DEFM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-12

BroadSoft, Inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

  (2)  

Aggregate number of securities to which transaction applies:

 

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

  (4)  

Proposed maximum aggregate value of transaction:

 

  (5)  

Total fee paid:

 

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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LOGO

BROADSOFT, INC.

9737 Washingtonian Boulevard, Suite 350

Gaithersburg, Maryland 20878

December 13, 2017

Dear Stockholder:

We invite you to attend a special meeting of stockholders of BroadSoft, Inc. (“BroadSoft” or “we,” “us” or “our”) to be held at BroadSoft’s headquarters at 9737 Washingtonian Boulevard, Suite 350, Gaithersburg, Maryland 20878, at 9:00 a.m., local time, on January 25, 2018 (the “Special Meeting”). Only holders of record of BroadSoft common stock at the close of business on December 11, 2017 (the “Record Date”), will be entitled to vote at the Special Meeting or any adjournment or postponement of the Special Meeting.

At the Special Meeting, we will ask you to vote for the adoption of the Agreement and Plan of Merger, dated as of October 20, 2017, by and among Cisco Systems, Inc. (“Cisco”), Brooklyn Acquisition Corp., a wholly-owned subsidiary of Cisco, and BroadSoft (the “merger agreement”). As a result of the merger contemplated by the merger agreement (the “merger”), BroadSoft will become a wholly-owned subsidiary of Cisco.

We are also asking you (a) to approve, on an advisory basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger and (b) to expressly grant the authority to vote your shares to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement.

If the merger is completed, you will be entitled to receive $55.00 in cash, without interest and subject to all applicable tax withholding, for each share of BroadSoft common stock that you own (unless you have properly and validly demanded and perfected your statutory rights of appraisal with regard to the merger), and you will have no ongoing ownership interest in the continuing business of BroadSoft. We cannot complete the merger unless all of the conditions to the completion of the merger, including the adoption of the merger agreement by holders of a majority of the outstanding shares of BroadSoft common stock and the receipt of certain regulatory approvals, are satisfied or waived.

Our board of directors carefully reviewed and considered the terms and conditions of the proposed merger. Based on its review, our board of directors has unanimously (a) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable, (b) determined that the merger agreement and the transactions contemplated thereby, including the merger, taken together, are at a price and on terms that are fair to, and in the best interest of BroadSoft and its stockholders, (c) approved the execution, delivery and performance by BroadSoft of the merger agreement and the consummation of the transactions contemplated thereby, including the merger, and (d) resolved to recommend that the stockholders of BroadSoft approve the adoption of the merger agreement and thereby approve the merger.

Our board of directors unanimously recommends that you vote “FOR” the proposal to adopt the merger agreement and thereby approve the merger, “FOR” the proposal to approve, on an advisory basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger, and “FOR” the proposal to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement.


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YOUR VOTE IS IMPORTANT.

In the materials accompanying this letter, you will find a Notice of Special Meeting of Stockholders, a proxy statement relating to the actions to be taken by our stockholders at the Special Meeting and a proxy card. The proxy statement includes other important information about the merger agreement and the merger. We encourage you to read the entire proxy statement and its annexes carefully. A copy of the merger agreement is attached as Annex A to the attached proxy statement.

Your vote is very important, regardless of how many shares you own. Whether or not you plan to attend the Special Meeting, please complete, sign, date and return your proxy card in the enclosed envelope as promptly as possible or submit your proxy over the Internet or by telephone as instructed in these materials. It is important that your shares be represented and voted at the Special Meeting. If you are a stockholder of record on the Record Date, you may vote in person at the Special Meeting as you wish, even if you have previously returned your proxy card or appointed a proxy over the Internet or by telephone. If your shares are held in the name of your bank, brokerage firm or other nominee, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote in person at the Special Meeting.

If your shares of BroadSoft common stock are held in street name by your bank, brokerage firm or other nominee, your bank, brokerage firm or other nominee will be unable to vote your shares of common stock without instructions from you. You should instruct your bank, brokerage firm or other nominee as to how to vote your shares of BroadSoft common stock, following the procedures provided by your bank, brokerage firm or other nominee. The failure to instruct your bank, brokerage firm or other nominee to vote your shares of BroadSoft common stock “FOR” approval of the proposal to adopt the merger agreement and thereby approve the merger will have the same effect as voting against the proposal to adopt the merger agreement and thereby against the merger.

If you have any questions or need assistance voting your shares of BroadSoft common stock, please call MacKenzie Partners, Inc., our proxy solicitor, toll-free at 1-800-322-2885.

On behalf of our board of directors, I thank you for your support and urge you to vote “FOR” the adoption of the merger agreement and thereby approve the merger.

 

Sincerely,

LOGO

 

Michael Tessler

President and Chief Executive Officer

Neither the U.S. Securities and Exchange Commission nor any state securities regulator has approved or disapproved the merger described in the proxy statement or determined if the proxy statement is adequate or accurate. Any representation to the contrary is a criminal offense.


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LOGO

BROADSOFT, INC.

9737 Washingtonian Boulevard, Suite 350

Gaithersburg, Maryland 20878

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON JANUARY 25, 2018

The proxy statement is dated December 13, 2017, and the proxy statement and form of proxy are first being mailed to stockholders of BroadSoft, Inc. on or about December 15, 2017.

Dear Stockholder:

You are cordially invited to attend the Special Meeting of Stockholders of BroadSoft, Inc., a Delaware corporation (“BroadSoft” or “we,” “us” or “our”), that will be held at BroadSoft’s headquarters at 9737 Washingtonian Boulevard, Suite 350, Gaithersburg, Maryland 20878, at 9:00 a.m., local time, on January 25, 2018 (the “Special Meeting”), for the following purposes:

 

  1. To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of October 20, 2017, by and among Cisco Systems, Inc. (“Cisco”), Brooklyn Acquisition Corp., a wholly-owned subsidiary of Cisco, and BroadSoft (the “merger agreement”);

 

  2. To consider and vote, on an advisory basis, upon a proposal to approve the compensation that BroadSoft’s named executive officers may receive in connection with the merger; and

 

  3. To vote to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement.

Our board of directors carefully reviewed and considered the terms and conditions of the merger contemplated by the merger agreement (the “merger”). Based on its review, our board of directors has unanimously (a) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable, (b) determined that the merger agreement and the transactions contemplated thereby, including the merger, taken together, are at a price and on terms that are fair to, and in the best interest of BroadSoft and its stockholders, (c) approved the execution, delivery and performance by BroadSoft of the merger agreement and consummation of the transactions contemplated thereby, including the merger and (d) resolved to recommend that the stockholders of BroadSoft approve the adoption of the merger agreement and thereby approve the merger. This item of business to be submitted to a vote of the stockholders at the Special Meeting is more fully described in the attached proxy statement, which we urge you to read carefully. Our board of directors also unanimously recommends that you (i) vote to approve, on an advisory basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger and (ii) expressly grant the authority to vote your shares to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement. We are not aware of any other business to come before the Special Meeting.

Stockholders of record at the close of business on December 11, 2017 (the “Record Date”), are entitled to notice of and to vote at the Special Meeting and any adjournment or postponement of the meeting. All stockholders are cordially invited to attend the Special Meeting in person. Adoption of the merger agreement will require the affirmative vote of the holders of a majority of the outstanding shares of BroadSoft common stock entitled to vote thereon at the close of business on the Record Date.

BroadSoft stockholders will have the right to demand appraisal of their shares of common stock and obtain payment in cash for the fair value of their shares of common stock, but only if they submit a written demand for an appraisal before the vote is taken on the adoption of the merger agreement and comply with the applicable provisions of Delaware law. A copy of the Delaware statutory provisions relating to appraisal rights is included as Annex C to the attached proxy statement, and a summary of these provisions can be found under “The Merger — Appraisal Rights” in the attached proxy statement.


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You should not send any certificates representing shares of BroadSoft common stock with your proxy card. Upon completion of the merger, you will be sent instructions regarding the procedure to exchange your stock certificates for the cash merger consideration.

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ADOPTION OF THE MERGER AGREEMENT AND THEREBY APPROVE THE MERGER, “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION THAT BROADSOFT’S NAMED EXECUTIVE OFFICERS MAY RECEIVE IN CONNECTION WITH THE MERGER, AND “FOR” THE PROPOSAL TO ADJOURN THE SPECIAL MEETING IF NECESSARY TO PERMIT FURTHER SOLICITATION OF PROXIES IF THERE ARE NOT SUFFICIENT VOTES AT THE TIME OF THE SPECIAL MEETING TO ADOPT THE MERGER AGREEMENT. YOUR VOTE IS IMPORTANT.

Your vote is very important, regardless of the number of shares you own. Even if you plan to attend the Special Meeting in person, we request that you complete, sign, date and return the enclosed proxy card, or appoint a proxy over the Internet or by telephone as instructed in these materials, to ensure that your shares will be represented and voted at the Special Meeting if you are unable to attend. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote in favor of adoption of the merger agreement and thereby approval of the merger, for the approval of the compensation that BroadSoft’s named executive officers may receive in connection with the merger and to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement.

If you fail to return your proxy card or if you fail to appoint a proxy over the Internet or by telephone, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and will have the same effect as a vote against adoption of the merger agreement, but will have no effect on the vote to approve the compensation that BroadSoft’s named executive officers may receive in connection with the merger or to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement. If you do attend the Special Meeting and wish to vote in person, you may withdraw your proxy and vote in person. If your shares are held in the name of your broker, bank or other nominee, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote in person at the Special Meeting.

No person has been authorized to give any information or to make any representations other than those set forth in the proxy statement in connection with the solicitation of proxies made hereby, and, if given or made, such information must not be relied upon as having been authorized by BroadSoft or any other person.

By Order of the Board of Directors,

LOGO

 

Mary Ellen Seravalli
Secretary

December 13, 2017

Gaithersburg, Maryland

Neither the United States Securities and Exchange Commission nor any state securities regulator has approved or disapproved the merger described in the proxy statement or determined if the proxy statement is adequate or accurate. Any representation to the contrary is a criminal offense.

 

IN ADDITION TO DELIVERING THE PROXY MATERIALS FOR THE SPECIAL MEETING TO BE HELD ON JANUARY 25, 2018, TO STOCKHOLDERS BY MAIL, THE PROXY STATEMENT FOR THE SPECIAL MEETING IS ALSO AVAILABLE AT http://investors.broadsoft.com.


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SUMMARY TERM SHEET

     1  

BroadSoft, Inc.

     1  

Cisco Systems, Inc. and Brooklyn Acquisition Corp.

     1  

The Merger

     1  

Merger Consideration

     1  

Treatment of Equity Awards

     1  

Market for the Common Stock; Dividend Data

     2  

Reasons for the Merger

     2  

Opinions of BroadSoft’s Financial Advisors

     2  

Vote Required and Recommendation of the Board of Directors

     2  

Interests of Our Directors and Executive Officers in the Merger

     3  

Appraisal Rights

     3  

Certain Material U.S. Federal Income Tax Consequences of the Merger

     3  

Antitrust Matters

     4  

The Special Meeting

     4  

The Merger Agreement

     5  

QUESTIONS AND ANSWERS ABOUT THE MERGER

     7  

RISK FACTORS RELATED TO PROPOSAL 1

     11  

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

     13  

THE COMPANIES

     14  

BroadSoft, Inc.

     14  

Cisco Systems, Inc.

     14  

Brooklyn Acquisition Corp.

     14  

LITIGATION RELATED TO THE MERGER

     15  

THE SPECIAL MEETING

     16  

Date, Time and Place

     16  

Purpose of the Special Meeting

     16  

Record Date; Stock Entitled to Vote; Quorum

     16  

Vote Required

     16  

Voting of Proxies

     17  

Voting over the Internet or by Telephone

     18  

Revocability of Proxies

     18  

Solicitation of Proxies

     19  

Delivery of this Proxy Statement to Multiple Stockholders with the Same Address

     19  

Stockholder List

     19  

PROPOSAL 1 – ADOPTION OF THE MERGER AGREEMENT

     20  

THE MERGER

     20  

Background of the Merger

     20  

Reasons for the Merger

     29  

Opinions of BroadSoft’s Financial Advisors

     31  

Certain Projections Utilized by BroadSoft in Connection with the Merger

     45  

Vote Required and Recommendation of the Board of Directors

     48  

Interests of Our Directors and Executive Officers in the Merger

     48  

Appraisal Rights

     56  

Delisting and Deregistration of BroadSoft Common Stock

     59  

Certain Material U.S. Federal Income Tax Consequences of the Merger

     59  

Antitrust Matters

     61  

THE MERGER AGREEMENT

     63  

The Merger

     63  

Closing and Effective Time of Merger

     63  

Merger Consideration

     64  

 

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Payment for Shares of Common Stock

     64  

Treatment of Equity Awards

     65  

Cisco’s Employment Agreements with BroadSoft’s Executive Officers

     65  

Representations and Warranties

     66  

Conduct of Business Prior to Closing

     68  

Proxy Statement, Board Recommendation and Stockholders Meeting

     72  

No Solicitation of Other Offers

     73  

Ability to Change Board Recommendation/Termination in Connection with a Superior Proposal

     75  

Agreements to Use Reasonable Best Efforts

     77  

Indemnification and Insurance

     77  

Employee Benefits

     78  

Other Covenants

     78  

Conditions to the Merger

     79  

Termination of the Merger Agreement

     81  

Fees and Expenses

     82  

Termination Fees

     83  

Effect of Termination

     84  

Amendment

     84  

PROPOSAL 2 – ADVISORY VOTE ON COMPENSATION

     85  

The Advisory Vote on Compensation

     85  

Vote Required and Recommendation of the Board of Directors

     85  

PROPOSAL 3 – AUTHORITY TO ADJOURN THE SPECIAL MEETING

     86  

The Adjournment Proposal

     86  

Vote Required and Recommendation of the Board of Directors

     86  

SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     87  

MARKET FOR THE COMMON STOCK; DIVIDEND DATA

     89  

OTHER MATTERS

     90  

Adjournments

     90  

Stockholder Proposals

     90  

Where You Can Find More Information

     90  

Directions to the Special Meeting Location

     91  

ANNEX A

   AGREEMENT AND PLAN OF MERGER DATED AS OF OCTOBER 20, 2017, BY AND AMONG CISCO SYSTEMS, INC., BROOKLYN ACQUISITION CORP., AND BROADSOFT, INC.      A-1  

ANNEX B-1

  

OPINION OF QATALYST PARTNERS LP

     B-1-1  

ANNEX B-2

  

OPINION OF JEFFERIES LLC

     B-2-1  

ANNEX C

  

SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW

     C-1  

 

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SUMMARY TERM SHEET

This summary highlights selected information from this proxy statement and may not contain all of the information that is important to you. To fully understand the merger contemplated by the Agreement and Plan of Merger, dated as of October 20, 2017, by and among Cisco Systems, Inc. (“Cisco”), Brooklyn Acquisition Corp., a wholly-owned subsidiary of Cisco, and BroadSoft, Inc. (“BroadSoft” or “we,” “us” or “our”) (the “merger agreement” and the merger contemplated thereby, the “merger”), and for a more complete description of the legal terms of the merger agreement, you should read carefully this entire proxy statement and the documents to which we refer. See “Other Matters — Where You Can Find More Information” (page 90) to obtain additional information on BroadSoft. We have included page references in parentheses to direct you to a more complete description of the topics presented in this summary. The merger agreement is attached as Annex A to this proxy statement. We encourage you to read the merger agreement as it is the legal document that governs the merger.

BroadSoft, Inc. (page 14). BroadSoft is a leading global provider of software and services that enable telecommunications service providers to deliver hosted, cloud-based Unified Communications, or UC, to their enterprise customers. Traditionally, many enterprises have utilized premise-based private branch exchanges, or PBX’s, to connect their offices and people to public telephony networks. Hosted UC enables the delivery of PBX features without the need for premise-based equipment. Hosted UC can be delivered through service providers using their own internet protocol, or IP-based networks and their mobile networks, as well as over the public internet (also known as “over the top” or OTT). In addition to voice telephony, UC offers additional features such as full integration with mobile devices, high definition, or HD, voice and video calling and conferencing, instant messaging and presence, or IM&P, team collaboration and desktop sharing.

Cisco Systems, Inc. and Brooklyn Acquisition Corp. (page 14). Cisco is a California corporation that designs and sells a broad range of technologies that have been powering the Internet since 1984. Across networking, security, collaboration and the cloud, Cisco’s evolving intent-based technologies are constantly learning and adapting to provide customers with a highly secure, intelligent platform for their digital business. Brooklyn Acquisition Corp. (“Merger Sub”) is a newly formed Delaware corporation and a wholly-owned subsidiary of Cisco that has been formed specifically for the purpose of participating in the merger transaction with BroadSoft.

The Merger (page 20). Under the merger agreement, Merger Sub will merge with and into BroadSoft, and BroadSoft will be the surviving corporation in the merger. After the completion of the merger, Cisco will own all outstanding shares of BroadSoft common stock. Our stockholders will receive cash in the merger in exchange for their shares of BroadSoft common stock.

Merger Consideration (page 64). If the merger is completed, you will receive $55.00 in cash, without interest and subject to all applicable tax withholding, in exchange for each share of BroadSoft common stock that you own unless you properly dissent and seek appraisal of the fair value of your shares in accordance with Delaware law. After the merger is completed, you will have the right to receive the merger consideration, but you will no longer have any rights as a BroadSoft stockholder.

Treatment of Equity Awards (page 65). Each outstanding vested stock option, vested restricted stock unit (“RSU”) and vested performance stock unit (“PSU”) granted under BroadSoft’s equity plans (including such stock options, RSUs and PSUs that vest in connection with the merger) will terminate and be converted into the right to receive from Cisco an amount of cash equal to $55.00 per share (or in the case of stock options, the excess, if any, of $55.00 over the exercise price of such option), without interest and subject to all applicable tax withholding. Each outstanding unvested stock option, unvested RSU and unvested PSU granted under BroadSoft’s equity plans held by the continuing employees and consultants of BroadSoft or its subsidiaries as of immediately prior to the effective time of the merger will be converted into and substituted for the right to

 



 

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receive from Cisco an amount of cash equal to $55.00 per share (or in the case of stock options, the excess, if any, of $55.00 over the exercise price of such option) (“unvested cash”), payable in accordance with the service-based vesting schedule for such equity award (including any applicable terms relating to termination and accelerated vesting of the equity award), without interest and subject to all applicable tax withholding. The unvested cash payable with respect to unvested PSUs will no longer be subject to performance-based vesting criteria but service-based vesting criteria only.

Market for the Common Stock; Dividend Data (page 89). BroadSoft common stock is listed on the NASDAQ Global Select Market under the ticker symbol “BSFT.” On August 29, 2017, the last full trading day prior to published speculation regarding a potential transaction involving BroadSoft, BroadSoft common stock closed at $43.05 per share. On October 20, 2017, the last full trading day prior to the public announcement of the proposed merger, BroadSoft common stock closed at $53.90 per share. On December 12, 2017, the last full trading day prior to the date of this proxy statement, BroadSoft common stock closed at $54.60 per share. Our stock price can fluctuate broadly even over short periods of time. It is impossible to predict the actual price of our stock immediately prior to the completion of the merger. We have never declared or paid dividends on our capital stock.

Reasons for the Merger (page 29). In the course of reaching its decision to approve the merger and the merger agreement, our board of directors considered possible alternative transactions involving us, as well as the merger described in this proxy statement, and considered a number of factors in its deliberations. Those factors are described below in this proxy statement.

Opinions of BroadSofts Financial Advisors (page 31). Our board of directors retained Qatalyst Partners LP (which we refer to as Qatalyst Partners) and Jefferies LLC (which we refer to as Jefferies) as its financial advisors in connection with the potential sale of BroadSoft. Qatalyst Partners and Jefferies each delivered an opinion to our board of directors to the effect that, as of October 20, 2017 and based on and subject to the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken, the merger consideration was fair, from a financial point of view, to holders of BroadSoft common stock (excluding Cisco or any affiliate of Cisco). You should read carefully and in their entirety the full text of Qatalyst Partners’ and Jefferies’ written opinions attached as Annex B-1 and Annex B-2, respectively, to this proxy statement, which are subject to the assumptions, limitations, qualifications and other conditions contained in such opinions and are necessarily based on economic, capital markets and other conditions, and the information made available to Qatalyst Partners and Jefferies, as of the date of such opinions.

For a description of the opinions that our board of directors received from Qatalyst Partners and from Jefferies, see “The Merger — Opinions of BroadSoft’s Financial Advisors” beginning on page 31.

Vote Required and Recommendation of the Board of Directors (pages 48, 85 and 86). Our board of directors has unanimously (a) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable, (b) determined that the merger agreement and the transactions contemplated thereby, including the merger, taken together, are at a price and on terms that are fair to, and in the best interest of BroadSoft and its stockholders, (c) approved the execution, delivery and performance by BroadSoft of the merger agreement and the consummation of the transactions contemplated thereby, including the merger and (d) resolved to recommend that the stockholders of BroadSoft approve the adoption of the merger agreement and thereby approve the merger. Our board of directors unanimously recommends that you vote “FOR” the proposal to adopt the merger agreement and thereby approve the merger, “FOR” the proposal to approve, on an advisory basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger, and “FOR” the proposal to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement.

 



 

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Interests of Our Directors and Executive Officers in the Merger (page 48). In considering the unanimous recommendation of our board of directors to vote in favor of the adoption of the merger agreement, you should be aware that the consummation of the merger will result in certain benefits to our directors and executive officers that are not available to our stockholders generally, including the following:

 

    accelerated vesting, upon the effective time of the merger, of the RSUs, held by non-employee non-continuing directors, as described in more detail below under the section of this proxy statement captioned “The Merger — Interests of Our Directors and Executive Officers in the Merger”;

 

    the entitlement of each executive officer to receive cash severance payments and benefits either under his existing Change in Control Severance Benefits Agreement or under a new employment agreement entered into with Cisco in connection with the merger, if his employment is terminated without cause or with good reason within 12 months or three years, as applicable, following the merger, as described in more detail below under the sections captioned “The Merger — Interests of Our Directors and Executive Officers in the Merger”;

 

    accelerated vesting and payment of unvested cash in connection with qualifying termination of an executive officer’s employment following the merger, as described in more detail below under the sections captioned “The Merger — Interests of Our Directors and Executive Officers in the Merger”; and

 

    continuation of certain indemnification and insurance arrangements.

In addition, Messrs. Tessler, Hoffpauir and Tholen have entered into employment agreements with Cisco setting forth the terms and conditions of these executives’ continued employment with Cisco from and after the closing of the merger, as further described under the section “The Merger — Interests of Our Directors and Executive Officers in the Merger” below.

Appraisal Rights (page 56). If you do not wish to accept the $55.00 per share cash consideration in the merger, you have the right under Delaware law to have your shares appraised by the Delaware Chancery Court. This “right of appraisal” is subject to a number of restrictions and technical requirements. Generally, to exercise appraisal rights, among other things, (a) you must NOT vote in favor of the adoption of the merger agreement, (b) you must make a written demand for appraisal in compliance with Delaware law BEFORE the vote on the adoption of the merger agreement and (c) you must hold shares of BroadSoft common stock on the date of making the demand for appraisal and continuously hold such shares through the completion of the merger. The fair value of your shares of BroadSoft common stock as determined in accordance with Delaware law may be more or less than, or the same as, the merger consideration to be paid to non-dissenting stockholders in the merger. Merely voting against the adoption of the merger agreement will not preserve your right of appraisal under Delaware law. Annex C to this proxy statement contains a copy of the Delaware statute relating to stockholders’ right of appraisal. Failure to follow all of the steps required by this statute may result in the loss of your appraisal rights. We encourage you to read these provisions carefully and in their entirety.

Certain Material U.S. Federal Income Tax Consequences of the Merger (page 59). In general, the receipt of cash by you in exchange for your shares of BroadSoft common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. Generally, subject to the more complete summary referenced in the next sentence, if you are a “U.S. person” (as defined in such summary) this means that for U.S. federal income tax purposes you will recognize taxable gain or loss equal to the difference, if any, between the total amount of cash you receive in the merger for your shares of BroadSoft common stock and your adjusted tax basis in such shares. You should read “The Merger — Certain Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 59 for a more complete summary of certain material U.S. federal income tax

 



 

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consequences of the merger. Tax matters can be complicated and the tax consequences of the merger to you will depend on the facts of your own situation. You should consult your own tax advisor to understand fully the tax consequences of the merger to you.

Antitrust Matters (page 61). The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and certain other applicable foreign antitrust laws prohibits us from completing the merger until we have furnished certain information and materials to the Antitrust Division of the Department of Justice, the Federal Trade Commission and certain applicable foreign antitrust authorities and the required waiting periods under the HSR Act have expired or been terminated and certain applicable foreign antitrust approvals have been obtained. BroadSoft and Cisco each filed the requisite notification and report forms with the Federal Trade Commission and the Antitrust Division on November 13, 2017. Cisco is withdrawing its filing on December 13, 2017, and will refile on December 15, 2017 to provide the antitrust agencies more time to review the transaction. Both BroadSoft and Cisco will also file in certain other applicable foreign jurisdictions.

The Special Meeting (page 16).

Time, Date and Place. The Special Meeting will be held (a) to consider and vote upon the proposal to adopt the merger agreement and thereby approve the merger, (b) to consider and vote, on an advisory basis, on the compensation that BroadSoft’s named executive officers may receive in connection with the merger and (c) to vote to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement and thereby approve the merger. The Special Meeting will be held at BroadSoft’s headquarters at 9737 Washingtonian Boulevard, Suite 350, Gaithersburg, Maryland 20878, at 9:00 a.m., local time, on January 25, 2018.

Record Date and Voting Power. You are entitled to vote at the Special Meeting if you owned shares of BroadSoft common stock at the close of business on December 11, 2017, the record date for the Special Meeting (the “Record Date”). You will have one vote at the Special Meeting for each share of BroadSoft common stock you owned at the close of business on the Record Date. There are 31,775,976 shares of BroadSoft common stock entitled to be voted at the Special Meeting.

Procedure for Voting. To vote, you can (a) complete, sign, date and return the enclosed proxy card, (b) appoint a proxy over the Internet or by telephone or (c) attend the Special Meeting and vote in person. If your shares are held in “street name” by your broker, bank or other nominee, you should instruct your broker to vote your shares by following the instructions provided by your broker. Your broker will not vote your shares without instruction from you. Failure to instruct your broker to vote your shares will have the same effect as a vote “against” the adoption of the merger agreement, but will have no effect on the other two proposals.

Required Vote.

 

    The adoption of the merger agreement, and thereby approval of the merger, requires the affirmative vote of the holders of a majority of the outstanding shares of BroadSoft common stock entitled to vote thereon at the close of business on the Record Date.

 

    The proposal to consider and vote, on an advisory basis, upon a proposal to approve the compensation that BroadSoft’s named executive officers may receive in connection with the merger, requires the approval of the holders of a majority of the shares of BroadSoft common stock present, in person or by proxy, at the Special Meeting and entitled to vote on the matter.

 

    The proposal to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement, requires the approval of the holders of a majority of the shares of BroadSoft common stock present, in person or by proxy, at the Special Meeting and entitled to vote on the matter.

 



 

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Abstentions will have the same effect as “against” votes with respect to (a) the proposal to adopt the merger agreement, (b) the proposal to approve, on an advisory basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger, and (c) the proposal to adjourn the Special Meeting if necessary. Broker non-votes will have the same effect as “against” votes with respect to the proposal to adopt the merger agreement, and will have no effect with respect to the other two proposals. Broker non-votes are shares held in “street name” by the beneficial owner of the shares and for which no instruction has been given to the broker on how to vote the shares, and the broker then does not vote the shares because the broker does not have the discretionary authority to do so.

The Merger Agreement (page 63).

No Solicitation of Competing Transactions by BroadSoft. Pursuant to the merger agreement, while the merger is pending, BroadSoft must, and must cause its subsidiaries and their respective representatives to immediately cease all existing activities, discussions and negotiations with any other third party conducted prior to signing the merger agreement with respect to any “acquisition proposal” and to direct any third party with which BroadSoft has engaged in any such activities, discussions and negotiations within the 12-month period preceding the signing of the merger agreement to promptly return or destroy all confidential information previously provided to such third party. BroadSoft also must not, and must cause its subsidiaries not to, waive any rights under “standstill” or similar covenants in confidentiality agreements entered into in connection with any acquisition proposal. In addition, while the merger is pending none of BroadSoft’s board of directors, BroadSoft and its subsidiaries may, nor will they authorize or permit any of their representatives to, directly or indirectly, (a) solicit, initiate or knowingly encourage, facilitate or induce the making, submission or public announcement of any inquiry, indication of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, an “acquisition proposal,” (b) enter into, participate in, maintain or continue any communications (except to provide written notice as to the existence of these provisions and to clarify the terms and conditions of any acquisition proposal) or negotiations regarding, or deliver or make available to any person any non-public information with respect to, or knowingly take any other action regarding, any inquiry, indication of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, an acquisition proposal, (c) agree to, accept, approve, endorse or recommend (or publicly propose or announce any intention to agree to, accept, approve, endorse or recommend) any acquisition proposal, (d) enter into any agreement in principle, letter of intent, term sheet or any other agreement, understanding or contract (whether binding or not) contemplating or otherwise relating to any acquisition proposal (other than customary confidentiality agreements), (e) submit any acquisition proposal to the vote of any securityholders of BroadSoft or any of its subsidiaries, (f) approve any transaction, or any third party becoming an “interested stockholder,” under Section 203 of the General Corporation Law of the State of Delaware or (g) resolve, propose or agree to do any of the foregoing, in each case except under specified circumstances set forth in the merger agreement. Please see “The Merger Agreement — No Solicitation of Other Offers” beginning on page 73 for a more complete summary.

Conditions to the Merger. The obligations of Cisco, Merger Sub and BroadSoft to complete the merger are subject to the satisfaction or waiver of specified conditions set forth in the merger agreement and described in this proxy statement, including, among others, the following:

 

    the adoption of the merger agreement by our stockholders at the Special Meeting;

 

    the absence of any order or restraint or applicable legal requirement prohibiting, making illegal or enjoining the completion of the merger;

 

    the expiration or termination of the applicable waiting period under the HSR Act; and

 

    the receipt of certain applicable foreign antitrust approvals.

Please see “The Merger Agreement — Conditions to the Merger” beginning on page 79 for a more complete summary of the conditions to the merger.

 



 

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Termination of the Merger Agreement. The merger agreement may be terminated under specified circumstances set forth in the merger agreement, including, among others, the following:

 

    by mutual written consent of BroadSoft and Cisco;

 

    by either BroadSoft or Cisco if (a) the merger has not been completed on or before July 20, 2018 (subject to extensions as described in the merger agreement and this proxy statement), (b) a governmental entity has issued a final and nonappealable order or taken any other final and nonappealable action, permanently restraining, enjoining or otherwise prohibiting the merger (provided that this right to terminate the merger agreement will not be available to any party that has materially breached its obligations under the merger agreement in any manner that principally caused the existence of such order or action in any material respect), (c) the approval of the adoption of the merger agreement by holders of BroadSoft common stock entitled to vote thereon is not obtained or (d) upon a breach of any covenants or agreement on the part of either party set forth in the merger agreement, or if any representation or warrant of the other party has become inaccurate, in each case such that the closing conditions with respect to the other party regarding the accuracy of representations and warranties and compliance with covenants and agreements would not be satisfied;

 

    by Cisco, prior to the approval by BroadSoft stockholders of the adoption of the merger agreement, upon the occurrence of a “Triggering Event” as described in The Merger Agreement — Ability to Change Board Recommendation/Termination in Connection with a Superior Proposal” beginning on page 75; or

 

    by BroadSoft, prior to the approval by BroadSoft’s stockholders of the adoption of the merger agreement, to accept a superior proposal and enter into a definitive agreement for a superior proposal, provided that BroadSoft makes concurrently a payment to Cisco of a termination fee of $56 million.

Please see “The Merger Agreement — Termination of the Merger Agreement” beginning on page 81 for complete summary of the termination provisions.

Expenses. The merger agreement provides that all fees and expenses incurred in connection with the merger agreement and the transactions contemplated thereby will be paid by the party incurring such expenses, whether or not the merger is consummated, except with respect to a termination fee that may be payable by BroadSoft to Cisco and the reimbursement of certain antitrust expenses of BroadSoft that may be payable by Cisco under certain circumstances as described below.

Termination Fees. The merger agreement requires us to pay Cisco a termination fee of $56 million if the merger agreement is terminated under certain circumstances described in the merger agreement. Cisco is obligated to reimburse BroadSoft for certain antitrust expenses up to $10 million if the merger agreement is terminated under certain circumstances described in the merger agreement involving the failure to consummate the merger by a specified date for failure to receive antitrust approvals. Please see “The Merger Agreement — Termination Fees” beginning on page 83 for a more complete summary regarding termination fees.

 



 

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QUESTIONS AND ANSWERS ABOUT THE MERGER

 

Q: What will happen to BroadSoft as a result of the merger?

 

A: If the merger is completed, we will become a wholly-owned subsidiary of Cisco.

 

Q: What will happen to my shares of BroadSoft common stock after the merger?

 

A: Upon completion of the merger, each outstanding share of BroadSoft common stock will automatically be canceled and will be converted into the right to receive $55.00 in cash, without interest and subject to all applicable tax withholding. This does not apply to shares of BroadSoft common stock held by any BroadSoft stockholders who have properly demanded (and not withdrawn or lost) their appraisal rights under Delaware law (as more fully described below under the heading “The Merger — Appraisal Rights” beginning on page 56 of this proxy statement).

 

Q: Will I own any shares of BroadSoft common stock after the merger?

 

A: No. You will be paid cash for any shares of BroadSoft common stock you own.

 

Q: Will I own any shares of Cisco common stock after the merger?

 

A: Only if you own shares of Cisco common stock before the merger and you continue to hold those shares after the merger. The shares of Cisco common stock that you own, if any, prior to the merger will be unaffected as a result of the merger. Our stockholders will not be issued any shares of Cisco common stock as a result of the merger.

 

Q: What happens to my vested and unvested BroadSoft stock options, RSUs and PSUs in the merger?

 

A: Upon the completion of the merger, each outstanding vested stock option, vested RSU and vested PSU granted under BroadSoft’s equity plans (including such options, RSUs and PSUs that vest in connection with the merger) will terminate and be converted into the right to receive from Cisco an amount of cash equal to $55.00 per share (or in the case of stock options, the excess, if any, of $55.00 over the exercise price of such option), without interest and subject to all applicable tax withholding. Each outstanding unvested stock option, unvested RSU and unvested PSU granted under BroadSoft’s equity plans held by the continuing employees and consultants of BroadSoft or its subsidiaries as of the effective time of the merger will be converted into and substituted for the right to receive from Cisco an amount of unvested cash equal to $55.00 per share (or in the case of stock options, the excess, if any, of $55.00 over the exercise price of such option), payable in accordance with the service-based vesting schedule for such equity award (including any applicable terms relating to termination and accelerated vesting of the equity award), without interest and subject to all applicable tax withholding. The unvested cash payable with respect to unvested PSUs will no longer be subject to performance-based vesting criteria but service-based vesting criteria only. See “The Merger Agreement — Treatment of Equity Awards” for more information.

 

Q: Will the merger be taxable to me?

 

A: Generally, yes. In general, the receipt of cash by you in exchange for your shares of BroadSoft common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. Generally, subject to the more complete summary referenced in the next sentence, if you are a “U.S. person” (as defined in such summary) this means that for U.S. federal income tax purposes you will recognize taxable gain or loss equal to the difference, if any, between the total amount of cash you receive in the merger for your shares of BroadSoft common stock and your adjusted tax basis in such shares. You should read “The Merger — Certain Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 59 for a more complete summary of certain material U.S. federal income tax consequences of the merger.

 

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Q: Does our board of directors recommend adoption of the merger agreement?

 

A: Yes. Our board of directors unanimously recommends that our stockholders vote “For” the adoption of the merger agreement and thereby approve the merger. Our board of directors considered many factors in deciding to unanimously recommend the adoption of the merger agreement and thereby approve the merger. These factors are described in “The Merger — Reasons for the Merger” beginning on page 29.

 

Q: What vote of the stockholders is required to adopt the merger agreement?

 

A: To adopt the merger agreement and thereby approve the merger, stockholders of record as of December 11, 2017, the Record Date, holding a majority of the outstanding shares of BroadSoft common stock entitled to vote thereon must vote “For” the adoption of the merger agreement. As of the Record Date, there are 31,775,976 shares of BroadSoft common stock entitled to be voted at the Special Meeting.

 

Q: Am I entitled to appraisal rights?

 

A: Yes. Under Delaware law, you have the right to seek appraisal of the fair value of your shares as determined by the Delaware Court of Chancery if the merger is completed, but only if you submit a written demand for an appraisal before the vote on the merger agreement, do not vote in favor of adopting the merger agreement and comply with the Delaware law procedures explained in this proxy statement. Please see the discussion below beginning on page 56 for more detail. Annex C to this proxy statement contains a copy of the Delaware statute relating to stockholders’ right of appraisal. Failure to follow all of the steps required by this statute may result in the loss of your appraisal rights. We encourage you to read these provisions carefully and in their entirety.

 

Q: What do I need to do now?

 

A: We urge you to read this proxy statement carefully, including its annexes, and consider how the merger affects you. Then, mail your completed, dated and signed proxy card in the enclosed return envelope or appoint a proxy over the Internet or by telephone by following the instruction on the enclosed proxy card as soon as possible so that your shares can be voted at the Special Meeting.

 

Q: What does it mean if I received more than one set of proxy materials?

 

A: If you received more than one set of proxy materials, it means that you hold shares of BroadSoft common stock in more than one account. For example, you may own your shares in various forms, including jointly with your spouse, as trustee of a trust or as custodian for a minor. To ensure that all of your shares are voted, please provide a proxy or voting instructions for each account for which you received proxy materials.

 

Q: What happens if I do not return a proxy card or otherwise appoint a proxy?

 

A: The failure to return your proxy card (or to appoint a proxy over the Internet or by telephone or to vote in person) by the deadline of 11:59 p.m., Eastern Time, on January 24, 2018 will have the same effect as voting against adoption of the merger agreement.

 

Q: May I vote in person?

 

A: Yes. You may vote in person at the meeting, rather than signing and returning your proxy card or appointing a proxy over the Internet or by telephone, if you own shares in your own name. However, we encourage you to return your signed proxy card, or appoint a proxy over the Internet or by telephone, to ensure that your shares are voted. You may also vote in person at the Special Meeting if your shares are held in “street name” through a broker or bank provided that you bring a legal proxy from your broker or bank and present it at the Special Meeting. You may also be asked to present photo identification for admittance to the special meeting.

 

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Q: May I vote over the Internet or by telephone?

 

A: Yes. You may vote by appointing a proxy over the Internet or by telephone by following the instructions included on the enclosed proxy card.

 

Q: What happens if I transfer my shares of BroadSoft common stock after the record date?

 

A: The record date for the determination of stockholders entitled to vote at the special meeting is earlier than the effective time of the merger. Therefore, transferors of shares of BroadSoft common stock after the record date but prior to the consummation of the merger will retain their right to vote at the special meeting, but the right to receive the merger consideration will transfer with the shares.

 

Q: May I revoke my proxy or change my vote after I have mailed my signed proxy card or otherwise appointed a proxy?

 

A: Yes. You may change your vote at any time before the shares reflected on your proxy card (or with respect to which you have appointed a proxy over the Internet or by telephone) are voted at the Special Meeting. You can do this in one of four ways. First, you can send a written, dated notice to our corporate secretary stating that you would like to revoke your proxy. Second, you can complete, sign, date and submit a new proxy card bearing a later date. Third, you can submit a subsequent proxy over the Internet or by telephone. Fourth, you can attend the meeting and vote in person. Your attendance alone will not revoke your proxy. If you have instructed a broker to vote your shares, you must follow the directions received from your broker to change your voting instructions.

 

Q: If my shares are held in “street name” by my broker, will my broker vote my shares for me?

 

A: Your broker will not vote your shares with respect to the adoption of the merger agreement without instructions from you. You should instruct your broker to vote your shares, following the procedure provided by your broker. Without instructions, your shares will not be voted with respect to the adoption of the merger agreement, which will have the same effect as voting against adoption of the merger agreement. In addition, your broker will not vote your shares with respect to the approval of, on an advisory basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger or, to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement.

 

Q: Should I send in my stock certificates now?

 

A: No. After the merger is completed, you will receive a letter of transmittal and instructions for use in effecting the surrender of the stock certificates or book-entry shares pursuant to such letter of transmittal. Please do NOT return your stock certificate(s) with your proxy.

 

Q: When do you expect the merger to be completed?

 

A: We are working toward completing the merger as quickly as possible; however, the merger is subject to various closing conditions, including BroadSoft stockholder approval, the expiration or termination of the required waiting period under the HSR Act and obtaining applicable foreign antitrust approvals. We cannot assure you that all conditions to the merger will be satisfied or, if satisfied, as to the date by which they will be satisfied.

 

Q: When will I receive the cash consideration for my shares of BroadSoft common stock?

 

A: After the merger is completed, you will receive a letter of transmittal and instructions for use in effecting the surrender of the stock certificates or book-entry shares pursuant to such letter of transmittal. When you properly return and complete the required documentation described in the written instructions or letter of transmittal, you will receive from the exchange agent a payment of the cash consideration for your shares.

 

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Q: Why am I being asked to cast an advisory vote to approve the compensation that BroadSoft’s named executive officers may receive in connection with the merger?

 

A: In accordance with rules adopted by the SEC, we are required to provide our stockholders with the opportunity to cast an advisory vote on the compensation that BroadSoft’s named executive officers may receive in connection with the merger.

 

Q: What will happen if our stockholders do not approve, on an advisory basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger?

 

A: Approval of the “golden parachute” compensation arrangements payable under existing agreements that the named executive officers of BroadSoft may receive in connection with the merger is not a condition to completion of the merger. The vote with respect to the “golden parachute” compensation arrangements is an advisory vote and will not be binding on Cisco or us. Therefore, if the merger agreement is adopted by our stockholders and completed, the “golden parachute” compensation arrangements will still be paid to our named executive officers as long as any other conditions applicable thereto are satisfied, regardless of the results of the vote.

 

Q: Who can help answer my additional questions?

 

A: If you would like additional copies, without charge, of this proxy statement or if you have additional questions about the merger, including with respect to the procedures for voting your shares, you should contact us, as follows:

BroadSoft, Inc.

9737 Washingtonian Boulevard, Suite 350,

Gaithersburg, Maryland 20878

Telephone: (561) 404-2130

You may also contact our proxy solicitor, MacKenzie Partners, Inc., at:

 

LOGO

105 Madison Avenue

New York, New York 10016

proxy@mackenziepartners.com

Call Collect: (212) 929-5500

or

Toll-Free (800) 322-2885

Email: proxy@mackenziepartners.com

 

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RISK FACTORS RELATED TO PROPOSAL 1

In connection with Proposal 1, you should consider the following factors in conjunction with the other information included this proxy statement.

If the proposed merger is not completed, our business could be materially and adversely affected and our stock price could decline.

On October 20, 2017, we entered into a definitive merger agreement with Cisco Systems, Inc. (“Cisco”) pursuant to which, upon the terms and subject to the conditions set forth in the merger agreement, a wholly-owned subsidiary of Cisco would merge with and into us, with us continuing on as the surviving entity and a wholly-owned subsidiary of Cisco. The merger is subject to closing conditions, which include among other conditions, the adoption of the merger agreement by the holders of a majority of the outstanding shares of BroadSoft common stock, the absence of any order or restraint or applicable legal requirement prohibiting, making illegal or enjoining the completion of the merger, the expiration or early termination of the waiting period under the HSR Act and the receipt of certain applicable foreign antitrust approvals. Therefore, the merger may not be completed or may not be completed as quickly as expected. If the merger agreement is terminated, the market price of BroadSoft common stock will likely decline, as we believe that our market price reflects an assumption that the merger will be completed. For example, on August 29, 2017, the last full trading day prior to published speculation regarding a potential transaction involving BroadSoft, BroadSoft common stock closed at $43.05 per share. On October 20, 2017, the last full trading day prior to the public announcement of the proposed merger, BroadSoft common stock closed at $53.90 per share, and, on the next trading day, following the announcement of our entering into the merger agreement, our stock price closed at $54.80 per share. In addition, our stock price may be adversely affected as a result of the fact that we have incurred and will continue to incur significant expenses related to the merger, all or a portion of which will not be recovered if the merger is not completed. If the merger agreement is terminated under certain circumstances, we may be obligated to pay Cisco a termination fee of $56 million. As a consequence of the failure of the merger to be completed, as well as of some or all of these potential effects of the termination of the merger agreement, our business could be materially and adversely affected.

The existence of the pending merger could have an adverse effect on our business, revenue and results of operations.

While the merger is pending, it creates uncertainty about our future. As a result of this uncertainty, customers may decide to delay, defer or cancel purchases of our products and/or services, pending completion of the merger or termination of the merger agreement. If these decisions represent a significant portion of our anticipated revenue, our results of operations and quarterly revenues could be substantially below the expectations of market analysts.

In addition, while the merger is pending, we are subject to a number of risks that may adversely affect our business, revenue and results of operations, including:

 

    the diversion of management and employee attention and the unavoidable disruption to our relationships with customers and vendors may detract from our ability to grow revenues and minimize costs;

 

    the fact that we have incurred and will continue to incur significant expenses related to the merger;

 

    the fact that, pursuant to the merger agreement, we must generally conduct our business in the ordinary course and we are subject to a variety of other restrictions on the conduct of our business prior to the closing of the merger or termination of the merger agreement; and

 

    the fact that we may be unable to respond effectively to competitive pressures, industry developments and future opportunities.

 

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If the merger occurs, our stockholders will not be able to participate in any upside to our business.

Upon consummation of the merger, our stockholders will receive $55.00 in cash per share, without interest and subject to applicable tax withholding, for each share of BroadSoft common stock owned by them, but will not receive any shares of Cisco common stock. As a result, if our business following the merger performs well, our current stockholders will not receive any additional consideration, and will therefore not receive any benefit from the performance of our business.

 

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CAUTION REGARDING FORWARD-LOOKING STATEMENTS

The statements contained in this proxy statement relating to the completion of the merger and other future events are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements preceded by, followed by or that otherwise include the words “may,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “should,” or similar expressions or variations on these expressions, are forward-looking statements. These statements involve risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, including risks relating to receiving the approval of a majority of our outstanding shares, satisfying other conditions to the completion of the merger, and other matters. As a result, we caution readers not to place undue reliance on these forward-looking statements.

For a detailed discussion of certain risk factors related to the merger, please refer to “Risk Factors Related to Proposal 1” immediately preceding this section. For other risk factors related to BroadSoft, please refer to our filings with the Securities and Exchange Commission (the “SEC”) on Forms 10-K, 10-Q and 8-K. You can obtain copies of our Forms 10-K, 10-Q and 8-K and other filings for free at the Investor Relations section of our website at www.broadsoft.com, at the SEC website at www.sec.gov, or from commercial document retrieval services.

We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

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THE COMPANIES

BroadSoft, Inc.

BroadSoft is a leading global provider of software and services that enable telecommunications service providers to deliver hosted, cloud-based Unified Communications, or UC, to their enterprise customers. Traditionally, many enterprises have utilized premise-based private branch exchanges, or PBX’s, to connect their offices and people to public telephony networks. Hosted UC enables the delivery of PBX features without the need for premise-based equipment. Hosted UC can be delivered through service providers using their own internet protocol, or IP-based networks and their mobile networks, as well as over the public internet (also known as “over the top” or OTT). In addition to voice telephony, UC offers additional features such as full integration with mobile devices, high definition, or HD, voice and video calling and conferencing, instant messaging and presence, or IM&P, team collaboration and desktop sharing.

We were incorporated in Delaware in 1998. Our principal executive office is located at 9737 Washingtonian Boulevard, Suite 350, Gaithersburg, Maryland 20878 and our telephone number is (301) 977-9440. Our website address is www.broadsoft.com. The information contained on, or that can be accessed through, our website is not part of this proxy statement.

Cisco Systems, Inc.

Cisco Systems, Inc., or Cisco, was incorporated in California in December 1984, and has its headquarters in San Jose, California. The mailing address of Cisco’s headquarters is 170 West Tasman Drive, San Jose, California 95134-1706, and its telephone number is (408) 526-4000. Cisco’s website is www.cisco.com.

Brooklyn Acquisition Corp.

Brooklyn Acquisition Corp., or Merger Sub, is a direct wholly-owned subsidiary of Cisco and has not engaged in any business activity other than in connection with the merger. Merger Sub is incorporated under the laws of the State of Delaware. Merger Sub’s executive offices are located at 170 West Tasman Drive, San Jose, California 95134-1706, and its telephone number is (408) 526-4000.

 

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LITIGATION RELATING TO THE MERGER

On November 16, 2017, Sebastian Agostino, a purported stockholder of BroadSoft, filed a putative class action complaint against BroadSoft and our board of directors in the United States District Court for the District of Maryland (the “Maryland District Court”), captioned Agostino v. BroadSoft, Inc. et al., Case No. 8:17-cv-3415. The complaint filed by Agostino (the “Agostino Complaint”) alleges that (a) BroadSoft and our board of directors violated Section 14(a) of the Exchange Act, and Rule 14a-9 promulgated thereunder, by filing this proxy statement, which allegedly fails to disclose and/or misrepresents material information about the merger, and (b) the members of our board of directors, as control persons of BroadSoft, violated Section 20(a) of the Exchange Act in connection with the filing of this allegedly materially deficient proxy statement. Agostino has asked the Maryland District Court to, among other things, (i) preliminarily and permanently enjoin the defendants from proceeding with the merger, unless and until the defendants disclose material information allegedly omitted from this proxy statement, (ii) rescind, to the extent already implemented, the merger agreement or any of the terms thereof, or grant the plaintiff rescissory damages and (iii) direct the defendants to account to the plaintiff for all damages allegedly suffered as a result of the defendant’s wrongdoing.

On November 22, 2017, Anthony Franchi, a purported stockholder of BroadSoft, filed a putative class action complaint against BroadSoft, our board of directors, Cisco and Merger Sub in the Maryland District Court, captioned Franchi v. BroadSoft, Inc. et al., Case No. 8:17-cv-3488. The complaint filed by Franchi (the “Franchi Complaint”) alleges that (a) BroadSoft and our board of directors violated Section 14(a) of the Exchange Act, and Rule 14a-9 promulgated thereunder, by filing this proxy statement, which allegedly contains statements that omit to state material facts necessary to make such statements not materially false or misleading, and (b) the members of our board of directors, Cisco and Merger Sub, as control persons of BroadSoft, violated Section 20(a) of the Exchange Act in connection with the filing of this allegedly materially deficient proxy statement. Franchi has asked the Maryland District Court to, among other things, (i) preliminarily and permanently enjoin the defendants from proceeding with the merger, (ii) in the event defendants consummate the merger, rescind it and set aside or award rescissory damages, (ii) direct our board of directors to disseminate a proxy statement that does not contain any untrue statements of material fact and that states all material facts required to make the statements contained therein not misleading, (iii) declare that the defendants violated Sections 14(a) and/or 20(a) of the Exchange Act and (iii) award plaintiff the costs of the Franchi Complaint, including reasonable allowance for plaintiff’s attorneys’ and experts’ fees.

BroadSoft believes that the above described claims are without merit and intends to vigorously defend both actions. BroadSoft cannot predict the outcome of or estimate the possible loss or range of loss from either matter. It is possible that additional, similar complaints may be filed or the complaints described above will be amended. If this occurs, BroadSoft does not intend to announce the filing of each additional, similar complaint or any amended complaint unless it contains allegations that are substantially distinct from those made in the pending actions described above.

 

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THE SPECIAL MEETING

We are furnishing this proxy statement to you as part of the solicitation of proxies by our board of directors for use at the Special Meeting.

Date, Time and Place

The Special Meeting will be held at the BroadSoft’s headquarters at 9737 Washingtonian Boulevard, Suite 350, Gaithersburg, Maryland 20878, at 9:00 a.m., local time, on January 25, 2018.

Purpose of the Special Meeting

You will be asked at the Special Meeting to vote on the adoption of the merger agreement and thereby approve the merger. Based on its review, our board of directors has unanimously (a) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable, (b) determined that the merger agreement and the transactions contemplated thereby, including the merger, taken together, are at a price and on terms that are fair to, and in the best interest of BroadSoft and its stockholders, (c) approved the execution, delivery and performance by BroadSoft of the merger agreement and the consummation of the transactions contemplated thereby, including the merger and (d) resolved to recommend that the stockholders of BroadSoft approve the adoption of the merger agreement and thereby approve the merger. You will also be asked to approve, on an advisory basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger. You will also be asked to vote on a proposal to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement.

Record Date; Stock Entitled to Vote; Quorum

Only holders of record of BroadSoft common stock at the close of business on December 11, 2017, the Record Date, are entitled to notice of and to vote at the Special Meeting. At the close of business on the Record Date, 31,775,976 shares of BroadSoft common stock were issued and outstanding and such shares were held by approximately 17 holders of record. A quorum will be present at the Special Meeting if a majority of the outstanding shares of BroadSoft common stock entitled to vote are represented in person or by proxy at the Special Meeting. In the event that a quorum is not present at the Special Meeting, or there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement, we expect that the meeting will be adjourned or postponed to solicit additional proxies. Holders of record of BroadSoft common stock at the close of business on the Record Date are entitled to one vote per share at the Special Meeting on each proposal presented.

Vote Required

The adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of BroadSoft common stock entitled to vote thereon at the close of business on the Record Date. If you abstain from voting or do not vote, either in person or by proxy, it will have the same effect as a vote against the adoption of the merger agreement. Broker non-votes will have the same effect as “against” votes with respect to the proposal to adopt the merger agreement.

The approval, on an advisory basis, of the compensation that BroadSoft’s named executive officers may receive in connection with the merger, requires the affirmative vote of the holders of a majority of the shares of BroadSoft common stock present, in person or by proxy, at the Special Meeting and entitled to vote on the matter. If you abstain from voting, either in person or by proxy, on this matter, it will have the same effect as a vote against the approval of this matter. Broker non-votes will have no effect with respect to this matter.

The proposal to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement, requires the approval of the

 

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holders of a majority of the shares of BroadSoft common stock present, in person or by proxy, at the Special Meeting and entitled to vote on the matter. If you abstain from voting, either in person or by proxy, on this matter, it will have the same effect as a vote against the approval of this matter. Broker non-votes will have no effect with respect to this matter.

Voting of Proxies

All shares represented by properly executed proxies received in time for the Special Meeting will be voted at the Special Meeting in the manner specified by the holders. Properly executed proxies that do not contain voting instructions will be voted “For” the adoption of the merger agreement, “For” approval, on an advisory basis, of the compensation that BroadSoft’s named executive officers may receive in connection with the merger, and “For” approval of the proposal to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement.

To vote, please complete, sign, date and return the enclosed proxy card or, to vote by appointing a proxy over the Internet or by telephone, follow the instructions provided below. If you attend the Special Meeting and wish to vote in person, you may withdraw your proxy and vote in person. If your shares are held in the name of your broker, bank or other nominee, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at the Special Meeting.

Shares of BroadSoft common stock represented at the Special Meeting but not voted, including shares of BroadSoft common stock for which proxies have been received but for which stockholders have abstained, will be treated as present at the Special Meeting for purposes of determining the presence or absence of a quorum for the transaction of all business.

Only shares affirmatively voted for the adoption of the merger agreement, including properly executed proxies that do not contain specific voting instructions, will be counted in favor of that proposal. If you properly execute a proxy card, appoint a proxy over the Internet or by telephone or attend the Special Meeting in person, but abstain from voting on any of the proposals at the Special Meeting, it will (a) have the same effect as a vote against the adoption of the merger agreement, (b) have the same effect as a vote against the proposal to approve, on an advisory basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger and (c) have the same effect as a vote against the proposal to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement. If you do not properly execute a proxy card, do not appoint a proxy over the Internet or by telephone and do not attend the Special Meeting in person, it will have the same effect as a vote against the adoption of the merger agreement, and will have no effect on each of the proposal to approve, on an advisory basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger, and the proposal to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement. Brokers who hold shares in street name for customers have the authority to vote on “routine” proposals when they have not received instructions from beneficial owners. However, brokers are precluded from exercising their voting discretion with respect to approval of non-routine matters, such as the adoption of the merger agreement and the proposal to approve, on an advisory basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger and the proposal to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement, and, as a result, absent specific instructions from the beneficial owner of such shares, brokers are not empowered to vote those shares, referred to generally as “broker non-votes.” Broker non-votes, if any, will be treated as shares that are present at the Special Meeting for purposes of determining whether a quorum exists and will have the same effect as votes against the adoption of the merger agreement, but will have no effect on the proposal to approve, on an advisory basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger, and the proposal to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement.

 

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We do not expect that any matter other than the proposal to adopt the merger agreement, the proposal to approve, on an advisory basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger, and, the proposal to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement will be brought before the Special Meeting.

Voting over the Internet or by Telephone

You may also grant a proxy to vote your shares over the Internet or by telephone. The law of Delaware, under which we are incorporated, specifically permits electronically transmitted proxies, provided that each such proxy contains or is submitted with information from which the inspector of election can determine that such proxy was authorized by the stockholder.

The Internet and telephone voting procedures described below are designed to authenticate stockholders’ identities, to allow stockholders to grant a proxy to vote their shares and to confirm that stockholders’ instructions have been recorded properly. Stockholders granting a proxy to vote over the Internet should understand that there may be costs associated with electronic access, such as usage charges from Internet access providers and telephone companies, that must be borne by the stockholder.

For Shares Registered in Your Name

Stockholders of record may go to www.proxyvote.com to grant a proxy to vote their shares over the Internet. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. Any stockholder using a touch-tone telephone may also grant a proxy to vote shares by calling 1-800-690-6903 and following the recorded instructions.

For Shares Registered in the Name of a Broker or Bank

If your shares are held in a brokerage account or by another nominee, such as a bank or trust, then such broker or other nominee is considered to be the stockholder of record with respect to your shares. However, you are still considered to be the beneficial owner of those shares, with your shares being held in “street name.” Most beneficial owners whose stock is held in street name receive instructions for authorizing votes by the broker or other nominee.

If your shares are held in street name, you may be eligible to vote your shares by telephone or through the Internet. A large number of banks and brokerage firms provide eligible stockholders the opportunity to vote in this manner. If your bank or brokerage firm allows for this, your voting form provided by your broker or other nominee will provide instructions for such alternative method of voting.

General Information for All Shares Voted over the Internet or by Telephone

Votes submitted over the Internet or by telephone must be received by 11:59 p.m., Eastern Time, on January 24, 2018. Submitting your proxy over the Internet or by telephone will not affect your right to vote in person should you decide to attend the Special Meeting.

Revocability of Proxies

The grant of a proxy on the enclosed proxy card or over the Internet or by telephone does not preclude a stockholder from voting in person at the Special Meeting. You may revoke your proxy at any time before the shares reflected on your proxy card (or with respect to which you have appointed a proxy over the Internet or by telephone) are voted at the Special Meeting by:

 

    filing with our corporate secretary a properly executed and dated revocation of proxy;

 

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    submitting a properly completed, executed and dated proxy card to our corporate secretary bearing a later date;

 

    submitting a subsequent vote over the Internet or by telephone; or

 

    appearing at the Special Meeting and voting in person.

Your attendance at the Special Meeting will not in and of itself constitute the revocation of a proxy. If you have instructed your broker to vote your shares, you must follow the directions received from your broker to change these instructions.

Solicitation of Proxies

All proxy solicitation costs will be borne by us. In addition to solicitation by mail, our directors, officers, employees and agents may solicit proxies from stockholders by telephone or other electronic means or in person. We also may reimburse brokers and other custodians, nominees and fiduciaries for their expenses in sending these materials to you and getting your voting instructions. We have also retained the services of a paid solicitor, MacKenzie Partners, Inc., or MacKenzie, to solicit proxies. We anticipate that the cost of utilizing the services of MacKenzie for the solicitation of proxies will be approximately $40,000, plus expenses, and will be paid by BroadSoft.

You should not send your stock certificates with your proxy card. A letter of transmittal with instructions for use in effecting the surrender of the stock certificates or book-entry shares pursuant to such letter of transmittal will be mailed to our stockholders as soon as practicable after completion of the merger.

Delivery of this Proxy Statement to Multiple Stockholders with the Same Address

The SEC has adopted rules that permit companies and intermediaries (for example, brokers) to satisfy the delivery requirements for proxy statements with respect to two or more stockholders sharing the same address, if we believe the stockholders are members of the same family, by delivering a single proxy statement addressed to those stockholders. Each stockholder will continue to receive a separate proxy card or voting instruction card. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies by reducing the volume of duplicate information.

A number of brokers with account holders who are our stockholders will be “householding” our proxy materials. A single proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker or us that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If your household received a single proxy statement, but you would prefer to receive your own copy, please notify your broker and direct your written request to BroadSoft, Inc., Attention: Investor Relations, 9737 Washingtonian Boulevard, Suite 350, Gaithersburg, Maryland 20878, or contact our Investor Relations Department at (561) 404-2130. If you would like to receive your own set of our proxy materials in the future, please contact your broker or BroadSoft’s Investor Relations and inform them of your request. Be sure to include your name, the name of your brokerage firm and your account number. Conversely, if you and another person sharing your same address are receiving multiple copies of annual reports or proxy statements and you would like to request that you only receive one copy, please contact your broker or BroadSoft’s Investor Relations and inform them of your request. Be sure to include your name, the name of your brokerage firm and your account number.

Stockholder List

A list of BroadSoft stockholders entitled to vote at the Special Meeting will be available for inspection at our principal executive offices located at 9737 Washingtonian Boulevard, Suite 350, Gaithersburg, Maryland 20878, at least ten days prior to the date of the Special Meeting and continuing through the Special Meeting for any purpose germane to the meeting. The list will also be available at the meeting for inspection by any stockholder present at the meeting.

 

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PROPOSAL 1 — ADOPTION OF THE MERGER AGREEMENT

THE MERGER

The discussion under the sections of this proxy statement entitled “The Merger” and “The Merger Agreement” summarizes the material terms of the merger and the merger agreement. Although we believe that the description covers the material terms of the merger and the merger agreement, this summary may not contain all of the information that is important to you. We urge you to read this proxy statement, the merger agreement and the other documents referred to herein carefully for a more complete understanding of the merger and the merger agreement. The discussion of the merger and the merger agreement in this proxy statement is qualified in its entirety by reference to the merger agreement, which is attached as Annex A to this proxy statement and incorporated by reference into this proxy statement.

Background of the Merger

BroadSoft is a leading provider of software and services that enable telecommunications service providers to deliver hosted, cloud-based enterprise voice and other Unified Communications, or UC, capabilities to their enterprise customers. Our UC solutions allow our customers to offer to enterprises a cloud-based alternative to premise-based private branch exchange, or PBX, solutions. BroadSoft business application suite empowers users and teams to share ideas and work simply to achieve breakthrough performance.

Our board of directors, also referred to herein as “our board,” and our senior management regularly review BroadSoft’s operations, financial performance, capital structure, strategic initiatives and product portfolio and pipeline. As part of this ongoing review, our board has regularly evaluated BroadSoft’s long-term strategy, as well as other strategic alternatives that might be available to enhance stockholder value.

Starting in March 2016, at the request of a private equity firm (“Party A”), we engaged in a series of discussions with Party A regarding a potential strategic transaction. On July 12, 2016, Party A delivered a non-binding written proposal to our senior management to acquire 100% of the shares of BroadSoft capital stock in an all-cash transaction for $46 per share, subject to due diligence and other conditions, including a requirement for a minimum cash balance on BroadSoft’s balance sheet at the closing of the transaction (the “Party A July 2016 Proposal”). Our stock was trading in the range of approximately $44 - $45 per share at that time.

On July 18, 2016 and July 28, 2016, our board held telephonic meetings with our senior management and representatives of Jefferies, as our financial advisor, and representatives of Cooley LLP, as our outside legal counsel (“Cooley”), attending the meetings, during which meetings our board reviewed the Party A July 2016 Proposal. Cooley reviewed with our board its fiduciary duties and Jefferies provided a review of the financial aspects of the Party A July 2016 Proposal. Our board also established a strategic transaction committee of independent directors (the “Strategic Transaction Committee”) to assist our board in connection with the consideration of the Party A July 2016 Proposal and strategic alternatives generally. Our board appointed Mr. Markley, the chairman of our board, and Messrs. Gavin, Maine and Bernardi as the members of the Strategic Transaction Committee and noted that the Strategic Transaction Committee was being formed as a matter of convenience to permit a subset of the members of our board to be able to meet and make decisions on an expedited basis and not to address any potential conflicts of interest among the members of our board or senior management, and our board reserved the right to approve any transactions involving BroadSoft. Following discussions, our board determined that the Party A July 2016 Proposal was inadequate. Jefferies communicated to Party A that the price was inadequate and discussions with Party A subsequently terminated in 2016 without Party A making any other proposals.

In connection with its review of the Party A July 2016 Proposal, our board requested that our senior management conduct a review to assess whether BroadSoft could or should make additional acquisitions to facilitate or reduce the risks attendant to our transition from being a software provider to a cloud communications

 

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provider or make other transformative acquisitions as an independent public company. On August 2, 2016, the Strategic Transaction Committee held a meeting with our senior management and Jefferies and reviewed potential acquisition or combination candidates and did not identify any significant transactions that the committee would recommend be pursued.

As more fully described below, in 2017, we received in-bound interest from a number of financial parties that ultimately resulted in a strategic review process. As part of the process, BroadSoft and/or its financial advisors had discussions with 16 parties, comprising both financial and strategic parties (including Cisco) regarding potential strategic transactions. Nine parties (including Cisco) entered into confidentiality agreements with BroadSoft and met with our senior management. Five parties submitted one or more proposals for a potential strategic transaction with BroadSoft, including Cisco, Party A, Party B, a strategic party (“Party C”), a portfolio company of a private equity firm (“Party D”) and another private equity firm (“Party E”). We first opened a virtual data room on July 8, 2017 that was updated from time to time, and ultimately provided access to the data room to Cisco, Party A, Party B, Party D and Party E.

The confidentiality agreements entered into with the eight parties other than Cisco either contained standstill provisions that terminated upon execution of the definitive agreement with Cisco or did not contain a standstill provision.

On February 14, 2017, representatives of Qatalyst Partners informed our senior management that a group consisting of two private equity firms (such group, “Party B”) had contacted Qatalyst Partners to determine whether we would be interested in engaging in strategic discussions. During this discussion, representatives of Qatalyst Partners also indicated that based on its knowledge of Cisco, it believed that Cisco could potentially have a strategic interest in BroadSoft and offered to make an introduction to Cisco. Qatalyst Partners had been engaged by us in 2013 in connection with our board’s consideration of a transaction at that time in light of its reputation and substantial knowledge and expertise in the unified communications industry and mergers and acquisition transactions generally.    

On March 23, 2017, representatives of Qatalyst Partners contacted Rowan Trollope, senior vice president and general manager of Cisco’s Applications Business Group, regarding a potential strategic transaction between BroadSoft and Cisco and also discussed arranging a meeting between the senior managements of BroadSoft and Cisco.

On April 6, 2017, Mr. Tessler met with Mr. Trollope in Cisco’s offices in San Francisco and Tom Puorro, vice president and general manager of Cisco’s Unified Communications Technology Group, via video teleconference, to discuss a potential strategic transaction between BroadSoft and Cisco.    

On April 27, 2017, at a regular meeting of our board, senior management and our board reviewed our market position, growth rates and possible shifts in our strategic direction as well as the strategic landscape in which we operate, discussed the interest expressed by third parties in BroadSoft, and discussed the benefits and detriments of various strategic alternatives.

On May 2, 2017, BroadSoft entered into a confidentiality agreement with Cisco that included a 12-month standstill provision pursuant to which Cisco would be prohibited from taking certain actions with respect to BroadSoft during such period.

On May 3, 2017, at the request of Party C, our senior management had an initial meeting with representatives of Party C at Party C’s corporate headquarters to discuss a potential strategic combination of Party C and BroadSoft for cash and stock consideration. Our senior management had subsequent meetings with Party C to review each party’s financial performance and operations and assess the potential for a strategic combination.

 

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On May 11, 2017, our senior management had preliminary discussions with Cisco about BroadSoft and our business.

In June 2017, Mr. Markley negotiated an amendment to the engagement letter between BroadSoft and Qatalyst Partners that was entered into in 2013 and separately negotiated an engagement letter with Jefferies, to provide financial advisory services to support our board’s ongoing evaluation and review of strategic opportunities. Jefferies was retained in light of its reputation and substantial knowledge and expertise in the unified communications industry and mergers and acquisition transactions generally and not to address any conflict of interest of Qatalyst Partners. Prior to such formal engagement, each of Jefferies and Qatalyst Partners, collectively referred to as our financial advisors, had been advising our board from time to time on its ongoing review of long-term strategy and other strategic alternatives.

On June 1, 2017, at the request of Party D, our senior management had a meeting with representatives of Party D to discuss Party D’s interest in pursuing a potential combination of BroadSoft and Party D for unspecified cash and stock consideration. Following this meeting, our senior management and the members of the Strategic Transaction Committee discussed Party D’s interest and senior management subsequently encouraged Party D to consider submitting a proposal for an all-cash transaction.

On June 20, 2017, we received a non-binding written joint proposal from Party B, expressing interest to acquire 100% of the capital stock of BroadSoft in an all-cash transaction at a price range of $49 - $51 per share subject to completion of due diligence and other conditions (the “Party B June 20 Proposal”). On the same day, we received a non-binding proposal from Party E to acquire 100% of the capital stock of BroadSoft in an all-cash transaction at a price range of $48.50 - $50 per share subject to completion of due diligence and other conditions (the “Party E June 20 Proposal”). Our stock was trading in the range of approximately $42 – $43 per share at that time. At the direction of our board, Qatalyst Partners managed communications with Party B, while Jefferies managed communications with Party E.

On June 22, 2017, a representative of Party A expressed interest to our senior management to reengage in further discussions regarding a potential strategic transaction between BroadSoft and Party A.

On June 23, 2017, our board held a special meeting by telephone, with senior management and representatives of Cooley also attending. Messrs. Markley and Tholen reviewed with our board the Party B June 20 Proposal and the Party E June 20 Proposal and the status of discussions with Cisco and other third parties. Representatives of Cooley reviewed with our board its fiduciary duties. Our board then discussed potential next steps with respect to such parties and the timing of a potential market check considering the need for confidentiality and the potential disruptive effect of the process on employees and the business. Our board authorized the Strategic Transaction Committee and our senior management to work with our financial advisors to continue to negotiate the proposals from Party B and Party E and to continue discussions with Cisco and other potentially interested third parties, including Party A, Party C and Party D.

On June 27 and June 28, 2017, we held meetings with representatives of Cisco to provide limited due diligence information regarding BroadSoft and its business. Following the meetings, we continued to have due diligence review discussions with Cisco throughout the month of July 2017.

Throughout June and July 2017, at the direction of the Strategic Transaction Committee, our financial advisors reached out to three other strategic parties, all of whom declined to engage in any discussion for a strategic transaction with BroadSoft.

On July 14, 2017, at the direction of our board, representatives of Jefferies sent bid process letters to Party A, Party C and Party E soliciting a submission of a proposal on definitive terms by July 24, 2017, and representatives of Qatalyst Partners did the same for Party B. The process letters were sent to obtain more certainty regarding the potential maximum value, financing plans for the financial parties and the proposed value

 

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and mixture of cash and stock expected to be proposed by Party C. Following discussions with our financial advisors, our senior management made a determination not to send Cisco a process letter to allow time for Cisco to continue its due diligence review and to encourage Cisco to submit a proposal for an all-cash transaction.

On July 21, 2017, Party B indicated that it could not support its prior value indication following refinement of its financial model and discussions with Party B terminated.

On July 24, 2017, we received an updated proposal from Party E proposing to acquire 100% of the capital stock of BroadSoft in an all-cash transaction for $49 per share, subject to due diligence and other conditions (the “Party E July 24 Proposal”). On July 25, 2017, we received an updated proposal from Party A proposing to acquire 100% of the capital stock of BroadSoft in an all-cash transaction for $50 per share, subject to due diligence and other conditions (the “Party A July 25 Proposal”). Our stock was trading in the range of approximately $43 – $44 per share at that time.    

On July 26, 2017, the Strategic Transaction Committee met, with senior management and representatives of our financial advisors and Cooley also attending. Representatives of our financial advisors, respectively, updated the Strategic Transaction Committee on the status of discussions with third parties, preliminary results of the market check and the outstanding proposals, including the Party A July 25 Proposal and the Party E July 24 Proposal. Representatives of our financial advisors, respectively, reported that Cisco was continuing its evaluation and due diligence but needed more time to submit a proposal and that Party C was holding a board meeting on July 27, 2017 to discuss the submission of a proposal for a stock and cash combination. Representatives of our financial advisors, respectively, also reviewed the financing plans of Party A and Party E and presented their preliminary assessment of the Party A July 25 Proposal and the Party E July 24 Proposal. Representatives of Cooley also reviewed fiduciary duty considerations with the committee.

On July 27, 2017, our board held a regular meeting with representatives of our financial advisors and Cooley joining for a portion of the meeting. During the meeting, our board reviewed with our senior management management’s financial projections for the years 2017 through 2022, including the key underlying assumptions. Following discussions, our board authorized use of these financial projections by our financial advisors in preparing financial analyses in connection with our board’s ongoing evaluation of strategic alternatives and our standalone prospects. Representatives of our financial advisors presented their preliminary assessment of the Party A July 25 Proposal and the Party E July 24 Proposal and our board discussed such proposals, the status of the strategic process and potential next steps.

On August 1, 2017, Party C informed Mr. Tessler and representatives of Jefferies that it did not intend to make a proposal and discussions with Party C terminated.

On August 7, 2017, Mr. Puorro informed Mr. Tessler that Cisco’s board of directors required more time to consider and submit a proposal for a strategic transaction with BroadSoft.

On August 14, 2017, a representative of Party D contacted Mr. Tholen to reengage in discussions regarding a potential all-cash transaction between BroadSoft and Party D.

On August 14, 2017, the Strategic Transaction Committee met, with senior management and representatives of our financial advisors also attending. Representatives of our financial advisors updated the committee on the status of discussions with third parties, including Party A, Party D and Party E and reported that Party A had not engaged in extensive due diligence and had not confirmed its July 25 Party A Proposal. Representatives of our financial advisors reported that Cisco was continuing to evaluate their interest in a strategic transaction with BroadSoft. The committee then authorized Mr. Tessler to contact Cisco to assess Cisco’s level of interest. Following the meeting, Mr. Tessler contacted Mr. Trollope on August 25, 2017 and August 28, 2017 and had discussions regarding the status of Cisco’s evaluation, and during the month of September 2017, representatives of Cisco, including Mr. Trollope, contacted Mr. Tessler from time to time to discuss market conditions and strategy in general in connection with Cisco’s evaluation of a potential strategic transaction with BroadSoft.

 

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On August 18, 2017, at Mr. Markley’s instruction, representatives of Jefferies provided a draft merger agreement contemplating an all-cash acquisition of 100% of the capital stock of BroadSoft by Party E, and requested that Party E provide a mark-up that they would be willing to execute as soon as practicable.

During the week of August 21, 2017, BroadSoft received a response from Party E on the draft merger agreement and received an updated proposal that reduced the proposed acquisition price to $48.40 per share from $49 per share contained in the Party E July 24 Proposal. The updated proposal included a tender offer condition that BroadSoft have a minimum amount of cash balance on its balance sheet at closing.

Also during that week, our senior management continued discussions with representatives of Party D in connection with its due diligence review.

On August 26, 2017, we received a non-binding proposal from Party D and its financial sponsor that contemplated a leveraged recapitalization in which Party D would be merged with BroadSoft and BroadSoft’s stockholders would receive $44 per share in cash through a special dividend distribution and retain a publicly traded common equity stake of 20% in the combined company (the “Party D August 26 Proposal”). The proposal contemplated that the sponsor and its funds would control 80% of the combined company as a controlled subsidiary under the NASDAQ Stock Market Rules, and was subject to completion of due diligence and other conditions.

During the week of August 28, 2017, our senior management continued to conduct due diligence meetings with representatives of Party E, and at the direction of our senior management, representatives of Jefferies and Cooley continued negotiations with Party E to obtain an improved proposal.

On August 30, 2017, Reuters reported that BroadSoft was exploring its strategic options, including a potential sale of BroadSoft, and was working with Jefferies. BroadSoft was not the source of the story and declined to comment. Following such press article, our stock price traded up to $48.40 and closed on August 30 at $48.00, an 11% increase over the closing price of $43.05 on the immediately preceding trading day.

Following the Reuters article, we received inbound interest from four additional parties (included in the 16 total parties). As a result of these inquiries, at the direction of the Strategic Transaction Committee and our senior management, representatives of Jefferies held initial discussions with each of the four parties; three of these four parties declined to move forward, and we entered into a confidentiality agreement with one strategic party. We had engaged in prior discussions with this strategic party in 2013, which were subsequently terminated, and thereafter the strategic party had not reengaged with us. After focused discussions, the strategic party elected again not to move forward or make a proposal, and discussions with the strategic party terminated.

On August 31, 2017 and September 1, 2017, representatives of Cooley and Jefferies had discussions with representatives of Party D’s outside legal counsel to discuss the Party D August 26 Proposal, including the proposed legal structure and timeline, the tax implications and the proposed financing plan.

On September 1, 2017, following a meeting of the Strategic Transaction Committee, representatives of Jefferies communicated to Party E that our board would not continue to move forward on a potential strategic transaction at a price that was less than $50 per share. Party E declined to increase its price and discussions were terminated. On the same day, our senior management reached out to Mr. Trollope to seek an update on Cisco’s status.

On September 5, 2017, our board held a special telephonic meeting, with senior management and representatives of Jefferies and Cooley also attending. Our board reviewed the current status of the discussions regarding the Party D August 26 Proposal. Our senior management discussed their views on the business rationale of a combination with Party D. Representatives of Jefferies discussed the financial aspects of the Party D August 26 Proposal, including the potential value of the 20% stake in the highly leveraged public company

 

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assuming Party D’s synergy assumptions were validated and assuming execution of Party D’s preliminary financial plan for the combined company. Our board discussed potential benefits and detriments of a potential transaction with Party D, including the risks and uncertainties associated with the value of the combined company, given the expected debt leverage, the limited public float and controlled-company governance structure and the execution risks of the strategic plan. Our board also discussed the need to validate synergies and the value of the stock through a due diligence review of Party D and its business. Following discussions, our board authorized Jefferies to continue discussions with Party D to attempt to obtain an improved proposal and to make a counterproposal at $52 per share in cash or, in the alternative, $48 per share in cash and a 20% common equity stake in the combined company, subject to additional financial and legal due diligence reviews of Party D and its business to, among other things, validate Party D’s synergy projections. Representatives of Jefferies also noted for our board that they had received several inbound inquiries from additional third parties after the Reuters article on August 30, 2017, but none of them had demonstrated active interest. They also updated our board on Mr. Tessler’s conversations with Cisco and that we were waiting on a response from Cisco on their interest to engage further in strategic discussions with us.

Later on September 5, 2017, we received an updated non-binding written proposal from Party E to acquire up to 40% of the capital stock of BroadSoft for $47.50 per share in cash through a tender offer transaction, and immediately following the consummation of the tender offer, to effect a leveraged recapitalization, which combined with BroadSoft’s cash, would fund a special dividend distribution of $26.50 per share to all remaining BroadSoft stockholders, including Party E. Following discussions among the members of the Special Transaction Committee, this proposal was rejected as inadequate.

Over the weekend of September 8, 2017, representatives of Cooley continued conversations with representatives of Party D’s outside legal counsel to explore alternative legal structures and financial statement requirements for a transaction with Party D and the potential impact on timing of a transaction.

On September 11, 2017 the Strategic Transaction Committee met by phone, with senior management and representatives of our financial advisors and Cooley also attending. Representatives of our financial advisors and the Strategic Transaction Committee reviewed the status of third-party discussions. The Strategic Transaction Committee noted that Party D had verbally agreed to increase its proposal to $45 per share in cash and a 20% common equity stake but had declined to make an all-cash proposal. After review of the various outstanding proposals and potential next steps, the Strategic Transaction Committee authorized senior management and our financial advisors to encourage Cisco to submit a definitive proposal as quickly as possible, continue engaging Party E to obtain an improved proposal for at least $50 per share in cash, and accelerate the due diligence review of Party D and its business to validate Party D’s synergy assumptions and the potential value of the 20% common equity stake in the combined company.

On September 12, 2017, Messrs. Tessler and Tholen had dinner with representatives of Party D and its financial sponsor. At the dinner, the representatives of Party D and its financial sponsor verbally increased its proposal to $47 per share in cash and a 20% common equity stake in the combined company. Party D confirmed this proposal in writing the following day, subject to finalizing legal structuring, legal documentation, financing commitments and due diligence review.

On September 15, 2017, the Strategic Transaction Committee met by phone, with senior management and representatives of Cooley also attending. Mr. Tholen updated the committee on the revised proposal from Party D, the status of our due diligence review of Party D and the status of the strategic review process generally. The committee discussed potential next steps and the potential complexities, risks and uncertainties involved in the proposed transaction with Party D. After discussion, the committee authorized senior management and our advisors to continue our due diligence review of Party D and business and legal discussions with Party D.

On September 18, 2017, Mr. Tessler spoke to Mr. Trollope to inform him that our board was considering proposals, and to inquire whether Cisco was intending to submit a proposal. Representatives of Qatalyst Partners

 

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later spoke to representatives of Cisco’s corporate development team to deliver the same message. Over the following week, our senior management and our advisors conducted due diligence review meetings with representatives of Party D and its financial sponsor regarding Party D, projected synergies and a strategic plan for the combined company. Our advisors also continued discussions with Party D’s advisors regarding the proposed transaction, including our preferred legal structure and financial statement requirements and timing, and requested a detailed financial model for the combined company from Party D’s financial sponsor. During this period, Party A formally withdrew from further discussions with our senior management and representatives of Jefferies.

On September 25, 2017, we received draft debt commitment documents from Party D, and on September 28, 2017, Cooley provided a draft merger agreement to Party D’s outside legal counsel contemplating a “double dummy” merger rather than a tender offer and dividend recapitalization as contemplated in the Party D August 26 Proposal.

On September 26, 2017, we received a written non-binding proposal from Party E to acquire 100% of the capital stock of BroadSoft in an all-cash transaction for $50 per share, subject to providing Party E with an exclusive negotiating period.

On September 27, 2017, we received a verbal non-binding proposal from Cisco to acquire 100% of the capital stock of BroadSoft in an all-cash transaction for $54 per share, subject to providing Cisco with an exclusive negotiating period. The following day, the Strategic Transaction Committee met by phone, with senior management and representatives of our financial advisors and Cooley also attending. The committee discussed the current status of the proposals from Cisco, Party E and Party D and potential next steps. The committee noted that Party E, who had previously conditioned its proposal on BroadSoft having a specified amount of cash on its balance sheet, was unlikely to be able to increase its price to be competitive with Cisco’s current proposal. The committee also discussed the uncertainties and risks associated with Party D’s mixed-consideration proposal and the value of the 20% common equity stake in the combined company, including that BroadSoft had not yet validated the synergies or operating plan for the combined company. The committee also discussed the potential antitrust-related risks of a transaction with Cisco. Following discussion, the committee authorized representatives of Qatalyst Partners to communicate to Cisco that we would be willing to grant them exclusivity for a period of two weeks if Cisco would increase its price to $58 per share and with the understanding that Cisco’s due diligence review would be substantially confirmatory in nature and our board would require contractual protections to address any antitrust-related risks.

On September 29, 2017, Cisco increased its proposal to $55 per share, which was confirmed in writing (the “Cisco Final Proposal”). The Cisco Final Proposal was subject to completion of due diligence and other customary conditions and contained requirements for a limited number of key BroadSoft employees (who were unidentified at that time) agreeing to work for the surviving corporation of the merger. Cisco also required that we agree to exclusivity through October 31, 2017 as a condition to continuing discussions. Representatives of Qatalyst Partners and Cooley continued discussions with representatives of Cisco and negotiated terms of an exclusivity agreement that would terminate immediately if Cisco reduced the price below $55 per share, subject to approval of the Strategic Transaction Committee.

Later on September 30, 2017, the Strategic Transaction Committee met by phone, with senior management and representatives of our financial advisors and Cooley also attending. The Strategic Transaction Committee and our financial advisors reviewed the status of discussions with Cisco and potential next steps with the other third parties. The committee discussed the likelihood of improving Cisco’s proposal further, terms of the exclusivity agreement and protections relating to antitrust-related risks BroadSoft would seek were it to pursue a strategic transaction with Cisco. Following discussion, taking into account the potential benefits as well as the uncertainties and risks associated with Party D’s proposal, including the uncertainty of obtaining the level of equity and debt financing required for the transaction proposed by Party D, achieving the proposed revenue and cost synergies, the value of the equity consideration in the combined company, and the risk that Cisco might

 

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terminate discussions if BroadSoft did not agree to exclusivity on the requested terms, the Strategic Transaction Committee authorized the execution of the exclusivity agreement with Cisco. Following the meeting, representatives of Jefferies informed Party E and Party D that BroadSoft was entering into exclusive negotiations with another party and ceasing all discussions with them. Following this call, we entered into an exclusivity agreement with Cisco through October 31, 2017.

On October 1, 2017, we received an updated non-binding proposal from Party D to acquire 100% of capital stock of BroadSoft for $51 per share in cash and retention of a 15% common equity stake in the combined company, and on October 4, 2017 we received a mark-up of the proposed merger agreement (the “Party D Final Proposal”). However, we did not engage in any discussion with Party D in compliance with the exclusivity agreement with Cisco.

After entering into exclusivity with Cisco, we provided more detailed due diligence information to representatives of Cisco, Fenwick & West LLP, Cisco’s outside legal counsel (“Fenwick”), and Arnold & Porter Kaye Scholer LLP, Cisco’s outside antitrust counsel (“A&P”), including by granting access to the virtual data room.

On October 6, 2017, Fenwick provided Cooley with a proposed draft of the merger agreement for the proposed transaction between BroadSoft and Cisco.

During the week of October 9, 2017, representatives of Cisco conducted a series of onsite due diligence meetings with representatives of BroadSoft. Representatives from our financial advisors, Cooley and A&P were also present at the meetings.

On October 13, 2017, Cooley provided a revised draft of the merger agreement to Fenwick. Between October 13, 2017 and the execution of the merger agreement, at the direction of the Strategic Transaction Committee and our senior management, representatives of Cooley negotiated the terms of the merger agreement and related schedules with representatives of Fenwick.

On October 15, 2017, our board held a special telephonic meeting, with senior management and representatives of our financial advisors and Cooley also attending. Mr. Tholen updated our board on the due diligence meetings with Cisco and the negotiation of the merger agreement. Mr. Tholen informed the Board that Cisco was negotiating employment and retention agreements with Messrs. Tessler, Hoffpauir and Tholen to be signed concurrently with the execution of the merger agreement with Cisco as a condition to signing. Mr. Tholen also informed our board that with the prior approval of Mr. Markley the executives retained outside legal counsel to represent them in such discussions. Representatives of Cooley discussed with our board their antitrust analysis of the proposed transaction with Cisco as well as potential terms in the merger agreement relating to antitrust risk to be considered. Our board also discussed with representatives of our financial advisors the financial aspects of the Party D Final Proposal based on the due diligence review of Party D that was conducted prior to entering into exclusivity with Cisco as well as the potential benefits and the complexities and uncertainties associated with the Party D Final Proposal. Representatives of Cooley also reviewed with our board their fiduciary duties in connection with considering a sale of BroadSoft.

On October 16, 2017, following discussions between Fenwick and Cooley regarding issues in the merger agreement, Fenwick provided a revised draft of the merger agreement to Cooley.

On October 17, 2017, the Strategic Transaction Committee met by phone, with senior management and representatives of our financial advisors and Cooley also attending. The committee reviewed the status of discussions with Cisco. Representatives of Cooley reviewed with the committee their analysis on the antitrust approval process, including timing and risks, and the status of the merger agreement negotiations, including deal protections and antitrust-related provisions. Later that day, Cooley provided a revised draft of the merger agreement to Fenwick reflecting input from the committee and our senior management.

 

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On October 18, 2017, the Strategic Transaction Committee met by phone, with senior management and representatives of our financial advisors and Cooley also attending. Senior management and our advisors reviewed with the committee the differing positions of the parties regarding the antitrust-related issues and other open issues in the merger agreement.

Later that day, the compensation committee of our board was presented with the proposed compensation and retention terms of employment for Messrs. Tessler, Hoffpauir and Tholen with Cisco and approved certain amendments to the terms of the PSU awards for Messrs. Tessler, Hoffpauir and Tholen and certain other executives and approved certain payments under our 2017 Executive Bonus Plan.

During the day of October 19, 2017, the parties continued to negotiate the merger agreement and related schedules. Later that day, our board held a special telephonic meeting, with senior management and representatives of Cooley also attending. Our board reviewed with representatives of Cooley the parties’ current positions on the antitrust-related issues and other open issues of the merger agreement. Following discussions, and based on the recommendation of the committee members and senior management, our board authorized continuing to pursue a transaction with Cisco without an antitrust reverse termination fee, taking into account other terms of the merger agreement taken as a whole and the potential value to BroadSoft stockholders. After the meeting, Mr. Tessler discussed key issues in the merger agreement with representatives of Cisco and provided a revised draft of the merger agreement to representatives of Cisco. During the day of October 20, 2017, the parties continued to negotiate the merger agreement and related schedules.

In the evening of October 20, 2017 after market close, our board held a special telephonic meeting, with senior management and representatives of our financial advisors and Cooley also attending. Representatives of Cooley reviewed our board’s fiduciary duties in the context of considering the proposed transaction with Cisco, the terms of the proposed merger agreement by referring to an executive summary of the merger agreement distributed in advance of the meeting, and the antitrust-related risks and approval process. The board asked questions and discussed the proposed transaction and related risks. Representatives of Qatalyst Partners reviewed with our board, its financial analysis of the per share merger consideration, and rendered to our board its oral opinion, which was subsequently confirmed by delivery of a written opinion, dated as of October 20, 2017, that, as of the date of such opinion, and based upon and subject to the matters and the limitations set forth therein, the per share merger consideration to be paid to the holders of BroadSoft common stock (other than as specified in such opinion) is fair from a financial point of view to such holders. Representatives of Jefferies also reviewed with our board, its financial analysis of the per share merger consideration, and rendered to our board a written opinion, dated as of October 20, 2017, that, as of the date of such opinion, and based upon and subject to the matters and the limitations set forth therein, the per share merger consideration to be paid to the holders of BroadSoft common stock (other than as specified in such opinion) is fair from a financial point of view to such holders. For a more detailed discussion of our financial advisors’ opinions, please see below under the caption “The Merger — Opinions of BroadSoft’s Financial Advisors.” The opinions of Qatalyst Partners and Jefferies are attached to this proxy statement as Annex B-1 and Annex B-2, respectively. Then, Mr. Gavin, a director and chairman of our board’s compensation committee, made a presentation to our board regarding the compensation and retention arrangements of the employment agreements negotiated between Cisco and Messrs. Tessler, Hoffpauir and Tholen. These agreements and arrangements are more fully described under “The Merger —Interests of Our Directors and Executive Officers in the Merger.” Following consideration of the merger agreement and the transactions contemplated by the merger agreement, including consideration of the factors described in “The Merger — Reasons for the Merger”, our board unanimously (a) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable, (b) determined that the merger agreement and the transactions contemplated thereby, including the merger, taken together, are at a price and on terms that are fair to, and in the best interest of BroadSoft and its stockholders, (c) approved the execution, delivery and performance by BroadSoft of the merger agreement and the consummation of the transactions contemplated thereby, including the merger, and (d) resolved to recommend that the stockholders of BroadSoft approve the adoption of the merger agreement and thereby the merger.

 

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Following our board meeting, the definitive merger agreement was executed by representatives of BroadSoft, Cisco, and Merger Sub late on the evening of October 20, 2017.

Execution of the merger agreement was publicly announced early on the morning of October 23, 2017. Later in the morning, we also announced the execution of the merger agreement to our customers and partners who attended the BroadSoft Connections 2017 annual customer conference in Phoenix, Arizona.

Reasons for the Merger

Reasons for the Recommendation of the Board of Directors

On October 20, 2017, our board of directors unanimously (a) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable, (b) determined that the merger agreement and the transactions contemplated thereby, including the merger, taken together, are at a price and on terms that are fair to, and in the best interest of BroadSoft and its stockholders, (c) approved the execution, delivery and performance by BroadSoft of the merger agreement and the consummation of the transactions contemplated thereby, including the merger and (d) resolved to recommend that the stockholders of BroadSoft approve the adoption of the merger agreement and thereby approve the merger.

Our board of directors consulted with our management, our outside legal advisor, Cooley LLP, and our financial advisors, Qatalyst Partners and Jefferies, and considered the following factors (which are not listed in any relative order of importance) in reaching its conclusion to approve the merger agreement and the transactions contemplated thereby, including the merger, and to recommend to our stockholders approval of the adoption of the merger agreement, all of which it viewed as generally supporting its decision to approve the business combination with Cisco:

 

    the merger consideration consists solely of cash, providing certainty, near-term value and liquidity to our stockholders;

 

    the current and historical market price of BroadSoft common stock, including the fact that the $55.00 price to be paid for each share in connection with the merger is the all-time high price for BroadSoft common stock and represents (a) a 28% premium to the closing price of $43.05 per share on August 29, 2017, the last trading day prior to published speculation regarding a potential transaction involving BroadSoft, and a 26% and 28% premium, respectively, over the average closing trading prices for the 30-day period and 90-day period ended on August 29, 2017 and (b) a 2% premium to the closing price of $53.90 per share on October 20, 2017, the last trading day before the merger was approved by our board of directors and publicly announced, and a 5% and 14% premium, respectively, over the average closing trading prices for the 30-day period and 90-day period ended on October 20, 2017;

 

    our board of directors’ familiarity with our current and historical financial condition, results of operations, prospects, business strategy, competitive position, properties, assets and prospects;

 

    our board of directors’ consideration of the Projections prepared by our management described under “The Merger — Certain Projections Utilized by BroadSoft in Connection with the Merger”;

 

    our board of directors’ consideration of BroadSoft’s strategic alternatives, including remaining an independent public company and pursuing our strategic business plan and/or pursuing a possible transformative combination, and its belief that the sale of BroadSoft for $55 per share in cash is a better alternative, considering, among other things, its projected stock trading price (taking into account its earnings multiple (prior to the published speculation) and projected earnings), and the growth rates and financial performance that BroadSoft would need to achieve for BroadSoft to obtain additional value for its stockholders, given that BroadSoft’s earnings multiple already exceeded the median multiple for comparable companies in our industry and given the risks of achieving these financial results, including competitive and technology risks and risks associated with continued geographic expansion;

 

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    our board of directors’ belief that BroadSoft, with the assistance of its financial advisors, had negotiated the highest price per share of common stock that Cisco was willing to pay for BroadSoft and the highest price reasonably available to BroadSoft under the circumstances;

 

    (a) the fact that BroadSoft had engaged in a fulsome process to obtain the best value reasonably available for our stockholders and created an opportunity for other potentially interested parties to negotiate a transaction with BroadSoft if such parties were interested in a strategic transaction and (b) the fact that the $55.00 per share cash consideration in the merger with Cisco was higher than the value of any alternative acquisition proposal that resulted from the process;

 

    the fact that Cisco’s obligation to consummate the merger is not subject to any financing condition;

 

    the fact that the merger agreement was unanimously approved by our board of directors, which is comprised of a majority of independent directors who are not affiliated with Cisco or Merger Sub or any of their affiliates and are not employees of BroadSoft or any of its subsidiaries, and which retained and received advice from our financial advisors and legal advisor in evaluating, negotiating and recommending the terms of the merger agreement;

 

    the terms and conditions of the merger agreement, which were the product of arm’s-length negotiations between the parties, including our board of directors’ ability under the merger agreement to withdraw or modify its recommendation in favor of the approval of adoption of the merger agreement in certain circumstances, including in connection with a superior proposal or certain intervening events, and its right to terminate the merger agreement in certain circumstances prior to the time that BroadSoft’s stockholders approve the adoption of the merger agreement and thereby approve the merger to accept a superior proposal, subject to the payment of the termination fee of $56 million;

 

    the conclusion of our board of directors that the termination fee of $56 million and the circumstances when such termination fee may be payable, are reasonable in light of the potential benefit of the merger;

 

    the opinion, dated as of October 20, 2017, of Qatalyst Partners and the opinion, dated as of October 20, 2017, of Jefferies to our board of directors as to the fairness, from a financial point of view and as of the date of each of such opinions, of the merger consideration to be paid to holders of BroadSoft common stock (excluding Cisco, Merger Sub or any of their respective affiliates), each of which opinions was based on and subject to the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken as more fully described under the section entitled “The Merger — Opinions of BroadSoft’s Financial Advisors”;

 

    the requirement that the merger agreement be adopted and approved by the holders of a majority of the outstanding shares of BroadSoft common stock entitled to vote thereon;

 

    the fact that the merger is not subject to approval by Cisco stockholders; and

 

    the availability of appraisal rights under the DGCL to BroadSoft’s stockholders who comply with all of the required procedures under the DGCL, which allows such holders to seek appraisal of the fair value of the shares of BroadSoft common stock.

Our board of directors also considered the potential risks of the merger and other potentially negative factors, including the following:

 

    the fact that we would no longer exist as an independent, publicly traded company, and our stockholders would no longer participate in any future earnings or growth of BroadSoft and would not benefit from any potential future appreciation in value of BroadSoft;

 

    the fact that receipt of the merger consideration generally will be taxable to our stockholders for U.S. federal income tax purposes;

 

   

the risk that the merger might not be consummated in a timely manner or at all due to a failure of certain conditions, including with respect to the required clearance of the transaction by U.S. and

 

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applicable foreign antitrust regulatory authorities, and as a result, the trading price of BroadSoft common stock may be adversely affected;

 

    the risk that the parties may incur significant costs and delays resulting from seeking governmental consents and approvals necessary for completion of the merger;

 

    the risk to BroadSoft’s business, sales, operations and financial results in the event that the merger is not consummated;

 

    the risk of diverting management’s attention from other strategic priorities to focus on matters relevant to the merger;

 

    the potential impact on BroadSoft’s business from any negative reaction by customers, suppliers or other constituencies after the announcement of the merger;

 

    the possible loss of key management or other BroadSoft personnel during the pendency of the merger;

 

    the fact that, pursuant to the merger agreement, we must generally conduct our business in the ordinary course and we are subject to a variety of other restrictions on the conduct of our business prior to the closing of the merger or the termination of the merger agreement;

 

    the $56 million termination fee payable by BroadSoft upon the occurrence of certain events, including the potential of such termination fee to deter other potential acquirers from proposing an alternative transaction that may be more advantageous to BroadSoft’s stockholders;

 

    that certain terms of the merger agreement prohibit BroadSoft and its representatives from soliciting third-party bids and from accepting, approving or recommending third-party bids except in limited circumstances, which terms could reduce the likelihood that other potential acquirers would propose an alternative transaction that may be more advantageous to our stockholders;

 

    the fact that our executive officers and directors may have interests in the merger that are different from, or in addition to, those of our stockholders, as described under “The Merger — Interests of Our Directors and Executive Officers in the Merger”; and

 

    the exclusivity agreement with Cisco limited the board’s ability to assess the interest of other potential acquirers from September 29, 2017, the date the exclusivity agreement was executed, until October 20, 2017, the date the merger agreement was executed.

The board of directors concluded that the risks, uncertainties, restrictions and potentially negative factors associated with the merger were outweighed by the potential benefits of the merger.

The foregoing discussion of our board of directors’ reasons for its recommendation to approve the merger is not meant to be exhaustive, but addresses the material information and factors considered by our board of directors in consideration of its recommendation. In view of the wide variety of factors considered by our board of directors in connection with its evaluation of the merger and the complexity of these matters, our board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. Rather, the directors made their determinations and recommendations based on the totality of the information presented to them, and the judgments of individual members of our board of directors may have been influenced to a greater or lesser degree by different factors.

Our board of directors unanimously recommends that you vote “FOR” the approval of the adoption of the merger agreement.

Opinions of BroadSoft’s Financial Advisors

Opinion of Qatalyst Partners

BroadSoft retained Qatalyst Partners to act as financial advisor to our board of directors in connection with a potential transaction such as the merger and to evaluate whether the consideration to be received by the holders

 

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of shares of BroadSoft common stock, other than Cisco or any affiliate of Cisco, pursuant to the merger agreement was fair, from a financial point of view, to such holders. BroadSoft selected Qatalyst Partners to act as its financial advisor based on Qatalyst Partners’ qualifications, expertise, reputation and knowledge of the business and affairs of BroadSoft and the industry in which it operates. Qatalyst Partners provided its written consent to the reproduction of its opinion in this proxy statement. At the meeting of our board of directors on October 20, 2017, Qatalyst Partners rendered its oral opinion, that, as of such date and based upon and subject to the considerations, limitations, qualifications, assumptions and other matters set forth therein, the consideration to be received by the holders of shares of BroadSoft common stock, other than Cisco or any affiliate of Cisco, pursuant to the merger agreement was fair, from a financial point of view, to such holders. Following the meeting, Qatalyst Partners delivered its written opinion, dated October 20, 2017, to our board of directors.

The full text of Qatalyst Partners’ written opinion to our board of directors, dated October 20, 2017, is attached hereto as Annex B-1 and is incorporated in this proxy statement by reference. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications of the review undertaken by Qatalyst Partners in rendering its opinion. You should read the opinion carefully in its entirety. Qatalyst Partners’ opinion was provided to our board of directors and addresses only, as of the date of the opinion, the fairness, from a financial point of view, of the consideration to be received by the holders of shares of BroadSoft common stock, other than Cisco or any affiliate of Cisco, pursuant to the merger agreement, and it does not address any other aspect of the merger. It does not constitute a recommendation to any BroadSoft stockholder as to how to vote with respect to the merger or any other matter and does not in any manner address the price at which BroadSoft common stock will trade at any time. The summary of Qatalyst Partners’ opinion set forth herein is qualified in its entirety by reference to the full text of the opinion.

In arriving at its opinion, Qatalyst Partners reviewed the merger agreement, certain related documents and certain publicly available financial statements and other business and financial information of BroadSoft. Qatalyst Partners also reviewed certain forward-looking information relating to BroadSoft prepared by BroadSoft’s management, including financial projections and operating data of BroadSoft which we refer to as financial forecasts described in the section of this proxy statement captioned “Certain Projections Utilized by BroadSoft in Connection with the Merger” (the “Projections”). Additionally, Qatalyst Partners discussed the past and current operations and financial condition and the prospects of BroadSoft with BroadSoft’s senior management. Qatalyst Partners also reviewed the historical market prices and trading activity for BroadSoft common stock and compared BroadSoft’s financial performance and the prices and trading activity of BroadSoft common stock with that of certain other selected publicly traded companies and their securities. In addition, Qatalyst Partners reviewed the financial terms, to the extent publicly available, of selected acquisition transactions and performed such other analyses, reviewed such other information and considered such other factors as Qatalyst Partners deemed appropriate.

In arriving at its opinion, Qatalyst Partners assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to, or discussed with, Qatalyst Partners by BroadSoft. With respect to the Projections, Qatalyst Partners was advised by the management of BroadSoft and assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of BroadSoft’s management of the future financial performance of BroadSoft and other matters covered thereby. Qatalyst Partners assumed that the merger would be consummated in accordance with the terms set forth in the merger agreement, without any modification, waiver or delay. In addition, Qatalyst Partners assumed that in connection with the receipt of all the necessary approvals of the proposed merger, no delays, limitations, conditions or restrictions will be imposed that could have an adverse effect on BroadSoft or Cisco or the contemplated benefits expected to be derived in the proposed merger. Qatalyst Partners did not make any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of BroadSoft nor was Qatalyst Partners furnished with any such evaluation or appraisal. In addition, Qatalyst relied, without independent verification, upon the assessment of BroadSoft’s management as to the existing and future technology and products of BroadSoft and the risks associated with such technology and products. Qatalyst Partners’ opinion has been approved by Qatalyst Partners’ opinion committee in accordance with its customary practice.

 

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Qatalyst Partners’ opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion. Events occurring after the date of the opinion may affect Qatalyst Partners’ opinion and the assumptions used in preparing it, and Qatalyst Partners did not assume any obligation to update, revise or reaffirm its opinion. Qatalyst Partners’ opinion does not address BroadSoft’s underlying business decision to engage in the merger, or the relative merits of the merger as compared to any strategic alternatives that may be available to BroadSoft. The opinion is limited to the fairness, from a financial point of view, of the consideration to be received by the holders of shares of BroadSoft common stock, other than Cisco or any affiliate of Cisco, pursuant to the merger agreement, and Qatalyst Partners expressed no opinion with respect to the fairness of the amount, nature or timing of the compensation to any of BroadSoft’s officers, directors or employees, or any class of such persons, relative to such consideration.

The following is a brief summary of the material analyses performed by Qatalyst Partners in connection with its opinion dated October 20, 2017. The analyses and factors described below must be considered as a whole; considering any portion of such analyses or factors, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Qatalyst Partners’ opinion. For purposes of its analyses, Qatalyst Partners utilized both the Projections as well as research analyst consensus estimates for BroadSoft, which we refer to as the “Street Case.” Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and to more fully understand the financial analyses used by Qatalyst Partners, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Qatalyst Partners’ financial analyses.

Discounted Cash Flow Analysis

Qatalyst Partners performed an illustrative discounted cash flow analysis, which is designed to imply a potential, present value of per share values for the common stock of BroadSoft as of September 30, 2017 by:

 

  adding:

 

  a) the implied net present value of BroadSoft’s estimated future unlevered free cash flows, based on the Projections for the fourth quarter of fiscal year 2017 through fiscal year 2021 (which implied present value was calculated by using a range of discount rates of 8.0% to 13.0%, based on an estimated weighted average cost of capital for BroadSoft);

 

  b) the implied net present value of a corresponding terminal value of BroadSoft, calculated by multiplying BroadSoft’s estimated net operating profit after tax (“NOPAT”) in fiscal year 2022, based on the Projections, by a range of multiples of fully-diluted enterprise value to next-twelve-months estimated NOPAT of 15.0x to 22.0x, and discounted to present value using the same range of discount rates used in item (a) above;

 

  c) the estimated cash balance, net of the face value of outstanding convertible debt, of BroadSoft as of September 30, 2017, as provided by BroadSoft’s management; and

 

    dividing the resulting amount by the number of fully-diluted shares of BroadSoft common stock (calculated using the treasury stock method) outstanding, taking into account RSUs, PSUs and stock options outstanding as of October 18, 2017, as provided by BroadSoft’s management and treating in-the-money convertible debt on a net share basis, and applying a dilution factor derived from the forecasted stock based compensation provided to Qatalyst Partners in the Projections, which BroadSoft’s management directed Qatalyst Partners to use for purposes of its opinion.

Based on the calculations set forth above, this analysis implied a range of values for BroadSoft common stock of approximately $38.22 to $56.48 per share.

 

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Selected Companies Analysis

Qatalyst Partners compared selected financial information and public market multiples for BroadSoft with publicly available information and public market multiples for selected companies. The companies used in this comparison included those companies listed below, and were selected by Qatalyst Partners based on its professional judgement, which included such factors as publicly traded companies in similar lines of business to BroadSoft, having a similar business model, having similar financial performance, or having other relevant or similar characteristics.

 

Selected High Unified Communications Companies

   CY2018E P/E
Multiples
     CY2018E EBITDA
Multiples
 

RingCentral, Inc. (1)

     —          —    

8x8, Inc.

     —          44.9x  

Mitel Networks Corporation (2)

     8.3x        8.1x  

 

Note: Multiples greater than 50x or negative noted as dashes.
(1) RingCentral unaffected multiples shown based on RingCentral closing price of $35.90 on August 8, 2017, the day prior to rumors of hiring a financial advisor after takeover interest.
(2) Mitel capitalization and statistics pro forma for the announced acquisition of ShoreTel on July 28, 2017. Statistics based on RBC analyst research dated September 25, 2017.

 

Selected Carrier Infrastructure and Software Companies

   CY2018E P/E
Multiples
     CY2018E EBITDA
Multiples
 

Cisco Systems, Inc.

     13.5x        7.7x  

Nokia Corp.

     15.4x        7.1x  

LM Ericsson Telephone Company

     22.6x        6.9x  

Juniper Networks, Inc.

     11.4x        5.7x  

Amdocs Ltd.

     16.0x        10.8x  

Sonus Networks, Inc. (1)

     12.5x        8.0x  

Synchronoss Technologies, Inc. (2)

     7.3x        7.6x  

 

(1) Sonus capitalization and statistics shown pro forma for the announced acquisition of GENBAND Inc. on May 23, 2017. Statistics based on William Blair analyst research dated June 1, 2017.
(2) Synchronoss unaffected multiples shown based on Synchronoss closing price of $10.72 on October 5, 2017, the day prior to Siris Capital acquisition rumors.

Based upon research analyst consensus estimates for calendar year 2018 as of October 18, 2017, and using the closing prices as of October 18, 2017 (except as noted above) for shares of the selected companies, Qatalyst Partners calculated, among other things, (a) the estimated calendar year 2018 price-to-earnings ratio (the “CY2018E P/E Multiples”) and (b) the implied fully-diluted enterprise value divided by the estimated calendar year 2018 EBITDA (the “CY2018E EBITDA Multiples”) for each of the selected companies.

Based on an analysis of the respective multiples for the selected companies, Qatalyst Partners selected a representative multiple range for each of the respective multiples and applied this range to BroadSoft’s estimated statistic (a) based on the Projections and (b) based on the Street Case.

Based on an analysis of the CY2018E P/E Multiples for the selected companies, Qatalyst Partners selected a representative multiple range of 16.0x to 25.0x and applied this range to BroadSoft’s estimated CY2018E Adjusted EPS after statutory taxes based on the Projections and the Street Case. For the purposes of this analysis, Qatalyst Partners added the per share present value of BroadSoft’s net operating losses and tax credits as of June 30, 2017, per BroadSoft’s management, to BroadSoft’s implied common stock price per share. The

 

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Adjusted EPS after statutory taxes was calculated based on a 25% statutory non-GAAP tax rate, per BroadSoft’s management. Based on the calculations set forth above, this analysis implied a range of values for BroadSoft common stock of approximately $35.11 to $54.68 per share based on the Projections, and $34.56 to $53.82 per share based on the Street Case.

Based on an analysis of the CY2018E EBITDA Multiples for the selected companies, Qatalyst Partners selected a representative multiple range of 9.0x to 14.0x and applied this range to BroadSoft’s estimated CY2018E EBITDA based on the Projections and the Street Case. This analysis implied a range of values for BroadSoft common stock of approximately $33.82 to $48.59 per share based on the Projections, and $32.14 to $46.44 per share based on the Street Case.

No company included in the selected companies analysis is identical to BroadSoft. In evaluating the selected companies, Qatalyst Partners made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters. Many of these matters are beyond the control of BroadSoft, such as the impact of competition on BroadSoft’s business and the industry in general, industry growth and the absence of any material adverse change in BroadSoft’s financial condition and prospects of or the industry or in the financial markets in general. Mathematical analysis, such as determining the arithmetic mean, median, or the high or low, is not in itself a meaningful method of using selected company data.

Selected Transactions Analysis

Qatalyst Partners compared eight selected transactions announced between November 2009 and July 2017 involving companies in the communications technology industry selected by Qatalyst Partners based on its professional judgment. These transactions are listed below:

 

Announcement Date

  

Target

  

Acquiror

   LTM P/E
Multiple
     NTM P/E
Multiple
     LTM
EBITDA
Multiple
     NTM
EBITDA
Multiple
 

July 27, 2017

   ShoreTel, Inc.    Mitel Networks Corporation      —          —          18.2x        21.1x  

July 8, 2016

   Polycom, Inc.    Siris Capital Group, LLC      14.5x        14.2x        6.7x        5.9x  

May 23, 2016

   Xura, Inc.    Siris Capital Group, LLC      —          —          —          —    

March 2, 2015

   Mavenir Systems, Inc.    Mitel Networks Corporation      —          —          —          44.0x  

November 11, 2013

   Aastra Technologies ,Ltd.    Mitel Networks Corporation      10.3x        13.1x        8.4x        6.8x  

February 4, 2013

   Acme Packet, Inc.    Oracle Corporation      46.3x        —          21.5x        31.0x  

October 28, 2010

   Syniverse Technologies, Inc.    Carlyle Group      17.1x        15.4x        10.7x        9.7x  

November 16, 2009

   Tandberg (1)    Cisco Systems, Inc.      27.0x        21.5x        13.9x        11.9x  

 

Note: Multiples that were not publicly available or not meaningful noted as dashes. Multiples greater than 50x or negative considered not meaningful.
(1) Based on revised tender offer at 170 Kroner per share on November 16, 2009.

For each of the transactions listed above, Qatalyst Partners reviewed, among other things, (a) the price per share paid for the target company as a multiple of (i) last-twelve-months non-GAAP earnings per share of the target company (“LTM P/E Multiple”), (ii) analyst estimates of the next-twelve-months non-GAAP earnings per share (“NTM P/E Multiple”), as well as (b) the implied fully-diluted enterprise value of the target company as a multiple of (i) last-twelve-months EBITDA of the target company (“LTM EBITDA Multiple”), and (ii) analyst

 

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estimates of the next-twelve-months EBITDA of the target company (“NTM EBITDA Multiple”).    Last-twelve-month and next-twelve-month periods were determined from the date of the last earnings release prior to, or in conjunction with, each respective transaction’s announcement date.

Based on an analysis of the LTM P/E Multiples for the selected transactions, Qatalyst Partners selected a representative multiple range of 18.0x to 27.0x and applied this range to BroadSoft’s Adjusted EPS after statutory taxes and BroadSoft’s as-reported non-GAAP earnings per share (calculated as the consecutive four quarters ended on June 30, 2017). For the purposes of the Adjusted EPS after statutory taxes analysis, Qatalyst Partners added the per share present value of BroadSoft’s net operating losses and tax credits as of June 30, 2017, per BroadSoft’s management, to BroadSoft’s implied common stock price per share. The Adjusted EPS after statutory taxes was calculated based on a 25% statutory non-GAAP tax rate, per BroadSoft’s management. Based on the calculations set forth above, this analysis implied a range of values for BroadSoft common stock of approximately $28.40 to $42.45 per share based on the Adjusted EPS after statutory taxes , and $36.36 to $54.54 per share based on the as-reported non-GAAP earnings per share.

Based on an analysis of the NTM P/E Multiples for the selected transactions, Qatalyst Partners selected a representative multiple range of 16.0x to 23.0x and applied this range to the estimated Adjusted EPS after statutory taxes and BroadSoft’s as-reported non-GAAP earnings per share, based on the Street Case (calculated as the consecutive four quarters ending on June 30, 2018). For the purposes of the Adjusted EPS after statutory taxes analysis, Qatalyst Partners added the per share present value of BroadSoft’s net operating losses and tax credits as of June 30, 2017, per BroadSoft’s management, to BroadSoft’s implied common stock price per share. The Adjusted EPS after statutory taxes was calculated based on a 25% statutory non-GAAP tax rate, per BroadSoft’s management. Based on the calculations set forth above, this analysis implied a range of values for BroadSoft common stock of approximately $33.43 to $47.91 per share based on the Adjusted EPS after statutory taxes, and $41.76 to $60.03 per share based on the as-reported earnings per share.

Based on the analysis of the LTM EBITDA Multiples for selected transactions, Qatalyst Partners selected a representative multiple range of 10.0x to 15.0x applied to BroadSoft’s last-twelve-months EBITDA (calculated as the consecutive four quarters ended on June 30, 2017). This analysis implied a range of values for the common stock of approximately $26.27 to $37.05 per share.

Based on the analysis of the NTM EBITDA Multiples for the selected transactions, Qatalyst Partners selected a representative multiple range of 9.0x to 13.0x applied to BroadSoft’s estimated next-twelve-months EBITDA (calculated as the consecutive four quarters ending on June 30, 2018), based on the Street Case. This analysis implied a range of values for the common stock of approximately $30.75 to $41.50 per share.

No company or transaction utilized in the selected transactions analysis is identical to BroadSoft or the merger. In evaluating the selected transactions, Qatalyst Partners made judgments and assumptions with regard to general business, market and financial conditions and other matters, many of which are beyond BroadSoft’s control, such as the impact of competition on BroadSoft’s business or the industry generally, industry growth and the absence of any material adverse change in BroadSoft’s financial condition or the industry or in the financial markets in general, which could affect the public trading value of the companies and the aggregate value of the transactions to which they are being compared.

Miscellaneous

In connection with the review of the merger by our board of directors, Qatalyst Partners performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a financial opinion is a complex process and is not necessarily amenable to a partial analysis or summary description. In arriving at its opinion, Qatalyst Partners considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Qatalyst Partners believes that selecting any portion of its analyses, without considering all analyses as a whole, could create a misleading or incomplete view of the process underlying its analyses and opinion. In addition, Qatalyst Partners may have given various

 

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analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Qatalyst Partners’ view of BroadSoft’s actual value. In performing its analyses, Qatalyst Partners made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond BroadSoft’s control. Any estimates contained in Qatalyst Partners’ analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.

Qatalyst Partners conducted the analyses described above solely as part of its analysis of the fairness, from a financial point of view, of the consideration to be received by the holders of BroadSoft common stock, other than Cisco or any affiliate of Cisco, pursuant to the merger agreement. This analysis does not purport to be an appraisal or to reflect the price at which BroadSoft common stock might actually trade.

Qatalyst Partners’ opinion and its presentation to our board of directors was one of many factors considered by our board of directors in deciding to approve the merger agreement. Consequently, the analyses as described above should not be viewed as determinative of the opinion of our board of directors with respect to the consideration to be received by the holders of BroadSoft common stock, other than Cisco or any affiliate of Cisco, pursuant to the merger agreement or of whether our board of directors would have been willing to agree to different consideration. The consideration payable in the merger was determined through arm’s length negotiations between BroadSoft and Cisco and was approved by our board of directors. Qatalyst Partners provided advice to BroadSoft during these negotiations. Qatalyst Partners did not, however, recommend any specific consideration to BroadSoft or that any specific consideration constituted the only appropriate consideration for the merger.

Qatalyst Partners provides investment banking and other services to a wide range of corporations and individuals, domestically and offshore, from which conflicting interests or duties may arise. In the ordinary course of these activities, affiliates of Qatalyst Partners may at any time hold long or short positions, and may trade or otherwise effect transactions in debt or equity securities or loans of BroadSoft, Cisco or certain of their respective affiliates. During the two year period prior to the date of Qatalyst Partners’ opinion, no material relationship existed between Qatalyst Partners and its affiliates and BroadSoft or Cisco pursuant to which compensation was received by Qatalyst Partners or its affiliates; however, Qatalyst Partners and its affiliates may in the future provide investment banking and other financial services to BroadSoft or Cisco or any of their respective affiliates for which it would expect to receive compensation.

Pursuant to a letter agreement dated August 27, 2013, as amended by a letter agreement dated June 1, 2017, Qatalyst Partners provided BroadSoft with financial advisory services in connection with the merger for which it will be paid approximately $32 million, $2.0 million of which was payable upon the delivery of its opinion (regardless of the conclusion reached therein), and the remaining portion of which will be paid upon, and subject to, consummation of the Merger.    Additionally, BroadSoft paid Qatalyst Partners $75,000 at the execution of the letter agreement and $75,000 in 2013 following BroadSoft’s first meeting with a company potentially interested in a strategic transaction with BroadSoft that BroadSoft determined to continue discussions with. BroadSoft has also agreed to reimburse Qatalyst for its expenses incurred in performing its services. BroadSoft has also agreed to indemnify Qatalyst Partners and its affiliates, their respective members, directors, officers, partners, agents and employees and any person controlling Qatalyst Partners or any of its affiliates against certain liabilities, including liabilities under the federal securities laws, and expenses related to or arising out of Qatalyst Partners’ engagement.

Opinion of Jefferies

BroadSoft has retained Jefferies to act as a financial advisor to BroadSoft in connection with the merger based on its reputation and substantial knowledge and expertise in the unified communications industry and

 

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mergers and acquisition transactions generally. In connection with this engagement, our board of directors requested that Jefferies evaluate the fairness, from a financial point of view, of the consideration to be received by the holders of BroadSoft common stock (other than Cisco and its affiliates) pursuant to the merger. At the meeting of our board of directors on October 20, 2017, Jefferies rendered its oral opinion to our board of directors, confirmed by delivery of a written opinion dated October 20, 2017, to the effect that, as of that date and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Jefferies as set forth in its opinion, the consideration to be received by holders of BroadSoft common stock (other than Cisco and its affiliates) pursuant to the merger agreement was fair, from a financial point of view, to such holders.

The full text of the written opinion of Jefferies, dated October 20, 2017, to our board of directors is attached hereto as Annex B-2. Jefferies’ opinion sets forth, among other things, the various assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Jefferies in rendering its opinion. We encourage you to read Jefferies’ opinion carefully and in its entirety. Jefferies’ opinion was provided for the use and benefit of our board of directors and addresses only the fairness, from a financial point of view, of the consideration to be received by the holders of BroadSoft common stock (other than Cisco and its affiliates) pursuant to the merger as of the date of the opinion. It does not address any other aspects of the merger, including the underlying business decision by BroadSoft to engage in the merger, and does not constitute a recommendation as to how any holder of BroadSoft common stock should vote or act with respect to the merger or any matter related thereto. The summary of the opinion of Jefferies set forth below is qualified in its entirety by reference to the full text of the opinion.

In arriving at its opinion, Jefferies, among other things:

 

    reviewed a draft dated October 20, 2017 of the merger agreement;

 

    reviewed certain publicly available financial and other information about BroadSoft;

 

    reviewed certain information furnished to Jefferies by BroadSoft’s management, including the Projections, relating to the business, operations and prospects of BroadSoft;

 

    held discussions with members of senior management of BroadSoft concerning the matters described in the second and third bullets immediately above;

 

    reviewed the share trading price history and valuation multiples for BroadSoft common stock and compared them with those of certain other publicly traded companies that Jefferies deemed relevant;

 

    reviewed the proposed financial terms of the merger and compared them with the financial terms of certain other acquisition transactions that Jefferies deemed relevant; and

 

    conducted such other financial studies, analyses and investigations as Jefferies deemed appropriate.

In Jefferies’ review and analysis and in rendering its opinion, Jefferies assumed and relied upon, but did not assume any responsibility to independently investigate or verify, the accuracy and completeness of all financial and other information that was supplied or otherwise made available by BroadSoft or that was otherwise publicly available to Jefferies (including, without limitation, the information described above), or that was otherwise reviewed by Jefferies. In its review, Jefferies relied on assurances of management of BroadSoft that it was not aware of any facts or circumstances that would make such information incomplete, inaccurate or misleading, and did not obtain any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance sheet or otherwise) of, or conduct a physical inspection of any of the properties or facilities of, BroadSoft. Jefferies was not furnished with any such evaluations or appraisals of such physical inspections and did not assume any responsibility to obtain any such evaluations or appraisals.

With respect to the Projections (including estimates as to potential net operating loss carryforwards of BroadSoft on a standalone basis) provided to and reviewed by Jefferies, Jefferies’ opinion noted that projecting

 

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future results of any company is inherently subject to uncertainty. We informed Jefferies, however, and Jefferies assumed, that such Projections were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of BroadSoft as to the future financial performance of BroadSoft. Jefferies expressed no opinion as to the Projections or the assumptions on which they were made.

Jefferies’ opinion was based on economic, monetary, regulatory, market and other conditions existing and which could be evaluated as of the date of its opinion. Jefferies expressly disclaimed any undertaking or obligation to advise any person of any change in any fact or matter affecting Jefferies’ opinion of which Jefferies became aware after the date of its opinion.

Jefferies made no independent investigation of any legal, regulatory, accounting or tax matters affecting BroadSoft or the merger, and Jefferies assumed the correctness in all respects meaningful to Jefferies’ analysis of all legal and accounting advice given to BroadSoft and our board of directors, including, without limitation, advice as to the legal, regulatory, accounting and tax consequences of the terms of, and transactions contemplated by, the merger agreement to BroadSoft and its stockholders. In addition, in preparing its opinion, Jefferies did not take into account any tax or other consequences of the merger to, or individual circumstances of, any holder of BroadSoft common stock. In rendering its opinion, Jefferies assumed that the final form of the merger agreement would be substantially similar to the last draft reviewed by it and assumed that the merger would be consummated in accordance with its terms without waiver, modification or amendment of any material term, condition or agreement and in compliance with all applicable laws, documents and other requirements. Jefferies also assumed that, in the course of obtaining the necessary governmental, regulatory or third party approvals, consents, waivers and releases for the merger, no delay, limitation, restriction or condition would be imposed or occur that would have an adverse effect on BroadSoft, Cisco or that otherwise would be meaningful in any respect to its analyses or opinion.

Jefferies’ opinion was for the use and benefit of our board of directors in its evaluation of the consideration from a financial point of view, and did not address the relative merits of the transactions contemplated by the merger agreement as compared to any alternative transaction or opportunity that might be available to BroadSoft. Jefferies’ opinion also did not address the underlying business decision by BroadSoft to engage in the merger or the terms of the merger agreement or the documents referred to therein, including the form or structure of the merger or any term, aspect or implication of any guarantee, financing or other arrangements, agreements or understandings entered into in connection with, or contemplated by or resulting from, the merger or otherwise. Jefferies’ opinion does not constitute a recommendation as to how any holder of shares of BroadSoft common stock should vote or act with respect to the merger or any matter. In addition, Jefferies did not express an opinion or view with respect to, and its opinion did not address, the fairness to, or any other consideration of, the holders of any class of securities, creditors or other constituencies of BroadSoft, other than the holders of shares of BroadSoft common stock. Jefferies expressed no opinion as to the price at which shares of BroadSoft common stock would trade at any time. Furthermore, Jefferies did not express any view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation or other consideration payable or to be received by any of BroadSoft’s officers, directors or employees, or any class of such persons, in connection with the merger relative to the consideration to be received by holders of shares of BroadSoft common stock. Jefferies’ opinion was authorized by the Fairness Committee of Jefferies.

In connection with rendering its opinion, Jefferies performed a variety of financial and comparative analyses, which are summarized below. The following summary is not a complete description of all analyses performed and factors considered in connection with Jefferies’ opinion. The preparation of a fairness opinion is a complex process involving subjective judgments and is not necessarily susceptible to partial analysis or summary description. With respect to the selected public companies and selected precedent transactions analyses summarized below, no company or transaction used as a comparison was identical or directly comparable to BroadSoft or the merger. These analyses necessarily involved complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading, acquisition or other values of the companies or transactions concerned.

 

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Jefferies believes that its analyses and the summary below must be considered as a whole. Considering any portion of Jefferies’ analyses or the factors considered by Jefferies or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying the conclusion expressed in Jefferies’ analyses and opinion. In addition, Jefferies may have given various analyses more or less weight than other analyses, and may have deemed various assumptions more or less probable than other assumptions, so that implied reference ranges resulting from any particular analysis described below should not be taken to be Jefferies’ view of BroadSoft’s actual value. Jefferies did not draft, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion, but rather arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole and also on the application of Jefferies’ own experience and judgment.

In performing its analyses, Jefferies made numerous assumptions with respect to industry performance, general business, economic, monetary, regulatory, market and other conditions and other matters, many of which are beyond our and Jefferies’ control. The analyses performed by Jefferies are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by such analyses. Estimates of the financial value of companies do not purport to be appraisals or necessarily reflect the prices at which companies or securities actually may be sold or acquired. Accordingly, the estimates used in, and the range of the valuations resulting from, any particular analysis described below are inherently subject to substantial uncertainty and should not be taken as Jefferies’ view of the actual value of BroadSoft or its securities.

The analyses performed were prepared solely as part of Jefferies’ analysis on the fairness, from a financial point of view, of the consideration to be received by holders of shares of BroadSoft common stock (other than Cisco or its affiliates) pursuant to the merger agreement, and were provided to our board of directors in connection with the delivery of Jefferies’ opinion. The consideration payable in the merger was determined through negotiation between BroadSoft and Cisco, and the decision by BroadSoft to enter into the merger agreement was solely that of our board of directors. Jefferies’ opinion and financial analyses were only one of many factors considered by the board of directors in its evaluation of the consideration and should not be viewed as determinative of the views of the board of directors or management with respect to the merger or the consideration payable in the merger.

The following is a summary of the material financial analyses performed by Jefferies in connection with Jefferies’ delivery of its opinion and presentation to our board of directors at its meeting on October 20, 2017. The financial analyses summarized below include information presented in tabular format. In order to fully understand Jefferies’ financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Jefferies’ financial analyses.

 

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Selected Companies Analysis

Jefferies reviewed publicly available financial and stock market information of the following ten selected companies, which we refer to as the selected companies, of which three were unified communications companies, and seven were carrier infrastructure & software provider companies, that Jefferies in its professional judgment considered generally relevant to BroadSoft for purposes of its financial analysis, and compared such information with similar publicly available financial and stock market information of BroadSoft.

 

     Selected Enterprise Unified
Communications Companies
   Price / CY17 Adj. EPS      Price / CY18 Adj. EPS  

RingCentral, Inc. (1)

     NM        NM  

8x8, Inc.

     NM        NM  

Mitel Networks Corporation (2)

     11.8x        8.3x  

 

Note:   Not Meaningful (NM) when relevant or projected figures are less than zero or multiples are greater than 50x.
(1) Reflects unaffected price of $35.90 as of August 8, 2017.
(2) Mitel metrics pro forma for Shoretel acquisition announced on July 27, 2017. Metrics per RBC research published September 25, 2017 and company filings.

 

Selected Carrier Infrastructure and
Software Provider Companies
   Price / CY17 Adj. EPS      Price / CY18 Adj. EPS  

Cisco Systems, Inc.

     14.1x        13.4x  

Nokia Corporation

     18.6x        15.7x  

LM Ericsson Telephone Company

     NM        24.3x  

Juniper Networks, Inc.

     11.9x        11.4x  

Amdocs Limited

     17.1x        15.9x  

Sonus Networks, Inc. (1)

     30.0x        13.2x  

Synchronoss Technologies, Inc. (2)

     11.3x        8.6x  

 

(1) Pro forma for announced acquisition of GENBAND Inc. on May 23, 2017. Metrics per William Blair research published July 12, 2017 and company filings.
(2) Reflects unaffected price of $10.72 as of October 5, 2017.

Jefferies reviewed total enterprise values (“TEV”), calculated as fully-diluted equity values based on closing stock prices on October 13, 2017, plus total debt, preferred stock and non-controlling interests (as applicable) less cash and cash equivalents, for the selected companies as a multiple of their respective estimated adjusted earnings per share for calendar years 2017 and 2018. Estimated financial data of the selected companies were based on publicly available Wall Street research analysts’ estimates, public filings and other publicly available information, calendarized in certain instances for comparative purposes. Estimated financial data of BroadSoft was based on publicly available information and the Projections.

Applying a range of selected multiples from each of the selected companies to BroadSoft’s estimated adjusted cash tax earnings per share for calendar years 2017 and 2018, respectively, Jefferies derived ranges of implied enterprise value for BroadSoft. Jefferies derived the below implied equity reference ranges per share of BroadSoft common stock, as compared to the consideration to be received by the holders of BroadSoft common stock (other than Cisco and its affiliates) pursuant to the merger, by subtracting total debt and adding cash and cash equivalents to the ranges of implied enterprise values for BroadSoft and dividing by BroadSoft’s fully diluted shares of BroadSoft common stock outstanding (including the make-whole shares from BroadSoft’s 2018

 

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and 2022 convertible debt), based on the capitalization table provided to Jefferies by BroadSoft’s management on October 18, 2017, which BroadSoft’s management directed Jefferies to use for purposes of its opinion.

 

Benchmark

   Multiple Range    Implied Equity Reference
Range Per Share of
BroadSoft common stock

BroadSoft Price / CY17 Adj. Cash Tax EPS of $2.41

   15.0x – 21.0x    $ 36.21 – $ 50.69

BroadSoft Price / CY18 Adj. Cash Tax EPS of $2.75

   14.0x – 20.0x    $ 38.56 – $ 55.08

None of the selected companies is identical to BroadSoft. In evaluating the selected companies, Jefferies made numerous judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond BroadSoft’s and Jefferies’ control. Mathematical analysis, such as determining the median, is not in itself a meaningful method of using the selected companies’ data.

Selected Transactions Analysis

Using publicly available information, Jefferies reviewed, among other things, financial data relating to eighteen completed transactions listed below involving the acquisition of unified communications and messaging related communication software companies or the acquisition of services to communication service providers and enterprises companies, that Jefferies in its professional judgment considered generally relevant, which we refer to as the selected transactions. Jefferies reviewed selected transactions announced since January 1, 2009 with an implied transaction enterprise value between $300 million and $4 billion.

 

Announce Date

 

Acquiror

 

Target

  TEV / LTM
(12/31/17) Revenue
    TEV / LTM
(12/31/17)
EBITDA
    Price / LTM (12/31/17)
Adjusted Earnings Per
Share
 
July 27, 2017   Mitel Networks Corporation   ShoreTel, Inc.     1.2x       18x       NM  
May 23, 2017   Sonus Networks, Inc.   GENBAND Inc.     1.0x       18x  (1)      NA  
December 19, 2016   Xura, Inc.   Mavenir Systems, Inc.     2.1x       16x       NA  
August 31, 2016   Genesys Telecommunications Laboratories, Inc.   Interactive Intelligence Group, Inc.     3.4x       NM       NM  
July 26, 2016   LogMeIn, Inc.   Citrix Systems, Inc.     NA       NA       NA  
July 8, 2016   Siris Capital Group, LLC   Polycom, Inc.     1.1x       7x       15x  
May 23, 2016   Siris Capital Group, LLC   Xura, Inc.     2.2x       22x       29x  (2) 
May 18, 2016   NICE-Systems, Ltd.   inContact, Inc.     4.2x       NM       NM  
November 3, 2015   Atos SE   Unify     0.5x       NM       NA  
June 15, 2015   Comverse, Inc.   Acision Global Limited (3)     Conf.       Conf.       NA  
March 2, 2015   Mitel Networks Corporation   Mavenir Systems, Inc.     4.0x       NM       NM  
November 11, 2013   Mitel Networks Corporation   Aastra Technologies, Ltd.     0.5x       7x       10x  
February 4, 2013   Oracle Corporation   Acme Packet, Inc.     6.1x       27x       NM  

 

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Announce Date

 

Acquiror

 

Target

  TEV / LTM
(12/31/17) Revenue
    TEV / LTM
(12/31/17)
EBITDA
    Price / LTM (12/31/17)
Adjusted Earnings Per
Share
 
November 7, 2011   Siris Capital Group, LLC   Tekelec     1.3x       9x       33x  
October 28, 2010   Carlyle Group   Syniverse Technologies, Inc.     4.2x       10x       16x  
October 27, 2010   Carlyle Group   CommScope, Inc.     1.2x       8x       16x  
October 13, 2009   Cisco Systems, Inc.   Starent Networks, Corp.     7.9x       20x       35x  
October 1, 2009   Cisco Systems, Inc.   Tandberg     3.7x       13x       27x  

 

Note:   Multiples that are greater than 50x or negative are Not Meaningful (NM). Not Available (NA) when figures are not publicly available.
(1) Based on 2016A EBITDA of $23.6 million
(2) LTM non-GAAP EPS calculated from annualizing sum of derived non-GAAP EPS from fiscal quarters Q1’17, Q4’16 and Q3’16.
(3) Operating metrics reflect Acision’s 2014 Audited Report and Financial Statement, prepared on an IFRS basis.

Jefferies reviewed, among other things, publicly available enterprise transaction values of the selected transactions, if available, and otherwise calculated enterprise transaction values as the purchase prices paid for the target companies involved in such transactions adjusted for cash and debt on the applicable target companies’ balance sheet at the time of acquisition if publicly available, in each case as a multiple of the respective target companies’ last-twelve-months’ revenue (“LTM Revenue”), last-twelve-months’ EBITDA (“LTM EBITDA”) and last-twelve-months’ adjusted earnings per share (“LTM Adj. EPS”).

Applying a range of selected multiples of 3.0x to 4.5x for LTM Revenue, 16.0x to 18.0x for LTM EBITDA and 20.0x to 24.0x LTM Adj. Cash Tax EPS, for the year ending December 31, 2017, and assuming a LTM Revenue of $386 million, LTM EBITDA of $97 million and LTM Adj. Cash Tax EPS of $2.41, Jefferies derived the below implied equity reference ranges per share of BroadSoft common stock, as compared to the consideration to be received by the holders of BroadSoft common stock (other than Cisco and its affiliates) pursuant to the merger, by subtracting total debt and adding cash and cash equivalents to the ranges of implied enterprise values for BroadSoft and dividing by BroadSoft’s fully diluted shares of BroadSoft common stock outstanding, based on the capitalization table provided to Jefferies by BroadSoft’s management on October 18, 2017, which BroadSoft’s management directed Jefferies to use. Financial data for the selected transactions and BroadSoft were based on public filings, other publicly available information and the Projections.

 

Benchmark

   Multiple
Range
   Implied Equity Reference
Range Per Share of
BroadSoft common stock

BroadSoft TEV / LTM (12/31/17) Revenue of $386 million

   3.0x – 4.5x    $37.91 – $52.04

BroadSoft TEV / LTM (12/31/17) EBITDA of $97 million

   16.0x – 18.0x    $47.49 – $52.10

BroadSoft Price / LTM (12/31/17) Adjusted Cash Tax Earnings Per Share of $2.41

   20.0x – 24.0x    $48.27 – $57.93

 

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No transaction selected by Jefferies for its analysis is identical to the merger. In evaluating the merger, Jefferies made numerous judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond BroadSoft’s and Jefferies’ control. Mathematical analysis, such as determining the median, is not in itself a meaningful method of analyzing transaction data.

Discounted Cash Flow Analysis

Jefferies performed a discounted cash flow analysis to estimate the present value of the free cash flows of BroadSoft through the fiscal year ending 2022 using the Projections, discount rates ranging from 10.8% to 12.8%, which were based on a weighted average cost of capital calculation for the selected companies, and a net operating profit after taxes next-twelve-months multiple ranging from 14.0x to 20.0x. Jefferies also, per BroadSoft’s management guidance, assumed that all net operating losses would be fully utilized by the end of 2019 and BroadSoft would have a 20% long term cash tax rate through the fiscal year ending 2020 and thereafter. To determine the implied total equity value for BroadSoft, Jefferies subtracted total debt and added cash and cash equivalents to the implied enterprise value of BroadSoft. To derive an implied equity reference range per share of BroadSoft common stock, as compared to the consideration to be received by the holders of BroadSoft common stock (other than Cisco and its affiliates) pursuant to the merger, Jefferies divided the total implied equity value by the amount of BroadSoft’s fully diluted shares of common stock outstanding, based on the capitalization table provided to Jefferies by BroadSoft’s management on October 18, 2017 and the forecasted stock based compensation provided to Jefferies in the Projections, which BroadSoft’s management directed Jefferies to use for purposes of its opinion. This analysis indicated an implied equity reference range per share of common stock of $37.86 to $50.47.

Other Information

For reference purposes only, using publicly available information, Jefferies reviewed the premia offered in all-cash mergers and acquisitions transactions that were announced between January 1, 2008 and October 13, 2017. For each of these transactions, Jefferies calculated the premium represented by the offer price or merger consideration over the target company’s closing stock price one trading day and 20 trading days prior to the transaction’s announcement. The review indicated the following premia for those time periods prior to announcement:

 

Time Period Prior

to Announcement

   25th Percentile     75th Percentile  

One-Day Premium

     20     44

20-Day Premium

     27     53

Applying a reference range of the 25th and the 75th percentile for each of the time periods described above to BroadSoft’s unaffected one trading day stock price of $43.05 on August 29, 2017 and BroadSoft’s unaffected 20 trading day stock price of $43.60 on August 2, 2017, Jefferies derived implied equity reference ranges of $51.52 to $61.96 with respect to the one trading day premium prior to affected date and $55.39 to $66.53 with respect to the 20 trading day premium prior to the affected date.

General

Jefferies’ opinion was one of many factors taken into consideration by our board of directors in making its determination to approve the merger and should not be considered determinative of the views of our board of directors or management with respect to the merger or the consideration.

Jefferies was selected by our board of directors based on Jefferies’ qualifications, expertise and reputation. Jefferies is an internationally recognized investment banking and advisory firm. Jefferies, as part of its

 

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investment banking business, is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements, financial restructurings and other financial services.

Pursuant to a letter agreement, dated May 22, 2017, between BroadSoft and Jefferies, BroadSoft has agreed to pay Jefferies for its financial advisory services in connection with the merger a fee of approximately $15.9 million, $1,000,000 of which was payable upon the delivery of Jefferies’ opinion (regardless of the conclusion reached therein). We have also agreed to reimburse Jefferies for certain expenses incurred in connection with Jefferies’ engagement, and to indemnify Jefferies against liabilities arising out of or in connection with the services rendered or to be rendered by Jefferies under its engagement. Jefferies has, in the past, provided financial advisory and financing services to BroadSoft and may continue to do so and have received, and may receive, fees for the rendering of such services. Jefferies has not, in the past two years, provided financial advisory and/or financing services to BroadSoft or Cisco. Jefferies maintains a market in the securities of BroadSoft, and in the ordinary course of its business, Jefferies and its affiliates may trade or hold securities of BroadSoft or Cisco and/or their respective affiliates for its own account and for the accounts of its customers and, accordingly, may at any time hold long or short positions in those securities. In addition, Jefferies may seek to, in the future, provide financial advisory and financing services to BroadSoft, Cisco or entities that are affiliated with BroadSoft or Cisco, for which Jefferies would expect to receive compensation.

Certain Projections Utilized by BroadSoft in Connection with the Merger

We do not, as a matter of course, publicly disclose forecasts or projections as to future performance, earnings or other results, other than our annual and quarterly guidance, due to the inherent unpredictability of the underlying long term assumptions, estimates and projections.

Our management prepared forward-looking financial information for the years 2017 through 2022, which was provided to our board of directors, as well as Qatalyst Partners and Jefferies, in July 2017 and thereafter updated the 2017 estimates in October 2017 only to reflect actual results through September 30, 2017, in connection with the evaluation of the proposed merger with Cisco and the merger consideration in comparison to other strategic alternatives. These internal financial forecasts for the years 2017 through 2022 (the “Projections”) were based on the assumptions of (a) a 13% compounded annual growth rate (“CAGR”) in total revenue for the period between 2016 and 2022, driven by 10% compounded annual growth rate for the same time period in software revenue (comprising a 15% CAGR between 2016 and 2019 and a 4% CAGR between 2019 and 2022 with the faster growth in the 2016-2019 timeframe driven by our transformation projects and slower growth in the 2019 to 2022 timeframe driven by a deceleration in those same transformation projects as they near completion), 19% compounded annual growth rate for 2016-2022 in maintenance and subscription revenue (comprising a 28% CAGR in SaaS revenue and a 13 % CAGR in maintenance revenue) and de minimus growth in compounded annual professional services revenue for the period between 2016 and 2022, (b) an increase in non-GAAP gross margin by 60 basis points in 2022 as compared to 2016, driven by an increase in software gross margin by 169 basis points and maintenance and subscription gross margin increase of 47 basis points (comprising a 146 basis point increase in maintenance margin and a 14.4% increase in SaaS margin; the aggregate margin impact is muted given the much faster growth forecast in lower-margin SaaS revenue), partially offset by a decline in professional services gross margin of 11%, (c) projected operating expense percentage decline of 129 basis points in 2019 as compared to 2016 given strong software revenue growth during that time period followed by a projected operating expense percentage increase of 144 basis points in 2022 as compared to 2019 concomitant with the slowdown in software revenue growth and (d) net operating losses utilization that would keep cash tax rate below 9% through 2019E and 20% thereafter. The Projections were reviewed by our board of directors and authorized by the board for use by our financial advisors, Qatalyst Partners and Jefferies, respectively. In addition, in connection with the evaluation of a possible transaction with Cisco, we provided Cisco with a subset of the Projections, including revenue, adjusted EBITDA and EBIT for the years 2017 through 2019 that were prepared by our management and not for public disclosure.

 

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The information set forth below is included solely to give BroadSoft’s stockholders access to relevant portions of such financial projections and is not included in this proxy statement to influence any BroadSoft stockholder to vote in favor of the merger or for any other purpose, including whether or not to seek appraisal rights with respect to a stockholder’s shares of BroadSoft common stock.

The Projections were not prepared with a view toward public disclosure or toward complying with generally accepted accounting principles (“GAAP”), nor were they prepared with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of Projections. The Projections are not meant to be considered in isolation or as a substitute for results prepared in accordance with GAAP. In addition, the Projections were not based on any comprehensive set of accounting rules or principles, nor were they prepared with the assistance of or reviewed, compiled or examined by independent accountants. The Projections may differ from published analyst estimates and forecasts and do not take into account any events or circumstances after the date they were prepared, including the announcement of the merger.

The Projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond our management’s control. Important factors that may affect actual results and result in such forecasts not being achieved include the risks and uncertainties detailed in our public periodic filings with the SEC. In addition, the Projections may be affected by our ability to achieve strategic goals, objectives and targets over the applicable period. The assumptions upon which the Projections were based necessarily involve judgments with respect to, among other things, future economic, competitive and regulatory conditions and financial market conditions and future business decisions that may not be realized and that are inherently subject to significant business, economic, competitive and regulatory uncertainties and contingencies, including, among other things, the inherent uncertainty of the business and economic conditions affecting the industry in which we operate, and the risk and uncertainties described under “Caution Regarding Forward-Looking Statements”, all of which are difficult or impossible to predict accurately and many of which are beyond our control. The Projections also reflect assumptions as to certain business decisions that are subject to change.

The Projections were developed by BroadSoft management on a standalone basis without giving effect to the transactions contemplated by the merger agreement, and therefore the Projections do not give effect to the merger and the other transactions contemplated by the merger agreement or any changes to BroadSoft’s operations or strategy that may be implemented after the consummation of the merger, including any costs incurred in connection with the merger and the other transactions contemplated by the merger agreement. Furthermore, the Projections do not take into account the effect of any failure of the transactions contemplated by the merger agreement to be completed and should not be viewed as accurate or continuing in that context.

Accordingly, there can be no assurance that the Projections will be realized, and actual results may vary materially from those shown. The inclusion of the Projections in this proxy statement should not be regarded as an indication that any of BroadSoft, Qatalyst Partners, Jefferies, Cisco or Sub or any of their respective affiliates, officers, directors, advisors or other representatives considered or consider the Projections necessarily predictive of actual future events, and the Projections should not be relied upon as such. None of BroadSoft, Qatalyst Partners, Jefferies, Cisco, Sub or any of their respective affiliates, officers, directors, advisors or other representatives can give any assurance that actual results will not differ from the Projections, and BroadSoft undertakes no obligation to update or otherwise revise or reconcile the Projections to reflect circumstances existing after the date such Projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the Projections are shown to be in error. None of BroadSoft, or, to the knowledge of BroadSoft, Cisco or Sub, intends to make publicly available any update or other revisions to the Projections. None of BroadSoft or its respective affiliates, officers, directors, advisors or other representatives has made or makes any representation to any stockholder or other person regarding the ultimate performance of BroadSoft compared to the information contained in the Projections or that forecasted results will be achieved. BroadSoft has made no representation to Cisco or Sub, in the merger agreement or otherwise, concerning the Projections.

 

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The Projections includes certain non-GAAP financial measures, including Adjusted EBITDA and EBIT, unlevered free cash flow, net operating income after cash taxes, net operating income after statutory taxes and earnings per share based on a non-GAAP number of outstanding shares (“EPS”). Certain of the financial projections set forth herein may be considered non-GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by BroadSoft may not be comparable to similarly titled amounts used by other companies.

In light of the foregoing factors and the uncertainties inherent in these projections, stockholders of BroadSoft are cautioned not to place undue, if any, reliance on these projections.

BroadSoft Projected Financial Information

 

Unlevered free cash flow                                     

(In millions)                    

   4Q 2017     2018E     2019E     2020E     2021E     2022E  

Revenue

   $ 125     $ 441     $ 512     $ 580     $ 642     $ 706  

Adjusted EBITDA(1)

     50       115       141       155       163       176  

less: Depreciation

     (4     (16     (18     (18     (19     (20

EBIT(2)

     46       99       124       137       144       156  

less: Cash taxes(3)

     (2     (5     (11     (27     (29     (31

plus: Depreciation

     4       16       18       18       19       20  

less: Capital expenditures

     (3     (18     (18     (19     (19     (20

less: Increase in net working capital

     (12     (18     (20     (22     (22     (23

Unlevered free cash flow (4)

     32       74       92       87       92       102  

 

(1) Adjusted EBITDA is non-GAAP financial measure calculated by starting with EBIT (a non-GAAP financial measure of earnings before interest and tax) and adding back depreciation expense (as shown in the table above).
(2) EBIT excludes expenses related to stock-based compensation, amortization of acquired intangible assets, non-cash interest expenses on our convertible notes, foreign currency transaction gains and losses and loss on repurchase of our convertible notes.

 

(3) Cash taxes assume that net operating losses and tax credits are fully utilized by the end of 2019.

 

(4) Unlevered free cash flow is a non-GAAP financial measure calculated by starting with EBIT and subtracting cash taxes, capital expenditures, changes in working capital and then adding back depreciation expense (as shown in the table above).

Net operating income after cash taxes; net operating income after statutory taxes; and earnings per share

 

(In millions, except for per share amounts)

   4Q 2017      2018E      2019E  

EBIT

     $46        $99        $124  

less: Interest expenses (income)

     (0.1      (1.3      (2.4

Pre-tax income

     46        100        126  

Net income after cash taxes(1)

     44        95        115  

Net income after statutory taxes(2)

     34        75        94  

Shares of BroadSoft common stock outstanding(3)

     34        34        36  

Adjusted EPS after cash taxes(4)

     1.30        2.75        3.20  

Adjusted EPS after statutory taxes(4)

     1.03        2.17        2.63  

 

(1) Net operating income after cash taxes is EBIT after interest expenses (income), and after cash taxes (as shown in the table above for unlevered free cash flow).

 

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(2) Net operating income after statutory taxes is EBIT after interest expenses (income), and after taxes based on a 25% statutory non-GAAP tax rate.
(3) Outstanding shares in millions, assuming increases by approximately 1 million per year starting in 2017, due to the effect of future issuances by BroadSoft of equity awards.
(4) Non-GAAP earnings per share of BroadSoft common stock.

Vote Required and Recommendation of the Board of Directors

At a special meeting of our board of directors held on October 20, 2017, our board of directors unanimously (a) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable, (b) determined that the merger agreement and the transactions contemplated thereby, including the merger, taken together, are at a price and on terms that are fair to, and in the best interest of, BroadSoft and its stockholders, (c) approved the execution, delivery and performance by BroadSoft of the merger agreement and consummation of the transactions contemplated thereby, including the merger and (d) resolved to recommend that the stockholders of BroadSoft approve the adoption of the merger agreement and thereby approve the merger.

Adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of BroadSoft common stock entitled to vote thereon at the close of business on the Record Date. Abstentions and broker non-votes, if any, will have the same effect as “against” votes with respect to the proposal to adopt the merger agreement.

Our board of directors unanimously recommends that the BroadSoft stockholders vote “FOR” the adoption of the merger agreement, and thereby approve the merger.

Interests of Our Directors and Executive Officers in the Merger

In considering the unanimous recommendation of our board of directors in favor of the merger, you should be aware that our directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of stockholders generally. Our board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement and the merger. Stockholders should take these benefits into account in deciding whether to vote for adoption of the merger agreement and thereby approve the merger. As described in more detail below, these interests include:

 

    at the effective time of the merger, each outstanding vested stock option, vested RSU and vested PSU granted under BroadSoft’s equity plans (including those held by our directors and executive officers) (including such options, RSUs, and PSUs that vest in connection with the merger) will terminate and be converted into the right to receive from Cisco an amount of cash equal to $55.00 per share (or in the case of stock options, the excess, if any, of $55.00 over the exercise price of such option), without interest and subject to all applicable tax withholding;

 

    each outstanding unvested stock option, unvested RSU and unvested PSU granted under BroadSoft’s equity plans held by the continuing employees and consultants of BroadSoft or its subsidiaries as of the effective time of the merger (including those held by our directors and executive officers) will be converted into and substituted for the right to receive from Cisco an amount of unvested cash equal to $55.00 per share (or in the case of stock options, the excess, if any, of $55.00 over the exercise price of such option), payable in accordance with the service-based vesting schedule for such equity award (including any applicable terms relating to termination and accelerated vesting of the equity award), without interest and subject to all applicable tax withholding (the unvested PSUs will no longer be subject to performance-based vesting criteria but service-based vesting criteria only);

 

    accelerated vesting, upon the effective time of the merger, of the RSUs, held by non-employee non-continuing directors, as described in more detail below under the section of this proxy statement captioned “Cash-Out of Certain BroadSoft Equity Awards”;

 

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    Messrs. Tessler, Hoffpauir and Tholen have entered into employment agreements with Cisco setting forth the terms and conditions of these executives’ continued employment with Cisco from and after the closing of the merger, as further described under the section “Future Arrangements with Cisco” below;

 

    other executive officers may be eligible to receive cash severance payments and benefits under individual Change in Control Severance Agreements upon certain types of terminations of employment that occur following the merger, but only if their respective employment is in fact so terminated; and

 

    accelerated vesting and payment of unvested cash in connection with qualifying terminations of an executive officer’s employment following the merger, as described in more detail below under the section captioned “Compensation Related to Transaction or Subsequent Termination.

For further information with respect to the arrangements between BroadSoft and its executive officers, directors and affiliates described in this Item, as well as other arrangements between BroadSoft and its executive officers, directors, and affiliates, please see our Definitive Proxy Statement filed pursuant to Regulation 14A on March 17, 2017.

Outstanding Shares Held by Executive Officers and Directors

Directors and executive officers will receive the same cash consideration for any shares of BroadSoft stock on the same terms and conditions as the other stockholders of BroadSoft. As of October 31, 2017, the executive officers and directors of BroadSoft owned, in the aggregate, 332,019 shares of BroadSoft common stock (which, for clarity, excludes shares of BroadSoft common stock issuable upon the exercise of BroadSoft stock options and the vesting of BroadSoft RSUs and PSUs).

The following table sets forth (a) the number of shares of BroadSoft common stock owned as of October 31, 2017, by each of our executive officers and directors and (b) the aggregate merger consideration that would be payable for such shares.

 

Name

   Number of
Shares
Owned
     Merger Consideration
for Shares
Owned
 

Executive Officers

     

Michael Tessler*

     118,527        $6,518,985  

Scott D. Hoffpauir

     39,089        $2,149,895  

James A. Tholen

     22,004        $1,210,220  

Taher G. Behbehani

     13,600        $748,000  

Dennis D. Dourgarian

     13,629        $749,595  

Dino Di Palma

     —          —    

Directors

     

David Bernardi

     8,301        $456,555  

Jane A. Dietze

     4,903        $269,665  

John J. Gavin, Jr.

     16,584        $912,120  

Andrew M. Geisse

     10,686        $587,730  

Paul J. Magelli

     6,780        $372,900  

Douglas L. Maine

     51,795        $2,848,725  

John D. Markley, Jr.

     21,836        $1,200,980  

Eva M. Sage-Gavin

     4,285        $235,675  

All of our current directors and executive officers as a group (14 persons)

     332,019        $18,261,045  

 

* Mr. Tessler is also a director.

 

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Cash-Out of Certain BroadSoft Equity Awards

As described above:

 

    at the effective time of the merger, each outstanding vested stock option, vested RSU and vested PSU granted under BroadSoft’s equity plans (including those held by our directors and executive officers) will terminate and be converted into the right to receive from Cisco an amount of cash equal to $55.00 per share (or in the case of stock options, the excess, if any, of $55.00 over the exercise price of such option), without interest and subject to all applicable tax withholding. Upon the effective time of the merger, the vesting of RSUs held by non-employee non-continuing directors will accelerate under the terms of their RSU awards; and

 

    each outstanding unvested stock option, unvested RSU and unvested PSU granted under BroadSoft’s equity plans held by the continuing employees and consultants of BroadSoft or its subsidiaries as of the effective time of the merger (including those held by our directors and executive officers) will be converted into and substituted for the right to receive from Cisco an amount of unvested cash equal to $55.00 per share (or in the case of stock options, the excess, if any, of $55.00 over the exercise price of such option), payable in accordance with the service-based vesting schedule for such equity award (including any applicable terms relating to termination and accelerated vesting of the equity award), without interest and subject to all applicable tax withholding. The unvested PSUs will no longer be subject to performance-based vesting criteria but service-based vesting criteria only.

On October 18, 2017, in connection with BroadSoft’s expected entry into the merger agreement, our compensation committee approved, and BroadSoft subsequently entered into, amendments to the terms of PSU awards granted on February 27, 2017 to each of Michael Tessler, Scott D. Hoffpauir and James A. Tholen, effective immediately prior to but subject to the occurrence of the merger (the “Key Employee PSU Amendments”). The Key Employee PSU Amendments provide that, in connection with the consummation of the merger, (a) such PSUs will convert into the right to receive an amount of unvested cash based on the sum of both the target number and the overachievement number of PSUs subject to the original award and (b) that, if the merger closes prior to the certification date of the PSUs for the 2017 calendar year, such unvested cash amount will vest one-third on March 1, 2018, with the remainder vesting in eight quarterly installments over a two-year period thereafter (or, if the merger closes after the certification date of the PSUs for the 2017 calendar year, the unvested portion will vest in quarterly installments over the remainder of the two-year period following the certification date (with the initial “catch up” installment vesting on the closing date if the closing occurs after June 1, 2018)), subject to continued service through such vesting dates. On the same date, our compensation committee also approved an amendment to the PSU award granted on February 27, 2017 to Dino Di Palma, effective immediately prior to but subject to the occurrence of the merger, that provides for conversion into the right to receive unvested cash based on the total number of PSUs subject to such award in connection with the merger to vest in full on December 31, 2018, subject to continued service through that date (together with the Key Employee PSU Amendments, the “PSU Amendments”).

 

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The table below provides a summary of the cash payments that would be payable to our executive officers and directors upon consummation of the merger in connection with the cancellation of outstanding vested stock options, vested RSUs and vested PSUs in exchange for the cash consideration described above, and assuming the merger closes on January 31, 2018.

 

Name

   Number of
Shares
Underlying
Vested
Options(1)
     Weighted
Average
Exercise
Price Per
Share
     Cash
Payments for
Vested
Options
     Number of
Shares
Underlying
Vested
RSUs and
PSUs (1)
     Cash Payment
for Vested RSUs
and PSUs
     Total Dollar
Value of Vested
Equity Awards
 

Executive Officers

                 

Michael Tessler

     132,584      $ 2.40      $ 6,973,918        133,775        $7,357,625        $14,331,543  

Scott D. Hoffpauir

     —          —          —          46,635        $2,564,925        $2,564,925  

James A. Tholen

     —          —          —          29,550        $1,625,250        $1,625,250  

Taher G. Behbehani

     —          —          —          22,120        $1,216,600        $1,216,600  

Dennis D. Dourgarian

     —          —          —          17,427        $958,485        $958,485  

Dino Di Palma

     —          —          —          6,666        $366,630        $366,630  

Directors

           —             

David Bernardi

     —          —          —          9,038        $497,090        $497,090  

Jane A. Dietze

     —          —          —          5,640        $310,200        $310,200  

John J. Gavin, Jr.

     —          —          —          17,321        $952,655        $952,655  

Andrew M. Geisse

     —          —          —          11,689        $642,895        $642,895  

Paul J. Magelli

     —          —          —          7,517        $413,435        $413,435  

Douglas L. Maine

     —          —          —          52,798        $2,903,890        $2,903,890  

John D. Markley, Jr.

     —          —          —          22,839        $1,256,145        $1,256,145  

Eva M. Sage-Gavin

     —          —          —          5,022        $276,210        $276,210  

All of our current directors and executive officers as a group (14 persons)

     132,584      $ 2.40      $ 6,973,918        388,037      $ 21,342,035      $ 28,315,953  

 

(1) Assuming accelerated vesting of RSUs held by non-employee directors.

The table below provides a summary of the unvested cash that our executive officers will have the right to receive following the consummation of the merger in substitution for unvested RSUs and unvested PSUs held by our executive officers as of the effective time of the merger, assuming the merger closes on January 31, 2018:

 

Name

   Number of
Shares
Underlying
Unvested RSUs
and PSUs (1)
     Cash Payment for
Unvested RSUs
and PSUs
     Total Dollar Value
of Unvested
Equity Awards
 

Executive Officers

        

Michael Tessler

     160,899      $ 8,849,445      $ 8,849,445  

Scott D. Hoffpauir

     83,004      $ 4,565,220      $ 4,565,220  

James A. Tholen

     83,004      $ 4,565,220      $ 4,565,220  

Taher G. Behbehani

     49,675      $ 2,732,125      $ 2,732,125  

Dennis D. Dourgarian

     16,085        $884,675        $884,675  

Dino Di Palma

     19,834      $ 1,090,870      $ 1,090,870  

 

(1) Assuming effectiveness of the PSU Amendments described above.

 

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Existing Change in Control Severance Agreements

We have entered into Change in Control Severance Agreements with each of our executive officers that contain severance provisions providing for continued payment of salary and payment for the cost of certain group health benefits for a specified period of time in the event that the executive officer is terminated without “cause” or resigns for “good reason” (as these terms are defined in such agreements) within one month prior to, or one year after, a change in control of BroadSoft (which would include the merger). Severance under these agreements is payable in the form of salary and payment for the cost of certain group health benefits for a period of 12 months, in the case of Mr. Tessler, nine months in the case of each of Messrs. Hoffpauir and Tholen and six months in the case of each of Messrs. Behbehani, Dourgarian and Di Palma. To receive any of the severance payments under these agreements, the executive officer would be required to execute, and not revoke, a release of claims against BroadSoft, its parents, subsidiaries, directors, executive officers and other related parties and comply with the provisions of the release, including confidentiality and non-disparagement provisions.

Future Arrangements with Cisco

On October 20, 2017, Cisco entered into an at-will Employment Agreement with each of Michael Tessler, BroadSoft’s President and Chief Executive Officer, and Scott D. Hoffpauir, BroadSoft’s Chief Technology Officer, and a Transitional Employment Agreement with James A. Tholen, BroadSoft’s Chief Financial Officer (collectively, the “Employment Agreements”), setting forth the terms and conditions of these executives’ continued employment with Cisco from and after the closing of the merger. The effectiveness of the Employment Agreements is contingent on the closing of the merger. The chairman of our board of directors approved the retention of outside legal counsel to represent the executives in the Employment Agreement negotiations.

The Employment Agreements provide, following the effective time of the merger, for (a) a base salary of $400,000, $365,000 and $365,000 for Messrs. Tessler, Hoffpauir and Tholen, respectively, (b) a target annual bonus of $300,000, $255,500 and $255,500 for Messrs. Tessler, Hoffpauir and Tholen, respectively, (c) payment of a one-time cash bridging bonus of $924,000 and $164,840, respectively for Mr. Tessler and Mr. Hoffpauir, in eight quarterly installments, and $82,420 for Mr. Tholen, in four quarterly installments, subject to the executive’s continued employment, and (d) payment of a retention bonus equal to (i) for Mr. Tessler, $4,333,333 payable in quarterly installments for a period of three years following the closing of the merger of $291,667 for the first eight quarterly installments and $500,000 for the last four quarterly installments, (ii) for Mr. Hoffpauir, $3,500,000 payable in quarterly installments for a period of three years following the closing of the merger of $250,000 for the first eight quarterly installments and $375,000 for the last four quarterly installments, and (iii) $200,000 for Mr. Tholen payable in two equal semi-annual installments following the merger, subject in each case to such executive’s continued employment.

Under each Employment Agreement, if an executive’s employment is terminated without “cause” or with “good reason” (as such terms are defined in the Employment Agreements) within three years following the closing date of the merger (or within one year of the closing date in the case of Mr. Tholen or if Mr. Tholen’s employment terminates at the end of his one-year transitional employment period), then subject to signing an effective release of claims, the executive will be entitled to receive a cash amount as severance equal to 12 months base salary and the cost to continue group health care coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) for 12 months, which amount will be grossed up to cover applicable taxes, and, if such termination occurs within 12 months following the closing date of the merger, the remaining installments of the retention bonus described above that would have been payable with respect to such 12-month period. In the event of any such termination, or in the event of an executive’s death or disability, in any such case that occurs within 18 months following the closing date of the merger (or within 12 months, in the case of Mr. Tholen, or if Mr. Tholen’s employment terminates at the end of his one-year transitional employment period), the executive’s benefits will vest with respect to any unvested cash amount into which unvested RSUs and unvested PSUs converted in the merger. In addition, in the case of Messrs. Tessler and Hoffpauir, if the executive is terminated at any time without “cause”, the executive will become entitled to accelerated vesting

 

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with respect to the unvested cash amount into which unvested RSUs and unvested PSUs converted in the merger to the extent such amount would have vested had the executive continued in employment for 12 months following the date of termination, subject to signing an effective release of claims, provided such additional acceleration does not provide for any duplication of benefits. Following the closing of the merger, the severance benefits set forth in the Employment Agreements will supersede the severance benefits previously set forth in the respective Change in Control Severance Agreements for each of Messrs. Tessler, Hoffpauir and Tholen.

The Employment Agreements require each executive to execute a non-competition agreement restricting the executive from competing with Cisco for the longer of (a) three years from the closing of the merger (or, in the case of Mr. Tholen, two years) and (b) one year following the termination of his employment, and from soliciting employees of Cisco for three years from the closing of the merger (or, in the case of Mr. Tholen, two years).

To our knowledge, except for the Employments Agreements and certain agreements described in this proxy statement between BroadSoft and its executive officers and directors, no other employment, equity contribution or other written agreement between any executive officer or director of BroadSoft, on the one hand, and Cisco or its affiliates, on the other hand, existed as of the date of this proxy statement, and the merger is not conditioned upon any executive officer or director of BroadSoft entering into any such agreement, arrangement or understanding.

It is possible that additional members of our current management team will enter into new employment or consulting arrangements with Cisco or its affiliates, with any such arrangements to become effective after the merger is completed, if at all. There can be no assurance that the applicable parties will reach an agreement on any terms, or at all.

Accelerated Vesting of RSU and PSU Awards

Under the terms of RSU and PSU awards granted to BroadSoft’s executive officers, if a change in control occurs (including the merger), and an executive officer’s employment is terminated without “cause” or the executive officer terminates employment with “good reason” (as such terms are defined in the equity award agreements) within one year following the change in control, then vesting of 100% of the then unvested cash amount into which such unvested RSUs and PSUs converted in the merger will accelerate. Following the closing of the merger, the acceleration benefits set forth in the Employment Agreements will supersede the acceleration benefits previously set forth in the respective equity award agreements for Messrs. Tessler, Hoffpauir and Tholen.

2017 Bonus Payments

On October 18, 2017, in connection with BroadSoft’s expected entry into the merger agreement, the Compensation Committee of our board of directors determined that payments to BroadSoft’s executive officers would be made under BroadSoft’s 2017 Executive Bonus Plan (the “2017 Bonus Plan”) at 90% of each executive’s target bonus for the year ending December 31, 2017. The 2017 Bonus Plan was previously described in our Current Report on Form 8-K filed with the SEC on March 3, 2017. Under the merger agreement, such bonuses shall be paid on the earlier of (a) February 28, 2018 and (b) immediately prior to the closing of the merger.

Compensation Related to Transaction or Subsequent Termination

This section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each of our named executive officers and Dino Di Palma, our Chief Revenue Officer, that is based on or otherwise relates to the merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules. The amounts set forth in the table are estimates based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement and in the footnotes to the table. As a result, the actual amounts, if any, that an executive officer receives may materially differ from the amounts set forth in the table.

 

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The table below assumes that (a) the merger will occur on January 31, 2018, (b) the employment of the executive officer will be terminated on such date in a manner entitling the executive officer to receive severance payments and benefits under the terms of the executive officer’s Change in Control Severance Benefits Agreement or, with respect to Messrs. Tessler, Hoffpauir and Tholen, under a new Employment Agreement entered into with Cisco in connection with the merger, (c) the executive officer’s base salary rate, target bonus and COBRA premium rate will remain unchanged (other than, with respect to Messrs. Tessler, Hoffpauir and Tholen, changes under a new Employment Agreement entered into with Cisco in connection with the merger), (d) no executive officer receives any additional equity grants on or prior to the merger and (e) no executive officer enters into any other new agreements or is otherwise legally entitled to, prior to the merger, additional compensation or benefits. The amounts shown in the table do not include the value of payments or benefits that would have been earned, or any amounts associated with equity awards that would vest pursuant to their terms, on or prior to the assumed date of the merger, or the value of payments or benefits that are not based on or otherwise related to the merger. In the footnotes to the amounts shown in the table below, we refer to payments that are conditioned on both the occurrence of the merger as well as the executive officer’s termination of employment as being payable on a “double-trigger” basis and we refer to payments that are conditioned only upon the occurrence of the merger as being payable on a “single-trigger” basis. The individuals named below represent the executive officers that would be listed in our annual proxy with respect to the fiscal year ending December 31, 2016. As required by relevant SEC rules, we are also including our current Chief Revenue Officer, Mr. Di Palma, who joined BroadSoft in January 2017, in this table. While Mr. Di Palma’s compensation is set forth in this table, it is not subject to the proposal to approve, on an advisory basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger.

 

Name

   Cash (1)      Equity (2)      Perquisites/
Benefits (3)
     Other (4)(5)(6)      Total  

Michael Tessler

   $ 400,000      $ 8,849,445      $ 25,632        $5,821,166        $15,096,244  

Scott D. Hoffpauir

   $ 365,000      $ 4,565,220      $ 42,019        $3,958,673        $8,930,912  

James A. Tholen

   $ 365,000      $ 4,565,220      $ 40,110        $576,253        $5,546,584  

Taher G. Behbehani

   $ 162,760      $ 2,732,125      $ 13,437        $252,000        $3,160,322  

Dennis D. Dourgarian

   $ 150,000        $884,675      $ 13,437        $72,000        $1,120,112  

Dino Di Palma

   $ 175,000      $ 1,090,870      $ 13,437        —          $1,279,307  

 

(1) Represents cash severance payable if such executive experiences a qualifying termination following the merger under the terms of the employment agreements between such executive and Cisco, the terms of which are summarized under the heading “Future Arrangements with Cisco” above, in the case of Messrs. Tessler, Hoffpauir and Tholen and the terms of the existing Change in Control Severance Agreements, in the case of Messrs. Behbehani, Dourgarian and Di Palma.
(2) Represents the value of the unvested cash amounts into which unvested RSUs and PSUs will convert, as described under “Cash-Out of Certain BroadSoft Equity Awards” and “Accelerated Vesting of RSU and PSU Awards” above, that will accelerate and be paid to each executive under the terms of the award or, in the case of Messrs. Tessler, Hoffpauir and Tholen, the terms of his Employment Agreement with Cisco in connection with a qualifying termination of his employment. Such accelerated vesting and payment of unvested cash amounts are “double trigger” in nature as they will only be payable on an accelerated basis in the event of a qualifying termination of employment following the merger.

 

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The amounts for each executive officer represent:

 

Name

   Unvested
Cash (RSUs)
     Unvested Cash
(PSUs)(*)
 

Michael Tessler

     $5,153,170        $3,696,275  

Scott D. Hoffpauir

     $2,641,155        $1,924,065  

James A. Tholen

     $2,641,155        $1,924,065  

Taher G. Behbehani

     $2,330,570        $401,555  

Dennis D. Dourgarian

     $884,676        —    

Dino Di Palma

     $733,370        $357,500  

 

* Assuming effectiveness of the PSU Amendments described above.
(3) Represents the estimated cost of continued health plan coverage (assuming the monthly premium rates under BroadSoft’s existing group health insurance plans) during the applicable severance period payable under the terms of the severance agreements between such executive and BroadSoft or, in the case of Messrs. Tessler, Hoffpauir and Tholen, under the terms of the employment agreements between each such executive and Cisco (which amounts will be grossed up to include applicable taxes), the terms of which are summarized under the headings “Existing Change in Control Severance Agreements” and “Future Arrangements with Cisco” above.
(4) Represents the one-time “single-trigger” cash bridging bonuses of $924,000, $164,840 and $82,420, respectively, for Messrs. Tessler, Hoffpauir and Tholen and payment of a retention bonus equal to $4,333,333, $3,500,000 and $200,000 respectively for Messrs. Tessler, Hoffpauir and Tholen, subject to the executive’s continued employment as further described under the heading “Future Arrangements with Cisco” above. This disclosure assumes that each executive is not terminated on the closing date of the merger and remains employed with Cisco through all of the applicable vesting and payment dates set forth in the employment agreements.
(5) Includes the value of 2017 cash bonuses payable to each executive officer under the 2017 Bonus Plan, as described under “2017 Bonus Payments,” above. The amount of each bonus payment is set forth in the table below. To the extent the merger closes prior to February 28, 2018, such payments would be considered “single trigger” in nature because they are not conditioned upon the termination of an executive’s employment. Mr. Di Palma does not participate in the 2017 Bonus Plan.

 

Name

   2017 Bonus Payment  

Michael Tessler

     $553,500  

Scott D. Hoffpauir

     $283,500  

James A. Tholen

     $283,500  

Taher G. Behbehani

     $252,000  

Dennis D. Dourgarian

     $72,000  

Dino Di Palma

     —    

 

(6) Includes $10,333 of legal fees paid by BroadSoft on behalf of each of Messrs. Tessler, Hoffpauir and Tholen in connection with the negotiation of their respective employment agreements with Cisco, as described under “Future Arrangements with Cisco” above.

Indemnification of Directors and Executive Officers and Insurance

Pursuant to the terms of the merger agreement, members of our board of directors and our executive officers will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance policies following the merger. For a more detailed description of the provisions of the merger agreement relating to director and officer indemnification, please see “The Merger Agreement — Indemnification and Insurance” (page 77).

 

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Appraisal Rights

If the merger is completed, holders of BroadSoft common stock will be entitled to appraisal rights under Section 262 of the Delaware General Corporation Law (“Section 262”), provided that they comply with the conditions established by Section 262.

The discussion below is not a complete summary regarding your appraisal rights under Delaware law and is qualified in its entirety by reference to the text of the relevant provisions of Delaware law, which are attached to this proxy statement as Annex C. Stockholders intending to exercise appraisal rights should carefully review Annex C. Failure to follow precisely any of the statutory procedures set forth in Annex C may result in a termination or waiver of these rights.

A record holder of shares of BroadSoft common stock who makes the demand described below with respect to such shares, who continuously is the record holder of such shares through the completion of the merger, who otherwise complies with the statutory requirements of Section 262 and who neither votes in favor of the adoption of the merger agreement nor consents thereto in writing will be entitled to an appraisal by the Delaware Court of Chancery (the “Delaware Court”) of the fair value of his or her shares of BroadSoft common stock. All references in this summary of appraisal rights to a “stockholder” or “holders of shares of BroadSoft common stock” are to the record holder or holders of shares of BroadSoft common stock. Except as set forth herein, stockholders of BroadSoft will not be entitled to appraisal rights in connection with the merger.

Under Section 262, where a merger is to be submitted for adoption at a meeting of stockholders, such as the Special Meeting, not less than 20 days prior to the meeting, a constituent corporation must notify each of the holders of its stock for whom appraisal rights are available that such appraisal rights are available and include in each such notice a copy of Section 262. This proxy statement shall constitute such notice to the record holders of BroadSoft common stock.

Stockholders who desire to exercise their appraisal rights must satisfy all of the conditions of Section 262. Those conditions include the following:

 

    Stockholders electing to exercise appraisal rights must not vote “for” the adoption of the merger agreement. Also, because a submitted proxy not marked “against” or “abstain” will be voted “for” the proposal to adopt the merger agreement, the submission of a proxy not marked “against” or “abstain” will result in the waiver of appraisal rights.

 

    A written demand for appraisal of shares must be delivered to us before the taking of the vote on the merger agreement at the Special Meeting on January 25, 2018. The written demand for appraisal should specify the stockholder’s name and mailing address, and that the stockholder thereby intends to demand appraisal of his or her BroadSoft common stock. The written demand for appraisal of shares is in addition to and separate from a vote against the adoption of the merger agreement or an abstention from such vote. Merely voting against the adoption of the merger agreement will not preserve your right of appraisal or constitute written demand for appraisal under Delaware law.

 

    A demand for appraisal should be executed by or for the stockholder of record, fully and correctly, as such stockholder’s name appears on the share certificate. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, this demand must be executed by or through the fiduciary. If the shares are owned by or for more than one person, as in a joint tenancy or tenancy in common, such demand should be executed by or for all joint owners. An authorized agent, including an agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record. However, the agent must identify the record owner and expressly disclose the fact that, in exercising the demand, he is acting as agent for the record owner. A person having a beneficial interest in BroadSoft common stock held of record in the name of another person, such as a broker or nominee, must act promptly to cause the record holder to follow the steps summarized below in a timely manner to perfect whatever appraisal rights the beneficial owners may have.

 

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    A stockholder who elects to exercise appraisal rights should mail or deliver his, her or its written demand to BroadSoft, Inc. at 9737 Washingtonian Boulevard, Suite 350, Gaithersburg, Maryland, Attention: Corporate Secretary.

Within ten days after the completion of the merger, the surviving corporation must provide notice of the completion of the merger to all of our stockholders who have complied with Section 262 and have not voted for the adoption of the merger agreement.

Within 120 days after the completion of the merger, either the surviving corporation or any stockholder who has complied with the required conditions of Section 262 may commence an appraisal proceeding by filing a petition in the Delaware Court, with a copy served on the surviving corporation in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares of all dissenting stockholders. There is no present intent on the part of the surviving corporation to file an appraisal petition and stockholders seeking to exercise appraisal rights should not assume that the surviving corporation will file such a petition or that the surviving corporation will initiate any negotiations with respect to the fair value of such shares. Accordingly, holders of BroadSoft common stock who desire to have their shares appraised should initiate any petitions necessary for the perfection of their appraisal rights within the time periods and in the manner prescribed in Section 262.

Within 120 days after the completion of the merger, any stockholder who has satisfied the requirements of Section 262 will be entitled, upon written request, to receive from the surviving corporation a statement setting forth the aggregate number of shares of BroadSoft common stock not voting in favor of the adoption of the merger agreement and with respect to which demands for appraisal were received by BroadSoft or the surviving corporation and the number of holders of such shares. Such statement must be mailed within ten days after the stockholder’s request has been received by the surviving corporation or within ten days after the expiration of the period for the delivery of demands as described above, whichever is later. Notwithstanding the foregoing, a person who is the beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition or request from the surviving corporation the statement described in this paragraph.

If a petition for an appraisal is timely filed, at the hearing on such petition, the Delaware Court will determine which stockholders are entitled to appraisal rights. The Delaware Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Delaware Court may dismiss the proceedings as to such stockholder. Under Section 262, the Delaware Court shall also dismiss the proceedings as to all stockholders who are otherwise entitled to appraisal rights unless (a) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of BroadSoft common stock eligible for appraisal or (b) the value of the consideration provided in the merger or consolidation for such total number of shares exceeds $1 million. Where proceedings are not dismissed, the Delaware Court will appraise the shares of BroadSoft common stock owned by such stockholders, determining the fair value of such shares exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. However, at any time before the entry of judgment in the proceedings, BroadSoft may pay to each stockholder entitled to appraisal an amount of cash, in which case interest will accrue after such entry of judgment only upon the sum of (a) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court and (b) interest theretofore accrued, unless paid at that time. BroadSoft is under no obligation to make such voluntary cash payment prior to such entry of judgment.

Although we believe that the $55.00 per share cash consideration payable in the merger is fair to our stockholders, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court and stockholders should recognize that such an appraisal could result in a determination of a

 

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value higher or lower than, or the same as, the consideration they would receive pursuant to the merger agreement. Moreover, we do not anticipate that the surviving corporation will offer more than the $55.00 per share cash consideration to any stockholder exercising appraisal rights and reserve the right to assert, in any appraisal proceeding, that, for purposes of Section 262, the “fair value” of a share of BroadSoft common stock is less than the $55.00 per share cash consideration. In determining “fair value,” the Delaware Court is required to take into account all relevant factors. The Delaware Supreme Court has stated that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered and that “fair price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court has stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts which could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be exclusive of any element of value arising from the accomplishment or expectation of the merger. The Delaware Supreme Court has stated that such exclusion is a narrow exclusion that does not encompass known elements of value, but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. The Delaware Supreme Court has construed Section 262 to mean that elements of future value, including the nature of the enterprise, that are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.

The cost of the appraisal proceeding may be determined by the Delaware Court and taxed against the parties as the Delaware Court deems equitable in the circumstances. However, costs do not include attorneys’ and expert witness fees. Each dissenting stockholder is responsible for his or her attorneys’ and expert witness expenses, although, upon application of a dissenting stockholder, the Delaware Court may order that all or a portion of the expenses incurred by any dissenting stockholder in connection with the appraisal proceeding, including without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all shares of stock entitled to appraisal.

Any stockholder who has duly demanded appraisal in compliance with Section 262 will not, after the completion of the merger, be entitled to vote for any purpose any shares subject to such demand or to receive payment of dividends or other distributions on such shares, except for dividends or distributions payable to stockholders of record at a date prior to the completion of the merger.

At any time within 60 days after the completion of the merger, any stockholder will have the right to withdraw his, her or its demand for appraisal and to accept the $55.00 per share cash consideration offered in the merger agreement. After this period, a stockholder may withdraw his, her or its demand for appraisal and receive payment for his, her or its shares as provided in the merger agreement only with the consent of the surviving corporation. If no petition for appraisal is filed with the court within 120 days after the completion of the merger, stockholders’ rights to appraisal (if available) will cease. Inasmuch as the surviving corporation will have no obligation to file such a petition, any stockholder who desires a petition to be filed is advised to file it on a timely basis. Any stockholder may withdraw such stockholder’s demand for appraisal by delivering to the surviving corporation a written withdrawal of his, her or its demand for appraisal and acceptance of the merger consideration, except (a) that any such attempt to withdraw made more than 60 days after the completion of the merger will require written approval of the surviving corporation and (b) that no appraisal proceeding in the Delaware Court shall be dismissed as to any stockholder without the approval of the Delaware Court, and such approval may be conditioned upon such terms as the Delaware Court deems just; provided, however, that this provision shall not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the terms offered upon the merger within 60 days after the effective date of the merger, as set forth in the relevant provisions of Section 262.

Failure by any BroadSoft stockholder to comply fully with the procedures described above and set forth in Annex C to this proxy statement may result in termination of such stockholder’s appraisal rights. In view of the complexity of exercising your appraisal rights under Delaware law and if you are considering exercising these rights, you should consult with your legal counsel.

 

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Delisting and Deregistration of BroadSoft Common Stock

If the merger is completed, BroadSoft common stock will be promptly delisted from The NASDAQ Global Select Market and will be promptly deregistered under the Securities Exchange Act of 1934.

Certain Material U.S. Federal Income Tax Consequences of the Merger

The following summary is a general discussion of certain material U.S. federal income tax consequences to our stockholders who are U.S. persons (as defined below) whose common stock is converted into cash in the merger assuming the merger is consummated as contemplated herein. This summary is based on the current provisions of the Internal Revenue Code of 1986, as amended (the “Code”), applicable Treasury Regulations, judicial authority, and administrative rulings, each as in effect as of the date hereof. These laws and authorities are subject to differing interpretations or to change, possibly with retroactive effect. Any such change could alter the tax consequences to our stockholders as described herein. No ruling from the Internal Revenue Service (“IRS”) has been or will be sought with respect to any aspect of the transactions described herein, and no opinion of counsel will be rendered in connection with the transactions described herein. Accordingly, the discussion below neither binds the IRS nor precludes it from adopting a contrary position. The tax treatment of the merger to our stockholders will vary depending on their particular situations.

This summary is for the general information of our stockholders only and does not purport to be a complete analysis of all potential tax effects of the merger. Accordingly, our stockholders should consult their own tax advisors with respect to the particular tax consequences to them of the merger, including applicable federal state, local and non-U.S. tax consequences. For example, this summary does not consider the effect of (a) any U.S. federal non-income tax laws, (b) any applicable state, local, or non-U.S. tax laws, or (c) the Medicare contribution tax on net investment income or the alternative minimum tax. In addition, this discussion does not address the tax consequences of transactions effectuated prior to, concurrently with, or after the completion of the merger (whether or not such transactions occur in connection with the merger), including, without limitation, any transaction involving the acquisition or disposition of shares of BroadSoft common stock other than pursuant to the merger, or the tax consequences to holders of stock options, RSUs, PSUs or similar rights to acquire BroadSoft common stock issued by BroadSoft that are converted in connection with the merger. In addition, it does not address all aspects of U.S. federal income taxation that may affect particular BroadSoft stockholders in light of their particular circumstances or to stockholders who are subject to special tax rules, including, without limitation, stockholders who, for U.S. federal income tax purposes:

 

    are not “U.S. persons” as defined below;

 

    are broker-dealers, traders in securities, financial institutions, mutual funds, regulated investment companies, real estate investment trusts, insurance companies, or tax-exempt entities;

 

    hold their shares as part of an integrated investment (including a hedge or as part of a hedging, “straddle,” pledge against currency risk, “constructive” sale or “conversion” transaction or other risk reduction transaction) consisting of shares of BroadSoft common stock and one or more other positions;

 

    hold common stock that constitutes “qualified small business stock” for purposes of Section 1202 of the Code or as “Section 1244 stock” for purposes of Section 1244 of the Code;

 

    do not hold their shares as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment);

 

    have a functional currency other than the U.S. dollar;

 

    hold their shares through individual retirement or other tax-deferred accounts;

 

    acquired their shares in a transaction subject to the gain rollover provisions of Section 1045 of the Code;

 

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    acquired their shares pursuant to the settlement of RSUs or PSUs, the exercise of a compensatory option or in other compensatory transactions;

 

    acquired their shares pursuant to the exercise of warrants or conversion rights under convertible instruments; or

 

    are partnerships or other entities or arrangements treated as partnerships or disregarded entities for U.S. federal income tax purposes, S corporations or other pass-through entities (including hybrid entities).

For purposes of this discussion, a “U.S. person” is a beneficial owner of BroadSoft common stock that is:

 

    an individual who is a citizen or resident of the United States or someone treated as a U.S. citizen or resident for U.S. federal income tax purposes;

 

    a corporation, including any entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

 

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

 

    a trust, if its administration is subject to the primary supervision of a U.S. court and one or more U.S. persons have the authority to control all substantial decisions of the trust, or a trust in existence on August 20, 1996, that has made a valid election under applicable Treasury Regulations to be treated as a U.S. person.

IN VIEW OF THE FOREGOING AND BECAUSE THE FOLLOWING DISCUSSION IS INTENDED AS A GENERAL SUMMARY ONLY, EACH STOCKHOLDER SHOULD CONSULT SUCH STOCKHOLDER’S OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES, AND ANY TAX REPORTING REQUIREMENTS OF THE MERGER AND RELATED TRANSACTIONS IN LIGHT OF SUCH STOCKHOLDER’S OWN TAX SITUATION.

In General

The conversion of BroadSoft common stock into cash in the merger will be a taxable transaction. Generally, this means that our stockholders will recognize gain or loss equal to the difference between (a) the amount of cash they receive in the merger, and (b) their adjusted tax basis in their BroadSoft common stock. For this purpose, BroadSoft stockholders who acquired different blocks of shares of BroadSoft common stock at different times for different prices must calculate gain or loss separately for each identifiable block of shares of BroadSoft common stock surrendered in the exchange.

Subject to various exceptions, a stockholder’s gain or loss on the disposition of BroadSoft common stock will be characterized as capital gain or loss and will generally be long-term capital gain or loss if the holder has held their BroadSoft common stock for more than one year as of the effective time of the merger. If a stockholder’s holding period for any BroadSoft common stock is one year or less at the effective time of the merger, any gain or loss with respect to such BroadSoft common stock will be treated as short-term capital gain or loss. Long-term capital gains recognized by certain non-corporate stockholders generally are currently taxable at preferential rates relative to the rates applicable to other forms of income. Capital losses are subject to limitations on deductibility.

Appraisal or Dissenter’s Rights

A BroadSoft stockholder who exercises appraisal or dissenters’ rights for such stockholder’s BroadSoft common stock with respect to the merger and receives payment for such stock in cash will generally recognize capital gain or loss, measured by the difference between the cash received and such stockholder’s tax basis in its

 

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BroadSoft common stock. Stockholders who exercise appraisal or dissenters’ rights are urged to consult their own tax advisors. Interest, if any, awarded in an appraisal proceeding by a court would be included in such stockholder’s income as ordinary income for U.S. federal income tax purposes.

Backup Withholding and Information Reporting

A BroadSoft stockholder may be subject to backup withholding with respect to certain reportable payments including taxable proceeds received in exchange for the stockholder’s shares of BroadSoft common stock in the merger. Backup withholding will generally not apply, however, to a BroadSoft stockholder who furnishes the exchange agent with a correct taxpayer identification number on IRS Form W-9 (if such stockholder is a U.S. person as defined in the instructions thereto) or the appropriate IRS Form W-8 (if the stockholder is not such a U.S. person) or otherwise establishes a basis for exemption from backup withholding. Each BroadSoft stockholder and, if applicable, each other payee, should properly complete and sign the IRS Form W-9 included with the letter of transmittal (or the applicable IRS Form W-8) to provide the information and certification(s) necessary to avoid the imposition of backup withholding, unless an exemption applies and is established in a manner satisfactory to the exchange agent. BroadSoft stockholders who fail to provide their correct taxpayer identification numbers and the appropriate certifications, or to establish an exemption as described above, will be subject to backup withholding on cash they receive in the merger and may be subject to penalties imposed by the IRS. BroadSoft stockholders should consult their tax advisors as to their qualifications for exemption from backup withholding and the procedure for obtaining such an exemption. If the exchange agent withholds on a payment to a stockholder, the affected stockholder should contact its tax advisor regarding whether and how any refund, credit or other tax benefit might be recognized with respect to any such withheld amounts.

THE FOREGOING DISCUSSION IS NOT INTENDED TO BE A COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. IN ADDITION, THE DISCUSSION DOES NOT ADDRESS TAX CONSEQUENCES THAT MAY VARY WITH, OR ARE CONTINGENT ON, A STOCKHOLDER’S INDIVIDUAL CIRCUMSTANCES OR TO CERTAIN TYPES OF STOCKHOLDERS MENTIONED ABOVE. MOREOVER, THE DISCUSSION DOES NOT ADDRESS ANY NON-INCOME TAX OR ANY NON-U.S., STATE OR LOCAL TAX CONSEQUENCES OF THE MERGER.

Antitrust Matters

Under the HSR Act or any foreign or other antitrust law and the rules that have been promulgated thereunder, certain acquisitions may not be completed until information has been furnished to the Antitrust Division of the U.S. Department of Justice (“DOJ”), to the Federal Trade Commission (“FTC”), or to certain applicable foreign antitrust authorities and applicable HSR Act waiting period requirements have been satisfied, early termination of the HSR Act waiting period has been granted, or the applicable foreign antitrust approvals have been obtained. The merger of BroadSoft with Merger Sub and the conversion of shares of BroadSoft common stock into the right to receive the merger consideration are subject to the provisions of the HSR Act and certain other applicable foreign antitrust laws. The merger therefore cannot be completed until the expiration or early termination of the HSR Act waiting period and the receipt of certain applicable foreign antitrust approvals following the filing of Hart-Scott-Rodino Notification and Report Forms and any other applicable foreign antitrust filings by Cisco and BroadSoft. BroadSoft and Cisco each filed the requisite notification and report forms with the FTC and DOJ on November 13, 2017. Cisco is withdrawing its filing on December 13, 2017, and will refile on December 15, 2017 to provide the antitrust agencies more time to review the transaction. Both BroadSoft and Cisco will also file the requisite filings in certain other applicable foreign jurisdictions. The merger agreement provides that each of Cisco and BroadSoft will use its respective reasonable best efforts to obtain all consents and approvals required to be obtained by it for the consummation of the merger, including regulatory clearance. However, if any legal proceeding is instituted or (threatened to be instituted) challenging the merger or the related transactions as violative of any antitrust law, Cisco does not have any obligation to litigate or contest any such legal proceeding or order resulting therefrom and Cisco does not have any obligation

 

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to make proposals, execute or carry out agreements or submit to orders providing for (a) the sale, license or other disposition or holding separate (through the establishment of a trust or otherwise) of any assets or categories of assets of Cisco or BroadSoft or any of their respective affiliates, (b) the imposition of any limitation or restriction on the ability of Cisco or any of its affiliates to freely conduct their business or, following the closing of the merger, BroadSoft’s business or own such assets or (c) the holding separate of the shares of BroadSoft capital stock or any limitation or regulation on the ability of Cisco or any of its affiliates to exercise full rights of ownership of the shares of BroadSoft capital stock (any of the foregoing, an “Antitrust Restraint”).

At any time before or after the completion of the merger, notwithstanding that the HSR Act waiting period has ended and the applicable foreign antitrust approvals have been obtained, the FTC, the DOJ, a state, foreign country, or private individual could take action to enjoin the merger under the antitrust laws as it deems necessary or desirable. We cannot be sure that a challenge to the merger will not be made or that, if a challenge is made, that we will prevail.

 

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THE MERGER AGREEMENT

The following description summarizes the material provisions of the merger agreement and is qualified in its entirety by reference to the complete text of the merger agreement. The merger agreement is included as Annex A to this proxy statement. We encourage you to read it carefully and in its entirety. The merger agreement has been included to provide you with information regarding its terms. It is not intended to provide any other factual information about BroadSoft. Such information can be found elsewhere in this proxy statement and in the other public filings BroadSoft makes with the SEC, which are available without charge at www.sec.gov.

The representations, warranties and covenants contained in the merger agreement were made only for purposes of that agreement and as of specific dates, were solely for the benefit of the parties to the merger agreement, and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the merger agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of affairs of BroadSoft without considering the entirety of public disclosure about BroadSoft as set forth in BroadSoft’s SEC filings. 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 this proxy statement or in other public disclosures by BroadSoft.

The Merger

Subject to the terms and conditions of the merger agreement and in accordance with the Delaware General Corporation Law (“DGCL”), at the effective time of the merger, BroadSoft and Cisco will consummate the merger, whereby Merger Sub will be merged with and into BroadSoft. The separate existence of Merger Sub will cease and BroadSoft will continue as the surviving corporation. As the surviving corporation, BroadSoft will continue to exist following the merger as a wholly-owned subsidiary of Cisco.

Closing and Effective Time of Merger

Unless the merger agreement is terminated (as described under “The Merger Agreement — Termination of the Merger Agreement”) and unless otherwise mutually agreed in writing between BroadSoft, Cisco and Merger Sub, subject to satisfaction or waiver of the conditions to closing (described under “The Merger Agreement — Conditions to the Merger”), the consummation of the merger (which we refer to as the “closing”) will take place on the third business day (or as otherwise mutually agreed) after the satisfaction or waiver of the conditions to closing (other than any such conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or waiver of such conditions). However, if the closing would otherwise occur on or between January 15, 2018 and January 26, 2018, Cisco may, in its discretion, delay the closing until the first business day following such period, so long as, as of the date the closing would have otherwise occurred (a) each party has delivered to the other party the certificates required to be delivered by it pursuant to the merger agreement, (b) each party irrevocably confirms in writing to the other party that the conditions to closing applicable to it have been satisfied or are waived and that it is ready, willing and able to close on such date and (c) between (and including) the date upon which those requirements have first been fulfilled and the closing, BroadSoft has not materially breached its covenants and agreements applicable to it between the date of the merger agreement and the closing as more fully described under the section entitled “The Merger Agreement — Conduct of Business Prior to Closing.”

The merger will become effective upon the date and time the certificate of merger is accepted by the Secretary of State of the State of Delaware or such later date and time as is agreed upon in writing by BroadSoft and Cisco and specified in the certificate of merger, which we refer to as the “effective time of the merger.”

The Certificate of Incorporation of the surviving corporation will be amended and restated as of the effective time of the merger to conform to Attachment A to the certificate of merger (the form of which is

 

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attached as Exhibit A to the merger agreement), and the bylaws of the surviving corporation will be amended and restated as of the effective time of the merger to conform to Exhibit B to the merger agreement. The directors of Merger Sub and the officers of Merger Sub immediately prior to the effective time of the merger will be the directors and officers, respectively, of the surviving corporation immediately after the effective time of the merger.

Merger Consideration

At the effective time of the merger, each share of BroadSoft common stock then outstanding will be converted automatically into the right to receive the merger consideration of $55.00 per share in cash upon the surrender of the stock certificates or book-entry shares, as applicable, without interest and subject to all applicable tax withholding, other than the following shares:

 

    each share of BroadSoft common stock then held by BroadSoft as treasury stock and by any of its direct or indirect wholly-owned subsidiaries, which will be canceled and retired and will cease to exist, and no consideration will be delivered in exchange therefor;

 

    each share of BroadSoft common stock then held by Cisco, Merger Sub or any other subsidiary of Cisco, which will be canceled and retired and will cease to exist, and no consideration will be delivered in exchange therefor; and

 

    each share owned by stockholders who have properly demanded (and not withdrawn or lost) their right to appraisal and payment under Section 262 of the DGCL, which will be treated as described in further detail in this proxy statement under “The Merger — Appraisal Rights.”

Subject to the above exceptions, from and after the effective time of the merger, each holder of BroadSoft common stock outstanding immediately prior to the effective of the merger will cease to have any rights with respect to such shares, except as otherwise provided in the merger agreement or by applicable law, and such shares will no longer be outstanding and will automatically be canceled.

Payment for Shares of Common Stock

Cisco has designated its transfer agent, Computershare Inc., to act as exchange agent for the holders of shares of BroadSoft common stock. At or prior to the effective time of the merger, Cisco will deposit, or will cause its direct or indirect subsidiary to deposit, with such exchange agent cash sufficient to pay the aggregate merger consideration payable to BroadSoft’s stockholders.

Promptly after the effective time of the merger, Cisco will instruct the exchange agent to mail to all record holders of BroadSoft common stock whose shares were converted into the right to receive the merger consideration, a letter of transmittal and instructions for use in effecting the surrender of the stock certificates or book-entry shares pursuant to such letter of transmittal. Upon surrender to the exchange agent of certificates or book-entry shares representing shares of BroadSoft common stock, together with a letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be reasonably required by the exchange agent, or in the case of book-entry shares, an appropriate agent’s message, the holder of such certificates or book-entry shares will be entitled to receive in exchange therefor the merger consideration for each share of BroadSoft common stock evidenced by such certificates or book-entry shares. No interest will accrue or be paid on the merger consideration payable upon the surrender of any certificates or book-entry shares for the benefit of the holder thereof. Each of the surviving corporation, Cisco, their respective subsidiaries and the exchange agent will be entitled to deduct and withhold (or cause the exchange agent to deduct and withhold) from the merger consideration payable to any holder of BroadSoft common stock, stock options, RSUs, PSUs or any other consideration otherwise payable pursuant to the merger agreement such amounts as it is required by any legal requirement to deduct and withhold with respect to taxes.

You should not send your stock certificate with the enclosed proxy card, and you should not forward your stock certificate to the exchange agent without a letter of transmittal.

 

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Treatment of Equity Awards

Stock Options. At the effective time of the merger, each vested stock option (including stock options the vesting of which accelerates in connection with the merger) that is unexpired and outstanding as of immediately prior to the effective time of the merger under BroadSoft’s 1999 Stock Option Plan or Amended and Restated 2009 Equity Incentive Plan (collectively, the “Equity Plans”) will be canceled and converted into the right to receive cash from Cisco equal to the number of shares subject to such option multiplied by the excess, if any, of the merger consideration over the exercise price of such stock option, without interest and subject to all applicable tax withholding. At the effective time of the merger, each unvested stock option under the Equity Plans that is unexpired and outstanding as of immediately prior to the effective time of the merger and held by continuing employees or contractors of the surviving corporation will be substituted by Cisco and converted into a right to receive unvested cash from Cisco, payable in accordance with the service-based vesting schedule for such award and subject to any applicable terms relating to termination and accelerated vesting, equal to the number of shares subject to such stock option multiplied by the excess, if any, of the merger consideration over the exercise price of such stock option, without interest and subject to all applicable tax withholding.

Restricted Stock Units. At the effective time of the merger, each vested RSU (including RSUs the vesting of which accelerates in connection with the merger) under the Equity Plans that is outstanding as of immediately prior to the effective time of the merger will be canceled and converted into the right to receive cash from Cisco equal to the number of shares subject to such RSU multiplied by the merger consideration, without interest and subject to all applicable tax withholding. At the effective time of the merger, each unvested RSU under the Equity Plans that is outstanding as of immediately prior to the effective time of the merger and held by continuing employees or contractors of the surviving corporation will be substituted by Cisco and converted into a right to receive unvested cash from Cisco, payable in accordance with the service-based vesting schedule for such award and subject to any applicable terms relating to termination and accelerated vesting, equal to the number of shares subject to such RSU multiplied by the merger consideration, without interest and subject to all applicable tax withholding.

Performance Stock Units. At the effective time of the merger, each vested PSU (including PSUs the vesting of which accelerates in connection with the merger) under the Equity Plans that is outstanding as of immediately prior to the effective time of the merger will be canceled and converted into the right to receive unvested cash from Cisco equal to the number of shares subject to such PSU multiplied by the merger consideration, without interest and subject to all applicable tax withholding. At the effective time of the merger, each unvested PSU under the Equity Plans that is outstanding as of immediately prior to the effective time of the merger and held by continuing employees or contractors of the surviving corporation will be substituted by Cisco and converted into a right to receive cash from Cisco, payable in accordance with the service-based vesting schedule for such award and subject to any applicable terms relating to termination and accelerated vesting, equal to the number of shares subject to such PSU multiplied by the merger consideration, without interest and subject to all applicable tax withholding. Any such outstanding unvested PSUs under the Equity Plans held by continuing employees or contractors of the surviving corporation that are subject to performance-based criteria will be converted into a right to receive such cash amount subject to a service-based criteria only.

The effect of the merger upon our other employee benefit plans is more fully described under “The Merger Agreement — Employee Benefits.”

Cisco’s Employment Agreements with BroadSoft’s Executive Officers

In connection with the execution of the merger agreement, Cisco entered into an Employment Agreement with each of Michael Tessler and Scott D. Hoffpauir, and a Transitional Employment Agreement with James A. Tholen, setting forth the terms and conditions of these executives’ continued employment with Cisco from and after the consummation of the merger. These agreements are more fully described under “The Merger — Interests of Our Directors and Executive Officers in the Merger.”

 

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Representations and Warranties

In the merger agreement, BroadSoft made representations and warranties relating to, among other things:

 

    the corporate organization, good standing, power and qualification of BroadSoft and its subsidiaries;

 

    BroadSoft’s capitalization, including with respect to its stock awards and indebtedness;

 

    BroadSoft’s corporate power and authority to enter into the merger agreement;

 

    the due execution and delivery by BroadSoft of the merger agreement and the enforceability of the merger agreement against BroadSoft;

 

    the resolutions of the board of directors of BroadSoft approving the merger agreement, the merger and the other transactions contemplated by the merger agreement;

 

    the vote required of the stockholders of BroadSoft to adopt the merger agreement, the merger and the other transactions contemplated by the merger agreement;

 

    the absence of conflicts with BroadSoft’s organizational documents, applicable law or certain material contracts to which BroadSoft or any of its subsidiaries is a party;

 

    required consents from governmental authorities;

 

    the inapplicability of Section 203 of the DGCL to the transactions contemplated by the merger agreement;

 

    BroadSoft’s financial statements, certain filings with the SEC and internal accounting controls;

 

    the absence of certain changes or any Material Adverse Effect (as defined below) since June 30, 2017;

 

    the absence of material legal proceedings involving BroadSoft and its subsidiaries;

 

    the absence of any contracts or government orders that would impair BroadSoft’s ability to conduct its business or acquire material property;

 

    compliance with legal requirements by BroadSoft and its subsidiaries;

 

    the permits issued by governmental authorities held by BroadSoft and its subsidiaries;

 

    title to assets owned by BroadSoft and its subsidiaries;

 

    real property leased by BroadSoft and its subsidiaries;

 

    intellectual property and information technology systems;

 

    compliance by BroadSoft and is subsidiaries with applicable privacy laws;

 

    environmental matters;

 

    tax matters;

 

    employee benefits and other employee matters, including benefit plans;

 

    interested party transactions that would be required to be reported by BroadSoft pursuant to Item 404 of Regulation S-K;

 

    insurance coverage;

 

    the absence of any undisclosed fees owed to brokers, finders, investment bankers, financial advisors or other persons in connection with the merger;

 

    BroadSoft’s significant customers and suppliers;

 

    material contracts and certain government contracts;

 

    compliance by BroadSoft and is subsidiaries with applicable export control laws;

 

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    certain business practices of BroadSoft and its subsidiaries;

 

    the fairness opinions delivered to BroadSoft’s board of directors by Jefferies and Qatalyst Partners, each as financial advisor to BroadSoft’s board of directors;

 

    the accuracy of the information provided by BroadSoft in this proxy statement; and

 

    an acknowledgment by BroadSoft that neither Cisco nor Merger Sub, nor any of their respective representatives, has made any representations and warranties to BroadSoft other than those contained in Article III of the merger agreement.

In the merger agreement, Cisco and Merger Sub each made representations and warranties relating to, among other things:

 

    the corporate organization, good standing, power and qualification of Cisco and Merger Sub;

 

    Cisco’s and Merger Sub’s corporate power and authority to enter into the merger agreement;

 

    the due execution and delivery by Cisco and Merger Sub of the merger agreement and the enforceability of the merger agreement against Cisco and Merger Sub;

 

    the absence of conflicts with the organizational documents of Cisco or Merger Sub, applicable law or material contracts to which Cisco or Merger Sub is a party;

 

    ownership and operations of Merger Sub since its formation;

 

    Cisco’s and Merger Sub’s ownership of BroadSoft common stock for purposes of Section 203 of the DGCL;

 

    the accuracy of the information supplied by Cisco or Merger Sub for inclusion in this proxy statement;

 

    sufficiency of funds to consummate the transactions contemplated by the merger agreement;

 

    the absence of material legal proceedings involving Cisco or Merger Sub; and

 

    an acknowledgment by Cisco that neither BroadSoft nor any of its representatives has made any representations and warranties to Cisco, including with respect to forward-looking information, other than those contained in Article II of the merger agreement.

Many of BroadSoft’s representations and warranties are qualified by a knowledge, materiality or Material Adverse Effect standard. For purposes of the merger agreement, “knowledge” means the knowledge of certain specified employees of the Company after reasonable inquiry under the circumstances. For purposes of the merger agreement, “Material Adverse Effect” or “MAE” means with respect to BroadSoft and its subsidiaries, taken as a whole, any change, event, occurrence, circumstance, condition or effect (each, an “Effect”) that, individually or taken together with all other Effects, and regardless of whether or not such Effect, considered together with all other Effects, would constitute a breach of the representations or warranties made by such person in the merger agreement (a) would, or would reasonably be expected to, be or become materially adverse to the financial condition, properties, assets (including intangible assets), business, operations or results of operations of BroadSoft and its subsidiaries, taken as a whole and (b) would, or would reasonably be expected to, prohibit or materially impede BroadSoft’s ability to consummate the transactions in accordance with the merger agreement and applicable laws. However, none of the following will be deemed in and of themselves, either alone or in combination, to constitute, and none of the following will be taken into account in determining whether there is, or would reasonably likely to be, a Material Adverse Effect on BroadSoft and its subsidiaries:

 

    changes in general economic conditions or financial, credit, foreign exchange, securities or capital markets, including any disruption thereof, in the United States or elsewhere in the world;

 

    changes generally affecting the industry in which BroadSoft and its subsidiaries operate;

 

    changes in applicable laws;

 

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    changes in United States generally accepted accounting principles, or GAAP, or other accounting regulations or principles or interpretations thereof, that apply to BroadSoft and its subsidiaries;

 

    national or international political conditions, any outbreak or escalation of hostilities, insurrection or war, or acts of terrorism;

 

    epidemics, quarantine restrictions, wildfires, earthquakes, hurricanes, tornadoes, other natural disasters or similar calamity or crisis;

 

    changes in the trading volume or trading prices of such entity’s capital stock in and of themselves (however, such exception will not apply to any underlying Effect that may have caused such change in the trading prices or volumes);

 

    any failure, in and of itself, to meet market revenue or earnings expectations, including revenue or earnings projections or predictions made by BroadSoft (whether or not publicly announced) or securities or financial analysts and any resulting analyst downgrades of BroadSoft’s securities in and of themselves (however, such exception will not apply to any underlying Effect that may have caused such failure or such downgrades);

 

    changes in BroadSoft’s and its subsidiaries’ relationships with employees, customers, distributors, suppliers, vendors, licensors or other business partners as a result of the announcement or pendency of the merger agreement or the anticipated consummation of the merger and the other transactions contemplated by the merger agreement (however, such exception will not apply with respect to the representations and warranties regarding non-contravention or to the closing condition regarding accuracy of representations of BroadSoft and Cisco’s termination right in the event of any breach of representations and warranties or covenants by BroadSoft to the extent related to such portions of such representations and warranties);

 

    any actions taken or failure to take action, in each case, that Cisco has expressly approved, consented to or requested in writing; or

 

    any legal proceeding brought or threatened by a current or former stockholder of BroadSoft against BroadSoft relating to the transactions contemplated by the merger agreement.

The first six exceptions listed above will not apply to the extent that such changes disproportionately and adversely affect BroadSoft and its subsidiaries, taken as a whole, as compared to other participants in the industry in which BroadSoft and its subsidiaries operate.

Conduct of Business Prior to Closing

BroadSoft agreed in the merger agreement that, until the effective time of the merger, except as required or otherwise expressly contemplated under the merger agreement or as required to comply with applicable legal requirements, with the written consent of Cisco or as set forth in the disclosure schedule that BroadSoft delivered to Cisco in connection with the execution of the merger agreement, BroadSoft will and will cause its subsidiaries to:

 

    conduct its and their businesses in the ordinary course in substantially the same manner as conducted beforehand;

 

    use commercially reasonable efforts to pay all material indebtedness and material taxes when due, subject to good faith disputes over such material indebtedness or material taxes;

 

    promptly notify Cisco of any knowledge of any notice from any person alleging that the consent of such person is or may be required in connection with any of the transactions contemplated by the merger agreement and any legal proceeding commenced, or, to its knowledge threatened, relating to or involving BroadSoft or its subsidiaries that relates to the consummation of the transactions contemplated by the merger agreement;

 

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    use commercially reasonable efforts to preserve intact its present business organizations, keep available the services of its present officers and key employees and preserve its relationships with customers, suppliers, distributors, licensors, licensees and others having material business dealings with it;

 

    use commercially reasonable efforts to assure that each of its material contracts entered into after the date of the merger agreement will not require the procurement of any consent, waiver or novation or provide for any material change in the obligations of any party thereto in connection with, or terminate as a result of the consummation of, the transactions contemplated by the merger agreement, and give reasonable advance notice to Cisco prior to terminating any such material contract or allowing any such material contract or right thereunder to lapse or terminate by its terms; and

 

    use commercially reasonable efforts to maintain all of the real property leased by BroadSoft and its subsidiaries in accordance with the terms of the applicable lease in all material respects.

BroadSoft also agreed that, until the effective time of the merger, except as required or otherwise expressly contemplated under the merger agreement or as required to comply with applicable legal requirements, with the written consent of Cisco or as set forth in the disclosure schedule that BroadSoft delivered to Cisco in connection with the execution of the merger agreement, BroadSoft will not and will cause its subsidiaries not to:

 

    amend its certificate of incorporation or bylaws, or comparable organizational or governing documents;

 

    declare or pay any dividend on or make any other distribution (whether in cash, stock or property) in respect of any of its capital stock (other than the payment of any dividend or distribution by any subsidiary to BroadSoft or another subsidiary), change any rights with respect to its outstanding securities, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, repurchase or otherwise acquire, directly or indirectly, any shares of its capital stock (subject to certain exceptions);

 

    accelerate, amend or change the period of exercisability or vesting of any stock options, RSUs, PSUs or other rights granted under the Equity Plans or the vesting of the securities purchased or purchasable under such stock options, RSUs, PSUs or other rights or the vesting schedule issued under such equity plans or otherwise, amend or change any other terms of such stock options, RSUs, PSUs or other rights or authorize cash payments in exchange for any stock options, RSUs, PSUs or other rights granted under any of such plans or the securities purchased or purchasable under those stock options, RSUs, PSUs issued under such plans or otherwise, in each case, other than in connection with termination of non-executive employees;

 

    enter into any material contract (subject to certain exceptions);

 

    materially violate, terminate (other than allowing expiration according to its scheduled term, including failure to renew) or waive any of the material terms of any material contracts;

 

    materially amend or otherwise modify any of its material contracts that results primarily in a material reduction of the expected business or economic benefits thereof;

 

    issue, deliver or sell or authorize or propose the issuance, delivery or sale of, or purchase or propose the purchase of, any voting debt or any shares of its capital stock or securities convertible into, or subscriptions, rights, warrants or options to acquire, or other contracts of any character obligating it to issue any such shares or other convertible securities (subject to certain exceptions);

 

    hire any additional officers (other than for non-executive officer replacements) or other employees (subject to certain exceptions), enter into any new engagements with any consultants or independent contractors (other than for replacement) or amend or extend the term of any employment or consulting agreement;

 

    terminate employment, change the title, office or position or materially reduce the responsibility of any management, supervisory or key personnel (subject to certain exceptions);

 

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    incur material liabilities to directors and officers (subject to certain exceptions);

 

    enter into any contract with a labor union or collective bargaining agreement unless required by law;

 

    other than (a) routine travel advances, sales commissions and draws and other business related expenses to employees and consultants of BroadSoft or any subsidiary in the ordinary course of business consistent with past practice and (b) payments or loans to any subsidiary in order to fund operations in the ordinary course of business consistent with past practice, (i) make any loans or advances to, or any investments in or capital contributions to, any person (including any officer, director or employee of BroadSoft), (ii) forgive or discharge in whole or in part any outstanding loans or advances owed to BroadSoft by any person or (iii) amend or modify in any material respect any loan previously granted by BroadSoft to any person;

 

    transfer or license to any person any material rights to any intellectual property owned by BroadSoft, other than non-exclusive licenses granted in connection with the use, sale or distribution of BroadSoft’s products granted pursuant to standard license agreements, or acquire or license from any person any material third-party intellectual property other than pursuant to standard inbound license agreements, and in each case, other than in the ordinary course of business consistent with past practice;

 

    sell, dispose of, transfer or provide a copy of any material source code (other than open source materials) to any person (including any current or former employee or consultant of BroadSoft or any contractor or commercial partner of BroadSoft outside the United States) (subject to certain exceptions);

 

    sell, lease, license or otherwise dispose of or encumber any of its properties or assets that are material, individually or in the aggregate, to its business, other than (a) sales and non-exclusive licenses of its products in the ordinary course of business consistent with past practice or (b) pursuant to dispositions of obsolete, surplus or worn out assets that are no longer useful in the conduct of its business, or enter into any contract with respect to the foregoing;

 

    incur any indebtedness, enter into any “keep well” or other contract to maintain any financial statement condition, or enter into any arrangement having the economic effect of any of the foregoing, other than in connection with the financing of ordinary course trade payables consistent with past practice, letters of credit or bonds in the ordinary course of business consistent with past practice of not more than $500,000 in the aggregate;

 

    enter into any operating lease requiring payment in excess of $250,000 per year or any leasing transaction of the type required to be capitalized in accordance with GAAP;

 

    make any capital expenditures, capital additions or capital improvements that are more than $5,000,000 in the aggregate in any calendar quarter (excluding capitalized internal software development expenditures in the ordinary course consistent with past practice);

 

    materially adversely change the amount or terms of any insurance coverage (subject to policy changes made by carriers);

 

    adopt or amend in any material respect any employee or compensation benefit plan, including any stock purchase, stock issuance or stock option plan, or amend in any material respect any compensation, benefit, entitlement, grant or award provided or made under any such plan (subject to certain exceptions);

 

    materially amend any deferred compensation plan (subject to certain exceptions);

 

    pay any special bonus or special remuneration to any employee or non-employee director or consultant or increase the salaries, wage rates or fees of its employees or consultants (other than pursuant to preexisting plans, policies or contracts that have been made available to Cisco) (subject to certain exceptions);

 

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    add any new members to the board of directors of BroadSoft or to the board of directors or similar governing body of any subsidiary (other than to replace a member of the board of directors of BroadSoft or the board of directors or similar governing body of such subsidiary who resigns or is otherwise removed from such position following the date of the merger agreement and prior to the closing);

 

    grant or pay, or enter into any contract providing for the granting of any severance, retention or termination pay (other than accrued but unpaid salary), or the acceleration of vesting or other benefits, such a termination of employment, to any person, other than (a) payments or acceleration made pursuant to preexisting plans, policies or contracts that have been made available to Cisco and (b) in connection with any replacement of any non-executive officer to the extent any such benefit granted to the replacing non-executive officer is no more favorable in the aggregate than that of the officer being replaced;

 

    commence a legal proceeding, other than, in any such case, (a) for routine matters in the ordinary course of business consistent with past practice, (b) where BroadSoft in good faith determines that failure to commence such legal proceeding would result in the material impairment of a valuable aspect of its business (provided that BroadSoft consults with Cisco prior to the filing of such a suit) or (c) in connection with a breach of the merger agreement;

 

    settle, offer to settle or agree to settle any pending or threatened legal proceeding or other dispute, including any such legal proceeding between a third party and any customers of BroadSoft for which BroadSoft is providing a defense or indemnity, in any such case, other than any legal proceeding relating to a breach of the merger agreement or pursuant to a settlement that does not relate to any of the transactions contemplated by the merger agreement and (a) that results solely in a monetary obligation involving only the payment of monies by BroadSoft and its subsidiaries of not more than $1,000,000 in the aggregate, (b) that results solely in a monetary obligation that is funded by an indemnity obligation to, or an insurance policy of, BroadSoft or any of its subsidiaries and the payment of monies by BroadSoft and its subsidiaries that together with any settlement made under clause (a) are not more than $1,000,000 in the aggregate (not funded by an indemnity obligation or through insurance policies) or (c) that results solely in the receipt of payment by BroadSoft or any of its subsidiaries; provided that in any such case such settlement would not impose any restrictive obligation that would have a material impact on its business;

 

    acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any person or division thereof, or otherwise acquire or agree to acquire any assets, in each case, that are material, individually or in the aggregate, to its business (subject to certain exceptions), or enter into any contract with respect to a joint venture, strategic alliance or partnership;

 

    make or change any material election in respect of taxes;

 

    adopt or change any accounting method in respect of taxes;

 

    file any material tax return relating to BroadSoft or any of its subsidiaries that has been prepared in a manner that is materially inconsistent with the past practices of BroadSoft or such subsidiary, as applicable, or any amendment to any material tax return (provided that Cisco will not unreasonably withhold, condition or delay its consent to such a filing);

 

    enter into any tax sharing or similar agreement or closing agreement (subject to certain exceptions);

 

    settle any claim or assessment in respect of taxes;

 

    consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of taxes (subject to certain exceptions);

 

    enter into intercompany transactions outside the ordinary course of business giving rise to deferred gain or loss;

 

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    materially change accounting methods, except as required by changes in GAAP (which requirement is confirmed by its independent auditors) and after notice to Cisco;

 

    fail to timely make any required filings with the SEC in substantially the form required to be filed under applicable law between the date of the merger agreement and the closing;

 

    enter into any contract for (a) the purchase or sale of any real property or (b) the lease of any real property involving an aggregate amount in excess of $500,000 per annum for any such lease;

 

    materially change the policy in which it extends warranties, discounts or credits to customers generally (subject to certain exceptions);

 

    enter into any contract that would be required to be reported by BroadSoft pursuant to Item 404 of Regulation S-K;

 

    enter into or materially modify any currency exchange, interest rate, commodities or other hedging or derivative transactions or arrangements, or other investment or cash management transactions or arrangements other than in the ordinary course of business consistent with past practice;

 

    enter into or materially modify any contract for the joint development with any other person of any material product, system, software, content, technology or intellectual property by or for BroadSoft or any of its subsidiaries;

 

    enter into any contract relating to the membership of, or participation by, BroadSoft or any of its subsidiaries in, or the affiliation of BroadSoft or any of its subsidiaries with, any industry standards group or association in which BroadSoft or any of its subsidiaries contributes and/or shares in pooled patent rights;

 

    enter into any joint marketing or marketing support contract involving an amount in excess of $1,000,000 per annum; or

 

    agree in writing or otherwise to take, any of the actions described in the clauses above.

Proxy Statement, Board Recommendation and Stockholders Meeting

BroadSoft has agreed to, as promptly as reasonably practicable following the date of the merger agreement, establish a record date for, duly call, give notice of, convene and hold the stockholders’ meeting, which is the Special Meeting that is the subject of this proxy statement, to consider and vote upon the adoption of the merger agreement, obtain advisory approval of the compensation that the named executive officers of the Company may receive in the merger and such other matters as agreed to by Cisco. Except as communicated in a change of recommendation by BroadSoft’s board of directors in compliance with the merger agreement, BroadSoft will use its reasonable best efforts to solicit from its stockholders proxies in favor of the adoption of the merger agreement and will take all other reasonable action necessary or advisable to obtain such proxies and the required stockholder vote to adopt the merger agreement and to secure the vote or consent of its stockholders required by all applicable laws and its organizational documents. As promptly as reasonably practicable following the later of (a) receipt and resolution of SEC comments with respect to the proxy statement and (b) the expiration of the ten-day waiting period under applicable securities laws, BroadSoft must file the definitive proxy statement and cause such definitive proxy statement to be mailed to its stockholders.

BroadSoft may adjourn or postpone the Special Meeting (a) to the extent necessary to ensure that any supplement or amendment to the proxy statement that BroadSoft reasonably determines (after consultation with Cisco, except with respect to any acquisition proposal (as defined below) or other permitted circumstances) is necessary to comply with applicable laws, is provided to its stockholders in advance of the Special Meeting, (b) if, as of the time that the Special Meeting is originally scheduled, there are insufficient shares of BroadSoft common stock represented at such meeting to constitute a quorum necessary to conduct the business of the Special Meeting, (c) if, as of the time that the Special Meeting is originally scheduled, adjournment or

 

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postponement of the Special Meeting is necessary to enable BroadSoft to solicit additional proxies required to obtain required stockholder vote to adopt the merger agreement or (d) as necessary to provide for the expiration of any time period required to allow BroadSoft’s board of directors to make a change of recommendation in compliance with the merger agreement.

Except in the circumstances described in this proxy statement under “The Merger Agreement — Ability to Change Board Recommendation/Termination in Connection with a Superior Proposal,” BroadSoft’s board of directors has agreed to unanimously recommend to BroadSoft’s stockholders that the stockholders approve the adoption of the merger agreement and include such recommendation in this proxy statement and also agreed that neither its board of directors nor any committee thereof will withhold, withdraw, qualify, amend or modify, or publicly propose or resolve to withhold, withdraw, qualify, amend or modify in a manner adverse to Cisco or Merger Sub, such recommendation.

The merger agreement further provides that, prior to the termination of the merger agreement, the Company’s obligations to call, give notice of, or convene the Special Meeting, will not be limited by the occurrence of any acquisition proposal, superior proposal or change of recommendation, except that the Special Meeting may be delayed or postponed in limited circumstances described in the proxy statement under “The Merger Agreement — Ability to Change Board Recommendation/Termination in Connection with a Superior Proposal.”

No Solicitation of Other Offers

Under the merger agreement, BroadSoft agreed to, and agreed to cause its subsidiaries and their respective representatives to, immediately cease all existing activities, discussions or negotiations with any person conducted prior to the date of the merger agreement with respect to any acquisition proposal and to direct any person (and their representatives) with which BroadSoft has engaged in any such activities within the 12-month period preceding the date of the merger agreement to promptly return or destroy all confidential information previously provided to such person. BroadSoft agreed not to, and agreed to cause its subsidiaries not to, waive any rights under “standstill” or similar covenants in confidentiality or non-disclosure agreements entered into in connection with any acquisition proposal. BroadSoft has also agreed that, except as permitted by the merger agreement, after the date of the merger agreement until the earlier of the closing and the termination of the merger agreement, none of the board of directors of BroadSoft, BroadSoft and its subsidiaries will, nor will they authorize or permit any of their respective representatives to:

 

    solicit, initiate or knowingly encourage, facilitate or induce the making, submission or public announcement of any inquiry, indication of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, an acquisition proposal;

 

    enter into, participate in, maintain or continue any communications (except to provide written notice as to the existence of these provisions and to clarify the terms and conditions of any acquisition proposal) or negotiations regarding, or deliver or make available to any person any non-public information with respect to, or knowingly take any other action regarding, any inquiry, indication of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, an acquisition proposal;

 

    agree to, accept, approve, endorse or recommend (or publicly propose or announce any intention to agree to, accept, approve, endorse or recommend) any acquisition proposal;

 

    enter into any agreement in principle, letter of intent, term sheet or any other agreement, understanding or contract (whether binding or not) contemplating or otherwise relating to any acquisition proposal (other than an acceptable confidentiality agreement (as defined below));

 

    submit any acquisition proposal to the vote of any securityholders of BroadSoft or any of its subsidiaries;

 

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    approve any transaction, or any third party becoming an “interested stockholder,” under Section 203 of the DGCL; or

 

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

Notwithstanding these restrictions, if, at any time prior to the time that BroadSoft’s stockholders approve the adoption of the merger agreement, BroadSoft or any of its representatives receives an unsolicited bona fide written acquisition proposal that BroadSoft’s board of directors concludes in good faith, after consultation with financial advisors and outside legal counsel, is or could reasonably be expected to lead to a superior proposal (as defined below), BroadSoft may:

 

    enter into discussions with such person regarding such acquisition proposal; and

 

    deliver or make available to such person non-public information regard BroadSoft and its subsidiaries.

However, prior to taking any of the actions listed above, BroadSoft must have complied with the following:

 

    none of BroadSoft, its subsidiaries and their representatives have violated the non-solicitation and related provisions in any material respect;

 

    the board of directors of BroadSoft must first conclude in good faith (after consultation with its outside legal counsel) that the failure to take such action would be inconsistent with its fiduciary obligations to BroadSoft’s stockholders under applicable laws;

 

    prior to making available any material non-public information, BroadSoft must first receive from such person an executed customary confidentiality agreement that contains terms that are no less favorable in the aggregate to BroadSoft than the terms in the confidentiality agreement with Cisco but does not have to contain any “standstill” provisions and that does not include any exclusive right to negotiate with such person or having the effect of restricting BroadSoft from fulfilling its obligations under the merger agreement (an “acceptable confidentiality agreement”);

 

    prior to engaging in any discussions, BroadSoft must first provide to Cisco written notice of its intent to engage in such discussions; and

 

    prior to or contemporaneously with delivering or making available any non-public information, BroadSoft must concurrently deliver to Cisco such non-public information to the extent such non-public information has not been previously delivered or made available to Cisco by BroadSoft.

BroadSoft must also as promptly as practicable (and in any event within one business day) notify Cisco orally and in writing after receipt by BroadSoft and/or any subsidiary (and/or to the knowledge of BroadSoft, by any representative (excluding employees who are not directors or officers) of any acquisition proposal, any inquiry, indication of interest, proposal or other offer that constitutes, or could reasonably be expected to lead to, an acquisition proposal, or any request for non-public information that could reasonably be expected to lead to an acquisition proposal. Such notice is required to describe the material terms and conditions of the acquisition proposal, inquiry, indication of interest, proposal offer or request and the identity of the person submitting such acquisition proposal, inquiry, indication of interest, proposal, offer or request. BroadSoft must keep Cisco reasonably informed as promptly as practicable (and in any event within one business day) of the status and material details of, and material amendments or modifications to, any such acquisition proposal, inquiry, indication of interest, proposal, offer or request and any related material correspondence or communications. BroadSoft shall provide Cisco as promptly as practicable (and in any event within one business day) with a copy of all written materials related thereto. BroadSoft agreed to notify Cisco about any meeting of its board of directors at which the BroadSoft board of directors discusses any acquisition proposal promptly following the meeting.

The merger agreement defines an “acquisition proposal” as any agreement, offer, proposal or indication of interest (other than the merger agreement or any other offer, proposal or indication of interest by Cisco), or any

 

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public announcement of intention to enter into any such agreement or of (or intention to make) any offer, proposal or indication of interest, relating to, or involving: (a) any acquisition or purchase by any person, directly or indirectly, of more than 20% of the outstanding voting securities of BroadSoft or any securities of any of its subsidiaries or any tender offer or exchange offer that if consummated would result in any person beneficially owning 20% or more of the outstanding voting securities of BroadSoft, (b) any merger, consolidation, business combination or similar transaction involving BroadSoft or any of its subsidiaries pursuant to which the stockholders of BroadSoft immediately preceding such transaction hold securities representing less than 80% of the outstanding voting power of the surviving or resulting entity of such transaction (or parent entity of such surviving or resulting entity), (c) any sale, acquisition, disposition, mortgage, pledge or other transfer of more than 20% of the assets of BroadSoft and its subsidiaries other than in the ordinary course of business consistent with past practice, or (d) any liquidation or dissolution of BroadSoft, or any extraordinary dividend, whether of cash or other property, in each case of clauses (a) – (d) in any single transaction or series of related transactions.

The merger agreement defines a “superior proposal,” with respect to BroadSoft, as an unsolicited, bona fide written offer submitted after the date of the merger agreement by a person to acquire, directly or indirectly, (a) pursuant to a tender offer, exchange offer, merger, consolidation or other business combination (including by means of a tender offer followed by a back-end merger) beneficial ownership of 50% or more of the outstanding voting securities of BroadSoft or (b) 50% or more of the assets of BroadSoft, in each case, for consideration consisting exclusively of cash, contingent value rights and/or publicly-traded equity securities that the board of directors of BroadSoft has concluded in its good faith judgment (following consultation with its outside legal counsel and a financial advisor of national standing), taking into account, among other things, all legal, financial, regulatory, timing and other aspects of the offer, including conditions to consummation and the person making the offer, in each case deemed relevant by the board of directors of BroadSoft (i) would be, if consummated, more favorable, from a financial point of view, to BroadSoft’s stockholders (in their capacities as stockholders) than the terms of the merger agreement and (ii) is reasonably likely to be consummated on the terms proposed.

In addition to the rights described above, BroadSoft may terminate the merger agreement, pay a termination fee and enter into a definitive agreement with respect to a superior proposal under certain circumstances. See “The Merger Agreement — Ability to Change Board Recommendation/Termination in Connection with a Superior Proposal.”

Ability to Change Board Recommendation/Termination in Connection with a Superior Proposal

On October 20, 2017, prior to the execution of the merger agreement, BroadSoft’s board of directors unanimously (a) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable, (b) determined that the merger agreement and the transactions contemplated thereby, including the merger, taken together, are at a price and on terms that are fair to, and in the best interest of BroadSoft and its stockholders, (c) approved the execution, delivery and performance by BroadSoft of the merger agreement and the consummation of the transactions contemplated thereby, including the merger and (d) resolved to recommend that the stockholders of BroadSoft approve the adoption of the merger agreement and thereby approve the merger. The merger agreement provides that BroadSoft’s board of directors, or any committee thereof, will not withhold, withdraw, qualify, amend or modify, or publicly propose or resolve to withhold, withdraw, qualify, amend or modify in a manner adverse to Cisco or Merger Sub, the board’s recommendation with respect to the merger agreement. The merger agreement also provides that BroadSoft may not fail to include the board’s recommendation with respect to the merger agreement in this proxy statement.

However, nothing in the merger agreement will prevent BroadSoft’s board of directors from withholding, withdrawing, qualifying, amending (in a manner adverse to Cisco) or modifying (in a manner adverse to Cisco) its recommendation with respect to the merger agreement in this proxy statement (a “change of recommendation”) in connection with a superior proposal or BroadSoft from terminating the merger agreement to enter into a definitive agreement to accept a superior proposal if:

 

    the approval of BroadSoft’s stockholders of the adoption of the merger agreement has not yet been obtained;

 

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    BroadSoft has complied in all material respects with its obligations with respect to calling the Special Meeting and has not breached the non-solicitation and related provisions of the merger agreement;

 

    a superior proposal has been submitted to BroadSoft, has not been withdrawn and continues to be a superior proposal;

 

    BroadSoft has given Cisco at least four business days’ prior written notice of its intention to take such action along with certain information relating to such superior proposal;

 

    if requested by Cisco, BroadSoft negotiates in good faith with Cisco during such notice period to make changes to the transaction terms so that such superior proposal would no longer be a superior proposal in comparison to the revised terms of the transaction;

 

    within such four business day period, Cisco has not made a written, binding and irrevocable offer that the board of directors of BroadSoft has concluded in good faith (following consultation with its outside legal counsel and a financial advisor of national standing) to be at least as favorable as such superior proposal; and

 

    the board of directors of BroadSoft has concluded in good faith (following consultation with its outside legal counsel) that, in light of the superior proposal and any modifications proposed by Cisco, the failure to make a change of recommendation and terminate the merger agreement would be inconsistent with its fiduciary obligations to BroadSoft’s stockholders under applicable law.

In addition, nothing in the merger agreement will prevent BroadSoft’s board of directors from making a change of recommendation for a reason unrelated to an acquisition proposal if:

 

    the approval of BroadSoft’s stockholders of the adoption of the merger agreement has not yet been obtained;

 

    BroadSoft has complied with its obligations with respect to calling the Special Meeting and has not breached the non-solicitation and related provisions of the merger agreement;

 

    BroadSoft’s board of directors has concluded in good faith (after consultation with its outside legal counsel) that, in light of material facts, events and/or circumstances that as of the date of the merger agreement were unknown by BroadSoft and which were not reasonably foreseeable as of the date of the merger agreement (an “intervening event”) and the failure to make a change of recommendation would be inconsistent with its fiduciary obligations to BroadSoft’s stockholders under applicable law (provided that in no event will any of the following, in and of itself, constitute or be deemed an intervening event: (a) any determination by BroadSoft’s board of directors that the amount payable by Cisco in the merger is not sufficient, (b) BroadSoft exceeding any earnings projections or predictions made by BroadSoft (whether or not publicly announced) or securities or financial analysts and any resulting analyst upgrades of BroadSoft’s securities or any change in the trading price of its common stock, (c) any facts, events or circumstances resulting from any breach of the merger agreement by BroadSoft or (d) the receipt, existence or terms of any acquisition proposal or any matter relating thereto or the consequences thereof);

 

    BroadSoft has given Cisco at least four business days’ prior written notice of its intention to take such action along with certain information relating to such intervening event;

 

    if requested by Cisco, BroadSoft negotiates in good faith with Cisco during the notice period to make changes to the transaction terms so that such changes to the terms obviate the need for the board of directors of BroadSoft to make a change of recommendation for an intervening event; and

 

   

if within such four business day period, Cisco has not made a written, binding and irrevocable offer that BroadSoft’s board of directors concludes in good faith (after consultation with its outside legal counsel and a financial advisor of national standing) would obviate the need for BroadSoft’s board of directors to make such change of recommendation (with the merger agreement providing that

 

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(a) BroadSoft’s board of directors must convene a meeting to consider any such offer by Cisco promptly following the receipt thereof, (b) BroadSoft’s board of directors will not make a change of recommendation for four business days after receipt by Cisco of the notice of an intervening event and (c) any material change in the facts, events or circumstances related to the intervening event shall require a new notice of an intervening event to Cisco and a new two-business day period and discussion process).

In addition, if BroadSoft’s board of directors decides to terminate the merger agreement with Cisco following receipt of a superior proposal upon the terms summarized above or Cisco terminates the merger agreement following a change of recommendation under certain scenarios, BroadSoft must pay the applicable termination fee as described in further detail under “The Merger Agreement — Termination Fees.”

Agreements to Use Reasonable Best Efforts

Subject to the terms and conditions of the merger agreement, including with respect to antitrust laws, which are discussed further below, BroadSoft and Cisco have agreed to apply for or otherwise seek, and use their respective reasonable best efforts to obtain, all consents and approvals required to be obtained by them for the consummation of the merger and the other transactions contemplated by the merger agreement.

With regard to antitrust laws, subject to the terms and conditions set forth in the merger agreement, BroadSoft and Cisco have agreed to make any initial filings required under the HSR Act and any other additional filings required by applicable antitrust laws, including all applicable foreign antitrust approvals set forth in the disclosure schedule that BroadSoft delivered to Cisco in connection with the execution of the merger agreement.

Notwithstanding these covenants, Cisco and its affiliates are not obligated to:

 

    litigate or contest any legal proceeding instituted or threatened to be instituted challenging the merger or the other transactions contemplated by the merger agreement as violative of any antitrust law; or

 

    make proposals, execute or carry out agreements or submit to government orders providing for (a) the sale, license or other disposition or holding separate (through the establishment of a trust or otherwise) of any assets or categories of assets of Cisco or BroadSoft or any of their respective affiliates, (b) the imposition of any limitation or restriction on the ability of Cisco or any of its affiliates to freely conduct their business or, following the closing, BroadSoft’s business or own such assets or (c) the holding separate of the shares of BroadSoft’s capital stock or any limitation or regulation on the ability of Cisco or any of its affiliates to exercise full rights of ownership of the shares of BroadSoft’s capital stock (an “Antitrust Restraint”).

Indemnification and Insurance

The merger agreement provides that, from and after the effective time of the merger until the sixth anniversary of the effective time of the merger, the surviving corporation and its subsidiaries will honor and fulfill all rights to indemnification by BroadSoft and its subsidiaries to their respective present and former directors and officers pursuant to any indemnification agreements with BroadSoft or such subsidiary made available to Cisco and any indemnification or advancement provisions under BroadSoft’s or such subsidiary’s certificate of incorporation or bylaws (or equivalent organizational documents) as in effect on the date of the merger agreement with respect to their acts and omissions as directors and officers of BroadSoft or such subsidiary occurring prior to the effective time, in each case, subject to applicable law.

From the effective time of the merger and ending on the sixth anniversary of the effective time of the merger, the surviving corporation will maintain in effect, and Cisco will cause the surviving corporation to maintain in effect, for the benefit of the present and former directors and officers of BroadSoft and its subsidiaries, with respect to their acts and omissions as directors and officers occurring prior to the effective time

 

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of the merger, the existing policy of directors’ and officers’ liability insurance maintained by BroadSoft or any subsidiary as of the date of the merger agreement in the form made available by BroadSoft to Cisco prior to the date of the merger agreement, to the extent that directors’ and officers’ liability insurance coverage is commercially available. However, (a) the surviving corporation may substitute for the existing policy a policy or policies of comparable coverage, including a “tail” or “runoff” insurance policy, (b) the surviving corporation will not be required to pay annual premiums for the existing policy (or for any substitute or “tail” policies) in excess of an amount equal to 300% of the most recently paid annual premium for the existing policy and (c) if requested by Cisco, BroadSoft will issue a broker of record letter acceptable to Cisco permitting its insurance broker to negotiate and place such “tail” or “runoff” insurance of comparable coverage, Cisco will have the right to negotiate such coverage and BroadSoft will reasonably cooperate therewith.

Notwithstanding the foregoing, by giving written notice to Cisco at least two business days prior to the effective time of the merger, in lieu of the foregoing insurance, BroadSoft may, at its sole discretion, purchase a comparable “tail” or “runoff” extension to the existing policy for a period of six years after the effective time of the merger for a premium not to exceed an amount equal to 300% of the most recently paid annual premium for the existing policy.

Employee Benefits

As soon as reasonably practicable after the effective time of the merger, Cisco will ensure that each employee of BroadSoft and any of its subsidiaries will receive retirement, health and welfare benefits that in the aggregate for each such employee are no less favorable than those provided to a similarly situated employee of Cisco or its affiliates taking into account the employee’s geographic location.

Cisco will, or will cause the surviving corporation to and instruct its affiliates to, as applicable, recognize the service of each employee of BroadSoft and any of its subsidiaries before the effective time of the merger (to the same extent recognized by BroadSoft or its affiliates immediately prior to the effective time of the merger) as if such service had been performed with Cisco or its affiliates for all purposes under the vacation, paid time off and severance plans maintained by Cisco or its affiliates after the effective time of the merger and for purposes of eligibility, vesting, level of benefit and benefit accrual (but not for purposes of benefit accrual under a defined benefit pension plan) under all other employee benefit plans or arrangements maintained by Cisco or its affiliates that such employees may be eligible to participate in after the effective time of the merger.

With respect to any welfare plan maintained by Cisco or its affiliates in which employees of BroadSoft and any of its subsidiaries are eligible to participate after the effective time of the merger, Cisco shall, and shall cause the surviving corporation and its other affiliates to, to the extent permitted by the relevant welfare plan and consistent with such plans’ application to similarly situated employees of Cisco or its affiliates, waive all limitations as to waiting periods, actively-at-work requirements, evidence or insurability requirements, preexisting condition limitations and other exclusions with respect to participation and coverage requirements applicable to such employees (and their spouses, domestic partners and dependents) to the extent such conditions and exclusions were satisfied or did not apply under the welfare plans maintained by BroadSoft or its affiliates prior to the effective time of the merger.

Other Covenants

The merger agreement contains additional agreements between BroadSoft and Cisco relating to, among other things:

 

    Cisco’s access to the properties, books, contracts and records of BroadSoft and each of its subsidiaries and all other information concerning its business, results of operations, product development efforts, properties (tangible and intangible, including intellectual property) and personnel of BroadSoft or any of its subsidiaries as Cisco may reasonably request between the date of the merger agreement and the earlier of the effective time of the merger and the termination of the merger agreement (subject to applicable legal obligations and restrictions);

 

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    stock exchange delisting by BroadSoft;

 

    control of securityholder litigation;

 

    confidentiality;

 

    press releases and other public announcements relating to the merger, the merger agreement, or any of the other transactions contemplated by the merger agreement;

 

    actions necessary if state takeover laws are or become applicable to the transactions contemplated by the merger agreement to ensure that the transactions contemplated by the merger agreement may be consummated as promptly as practicable;

 

    notice of certain matters;

 

    terminate benefit plans if requested by Cisco;

 

    certain tax certificates and documents;

 

    certain actions required to be taken by BroadSoft with respect to its convertible notes; and

 

    the actions necessary to cause the dispositions of certain common stock and equity-based securities by directors and officers of BroadSoft pursuant to the merger agreement to be exempt under Rule 16b-3 promulgated under the Exchange Act.

Further, BroadSoft has agreed to use its commercially reasonable efforts (not to require a concession or expenditure other than immaterial processing or consent fees) to obtain, prior to the closing, all consents, waivers and approvals of or under contracts of BroadSoft or one of its subsidiaries reasonably requested by Cisco. However, any failure to obtain such consents, waivers or approvals will not be considered a breach of covenant for all purposes of the merger agreement.

Conditions to the Merger

Conditions to Each Party’s Obligations. Each party’s obligation to effect the merger is subject to the satisfaction, at or prior to the closing of the merger, of each of the following conditions:

 

    the adoption of the merger agreement by our stockholders;

 

    no order issued by any governmental authority or other legal or regulatory restraint or prohibition preventing the consummation of the merger will be in effect, nor shall any action have been taken by any governmental authority, and no law will have been enacted, entered, enforced or deemed applicable to the merger that prohibits, makes illegal or enjoins the consummation of the merger;

 

    all applicable waiting periods (and any extensions thereof) applicable to the merger under the HSR Act will have expired or early termination of such waiting periods shall have been granted; and

 

    all applicable foreign antitrust approvals that have been set forth in the disclosure schedule that BroadSoft delivered to Cisco in connection with the execution of the merger agreement will have been obtained (the last three such conditions, the “Joint Antitrust Conditions”).

Conditions to Obligations of Cisco and Merger Sub. The obligations of Cisco and Merger Sub to consummate the transactions contemplated by the merger agreement are subject to the satisfaction at or prior to the closing of each of the following conditions, any of which may be waived, in writing, by Cisco (with the merger agreement providing that each such condition is solely for the benefit of Cisco and may be waived by Cisco in its sole discretion without notice, liability or obligation to any person):

 

   

the representations and warranties of BroadSoft regarding certain matters relating to BroadSoft’s capitalization must be accurate in all respects as of the date of the merger agreement and at and as of the closing as if made on and as of the closing (except for representations and warranties that address

 

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matters only as to a specified date, which representations and warranties must be true and correct with respect to such specified date), except where the failure to be so accurate in all respects is not in excess of 0.5% of the fully-diluted capitalization of BroadSoft;

 

    the representations and warranties of BroadSoft regarding certain matters relating to due organization and subsidiaries of BroadSoft, BroadSoft’s corporate authority to enter into the merger agreement, the due execution, delivery and enforceability of the merger agreement, the required stockholder vote and financial advisors must be accurate in all material respects as of date of the merger agreement and at and as of the closing as if made on and as of the closing (except for representations and warranties that address matters only as to a specified date, which representations and warranties must be true and correct with respect to such specified date);

 

    the representations and warranties of BroadSoft regarding certain matters relating to the absence of any Material Adverse Effect on BroadSoft since June 30, 2017, must be accurate in all respects as of the date of the merger agreement and at and as of the closing as if made on and as of the closing (except for representations and warranties that address matters only as to a specified date, which representations and warranties must be true and correct with respect to such specified date);

 

    the representations and warranties of BroadSoft set forth in the merger agreement other than those listed above, disregarding all qualifications and exceptions contained in the merger agreement relating to materiality or Material Adverse Effect or any similar standard or qualification, must be true and correct as of the date of the merger agreement and at and as of the closing as if made on and as of the closing (except for representations and warranties that address matters only as to a specified date, which representations and warranties must be true and correct with respect to such specified date), except where the circumstances causing the failure of such representations or warranties to be true and correct have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

 

    BroadSoft must have performed and complied in all material respects with all covenants and other agreements in the merger agreement required to be performed and complied with by it at or prior to the closing;

 

    since the date of the merger agreement, there must not have been any Material Adverse Effect that is then continuing;

 

    (a) no order shall have been issued by any court, and no other applicable law will have been enacted, entered, enforced or deemed applicable to the transactions contemplated by the merger agreement by a governmental authority that shall be in effect and that provides for an Antitrust Restraint and that would prevent or condition the consummation of the merger and (b) there shall not be pending any legal proceeding brought by any governmental authority seeking any of the foregoing (the “Cisco Antitrust Condition” and together with the Joint Antitrust Conditions, the “Antitrust Conditions”); and

 

    Cisco must have received a certificate signed on behalf of BroadSoft by its Chief Executive Officer and Chief Financial Officer, to the effect that certain of the closing conditions have been satisfied.

Conditions to Obligations of BroadSoft. The obligations of BroadSoft to consummate the merger and the other transactions contemplated by the merger agreement are subject to the satisfaction at or prior to the closing of each of the following conditions, any of which may be waived, in writing, by BroadSoft (it being understood that each such condition is solely for the benefit of BroadSoft and may be waived in writing by BroadSoft in its sole discretion without notice, liability or obligation to any person):

 

   

the representations and warranties of Cisco and Merger Sub regarding certain matters relating to due organization of Cisco and Merger Sub, Cisco’s and Merger Sub’s corporate authority to enter into the merger agreement, the due execution, delivery and enforceability of the merger agreement and the ownership of BroadSoft stock by Cisco and Merger Sub as of the date of the merger agreement must be accurate in all material respects as of date of the merger agreement and at and as of the closing as if

 

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made on and as of the closing (except for representations and warranties that address matters only as to a specified date, which representations and warranties must be true and correct with respect to such specified date);

 

    the representations and warranties of Cisco and Merger Sub set forth in the merger agreement other than those listed above, disregarding all qualifications and exceptions contained therein relating to materiality or “Parent Material Adverse Effect” or any similar standard or qualification, must be true and correct as of the date of the merger agreement and at and as of the closing as if made on and as of the closing (except for representations and warranties that address matters only as to a specified date, which representations and warranties must be true and correct with respect to such specified date), except where the circumstances causing the failure of such representations or warranties to be true and correct have not had and would not reasonably be expected to have, individually or in the aggregate, a “Parent Material Adverse Effect,” which means any effect that would, or would reasonably be expected to, prohibit or materially impede Cisco’s or Merger Sub’s ability to consummate the transactions in accordance with the merger agreement and applicable legal requirements;

 

    Cisco must have performed and complied in all material respects with all covenants and other agreements in the merger agreement required to be performed and complied with by it at or prior to the closing; and

 

    BroadSoft must have received a certificate signed on behalf of Cisco by a duly authorized officer, to the effect that certain of the closing conditions have been satisfied.

BroadSoft and Cisco can provide no assurance that all of the conditions precedent to the merger will be satisfied or waived by the party permitted to do so.

Termination of the Merger Agreement

The merger agreement may be terminated prior to the effective time of the merger by mutual written consent of Cisco and BroadSoft at any time. Also, either Cisco or BroadSoft may terminate the merger agreement prior to the effective time of the merger if:

 

    the closing has not occurred by July 20, 2018 (the “End Date”), which will be extended for an additional three month period and for another three month period, at BroadSoft’s election, if the only closing condition that has not been satisfied as of each relevant extension relates to antitrust approval (provided that this right to terminate the merger agreement will not be available to any party if the failure to consummate the merger by such dates, as the case may be, is principally caused by the material breach by such party of the merger agreement);

 

    a governmental entity will have issued a final and nonappealable order or taken any other final and nonappealable action, permanently restraining, enjoining or otherwise prohibiting the merger (provided that this right to terminate the merger agreement will not be available to any party that has materially breached its obligations under the merger agreement in any manner that principally caused the existence of such order or action in any material respect); or

 

    the holders of BroadSoft common stock fail to approve the adoption of the merger agreement at the Special Meeting or any adjournment or postponement thereof.

BroadSoft can terminate the merger agreement prior to the effective time of the merger if:

 

   

at any time prior to approval of the adoption of the merger agreement by holders of BroadSoft common stock, to accept a superior proposal and enter into a binding written definitive acquisition agreement providing for the consummation of a transaction constituting a superior proposal (provided that BroadSoft may terminate the merger agreement pursuant to this provision only if it has: (a) complied in all material respects with its obligations under the merger agreement with respect to the superior

 

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proposal, (b) concurrently entered into a definitive agreement pursuant to which such superior proposal is to be effected and (c) paid, or concurrently pays, to Cisco the termination fee (as described below)); or

 

    a breach of any representation or warranty contained in the merger agreement or failure to perform any covenant or obligation in the merger agreement on the part of Cisco or Merger Sub will have occurred, which breach or failure to perform or comply would give rise to the failure to satisfy certain conditions to completion of the merger, and such breach or failure cannot be cured by the End Date, or if capable of being cured, will not have been cured within 20 days of the date BroadSoft gives Cisco notice of such breach or failure to perform, or, if earlier, by the End Date.

Cisco can terminate the merger agreement prior to the effective time of the merger if:

 

    prior to obtaining the approval of the adoption of the merger agreement by holders of BroadSoft common stock, (a) BroadSoft’s board of directors fails to include its recommendation to BroadSoft’s stockholders to approve the merger agreement in this proxy statement when mailed, (b) the board of directors of BroadSoft effects a change of recommendation, (c) BroadSoft agrees to, accepts, approves, endorses or recommends (or publicly proposes or announces any intention to agree to, accept, approve, endorse or recommend) any acquisition proposal, (d) BroadSoft enters into any agreement in principle, letter of intent, term sheet or any other agreement, understanding or contract (whether binding or not) contemplating or otherwise relating to any acquisition proposal (other than an acceptable confidentiality agreement), (e) BroadSoft’s board of directors or BroadSoft submits any acquisition proposal to the vote of any securityholders of BroadSoft or any of its subsidiaries, (f) BroadSoft’s board of directors or any of its committees approves any transaction pursuant to which any third party, but for such approval, becomes an “interested stockholder” under Section 203 of the DGCL, (g) BroadSoft fails to convene or hold the Special Meeting, (h) BroadSoft’s board of directors fails to reaffirm its recommendation of the merger agreement within ten business days after Cisco requests in writing that such recommendation be reaffirmed in response to an acquisition proposal or material modification to an acquisition proposal that has been publicly announced (or if such request is delivered less than ten business days prior to the Special Meeting, no later than one business day prior to the Special Meeting; provided that if such acquisition proposal is subsequently modified within such period, then BroadSoft’s board of directors will be required to reaffirm such recommendation no later than one business day prior to the Special Meeting), (i) BroadSoft materially breaches any of the obligations with respect to calling the Special Meeting and non-solicitation and related provisions of the merger agreement or (j) a tender or exchange offer has been commenced and BroadSoft fails to send to its stockholders, within ten business days after such tender or exchange offer is first published, a statement that BroadSoft unconditionally recommends rejection of such tender or exchange offer (the “Rejection Recommendation”) and reaffirm its recommendation of the merger agreement or fails to reaffirm the Rejection Recommendation in any press release published by BroadSoft or in any Schedule 14D-9, at any time after the foregoing ten business day period (each of the foregoing, a “Triggering Event”); or

 

    a breach of any representation or warranty contained in the merger agreement or failure to perform any covenant or obligation in the merger agreement on the part of BroadSoft will have occurred, which breach or failure to perform or comply would give rise to the failure to satisfy certain conditions to completion of the merger, and such breach or failure cannot be cured by the End Date, or if capable of being cured, will not have been cured within 20 days of the date Cisco gives BroadSoft notice of such breach or failure to perform, or, if earlier, by the End Date.

Fees and Expenses

Except as described below under “The Merger Agreement — Termination Fees,” all fees and expenses incurred in connection with the merger agreement and the transactions contemplated by the merger agreement will be paid by the party incurring such expenses whether or not the merger is consummated.

 

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Termination Fees

Termination Fee. BroadSoft will be required to pay Cisco a termination fee equal to $56 million if the merger agreement is terminated:

 

    by Cisco because of the occurrence of a Triggering Event;

 

    by either Cisco or BroadSoft because (a) the holders of BroadSoft common stock failed to approve adoption of the merger agreement at the Special Meeting or any adjournment or postponement thereof, or (b) before obtaining the stockholder approval at the Stockholder Meeting, the closing did not occur on or prior to the End Date, in each case at a time that Cisco would have been entitled to terminate the merger agreement because of the occurrence of a Triggering Event;

 

    by BroadSoft in order to accept a superior proposal; or

 

    by either Cisco or BroadSoft because (a) the holders of BroadSoft common stock failed to approve adoption of the merger agreement at the Special Meeting or any adjournment or postponement thereof, (b) before obtaining the stockholder approval, the closing did not occur on or prior to the End Date or (c) before obtaining the stockholder approval, BroadSoft breached a representation or warranty contained in the merger agreement or failed to perform any of its covenants or agreements contained in the merger agreement, which breach or failure to perform or comply would give rise to the failure to satisfy certain conditions to completion of the merger, and in each such case, (i) any person will have publicly announced an acquisition proposal (or an acquisition proposal will have become publicly known) prior to such termination (unless publicly withdrawn prior to such termination) and (ii) within 12 months of such termination BroadSoft entered into a definitive agreement with respect to an acquisition that is ultimately consummated (even if after such 12-month period) or consummated an acquisition (with “acquisition” meaning (i) a merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction or series of transactions involving BroadSoft pursuant to which the stockholders of BroadSoft immediately preceding such transaction or series of transactions hold less than 50% of the aggregate equity interests in the surviving or resulting entity of such transaction or series of transactions or any direct or indirect parent thereto, (ii) a sale or other disposition in a transaction or series of transactions by BroadSoft or its subsidiaries of assets representing in excess of 50% of the aggregate fair market value of the assets of BroadSoft and its subsidiaries immediately prior to such transaction or series of transactions or (iii) the acquisition by any person or group (including by way of a tender offer or an exchange offer or issuance by BroadSoft), directly or indirectly, in a transaction or series of transactions, of beneficial ownership or a right to acquire beneficial ownership of shares representing in excess of 50% of the voting power of the shares of BroadSoft common stock outstanding immediately prior to such transaction or series of transactions).

The parties have agreed that in no event will BroadSoft be required to pay the termination fee on more than one occasion. The termination fee, if paid, will be the sole and exclusive remedy of Cisco, Merger Sub and their respective affiliates against BroadSoft and any of its affiliates for any loss suffered as a result of the failure of merger to be consummated or for a breach or failure to perform under the merger agreement or otherwise in the circumstances in which the termination fee is payable.

Parent Expense Reimbursement. Cisco will be required to reimburse BroadSoft’s reasonable fees and expenses not in excess of $10 million in connection with any filings and review of the transactions contemplated by the merger agreement under antitrust laws if the merger agreement is terminated by either Cisco or BroadSoft because (a) the closing will not have occurred on or prior to the close of business on the End Date or (b) a court of competent jurisdiction or other governmental body issued a final and nonappealable decree or ruling, or took any other action, having the effect of permanently restraining, enjoining or otherwise prohibiting the merger or making consummation of the merger illegal, and in each case, at the time of termination all of the closing conditions to the merger have been satisfied or waived other than (i) any of the Antitrust Conditions and (ii) any such conditions that by their nature cannot be satisfied until the closing date so long as such conditions would be satisfied if the closing date were the date of termination of the merger agreement.

 

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Effect of Termination

If the merger agreement is terminated by BroadSoft or Cisco in accordance with its terms, the merger agreement will become void and there will be no liability on the part of Cisco or BroadSoft or their respective stockholders or representatives following any such termination except with regard to liability as a result of fraud or willful and material breach by such party of its representations, warranties, covenants or the agreements under the merger agreement. However, the provisions of the merger agreement regarding confidentiality, payment of the termination fee and expense reimbursement and the general provisions in Article VIII of the merger agreement shall survive any termination.

The parties are entitled to an injunction or injunctions to prevent breaches of the merger agreement and to enforce specifically the terms and provisions of the merger agreement, in addition to any other remedy to which they are entitled at law or in equity.

Amendment

Subject to applicable law, the parties may amend the merger agreement by executed written agreement, prior to obtaining the approval of the adoption of the merger agreement by holders of BroadSoft common stock at the Special Meeting, with the approval of the respective boards of directors of BroadSoft and Cisco.

 

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PROPOSAL 2 — ADVISORY VOTE ON COMPENSATION

The Advisory Vote on Compensation

Section 14A of the Exchange Act requires that BroadSoft provide its stockholders with the opportunity to vote to approve, on an advisory (non-binding) basis, the compensation arrangements that BroadSoft’s named executive officers may receive in connection with the merger, as disclosed in the section entitled “The Merger — Interests of Our Directors and Executive Officers in the Merger,” beginning on page 48.

Our board of directors encourages you to review carefully the named executive officer merger-related compensation information disclosed in this proxy statement, and to cast a vote either to approve or disapprove, on an advisory basis, the compensation that may be paid or become payable to BroadSoft’s named executive officers in connection with the merger, through the following resolution:

RESOLVED, that the stockholders of BroadSoft approve, on an advisory (non-binding) basis, the compensation to be paid by BroadSoft to its named executive officers, that is based on, or otherwise relates to, its proposed acquisition by Cisco Systems, Inc., in the table set forth in the section of the proxy statement for the merger entitled “The Merger — Interests of Our Directors and Executive Officers in the Merger,” and in the related notes and narrative disclosure.”

The advisory vote on the compensation that BroadSoft’s named executive officers may receive in connection with the merger is a vote separate and apart from the vote to adopt the merger agreement. Accordingly, you may vote for adoption of the proposal to approve, on an advisory basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger and vote not to adopt the merger agreement or vice versa. Approval of this proposal is not a condition to completion of the merger, and the vote with respect to this proposal is advisory only. Because the vote is advisory only, it will not be binding on either BroadSoft or Cisco.

Vote Required and Recommendation of the Board of Directors

The affirmative vote of the holders of a majority of the shares present in person or by proxy at the Special Meeting and entitled to vote on the matter, provided there is a quorum, is required for approval of this proposal on an advisory (non-binding) basis.

Abstentions and broker non-votes, if any, will be counted as present for the purpose of determining the presence of a quorum and abstentions will have the same effect as a vote against the proposal. Broker non-votes will have no effect in determining whether or not the proposal is approved.

Our board of directors unanimously recommends that the BroadSoft stockholders vote “FOR” the adoption of the resolution to approve, on an advisory (non-binding) basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger.

 

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PROPOSAL 3 — AUTHORITY TO ADJOURN THE SPECIAL MEETING

The Adjournment Proposal

If at the Special Meeting of stockholders, the number of shares of BroadSoft common stock represented and voting in favor of approval of the merger agreement is insufficient to adopt that proposal under the Delaware General Corporation Law, we may move to adjourn the Special Meeting to enable our board of directors to solicit additional proxies in respect of such proposal. In that event, we will ask our stockholders to vote only upon the adjournment proposal, and not the proposal regarding the adoption of the merger agreement or the proposal to approve, on an advisory basis, the compensation that BroadSoft’s named executive officers may receive in connection with the merger.

In this proposal, we are asking you to authorize the holder of any proxy solicited by our board of directors to vote in favor of granting discretionary authority to the proxy or attorney-in-fact to adjourn the Special Meeting to another time and place for the purpose of soliciting additional proxies. If the stockholders approve the adjournment proposal, we could adjourn the Special Meeting and any adjourned session of the Special Meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from stockholders that have previously voted. Among other things, approval of the adjournment proposal could mean that, even if we had received proxies representing a sufficient number of votes against the approval of the merger agreement to defeat that proposal, we could adjourn the Special Meeting without a vote on the merger agreement and seek to convince the holders of those shares to change their votes to votes in favor of adoption of the merger agreement.

Failure for this proposal to pass will not affect the ability of the holder of any proxy solicited by us to adjourn the Special Meeting in the event insufficient shares of BroadSoft common stock are represented to establish a quorum, or for any other lawful purpose.

Vote Required and Recommendation of the Board of Directors

Approval of the proposal to adjourn the Special Meeting if necessary for the purpose of soliciting proxies requires the affirmative vote of the holders of a majority of the shares present in person or by proxy at the Special Meeting and entitled to vote on the matter.

Abstentions and broker non-votes, if any, will be counted as present for the purpose of determining the presence of a quorum and abstentions will have the same effect as a vote against the proposal. Broker non-votes will have no effect in determining whether or not the proposal is approved.

Our board of directors unanimously recommends that the BroadSoft stockholders vote “FOR” the proposal to adjourn the Special Meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to adopt the merger agreement.

 

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SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the ownership of BroadSoft common stock as of October 31, 2017, at which time there were 31,647,785 shares of BroadSoft common stock outstanding, by: (a) each BroadSoft director; (b) each of BroadSoft’s named executive officers; (c) all BroadSoft executive officers and directors as a group; and (d) all those known by BroadSoft to be beneficial owners of more than five percent of BroadSoft common stock. BroadSoft does not have any class of equity securities outstanding other than its common stock.

The information in the table below regarding the beneficial owners of 5% or more of BroadSoft common stock is based on our review of Schedule 13D and Schedule 13G filings with the Securities and Exchange Commission. Each person listed below has sole voting and investment power with respect to the shares beneficially owned, unless otherwise stated.

 

Name

   Number of Shares
Beneficially
Owned(1)
     Percentage  

Named Executive Officers and Directors:

     

Michael Tessler(2)

     257,652        *  

James A. Tholen(3)

     25,570        *  

Scott D. Hoffpauir(4)

     42,655        *  

Taher G. Behbehani(5)

     15,946        *  

Dennis D. Dourgarian(6)

     15,604        *  

David Bernardi

     8,301        *  

Jane A. Dietze

     4,903        *  

John J. Gavin, Jr.(7)

     41,584        *  

Andrew M. Geisse

     10,686        *  

Paul J. Magelli

     6,780        *  

Douglas L. Maine

     51,795        *  

John D. Markley, Jr.

     21,836        *  

Eva M. Sage-Gavin

     4,285        *  

All directors and executive officers as a group (14 persons)(8)

     507,597        1.6

5% Holders:

     

Wellington Management Group LLP(9)

     2,730,187        9.0

The Vanguard Group(10)

     2,290,404        7.5

BlackRock, Inc.(11)

     1,806,736        6.0

Brown Advisory Incorporated(12)

     1,511,978        5.0

 

* Less than 1% of the outstanding shares of common stock
(1) This table is based upon information supplied by officers, directors and principal stockholders. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, BroadSoft believes that each of the stockholders named in this table has sole voting and sole investment power with respect to the shares indicated as beneficially owned. Pursuant to the rules of the SEC, the number of shares of common stock deemed outstanding includes shares issuable upon the vesting of RSUs held by the respective person that will vest within 60 days of October 31, 2017 and pursuant to options held by the respective person or group that are currently exercisable or may be exercised within 60 days of October 31, 2017. Shares shown in the table above include shares held in the beneficial owner’s name or jointly with others, or in the name of a bank, nominee or trustee for the beneficial owner’s account. Applicable percentages are based on 31,647,785 shares outstanding on October 31, 2017.
(2) Includes 132,584 shares underlying currently exercisable options and 6,541 shares issuable upon the vesting of RSUs that will vest within 60 days of October 31, 2017.
(3) Includes 3,566 shares issuable upon the vesting of RSUs that will vest within 60 days of October 31, 2017.

 

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(4) Includes 3,566 shares issuable upon the vesting of RSUs that will vest within 60 days of October 31, 2017. Also includes 16,666 shares held by The Scott D. Hoffpauir 2000 Family Irrevocable Trust U/T/A dated 04/04/00 for the benefit of the children of Mr. Hoffpauir. Mr. Hoffpauir’s brother, Samuel Hoffpauir, is the trustee of The Scott D. Hoffpauir 2000 Family Irrevocable Trust U/T/A dated 04/04/00. Mr. Hoffpauir disclaims beneficial ownership of any shares held by The Scott D. Hoffpauir 2000 Family Irrevocable Trust U/T/A dated 04/04/00.
(5) Includes 2,346 shares issuable upon the vesting of RSUs that will vest within 60 days of October 31, 2017.
(6) Includes 1,975 shares issuable upon the vesting of RSUs that will vest within 60 days of October 31, 2017.
(7) Includes 25,000 shares issuable upon the exercise of an option originally granted to Mr. Gavin that Mr. Gavin gifted to his adult children in June 2010. Mr. Gavin disclaims beneficial ownership of all of the shares underlying the option awards gifted to his adult children.
(8) Includes 157,584 shares underlying options that are currently exercisable or may be exercised within 60 days of October 31, 2017, and 17,994 shares issuable upon the vesting of RSUs that will vest within 60 days of October 31, 2017. See footnotes 2 through 14.
(9) Based solely on a Schedule 13G filed by Wellington Management Group LLP (“Wellington”) on February 9, 2017. The address of Wellington is c/o Wellington Management Group LLP, 280 Congress Street, Boston, Massachusetts 02210. Wellington, Wellington Group Holdings LLP and Wellington Investment Advisors Holdings LLP all have shared voting power with respect to 1,614,098 shares and shared dispositive power with respect to 2,730,187 shares as of December 31, 2016. Wellington Management Company, LLP has sole voting power over no shares, shared voting power over 1,578,305 shares, sole dispositive power over no shares, and shared dispositive power over 2,636,155 shares. Various persons have the right to receive, or the power to direct, the receipt of dividends from, or the proceeds from the sale of, such shares of common stock. No one person’s interest in such shares of Common Stock is more than 5% of BroadSoft’s total common stock outstanding.
(10) Based solely on information contained in a Schedule 13G/A filed by The Vanguard Group (“Vanguard”) with the SEC on February 10, 2017. The address of Vanguard is 100 Vanguard Blvd., Malvern, PA 19355. Vanguard has sole voting power over 58,444 shares, shared voting power over 4,616 shares, sole dispositive power over 2,228,728 shares and shared dispositive power over 61,676 shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of Vanguard, is the beneficial owner of 57,060 shares as a result of its serving as investment manager of collective trust accounts for Vanguard. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of Vanguard, is the beneficial owner of 6,000 shares as a result of its serving as investment manager of Australian investment offerings.
(11) Based solely on information contained in a Schedule 13G/A filed by BlackRock, Inc. (“BlackRock”) with the SEC on January 19, 2017. The address of Blackrock is 55 East 52nd St, New York, New York 10055. Blackrock has sole voting power over 1,746,041 shares, shared voting power over no shares, sole dispositive power over 1,806,736 shares and shared dispositive power over no shares.
(12) Based solely on a Schedule 13G filed by Brown Advisory Incorporated (“Brown”) with the SEC on February 10, 2017. The address of Brown Advisory Incorporated is 901 South Bond Street, Ste. 400, Baltimore, Maryland 21231. Brown has sole voting power over 1,191,026 shares, shared voting power over no shares, sole dispositive power over no shares and shared dispositive power over 1,511,978 shares.

In addition to the amounts set forth in the foregoing table, based on the merger agreement, Cisco has the right to acquire all of the issued and outstanding shares of BroadSoft common stock in connection with the closing of the merger, subject to the terms of the merger agreement. Accordingly, depending upon the timing of the merger, Cisco may acquire such shares of BroadSoft common stock within 60 days of the date of the foregoing table. The address for Cisco is 170 West Tasman Drive, San Jose, California 95134-1706.

 

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MARKET FOR THE COMMON STOCK; DIVIDEND DATA

BroadSoft common stock is quoted on The NASDAQ Global Select Market under the ticker symbol “BSFT.” This table shows, for the periods indicated, the high and low sales price per share for BroadSoft common stock as reported by The NASDAQ Global Select Market.

 

     BroadSoft Common Stock  
     High      Low  

Year ending December 31, 2017

     

Fourth Quarter (through December 12, 2017)

   $ 55.05      $ 50.40  

Third Quarter

   $ 52.15      $ 41.50  

Second Quarter

   $ 44.70      $ 33.85  

First Quarter

   $ 46.65      $ 39.75  

Year ending December 31, 2016

     

Fourth Quarter

   $ 48.40      $ 37.75  

Third Quarter

   $ 48.01      $ 39.89  

Second Quarter

   $ 44.49      $ 35.01  

First Quarter

   $ 41.09      $ 26.99  

Year ending December 31, 2015

     

Fourth Quarter

   $ 40.90      $ 28.37  

Third Quarter

   $ 36.80      $ 27.84  

Second Quarter

   $ 38.83      $ 31.51  

First Quarter

   $ 35.76      $ 26.42  

The high and low sales price per share for BroadSoft common stock as reported by The NASDAQ Global Select Market on December 12, 2017, the latest practicable trading day before the filing of this proxy statement, were $54.70 and $54.60, respectively.

As of December 11, 2017, BroadSoft common stock was held of record by 17 stockholders.

We have never declared or paid dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support operations and to finance the growth and development of our business. We do not intend to declare or pay cash dividends on BroadSoft common stock in the foreseeable future. Any future determination to pay dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend upon, among other factors, our results of operations, financial condition, contractual restrictions and capital requirements. Following the merger, BroadSoft common stock will not be traded on any public market.

 

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OTHER MATTERS

As of the date of this proxy statement, our board of directors is not aware of any matter to be presented for action at the Special Meeting, other than the matters set forth in this proxy statement. Should any other matter requiring a vote of stockholders arise, the proxies in the enclosed form of proxy confer upon the person or persons entitled to vote the shares represented by such proxies discretionary authority to vote the same in accordance with their best judgment.

Adjournments

The Special Meeting may be adjourned without notice, other than by the announcement made at the Special Meeting, by approval of the holders of a majority of the shares of BroadSoft common stock present, in person or by proxy, and voting on whether to adjourn the Special Meeting. We are soliciting proxies to grant the authority to vote in favor of adjournment of the Special Meeting. In particular, authority is expected to be exercised if the purpose of the adjournment is to provide additional time to solicit votes in favor of adoption of the merger agreement. Our board of directors unanimously recommends that you vote in favor of the proposal to adjourn the meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting. In addition, if a quorum is not present at the Special Meeting, the Special Meeting may be adjourned by the chairman of the Special Meeting or by the vote of a majority of the shares represented at the Special Meeting, regardless of whether Proposal 3 is approved, but no other business will be transacted at the Special Meeting until a quorum is present.

Stockholder Proposals

If the merger is consummated, we will not have public stockholders and there will be no public participation in any future meeting of stockholders. However, if the merger is not completed, we expect to hold an annual meeting of stockholders in 2018 (the “2018 Annual Meeting”). Stockholders who want to make a proposal to be considered for inclusion in the 2018 Annual Meeting proxy materials, must have submitted their proposal in writing by November 17, 2017, to our Secretary at 9737 Washingtonian Boulevard, Suite 350, Gaithersburg, Maryland 20878. If you wish to submit a proposal that is not to be included in next year’s proxy materials or nominate a director, you must provide the written notice required by our Second Amended and Restated Bylaws (“Bylaws”), no earlier than December 28, 2017 and no later than the close of business on January 27, 2018 to our Secretary at 9737 Washingtonian Boulevard, Suite 350, Gaithersburg, Maryland 20878. You are also advised to review our Bylaws, filed on November 20, 2013 with the SEC as an exhibit to our Current Report on Form 8-K, which contain additional requirements about advance notice of stockholder proposals and director nominations.

Where You Can Find More Information

BroadSoft files annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information that we file with the SEC at the SEC public reference room at the following location: Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. These SEC filings are also available to the public from commercial document retrieval services and at the website maintained by the SEC at www.sec.gov.

Cisco has supplied all information contained in this proxy statement relating to Cisco and Merger Sub and BroadSoft has supplied all information relating to BroadSoft.

If you have any questions about this proxy statement, the Special Meeting or the acquisition by Cisco after reading this proxy statement, or if you would like additional copies of this proxy statement, please contact us at:

BroadSoft, Inc.

9737 Washingtonian Boulevard, Suite 350

Gaithersburg, Maryland 20878

Telephone: (561) 404-2130

Attn: Investor Relations

 

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This proxy statement contains references to the availability of certain information from our website, www.BroadSoft.com. By making such references, we do not incorporate into this document the information included on our website.

You should rely only on the information contained in this proxy statement, including the annexes attached hereto, or information incorporated by reference herein. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated December 13, 2017. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date. Neither the mailing of this proxy statement to stockholders nor the issuance of cash in the merger creates any implication to the contrary.

Directions to the Special Meeting Location

The Special Meeting will be held at the BroadSoft’s headquarters at 9737 Washingtonian Boulevard, Suite 350, Gaithersburg, Maryland 20878 at 9:00 a.m. Eastern Time on January 25, 2018. Directions to the Special Meeting may be found at www.broadsoft.com.

 

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Annex A

Execution Version

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

CISCO SYSTEMS, INC.,

BROOKLYN ACQUISITION CORP.

AND

BROADSOFT, INC.

OCTOBER 20, 2017

 

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TABLE OF CONTENTS

 

         Page  
ARTICLE I THE MERGER      A-6  

1.1.

 

Certain Definitions

     A-6  

1.2.

 

The Merger

     A-13  

1.3.

 

Closing

     A-14  

1.4.

 

Effective Time

     A-14  

1.5.

 

Effect of the Merger

     A-14  

1.6.

 

Certificate of Incorporation; Bylaws

     A-14  

1.7.

 

Directors and Officers of the Surviving Corporation

     A-14  

1.8.

 

Effect on Company Capital Stock, Company Options, Company RSUs and Company PSUs

     A-15  

1.9.

 

Surrender of Certificates

     A-17  

1.10.

 

No Further Ownership Rights in Company Capital Stock

     A-18  

1.11.

 

Lost, Stolen or Destroyed Certificates

     A-18  

1.12.

 

Withholding Rights

     A-19  

1.13.

 

Tax Consequences

     A-19  
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY      A-19  

2.1.

 

Organization, Standing and Power; Subsidiaries

     A-19  

2.2.

 

Capital Structure

     A-20  

2.3.

 

Authority; Non-contravention

     A-21  

2.4.

 

SEC Filings; Financial Statements; Internal Controls

     A-22  

2.5.

 

Absence of Certain Changes

     A-24  

2.6.

 

Litigation

     A-24  

2.7.

 

Restrictions on Business Activities

     A-25  

2.8.

 

Compliance with Laws; Governmental Permits

     A-25  

2.9.

 

Title to Property and Assets

     A-26  

2.10.

 

Intellectual Property

     A-26  

2.11.

 

Environmental Matters

     A-31  

2.12.

 

Taxes

     A-32  

2.13.

 

Employee Benefit Plans and Employee Matters

     A-34  

2.14.

 

Interested Party Transactions

     A-37  

2.15.

 

Insurance

     A-37  

2.16.

 

Brokers’ and Advisors’ Fees

     A-37  

2.17.

 

Customers and Suppliers

     A-38  

 

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         Page  

2.18.

 

Material Contracts

     A-38  

2.19.

 

Export Control Laws

     A-41  

2.20.

 

Fairness Opinion

     A-42  

2.21.

 

Information Supplied

     A-42  

2.22.

 

No Additional Representations

     A-43  
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB      A-43  

3.1.

 

Organization, Standing and Power

     A-43  

3.2.

 

Authority; Non-contravention

     A-43  

3.3.

 

No Prior Sub Operations

     A-44  

3.4.

 

Stock Ownership

     A-44  

3.5.

 

Information Supplied

     A-44  

3.6.

 

Availability of Funds

     A-44  

3.7.

 

Absence of Litigation

     A-44  

3.8.

 

No Additional Representations

     A-44  
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME      A-45  

4.1.

 

Conduct of Business of the Company and the Subsidiaries

     A-45  

4.2.

 

Restrictions on Conduct of Business of the Company and Subsidiaries

     A-45  
ARTICLE V ADDITIONAL AGREEMENTS      A-50  

5.1.

 

Proxy Statement

     A-50  

5.2.

 

Company Stockholder Meeting; Board Recommendation

     A-51  

5.3.

 

No Solicitation; Acquisition Proposals

     A-52  

5.4.

 

Access to Information

     A-56  

5.5.

 

Confidentiality; Public Disclosure

     A-56  

5.6.

 

Regulatory Approvals

     A-57  

5.7.

 

Reasonable Best Efforts

     A-58  

5.8.

 

Third-Party Consents; Consultations.

     A-58  

5.9.

 

Notice of Certain Matters

     A-58  

5.10.

 

Employees and Contractors

     A-59  

5.11.

 

Benefit Plans

     A-60  

5.12.

 

D&O Indemnification

     A-60  

5.13.

 

Section 16 Matters

     A-61  

5.14.

 

Convertible Notes

     A-61  

5.15.

 

Takeover Statutes

     A-61  

 

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         Page  

5.16.

 

Certain Tax Certificates and Documents

     A-62  

5.17.

 

Stock Exchange Delisting; Deregistration

     A-62  

5.18.

 

Stockholder Litigation

     A-62  
ARTICLE VI CONDITIONS TO THE MERGER      A-62  

6.1.

 

Conditions to Obligations of Each Party to Effect the Merger

     A-62  

6.2.

 

Additional Conditions to Obligations of the Company

     A-63  

6.3.

 

Additional Conditions to the Obligations of Parent and Sub

     A-63  
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER      A-64  

7.1.

 

Termination

     A-64  

7.2.

 

Effect of Termination

     A-66  

7.3.

 

Expenses and Termination Fees

     A-66  

7.4.

 

Amendment

     A-67  

7.5.

 

Extension; Waiver

     A-68  
ARTICLE VIII GENERAL PROVISIONS      A-68  

8.1.

 

Non-Survival of Representations and Warranties

     A-68  

8.2.

 

Notices

     A-68  

8.3.

 

Interpretation

     A-69  

8.4.

 

Counterparts

     A-70  

8.5.

 

Entire Agreement; Parties in Interest

     A-70  

8.6.

 

Assignment

     A-70  

8.7.

 

Severability

     A-70  

8.8.

 

Remedies Cumulative; Specific Performance

     A-70  

8.9.

 

Governing Law

     A-71  

8.10.

 

Rules of Construction

     A-71  

8.11.

 

WAIVER OF JURY TRIAL

     A-71  

 

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EXHIBITS

 

Exhibit A    -    Form of Certificate of Merger
Exhibit B    -    Form of Bylaws

 

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AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of October 20, 2017 (the “Agreement Date”), by and among Cisco Systems, Inc., a California corporation (“Parent”), Brooklyn Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Parent (“Sub”), and BroadSoft, Inc., a Delaware corporation (the “Company”).

RECITALS

A. The board of directors of the Company (the “Company Board”) and the boards of directors of Parent and Sub (or duly authorized committees thereof) have determined that it would be advisable to, and in the best interests of, their respective companies and 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 this Agreement and the Merger and the other transactions contemplated by this Agreement (collectively, the “Transactions”).

B. Parent, Sub and the Company desire to set forth 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 employees of the Company (the “Key Employees”) are entering into employment agreements and agreements ancillary thereto (collectively, the “Employment Offer Documents”), 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.

(a) As used in this Agreement, the following terms shall have the meanings indicated below.

Acceptable Confidentiality Agreement” means a customary confidentiality agreement (i) that contains provisions that are no less favorable in the aggregate to the Company than those contained in the Confidentiality Agreement, including with respect to the treatment of confidential information and the non-solicitation of the Company’s employees; provided that an Acceptable Confidentiality Agreement need not contain any “standstill” or similar covenant, and (ii) that does not include any provision for any exclusive right to negotiate with such Person or having the actual or purported effect of restricting the Company from fulfilling its obligations under this Agreement, including under Section 5.3.

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

Applicable Foreign Antitrust Approvals” means, as applicable in the jurisdiction in question, the pre-merger filings, notifications, approvals, authorizations, consents, waivers, “no-action-letters” and/or, expiration or early termination of waiting periods (or extensions thereof), under the Antitrust Laws of the jurisdictions listed on either Schedule 5.6(a) or Schedule 6.1(d) of the Company Disclosure Letter.

 

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Applicable Legal Requirements” means with respect to any Person, any federal, state, foreign, local, municipal or other law, statute, constitution, 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 applicable to such Person or its subsidiaries, their business or any of their respective assets or properties.

Business” means the business of the Company and the Subsidiaries as currently conducted, 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.

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

Cash-Out Amount” means: (i) with respect to (A) a Vested Company Option or (B) an Unvested Company Option, an amount of cash, without interest, equal to (I) the number of shares of Company Common Stock subject to such Vested Company Option or Unvested Company Option, as applicable, multiplied by (II) the Per Share Cash Amount less the exercise price per share of such Vested Company Option or Unvested Company Option, as applicable, in effect immediately prior to the Effective Time; provided that if the exercise price per share of such Company Option is equal to or greater than the Per Share Cash Amount, the Cash-Out Amount for such Company Option shall be zero, and (ii) with respect to (A) (I) a Vested Company RSU or (II) an Unvested Company RSU or (B) (I) a Vested Company PSU, or (II) an Unvested Company PSU, an amount of cash, without interest, equal to (x) the number of shares of Company Common Stock issuable upon settlement of such Vested Company RSU, Unvested Company RSU, Vested Company PSU or Unvested Company PSU, as applicable, multiplied by (y) the Per Share Cash Amount.

Code” means the Internal Revenue Code of 1986, as amended.

Company Capital Stock” means the Company Common Stock and the Company Preferred Stock.

Company Common Stock” means the common stock, par value $0.01 per share, of the Company.

Company Debt” means all indebtedness of the Company and the Subsidiaries for borrowed money, whether current or funded, short- or long-term, secured or unsecured, direct or indirect, including any accrued and unpaid interest, fees, premiums and prepayment or termination penalties (including any penalties payable by the Company or the Subsidiaries in connection with the termination or prepayment in full of any Company Debt at or prior to the Closing), if any, measured as of the Closing, and including, without duplication, (i) any indebtedness evidenced by any bond, debenture, note, mortgage, indenture (including the 2011 Indenture and the 2015 Indenture), letter of credit or other debt instrument or debt security, (ii) any indebtedness to any lender or creditor under credit facilities of the Company, (iii) any indebtedness for the deferred purchase price of property with respect to which the Company is liable contingently or otherwise, as obligor or otherwise, (iv) any amounts owing under any capitalized or synthetic leases, (v) any drawn amounts under letter of credit arrangements and (vi) any liability of other Persons of the type described in clauses (i) through (v) that the Company or any Subsidiary has guaranteed, that is recourse to the Company or any Subsidiary or any of their assets or that is otherwise the legal liability of the Company or any Subsidiary (other than, in any case, accounts payable to trade creditors and accrued expenses, in each case arising in the ordinary course of business).

Company Option Plans” means the stock option plans, programs, agreements or arrangements of the Company, collectively and as amended, including the Company’s 1999 Stock Incentive Plan and the Company’s Amended and Restated 2009 Equity Incentive Plan.

Company Options” means options to purchase shares of Company Common Stock.

Company Preferred Stock” means the preferred stock, par value $0.01 per share, of the Company.

 

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Company PSUs” means performance stock units granted under the Company Option Plans.

Company RSUs” means restricted stock units granted under the Company Option Plans.

Continuing Consultants” means the consultants of the Company or the Subsidiaries as of the Effective Time.

Continuing Employees” means the employees of the Company or the Subsidiaries as of the Effective Time.

Contract” means any legally binding written, oral or other agreement, contract, subcontract, lease, binding understanding, obligation, promise, instrument, indenture, mortgage, note, option, guarantee, warranty, license, sublicense, insurance policy, benefit plan, commitment or undertaking of any nature (other than purchase orders for services or products under any Standard Outbound IP Agreements to the extent such purchase orders do not contain binding obligations (excluding pricing, delivery and quantity terms) beyond the obligations provided under the Contract under which the applicable purchase order is issued).

Delaware Law” means the General Corporation Law of the State of Delaware, as amended.

Dissenting Shares” means 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 properly demanded (and not withdrawn or lost) in accordance with Delaware Law in connection with the Merger.

Dissenting Stockholder” means any stockholder of the Company holding Dissenting Shares as of the Effective Time.

Encumbrance” means, 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” means the Securities Exchange Act of 1934, as amended, including the rules and regulations promulgated thereunder.

GAAP” means United States generally accepted accounting principles applied on a consistent basis throughout the relevant periods.

Governmental Entity” means any supranational, national, state, municipal, local or foreign government, any court, tribunal, arbitrator, quasi-judicial or administrative agency, commission or other governmental official, authority or instrumentality, in each case whether domestic or foreign, any stock exchange or similar self-regulatory organization or any quasi-governmental or private body exercising any regulatory, Taxing or other governmental or quasi-governmental authority.

Group” has the meaning ascribed to such term under Section 13(d) of the Exchange Act.

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

knowledge” means, 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 under the circumstances.

 

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Legal Proceeding” means any private or governmental action, inquiry, claim, charge, complaint, demand, proceeding, suit, hearing, litigation, arbitration, mediation, audit or investigation, in each case whether civil, criminal, administrative, judicial or investigative, or any appeal therefrom.

Liabilities” means all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, determined or determinable, asserted or unasserted, known or unknown, including those arising under any Applicable Legal Requirement, Order or Contract, regardless of whether the same would be required to be reflected on a balance sheet prepared in accordance with GAAP or disclosed in the notes thereto.

made available” means, 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, that such information, document or material was: (i) made available for review by Parent and its Representatives in the virtual data room made available in connection with the Transactions at least 24 hours prior to the execution of this Agreement, (ii) actually delivered (whether by physical or electronic delivery) to Parent or its Representatives at least 24 hours prior to the execution of this Agreement or (iii) the relevant part of which is contained in unredacted form in the Company SEC Reports; provided that any information, document or material that has been made available or delivered to Parent or its Representatives pursuant to a request by Parent or its Representative that was made within a 24-hour period prior to the execution of this Agreement shall be deemed made available or delivered, as long as such information, document or material was made available or delivered prior to the execution of this Agreement.

Material Adverse Effect” means with respect to the Company and the Subsidiaries, taken as a whole, any change, event, occurrence, circumstance, condition or effect (each, an “Effect”) that, individually or taken together with all other Effects, and regardless of whether or not such Effect, considered together with all other Effects, would constitute a breach of the representations or warranties made by such Person in this Agreement (i) would, or would reasonably be expected to, be or become materially adverse to the financial condition, properties, assets (including intangible assets), business, operations or results of operations of the Company and the Subsidiaries, taken as a whole; provided that none of the following shall be deemed in and of themselves, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there is, or would reasonably likely to be, a Material Adverse Effect on the Company and the Subsidiaries, taken as a whole: (A) changes in general economic conditions or financial, credit, foreign exchange, securities or capital markets, including any disruption thereof, in the United States or elsewhere in the world, (B) changes generally affecting the industry in which the Company and the Subsidiaries operate, (C) changes in Applicable Legal Requirements, (D) changes in GAAP, or other accounting regulations or principles or interpretations thereof, that apply to the Company and the Subsidiaries, (E) national or international political conditions, any outbreak or escalation of hostilities, insurrection or war, or acts of terrorism, (F) epidemics, quarantine restrictions, wildfires, earthquakes, hurricanes, tornadoes, other natural disasters or similar calamity or crisis, (G) changes in the trading volume or trading prices of such entity’s capital stock in and of themselves (provided that such exception shall not apply to any underlying Effect that may have caused such change in the trading prices or volumes), (H) any failure, in and of itself, to meet market revenue or earnings expectations, including revenue or earnings projections or predictions made by the Company (whether or not publicly announced) or securities or financial analysts and any resulting analyst downgrades of the Company’s securities in and of themselves (provided that such exception shall not apply to any underlying Effect that may have caused such failure or such downgrades), (I) changes in the Company’s and the Subsidiaries’ relationships with employees, customers, distributors, suppliers, vendors, licensors or other business partners as a result of the announcement or pendency of this Agreement or the anticipated consummation of the Merger and the other Transactions (provided that the exceptions in this clause (I) will not apply with respect to the representations and warranties contained in Section 2.3(b) or to Section 6.3(a) and Section 7.1(f) to the extent related to such portions of such representations and warranties), (J) any actions taken or failure to take action, in each case, that Parent has expressly in writing approved, consented to or requested or (K) any Stockholder Litigation or threatened Stockholder Litigation; provided that the exceptions in clauses (A) through (F) shall not apply to the extent that

 

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such changes disproportionately and adversely affect the Company and the Subsidiaries, taken as a whole, as compared to other participants in the industry in which the Company and the Subsidiaries operate, or (ii) would, or would reasonably be expected to, prohibit or materially impede the Company’s ability to consummate the Transactions in accordance with this Agreement and Applicable Legal Requirements.

Order” means any judgment, writ, decree, stipulation, determination, decision, legal or arbitration award, settlement or consent agreement, charge, ruling, injunction, restraining order or other order issued, promulgated or entered into by or with (or in the case of a settlement or consent agreement, subject to) any Governmental Entity, whether temporarily, preliminarily or permanently in effect.

Parent Material Adverse Effect” means any Effect that would, or would reasonably be expected to, prohibit or materially impede Parent’s or Sub’s ability to consummate the Transactions in accordance with this Agreement and Applicable Legal Requirements.

Per Share Cash Amount” means $55.00 in cash per share of Company Common Stock.

Permitted Encumbrance” means (i) liens for current Taxes not yet due and payable or that are being contested in good faith by appropriate proceedings (provided that reserves, established in accordance with GAAP, have been recorded on the Company Balance Sheet for any such contest that is material), (ii) statutory liens that are incurred in the ordinary course of business and that are not yet due and payable or that are being contested in good faith (provided that reserves established in accordance with GAAP have been recorded on the Company Balance Sheet for any such contest that is material), (iii) any Encumbrance representing the rights of suppliers and subcontractors in the ordinary course of business under the terms of any Contracts to which the relevant party is a party or under general principles of commercial or government contract law (including mechanics’, materialmen’s, carriers’, workmen’s, warehouseman’s, repairmen’s, landlords’ and similar liens granted or which arise in the ordinary course of business), (iv) such imperfections of title and non-monetary Encumbrances and other liens, in each case incurred in the ordinary course of business, that are not reasonably likely to materially detract from or interfere with the use of the properties subject thereto or affected thereby, or otherwise materially impair any business operations involving such properties, (v) liens incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return of money bonds and similar obligations, (vi) any Encumbrances for which appropriate reserves have been established in the consolidated financial statements of the Company and the Subsidiaries, or (vii) liens securing indebtedness for borrowed money or Company Debt, in each case, that is reflected on the Company Balance Sheet or Schedule 2.4(d) of the Company Disclosure Letter.

Person” means any natural person, company, corporation, limited liability company, general partnership, limited partnership, trust, proprietorship, unincorporated association, joint venture, business organization or Governmental Entity.

Representatives” means, collectively, with respect to any Person, such Person’s officers, directors, Affiliates, employees, agents or advisors, including any investment banker, broker, attorney, accountant, consultant or other authorized representative of such Person.

SEC” means the United States Securities and Exchange Commission.

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

Subsidiary” means 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

 

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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”) means 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), Code Section 59A or windfall profit tax, custom duty or other tax of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount (whether disputed or not) imposed by any Tax Authority.

Tax Authority” means any Governmental Entity responsible for the assessment, determination, collection or administration of any Tax (domestic or foreign).

Tax Return” means 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) filed or required to be filed with respect to Taxes.

Unvested Company Options” means any Company Options that are not Vested Company Options.

Unvested Company PSUs” means any Company PSUs that are not Vested Company PSUs.

Unvested Company RSUs” means any Company RSUs that are not Vested Company RSUs.

Vested Company Options” means any Company Options that are vested under the terms of any Contract with the Company as of immediately prior to the Effective Time (including any stock option agreement), including any Company Option the vesting of which accelerates in connection with the Merger, whether alone or in conjunction with any contemporaneous event. For purposes of clarification, for any outstanding awards of Company Options that are partially vested, only the vested portion of such grants shall be considered Vested Company Options, and the unvested portions of such awards shall be considered Unvested Company Options.

Vested Company PSUs” means any Company PSUs that are vested under the terms of any Contract with the Company as of immediately prior to the Effective Time (including any performance stock unit agreement), including any Company PSUs the vesting of which accelerates in connection with the Merger, whether alone or in conjunction with any contemporaneous event. For purposes of clarification, for any outstanding awards of Company PSUs that are partially vested, only the vested portion of such grants shall be considered Vested Company PSUs, and the unvested portions of such awards, assuming conversion of performance-based vesting to service-based vesting as provided in Schedule 1.8(a)(iv) of the Company Disclosure Letter shall be considered Unvested Company PSUs.

Vested Company RSUs” means any Company RSUs that are vested under the terms of any Contract with the Company as of immediately prior to the Effective Time (including any restricted stock unit agreement), including any Company RSUs the vesting of which accelerates in connection with the Merger, whether alone or in conjunction with any contemporaneous event. For purposes of clarification, for any outstanding awards of Company RSUs that are partially vested, only the vested portion of such grants shall be considered Vested Company RSUs, and the unvested portions of such awards shall be considered Unvested Company RSUs.

 

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(b) Other capitalized terms used herein and not defined in Section 1.1(a) have the meanings ascribed to such terms in the following Sections:

 

2011 Indenture

     5.14  

2015 Indenture

     5.14  

2018 Notes

     5.14  

2022 Notes

     5.14  

Acquisition

     7.3(f)  

Acquisition Proposal

     5.3(a)  

Agreement

     Preamble  

Agreement Date

     Preamble  

Antitrust Laws

     5.6(a)  

Antitrust Restraint

     5.6(d)  

Author

     2.10(k)  

Bonus Payment Date

     5.10(f)  

Certificate of Merger

     1.2  

Certificates

     1.9(c)  

Change of Recommendation

     5.3(d)  

Closing

     1.3  

Closing Date

     1.3  

COBRA

     2.13(c)  

Company

     Preamble  

Company Associate

     4.2(b)  

Company Authorizations

     2.8(b)  

Company Balance Sheet

     2.4(b)  

Company Balance Sheet Date

     2.4(b)  

Company Board

     Recitals  

Company Board Recommendation

     5.2(b)  

Company Customer End-Users

     2.10(w)  

Company Customers

     2.10(w)  

Company Disclosure Letter

     Article II  

Company Employee Plans

     2.13(a)  

Company Financial Advisors

     2.16  

Company Insiders

     5.15  

Company Intellectual Property

     2.10(a)(i)  

Company Intellectual Property Agreements

     2.10(a)(ii)  

Company-Owned Intellectual Property

     2.10(a)(iii)  

Company Products

     2.10(a)(iv)  

Company Registered Intellectual
Property Rights

     2.10(a)(v)  

Company Representatives

     5.3(a)  

Company SEC Reports

     2.4(a)  

Company Source Code

     2.10(a)(vi)  

Company Stockholder Approval

     2.3(a)  

Company Stockholder Meeting

     5.2(a)  

Company Voting Debt

     2.2(c)  

Company Websites

     2.10(w)  

Confidential Information

     2.10(o)  

Confidentiality Agreement

     5.5(a)  

Convertible Notes

     5.14  

EAR

     2.19(a)(i)  

Effect

    

Material Adverse

Effect


 

Effective Time

     1.4  

Employment Offer Documents

     Recitals  

Enforceability Limitations

     2.3(a)  

Environmental and Safety Laws

     2.11(a)(i)  

ERISA

     2.13(a)  

EU

     2.19(a)(ii)  

Exchange Agent

     1.9(a)  

Existing D&O Policy

     5.14(b)  

Extended End Date

     7.1(b)  

Facilities

     2.11(a)(ii)  

Financial Statements

     2.4(b)  

Foreign Plan

     2.13(f)  

GCA Software Agreements

     2.10(a)(x)  

Government Contract

     2.18(a)(xix)  
 

 

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Hazardous Materials

     2.11(a)(iii)  

Indemnified Parties

     5.14(a)  

Indentures

     5.14  

Initial End Date

     7.1(b)  

Intellectual Property

     2.10(a)(vii)  

Intellectual Property Rights

     2.10(a)(viii)  

Intervening Event

     5.3(e)  

ITAR

     2.19(a)(i)  

Jefferies

     2.16  

Key Employees

     Recitals  

Leased Real Property

     2.9(b)  

Material Contract

     2.18(a)  

Maximum Premium

     5.14(b)  

Measurement Date

     2.2(a)  

Merger

     Recitals  

Merger Notification Filings

     5.6(a)  

Notice of Intervening Event

     5.3(e)  

Notice of Superior Proposal

     5.3(d)(iv)  

Open Source Materials

     2.10(p)  

Ordinary Commercial Agreements

     2.12(d)  

Parent

     Preamble  

Parent Expense Reimbursements

     7.3(c)  

Pre-Closing Period

     4.1  

Property

     2.11(a)(iv)  

Proprietary Information and Technology”

     2.10(a)(ix)  

Proxy Statement

     2.21  

Qatalyst Partners

     2.16  

Regulation S-K

     2.4(b)  

Rejection Recommendation

     7.1(h)  

Release

     2.11(a)(v)  

Required Fiduciary Disclosure

     5.3(f)  

Reseller Agreement

     2.18(a)(iii)  

Satisfaction Date

     1.3  

Satisfaction Event

     1.3  

Section 16 Information

     5.15  

Significant Customer

     2.17(a)  

Significant Supplier

     2.17(b)  

SOXA

     2.4(e)  

Standard Inbound IP Agreements

     2.10(a)(x)  

Standard NDA

     2.10(a)(x)  

Standard Outbound IP Agreements

     2.10(a)(xi)  

Stockholder Litigation

     5.18  

Sub

     Preamble  

Superior Proposal

     5.3(c)  

Superior Proposal Materials

     5.3(d)(iv)  

Surviving Corporation

     1.2  

Termination Fee

     7.3(b)  

Third-Party Intellectual Property

     2.10(a)(xii)  

Transactions

     Recitals  

Triggering Event

     7.1(h)  

Uncertificated Shares

     1.9(c)  

Unvested Cash

     1.8(a)(iv)  

Unvested Cash (Options/RSUs)

     1.8(a)(iii)  

Unvested Cash (PSUs)

     1.8(a)(iv)  

WARN Act

     2.13(m)  
 

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

 

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1.3. Closing. Unless this Agreement is earlier and validly terminated in accordance with Section 7.1, the closing of the Transactions (the “Closing”) shall take place (i) at a time and date to be specified by the parties hereto that will be no later than the third Business Day after the satisfaction or waiver of each of the conditions set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions); provided that if such Business Day would otherwise occur on or between January 15, 2018 and January 26, 2018, then Parent may, in its discretion, delay the Closing until the first Business Day following the period in which the Closing was delayed, in which case the Closing shall be held on such first Business Day, so long as, as of the date the Closing would have otherwise occurred but for this proviso (a) each party has delivered to the other party the certificates required to be delivered by it pursuant to Section 6.2 and Section 6.3, as applicable, (b) each party irrevocably confirms in writing to the other party that the conditions in Section 6.1, Section 6.2 (in the case of the Company) and Section 6.3 (in the case of Parent and Sub) have been satisfied or are waived and that it is ready, willing and able to close on such date (the occurrence of clauses (a) and (b), the “Satisfaction Event” and the date on which the Satisfaction Event occurs, the “Satisfaction Date”) and (c) between (and including) the Satisfaction Date and the Closing, the Company shall not have materially breached its covenants and agreements in Section 4.1 and Section 4.2; or (ii) 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 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 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 Company shall be amended in its entirety 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 parties hereto shall cause the bylaws of the Surviving Corporation to be amended and restated in their entirety to read as set forth on Exhibit B attached hereto, until thereafter amended as provided by Delaware Law, the certificate of incorporation of the Surviving Corporation and such bylaws.

1.7. Directors and Officers of the Surviving Corporation.

(a) The parties hereto shall take all necessary action prior to the Closing so that, effective as of the Effective Time, the members of the board of directors of Sub immediately prior to the Effective Time shall be appointed as the sole members of the board of directors of the Surviving Corporation until their respective successors are duly elected or appointed and qualified or their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.

(b) The parties hereto shall take all necessary action prior to the Closing so that, effective as of the Effective Time, the officers of Sub immediately prior to the Effective Time shall be appointed as the sole officers of the Surviving Corporation until their respective successors are duly appointed and qualified or their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.

 

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1.8. Effect on Company Capital Stock, Company Options, Company RSUs and Company PSUs.

(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) Company Common Stock. 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(c)) shall be automatically converted into the right to receive, subject to and in accordance with Section 1.9, 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 and/or Uncertificated Shares in accordance with Section 1.9.

(ii) Vested Company Options, Vested Company RSUs and Vested Company PSUs. Notwithstanding anything to the contrary herein, Parent will not assume any Vested Company Option, Vested Company RSU or Vested Company PSU. At the Effective Time, by virtue of the Merger and without the need for any further action on the part of the holder thereof, each Vested Company Option that is unexpired, unexercised and outstanding as of immediately prior to the Effective Time, each Vested Company RSU that is unexpired, outstanding and has not yet been settled as of immediately prior to the Effective Time, and each Vested Company PSU that is unexpired, outstanding and has not yet been settled as of immediately prior to the Effective Time, each subject to and in accordance with Section 1.9, shall terminate and shall be converted into and represent the right to receive the applicable Cash-Out Amount from Parent for such Vested Company Option, Vested Company RSU or Vested Company PSU; provided that the Surviving Corporation and Parent shall be entitled to deduct and withhold from such Cash-Out Amount the required amount of withholding for Taxes pursuant to Section 1.12. The Cash-Out Amount payable pursuant to this Section 1.8(a)(ii) shall be rounded to the nearest cent and computed after aggregating Cash-Out Amounts for all Vested Company Options, Vested Company RSUs or Vested Company PSUs held by such Person.

(iii) Unvested Company Options and Unvested Company RSUs. Notwithstanding anything to the contrary herein, Parent will not assume any Unvested Company Option or any Unvested Company RSU. At the Effective Time, by virtue of the Merger and without the need for any further action on the part of the holder thereof, each Unvested Company Option held by a Continuing Employee or Continuing Consultant that is unexpired, unexercised and outstanding as of immediately prior to the Effective Time, and each Unvested Company RSU held by a Continuing Employee or Continuing Consultant that is unexpired, outstanding and has not yet been settled as of immediately prior to the Effective Time, each subject to and in accordance with Section 1.8(a)(v) and Section 1.9, shall, in each case, be converted into and substituted for the right to receive the applicable Cash-Out Amount from Parent for such Unvested Company Option or Unvested Company RSU in accordance with the terms of this Section 1.8(a)(iii) (the “Unvested Cash (Options/RSUs)”).

(iv) Unvested Company PSUs. Notwithstanding anything to the contrary herein, Parent will not assume any Unvested Company PSU. At the Effective Time, by virtue of the Merger and without the need for any further action on the part of the holder thereof, each Unvested Company PSU held by a Continuing Employee or Continuing Consultant that is unexpired, outstanding and has not yet been settled as of immediately prior to the Effective Time shall be subject to service-based vesting as provided in Schedule 1.8(a)(iv) of the Company Disclosure Letter only and shall no longer be subject to any performance-based vesting criteria. At the Effective Time, by virtue of the Merger and without the need for any further action on the part of the holder thereof, each Unvested Company PSU held by a Continuing Employee or Continuing Consultant that is unexpired, outstanding and has not yet been settled immediately prior to the Effective Time, subject to and in accordance with Section 1.8(a)(v) and Section 1.9, shall be converted into and substituted for the right to receive the applicable Cash-Out Amount from Parent for such Unvested Company PSU in accordance with the terms of this Section 1.8(a)(iv) (the “Unvested Cash (PSUs)” and, together with the Unvested Cash (Options/RSUs), the “Unvested Cash”).

 

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(v) Payment of Unvested Cash (Options/RSUs) and Unvested Cash (PSUs). The cash payment pursuant to (i) Section 1.8(a)(iii) for Unvested Company Options and Unvested Company RSUs shall be subject to the same restrictions and vesting arrangements (including all provisions with respect to the acceleration of vesting following the Effective Date that would apply if such awards were assumed by Parent, including pursuant to applicable Employment Offer Documents) that were applicable to such Unvested Company Options or Unvested Company RSUs, and (ii) Section 1.8(a)(iv) in exchange for Company PSUs shall be subject to the same restrictions and service-based vesting arrangements (including all provisions with respect to the acceleration of vesting following the Effective Date, including pursuant to applicable Employment Offer Documents, and assuming conversion of performance-based vesting to service-based vesting as provided in Schedule 1.8(a)(iv) of the Company Disclosure Letter) that were applicable to such Company PSUs, in each case as of the Effective Time by virtue of Section 1.8(a)(iii) and Section 1.8(a)(iv) as applicable. Therefore, the Unvested Cash (Options/RSUs) and Unvested Cash (PSUs) shall not be payable by Parent at the Effective Time, and shall instead become payable by Parent on the date that such Unvested Company Options, Unvested Company RSU or Company PSUs would have become vested under the vesting schedule in place for such awards at the Effective Time (subject to the restrictions and other terms of such vesting schedule and giving effect to all applicable terms with respect to the acceleration of vesting and any applicable Employment Offer Document); provided that if such vesting conditions and terms are not satisfied and vesting ceases at any point after the Effective Time (after giving effect to any applicable terms of acceleration), no further cash payments will be made with respect to Unvested Cash (Options/RSUs) and Unvested Cash (PSUs). Parent shall make, or in its discretion shall cause the Surviving Corporation to make, all such required payments to holders of Unvested Cash (Options/RSUs) and Unvested Cash (PSUs) no later than the earlier of (A) the 15th day of the calendar month immediately following the calendar month in which the corresponding Unvested Company Option, Unvested Company RSU and Company PSUs would have become vested under the service-based vesting schedule in place for such awards at the Effective Time and (B) the end of the calendar year in which the corresponding Unvested Company Option, Unvested Company RSU or Company PSUs, would have become vested (subject to the restrictions and other terms of such service-based vesting schedule and giving effect to the applicable terms with respect to all acceleration of vesting and any applicable Employment Offer Documents); provided that Parent and the Surviving Corporation shall be entitled to deduct and withhold from such Unvested Cash (Options/RSUs) and Unvested Cash (PSUs) the required amount of withholding for Taxes pursuant to Section 1.12. The Unvested Cash (Options/RSUs) payable pursuant to Section 1.8(a)(iii) and Unvested Cash (PSUs) payable pursuant to Section 1.8(a)(iv) on a given payment date shall be rounded to the nearest cent and computed after aggregating Cash-out Amounts for all Unvested Company Options, Unvested Company RSUs and Company PSUs represented by a particular grant previously held by such Person that would have vested on the relevant vesting date. All amounts payable pursuant to Section 1.8(a)(iii) and Section 1.8(a)(iv) shall be paid without interest. No Unvested Cash (Options/RSUs) or Unvested Cash (PSUs), 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 Liability of such Person, prior to the distribution to such Person of such Unvested Cash (Options/RSUs) and Unvested Cash (PSUs) in accordance with this Agreement.

(b) Capital Stock of Sub. 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.

(c) 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

 

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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 without any conversion thereof.

(d) 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 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 hereto 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.

(e) Appraisal Rights. Notwithstanding anything to the contrary herein, if any stockholder of the Company that is entitled to assert appraisal rights properly demands to be paid the “fair value” of such holder’s shares of Company Capital Stock in accordance with Delaware Law and complies with all conditions and obligations of Section 262 thereof, meaning such perfected appraisal rights are not effectively withdrawn or lost, each Dissenting Share held by such Dissenting Stockholder shall not be converted at the Effective Time into the right to receive the applicable portion of the consideration payable in the Merger, but shall be entitled only to such rights as are granted by Delaware Law to a holder of Dissenting Shares. 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 Stockholder Meeting, withdrawals of such demands and any other instruments served pursuant to Delaware Law and received by the Company, and (ii) the right 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 Dissenting 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 1.9(c), following the satisfaction of the applicable conditions set forth in Section 1.9(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. Surrender of Certificates.

(a) Exchange Agent. Parent’s transfer agent, Computershare Inc. (or such other agent or agents as may be appointed by Parent), shall act as exchange agent (the “Exchange Agent”) in the Merger.

(b) Parent to Deposit Cash. On or prior to the Closing Date, 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 Section 1.8(a)(i) and Section 1.8(a)(ii) (which, for the avoidance of doubt, excludes the Unvested Cash) (provided that the cash payable pursuant to Section 1.8(a)(ii) in respect of Vested Company Options, Vested Company RSUs or Vested Company PSUs, in each case to be received by the holder in the holder’s capacity as an employee of the Company or the Subsidiaries for applicable employment Tax purposes, may instead be paid directly by either Parent through its payroll provider or, if so directed by Parent, by the Surviving Corporation through its payroll provider).

(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 book-entry shares (“Uncertificated Shares”) that, in each case, immediately prior to the Effective Time represented outstanding shares of Company Capital Stock, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the

 

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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 and/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 such 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 the Company Capital Stock represented by such Certificate or such Uncertificated Shares (which, for the avoidance of doubt, excludes any Unvested Cash), 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(e).

(d) No Interest. No interest will be paid or accrued on any cash payable pursuant to Section 1.8(a) or otherwise in connection with the Merger.

(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 or Uncertificated Shares so surrendered shall, as applicable, 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 1.9, 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 Applicable Legal Requirement.

(g) Unclaimed Cash. Any portion of funds held by the Exchange Agent that has not been delivered to any holders of Certificates or Uncertificated Shares pursuant to this Article I within 12 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 1.9(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 Section 1.8(a). Notwithstanding anything to the contrary 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.

1.10. 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 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 that 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.

1.11. 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

 

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such Certificate; provided that Parent or the Exchange Agent may, in its respective reasonable discretion and as a condition precedent to the issuance thereof, require the record holder of such Certificate to deliver a bond in such sum 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 with respect to such Certificate.

1.12. Withholding Rights. Parent, the Surviving Corporation, their respective subsidiaries and the Exchange Agent shall be entitled to deduct and withhold from the cash otherwise deliverable under 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, any Company PSUs, any Certificates or any Uncertificated Shares such amounts as any of Parent, the Surviving Corporation, their respective subsidiaries or the Exchange Agent is required to deduct and withhold with respect to any such deliveries and payments under the Code or any other Ap