substitute policies of
Parent, the Final Surviving Entity or any of their respective
Subsidiaries with containing terms with respect to coverage and
amounts no less favorable, in the aggregate, to the Indemnified
Parties than the D&O Insurance, provided, further,
however, that, in satisfying its obligations under this
Section 6.12(b), Parent and the Final Surviving
Entity shall not be obligated to pay annual premiums in excess
of two hundred percent (200%) of the amount paid by the Company
for coverage for its last fiscal year (such two hundred percent
(200%) amount, the Maximum Annual Premium)
(which premiums the Company represents and warrants to be as set
forth in Section 6.12 of the Company Disclosure
Schedule), provided that if the annual premiums of such
insurance coverage exceed such amount, Parent and the Final
Surviving Entity shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding the Maximum
Annual Premium. Prior to the Effective Time, the Company may
purchase a six-year tail prepaid policy (the
Tail Policy) on the D&O Insurance which
Tail Policy shall (i) be on terms and conditions with
respect to coverage and amounts no less favorable, in the
aggregate, than the D&O Insurance, (ii) be for an
amount not to exceed the Maximum Annual Premium and
(iii) name Parent as a
successor-in-interest
of such Tail Policy. In the event that the Company purchases the
Tail Policy prior to the Effective Time, Parent and the Final
Surviving Entity shall maintain such Tail Policy in full force
and effect and continue to honor their respective obligations
thereunder, in lieu of all other obligations of Parent and the
Final Surviving Entity under the first sentence of this
Section 6.12(b) for so long as such Tail Policy
shall be maintained in full force and effect.
(c) If Parent, the Final Surviving Entity, any Subsidiaries
of the Final Surviving Entity or any of their respective
successors or assigns shall (i) consolidate with or merge
into any other Person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger
or (ii) transfer all or substantially all of its properties
and assets to any Person, then, and in each such case, proper
provisions shall be made so that the successors and assigns of
Parent, the Final Surviving Entity
and/or any
such Subsidiaries, as applicable, shall assume all of the
obligations of Parent, the Final Surviving Entity or its
Subsidiaries, as applicable, under this Section 6.12.
(d) The obligations under this Section 6.12
shall not be terminated, amended or otherwise modified in such a
manner as to adversely affect any Indemnified Party or any other
person who is a beneficiary under the D&O Insurance or the
tail policy referred to in
Section 6.12(c) (and their heirs and
representatives) without the prior written consent of such
Person. Each of the Indemnified Parties or other persons who are
beneficiaries under the D&O Insurance or the
tail policy referred to in
Section 6.12(c) (and their heirs and
representatives) are intended to be third party beneficiaries of
this Section 6.12, with full rights of enforcement
as if a party thereto. The rights of the Indemnified Parties and
other persons who are beneficiaries under the D&O Insurance
or the tail policy referred to in
Section 6.12(c) (and their heirs and
representatives) under this Section 6.12 shall be in
addition to, and not in substitution for, any other rights that
such persons may have under the certificate or articles of
incorporation, bylaws or other equivalent organizational
documents, any and all indemnification agreements of or entered
into by the Company or any of its Subsidiaries, or applicable
Laws (whether at law or in equity).
6.13 Resignation of Officers and Directors of Company
Subsidiaries. At or prior to the Closing,
upon the request of Parent delivered to the Company at least ten
(10) Business Days prior to the Closing, the Company shall
use its reasonable best efforts to obtain the resignations of
all directors and officers of its Subsidiaries, in each case to
be effective as of the Effective Time.
6.14 Section 16 Resolutions.
The Parent Board, or a committee thereof consisting of
non-employee directors (as such term is defined for purposes of
Rule 16b 3(d) under the Exchange Act), shall adopt a
resolution prior to the Effective Time providing that the
receipt by Company Insiders of Parent Common Stock in exchange
for shares of Company Common Stock or Company Stock Awards, and
of options to purchase Parent Common Stock upon assumption and
conversion of the Company Stock Awards, pursuant to the
transactions contemplated by this Agreement is intended to be
exempt from Section 16(b) of the Exchange Act pursuant to
Rule 16b-3
promulgated thereunder. In addition, the Company Board, or a
committee thereof consisting of non-employee directors (as such
term is defined for purposes of
Rule 16b-3(d)
promulgated under the Exchange Act) shall adopt a resolution
prior to the Effective Time providing that the disposition by
Company Insiders of Company Common Stock or Company Stock Awards
in exchange for cash and shares of Parent Common Stock, and the
disposition of their Company Stock Awards which will be deemed
to occur upon the assumption of those options and their
resulting conversion into
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options to purchase Parent Common Stock pursuant to the
transactions contemplated hereby are also intended to be exempt
from Section 16(b) of the Exchange Act pursuant to
Rule 16b-3
promulgated thereunder. For purposes of this Agreement, and the
term Company Insiders shall mean those
directors and officers of the Company who are subject to the
reporting requirements of Section 16(a) of the Exchange Act.
6.15 Nasdaq Listing. Prior to the
Closing, Parent shall file a Notification of Listing of
Additional Shares (or such other form as may be required by
Nasdaq) with Nasdaq with respect to the shares of the Parent
Common Stock to be issued in the Merger and those required to be
reserved for issuance in connection with the Merger and shall
use reasonable best efforts to cause such shares to be approved
for listing before the Closing Date.
6.16 Registration Statements for Assumed Options and
Other Awards. As soon as practicable
following the Effective Time (and within two (2) Business
Days of the Effective Time in any event), Parent shall file a
registration statement under the Securities Act on
Form S-8
(and use its reasonable best efforts to maintain the
effectiveness thereof) relating to shares of Parent Common Stock
issuable with respect to the Assumed Options and Assumed
Restricted Stock Units, in each case to the extent eligible for
registration on
Form S-8,
and shall use its reasonable best efforts to cause such
registration statement to remain in effect for so long as such
Assumed Options and Assumed Restricted Stock Units shall remain
outstanding.
6.17 Obligations of the Merger
Subs. Parent shall cause Merger Sub One,
Merger Sub Two, the Interim Surviving Corporation and the Final
Surviving Entity to perform their respective obligations under
this Agreement and to consummate the transactions contemplated
hereby upon the terms and subject to the conditions set forth in
this Agreement.
6.18 Tax Matters. None of Parent,
Merger Sub One, Merger Sub Two or the Company shall, and they
shall not permit any of their respective Subsidiaries to, take
any action (other than actions specifically contemplated by this
Agreement) prior to or following the Effective Time that would
reasonably be expected to cause the Merger to fail to qualify as
a reorganization within the meaning of
Section 368(a) of the Code. Each of Parent, Merger Sub One,
Merger Sub Two shall use its reasonable best efforts to obtain
the opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, counsel to Parent, and the Company
shall use its reasonable best efforts to obtain the opinion of
Fenwick & West LLP, counsel to the Company, each dated
as of the Effective Time and each to the effect that the Merger
will qualify as a reorganization within the meaning
of Section 368(a) of the Code. The issuance of such
opinions shall be conditioned upon the receipt by such counsel
of customary representation letters from each of Parent, Merger
Sub One, Merger Sub Two and the Company, in each case, in form
and substance reasonably satisfactory to such counsel, which
shall include representations to the effect that the Stock
Consideration (valued as of the last Business Day immediately
prior to the Closing Date) shall constitute at least forty
percent (40%) of the total consideration paid or payable in
exchange for shares of Company Common Stock in the Merger, and
which shall be dated on or before the date of such opinion and
shall not have been withdrawn or modified in any material
respect. None of Parent, Merger Sub One, Merger Sub Two or the
Company shall, and they shall not permit any of their respective
Subsidiaries to, take any action (other than actions
specifically contemplated by this Agreement, including the terms
of Section 2.7(b)(ii) (but excluding the actions
contemplated by the second and third sentences of
Section 2.7(b)(i))) prior to or following the
Effective Time that would reasonably be expected to cause the
Merger to fail to qualify as a reorganization within
the meaning of Section 368(a) of the Code.
6.19 Open Source Materials. Prior
to the Effective Time, the Company shall (i) complete a
scan of Company Source Code to identify Open Source Materials
and Open Source Licenses applicable thereto using a program
reasonably acceptable to Parent, (ii) permit Parent to
review such scan and cooperate with Parent to identify any
issues of concern to Parent and to develop a remediation plan,
and (iii) use commercially reasonably efforts to implement
any reasonable remediation plan requested by Parent.
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ARTICLE VII
CONDITIONS
TO THE MERGER
7.1 Conditions to Each Partys Obligations to
Effect the Merger. The respective
obligations of Parent, Merger Sub One, Merger Sub Two and the
Company to consummate the Merger shall be subject to the
satisfaction or waiver (where permissible under applicable Laws)
prior to the Closing, of each of the following conditions:
(a) Effectiveness of the Registration
Statement. The Registration Statement shall
have been declared effective by the SEC under the Securities
Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no
proceedings for that purpose and no similar proceeding in
respect of the Proxy Statement/Prospectus shall have been
initiated or threatened in writing by the SEC.
(b) Requisite Merger Approval.
The Requisite Merger Approval shall have been obtained.
(c) Antitrust Approval. Any and
all waiting period (and extensions thereof) applicable to the
transactions contemplated by this Agreement under the HSR Act
shall have expired or been terminated (the HSR Act waiting
period referred to herein as the Antitrust
Approval).
(d) Nasdaq Listing. The shares of
Parent Common Stock issuable in the Merger shall have been
approved for listing on Nasdaq, subject to official notice of
issuance.
(e) No Legal Prohibition. No
Governmental Authority of competent jurisdiction shall have
(i) enacted, issued, granted, promulgated, entered,
enforced or deemed applicable to the Merger or the transactions
contemplated by this Agreement any Law that is in effect and has
the effect of making the Merger illegal, or which has the effect
of prohibiting or otherwise preventing the Merger, or
(ii) issued or granted, or threatened to issue or grant,
any Order (whether temporary, preliminary or permanent) that has
(or would be reasonably expected to have) the effect of making
the Merger illegal or which has (or would be reasonably expected
to have) the effect of prohibiting or otherwise preventing the
Merger.
7.2 Additional Conditions to the Obligations of
Parent and the Merger Subs. The obligations
of Parent, Merger Sub One and Merger Sub Two to consummate the
Merger shall be subject to the satisfaction or waiver prior to
the Effective Time of each of the following conditions, any of
which may be waived exclusively by Parent:
(a) Representations and Warranties.
(i) The representations and warranties of the Company set
forth in Section 3.1(a) (Organization and Standing),
Section 3.2 (Corporate Approvals),
Section 3.3(b) (Non-contravention; Required
Consents) and Section 3.23 (State Anti-Takeover
Statutes) (collectively, the Specified Company
Representations), (A) shall have been true and
correct in all respects as of the date of this Agreement, and
(B) shall be true and correct in all respects on and as of
the Closing Date with the same force and effect as if made on
and as of the Closing Date (other than those representations and
warranties which address matters only as of a particular date,
which shall have been true and correct in all respects only as
of such particular date); provided, however, that for
purposes of determining the accuracy of the representations and
warranties of the Company set forth in this Agreement for
purposes of this Section 7.2(a)(i), any update of or
modification to the Company Disclosure Schedule made or
purported to have been made after the date hereof shall be
disregarded.
(ii) The representations and warranties of the Company set
forth in Section 3.4(a) and 3.4(c)
(Capitalization) (the Company Capitalization
Representation) (A) shall have been true and
correct in all respects as of the date of this Agreement, and
(B) shall be true and correct in all respects on and as of
the Closing Date with the same force and effect as if made on
and as of the Closing Date (other than those representations and
warranties which address matters only as of a particular date,
which shall have been true and correct in all respects only as
of such particular date), other than inaccuracies that
(X) would not result in the issuance or payment of an
aggregate value of Merger Consideration in the Merger and
consideration allocated to Company Stock Awards that equals or
exceeds 101% of the aggregate value of Merger Consideration
otherwise issuable and payable in the Merger and consideration
allocated to Company Stock Awards in the absence of such breach
or inaccuracy and (Y) would not result in the issuance of
Parent Common Stock in excess of the Stock Threshold in the
absence of such breach or inaccuracy; provided, however,
that for
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purposes of determining the accuracy of the representations and
warranties of the Company set forth in this Agreement for
purposes of this Section 7.2(a)(ii), any update of
or modification to the Company Disclosure Schedule made or
purported to have been made after the date hereof shall be
disregarded.
(iii) All representations and warranties of the Company set
forth in this Agreement (other than the Specified Company
Representations and the Company Capitalization Representation)
which are qualified by Material Adverse Effect, and
the representation and warranty set forth in
Section 3.9(a)(i), (A) shall have been true and
correct in all respects as of the date of this Agreement and
(B) shall be true and correct in all respects on and as of
the Closing Date with the same force and effect as if made on
and as of the Closing Date (other than those representations and
warranties which address matters only as of a particular date,
which shall be true and correct in all respects as of such
date); provided, however, that for purposes of
determining the accuracy of the representations and warranties
of the Company set forth in this Agreement for purposes of this
Section 7.2(a)(iii), any update of or modification
to the Company Disclosure Schedule made or purported to have
been made after the date hereof shall be disregarded.
(iv) All representations and warranties of the Company set
forth in this Agreement (other than the Specified Company
Representations and the Company Capitalization Representation)
which are not qualified by Material Adverse Effect
(A) shall have been true and correct in all respects as of
the date of this Agreement and (B) shall be true and
correct in all respects on and as of the Closing Date with the
same force and effect as if made on and as of the Closing Date
(other than those representations and warranties which address
matters only as of a particular date, which shall have been true
and correct in all respects only as of such particular date),
except for any failure to be so true and correct which has not
had and would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company;
provided, however, that for purposes of determining the
accuracy of the representations and warranties of the Company
set forth in this Agreement for purposes of this
Section 7.2(a)(iv), any update of or modification to
the Company Disclosure Schedule made or purported to have been
made after the date hereof shall be disregarded.
(b) Performance of Obligations of the
Company. The Company shall have performed in
all material respects any obligations and complied in all
material respects with any covenants or other agreements of the
Company to be performed or complied with by it under this
Agreement prior to the Effective Time.
(c) No Material Adverse Effect.
No Material Adverse Effect on the Company shall have occurred
following the execution and delivery of this Agreement that is
continuing.
(d) Officers Certificate.
Parent shall have received a certificate, validly executed for
and on behalf of the Company and in its name by the Chief
Executive Officer and Chief Financial Officer of the Company,
certifying the satisfaction of the conditions set forth in
Section 7.2(a) and Section 7.2(b).
(e) Governmental Actions. There
shall not be pending, nor has any Governmental Authority
notified Parent or the Company of its intent to commence, any
suit, action or proceeding by any Governmental Authority of
competent jurisdiction against Parent, Merger Sub One, Merger
Sub Two, the Company or any of their respective Subsidiaries
(i) seeking to restrain or prohibit the consummation of the
Merger or the performance of any of the other transactions
contemplated by this Agreement or the Voting Agreements or
(ii) seeking to prohibit or impose any limitations on the
ownership or operation by Parent (or any of its Subsidiaries) of
all or any portion of the businesses or assets of the Company or
any of its Subsidiaries, or to compel Parent, the Company or any
of their respective Subsidiaries to dispose of or hold separate
any portion of the businesses or assets of the Company or any of
its Subsidiaries.
7.3 Additional Conditions to the Obligations of the
Company. The obligations of the Company to
consummate the Merger shall be subject to the satisfaction or
waiver prior to the Effective Time of each of the following
conditions, any of which may be waived exclusively by the
Company:
(a) Representations and Warranties.
(i) The representations and warranties of Parent set forth
in Section 4.1(a) (Organization and Standing),
Section 4.2 (Authorization; Board Approvals) and
Section 4.3(b) (Non-contravention; Required
Consents)
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(the Specified Parent Representations)
(A) shall have been true and correct as of the date of this
Agreement and (B) shall be true and correct in all respects
on and as of the Closing Date with the same force and effect as
if made on and as of the Closing Date (other than those
representations and warranties which address matters only as of
a particular date, which shall have been true and correct in all
respects only as of such particular date); provided,
however, that for purposes of determining the accuracy of
the representations and warranties of Parent set forth in this
Agreement for purposes of this Section 7.3(a)(i),
any update of or modification to the Parent Disclosure Schedule
made or purported to have been made after the date hereof shall
be disregarded.
(ii) The representations and warranties of Parent set forth
in this Agreement (other than the Specified Parent
Representations) which are qualified by Material Adverse
Effect, and the representation and warranty set forth in
Section 4.8, (A) shall have been true and
correct in all respects as of the date of this Agreement, and
(B) shall be true and correct in all respects on and as of
the Closing Date with the same force and effect as if made on
and as of the Closing Date (other than those representations and
warranties which address matters only as of a particular date,
which shall have been true and correct in all respects only as
of such particular date); provided, however, that for
purposes of determining the accuracy of the representations and
warranties of Parent set forth in this Agreement for purposes of
this Section 7.3(a)(iii), any update of or
modification to the Parent Disclosure Schedule made or purported
to have been made after the date hereof shall be disregarded.
(iii) The representations and warranties of Parent set
forth in this Agreement (other than the Specified Parent
Representations) which are not qualified by Material
Adverse Effect (A) shall have been true and correct
in all respects as of the date of this Agreement and
(B) shall be true and correct in all respects on and as of
the Closing Date with the same force and effect as if made on
and as of the Closing Date (other than those representations and
warranties which address matters only as of a particular date,
which shall have been true and correct in all respects only as
of such particular date), except for any failure to be so true
and correct which has not had and would not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent; provided, however, that for
purposes of determining the accuracy of the representations and
warranties of Parent set forth in this Agreement for purposes of
this Section 7.3(a)(ii), any update of or
modification to the Parent Disclosure Schedule made or purported
to have been made after the date hereof shall be disregarded.
(b) Performance of Obligations of Parent and the
Merger Subs. Parent, Merger Sub One and
Merger Sub Two shall have performed in all material respects any
obligations and complied in all material respects with any
covenants or other agreements of Parent and the Merger Subs to
be performed or complied with by them under this Agreement prior
to the Effective Time.
(c) No Material Adverse Effect.
No Material Adverse Effect on Parent shall have occurred
following the execution and delivery of this Agreement that is
continuing.
(d) Officers Certificate.
The Company shall have received a certificate, validly executed
for and on behalf of Parent and in its name by the Chief
Executive Officer and Chief Financial Officer of Parent,
certifying the satisfaction of the conditions set forth in
Section 7.3(a) and Section 7.3(b).
ARTICLE VIII
TERMINATION,
AMENDMENT AND WAIVER
8.1 Termination. This Agreement
may be validly terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Effective Time
only as follows (it being agreed (i) that this Agreement
may not be terminated for any other reason or on any other basis
and (ii) that the party hereto terminating this Agreement
pursuant to this Section 8.1 shall give prompt
written notice of such termination to the other party or parties
hereto):
(a) by mutual written agreement of Parent and the
Company; or
(b) by either Parent or the Company, at any time prior to
the Effective Time (whether or not the Requisite Merger Approval
has been obtained), if the Effective Time has not occurred prior
to 11:59 p.m. (California time) on December 31, 2009
(the Termination Date); provided,
however, that, if the conditions to the Merger set forth in
Sections 7.1(c), Section 7.1(e) or
Section 7.2(e) have not been satisfied as of the
Termination Date, but all other conditions set forth in
Article VII would be satisfied if the Closing Date
were to occur on such
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date, then the Termination Date shall be extended to
March 30, 2010, provided, however that the right to
terminate this Agreement pursuant to this
Section 8.1(b) shall not be available to any party
hereto whose action or failure to take any action has been the
cause of, or resulted in, any of the conditions to the Merger
set forth in Article VII having failed to be
satisfied on or before the Termination Date, as applicable, or
in the Effective Time not occurring prior to the Termination
Date, as applicable, in either case and if such action or
failure to take action constituted a material breach of this
Agreement; or
(c) by either Parent or the Company, at any time prior to
the Effective Time (whether or not the Requisite Merger Approval
has been obtained), if any Governmental Authority of competent
jurisdiction (i) shall have enacted, issued, granted,
promulgated, entered, enforced or deemed applicable to the
Merger any Law that is in effect at the time of such termination
and renders the Merger illegal in the United States or any state
thereof, or (ii) shall have issued or granted any final,
non-appealable Order that is in effect and has the effect of
making the consummation of the Merger illegal in the United
States or any state thereof, or which has the effect of
prohibiting or otherwise preventing the consummation of the
Merger in the United States or any state thereof; or
(d) by either Parent or the Company, at any time prior to
the Effective Time, if the Company shall have failed to obtain
the Requisite Merger Approval at the Company Stockholder Meeting
(or any postponement or adjournment thereof) at which a vote was
taken on the Merger Proposal; or
(e) by the Company, at any time prior to the Effective Time
(whether or not the Requisite Merger Approval has been
obtained), provided that the Company is not then in
material breach of any covenant or agreement of the Company set
forth in this Agreement, in the event (i) of a breach of
any covenant or agreement on the part of Parent or the Merger
Subs set forth in this Agreement or (ii) that any of the
representations and warranties of Parent and the Merger Subs set
forth in this Agreement shall have been inaccurate when made or
shall have become inaccurate, in either case such that the
conditions to the Merger set forth in Section 7.3(a)
or Section 7.3(b) would not be satisfied as of the
time of such breach or as of the time such representation and
warranty became inaccurate; provided, however, that
notwithstanding the foregoing, in the event that such breach by
Parent, Merger Sub One or Merger Sub Two or such inaccuracies in
the representations and warranties of Parent, Merger Sub One or
Merger Sub Two are curable by Parent, Merger Sub One or Merger
Sub Two through the exercise of commercially reasonable efforts
within thirty (30) calendar days, then the Company shall
not be permitted to terminate this Agreement pursuant to this
Section 8.1(e) until the expiration of such thirty
(30) calendar day period after delivery of written notice
from the Company to Parent of such breach or inaccuracy, as
applicable (it being understood that the Company may not
terminate this Agreement pursuant to this
Section 8.1(e) if such breach or inaccuracy by
Parent, Merger Sub One or Merger Sub Two is cured within such
thirty (30) calendar day period); or
(f) by Parent, at any time prior to the Effective Time
(whether or not the Requisite Merger Approval has been
obtained), provided that Parent is not then in material
breach of any covenant or agreement of Parent set forth in this
Agreement, in the event (i) of a breach of any covenant or
agreement on the part of the Company set forth in this Agreement
or (ii) that any representation or warranty of the Company
set forth in this Agreement shall have been inaccurate when made
or shall have become inaccurate, in either case such that the
conditions to the Merger set forth in Section 7.2(a)
or Section 7.2(b) would not be satisfied as of the
time of such breach or as of the time such representation and
warranty became inaccurate; provided, however, that
notwithstanding the foregoing, in the event that such breach by
the Company or such inaccuracies in the representations and
warranties of the Company are curable by the Company through the
exercise of commercially reasonable efforts within thirty
(30) calendar days, then Parent shall not be permitted to
terminate this Agreement pursuant to this
Section 8.1(f) until the expiration of such thirty
(30) calendar day period after delivery of written notice
from Parent to the Company of such breach or inaccuracy, as
applicable (it being understood that Parent may not terminate
this Agreement pursuant to this Section 8.1(f) if
such breach or inaccuracy by the Company is cured within such
thirty (30) calendar day period); or
(g) by Parent, at any time prior to the Effective Time
(whether or not the Requisite Merger Approval has been
obtained), in the event that:
(i) the Company shall have breached or violated the terms
of Section 6.1 (other than an inadvertent breach
that does not result in an Acquisition Proposal),
Section 6.6 or Section 6.7 in any
material respect;
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(ii) the Company Board or any committee thereof shall have
for any reason effected a Company Board Recommendation Change
(whether or not in compliance with the terms of this Agreement);
(iii) the Company shall have failed to include the Company
Board Recommendation in the Proxy Statement/Prospectus;
(iv) a tender offer or exchange offer for Company Common
Stock is commenced by a Person unaffiliated with Parent or the
Merger Subs and (A) within the ten
(10) business-day
period specified in
Rule 14e-2
promulgated under the Exchange Act, the Company shall have
failed to issue a public statement (and filed a
Schedule 14D-9
pursuant to
Rule 14e-2
and
Rule 14d-9
promulgated under the Exchange Act) reaffirming the Company
Board Recommendation and recommending that the Companys
stockholders reject such tender or exchange offer and not tender
any shares of Company Common Stock into such tender or exchange
offer, or (B) at any time after the foregoing 10
business-day
period, the Company shall issue a press release or file a
Schedule 14D-9,
in any such case relating to such tender or exchange offer that
fails to reaffirm the Company Board Recommendation and recommend
that the Companys stockholders reject such tender or
exchange offer and not tender any shares of Company Common Stock
into such tender or exchange offer; or
(v) the Company Board shall fail to reaffirm (publicly, if
requested by Parent) the Company Board Recommendation within ten
(10) Business Days following Parents request in
writing that such recommendation be reaffirmed.
(h) by the Company, at any time prior to the Company
Stockholder Meeting, if the following conditions are satisfied:
(i) the Company shall have received an unsolicited
Acquisition Proposal in writing after the date hereof and the
Company Board shall have determined in good faith (after
consultation wit its financial advisor and outside legal
counsel) that such Acquisition Proposal constitutes a Superior
Proposal;
(ii) none of the Company, any of its Subsidiaries or any of
their respective Representatives shall have breached or violated
in any material respect the terms of Section 6.1 in
connection with such Superior Proposal or in connection with any
other Acquisition Proposal made by any Person (or any Affiliate
or agent thereof) making such Acquisition Proposal;
(iii) the Company Board shall have determined in good faith
(after consultation with its financial advisor and its outside
legal counsel) that, in light of such Superior Proposal, the
failure to terminate this Agreement pursuant to this
Section 8.1(h) is reasonably likely to be a breach
of its fiduciary duties to the Companys stockholders under
Delaware Law;
(iv) the Company Board shall have given Parent at least
five (5) Business Days prior written notice (1) of the
identity of the Person(s) making such Superior Proposal and all
of the material terms and conditions of such Superior Proposal
(and if such Superior Proposal is in written form, a copy of
such Superior Proposal and all related agreements, commitment
letters and other material documents provided or otherwise
furnished by the Person(s) making such Superior Proposal in
connection therewith) (it being agreed that in the event that,
after commencement of such five (5) Business Day period,
there is any material revision to the terms of a Superior
Proposal, including any revision in price, the five
(5) Business Day period shall be extended to ensure that at
least five (5) Business Days remains in such period
subsequent to the time the Company notifies Parent of any such
material revision) and (2) that the Company Board intends
to terminate this Agreement pursuant to this
Section 8.1(h) in response to such Superior Proposal
and the opportunity to meet with the Company Board and the
Companys financial advisors and outside legal counsel at
such times as Parent may reasonably request for the purpose of
enabling Parent and the Company to discuss in good faith this
Agreement and the terms and conditions hereof, and any
modifications of the terms and conditions of this Agreement that
Parent may propose in response thereto;
(v) after the foregoing five (5) Business Day period
and any extensions and, if requested by Parent, meetings with
Parent and its financial advisors and legal counsel during such
period, (1) Parent shall not
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have made a proposal at least as favorable or more favorable to
the Companys stockholders as such Acquisition Proposal,
(2) the Company Board shall have determined in good faith
(after consultation with its financial advisor and its outside
legal counsel) that (A) such Acquisition Proposal continues
to constitute a Superior Proposal, and (B) in light of such
Superior Proposal and after good faith consideration of all
proposals by Parent, the failure to terminate this Agreement
pursuant to this Section 8.1(h) is reasonably likely
to be a breach of its fiduciary duties to the Companys
stockholders under Delaware Law; and
(vi) concurrently with the termination of this Agreement
pursuant to this Section 8.1(h) (and as a condition
to the effectiveness of such termination), the Company shall
(A) enter into a definitive agreement for the Superior
Proposal referenced in this Section 8.1(h) and
(B) pay to Parent a fee equal to the Termination Fee Amount
pursuant to Section 8.3(b)(iv).
8.2 Notice of Termination; Effect of
Termination. Any proper termination of this
Agreement pursuant to Section 8.1 shall be effective
immediately upon the delivery of written notice of the
terminating party to the other party or parties hereto, as
applicable. In the event of the termination of this Agreement
pursuant to Section 8.1, this Agreement shall be of
no further force or effect without liability of any party or
parties hereto, as applicable (or any stockholder, director,
officer, employee, agent, consultant or representative of such
party or parties) to the other party or parties hereto, as
applicable, except (a) for the terms of
Section 6.9, this Section 8.2,
Section 8.3 and Article IX, each of
which shall survive the termination of this Agreement, and
(b) that nothing herein shall relieve any party or parties
hereto, as applicable, from liability for any intentional breach
of, or fraud in connection with, this Agreement. In addition to
the foregoing, no termination of this Agreement shall affect the
obligations of the parties hereto set forth in the
Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their
respective terms.
8.3 Fees and Expenses.
(a) General. All fees and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party or parties, as
applicable, incurring such expenses whether or not the Merger is
consummated.
(b) Company Payments.
(i) The Company shall pay to Parent a fee equal to Fifty
Seven Million Dollars ($57,000,000) (the Termination
Fee Amount), by wire transfer of immediately available
funds to an account or accounts designated in writing by Parent,
in the event that (A) following the execution and delivery
of this Agreement and prior to the Company Stockholder Meeting,
an Acquisition Proposal shall have been publicly announced or
shall have become generally publicly known (and not withdrawn,
unless such Acquisition Proposal is withdrawn within ten
(10) Business Days of the date of the Company Stockholder
Meeting, in which case such withdrawal shall be disregarded for
purposes of this provision), and (B) this Agreement is
validly terminated pursuant to Section 8.1(d) (or,
after a vote on the Merger Proposal has been taken at the
Company Stockholder Meeting and the Requisite Merger Approval
has not been obtained, the Company terminates this Agreement for
any other reason), and (C) within twelve (12) months
following the valid termination of this Agreement pursuant to
Section 8.1(d) (or, after a vote on the Merger
Proposal has been taken at the Company Stockholder Meeting and
the Requisite Merger Approval has not been obtained, the
termination of this Agreement for any other reason), either
(1) an Acquisition Transaction is consummated (whether or
not related to the Acquisition Proposal referenced in the
preceding clause (A)), or (2) the Company enters into a
letter of intent, memorandum of understanding or other Contract
providing for an Acquisition Transaction (whether or not related
to the Acquisition Proposal referenced in the preceding clause
(A)) and such Acquisition Transaction is consummated (whether or
not within the preceding twelve (12) month period). The fee
amount payable pursuant to this Section 8.3(b)(i)
shall be paid within one (1) Business Day of the
consummation of the applicable Acquisition Transaction
contemplated by the foregoing clause (C).
(ii) The Company shall pay to Parent a fee equal to the
Termination Fee Amount by wire transfer of immediately available
funds to an account or accounts designated in writing by Parent,
in the event that (A) following the execution and delivery
of this Agreement and prior to the valid termination of this
Agreement pursuant to Section 8.1(b), an Acquisition
Proposal shall have been publicly announced or shall have become
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publicly known, or shall have been communicated or otherwise
made known to the Company, and (B) this Agreement is
validly terminated pursuant to Section 8.1(b), and
(C) within twelve (12) months following the valid
termination of this Agreement pursuant to
Section 8.1(b), either (1) an Acquisition
Transaction (whether or not related to the Acquisition Proposal
referenced in the preceding clause (A)) is consummated, or
(2) the Company enters into a letter of intent, memorandum
of understanding or other Contract providing for any Acquisition
Transaction (whether or not related to the Acquisition Proposal
referenced in the preceding clause (A)) and such Acquisition
Transaction is consummated (whether or not within the preceding
twelve (12) month period). The fee amount payable pursuant
to this Section 8.3(b)(ii) shall be paid within one
(1) Business Day of the consummation of the applicable
Acquisition Transaction contemplated by the foregoing clause (C).
(iii) In the event that this Agreement is validly
terminated (A) pursuant to Section 8.1(d), if
such termination is preceded by the occurrence of any of the
events referenced in Section 8.1(g)(ii)
(v), or (B) pursuant to Section 8.1(g),
then the Company shall pay to Parent a fee equal to the
Termination Fee Amount, by wire transfer of immediately
available funds to an account or accounts designated in writing
by Parent, within one (1) Business Day after demand by
Parent.
(iv) In the event that this Agreement is validly terminated
pursuant to Section 8.1(h), as a condition to such
termination, the Company shall pay to Parent a fee equal to the
Termination Fee Amount, by wire transfer of immediately
available funds to an account or accounts designated in writing
by Parent.
(v) In the event this Agreement is validly terminated
pursuant to Section 8.1(d), the Company shall pay to
Parent, by wire transfer of immediately available funds to an
account or accounts designated in writing by Parent, as promptly
as possible following receipt of an invoice from Parent (but in
any event within two (2) Business Days) all of
Parents
out-of-pocket
fees and expenses (including legal and other third party
advisors fees and expenses) incurred by Parent and its
Affiliates on or prior to the valid termination of this
Agreement in connection with the transactions contemplated by
this Agreement, but in no event more than Three Million Dollars
($3,000,000) (the Parent Expenses),
provided, however, that the amount of any payment of
Parent Expenses pursuant to this Section 8.1(b)(vi)
shall be credited against any Termination Fee that becomes
payable pursuant to Section 8.1(b).
(c) Solely for purposes of this Section 8.3,
the terms Acquisition Proposal and Acquisition
Transaction shall have the same meaning as an
Acquisition Proposal and Acquisition
Transaction, respectively, except that all references
therein to fifteen percent (15%) shall be deemed to be
references to fifty percent (50%) and the reference therein to
eighty five percent (85%) shall be deemed to be a reference to
fifty percent (50%).
(d) Enforcement. Each of Parent
and the Company acknowledges and hereby agrees that the
provisions of Section 8.3 are an integral part of
the transactions contemplated by this Agreement, and that,
without such provisions, neither Parent nor the Company would
have entered into this Agreement. Accordingly, if the Company
shall fail to pay in a timely manner any amounts due and payable
pursuant to Section 8.3, and, in order to obtain
such payment, Parent shall make a claim against the Company and
such claim results in a judgment against the Company, the
Company shall pay to Parent an amount in cash equal to
Parents costs and expenses (including its attorneys fees
and expenses) incurred in connection with such claim, together
with interest at the prime rate of Citibank N.A. in effect on
the date such payment was required to be made. The parties
acknowledge and agree that in no event shall the Company be
obligated to pay the Termination Fee Amount on more than one
occasion, whether or not the Termination Fee Amount may be
payable under more than one provision of this Agreement at the
same or at different times and the occurrence of different
events.
(e) Liquidated Damages. In the
event that Parent shall receive the Termination Fee Amount, the
receipt of such fee shall be deemed to be liquidated damages for
any and all losses or damages suffered or incurred by Parent,
Merger Subs, any of their respective Affiliates or any other
Person in connection with this Agreement (and the termination
hereof), the transactions contemplated hereby (and the
abandonment thereof) or any matter forming the basis for such
termination, and none of Parent, Merger Subs, any of their
respective Affiliates or any other Person shall be entitled to
bring or maintain any other claim, action or proceeding against
the Company or any of its Affiliates arising out of this
Agreement, any of the transactions contemplated hereby or any
matters forming the basis for such termination.
8.4 Amendment. Subject to
applicable Laws and subject to the other provisions of this
Agreement, this Agreement may be amended by the parties hereto
at any time by execution of an instrument in writing signed on
A-60
behalf of each of Parent, Merger Sub One, Merger Sub Two and the
Company; provided, however, that in the event that this
Agreement has been adopted by the Companys stockholders in
accordance with the DGCL, no amendment shall be made to this
Agreement that requires the approval of such Companys
stockholders under the DGCL without such approval.
8.5 Extension; Waiver. At any time
and from time to time prior to the Effective Time, any party or
parties hereto may, to the extent legally allowed and except as
otherwise set forth herein, (a) extend the time for the
performance of any of the obligations or other acts of the other
party or parties hereto, as applicable, (b) waive any
inaccuracies in the representations and warranties made to such
party or parties hereto contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any
of the agreements or conditions for the benefit of such party or
parties hereto contained herein. Any agreement on the part of a
party or parties hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on
behalf of such party or parties, as applicable. Any delay in
exercising any right under this Agreement shall not constitute a
waiver of such right.
ARTICLE IX
GENERAL
PROVISIONS
9.1 Survival of Representations, Warranties and
Covenants. The representations, warranties
and covenants of the Company, Parent and the Merger Subs set
forth in this Agreement shall terminate at the Effective Time,
and only the covenants that by their terms survive the Effective
Time shall so survive the Effective Time in accordance with
their respective terms.
9.2 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
to have been duly delivered and received hereunder (i) four
(4) Business Days after being sent by registered or
certified mail, return receipt requested, postage prepaid,
(ii) one (1) Business Day after being sent for next
Business Day delivery, fees prepaid, via a reputable nationwide
overnight courier service, or (iii) immediately upon
delivery by hand or by facsimile (with a written or electronic
confirmation of delivery), in each case to the intended
recipient, at the following addresses or telecopy numbers (or at
such other address or telecopy numbers for a party as shall be
specified by like notice):
(a) if to Parent, Merger Sub One or Merger Sub Two, to:
NetApp, Inc.
495 East Java Drive
Sunnyvale, CA 94089
Attention: General Counsel
Telecopy No.:
(408) 822-4501
with copies (which shall not constitute notice) to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California
94304-1050
Attention: Steven E. Bochner and Nate Gallon
Telecopy No.:
(650) 493-6811
and
Wilson Sonsini Goodrich & Rosati
Professional Corporation
One Market Street
Spear Tower, Suite 3300
San Francisco, California
94105-1126
Attention: Michael S. Ringler
Telecopy No.:
(650) 493-6811
A-61
(b) if to the Company (prior to the Effective Time), to:
Data Domain, Inc.
2421 Mission College Blvd.
Santa Clara, CA 95054
Attention: Michael P. Scarpelli
Telecopy No.:
(408) 980-4995
with copies (which shall not constitute notice) to:
Fenwick & West LLP
801 California Street
Mountain View, California 94041
Attention: Gordon K. Davidson, Dennis R. Debroeck and R. Gregory
Roussel
Telecopy No.:
(650) 938-5200
9.3 Assignment. No party may
assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the
other parties. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted
assigns.
9.4 Entire Agreement. This
Agreement and the agreements, documents, instruments and
certificates among the parties hereto as contemplated by or
referred to herein, including the Company Disclosure Schedule,
the Parent Disclosure Schedule and the Exhibits and Schedules
hereto, constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof; provided,
however, the Confidentiality Agreement shall not be
superseded, shall survive any termination of this Agreement and
shall continue in full force and effect. Each party hereto
agrees that, except for the representations and warranties set
forth in this Agreement, neither Parent, Merger Sub One and
Merger Sub Two, on the one hand, nor the Company, on the other
hand, makes any representations or warranties, express or
implied, or as to the accuracy or completeness of any other
information, made (or made available) by itself or any of its
Representatives, with respect to, or in connection with, the
negotiation, execution or delivery of this Agreement or the
transactions contemplated hereby, notwithstanding the delivery
of disclosure to the other or the others Representatives
of any documentation of any other information with respect to
any one or more of the foregoing; provided, however, that
notwithstanding the foregoing or anything to the contrary set
forth in this Agreement, nothing in this Agreement shall relieve
any party hereto for liability arising out of fraud or
intentional misrepresentation.
9.5 Third Party
Beneficiaries. Except (a) as set forth
in or contemplated by the provisions of Section 6.12
and (b) from and after the Effective Time, the rights of
holders of shares of the Company Common Stock to receive the
Merger Consideration set forth in Article II, this
Agreement is not intended to, and shall not, confer upon any
other Person any rights or remedies hereunder.
9.6 Severability. In the event
that any provision of this Agreement, or the application
thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder
of this Agreement will continue in full force and effect and the
application of such provision to other persons or circumstances
will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such
illegal, void or unenforceable provision of this Agreement with
a legal, valid and enforceable provision that will achieve, to
the extent possible, the economic, business and other purposes
of such illegal, void or unenforceable provision.
9.7 Other Remedies. Except as
otherwise provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or
equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy.
9.8 Governing Law. This Agreement
shall be governed by and construed in accordance with the laws
of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of law
thereof.
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9.9 Specific Performance. The
parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that, in addition
to any other remedy to which they are entitled at law or in
equity, the parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction.
9.10 Consent to Jurisdiction. Each
of the parties hereto irrevocably consents to the exclusive
jurisdiction and venue in any state court within the State of
Delaware (or, if a state court located within the State of
Delaware declines to accept jurisdiction over a particular
matter, any court of the United States located in the State of
Delaware) in connection with any matter based upon or arising
out of this Agreement or the transactions contemplated hereby,
agrees that process may be served upon them in any manner
authorized by the laws of the State of Delaware for such persons
and waives and covenants not to assert or plead any objection
which such person might otherwise have to such jurisdiction,
venue and process. Each party hereto hereby agrees not to
commence any legal proceedings relating to or arising out of
this Agreement or the transactions contemplated hereby in any
jurisdiction or courts other than as provided herein.
9.11 Waiver Of Jury Trial. EACH OF
PARENT, COMPANY, MERGER SUB ONE AND MERGER SUB TWO HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
ACTIONS OF PARENT, COMPANY, MERGER SUB ONE OR MERGER SUB TWO IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
HEREOF.
9.12 Counterparts. This Agreement
may be executed in one or more counterparts, all of which shall
be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being
understood that all parties need not sign the same counterpart.
[Remainder
of Page Intentionally Left Blank]
A-63
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be executed by their respective duly authorized officers to
be effective as of the date first above written.
NETAPP, INC.
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|
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By:
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/s/ Thomas
Georgens
Name: Thomas
Georgens
Title: President and Chief Operating Officer
|
DATA DOMAIN, INC.
|
|
|
|
By:
|
/s/ Frank
Slootman
Name: Frank
Slootman
Title: President & CEO
|
KENTUCKY MERGER SUB ONE CORPORATION
|
|
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By:
|
/s/ Andrew
Kryder
Name: Andrew
Kryder
Title: President
|
DERBY MERGER SUB TWO LLC
|
|
|
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By:
|
/s/ Andrew
Kryder
Name: Andrew
Kryder
Title: President
|
A-64
Exhibit A
Voting
Agreement
A-65
APPENDIX B
Exhibit A
FORM OF
VOTING AGREEMENT
THIS VOTING AGREEMENT (this Agreement) is
made and entered into as of May 20, 2009 by and between
NetApp, Inc., a Delaware corporation
(Parent), and the undersigned
Stockholder (the Stockholder) of Data Domain,
Inc., a Delaware corporation (the Company).
WITNESSETH:
WHEREAS, Parent, Kentucky Merger Sub One Corporation, a Delaware
corporation and wholly-owned subsidiary of Parent
(Merger Sub One), Derby Merger Sub Two LLC, a
Delaware limited liability company and wholly-owned subsidiary
of Parent (Merger Sub Two), and the Company
have entered into an Agreement and Plan of Merger of even date
herewith (the Merger Agreement), which
provides for, among other things, the merger of Merger Sub One
with and into the Company (the First Step
Merger or the Merger), pursuant to
which all outstanding shares of capital stock of the Company
will be converted into the right to receive the consideration
set forth in the Merger Agreement. If the opinions described in
Section 6.18 of the Merger Agreement are delivered,
as soon as practicable following the First Step Merger and as a
single integrated transaction, Parent will cause the Company to
merge with and into Merger Sub Two with Merger Sub Two
continuing as the surviving entity (the Second Step
Merger ; provided that, if the Second Step Merger does
occurs, the Second Step Merger shall be included in the meaning
of the term, the Merger).
WHEREAS, the Stockholder is the beneficial owner (as defined in
Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the
Exchange Act)) of that number of shares of
the outstanding capital stock of the Company, and the holder of
options to purchase such number of shares of capital stock of
the Company, in each case, as set forth on the signature page of
this Agreement.
WHEREAS, as a condition and inducement to the willingness of
Parent, Merger Sub One and Merger Sub Two to enter into the
Merger Agreement, the Stockholder (in the Stockholders
capacity as such) has agreed to enter into this Agreement.
NOW, THEREFORE, intending to be legally bound, the parties
hereto agree as follows:
1. Certain Definitions. All
capitalized terms that are used but not defined herein shall
have the respective meanings ascribed to them in the Merger
Agreement. For all purposes of and under this Agreement, the
following terms shall have the following respective meanings:
(a) Expiration Date shall mean
the earlier to occur of (i) such date and time as the
Merger Agreement shall have been validly terminated pursuant to
Article VIII thereof, or (ii) such date and
time as the Requisite Merger Approval has been obtained or
(iii) the written agreement of the parties hereto to
terminate this Agreement.
(b) Person shall mean any
individual, corporation, limited liability company, general or
limited partnership, trust, unincorporated association or other
entity of any kind or nature, or any governmental authority.
(c) Shares shall mean
(i) all equity securities of the Company (including all
shares of Company Common Stock, Company Preferred Stock and all
Company Stock Awards and any other rights to acquire shares of
Company capital stock) owned by the Stockholder as of the date
hereof, and (ii) all additional equity securities of the
Company (including all additional shares of Company Common
Stock, Company Preferred Stock and all additional Company Stock
Awards, warrants and other rights to acquire shares of Company
capital stock) of which the Stockholder acquires beneficial
ownership during the period from the date of this Agreement
through the Expiration Date (including by way of stock dividend
or distribution,
split-up,
recapitalization, combination, exchange of shares and the like).
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(d) Transfer A Person shall be
deemed to have effected a Transfer of a Share
if such person directly or indirectly (i) sells, pledges,
encumbers, assigns, grants an option with respect to, transfers,
tenders or disposes of such Share or any interest in such Share,
or (ii) enters into an agreement to effect any of the
foregoing.
2. Transfer of Shares.
(a) Transfer Restrictions. The
Stockholder shall not Transfer (or cause or permit the Transfer
of ) any of the Shares, or enter into any agreement relating
thereto, except (i) by selling already-owned Shares either
to pay the exercise price upon the exercise of a Company Option
or to satisfy the Stockholders tax withholding obligation
upon the exercise of a Company Option, in each case as permitted
by any Company Option Plan, or (ii) by selling
already-owned Shares pursuant to 10b5-1 trading plans existing
as of the date hereof or (iii) transferring Shares to
Affiliates, immediate family members, a trust established for
the benefit of Stockholder
and/or for
the benefit of one or more members of the Stockholders
immediate family or upon the death of the Stockholder or
charitable organizations or in connection with, or solely for
the purpose of, personal tax-planning, provided that, as a
condition to such Transfer, the recipient agrees to be bound by
this Agreement and delivers a Proxy (as defined below) in the
form attached hereto as Exhibit A. Any Transfer, or
purported Transfer, of Shares in breach or violation of this
Agreement shall be void and of no force or effect.
(b) Transfer of Voting Rights. The
Stockholder shall not deposit (or cause or permit the deposit
of) any Shares in a voting trust or grant any proxy or enter
into any voting agreement or similar agreement in contravention
of the obligations of the Stockholder under this Agreement with
respect to any of the Shares.
3. Agreement to Vote Shares.
(a) At every meeting of the stockholders of the Company,
and at every adjournment or postponement thereof, and on every
action or approval by written consent of the stockholders of
Company, the Stockholder (in the Stockholders capacity as
such), to the extent not voted by the Person(s) appointed under
the Proxy, shall, or shall cause the holder of record on any
applicable record date to, vote the Shares:
(i) in favor of the adoption of the Merger Agreement, and
in favor of each of the other actions contemplated by the Merger
Agreement and any action required in furtherance thereof;
(ii) against approval of any proposal made in opposition
to, in competition with, or would result in a breach of, the
Merger Agreement or the Merger or any other transactions
contemplated by the Merger Agreement; and
(iii) against any of the following actions (other than
those actions that relate to the Merger and any other
transactions contemplated by the Merger Agreement): (A) any
merger, consolidation, business combination, sale of assets,
reorganization or recapitalization of or involving the Company
or any of its Subsidiaries, (B) any sale, lease or transfer
of any significant part of the assets of the Company or any of
its Subsidiaries, (C) any reorganization, recapitalization,
dissolution, liquidation or winding up of the Company or any of
its Subsidiaries, (D) any material change in the
capitalization of the Company or any of its Subsidiaries, or the
corporate structure of the Company or any of its Subsidiaries,
or (E) any other action that is intended, or could
reasonably be expected to, impede, interfere with, delay,
postpone, discourage or adversely affect the Merger or any other
transactions contemplated by the Merger Agreement.
(b) In the event that a meeting of the Stockholders of the
Company is held, the Stockholder shall, or shall cause the
holder of record on any applicable record date to, appear at
such meeting or otherwise cause the Shares to be counted as
present thereat for purposes of establishing a quorum.
(c) The Stockholder shall not enter into any agreement or
understanding with any Person to vote or give instructions in
any manner inconsistent with the terms of this
Section 3.
4. Agreement Not to Exercise Appraisal
Rights. The Stockholder shall not exercise,
and hereby irrevocably and unconditionally waives, any statutory
rights (including, without limitation, under Section 262 of
the DGCL) to demand appraisal of any Shares that may arise in
connection with the Merger.
B-2
5. Directors and
Officers. Notwithstanding any provision of
this Agreement to the contrary, nothing in this Agreement shall
limit or restrict a Stockholder who is a director or officer of
the Company from acting in such capacity or voting, in his
capacity as a director or officer of the Company, in the
Stockholders sole discretion on any matter (it being
understood that this Agreement shall apply to the Stockholder
solely in the Stockholders capacity as a Stockholder of
the Company). In this regard, the Stockholder shall not be
deemed to make any agreement or understanding in this Agreement
in Stockholders capacity as a director or officer of the
Company.
6. Irrevocable Proxy. Concurrently
with the execution of this Agreement, the Stockholder shall
deliver to Parent a proxy in the form attached hereto as
Exhibit A (the Proxy), which
shall be irrevocable to the fullest extent permissible by law,
with respect to the Shares.
7. Representations and Warranties of the
Stockholder.
(a) Power; Binding Agreement. The
Stockholder has full power and authority to execute and deliver
this Agreement and the Proxy, to perform the Stockholders
obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by the Stockholder, and, assuming this Agreement
constitutes a valid and binding obligation of Parent, Merger Sub
One and Merger Sub Two, constitutes a valid and binding
obligation of the Stockholder, enforceable against the
Stockholder in accordance with its terms.
(b) No Conflicts. None of the
execution and delivery by the Stockholder of this Agreement, the
performance by the Stockholder of its obligations hereunder or
the consummation by the Stockholder of the transactions
contemplated hereby will (i) result in a violation or
breach of any agreement to which the Stockholder is a party or
by which the Stockholder may be bound, including any voting
agreement or voting trust, or (ii) violate any order, writ,
injunction, decree, judgment, order, statute, rule, or
regulation applicable to the Stockholder.
(c) Ownership of Shares. The
Stockholder (i) is the sole beneficial owner of the shares
of Company Common Stock set forth on the signature page of this
Agreement, all of which are free and clear of any liens,
security interests, pledges or options, proxies or any other
rights or encumbrances whatsoever
(Encumbrances) (other than pursuant to the
terms of restricted stock agreements as in effect on the date
hereof and except any Encumbrances arising under securities laws
or arising hereunder), (ii) is the sole holder of Company
Options that are exercisable for the number of shares of Company
Common Stock set forth on the signature page of this Agreement,
all of which Company Options and shares of Company Common Stock
issuable upon the exercise of such Company Options are, or in
the case of Company Common Stock received upon exercise of an
option after the date hereof will be, free and clear of any
Encumbrances (except any Encumbrances arising under securities
laws or arising hereunder), and (iii) except as set forth
on the signature page to this Agreement, does not own,
beneficially or otherwise, any securities of the Company other
than the shares of Company Common Stock or options to purchase
shares of Company Common Stock, and shares of Company Common
Stock issuable upon the exercise of such Company Options, set
forth on the signature page of this Agreement.
(d) Voting Power. The Stockholder
has or will have sole voting power, sole power of disposition,
sole power to issue instructions with respect to the matters set
forth herein, and sole power to agree to all of the matters set
forth in this Agreement, in each case with respect to all of the
Shares, with no limitations, qualifications or restrictions on
such rights, subject to applicable federal securities laws and
the terms of this Agreement.
(e) Reliance by Parent. The
Stockholder understands and acknowledges that Parent is entering
into the Merger Agreement in reliance upon the
Stockholders execution and delivery of this Agreement.
(f) No Legal Actions. Stockholder
agrees that Stockholder will not in Stockholders capacity
as a Stockholder of the Company bring, commence, institute,
maintain, prosecute or voluntarily aid any action, claim, suit
or cause of action, in law or in equity, in any court or before
any governmental entity, which (i) challenges the validity
of or seeks to enjoin the operation of any provision of this
Agreement or (ii) alleges that the execution and delivery
of this Agreement by Stockholder, either alone or together with
the other Company voting agreements and proxies to be delivered
in connection with the execution of the Merger Agreement, or the
approval of the Merger Agreement by the Company Board, breaches
any fiduciary duty of the Company Board or any member thereof.
8. Certain Restrictions. The
Stockholder shall not, directly or indirectly, take any action
that would make any representation or warranty of the
Stockholder contained herein untrue or incorrect.
B-3
9. Disclosure. The Stockholder
shall permit Parent to publish and disclose in all documents and
schedules filed with the SEC, and any press release or other
disclosure document that Parent determines to be necessary or
desirable in connection with the Merger and any transactions
related to the Merger, the Stockholders identity and
ownership of Shares and the nature of the Stockholders
commitments, arrangements and understandings under this
Agreement.
10. No Ownership Interest. Nothing
contained in this Agreement shall be deemed to vest in Parent
any direct or indirect ownership or incidence of ownership of or
with respect to any Shares. Except as provided in this
Agreement, all rights, ownership and economic benefits relating
to the Shares shall remain vested in and belong to Stockholder.
11. Further Assurances. Subject to
the terms and conditions of this Agreement, the Stockholder
shall use commercially reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all
things necessary to fulfill such Stockholders obligations
under this Agreement.
12. Stop Transfer Instructions. At
all times commencing with the execution and delivery of this
Agreement and continuing until the Expiration Date, the Company
shall not register the Transfer (by book-entry or otherwise) of
any certificate or uncertificated interest representing any of
the Shares unless such Transfer is made pursuant to and in
compliance with the terms and conditions of this Agreement.
13. Termination. This Agreement
and the Proxy shall terminate and shall have no further force or
effect as of the Expiration Date. Notwithstanding the foregoing,
nothing set forth in this Section 13 or elsewhere in
this Agreement shall relieve either party hereto from liability,
or otherwise limit the liability of either party hereto, for any
intentional breach of this Agreement.
14. Miscellaneous.
(a) Validity. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of the other provisions of
this Agreement, which will remain in full force and effect. In
the event any Governmental Authority of competent jurisdiction
holds any provision of this Agreement to be null, void or
unenforceable, the parties hereto shall negotiate in good faith
and execute and deliver an amendment to this Agreement in order,
as nearly as possible, to effectuate, to the extent permitted by
law, the intent of the parties hereto with respect to such
provision.
(b) Binding Effect and
Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be
assigned by either of the parties without prior written consent
of the other.
(c) Amendments; Waiver. This
Agreement may be amended by the parties hereto, and the terms
and conditions hereof may be waived, only by an instrument in
writing signed on behalf of each of the parties hereto, or, in
the case of a waiver, by an instrument signed on behalf of the
party waiving compliance.
(d) Specific Performance; Injunctive
Relief. The parties hereto agree that
irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is
accordingly agreed that, in addition to any other remedy to
which they are entitled at law or in equity, the parties hereto
shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms
and provisions hereof in any court of the United States or any
state having jurisdiction.
(e) Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
to have been duly delivered and received hereunder (i) four
(4) Business Days after being sent by registered or
certified mail, return receipt requested, postage prepaid,
(ii) one (1) Business Day after being sent for next
Business Day delivery, fees prepaid, via a reputable nationwide
overnight courier service, or (iii) immediately upon
delivery by hand or by facsimile (with a written electronic
confirmation of delivery), in each case to the intended
recipient, at
B-4
the following addresses or telecopy numbers (or at such other
address or telecopy numbers for a party as shall be specified by
like notice):
If to Parent:
NetApp, Inc.
495 East Java Drive
Sunnyvale, CA 94089
Attention: General Counsel
Telecopy No.:
(408) 822-4501
with copies to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California
94304-1050
Attention: Steven E. Bochner and Nate Gallon
Telecopy No.:
(650) 493-6811
Wilson Sonsini Goodrich & Rosati
Professional Corporation
One Market
Spear Street Tower, Suite 3300
San Francisco, California
94105-1126
Attention: Michael S. Ringler
Telecopy No.:
(650) 493-6811
with a copy to:
If to the Stockholder:
Fenwick & West LLP
801 California Street
Mountain View, California 94041
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Attention:
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Gordon K. Davidson
Dennis R. Debroeck
R. Gregory Roussel
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Telecopy No.:
(650) 938-5200
(f) No Waiver. The failure of
either party hereto to exercise any right, power or remedy
provided under this Agreement or otherwise available in respect
of this Agreement at law or in equity, or to insist upon
compliance by any other party with its obligation under this
Agreement, and any custom or practice of the parties at variance
with the terms of this Agreement, shall not constitute a waiver
by such party of such partys right to exercise any such or
other right, power or remedy or to demand such compliance.
(g) No Third Party
Beneficiaries. This Agreement is not intended
to confer upon any person other than the parties hereto any
rights or remedies hereunder.
(h) Governing Law. This Agreement
shall be governed by and construed in accordance with the laws
of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of law
thereof.
(i) Submission to
Jurisdiction. Each of the parties hereto
irrevocably consents to the exclusive jurisdiction and venue in
any state court within the State of Delaware (or, if a state
court located within the State of Delaware declines to accept
jurisdiction over a particular matter, any court of the United
States located in the State of
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Delaware) in connection with any matter based upon or arising
out of this Agreement or the transactions contemplated hereby,
agrees that process may be served upon them in any manner
authorized by the laws of the State of Delaware for such persons
and waives and covenants not to assert or plead any objection
which such person might otherwise have to such jurisdiction,
venue and process. Each party hereto hereby agrees not to
commence any legal proceedings relating to or arising out of
this Agreement or the transactions contemplated hereby in any
jurisdiction or courts other than as provided herein.
(j) Rules of Construction. The
parties hereto hereby waive the application of any law,
regulation, holding or rule of construction providing that
ambiguities in an agreement or other document will be construed
against the party drafting such agreement or document.
(k) Entire Agreement. This
Agreement and the Proxy contain the entire understanding of the
parties hereto in respect of the subject matter hereof, and
supersede all prior negotiations, agreements and understandings,
both written and oral, between the parties hereto with respect
to the subject matter hereof.
(l) Interpretation.
(i) Whenever the words include,
includes or including are used in this
Agreement they shall be deemed to be followed by the words
without limitation. As used in this Agreement, the
term affiliate shall have the meaning set forth in
Rule 12b-2
promulgated under the Exchange Act.
(ii) The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part
of the agreement of the parties hereto and shall not in any way
affect the meaning or interpretation of this Agreement.
(m) Expenses. All costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring the expenses.
(n) Counterparts. This Agreement
may be executed in several counterparts, each of which shall be
an original, but all of which together shall constitute one and
the same agreement.
(o) No Obligation to Exercise Options or
Warrants. Notwithstanding any provision of
this Agreement to the contrary, nothing in this Agreement shall
obligate the Stockholder to exercise any Company Option, warrant
or other right to acquire shares of Company Common Stock.
[Remainder
of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the undersigned have executed and caused to
be effective this Agreement as of the date first above written.
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NETAPP, INC.
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STOCKHOLDER
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By:
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By:
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Name:
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Name:
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Title:
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Name:
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Shares beneficially owned as of the date hereof:
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shares
of Company Common Stock
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shares
of Company Restricted Stock
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shares
of Company Common Stock issuable upon exercise of outstanding
options
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shares
of Company Common Stock issuable upon settlement of Company
Restricted Stock Units
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****
VOTING AGREEMENT ****
B-7
EXHIBIT A
IRREVOCABLE
PROXY
The undersigned Stockholder (the Stockholder)
of Data Domain, Inc., a Delaware corporation (the
Company), hereby irrevocably (to the fullest
extent permitted by law) appoints NetApp, Inc., a Delaware
corporation (Parent), acting through any of
its General Counsel or Chief Financial Officer, as the sole and
exclusive attorneys and proxies of the undersigned, with full
power of substitution and resubstitution, to vote and exercise
all voting and related rights (to the full extent that the
undersigned is entitled to do so) with respect to all of the
shares of capital stock of the Company that now are or hereafter
may be beneficially owned by the undersigned, and any and all
other shares or equity securities of the Company issued or
issuable in respect thereof commencing with the execution and
delivery of this Proxy (collectively, the
Shares) in accordance with the terms of this
Irrevocable Proxy until the Expiration Date (as defined below);
provided, however, that such proxy and voting and related rights
are expressly limited to the matters discussed in
clauses (i) through (iii) in the fourth paragraph of
this Irrevocable Proxy. Upon the undersigneds execution of
this Irrevocable Proxy, any and all prior proxies given by the
undersigned with respect to any Shares are hereby revoked and
the undersigned agrees not to grant any subsequent proxies with
respect to the Shares until after the Expiration Date.
This Irrevocable Proxy is irrevocable to the fullest extent
permitted by law, is coupled with an interest and is granted
pursuant to that certain Voting Agreement of even date herewith
by and between Parent and the undersigned Stockholder (the
Voting Agreement), and is granted as a
condition and inducement to the willingness of Parent, Kentucky
Merger Sub One Corporation, a Delaware corporation and
wholly-owned subsidiary of Parent (Merger Sub
One), Derby Merger Sub Two LLC, a Delaware limited
liability company and wholly-owned subsidiary of Parent
(Merger Sub Two), to enter into that certain
Agreement and Plan of Merger of even date herewith (the
Merger Agreement), among Parent, Merger Sub
One, Merger Sub Two and the Company. The Merger Agreement
provides for, among other things, the merger of Merger Sub One
with and into the Company (the First Step
Merger or the Merger) pursuant to
which all outstanding shares of capital stock of the Company
will be converted into the right to receive the consideration
set forth in the Merger Agreement. If the opinions described in
Section 6.18 of the Merger Agreement are delivered,
as soon as practicable following the First Step Merger and as a
single integrated transaction, Parent will cause the Company to
merge with and into Merger Sub Two with Merger Sub Two
continuing as the surviving entity (the Second Step
Merger ; provided that, if the Second Step Merger does
occurs, the Second Step Merger shall be included in the meaning
of the term, the Merger).
As used herein, the term Expiration Date
shall mean the earlier to occur of (i) such date and time
as the Merger Agreement shall have been validly terminated
pursuant to Article VIII thereof, or (ii) such
date and time as the Merger has received the Requisite Merger
Approval or (iii) the written agreement of the parties
hereto to terminate this Agreement.
The attorneys and proxies named above, and each of them, are
hereby authorized and empowered by the undersigned, at any time
prior to the Expiration Date, to act as the undersigneds
attorney and proxy to vote the Shares, and to exercise all
voting, consent and similar rights of the undersigned with
respect to the Shares (including, without limitation, the power
to execute and deliver written consents) at every annual,
special, adjourned or postponed meeting of stockholders of the
Company and in every written consent in lieu of such meeting:
(i) in favor of the adoption of the Merger Agreement, and
in favor of each of the other actions contemplated by the Merger
Agreement and any action required in furtherance thereof;
(ii) against approval of any proposal made in opposition
to, or in competition with, the Merger Agreement or the Merger
or any other transactions contemplated by the Merger
Agreement; and
(iii) against any of the following actions (other than
those actions that relate to the Merger and any other
transactions contemplated by the Merger Agreement): (A) any
merger, consolidation, business combination, sale of assets,
reorganization or recapitalization of or involving the Company
or any of its Subsidiaries, (B) any sale, lease or transfer
of any significant part of the assets of the Company or any of
its Subsidiaries, (C) any reorganization, recapitalization,
dissolution, liquidation or winding up of the Company or any of
its Subsidiaries, (D) any material change in the
capitalization of the Company or any of its Subsidiaries, or the
corporate structure of the Company or any of its Subsidiaries,
or (E) any other action that is intended, or could
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reasonably be expected to, impede, interfere with, delay,
postpone, discourage or adversely affect the Merger or any other
transactions contemplated by the Merger Agreement.
The attorneys and proxies named above may not exercise this
Irrevocable Proxy on any other matter. The undersigned
Stockholder may vote the Shares on all other matters.
Any obligation of the undersigned hereunder shall be binding
upon the successors and assigns of the undersigned.
This Irrevocable Proxy shall terminate, and be of no further
force and effect, automatically upon the Expiration Date.
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Dated: May , 2009
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STOCKHOLDER
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By:
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Name:
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Title:
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*****
IRREVOCABLE PROXY ****
B-9
APPENDIX C
DGCL
§262. Appraisal rights.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to §228 of this title
shall be entitled to an appraisal by the Court of Chancery of
the fair value of the stockholders 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 §251
(other than a merger effected pursuant to §251(g) of this
title), §252, §254, §257, §258, §263 or
§264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of 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 (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 §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
§§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 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.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under §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.
C-1
(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 stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders 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 stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
§228 or §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 holders 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 holders 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 holders 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 complied with subsections (a)
and (d) of this section here of and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
consolidation, any stockholder who has not commenced an
appraisal proceeding or joined that proceeding as a named party
shall have the right to withdraw such stockholders demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and (d) of
this section here of, upon written request, shall be entitled to
receive from
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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 stockholders written request for such a
statement is received by the surviving or resulting corporation
or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) of
this section here of, whichever is later. Notwithstanding
subsection (a) of this section, a person who is the
beneficial owner of shares of such stock held either in a voting
trust or by a nominee on behalf of such person may, in such
persons own name, file a petition or request from the
corporation the statement described in this subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholders entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such
stockholders certificates of stock to the Register in
Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder
is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation,
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reasonable attorneys 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 stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right
of any stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholders demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation. (Last amended by Ch. 145, L.
07, eff. only with respect to transactions consummated
pursuant to agreements entered into after August 1, 2007
(or, in the case of mergers pursuant to Section 253,
resolutions of the board of directors adopted after
August 1, 2007), and appraisal proceedings arising out of
such transactions.)
C-4
APPENDIX D
Opinion
of Qatalyst Partners LP
May 20,
2009
The Board of Directors
Data Domain, Inc.
2421 Mission College Blvd.
Santa Clara, California 95054
Members of
the Board:
We understand that Data Domain, Inc. (the
Company), NetApp, Inc.
(Parent), Kentucky Merger Sub One
Corporation, a direct wholly owned subsidiary of Parent
(Merger Sub One) and Derby Merger Sub Two
LLC, a direct, wholly owned subsidiary of Parent
(Merger Sub Two), have entered an Agreement
and Plan of Merger, dated as of May 20, 2009 (the
Merger Agreement), pursuant to which, among
other things, (i) Merger Sub One will merge with and into
the Company (the First Step Merger) and
(ii) the surviving corporation in the First Step Merger
will merge with and into Merger Sub Two (the Second
Step Merger and, together with the First Step Merger,
the Merger). Pursuant to the Merger, each
outstanding share of common stock of the Company
(Company Common Stock), other than shares as
to which dissenters rights have been perfected, will be
converted into the right to receive (i) $11.45 in cash and
(ii) a certain number of shares of common stock of Parent
(Parent Common Stock) determined pursuant to
a formula set forth in the Merger Agreement. The Merger
Agreement provides that under certain circumstances the
aggregate number of shares of Parent Common Stock issued may be
reduced in connection with an increase in the aggregate amount
of cash consideration. The terms and conditions of the Merger
are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the consideration
to be received by the holders of shares of Company Common Stock,
other than affiliates who have executed voting agreements (the
Holders) pursuant to the Merger Agreement is
fair, from a financial point of view, to such Holders.
For purposes of the opinion set forth herein, we have reviewed
the Merger Agreement and certain publicly available financial
statements and other business and financial information of the
Company and Parent. We have also reviewed certain financial
projections and operating data prepared by the management of the
Company (the Company Projections) and by the
management of Parent (the Parent Projections)
and reviewed information relating to certain strategic,
financial and operational benefits anticipated from the Merger,
prepared by the managements of the Company and Parent,
respectively. Additionally, we discussed the past and current
operations and financial condition and the prospects of the
Company and Parent, including information relating to certain
strategic, financial and operational benefits anticipated from
the Merger, with senior executives of the Company and Parent. We
also reviewed the historical market prices and trading activity
for Company Common Stock and Parent Common Stock and compared
the financial performance of the Company and the prices and
trading activity of Company Common Stock with that of certain
other selected publicly-traded companies and their securities.
In addition, we reviewed the financial terms, to the extent
publicly available, of selected acquisition transactions and
performed such other analyses, reviewed such other information
and considered such other factors as we have deemed appropriate.
In arriving at our opinion, we have assumed and relied upon,
without independent verification, the accuracy and completeness
of the information that was publicly available or supplied or
otherwise made available to, or discussed with, us by the
Company and Parent. With respect to the Company Projections and
the Parent Projections, including information relating to
certain strategic, financial and operational benefits
anticipated from the Merger
D-1
and other matters covered thereby, we have been advised by the
management of the Company and Parent, respectively, and have
assumed, that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments
of the management of the Company and Parent, respectively, of
the future financial performance of the Company and Parent,
respectively. We have assumed that the Merger will be
consummated in accordance with the terms set forth in the Merger
Agreement, without any modification or delay. In addition, we
have assumed that in connection with the receipt of all the
necessary approvals of the proposed Merger, no delays,
limitations, conditions or restrictions will be imposed that
could have an adverse effect on the Company, Parent or the
contemplated benefits expected to be derived in the proposed
Merger. We have also assumed that the Merger will qualify as a
tax-free reorganization under the Internal Revenue Code of 1986,
as amended. We have not made any independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise)
of the Company or Parent, nor have we been furnished with any
such evaluation or appraisal. In addition, we have relied,
without independent verification, upon the assessments of the
managements of the Company and Parent as to (i) the
existing and future technology and products of the Company and
Parent and the risks associated with such technology and
products, (ii) their ability to integrate the businesses of
the Company and Parent and (iii) their ability to retain
key employees of the Company and Parent. In arriving at our
opinion, we were not authorized to solicit, and did not solicit,
interest from any party with respect to an acquisition, business
combination or other extraordinary transaction involving the
Company.
We have 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 payable upon rendering of this opinion.
We will also receive an additional, larger fee if the Merger is
consummated. In addition, the Company has agreed to reimburse
our expenses and indemnify us for certain liabilities arising
out of our engagement. During the two year period prior to the
date hereof, no material relationship existed between Qatalyst
and its affiliates and the Company or Parent pursuant to which
compensation was received by Qatalyst or its affiliates; however
Qatalyst and its affiliates may in the future may provide
investment banking and other financial services to the Company
and Parent and their respective affiliates for which they would
expect to receive compensation.
Qatalyst provides investment banking and other services to a
wide range of corporations and individuals, domestically and
offshore, from which conflicting interests or duties may arise.
In the ordinary course of these activities, affiliates of
Qatalyst may at any time hold long or short positions, and may
trade or otherwise effect transactions in debt or equity
securities or loans of the Company, Parent or their respective
affiliates.
This opinion has been approved by our opinion committee in
accordance with our customary practice. This opinion is for the
information of the Board of Directors of the Company and may not
be used for any other purpose without our prior written consent.
This opinion does not constitute a recommendation to any Holder
as to how to vote with respect to the Merger and does not in any
manner address the prices at which Company Common Stock or
Parent Common Stock will trade at any time.
Our opinion is necessarily based on financial, economic, market
and other conditions as in effect on, and the information made
available to us as of, the date hereof. Events occurring after
the date hereof may affect this opinion and the assumptions used
in preparing it, and we do not assume any obligation to update,
revise or reaffirm this opinion. Our opinion does not address
the underlying business decision of the Company to engage in the
Merger, or the relative merits of the Merger as compared to any
strategic alternatives that may be available to the Company. Our
opinion is limited to the fairness, from a financial point of
view, of the consideration to be received by the Holders
pursuant to the Merger Agreement, and we express no opinion with
respect to the fairness of the amount or nature of the
compensation to any of the Companys officers, directors or
employees, or any class of such persons, relative to such
consideration.
Based on and subject to the foregoing, we are of the opinion on
the date hereof that the consideration to be received by the
Holders pursuant to the Merger Agreement is fair, from a
financial point of view, to such Holders.
Yours faithfully,
QATALYST PARTNERS LP
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