Exhibit 2.1

E XECUTION V ERSION

A GREEMENT AND P LAN OF M ERGER

BY AND AMONG

C ISCO S YSTEMS , I NC .,

B ARCELONA A CQUISITION C ORP .

AND

S TARENT N ETWORKS , C ORP .

October 12, 2009

 

TABLE OF CONTENTS

 

 

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E XHIBITS

 

 

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A GREEMENT AND P LAN OF M ERGER

This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of October 12, 2009 (the “ Agreement Date ”), by and among Cisco Systems, Inc., a California corporation (“ Parent ”), Barcelona Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Parent (“ Sub ”), and Starent Networks, Corp., a Delaware corporation (the “ Company ”).

R ECITALS

A. The Boards of Directors of the Company, Parent and Sub have determined that it is advisable and in the best interests of the stockholders of their respective companies that Sub merge with and into the Company (the “ Merger ”), with the Company to survive the Merger and to become a wholly-owned subsidiary of Parent, on the terms and subject to the conditions set forth in this Agreement, and, in furtherance thereof, have approved and declared advisable the Merger, this Agreement and the other transactions contemplated by this Agreement.

B. The Company, Parent and Sub desire to make certain representations, warranties, covenants and other agreements in connection with the Merger as set forth herein.

C. Concurrently with the execution of this Agreement and as a material inducement to the willingness of Parent to enter into this Agreement, certain stockholders of the Company are entering into voting agreements and irrevocable proxies in substantially the form attached hereto as Exhibit A (the “ Voting Agreements ”).

D. Concurrently with the execution of this Agreement, certain employees of the Company are entering into employment agreements, and related Ancillary Agreements (as defined below) (collectively, the “ Employment Offer Documents ”), in each case to become effective upon the Closing.

E. Concurrently with the execution of this Agreement, certain employees of the Company are entering into Non-Competition Agreements, in each case to become effective upon the Closing.

F. Concurrently with the execution of this Agreement, certain employees of the Company are entering into Equity Agreements with the Company for the benefit of Parent, in each case to become effective upon the Closing.

G. Concurrently with the execution of this Agreement, certain employees of the Company are entering into Benefits Waivers, in each case to become effective upon the Closing.

NOW, THEREFORE, in consideration of the representations, warranties, covenants and other agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I

THE MERGER

1.1 Certain Definitions . As used in this Agreement, the following terms shall have the meanings indicated below.

“ 2000 Plan Awards ” shall mean Company Options or Company RSUs under the Company’s 2000 Stock Incentive Plan.

“ 2007 Plan Awards ” shall mean Company Options or Company RSUs under the Company’s 2007 Stock Incentive Plan.

“ Affiliate ” shall have the meaning set forth in Rule 12b-2 promulgated under the Exchange Act.

“ Ancillary Agreements ” shall mean non-competition agreements, proprietary information and inventions agreements, transfer technology assessment agreements, arbitration agreements, conflicts of interest agreements, and benefit waivers, each to be entered into with Parent.,

“ Business ” shall mean the business of the Company and its Subsidiaries as currently conducted and/or as currently proposed to be conducted by the Company or any Subsidiary, including the design, development, manufacturing, reproduction, branding, marketing, advertising, promotion, licensing, sale, offer for sale, importation, distribution, provision and/or use of any and all Company Products in any and every territory of the world.

“ Business Day ” shall mean a day (i) other than Saturday or Sunday, and (ii) on which commercial banks are open for business in San Francisco, California.

“ Cash Out Amount ” shall mean (i) with respect to a Company Option to purchase Company Common Stock, an amount of cash, without interest, equal to the product of (A) the number of shares of Company Common Stock subject to such Company Option multiplied by (B) the Per-Share Cash Amount less the exercise price per share of such Company Option in effect immediately prior to the Effective Time, and (ii) with respect to a Company RSU to acquire Company Common Stock, an amount of cash, without interest, equal to the product of (A) the number of shares of Company Common Stock issuable upon settlement of Company Common Stock subject to such Company RSU as of immediately prior to the Effective Time multiplied by (B) the Per-Share Cash Amount. If the exercise price per share of a Company Option is equal to or greater than the Per-Share Cash Amount, the Cash Out Amount for such Company Option shall be zero.

“ Code ” shall mean the Internal Revenue Code of 1986, as amended.

“ Company Board ” shall mean the Board of Directors of the Company.

“ Company Capital Stock ” shall mean the Company Common Stock and the Company Preferred Stock.

“ Company Common Stock ” shall mean the common stock, par value $0.001 per share, of the Company.

“ Company Options ” shall mean options to purchase shares of Company Common Stock.

“ Company Option Plans ” shall mean the stock option plans, programs, agreements or arrangements of the Company, collectively and as amended, including the Company’s 2000 Stock Incentive Plan and 2007 Stock Incentive Plan.

“ Company Preferred Stock ” shall mean the preferred stock of the Company.

“ Company RSUs ” shall mean restricted stock purchase rights, restricted stock units or restricted stock bonuses granted under the Company Option Plans.

“ Continuing Employees ” shall mean the employees of the Company or its Subsidiaries who remain employees of the Surviving Corporation or its Subsidiaries or become employees of Parent or its subsidiaries as of the Effective Time.

“ Contract ” shall mean any legally-binding written, oral or other agreement, contract, subcontract, lease, obligation, promise, instrument, indenture, mortgage, note, option, warranty, purchase order, license, sublicense, insurance policy, benefit plan, commitment or undertaking of any nature, as of the Agreement Date or as may hereafter be in effect.

“ Debt ” shall mean the outstanding amount of (i) indebtedness for borrowed money, (ii) amounts owing as deferred purchase price for the purchase of any property, (iii) indebtedness evidenced by any bond, debenture, note, mortgage, indenture, letter of credit or other debt instrument or debt security, (iv) accounts payable to trade creditors and other accrued expenses, in each case not arising in the Ordinary Course of

 

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Business, (v) amounts owing under any capitalized or synthetic leases, (vi) obligations secured by any Encumbrances, (vii) commitments or obligations to assure a Person against loss (including contingent reimbursement obligations under letters of credit), and (viii) guarantees with respect to any indebtedness or obligation of a type described in clauses (i) through (vii) above of any Person, of the Company and the Subsidiaries.

“ Delaware Law ” shall mean the General Corporation Law of the State of Delaware, as amended.

“ Dissenting Shares ” shall mean any shares of Company Capital Stock that are issued and outstanding immediately prior to the Effective Time and in respect of which appraisal rights shall have been perfected in accordance with Delaware Law in connection with the Merger.

“ Dissenting Stockholder ” shall mean any stockholder of the Company exercising appraisal rights pursuant to Delaware Law in connection with the Merger.

“ Encumbrance ” shall mean, with respect to any asset or security, any mortgage, deed of trust, lien, pledge, charge, security interest, title retention device, conditional sale or other security arrangement, collateral assignment, claim, charge, adverse claim of title, ownership or right to use, restriction or other encumbrance of any kind in respect of such asset or security (including any restriction on (i) the voting of any security or the transfer of any security or other asset, (ii) the receipt of any income derived from any asset, (iii) the use of any asset, and (iv) the possession, exercise or transfer of any other attribute of ownership of any asset).

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, including the rules and regulations promulgated thereunder.

“ GAAP ” shall mean United States generally accepted accounting principles applied on a consistent basis.

“ Governmental Entity ” shall mean any supranational, national, state, municipal, local or foreign government, any court, tribunal, arbitrator, administrative agency, commission or other governmental official, authority or instrumentality, in each case whether domestic or foreign, or any quasi-governmental or private body exercising any regulatory, Taxing or other governmental or quasi-governmental authority.

“ Group ” shall have the definition ascribed to such term under Section 13(d) of the Exchange Act.

“ HSR Act ” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“ knowledge ” shall mean, with respect to the Company, the knowledge of any individual set forth on Schedule 1.1 of the Company Disclosure Letter with respect to a fact, circumstance, event or other matter after reasonable inquiry, including reasonable inquiry of such individual’s files and records.

“ Legal Requirements ” shall mean with respect to any Person, any federal, state, foreign, local, municipal or other law, statute, constitution, principle of common law, resolution, ordinance, code, permit, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity and any orders, writs, injunctions, awards, judgments and decrees applicable to such Person or its subsidiaries, their business or any of their respective assets or properties.

“ made available ” shall mean, with respect to any statement in this Agreement or the Company Disclosure Letter to the effect that any information, document or other material has been “made available” to Parent or its representatives, that such information, document or material was: (i) made available for review by Parent or its representatives in the virtual data room managed by the Company in connection with this Agreement at least 24 hours prior to the time of execution of this Agreement; or (ii) actually delivered (whether by physical or electronic delivery) to or otherwise in the possession of Parent or its representatives at least 24 hours prior to the time of execution of this Agreement.

“ Material Adverse Effect ” shall mean with respect to any entity, any change, event, violation, inaccuracy, occurrence, circumstance or effect (each, an “ Effect ”) that, individually or taken together with all other Effects, and regardless of whether or not such Effect constitutes a breach of the representations or

 

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warranties made by such entity in this Agreement, is, or is reasonably likely to, (i) have a material adverse effect on the condition (financial or otherwise), assets (including intangible assets), business, operations or results of operations of such entity and its subsidiaries, taken as a whole or (ii) materially impede or delay such entity’s ability to consummate the transactions contemplated by this Agreement in accordance with its terms and applicable Legal Requirements, except to the extent that any such Effect is proximately caused by: (A) general economic conditions (or changes in such conditions) in the United States or any other country or region in the world, or conditions in the global economy generally (provided that such conditions or changes do not affect such entity disproportionately as compared to other companies that operate in such entity’s industries in such affected geography); (B) conditions (or changes in such conditions) in the securities markets, credit markets, currency markets or other financial markets in the United States or any other country or region in the world (provided that such conditions or changes do not affect such entity disproportionately as compared to other companies that operate in such entity’s industries in such affected geography); (C) conditions (or changes in such conditions) in the industries in which the entity and its subsidiaries conduct business (provided that such conditions or changes do not affect such entity disproportionately as compared to other companies that operate in such affected industries); (D) political conditions (or changes in such conditions) in the United States or any other country or region in the world or acts of war, sabotage or terrorism (including any escalation or general worsening of any such acts of war, sabotage or terrorism) in the United States or any other country or region in the world (provided that such conditions, changes or acts do not affect such entity disproportionately as compared to other companies that operate in such entity’s industries in such affected geography); (E) earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions and other force majeure events in the United States or any other country or region in the world (provided that such events do not affect such entity disproportionately as compared to other companies that operate in such entity’s industries in such affected geography); (F) changes in the Company’s relationships or prospective relationships with current or potential customers, suppliers or business partners as a result of the entering into, announcement or pendency of the transactions contemplated hereby; (G) with respect to the Company, any actions taken or failure to take action, in each case, which Parent has expressly in writing approved, consented to or requested; (H) changes in such entity’s stock price or the trading volume of such entity’s stock, or any failure by such entity to meet any published financial analysts’ estimates or expectations of such entity’s revenue, earnings or other financial performance or results of operations for any period, or any failure by such entity to meet any internal budgets, plans or forecasts of its revenues, earnings or other financial performance or results of operations (but not, in each case, the underlying Effects that may have caused such changes or failures unless such Effects would otherwise be excepted from this definition); (I) any legal proceedings commenced or threatened by any of the current or former stockholders of the Company (on their own behalf or on behalf of the Company) against the Company that assert allegations of a breach of fiduciary duty or violations of securities laws relating to this Agreement or the transactions contemplated by this Agreement; or (J) changes in any applicable Legal Requirement (or the interpretation thereof by a Governmental Entity of competent authority with respect to such entity) or changes in GAAP or other accounting standards (or the interpretation thereof by the PCAOB, independent auditors or similar competent authority with respect to such entity) (provided that such changes or interpretations do not affect such entity disproportionately as compared to other companies that operate in such entity’s industries that are subject to such authority).

“ Option Exchange Ratio ” shall mean the quotient obtained by dividing the Per-Share Cash Amount by the Parent Stock Price.

“ Ordinary Course of Business ” shall mean the ordinary course of business consistent in all material respects with past practice.

“ Parent Common Stock ” shall mean the common stock, par value $0.001 per share, of Parent.

“ Parent Stock Price ” shall mean the average of the closing sale prices for a share of Parent Common Stock as quoted on the NASDAQ Global Select Market for the ten consecutive trading days ending with the third trading day that precedes the Closing Date (as defined in Section 1.3).

 

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“ Permitted Encumbrance ” shall mean (i) liens for Taxes or other impositions imposed by any Governmental Entity not yet due and payable or being contested in good faith, provided that adequate reserves (as determined in accordance with GAAP) have been set aside for payment thereof, (ii) statutory liens which are incurred in the Ordinary Course of Business for sums which are not yet due and payable or being contested in good faith, provided adequate reserves (as determined in accordance with GAAP) have been set aside for the payment thereof, (iii) liens arising in the Ordinary Course of Business and securing obligations not yet due and payable, (iv) easements, rights-of-way, restrictions and other similar charges or non-monetary Encumbrances which do not materially and adversely impair the current use, occupancy or business operations of such properties, (v) Encumbrances arising under any lease, sublease or other occupancy agreement of any property, or (vi) liens securing Debt reflected on the Company Balance Sheet.

“ Per-Share Cash Amount ” shall mean $35.00 per share of Company Common Stock.

“ Person ” shall mean any natural person, company, corporation, limited liability company, general partnership, limited partnership, trust, proprietorship, joint venture, business organization or Governmental Entity.

“ Repurchase Rights ” shall mean outstanding rights to repurchase unvested shares of Company Capital Stock that are held by the Company or similar restrictions in the Company’s favor with respect to shares of Company Capital Stock.

“ SEC ” shall mean the United States Securities and Exchange Commission.

“ Securities Act ” shall mean the Securities Act of 1933, as amended, including the rules and regulations promulgated thereunder.

“ Subsidiary ” shall mean any corporation, association, business entity, partnership, joint venture, limited liability company or other Person of which the Company, either alone or together with one or more Subsidiaries or by one or more other Subsidiaries (i) directly or indirectly owns or controls securities or other interests representing more than 50% of the voting power of such Person, or (ii) is entitled, by Contract or otherwise, to elect, appoint or designate directors constituting a majority of the members of such Person’s board of directors or other governing body.

“ Tax ” (and, with correlative meaning, “ Taxes ”, “ Taxable ” and “ Taxing ”) shall mean (i) any income, alternative or add-on minimum tax, gross income, estimated, gross receipts, sales, use, ad valorem, value added, transfer, franchise, capital stock, profits, license, registration, withholding, payroll, social security (or equivalent), employment, unemployment, disability, excise, severance, stamp, occupation, premium, property (real, tangible or intangible), environmental or windfall profit tax, custom duty or other tax, governmental fee or other like assessment or charge in the nature of a tax, together with any interest or any penalty, addition to tax or additional amount (whether disputed or not) imposed by any Governmental Entity responsible for the imposition of any such tax (domestic or foreign) (each, a “ Tax Authority ”), (ii) any liability for the payment of any amounts of the type described in clause (i) of this sentence as a result of being a member of an affiliated, consolidated, combined, unitary or aggregate group for any Taxable period, and (iii) any liability for the payment of any amounts of the type described in clause (i) or (ii) of this sentence as a result of being a transferee of or successor to any Person or as a result of any express obligation to assume such Taxes or to indemnify any other Person.

“ Tax Return ” shall mean any return, statement, report or form (including estimated Tax returns and reports, withholding Tax returns and reports, any schedule or attachment, and information returns and reports) required to be filed with respect to Taxes.

Other capitalized terms defined elsewhere in this Agreement and not defined in this Section 1.1 shall have the meanings assigned to such terms in this Agreement.

1.2 The Merger . At the Effective Time (as defined in Section 1.4), on the terms and subject to the conditions set forth in this Agreement, the Certificate of Merger in substantially the form attached hereto as Exhibit B (the “ Certificate of Merger ”) (which shall include the form of certificate of incorporation of the Surviving

 

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Corporation), and the applicable provisions of Delaware Law, Sub shall merge with and into the Company, the separate corporate existence of Sub shall cease and the Company shall continue as the surviving corporation. The Company, as the surviving corporation after the Merger, is hereinafter sometimes referred to as the “ Surviving Corporation .”

1.3 Closing . The closing of the transactions contemplated hereby (the “ Closing ”) shall take place at a time and date to be specified by the parties which will be no later than the second Business Day after the satisfaction or waiver of each of the conditions set forth in Article VI (excluding conditions that by their terms are to be satisfied on the Closing Date, but subject to the satisfaction or waiver of such conditions) or at such other time as the parties hereto agree in writing. The Closing shall take place at the offices of Fenwick & West LLP, Silicon Valley Center, 801 California Street, Mountain View, California, or at such other location as the parties hereto agree in writing. The date on which the Closing occurs is herein referred to as the “ Closing Date .”

1.4 Effective Time . At the Closing, after the satisfaction or waiver in writing of each of the conditions set forth in Article VI, Sub and the Company shall cause the Certificate of Merger to be filed with the Secretary of State of the State of Delaware, in accordance with the relevant provisions of Delaware Law (the time of acceptance by the Secretary of State of the State of Delaware of such filing or such later time as may be agreed to by Parent and the Company and specified in the Certificate of Merger being referred to herein as the “ Effective Time ”).

1.5 Effect of the Merger . At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificate of Merger, and the applicable provisions of Delaware Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company shall become debts, liabilities and duties of the Surviving Corporation.

1.6 Certificate of Incorporation; Bylaws .

(a) At the Effective Time, the Certificate of Incorporation of the Surviving Corporation shall be amended to read as set forth in Attachment A to the Certificate of Merger until thereafter amended as provided by Delaware Law and such Certificate of Incorporation.

(b) At the Effective Time, the Bylaws of Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended as provided by Delaware Law, the Certificate of Incorporation of the Surviving Corporation, and such Bylaws.

1.7 Directors and Officers . At the Effective Time, the directors and officers of Sub, as constituted immediately prior to the Effective Time, shall be the directors and officers of the Surviving Corporation, until their respective successors are duly elected or appointed and qualified.

1.8 Effect on Capital Stock .

(a) On the terms and subject to the conditions set forth in this Agreement, and without any action on the part of any holder of Company Capital Stock:

(i) At the Effective Time, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares and shares cancelled pursuant to Section 1.8(b)) shall be converted into the right to receive, subject to and in accordance with Section 1.10(c), an amount of cash equal to the Per-Share Cash Amount, without interest. As of the Effective Time, all such shares of Company Common Stock shall automatically be cancelled and no longer be deemed outstanding, and the holders thereof shall not have any rights with respect thereto, except the right to receive the Per-Share Cash Amount, without interest, upon surrender of Certificates (as defined in Section 1.10) in accordance with Section 1.10.

 

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(ii) At the Effective Time, each share of capital stock of Sub that is issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without further action on the part of the sole stockholder of Sub, be converted into and become one share of common stock of the Surviving Corporation (and the shares of common stock of the Surviving Corporation into which the shares of Sub capital stock are so converted shall be the only shares of the Surviving Corporation’s capital stock that are issued and outstanding immediately after the Effective Time). The certificate evidencing ownership of shares of Sub common stock will evidence ownership of the same number of shares of common stock of the Surviving Corporation.

(b) Cancellation of Company Capital Stock Owned by the Company and Parent . At the Effective Time, all shares of Company Capital Stock that are owned by the Company as treasury stock immediately prior to the Effective Time, and each share of Company Capital Stock owned by Parent or any direct or indirect wholly-owned Subsidiary of the Company or subsidiary of Parent immediately prior to the Effective Time, shall be cancelled and extinguished without any conversion thereof.

(c) Adjustments . In the event of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into capital stock), reorganization, reclassification, combination, recapitalization or other like change with respect to the Company Capital Stock or Parent Common Stock occurring after the Agreement Date and prior to the Effective Time, all references in this Agreement to specified numbers of shares of any class or series affected thereby, and all calculations provided for that are based upon numbers of shares of any class or series (or trading prices therefor) affected thereby, shall be equitably adjusted to the extent necessary to provide the parties the same economic effect as contemplated by this Agreement prior to such stock split, reverse stock split, stock dividend, reorganization, reclassification, combination, recapitalization or other like change.

(d) Appraisal Rights . Notwithstanding anything contained herein to the contrary, if any stockholder of the Company that is entitled to appraisal rights demands to be paid the “fair value” of such holder’s shares of Company Capital Stock and complies with all conditions and obligations necessary to perfect appraisal rights in accordance with Delaware Law, each Dissenting Share held by such stockholder will not be converted into the right to the cash amounts set forth in Section 1.8(a), but shall be entitled only to such rights as are granted by Delaware Law to a holder of Dissenting Shares except as provided in this Section 1.8(d). The Company shall give Parent (i) prompt notice of any such demands received by the Company, including any stockholder’ s notice of their intent to demand payment pursuant to Delaware Law that the Company receives prior to the Company Stockholders Meeting, withdrawals of such demands, and any other instruments served pursuant to Delaware Law and received by the Company, and (ii) the opportunity to participate in all negotiations and proceedings with respect to such demands under Delaware Law. The Company shall not, except with the prior written consent of Parent, voluntarily make any payment or offer to make any payment with respect to, or settle or offer to settle, any claim or demand in respect of any Dissenting Shares. If, after the Effective Time, any Dissenting Stockholder shall fail to perfect or shall have effectively withdrawn or lost the right to seek appraisal rights, the Dissenting Shares held by such stockholder shall immediately be converted into the right to receive the cash payable pursuant to Section 1.8(a) in respect of such shares as if such shares never had been Dissenting Shares, and Parent shall issue and deliver to the holder thereof, at (or as promptly as reasonably practicable after) the applicable time or times specified in Section 1.10(c), following the satisfaction of the applicable conditions set forth in Section 1.10(c), the amount of cash to which such holder would be entitled in respect thereof under Section 1.8(a) as if such shares never had been Dissenting Shares (and all such cash shall be deemed for all purposes of this Agreement to have become deliverable to such holder pursuant to Section 1.8(a)).

1.9 Unvested Company Shares; Company Options; Company RSUs .

(a) Unvested Company Shares . The payout of cash pursuant to clause (i) of Section 1.8(a) in exchange for Company Common Stock that immediately prior to the Effective Time was restricted, not fully vested or subject to Repurchase Rights (“ Unvested Company Shares ”) shall be subject to the same restrictions, vesting arrangements or Repurchase Rights that were applicable to such Unvested Company Shares

 

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immediately prior to or at the Effective Time. Therefore, cash otherwise payable pursuant to Section 1.8(a)(i) in exchange for each share of Company Common Stock that immediately prior to the Effective Time was restricted or not fully vested (“ Unvested Cash ”) shall not be payable by Parent at the Effective Time, and shall instead be paid out by Parent on the date that such share of Company Common Stock would have become vested under the vesting schedule in place for such share immediately prior to or at the Effective Time (subject to the conditions and other terms of such vesting schedule, any applicable employment, change in control or retention plan or agreement (as modified or superseded by any Equity Agreement and/or Benefits Waiver), and provided that if such conditions and terms are not satisfied and vesting ceases to continue at any point after the Effective Time, no cash payments shall be made, except the repurchase price described below, with respect to the unvested shares of Company Common Stock). Parent shall make, or in its discretion shall cause a paying agent authorized by Parent to administer such payments on Parent’s behalf to make, all such required payments to holders of Unvested Cash no later than the 15 ^th day of the calendar month immediately following the calendar month in which such Unvested Cash would have become vested under the original vesting schedule. All amounts payable pursuant to this Section 1.9(a) shall be subject to any required withholding of Taxes and shall be paid without interest. A portion of such newly vested cash so distributed will be treated as imputed interest to the extent required under the Code and the regulations promulgated thereunder. All outstanding Repurchase Rights with respect to Unvested Company Shares that the Company may hold immediately prior to the Effective Time shall be assigned to Parent in the Merger and shall thereafter be exercisable by Parent upon the same terms and subject to the same conditions that were in effect immediately prior to the Effective Time (including those under any applicable employment, change in control or retention plan or agreement (as modified or superseded by any Equity Agreement and/or Benefits Waiver)), except that Repurchase Rights may be exercised by Parent retaining the Unvested Cash into which such Unvested Company Shares have been converted and paying to the former holder thereof the repurchase price in effect immediately prior to the Effective Time for each such share subject to that Repurchase Right. Following the Effective Time, no Unvested Cash, or right thereto, may be pledged, encumbered, sold, assigned or transferred (including any transfer by operation of law), by any Person, other than Parent, or be taken or reached by any legal or equitable process in satisfaction of any debt or other liability of such Person, prior to the distribution to such Person of such Unvested Cash in accordance with this Agreement.

(b) Company Options and Company RSUs held by Continuing Employees or as 2000 Plan Awards . At the Effective Time, each Company Option held by a Continuing Employee and any other Company Options that are 2000 Plan Awards that are unexpired, unexercised and outstanding immediately prior to the Effective Time (each, a “ Rollover Option ”), and each Company RSU held by a Continuing Employee and any other Company RSUs that are 2000 Plan Awards that are outstanding immediately prior to the Effective Time (each, a “ Rollover RSU ”), shall on the terms and subject to the conditions set forth in this Agreement (including Section 1.9(d)) be assumed and converted by Parent in accordance with Section 5.11.

(c) 2007 Plan Awards Held by Persons Other than Continuing Employees . Parent will not assume any 2007 Plan Awards held by Persons who are not Continuing Employees. At the Effective Time, each vested 2007 Plan Award held by a Person that is not a Continuing Employee shall, by virtue of the Merger and without the need for any further action on the part of the holder thereof, subject to and in accordance with Section 1.10, be converted into and represent the right to receive the Cash Out Amount from Parent for such Company Option or Company RSU; provided , however , that the Surviving Corporation and Parent shall be entitled to deduct and withhold from the Cash Out Amount the amount of withholding for Taxes required to be deducted and withheld as a result of the transactions contemplated hereby. The Cash Out Amount payable to each Person covered by this Section 1.9(c) hereunder shall be rounded to the nearest cent and computed after aggregating cash amounts for all Company Options or Company RSUs represented by a particular grant held by such non-Continuing Employee. Promptly following the Effective Time, Parent shall cause the payment to each Person that is not a Continuing Employee but holds a 2007 Plan Award of an amount equal to the Cash Out Amount with respect to each such Company Option and Company RSU. At the Effective Time, each 2007 Plan Award that is held by a Person covered by this Section 1.9(c) will, by virtue of the Merger and without any further action on the part of any holder thereof, be cancelled and extinguished.

 

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(d) Reserved but Unissued Shares . At the Effective Time, the Specified Target Plan (as defined in Section 5.11(e)) and all shares of Company Common Stock then reserved and available for issuance under the Specified Target Plan shall be assumed by Parent in accordance with Section 5.11(e).

1.10 Surrender of Certificates .

(a) Exchange Agent . Parent’s transfer agent, Computershare Investor Services, shall act as exchange agent (the “ Exchange Agent ”) in the Merger.

(b) Parent to Deposit Cash . At or promptly following the Effective Time, Parent shall, or shall cause a direct or indirect subsidiary of Parent to, deposit with the Exchange Agent for exchange in accordance with this Article I the cash payable pursuant to Sections 1.8(a) and 1.9(c).

(c) Exchange Procedures . Promptly following the Effective Time, Parent shall instruct the Exchange Agent to mail to each holder of record of a certificate or certificates (“ Certificates ”) and each holder of record of uncertificated shares of Company Common Stock represented by book-entry shares (“ Uncertificated Shares ”) which immediately prior to the Effective Time represented outstanding shares of Company Capital Stock, (i) a letter of transmittal (that shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent and shall contain such other provisions as Parent may reasonably specify), and (ii) instructions for use of such letter of transmittal in effecting surrender of Certificates or Uncertificated Shares in exchange for the cash payable pursuant to Section 1.8(a). Upon surrender of a Certificate for cancellation to the Exchange Agent together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may reasonably be required by the Exchange Agent, or upon receipt by the Exchange Agent of an appropriate agent’s message in the case of book-entry transfer of Uncertificated Shares, each holder of such Certificate or Uncertificated Shares shall be entitled to receive in exchange therefor a check for the cash amount that such holder has the right to receive pursuant to Section 1.8(a) in respect of such Certificate or Uncertificated Shares, and the Certificate or Uncertificated Shares so surrendered shall forthwith be cancelled. Until so surrendered, outstanding Certificates and Uncertificated Shares will be deemed from and after the Effective Time, for all corporate purposes, to evidence only the right to receive cash pursuant to Section 1.8(a), except as provided in Section 1.8(d).

(d) No Interest . No interest will be paid or accrued on any cash payable pursuant to Section 1.8(a) or Section 1.9(a).

(e) Transfers of Ownership . If any cash amount payable pursuant to Section 1.8(a) is to be paid to a Person other than the Person to which the Certificate or Uncertificated Shares surrendered in exchange therefor is registered, it shall be a condition of the payment thereof that the Certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer and that the Person requesting such exchange shall have paid to Parent or any agent designated by it any transfer or other Taxes required by reason of the payment of cash in any name other than that of the registered holder of the Certificate or Uncertificated Shares surrendered, or established to the satisfaction of Parent or any agent designated by it that such Tax has been paid or is not payable.

(f) No Liability . Notwithstanding anything to the contrary in this Section 1.10, none of the Exchange Agent, the Surviving Corporation or any party hereto shall be liable to any Person for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar Legal Requirement.

(g) Unclaimed Cash . Any portion of funds held by the Exchange Agent which have not been delivered to any holders of Certificates or Uncertificated Shares pursuant to this Article I within six months after the Effective Time shall promptly be paid to Parent, and thereafter each holder of a Certificate or Uncertificated Shares who has not theretofore complied with the exchange procedures set forth in and contemplated by Section 1.10(c) shall look only to Parent (subject to abandoned property, escheat and similar laws) for its claim, only as a general unsecured creditor thereof, to the cash payable to such holder pursuant to

 

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Section 1.8(a). Notwithstanding anything to the contrary contained herein, if any Certificate or Uncertificated Shares have not been surrendered prior to the fifth anniversary of the Effective Time (or immediately prior to such earlier date on which the merger consideration contemplated by Section 1.8(a) in respect of such Certificate or Uncertificated Shares would otherwise escheat to or become the property of any Governmental Entity), any amounts payable in respect of such Certificate or Uncertificated Shares shall, to the extent permitted by applicable Legal Requirements, become the property of Parent, free and clear of all claims or interests of any Person previously entitled thereto.

1.11 No Further Ownership Rights in Company Capital Stock . All cash paid or payable following the surrender for exchange of shares of Company Capital Stock in accordance with the terms of this Agreement shall be so paid or payable in full satisfaction of all rights pertaining to such shares of Company Capital Stock, and there shall be no further registration of transfers on the records of the Surviving Corporation of shares of Company Capital Stock which were issued and outstanding immediately prior to the Effective Time. If, after the Effective Time, any Certificate or Uncertificated Shares are presented to the Surviving Corporation for any reason, such Certificate or Uncertificated Shares shall be cancelled and exchanged as provided in this Article I.

1.12 Lost, Stolen or Destroyed Certificates . In the event any Certificate shall have been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such Certificate, following the making of an affidavit of that fact by the record holder thereof, such cash as may be required pursuant to Section 1.8(a) in respect of such Certificate; provided, however, that Parent or the Exchange Agent may, in its discretion and as a condition precedent to the issuance thereof, require the record holder of such Certificate to deliver a bond in such reasonable amount as Parent or the Exchange Agent may reasonably direct as indemnity against any claim that may be made against Parent, the Surviving Corporation, the Exchange Agent and/or any of their respective representatives or agents with respect to such Certificate.

1.13 Withholding Rights . The Surviving Corporation shall be entitled to deduct and withhold from the cash otherwise deliverable under this Agreement, from shares deliverable upon exercise of Rollover Options and settlement of Rollover RSUs assumed by Parent pursuant to this Agreement, and from any other payments otherwise required pursuant to this Agreement, to any holder of any shares of Company Capital Stock, any Company Options, any Company RSUs or any Certificates or Uncertificated Shares such amounts as the Surviving Corporation, Parent or the Exchange Agent is required to deduct and withhold with respect to any such deliveries and payments under the Code, any provision of state, local, provincial or foreign Legal Requirements. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been delivered and paid to such holders in respect of which such deduction and withholding was made.

1.14 Tax Consequences . Parent makes no representations or warranties to the Company or to any holder of Company Capital Stock, Company Options or Company RSUs regarding the Tax treatment of the Merger, or any Tax consequences to the Company or any such holder of this Agreement, the Merger, or any of the other transactions or agreements contemplated hereby.

1.15 Taking of Necessary Action; 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 Surviving Corporation with full right, title and interest in, to and under, and/or possession of, all assets, property, rights, privileges, powers and franchises of the Company, the officers and directors of the Surviving Corporation are fully authorized in the name and on behalf of the Company or otherwise, to take all lawful action necessary or desirable to accomplish such purpose or acts, except to the extent inconsistent with this Agreement.

 

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ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as disclosed in the disclosure letter of the Company delivered to Parent and Sub concurrently with the parties’ execution of this Agreement (the “ Company Disclosure Letter ”) (each of which exceptions, in order to be effective, shall clearly indicate the Section and, if applicable, the Subsection of this Article II to which it relates (unless and to the extent the relevance of such disclosure to other representations and warranties is reasonably apparent from the actual text of the disclosed exception, in which event such disclosed exception shall be deemed so applicable to such other representations and warranties)), the Company represents and warrants to Parent and Sub as follows:

2.1 Organization, Standing and Power; Subsidiaries .

(a) Each of the Company and each Subsidiary is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization (except in the case of good standing, any jurisdiction that does not recognize such concept) and has the requisite corporate or other power to own its properties and to conduct its business as now being conducted and as currently proposed by it to be conducted (without regard to the Merger) and is duly qualified to do business and is in good standing in each jurisdiction where the failure to be so qualified and in good standing, individually or in the aggregate with any such other failures, would reasonably be expected to have a Material Adverse Effect on the Company.

(b) The Company has made available to Parent a correct and complete copy of the Certificate of Incorporation and Bylaws or other equivalent organizational documents, as applicable, of the Company and each Subsidiary, in each case as amended to date. Neither the Company nor any Subsidiary is in violation of any of the provisions of its Certificate of Incorporation or Bylaws or equivalent organizational documents. Schedule 2.1 to the Company Disclosure Letter sets forth a correct and complete list as of the Agreement Date of the Subsidiaries of the Company and their respective jurisdictions of organization. Each of the Subsidiaries was formed by the Company. All of the issued and outstanding shares of capital stock of each Subsidiary are duly authorized, validly issued, fully paid and nonassessable (in any jurisdiction that recognizes such concepts), are owned by the Company or another Subsidiary free and clear of all Encumbrances other than Permitted Encumbrances (other than shares owned by directors of a Subsidiary consistent with applicable Legal Requirements, which to the knowledge of the Company are owned by such directors free and clear of all Encumbrances other than Permitted Encumbrances), and are not subject to any preemptive right or right of first refusal, other than in favor of the Company or a Subsidiary, created by statute, the Certificate of Incorporation and Bylaws or other equivalent organizational documents, as applicable, of such Subsidiary or any Contract to which the Company or such Subsidiary is a party or by which it is bound. There are no outstanding subscriptions, options, warrants, “put” or “call” rights, exchangeable or convertible securities or other Contracts of any character relating to the issued or unissued capital stock or other securities of any Subsidiary, or otherwise obligating the Company or any Subsidiary to issue, transfer, sell, purchase, redeem or otherwise acquire or sell any such securities. Other than the Subsidiaries, the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible or exchangeable or exercisable for, any equity or similar interest in, any Person. There are no outstanding obligations of the Company or any of its Subsidiaries under any Contract to which it is a party or by which it is otherwise bound to make any loan to, or any equity or other investment (in the form of a capital contribution or otherwise) in any other Person (other than the Company or a Subsidiary) in an amount in excess of $250,000 in respect of any single Person.

(c) The Company has made available to Parent or its counsel correct and complete copies of the minute books containing records of all proceedings, consents, actions and meetings of the Company Board, committees of the Company Board and stockholders of the Company for the period from since the effective date of the registration statement for the Company’s initial public offering (the “ Effective Date ”) through the Agreement Date, which minute books of the Company so made available contain accurate summaries of

 

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all meetings of, or actions by written consent by, directors and stockholders of the Company, except in each case for (i) records that may discuss the Merger and other strategic alternatives and (ii) draft minutes pending approval by the Company Board or a committee of the Company Board. The Company has made available to Parent or its counsel correct and complete copies of the charters of all committees of the Company Board and all codes of conduct, whistleblower policies, disclosure committee policy or similar policies adopted by the Company Board, as in effect on the Agreement Date unless the same are contained in unredacted exhibits to the Company SEC Reports.

2.2 Capital Structure .

(a) The authorized capital stock of the Company consists solely of (i) 250,000,000 shares of Company Common Stock, and (ii) 5,000,000 shares of Company Preferred Stock. A total of 72,015,949 shares of Company Common Stock are issued and outstanding as of October 9, 2009. No shares of Company Preferred Stock are issued and outstanding. The Company has not designated, authorized, or issued any other shares of capital stock. The Company holds no shares of Company Common Stock in its treasury as of the Agreement Date. All issued and outstanding shares of Company Capital Stock are duly authorized, validly issued, fully paid and non-assessable and are free of all Encumbrances, preemptive rights, rights of first refusal and “put” or “call” rights created by statute, the Certificate of Incorporation or Bylaws of the Company or any agreement to which the Company is a party or by which it is bound. As of the Agreement Date, the Company has reserved 24,991,850 shares of Company Common Stock for issuance to employees, non-employee directors and consultants pursuant to the Company Option Plans, of which 13,267,548 shares have been issued pursuant to option exercises, RSU settlements or direct stock grants or purchases, 9,317,930 shares are subject to outstanding and unexercised Company Options, 1,006,463 shares are subject to outstanding and unvested Company RSUs, and 1,399,909 shares remain available for issuance thereunder. The Company has granted no Company Options or Company RSUs other than pursuant to the Company Option Plans. As of the Agreement Date, except for (i) the Company’s right to repurchase any unvested shares of Company Common Stock under the Company Option Plans, (ii) Company Options listed on Schedule 2.2(b)-2 of the Company Disclosure Letter, and (iii) Company RSUs listed on Schedule 2.2(b)-4 of the Company Disclosure Letter, there are no options, warrants, calls, rights or Contracts of any character to which the Company is a party or by which it is bound obligating the Company to grant, issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of any capital stock of the Company, any options or warrants to purchase capital stock of the Company, or any Company Voting Debt. There is no liability for dividends accrued and unpaid by the Company or any Subsidiary.

(b) Schedule 2.2(b)-1 of the Company Disclosure Letter sets forth a correct and complete list as of the Agreement Date of all holders of any Unvested Company Shares, including the number and kind of shares of Company Capital Stock unvested as of the date of this Agreement, the purchase price paid per share, the vesting schedule (and the terms of any acceleration thereof) in effect for such Unvested Company Shares, the repurchase price payable per unvested share and the length of the repurchase period following the holder’s termination of service. Schedule 2.2(b)-2 of the Company Disclosure Letter sets forth a correct and complete list as of the Agreement Date of all holders of outstanding Company Options, whether or not granted under the Company Option Plans, including the number of shares of Company Common Stock subject to each such option, the date of grant, the exercise or vesting schedule, including the vesting commencement date (and the terms of any acceleration thereof), the extent exercisable or issued as of the Agreement Date, the exercise price per share, the Tax status of such option under Section 409A and Section 422 of the Code and the term of each such option. In addition, Schedule 2.2(b)-3 of the Company Disclosure Letter (which Schedule shall be a subset of Schedule 2.2(b)-2 ) sets forth a correct and complete list as of the Agreement Date of all holders of outstanding Company Options that are held by Persons that are not employees of the Company or any Subsidiary (including non-employee directors, consultants, advisory board members, vendors, service providers or other similar persons). In addition, Schedule 2.2(b)-4 of the Company Disclosure Letter sets forth a correct and complete list as of the Agreement Date of all holders of Company RSUs including the number of shares of Company Common Stock remaining subject to

 

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issuance under such Company RSUs, and the vesting schedule (and the terms of any acceleration thereof) (and none of such Company RSUs have an applicable exercise price per share). All issued and outstanding shares of Company Capital Stock and all outstanding Company Options and Company RSUs were issued, and all repurchases of Company securities were made, in material compliance with all applicable Legal Requirements, including federal and state securities laws and all requirements set forth in applicable Contracts. All shares that may be issued upon the exercise of Company Options or under Company RSUs will, when issued, be validly issued in material compliance with all applicable Legal Requirements, including federal and state securities laws and all requirements set forth in applicable Contracts. The Company is not under any obligation to register under the Securities Act any of the presently outstanding securities of the Company or any Subsidiary now outstanding or that may be subsequently issued.

(c) No Debt of the Company or any Subsidiary (i) having the right to vote on any matters on which stockholders may vote (or which is convertible into, or exchangeable for, securities having such right) or (ii) the value of which is in any way based upon or derived from capital or voting stock of the Company (collectively, “ Company Voting Debt ”), is issued or outstanding as of the Agreement Date. Schedule 2.2(c) to the Company Disclosure Letter accurately lists as of the Agreement Date all Debt of the Company and its Subsidiaries representing outstanding obligations in excess of $1,000,000 in the aggregate, including, for each item of Debt, the agreement governing the Debt and the interest rate, maturity date and any assets or properties securing such Debt. All Debt may be prepaid at the Closing without penalty under the terms of the agreements governing such Debt.

(d) Except as expressly provided for in this Agreement, there are no Contracts relating to voting, purchase or sale of any Company Capital Stock between or among the Company and any of its securityholders, other than written Contracts granting the Company the right to purchase unvested shares upon termination of employment or service. The terms of each of the Company Option Plans and the applicable stock option agreements and restricted stock unit award agreements permit the assumption by Parent of all outstanding Company Options and Company RSUs, whether vested or unvested, as provided in this Agreement, without the consent or approval of the holders of such securities, the Company stockholders, or otherwise. Schedule 2.2(d) to the Company Disclosure Letter sets forth a true, complete and accurate summary as of the Agreement Date of the terms of any accelerated vesting or exercisability of any Company Options or of any Company RSUs, or any accelerated vesting or lapse of the Repurchase Rights with respect to shares of Company Capital Stock that are subject to Repurchase Rights, or any change in the price, exercise period, or other modifications in the terms of any Company Option, call, or other right, either in connection with the Merger or any other transaction contemplated by this Agreement or upon termination of employment or service with the Company or any Subsidiary, or with Parent or any subsidiary, following the Merger or otherwise. Correct and complete copies of each of the Company Option Plans and the standard form of all agreements and instruments relating to or issued under each Company