KEYN Keynote Systems, Inc. (MM)

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Indemnification and Insurance

        The Merger Agreement provides that, from the effective time of the Merger, all rights to indemnification, expense advancement and exculpation from personal liability existing in favor of any of our or our subsidiaries' present or former directors, officers or employees as provided in the applicable charter or organizational documents as in effect on the date of the Merger Agreement will survive the Merger to the same extent and in the same manner as on June 23, 2013. The Company as the surviving corporation also has agreed to abide by each of our contractual obligations to provide indemnification and exculpation to any person.

        The Merger Agreement also requires the surviving corporation to negotiate and purchase "tail" insurance coverage that provides coverage for a period of six years for acts or omissions occurring on or prior to the effective time of the Merger that is no less favorable in amount and terms and conditions of coverage than our existing directors and officers liability insurance policy, and that will not exceed an annual premium of $600,000; or if substantially equivalent insurance coverage is not available, the best available coverage that can be purchased for an annual premium of $600,000.

Fees and Expenses

        All fees and expenses incurred in connection with the consummation of the Merger will be paid by the party incurring those fees and expenses.

        If the Merger Agreement is terminated, we will, in specified circumstances, be required to reimburse Parent for its expenses incurred in connection with the transactions contemplated by the Merger Agreement, up to a maximum of $2,000,000, and may also be required to pay Parent a termination fee of $13,800,000 (less any amount previously paid to Parent in reimbursement of Parent's transaction expenses). See the section entitled "Termination Fees and Expenses" beginning on page 59.

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Certain Material United States Federal Income Tax Consequences of the Merger

         The following was written to support the promotion or marketing of the transaction or matters addressed herein. The following was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax law. Each taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.

        The following is a discussion of certain material United States federal income tax consequences of the Merger to U.S. holders (as defined below) whose shares of our common stock are converted into the right to receive cash in the Merger. This discussion is for general information only and is not tax advice. The discussion is based upon the Internal Revenue Code, Treasury regulations, Internal Revenue Service published rulings and judicial and administrative decisions in effect as of the date of this proxy statement, all of which are subject to change (possibly with retroactive effect) and to differing interpretations. In addition, this discussion assumes that the Merger and the payment of the Merger Consideration will take place on or before the closing.

        The following discussion does not purport to consider all aspects of U.S. federal income taxation that might be relevant to our stockholders. This discussion applies only to stockholders who, on the date on which the Merger is completed, hold shares of our common stock as capital assets within the meaning of section 1221 of the Internal Revenue Code. The following discussion does not address taxpayers subject to special treatment under U.S. federal income tax laws, such as insurance companies, financial institutions, dealers in securities or currencies, traders of securities that elect the mark-to-market method of accounting for their securities, persons that have a functional currency other than the U.S. dollar, tax-exempt organizations, mutual funds, real estate investment trusts, S corporations or other pass-through entities (or investors in an S corporation or other pass-through entity) and taxpayers subject to the alternative minimum tax. In addition, the following discussion may not apply to stockholders who acquired their shares of our common stock upon the exercise of employee stock options or otherwise as compensation for services or through a tax-qualified retirement plan or who hold their shares as part of a hedge, straddle, conversion transaction or other integrated transaction. If our common stock is held through a partnership, the U.S. federal income tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. It is recommended that partnerships that are holders of our common stock and partners in those partnerships consult their own tax advisors regarding the tax consequences to them of the Merger.

        The following discussion also does not address potential alternative minimum tax, foreign, state, local and other tax consequences of the Merger. All stockholders should consult their own tax advisors regarding the U.S. federal income tax consequences, as well as the foreign, state and local tax consequences of the disposition of their shares in the Merger.

        For purposes of this summary, a "U.S. holder" is a beneficial owner of shares of our common stock, who or that is, for U.S. federal income tax purposes:

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an individual who is a citizen or resident of the United States;



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a corporation (or other entity taxable as a corporation) created or organized in or under the laws of the United States, any state of the United States or the District of Columbia;



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an estate the income of which is subject to U.S. federal income tax regardless of its source;



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a trust if (i) a U.S. court is able to exercise primary supervision over the trust's administration and one or more U.S. persons are authorized to control all substantial decisions of the trust; or (ii) it was in existence on August 20, 1996 and has a valid election in place to be treated as a domestic trust for U.S. federal income tax purposes; or

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•

otherwise is subject to U.S. federal income taxation on a net income basis.

        Except with respect to the backup withholding discussion below, this discussion is confined to the tax consequences to a stockholder who or that, for U.S. federal income tax purposes, is a U.S. holder.

        For U.S. federal income tax purposes, the disposition of our common stock pursuant to the Merger generally will be treated as a sale of our common stock for cash by each of our stockholders. Accordingly, in general, the U.S. federal income tax consequences to a stockholder receiving cash in the Merger will be as follows:

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the stockholder will generally recognize a capital gain or loss for U.S. federal income tax purposes upon the disposition of the stockholder's shares of our common stock pursuant to the Merger.



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the amount of capital gain or loss recognized by each stockholder will be measured by the difference, if any, between the amount of cash received by the stockholder in the Merger (other than, in the case of a dissenting stockholder, amounts, if any, which are deemed to be interest for U.S. federal income tax purposes, which amounts will be taxed as ordinary income) and the stockholder's adjusted tax basis in the shares of our common stock surrendered in the Merger. Gain or loss will be determined separately for each block of shares (i.e., shares acquired at the same cost in a single transaction) surrendered for cash in the Merger.



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the capital gain or loss, if any, will be long-term with respect to shares of our common stock that have a holding period for tax purposes in excess of one year at the effective time of the Merger. Long-term capital gains of individuals are eligible for reduced rates of taxation. There are limitations on the deductibility of capital losses. A dissenting stockholder may be required to recognize any gain or loss in the year the Merger closes, irrespective of whether the dissenting stockholder actually receives payment in that year.

        Cash payments made pursuant to the Merger will be reported to our stockholders and the Internal Revenue Service to the extent required by the Internal Revenue Code and applicable Treasury regulations. Non-corporate stockholders may be subject to back-up withholding at a rate of 28 percent on any cash payments they receive. Stockholders who are U.S. holders generally will not be subject to backup withholding if they: (1) furnish a correct taxpayer identification number and certify that they are not subject to backup withholding on the substitute Form W-9 included in the letter of transmittal they are to receive or (2) are otherwise exempt from backup withholding and comply with other applicable rules and certification requirements. Stockholders who are not U.S. holders should complete and sign a Form W-8BEN (or other applicable tax form) and return it to the paying agent in order to provide the information and certification necessary to avoid backup withholding tax or otherwise establish an exemption from backup withholding tax. Certain of our stockholders will be asked to provide additional tax information in the letter of transmittal for the shares of our common stock.

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        Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is timely furnished to the Internal Revenue Service.

         The foregoing is a general discussion of certain material U.S. federal income tax consequences. We recommend that you consult your own tax advisor to determine the particular tax consequences to you (including the application and effect of any foreign, state or local income and other tax laws) of the receipt of cash in exchange for shares of our common stock pursuant to the Merger.

Delisting and Deregistration of the Company's Common Stock

        If the Merger is completed, our common stock will be delisted from The Nasdaq Global Select Market and deregistered under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and we will no longer file periodic reports with the SEC on account of our common stock.

Approvals and Consents

        Under the Merger Agreement, we and the other parties to the Merger Agreement have agreed to use our reasonable best efforts to complete the transactions contemplated by the Merger Agreement, including obtaining all necessary authorizations, consents and approvals or waivers from third parties, including governmental entities. The HSR Act provides that transactions such as the Merger may not be completed until certain information has been submitted to the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice and certain waiting period requirements have been satisfied. The Company and Parent filed notification reports and requested early termination with the Department of Justice and the Federal Trade Commission under the HSR Act on July 3, 2013.

        At any time before or after the consummation of the Merger, the Federal Trade Commission and Department of Justice may, however, challenge the Merger on antitrust grounds. Private parties could take antitrust action under the antitrust laws, including seeking an injunction prohibiting or delaying the Merger, divestiture or damages under certain circumstances. Additionally, at any time before or after the consummation of the Merger, notwithstanding the termination of the applicable waiting period, any state could take action under its antitrust laws as it deems necessary or desirable in the public interest.

Anticipated Closing of the Merger

        We expect the Merger to be completed prior to the end of the third calendar quarter of 2013. However, the timing of the completion of the Merger depends upon the adoption of the Merger Agreement by our stockholders, and other conditions described in this proxy statement.

Litigation Related to the Merger

        On June 27, 2013, a suit entitled Telker v. Keynote Systems, Inc., et al., Case No. CIV 52260 and on July 3, 2013 a suit entitled Satyanaryana Gunda v. Keynote Systems, Inc., et al , Case No. CIV 522675, were filed in the Superior Court of the State of California for San Mateo County. In addition, on July 2, 2013, a suit entitled Ruffner v. Keynote Systems, Inc., et al. , Civil Action No. 8699 and on July 9, 2013 a suit entitled Vladimir v. Keynote Systems, Inc., et al. , Civil Action No. 8710 were filed in the Court of Chancery of the State of Delaware. All four of the suits challenge the proposed acquisition of the Company. Each is a putative class action filed on behalf of our stockholders and name as defendants the Company, its directors, the Sponsor, Parent and Merger Sub. The suits allege that the individual defendants breached their fiduciary duty by failing to maximize stockholder value in negotiating and approving the Merger Agreement. Specifically, the allegations include that the Merger undervalues the Company, our directors failed to enhance stockholder value, the defendants failed to engage in meaningful auction with third parties to obtain the best value, the defendants failed to

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provide material information to our stockholders, the defendants failed to adequately ensure that no conflicts of interest existed and the Board disregarded the true value of the Company for their personal benefit.

        Each of the suits also allege that the Sponsor, Parent and Merger Sub aided and abetted the alleged breaches of fiduciary duties. The suits seek, among other relief, declaratory and injunctive relief enjoining the Merger.

        While the defendants believe that the allegations against them are without merit, the outcome of the litigation cannot be predicted with any certainty. An adverse judgment for monetary damages could have an adverse effect on the operations and liquidity of the Company. A preliminary injunction could delay or jeopardize the completion of the Merger, and an adverse judgment granting permanent injunctive relief could indefinitely enjoin completion of the Merger.

THE MERGER AGREEMENT

        This section of this proxy statement describes the material provisions of the Merger Agreement, but it may not contain all of the information about the Merger Agreement that is important to you. The Merger Agreement is attached as Annex A to this proxy statement and is incorporated into this proxy statement by reference. We encourage you to read the Merger Agreement in its entirety. The Merger Agreement is a document that establishes and governs the legal relations among us, Parent, and Merger Sub with respect to the transactions described in this proxy statement.

Explanatory Note Regarding the Merger Agreement

        The representations and warranties of the Company contained in the Merger Agreement have been made solely for the benefit of Parent and Merger Sub. In addition, such representations and warranties (i) have been made only for purposes of the Merger Agreement, (ii) have been qualified by certain disclosures made to Parent and Merger Sub not reflected in the text of the Merger Agreement, (iii) may be subject to materiality qualifications contained in the Merger Agreement, which may differ from what may be viewed as material by investors, (iv) were made only as of the date of the Merger Agreement or other specific dates and (v) have been included in the Merger Agreement for the purpose of allocating risk between the contracting parties rather than establishing matters as facts. Accordingly, the Merger Agreement and its summary is included with this proxy statement only to provide investors with information regarding the terms of the Merger Agreement and not to provide investors with any other factual information regarding the Company or its business. Investors should not rely on the representations and warranties or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of our subsidiaries. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company's public disclosures. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding the Company that is or will be contained in, or incorporated by reference into, the Forms 10-K, Forms 10-Q, proxy statements and other documents that the Company files with the SEC.

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Effective Time

        The effective time of the Merger will occur at the time that we file the certificate of Merger with the Delaware Secretary of State on the closing date of the Merger or on such later date as may be mutually agreed to by Parent and us (or such later time as is provided in the certificate of Merger). The closing date will occur as promptly as practicable (but no later than the third business day) after all of the conditions to the consummation of the Merger set forth in the Merger Agreement have been satisfied or waived (other than those conditions that by their nature cannot be satisfied until after the closing of the Merger), or on such other date as we and Parent may agree.

Structure of the Merger

        Subject to the terms and conditions of the Merger Agreement and in accordance with Delaware law, at the effective time of the Merger, Merger Sub, a wholly-owned subsidiary of Parent, will merge with and into the Company. The separate corporate existence of Merger Sub will cease, and the Company will continue as the surviving corporation and a wholly-owned subsidiary of Parent. The surviving corporation will be a privately held corporation and our current stockholders will cease to have any ownership interest in the surviving corporation or rights as a stockholders. Therefore, as a result of the Merger, our current stockholders will not participate in the opportunity for future earnings or growth of the surviving corporation and will not benefit from any appreciation in value of the surviving corporation.

Treatment of Stock, Stock Options and Other Stock-Based Awards

        Common Stock.     At the effective time of the Merger, each share of our common stock, par value $0.001 per share, issued and outstanding immediately prior to the effective time of the Merger will automatically be cancelled and retired and will cease to exist and will be converted into the right to receive the Merger Consideration, without interest and less applicable withholding taxes, other than shares (i) held by Parent or its affiliates, in treasury of the Company or owned by any subsidiary of the Company or (ii) held by persons who properly exercise appraisal rights under Delaware law, which shares will automatically be cancelled and retired and will cease to exist, without conversion or consideration.

        At the effective time of the Merger, each share of common stock of Merger Sub, issued and outstanding immediately prior to the effective time of the Merger will be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock of the surviving corporation.

        After the effective time of the Merger, each stock certificate representing shares of our common stock will be cancelled and each holder of record of uncertificated shares of our common stock will cease to have any rights with respect to those shares, and the holder of such certificate or uncertificated shares will have only the right to receive the Merger Consideration, without any interest and less applicable withholding taxes.

        Stock Options.     At the effective time of the Merger, each then-outstanding option to purchase shares of our common stock will be accelerated and will be cancelled and, promptly following the effective time of the Merger, Parent or the surviving corporation will pay to the holders of such option an amount in cash equal to the excess of $20.00 over the per share exercise price of such option, multiplied by the number of shares subject to such option, without interest and less any applicable withholding taxes.

        Restricted Stock Units.     At the effective time of the Merger, each then outstanding restricted stock unit will be accelerated and will be cancelled and, promptly following the effective time of the Merger, Parent or the surviving corporation will pay to the holders of such restricted stock unit an amount in cash equal to $20.00 per restricted stock unit, without interest and less any applicable withholding taxes.

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        Restricted Stock.     At the effective time of the Merger, all restrictions on restricted stock awards will lapse and each restricted share of our common stock will be converted into the right to receive $20.00 per share, without interest and less any applicable withholding taxes, payable by Parent or the surviving corporation promptly following the effective time of the Merger.

        Following the effective time of the Merger, no holder of any option to purchase shares of our common stock, holder of any restricted stock unit or holder of any shares of our restricted stock will have the right to acquire any equity interest in the Company or the surviving corporation with respect to such shares.

Treatment of the Company's ESPP

        Under the Merger Agreement, the current offering period under the Company's 1999 Employee Stock Purchase Plan (the "ESPP") will continue through the earlier of the completion of the Merger or the scheduled conclusion of the current offering period on July 31, 2013. Following the date of the Merger Agreement (June 23, 2013), no new participants may join the ESPP, and existing participants may not increase their rate of contribution or make any non-payroll contributions to the ESPP. Thereafter, there will be no subsequent offering periods under the ESPP and the ESPP will be terminated in accordance with its terms, subject to completion of the Merger.

Exchange and Payment Procedures

        The paying agent will act as the agent for payment of the Merger Consideration to our stockholders. At or before the effective time of the Merger, Parent will cause to be deposited with the paying agent an amount of cash necessary for payment of the Merger Consideration (but not for payments in respect of options to purchase shares of the common stock, restricted stock units or restricted stock awards, which the surviving corporation will pay through its payroll system), without interest and less applicable withholding taxes, which will be deposited in a separate fund established for the benefit of our stockholders.

        Instructions with regard to the surrender of certificates formerly representing shares of our common stock or uncertificated shares of our common stock, together with the letter of transmittal to be used for that purpose, will be mailed to our stockholders by the paying agent promptly after the effective time of the Merger. As soon as practicable following receipt from the stockholder of a duly executed letter of transmittal, together with (i) in the case of shares of our common stock represented by a certificate, receipt of any such certificate and (ii) in the case of shares of our common stock held in book-entry form, automatically or, if required, the receipt of an agent's message, and any other items specified by the letter of transmittal, the paying agent will pay in cash to such stockholder an amount equal to the product of the number of shares of our common stock represented by such certificates remitted by the stockholder or agent's message and $20.00, without interest and less any applicable withholding tax.

         If you have lost a certificate, or if it has been stolen or destroyed, then before you will be entitled to receive the Merger Consideration you will have to make an affidavit of the loss, theft or destruction, and if required by Parent, post a bond in a reasonable and customary amount as indemnity against any claim that may be made against it with respect to such certificate. These procedures will be described in the letter of transmittal that you will receive, which you should read carefully in its entirety.

        At the effective time of the Merger, the stock transfer books of the Company will be closed, and no further registration of transfer of shares of the Company common stock will be made on the stock transfer books. At and after the effective time of the Merger, previous stockholders will have no rights with respect to shares of the Company common stock except to receive the Merger Consideration, without interest and less applicable withholding taxes.

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        After nine months following the effective time of the Merger, any amount remaining in the payment fund will be refunded to surviving corporation, upon demand, and any previous holders of the Company common stock who have not complied with the applicable provisions for payment summarized above will be entitled to payment of the Merger Consideration, without interest and less applicable withholding taxes, only from the surviving corporation.

         You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal.

Representations and Warranties

        We make various representations and warranties in the Merger Agreement with respect to the Company and our affiliates. These include representations and warranties regarding, among other things:

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organization, good standing and qualification to do business;



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corporate power and authority to enter into the Merger Agreement and to consummate the transactions contemplated by the Merger Agreement;



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capitalization, including in particular the number of shares of our common stock, Company options, restricted stock units, restricted stock awards and other equity-based interests;



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the subsidiaries of the Company;



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the absence of violations of or conflicts with governing documents, applicable laws or certain agreements as a result of entering into the Merger Agreement and consummating the Merger;



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the required consents and approvals of governmental entities in connection with the transactions contemplated by the Merger Agreement;



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the stockholder vote required to adopt the Merger Agreement and the transactions contemplated by the Merger Agreement;



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possession of permits and licenses necessary to conduct our business;



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compliance with certain laws;



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the absence of litigation, investigations and administrative proceedings;



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our SEC filings since September 30, 2011, including the financial statements contained therein, and compliance of such reports and documents with applicable requirements of federal securities laws and regulations, and the absence of undisclosed liabilities;



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internal controls and procedures over financial reporting, compliance with the Sarbanes-Oxley Act, and the adoption of a code of ethics;



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the conduct of our business, and absence of certain material changes or events, since September 30, 2012;



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tax matters;



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personal property and real property;



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employment and labor matters, including matters relating to employee benefit plans;



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material agreements;



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intellectual property and computer software;



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insurance;

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•

the absence of broker's fees (other than the fee payable to Savvian) and the receipt by the Company of an opinion from Savvian;



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the inapplicability of anti-takeover provisions, protections, and statutes to the Merger and the other transactions contemplated by the Merger Agreement;



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environmental laws and regulations;



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major customers and suppliers of the Company;



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the accuracy and completeness of this proxy statement and its compliance with applicable laws; and



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the accuracy and completeness of information supplied for inclusion or incorporation by reference in this proxy statement and the compliance of that information with applicable laws.

        Many of our representations and warranties are qualified by the absence of a "Company Material Adverse Effect", which means, for purposes of the Merger Agreement, any condition, event, change, occurrence, fact or effect that is or would reasonably be expected to become, individually or in the aggregate, materially adverse to the business, properties, assets, liabilities, financial condition, or results of operations of the Company and its subsidiaries taken as a whole, or prevents or materially impairs the Company's ability to perform its obligations under, or to consummate the transactions contemplated by, the Merger Agreement, subject to a number of customary exceptions. In addition, many of our representations and warranties are qualified by the knowledge of certain employees of the Company.

        Parent and Merger Sub make various representations and warranties in the Merger Agreement with respect to Parent and Merger Sub. These include representations and warranties regarding:

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organization, good standing and qualification to do business;



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corporate or other power and authority to enter into the Merger Agreement and to consummate the transactions contemplated by the Merger Agreement;



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the absence of violations of or conflicts with governing documents, applicable laws or certain agreements as a result of entering into the Merger Agreement and consummating the Merger;



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the required consents and approvals of governmental entities in connection with the transactions contemplated by the Merger Agreement;



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the absence of litigation and administrative proceedings;



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financing relating to their consummation of the Merger;



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the delivery of a guaranty of certain obligations of Parent and Merger Sub to pay a termination fee of $27,600,000 in certain circumstances;



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the absence of undisclosed broker's fees;



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the organization and lack of operations of Merger Sub;



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solvency;



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the accuracy and completeness of information supplied for inclusion or incorporation by reference in this proxy statement and the compliance of that information with applicable laws;



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employment and labor matters; and



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ownership of Parent and Merger Sub.

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        The representations and warranties of each of the parties to the Merger Agreement will expire upon the effective time of the Merger. The assertions embodied in those representations and warranties were made solely for purposes of the Merger Agreement and are subject to important qualifications and limitations agreed by the parties in connection with negotiating its terms. Moreover, some of those representations and warranties may not be accurate or complete as of any particular date because they are used for the purpose of allocating risk between the parties to the Merger Agreement rather than establishing matters of fact and may be subject to a contractual standard of materiality or material adverse effect different from that generally applicable to public disclosures to stockholders. For the foregoing reasons, you should not rely on the representations and warranties contained in the Merger Agreement as statements of factual information.

Conduct of Our Business Pending the Merger

        We have undertaken certain customary covenants that place restrictions on us and our subsidiaries until the effective time of the Merger. From the date of the Merger Agreement until the effective time of the Merger, we have agreed to (and to cause our subsidiaries to), (i) maintain our good standing under applicable law, (ii) except as otherwise provided, conduct our business and operations in all material respects only in the ordinary and usual course of business and in a manner consistent with past practice and (iii) use commercially reasonable efforts to, in all material respects, (A) preserve intact its assets, properties, contracts or other legally binding understandings and business organizations, (B) keep available the services of our current officers and key employees and consultants and (C) preserve the current relationships with customers, suppliers, distributors, lessors, licensors, licensees, creditors, employees, contractors and other persons with which the Company or any of its Subsidiaries has business relations.

        In addition, we have agreed, with certain limited exceptions, not to do (and not to permit our subsidiaries to do) any of the following, except as expressly contemplated by the Merger Agreement:

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declare or pay any dividends, enter into any agreement with respect to the voting of its equity interests, except dividends or other distributions from any subsidiary of the Company to the Company or any wholly-owned subsidiary of the Company;



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adjust, split, combine or reclassify any of its capital stock or that of its subsidiaries or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or that of its subsidiaries;



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repurchase, redeem or otherwise acquire, any shares of its or its subsidiaries' capital stock or any Company common stock rights or subsidiary stock rights (except pursuant to restricted stock award agreements outstanding on the date hereof) or any other equity interests, except to effect any withholding obligations in connection with the exercise of Company common stock options, settlement of restricted stock units, or the issuance of shares under the Company's employee stock purchase plan;



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issue, deliver or sell, pledge or encumber any shares of its or its subsidiaries' capital stock, or any Company common stock rights or other equity interests;



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amend the certificate of incorporation or the bylaws of the Company or equivalent organizational documents of the Company's subsidiaries;



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incur, create, assume or otherwise become liable for any indebtedness for borrowed money or assume, guaranty, endorse or otherwise become liable or responsible for the indebtedness for borrowed money of any third person;



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make any loans or advances to any other person other than in the ordinary course of business consistent with past practice or in accordance with the indemnification and expense advancement

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provisions of the certificate of incorporation or the bylaws of the Company or make any capital contributions to or investments in any third person;

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merge or consolidate with any other entity or adopt a plan of complete or partial liquidation, dissolution, recapitalization or other reorganization or otherwise permit its corporate existence to be suspended, lapsed or revoked;



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change in any material respect its tax accounting methods, principles or practices, except as required by GAAP or applicable Law;



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alter, amend or create any obligations with respect to compensation, severance, benefits, change of control payments or any other payments to present or former employees, directors or affiliates of the Company, with certain exceptions;



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hire any new employees, other than non-officer employees in the ordinary course of business consistent with past practice;



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sell, license, mortgage, transfer, lease, pledge or otherwise subject to any encumbrance or otherwise dispose of any entity, business or material rights, properties or assets, non-exclusive licenses or otherwise in the ordinary course of business consistent with past practice;



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acquire (by merger, consolidation or acquisition of stock or assets) any business for which the aggregate amount to be paid in respect of such business would exceed $250,000;



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make any material tax election not consistent with past practice or settle or compromise any income tax liability or fail to file any material tax return when due or fail to cause such tax returns when filed to be complete and accurate in all material respects or file any material amended tax return;



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incur or commit to incur any capital expenditures, or any obligations or liabilities in connection therewith that are in excess of $750,000 individually in any fiscal quarter or $1,500,000 in the aggregate in any fiscal quarter, except in the ordinary course of business consistent with past practice, or materially delay any material capital expenditures;



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pay, discharge, settle, cancel, incur or satisfy any material liabilities, other than the payment, discharge, settlement, cancellation, incurrence or satisfaction of liabilities in the ordinary course of business consistent with past practice, as required by any applicable Law, as accrued for in the Company's financial statements or as required by the terms of any contract of the Company, as in effect on the date hereof;



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enter into, modify, amend or terminate any Contract which if so entered into, modified, amended or terminated would reasonably be likely to have a Company material adverse effect or prevent or materially delay the consummation of the transactions contemplated by the Merger Agreement or any Company material contract;



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terminate any officer of the Company or any of its subsidiaries other than for good reason or for reasonable cause;



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maintain insurance at less than current levels or otherwise in a manner inconsistent with past practice;



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except as required by GAAP, revalue in any material respect any of its material assets or make any material changes in accounting methods, principles or practices;



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enter into any transaction that could give rise to a disclosure obligation as a "reportable transaction" under Section 6011 of the Internal Revenue Code of 1986, as amended;

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•

engage in any transaction with, or enter into any agreement, arrangement or understanding with any affiliate of the Company or other person covered by Item 404 of Regulation S-K promulgated under the Exchange Act that would be required to be disclosed under such Item 404;



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compromise, release, waive or settle any claims, actions, suits, charges, demands, directives, proceedings, governmental investigations, inquiries, notices of violation or subpoenas having a value or in an amount, individually or in the aggregate, in excess of $1,500,000;



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compromise, release, waive or settle any claims, actions, suits, charges, demands, directives, proceedings, governmental investigations, inquiries, notices of violation or subpoenas directly relating to or affecting the Company's intellectual property, having a value or in an amount, individually or in the aggregate, in excess of $750,000;



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compromise, release, waive or settle any claims, actions, suits, charges, demands, directives, proceedings, governmental investigations, inquiries, notices of violation or subpoenas that is brought by any current, former or purported holder of any capital stock of the Company or any of its subsidiaries relating to the transactions contemplated by the Merger Agreement, having a value or in an amount, individually or in the aggregate, in excess of $750,000;



•

effectuate a "plant closing" or "mass layoff," as those terms are defined in the United States Worker Adjustment and Restraining Notification Act, as amended, or any similar law, affecting in whole or in part any site of employment, facility, operating unit or employee of the Company or any of its Subsidiaries;



•

grant any material refunds, credits, rebates or other allowances by the Company to any end user, customer, reseller or distributor, in each case, other than in the ordinary course of business;



•

abandon or allow to lapse or expire any registration or application for material Company intellectual property;



•

enter into any material new line of business outside of its existing business segments;



•

except as otherwise contemplated by the Merger Agreement, communicate with employees of the Company or any of its subsidiaries regarding the compensation, benefits or other treatment that they will receive in connection with the Merger prior to providing Parent with prior notice of, and the opportunity to review and comment upon, any such communications; or



•

knowingly commit, authorize, agree to take or enter into any letter of intent or similar agreement or arrangement with respect to any of the actions described above.

Acquisition Proposals by Third Parties; Change of Recommendation

        In accordance with the Merger Agreement, the Company instructed and caused its subsidiaries and its and their respective representatives to cease all discussions and negotiations with any persons that was ongoing at the execution of the Merger Agreement with respect to an Acquisition Proposal. In addition, the Company has agreed that it will not and will not authorize or permit any subsidiary or representative to, directly or indirectly:

•

initiate, solicit, propose, knowingly encourage (including by providing information) or take any action to knowingly facilitate any inquiries or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to an Acquisition Proposal;



•

engage in, continue or otherwise participate in any discussions (other than to refer to the Merger Agreement) or negotiations regarding, or provide any information or data concerning the Company or any of its subsidiaries to any person relating to, any Acquisition Proposal or any proposal or offer that would reasonably be expected to lead to an Acquisition Proposal;

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•

grant any waiver, amendment or release under any standstill or confidentiality agreement or Section 203 of the DGCL (other than with respect to a confidential proposal made to the Board (directly or indirectly through the Company's representatives) or as would restrict the Company's rights under the Merger Agreement);



•

approve, endorse, recommend, or execute or enter into any letter of intent, agreement in principle, Merger Agreement, acquisition agreement or other similar agreement relating to an Acquisition Proposal or any proposal or offer that could reasonably be expected to lead to an Acquisition Proposal, or that contradicts, or requires us to abandon, the Merger Agreement; or



•

resolve, propose or agree to do any of the foregoing.

        An "Acquisition Proposal" is defined as any inquiry, proposal or offer relating to (i) the acquisition of 20 percent or more of any class of the equity interests in the Company (by vote or by value) by any third party, (ii) any merger, consolidation, business combination, reorganization, share exchange, sale of assets, recapitalization, equity investment, joint venture, liquidation, dissolution or other transaction which would result in any third party acquiring assets (including capital stock of or interest in any subsidiary or affiliate of the Company) representing, directly or indirectly, 20 percent or more of the net revenues, net income or assets of the Company and its subsidiaries, taken as a whole, (iii) the acquisition (whether by merger, consolidation, equity investment, share exchange, joint venture or otherwise) by any third party, directly or indirectly, of any class of equity interest in any entity that holds assets representing, directly or indirectly, 20 percent or more of the net revenues, net income or assets of the Company and its subsidiaries, taken as a whole, (iv) any tender offer or exchange offer, as such terms are defined under the Exchange Act, that, if consummated, would result in any third party beneficially owning 20 percent or more of the outstanding shares of our Common Stock and any other voting securities of the Company (or instruments convertible to or exchangeable for 20 percent or more of such outstanding shares or securities) or (v) any combination of the foregoing.

        However, notwithstanding the foregoing, before the adoption of the Merger Agreement at the special meeting of our stockholders, we may furnish non-public information with respect to the Company and its subsidiaries (pursuant to a confidentiality agreement no less favorable to us than the confidentiality agreement with the Sponsor and Savvian as our financial advisor) to, and enter into discussions and negotiations with, a third party in connection with a bona fide written Acquisition Proposal and approve or recommend such proposal, if:

•

the Board determines in good faith, after consultation with outside legal advisor, that failure to take such action would be inconsistent with the Board's fiduciary duties under applicable law; and



•

the Board determines in good faith, after consultation with its outside financial and legal advisors, that the Acquisition Proposal either constitutes or would reasonably be expected to result in a Superior Proposal.

        A "Superior Proposal" is a bona fide written Acquisition Proposal (with all of the percentages increased to 80 percent) that the Board determines in good faith, after consultation with its outside financial and legal advisors, and taking into consideration all of the terms, conditions, impact and all legal, financial, regulatory and other aspects of such Acquisition Proposal, (i) is reasonably likely to be consummated in accordance with its terms and (ii) would result in a transaction more favorable to our stockholders from a financial point of view than the transactions provided for in the Merger Agreement.

        Subject to the exceptions discussed below, the Board may not effect a Company Adverse Recommendation Change. "Company Adverse Recommendation Change" means the occurrence of any of the following: (i) the Board withholds, withdraws, qualifies or modifies (or publicly propose or resolve to withhold, withdraw, qualify or modify), in a manner adverse to Parent or Merger Sub, the

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Board's recommendation with respect to the Merger, (ii) the Board adopts, approves or recommends to our stockholders or proposes to adopt, approve or recommend to our stockholders an Acquisition Proposal, (iii) the Board fails to reaffirm publicly its recommendation with respect to the Merger within five business days after Parent so requests in writing (unless the Company had previously made such reaffirmation on two or more occasions or within the 30 days immediately preceding such request and unless, at the time of such request, there has not been a publicly announced Acquisition Proposal that has not been withdrawn or there are substantial market rumors with respect to a potential Acquisition Proposal) or (iv) the Board fails to recommend against any Acquisition Proposal subject to Regulation 14D under the Exchange Act in a Solicitation/Recommendation Statement on Schedule 14D-9 within 10 business days after the commencement of such Acquisition Proposal.

        However, notwithstanding the foregoing, if, prior to the adoption of the Merger Agreement by our stockholders, the Company receives a bona fide written Acquisition Proposal that the Board concludes in good faith constitutes a Superior Proposal, then the Board may effect a Company Adverse Recommendation Change with respect to such Superior Proposal and terminate the Merger Agreement to enter into an acquisition agreement with respect to such Superior Proposal, if:

•

the Board determines in good faith, after consultation with its outside financial and legal advisors, that failure to do so would be inconsistent with the Board's fiduciary duties under applicable law;



•

the Company complies in all material respects with its obligations under the applicable "no-shop" provisions in the Merger Agreement with respect to such Acquisition Proposal;



•

the Company provides prior written notice to Parent at least four business days in advance (the "Notice Period"), to the effect that the Board has received a bona fide written Acquisition Proposal that is not withdrawn and that the Board concludes in good faith constitutes a Superior Proposal and, absent any revision to the terms and conditions of the Merger Agreement, the Board has resolved to effect a Company Adverse Recommendation Change and/or to terminate the Merger Agreement;



•

prior to effecting such Company Adverse Recommendation Change or termination, the Company, during the Notice Period, negotiates with Parent and its representatives in good faith (to the extent Parent desires to negotiate) to make such adjustments in the terms and conditions of the Merger Agreement so that such Acquisition Proposal would cease to constitute a Superior Proposal; and



•

the Company effects any such termination in accordance with the termination provisions discussed below, including the payment of the Company Termination Fee.

        In addition, at any time prior to the adoption of the Merger Agreement by our stockholders, the Board may, in response to a material development or change in material circumstances not relating to any Acquisition Proposal that arose after the date of the Merger Agreement and the existence and material consequences of which were not known by the Board at or prior to the date of the Merger Agreement, effect a Company Adverse Recommendation Change, if:

•

the Board determines in good faith, after consultation with its outside financial and legal advisors, that the failure to do so would be inconsistent with the Board's fiduciary duties under applicable law; and



•

the Company provides to Parent at least four business days prior written notice (unless such development or change arose fewer than four business days prior to our stockholders' meeting, in which case such notice may be given as promptly as practicable prior to such meeting) and, during such four business days, if requested by Parent, engages in good faith negotiations with Parent to make such adjustments in the terms of the Merger Agreement in such a manner that obviates the need for a Company Adverse Recommendation Change.

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Stockholders' Meeting

        The Merger Agreement requires us to duly call, give notice of and hold a meeting of our stockholders for the purpose of considering the adoption of the Merger Agreement promptly following the date upon which this proxy statement is cleared by the SEC. Subject to certain fiduciary obligations of our directors, the Board is required to recommend that our stockholders vote in favor of the Merger Agreement at our stockholders' meeting. Until the Board or any committee withdraws or modifies its recommendation in favor of the Merger, we are required to take all reasonable best efforts to solicit the number of votes needed for adoption of the Merger Agreement. Under the Merger Agreement, we are required to submit the Merger Agreement to our stockholders even if the Board withdraws or modifies its recommendation in favor of the Merger, unless the Merger Agreement is validly terminated according with its terms.

Indemnification of Directors and Officers; Insurance

        The Merger Agreement provides that, from the effective time of the Merger, all rights to indemnification, expense advancement and exculpation from personal liability existing in favor of any of our or our subsidiaries' present or former directors, officers or employees as provided in the applicable charter or organizational documents as in effect on the date of the Merger Agreement will survive the Merger to the same extent and in the same manner as on June 23, 2013. The Company as the surviving corporation also has agreed to abide by each of our contractual obligations to provide indemnification and exculpation to any person.

        The Merger Agreement also requires the surviving corporation to negotiate and purchase "tail" insurance coverage that provides coverage for a period of six years for acts or omissions occurring on or prior to the effective time of the Merger that is no less favorable in amount and terms and conditions of coverage than our existing directors and officers liability insurance policy, and that will not exceed an annual premium of $600,000; or if substantially equivalent insurance coverage is not available, the best available coverage that can be purchased for an annual premium of $600,000.

Equity Financing Commitment; Cooperation of the Company

        Parent and Merger Sub expect that the funds necessary to complete the Merger and related transactions will be funded by equity financing, debt financings and cash and property of the Company. However, Parent's and Merger Sub's obligations to complete the Merger are not subject to any financing conditions. Although funding of the equity financing of the Sponsor is subject to the satisfaction of the conditions set forth in the commitment letter under which the financing will be provided, the unfulfilled conditions are limited to satisfaction of the closing conditions set forth in the Merger Agreement. The following arrangements are in place for the financing of the Merger:

        Equity Financing.     Parent has received an equity commitment letter from the Sponsor to provide an equity contribution to allow Parent and/or Merger Sub to fund, together with the debt financing discussed below, the aggregate Merger Consideration (including any payments owed to holders of outstanding Company options, restricted stock units and restricted stock granted by the Company in accordance with the Merger Agreement) and to pay related fees and expenses upon the consummation of the Merger. In addition, the Sponsor has agreed to guarantee Parent's obligations to pay the Parent Termination Fee as described below. Parent and Merger Sub have agreed to take or cause to be taken all actions necessary or advisable to obtain the proceeds of the equity financing.

        Debt Financing.     In addition, Parent has obtained a debt financing commitment, which is subject to certain terms and conditions, for the transaction contemplated by the Merger Agreement. Ares Capital Corporation has committed to provide a senior secured credit facility in the maximum aggregate amount of $185 million on the terms and subject to the conditions set forth in a debt commitment letter. The Financing Facility will consist of (i) the Revolver and (ii) the Term Loan.

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Parent will be entitled to use the Revolver for working capital, to finance capital expenditures, and for general corporate purposes. Parent will be entitled to use the Term Loan to finance the acquisition of the Company, finance any existing debt of the Company, pay fees and expenses incurred in connection with the transactions contemplated by the Merger Agreement, and for general corporate purposes of the Parent or its subsidiaries.

Sponsor Limited Guarantee

        The Sponsor has guaranteed to us Parent's obligation under the Merger Agreement to pay a termination fee of $27,600,000 in certain circumstances.

Additional Agreements

Mutual Agreements

        In addition to the other agreements described elsewhere in this section of this proxy statement, the Company, Parent and Merger Sub have agreed to take the following actions:

•

to use 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 parties to the Merger Agreement in doing, all things necessary, proper or advisable to fulfill all conditions to the obligations to consummate the transactions contemplated by the Merger Agreement, including obtaining all actions or non-actions, waivers, consents, qualifications and approvals from governmental entities and making all necessary registrations, filings and notices, taking all reasonable steps as may be necessary to obtain any required approval, waiver or exemption from any governmental entity, and all necessary consents, qualifications, approvals, waivers or exemptions from the non-governmental third parties, and defending or contesting any action, suit or proceeding challenging the Merger Agreement or the transactions contemplated by the Merger Agreement.



•

to consult with and obtain the approval of the other parties to the Merger Agreement before issuing the initial, joint press release, and thereafter;



•

to cooperate with each other in the preparation, execution, and filing of all returns, questionnaires, applications or other documents regarding real property, gains, sales, use, transfer, valued added, stock transfer and stamp taxes, any transfer, recording, registration or other fees; and



•

to cooperate with each other to take, or cause to be taken, all actions necessary to delist the Company common stock from The Nasdaq Global Select Market.

Company Agreements

        In addition to the other agreements described elsewhere in this section of this proxy statement, we have agreed to take the following actions from the date of the Merger Agreement until the earlier of the effective time of the Merger or the termination of the Merger Agreement:

•

to provide Parent and Merger Sub and their respective representatives access to certain information and personnel.

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Parent and Merger Sub Agreements

        In addition to the other agreements described elsewhere in this section of this proxy statement, Parent and Merger Sub have agreed to take, or refrain from taking, the following actions:

•

negotiate and execute definitive debt agreements, satisfy all conditions set forth in the debt commitment letter, obtain the financing necessary to pay the Merger Consideration, and comply with the obligations of the debt commitment letter;



•

use commercially reasonable efforts to mitigate any "parachute payments" (within the meaning of Section 280G of the Code) to "disqualified individuals" (within the meaning of Section 280G of the Code) of the Company, which efforts may include analyses with respect to reasonable compensation and the valuation of noncompetition agreements; and



•

for a period of at least one year after the effective time of the Merger, to provide or cause to be provided to our or our subsidiaries' employees who continue as employees following the Merger compensation and employee benefits (but excluding equity-based compensation) that are in the aggregate not materially less favorable than those provided to our employees immediately prior to the effective time, and with respect to any health benefit plans maintained by Parent for the benefit of the employees who continue will (i) use commercially reasonable efforts to cause to be waived any eligibility requirements or pre-existing condition limitations in the plan year of the closing, to the extent satisfied or waived under a similar Company benefit plan and (ii) give effect, in determining any deductible maximum out-of-pocket limitations in the year of the closing, to amounts paid by the employee with respect to substantially similar plans maintained by the Company or its Subsidiaries during the year of the closing.

Conditions to the Merger

        The completion of the Merger depends on the satisfaction or waiver of the following mutual conditions:

•

adoption of the Merger Agreement by our stockholders;



•

absence of any federal, state, local or foreign, law, injunction, or order of any governmental entity, that permanently enjoins or otherwise prohibits the consummation of the Merger; and



•

expiration or termination of the applicable waiting period and any extension under the HSR Act.

        The obligation of the Parent and Merger Sub to complete the Merger is subject to the following conditions:

•

accuracy of the representations and warranties of the Company as of the date of the Merger Agreement and immediately before the effective time of the Merger, subject to certain exceptions;



•

performance in all material respects by the Company of all obligations under the Merger Agreement required to be performed by the Company;



•

delivery of a tax matters certificate executed by us to the effect that we are not a United States real property holding company within the meaning of section 897(c)(2) of the Internal Revenue Code of 1986;



•

the absence of any change, event, occurrence, effect, fact or condition that has, individually or in the aggregate, a Company Material Adverse Effect;



•

filing by us of all certifications, reports and proxy statements required to be filed with the SEC prior to the closing that are required to contain financial statements; and

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•

our delivery to Parent of payoff letters with respect to all indebtedness of the Company and its subsidiaries for borrowed money as of the closing and release of all encumbrances securing such indebtedness.

        The obligation of the Company to complete the Merger is subject to the following conditions:

•

accuracy of the representations and warranties of Parent and Merger Sub as of the date of the Merger Agreement and immediately before the effective time of the Merger, subject to certain exceptions; and



•

performance in all material respects by the Company of all obligations under the Merger Agreement required to be performed by Parent and Merger Sub.

        Either we or Parent may elect to waive a condition to its obligation to complete the Merger that has not been satisfied and complete the Merger regardless of the failure of that condition. We cannot be certain whether or when any of these conditions will be satisfied or waived, or that we will complete the Merger.

Termination

        We and Parent can agree by mutual written consent at any time prior to the effective time of the Merger to terminate the Merger Agreement and abandon the Merger, whether before or after adoption of the Merger Agreement by our stockholders. Also, we or Parent can decide without the consent of the other not to complete the Merger in a number of other situations, including:

•

if any governmental entity of competent jurisdiction has issued, any injunction or other order enjoins or otherwise prohibits the Merger and such order has become final and non-appealable;



•

if our stockholders fail to adopt the Merger Agreement (a "No Vote Termination"); and



•

if the Merger is not consummated prior to the Outside Termination Date, unless the party seeking to terminate failed to fulfill any obligation under the Merger Agreement and that is the cause of the failure to complete the Merger.

        In addition, Parent can terminate the Merger Agreement without our consent:

•

if the Board has effected a Company Adverse Recommendation Change (a "Company Adverse Recommendation Change Termination");



•

if we breach any of our representations, warranties, covenants or agreements under the Merger Agreement and such breach (a) would result in our failure to satisfy the conditions precedent in the Merger Agreement related to the accuracy of our representations and warranties and our material performance of our agreements and covenants under the Merger Agreement and (b) has not been cured, or is not reasonably capable of being cured before the Outside Termination Date or we do not within 30 calendar days after written notice of such breach make commercially reasonable efforts to cure (a "Material Company Breach Termination"); or



•

if we breach any of our obligations related to the proxy discussed on page 57, the special meeting discussed on page 17 (a "Stockholder Meeting Termination"), or the "no-shop" requirement discussed on page 52, other than any breaches that are authorized, materially cured, immaterial, or inadvertent.

        We can terminate the Merger Agreement without Parent's consent:

•

in order to enter into any acquisition agreement for a Superior Proposal (a "Superior Proposal Termination");

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•

if Parent or Merger Sub breaches any of its representations, warranties, covenants or agreements under the Merger Agreement and such breach (a) would result in its failure to satisfy the conditions precedent in the Merger Agreement related to the accuracy of its representations and warranties and its material performance of our agreements and covenants under the Merger Agreement and (b) has not been cured, or is not reasonably capable of being cured before the Outside Termination Date or Parent does not within 30 calendar days after written notice of such breach make commercially reasonable efforts to cure (a "Parent Material Breach Termination"); or



•

if Parent (a) fails to complete the Merger within six business days following the satisfaction or waiver of all conditions to the Merger, and (b) we were ready and willing to consummate the closing (a "Parent Delay Breach Termination").

        Neither we nor Parent have any right to terminate the Merger Agreement except for the situations described in the Merger Agreement.

Termination Fees and Expenses

        We may be required to pay to Parent a termination fee in the amount of $13,800,000 (less any amount previously paid to Parent in reimbursement of Parent's transaction expenses) if the Merger Agreement is terminated under certain specified circumstances, including if:

•

we effect (a) a No Vote Termination and Parent would have been entitled to effect a No-Shop Breach Termination or (b) a Superior Proposal Termination;



•

Parent effects (a) a Company Adverse Recommendation Change Termination or (b) a No-Shop Breach Termination;



•

(a) either party (i) terminates the Merger Agreement because the Merger is not consummated prior to Outside Termination Date or (ii) effects a No Vote Termination and (b) an Acquisition Proposal is publicly announced or otherwise made publically known, and not withdrawn, after the date of the Merger Agreement but prior to the earlier of the date of such termination and the date of the special meeting and (c) within 12 months after such termination we consummate an Acquisition Proposal (but replacing each reference to 20 percent in the definition of Acquisition Proposal with 50 percent) (a "Subsequent Acquisition"); or



•

(a) Parent effects a Material Company Breach Termination due to our willful breach; and (b) within 12 months after such termination we consummate an Acquisition Proposal (but replacing each reference to 20 percent in the definition of Acquisition Proposal with 50 percent).

        We may be required to pay to Parent its reasonable and documented out-of-pocket fees and expenses (including legal fees and expenses) of up to $2,000,000 if (a) Parent effects a Material Company Breach Termination due to our willful breach and (b) Parent is not entitled to the Company Termination Fee.

        Parent may be required to pay to us a termination fee (the "Parent Termination Fee") in the amount of $27,600,000 if (i) the obligations of the Company under the terms of the Merger Agreement have been satisfied or waived, (ii) Parent has failed to complete the closing of the Merger and (iii) the Company effects a Parent Material Breach Termination or Parent Delay Breach Termination.

Remedies

        Both we and Parent and Merger Sub are entitled to seek an injunction, specific performance and other equitable relief to ensure performance of the Merger Agreement unless it is validly terminated as provided in the Merger Agreement, subject to certain exceptions. In particular, we are entitled to seek an injunction, specific performance and other equitable relief to enforce our rights as a third-party

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beneficiary of the equity commitment of the Sponsor if the debt financing has been or will be funded in accordance with the terms of the debt commitment letter (or alternative debt commitment, if applicable).

Amendment and Waiver

        The Merger Agreement may be amended, in accordance with its terms, by the parties in a writing authorized by action of their respective board of directors at any time before or after the stockholder adopt the Merger Agreement and prior to the Merger. After our stockholders have adopted the Merger Agreement, any amendment, modification or supplement that requires additional stockholder adoption will only be effective upon adoption by our stockholders.

        Before the Merger, the Company, Parent and Merger Sub may (i) extend the time for the performance of any of the obligations or other acts of the other party, (ii) waive any inaccuracies in the representations and warranties of the other party contained in the Merger Agreement or in any document delivered pursuant to the Merger Agreement or (iii) waive compliance with any of the agreements or conditions of the other parties contained in the Merger Agreement. Any agreement on the part of a party to any such extension or waiver will be valid only if set forth in an instrument in writing signed on behalf of the party against whom the waiver is to be effective. The failure of any party to the Merger Agreement to assert any of its rights under the Merger Agreement or otherwise will not constitute a waiver of those rights.

Voting Agreements

        As a condition to its willingness to enter into the Merger Agreement, Parent required that certain directors and executive officers in their capacities as stockholders enter into voting agreements with Parent, dated June 23, 2013 (the "Voting Agreements"). The stockholders party to a Voting Agreement have agreed to vote in favor of the adoption of the Merger Agreement and against Acquisition Proposals by third parties. Such voting obligation terminates, among other things, upon a Company Adverse Recommendation Change. Each stockholder who is a party to a voting agreement also agreed that, subject to limited exceptions, the stockholder agrees not to, directly or indirectly, sell, transfer, exchange or otherwise dispose of (including by merger, consolidation or otherwise by operation of law) their shares of common stock and not to, directly or indirectly, grant any proxies or powers of attorney, deposit any of the Shares into a voting trust or enter into a voting agreement with respect to any of the shares of common stock. However, a Voting Agreement does not limit or affect the stockholder's rights or obligations as a director, officer or other fiduciary of the Company.

        Until the Merger is consummated, each Voting Agreement terminates by its terms, or a Company Adverse Recommendation Change that is not rescinded or otherwise withdrawn, the certain directors and executive officers who executed a Voting Agreement will at every meeting of our stockholders called with respect to any of the following, and at every adjournment thereof, and on every action or approval by written consent of the stockholders with respect to any of the following, appear at such meeting (in person or by proxy) and will vote or consent their shares (i) in favor of adoption of the Merger Agreement and (ii) against any Acquisition Proposal.

        Each Voting Agreement terminates upon the earliest of (i) the termination of the Merger Agreement, (ii) the notification by Parent to the Company that it is not willing or not able to proceed with the Merger on substantially the terms set forth in the Merger Agreement, including by advising the Company that it is unwilling to proceed with the Merger unless the Merger Consideration is reduced or changed in form, (iii) any waiver, change or amendment to the terms or conditions of the Merger Agreement that adversely affects the director or executive officer, (iv) immediately following our stockholders meeting, including any adjournment or postponement thereof and (v) the Outside Termination Date.

        As of the record date, the directors and executive officers who that have executed a Voting Agreement owned, directly or indirectly, 2,004,313 shares in the aggregate, or approximately 10.8 percent, of our common stock.

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APPRAISAL RIGHTS

        If you (i) do not vote for the adoption of the Merger Agreement at the special meeting, (ii) make a written demand for appraisal prior to the taking of the vote on the adoption of the Merger Agreement and (iii) otherwise comply with the applicable statutory procedures of Section 262, summarized herein, you may be entitled to appraisal rights under Section 262. In order to exercise and perfect appraisal rights, a record holder of shares of our common stock should follow the steps summarized below properly and in a timely manner.