Guidance Software, Inc.

We incurred realignment expense for the three and six months ended June 30, 2017 of $0.7 million and $2.1 million, respectively, primarily resulting from the consolidation of leased space at our corporate headquarters, as compared to $0.9 million and $3.1 million, respectively, for the same periods in 2016, as a result of reducing headcount and the closing of our Orlando and Houston offices.  Severance costs are included in cost of services revenue, selling and marketing expense, research and development expense and general and administrative expense, based on the employees’ cost center assignments prior to termination.  Lease termination costs are included in cost of services revenue, selling and marketing expense, research and development expense and general and administrative expense, based on the size of the space occupied by the department.

On July 25, 2017, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with OpenText Corporation, a corporation incorporated under the federal laws of Canada (“OpenText”), and Galileo Acquisition Sub Inc., a Delaware corporation and a direct wholly-owned subsidiary of OpenText (“Purchaser”).   Pursuant to the Merger Agreement, and on the terms and subject to the conditions thereof, among other things, Purchaser will commence a tender offer (“Offer”) to acquire all of the outstanding shares of common stock of the Company, par value $0.001 per share, at a purchase price of $7.10 per share in cash, net of any applicable withholding taxes and without interest. The Offer is not subject to any financing condition.  The merger is expected to close in the third quarter of calendar 2017.

On July 25, 2017 we entered into an Agreement and Plan of Merger, or the Merger Agreement, with OpenText Corporation, or OpenText, pursuant to which a wholly-owned subsidiary of OpenText will, upon the terms and subject to the conditions set forth in the Merger Agreement, commence a tender offer for all outstanding shares of Guidance Software, Inc., followed by a merger to acquire any untendered shares.  Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the merger, each share of common stock of Guidance Software issued and outstanding immediately prior to the effective time of the merger will be cancelled and automatically converted into the right to receive $7.10 in cash, without interest and subject to any applicable withholding taxes.

Uncertainty about the effect of the proposed merger on our employees, customers and technology partners may have a significant adverse impact our business and operations. Our employees may experience uncertainty about their positions with the company following the merger. We may be unable to attract and retain key talent as we had prior to announcement of the Merger Agreement. Any loss or distraction of such employees could have a material adverse effect on our business and operations. Management resources have been, and will continue to be, directed towards the completion of the merger, which could materially adversely affect our business and operations.

Completion of the merger with OpenText is subject to conditions beyond our control that may prevent, delay or otherwise adversely affect its completion in a material way, including the expiration or termination of applicable waiting periods under antitrust and competition laws, national security laws relating to foreign ownership of American companies, and similar approvals or consents that must be obtained from regulatory entities and government agencies. If the merger or a similar transaction is not completed, the share price of our common stock may drop to the extent that the current market price of our common stock reflects an assumption that a transaction will be completed. In addition, under circumstances specified in the Merger Agreement, we may be required to pay a termination fee of $6,014,095.55 in the event the merger is not consummated or if a proposal by a third party competitive to the Merger Agreement is publicly disclosed or consummated. Further, a failure to complete the merger may result in negative public opinion of us by customers and investors. Any disruption to our business and increased competition resulting from the proposed merger could continue or accelerate in the event of a failure to complete the merger. No assurances can be given that our business will not be adversely affected if the merger is not consummated.