Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), is made and entered
into as of September 28, 2001, among Activision, Inc., a Delaware corporation
("Activision"), Activision Publishing, Inc., a Delaware corporation ("Activision
Publishing"), Treyarch Acquisition, Inc., a Delaware corporation and a wholly
owned subsidiary of Activision ("Merger Subsidiary"), Treyarch Invention LLC, a
California limited liability company ("Treyarch"), Don Likeness, Xxxxx Xxxxxxx,
Xxxx Xxxxxxxxx and Xxxxx Xxxxxxxxxx (collectively, the "Principal Members") and
Xxxx Xxxxxxxxx, as representative of the persons listed on Schedule 1 hereto
(the "Employee Members") (the "Representative"). For purposes of this Agreement,
the Principal Members and the Employee Members hereinafter are individually
referred to as a "Member" and collectively referred to as the "Members".
Treyarch and Merger Subsidiary are sometimes referred to herein as the
"Constituent Corporations."
W I T N E S S E T H:
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WHEREAS, the Members own all of the membership interests in Treyarch; and
WHEREAS, the respective Boards of Directors of Activision and Merger
Subsidiary and the Managing Members of Treyarch each have determined that a
business combination between Treyarch, Activision and Merger Subsidiary is fair
to and in the best interests of their respective companies and stockholders and
accordingly have approved this Agreement and agreed to effect the merger
provided for herein upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. On the terms and subject to the conditions contained in
this Agreement, at the Effective Time (as defined in Section 1.3 hereof),
Treyarch shall be merged with and into Merger Subsidiary in accordance with this
Agreement and the separate existence of Treyarch shall thereupon cease (the
"Merger"). Merger Subsidiary shall be the surviving corporation in the Merger
(Merger Subsidiary, after the Effective Time, is sometimes hereinafter referred
to as the "Surviving Corporation"). From and after the Effective Time, all the
rights and property of each of the Constituent Corporations shall vest in the
Surviving Corporation and the Surviving Corporation shall be subject to all the
debts and liabilities of the Constituent Corporations. The Merger shall have the
effects provided in this Agreement and the applicable provisions of the Delaware
General Corporation Law ("DGCL") and the California Limited Liability Company
Law ("LLCL").
1.2. The Closing. On the terms and subject to the conditions of this
Agreement, the closing of the Merger (the "Closing") shall be held at the
offices of Activision, 0000 Xxxxx Xxxx Xxxxxxxxx, Xxxxx Xxxxxx, Xxxxxxxxxx, at
10:00 a.m., local time, on the date hereof, with the Closing to become effective
as of October 1, 2001. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date." All transactions required to occur at the
Closing shall be deemed to have occurred simultaneously, and no such transaction
shall be deemed to have occurred until all have occurred.
1.3. Effective Time. If all the conditions to the Merger set forth in
Article 5 shall have been fulfilled or waived in accordance herewith, the
parties hereto shall cause an Agreement of Merger and officers' certificates
satisfying the requirements of Section 17552 of the LLCL to be properly
executed, verified and delivered for filing in accordance with the LLCL on the
Closing Date and (ii) a Certificate of Merger satisfying the requirements of
Section 252 of the DGCL to be properly executed, verified and delivered for
filing in accordance with the DGCL on the Closing Date. The Merger shall become
effective upon the acceptance for record of the Agreement of Merger by the
Secretary of State of the State of California in accordance with the LLCL and
the acceptance for record of Certificate of Merger by the Secretary of State of
the State of Delaware in accordance with the DGCL (but not earlier than the
Closing Date) or at such later time which the parties hereto shall have agreed
upon and designated in such filings in accordance with applicable law as the
effective time of the Merger (the "Effective Time").
1.4. Articles of Incorporation; By-Laws. (a) Articles of Incorporation. The
Articles of Incorporation of Merger Subsidiary in effect immediately prior to
the Effective Time shall be the Articles of Incorporation of the Surviving
Corporation (except that the name of the Surviving Corporation shall be
"Treyarch Corporation"), until duly amended in accordance with applicable law.
(b) By-Laws. The By-laws of Merger Subsidiary in effect immediately prior
to the Effective Time shall be the By-laws of the Surviving Corporation (except
that the name of the Surviving Corporation shall be "Treyarch Corporation"),
until duly amended in accordance with its terms or the Articles of Incorporation
of the Surviving Corporation and as provided by applicable law.
1.5. Directors and Officers. (a) Directors. The directors of Merger
Subsidiary immediately prior to the Effective Time shall automatically become
the directors of the Surviving Corporation as of the Effective Time.
(b) Officers. The officers of Merger Subsidiary immediately prior to the
Effective Time shall automatically become the officers of the Surviving
Corporation as of the Effective Time.
1.6. Dissenting Shares. The Members hereby waive all dissenters' rights of
appraisal set forth in Section 17600 of the LLCL (the "Appraisal Rights").
1.7. Tax Consequences. It is intended by the parties hereto that the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the parties intend
to report the Merger consistent therewith. The parties hereto hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Section 1.368-2(g)
and 1.368-3(a) of the United States Treasury Regulations.
ARTICLE II
CONVERSION OF SHARES; MERGER CONSIDERATION
2.1. Conversion of Merger Subsidiary Shares. At the Effective Time, each
share of common stock, $.01 par value per share, of Merger Subsidiary that is
issued and outstanding immediately prior to the Effective Time will remain one
share of common stock, $.01 par value per share, of the Surviving Corporation
that is
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issued and outstanding immediately after the Effective Time, and such shares
will be the only shares of capital stock of the Surviving Corporation that are
issued and outstanding immediately after the Effective Time.
2.2. Merger Consideration. (a) Within five (5) business days of the
Effective Time, by virtue of the Merger and without any action on the part of
Activision, Merger Subsidiary, Treyarch or the Members, each Member shall
receive the shares of Common Stock, par value $.000001 per share, of Activision
(the "Activision Common Stock") set forth opposite such Member's name on
Schedule 2.2(a). The shares of Activision Common Stock to be issued in
connection with the Merger are sometimes referred to as the "Activision Shares."
(b) If, prior to the first anniversary of the date of this Agreement, the
closing price of the Activision Common Stock on the Nasdaq National Market
("NASDAQ"), or on such Subsequent Market on which the shares of Activision
Common Stock are then listed or quoted, is not greater than or equal to the
Maximum Price per share for a period of five (5) consecutive trading days, then
the Members shall receive as additional merger consideration 54,685 shares of
Activision Common Stock (the "Additional Activision Shares"). The Additional
Activision Shares shall be distributed pro rata to the Members in accordance
with their percentage ownership interest as reflected on the second column of
Schedule 2.2(a). For purposes of this subsection, "Subsequent Market" shall mean
the Nasdaq Smallcap Market, New York Stock Exchange or American Stock Exchange.
If the shares of Activision Common Stock are not then listed or quoted on the
NASDAQ or a Subsequent Market, then the closing price of Activision Common Stock
shall be as reported in the over-the-counter market (as reported by the National
Quotation Bureau Incorporated or similar organization or agency succeeding to
its functions of reporting prices). If the shares of Activision Common Stock are
not then reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices), then
the closing price of Activision Common Stock shall be as reported in the "Pink
Sheet" quotes. For purposes of this Agreement, "Maximum Price" shall mean $34.50
per share, subject to adjustment for any stock splits, reverse splits,
recapitalizations or similar transactions occurring after the Closing which are
made in good faith by the Board of Directors of Activision.
(c) In the event that the conditions set forth in Section 6.2(c)(i) with
respect to Spider-Man (as defined below) have been met, then, concurrently with
any release of the Spider-Man Holdback Shares (as defined below) pursuant to
Section 6.2(c)(i), the Members shall receive, in addition to the Activision
Shares received pursuant to Section 2.2(a), the number of shares of Activision
Common Stock equal to ten percent (10%) of the aggregate number of shares of
Spider-Man Holdback Shares which have been released pursuant to Section
6.2(c)(i). Such shares issued pursuant to this subsection shall be distributed
pro rata to the Members in accordance with their percentage ownership interest
as reflected on the second column of Schedule 2.2(a).
(d) In the event that the conditions set forth in Section 6.2(c)(i)(ii)
with respect to Minority Report (as defined below) have been met, then,
concurrently with any release of the Minority Report Holdback Shares pursuant to
Section 6.2(c)(ii), the Members shall receive, in addition to the Activision
Shares received pursuant to Section 2.2(a), the number of shares of Activision
Common Stock equal to ten percent (10%) of the aggregate number of shares of
Minority Report Holdback Shares which have been released pursuant to Section
6.2(c)(ii). Such shares issued pursuant to this subsection shall be distributed
pro rata to the Members in accordance with their percentage ownership interest
as reflected on the second column of Schedule 2.2(a).
(e) In the event that the conditions set forth in Section 6.2(c)(iii) with
respect to Xxxxx Xxxxxx'x Pro Surfer (as defined below) have been met, then,
concurrently with any release of the Xxxxx Xxxxxx Holdback Shares (as defined
below) pursuant to Section 6.2(c)(iii), the Members shall receive, in addition
to the Activision Shares received pursuant to Section 2.2(a), the number of
shares of Activision Common Stock equal to ten percent (10%) of the aggregate
number of shares of Xxxxx Xxxxxx Holdback Shares which have been released
pursuant to Section 6.2(c)(iii). Such shares issued pursuant to this subsection
shall be distributed
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pro rata to the Members in accordance with their percentage ownership interest
as reflected on the second column of Schedule 2.2(a).
(f) No fractional shares of Activision Common Stock shall be issued
pursuant to this Agreement. In lieu of the issuance of any fractional shares of
Activision Common Stock pursuant to this Agreement, the number of shares of
Activision Common Stock issuable under the terms of this Agreement shall be
rounded to the nearest whole share.
2.3. Employees. Each of the employees of Treyarch set forth in Schedule 2.3
(the "Employee Holders") shall become entitled to the Activision Shares set
forth opposite such Employee Holder's name pursuant to Treyarch's Standard
Equity Sharing Plan (the "Equity Sharing Plan").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TREYARCH AND THE MEMBERS
Treyarch and the Members hereby represent and warrant to Activision,
Activision Publishing and the Merger Subsidiary as follows (except that the
representation set forth in Section 3.3(b) shall be made by Treyarch and each
Member individually with respect to himself or herself):
3.1. Organization. Treyarch is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of California.
Treyarch has all requisite power and authority to carry on its business as it is
now being conducted and to own or lease and to operate its properties. Except as
set forth in Schedule 3.1, Treyarch is not qualified to transact business as a
foreign corporation or other entity in any jurisdiction, and neither the nature
of the property owned or leased by it nor the nature of the business conducted
by it makes any such qualification necessary, other than such failures which do
not and would not individually or in the aggregate have a Material Adverse
Effect on Treyarch. True and complete copies of the Articles of Organization and
Amended and Restated Operating Agreement of Treyarch have previously been
delivered or made available to Activision. For purposes of this Agreement,
"Material Adverse Effect" with respect to a person or entity shall mean a
material adverse effect on the business, assets, properties, financial condition
or results of operations of such person or entity (in the case of Activision,
Activision and its Subsidiaries taken as a whole), or on the ability of any
person or entity timely to consummate the transactions contemplated hereby.
3.2. Authorization, Validity and Effect of Agreement. Each of Treyarch and
the Members has all requisite power and authority to execute, deliver and
perform this Agreement and to consummate their respective obligations and the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Treyarch and the Members and the consummation of the
transactions contemplated hereby have been duly authorized by any and all
necessary corporate action of Treyarch and by the Members and no other action on
the part of Treyarch or the Members is necessary to authorize the execution,
delivery and performance of this Agreement by Treyarch or the Members and the
consummation of the transactions contemplated hereby. Treyarch has delivered to
Activision true and complete copies of the resolutions of the Managing Members
authorizing the execution, delivery and performance of this Agreement, the
Merger and the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Treyarch and the Members and constitutes
the valid and binding obligation of Treyarch and the Members, enforceable
against Treyarch and the Members in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws affecting
creditors' rights generally and general principles of equity.
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3.3. Capitalization. (a) Schedule 2.2(a) hereto sets forth the percentage
interest in Treyarch owned by each Member. There are outstanding no securities
convertible into, exchangeable for, or carrying the right to acquire, equity
securities of Treyarch, and no subscriptions, warrants, options, calls, rights
(pre-emptive or other) or other arrangements or commitments obligating Treyarch
to issue or dispose of any of its equity securities or any ownership interest
therein.
(b) Each of the Members hereby represents and warrants that such Member
owns the percentage interest in Treyarch set forth in such Member's respective
signature page to the Member Side Agreement among Treyarch, the Representative,
Xxxxx Xxxxxxxxxx and the Members (the "Member Side Agreement") executed on or
prior to the date of this Agreement.
3.4. No Subsidiaries. Treyarch does not have any direct or indirect
Subsidiaries. For purposes of this Agreement, "Subsidiary" when used with
respect to any party shall mean any corporation, partnership, joint venture,
business trust or other entity, of which such party or a Subsidiary of such
party, directly or indirectly, owns or controls at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization.
3.5. Other Interests. Treyarch does not own, directly or indirectly, any
interest or investment (whether equity or debt) in any corporation, partnership,
joint venture, business trust or other entity (other than investments in
short-term investment securities).
3.6. No Violation. The execution, delivery and performance by Treyarch and
the Members of this Agreement do not, and the consummation by Treyarch and the
Members of the transactions contemplated hereby will not, with or without the
giving of notice or the lapse of time, or both, conflict with or violate (i) any
provision of law, rule or regulation to which the Members or Treyarch are
subject, (ii) any order, judgment, injunction or decree binding upon or
applicable to the Members or Treyarch or binding upon the assets or properties
of the Members or Treyarch, (iii) any provision of the Articles of Organization
or the Operating Agreement of Treyarch, or (iv) other than the consents and
filings provided for in this Agreement, require any consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority which has not been obtained or made, except where the
failure to obtain any such consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority would not individually or in the aggregate have a Material Adverse
Effect on Treyarch.
3.7. Investment Intent. (a) The Activision Common Stock to be issued to the
Members in connection with the Merger and Activision Common Stock to be issued
to the Employee Holders pursuant to the Equity Sharing Plan is being acquired by
such Member or Employee Holder for his or her own account, for investment
purposes only and not with a view to the distribution of such shares or with any
present intention of distributing any of such shares within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), or reselling in
violation of any other applicable securities laws, it being understood that the
shares of Activision Common Stock to be issued to the Members and Employee
Holders under this Agreement have not been registered under the Securities Act,
and therefore cannot be sold unless registered under the Securities Act or
unless an exemption from registration is available, and also subject to further
restrictions under the provisions of Sections 6.1 and 6.2 hereof and the
Warranty Escrow Agreement (as defined in Section 6.2). Each of the Members and
Employee Holders will execute and deliver to Activision at or prior to the
Closing an investment letter to that effect, the form of which is attached as
Exhibit A-1 to this Agreement.
(b) Each Member who is an "accredited investor" ("Accredited Investor"), as
that term is defined in Rule 501(a) of Regulation D of the Securities Act, will
have completed, executed and delivered to
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Activision prior to or at the Closing an accredited investor agreement in the
form attached hereto as Exhibit A-3 ("Accredited Investor Agreement"), and all
of the representations and other information contained in the Accredited
Investor Agreement executed by such Member are true, complete and correct in all
respects. Each Member who is not an Accredited Investor ("Non-Accredited
Investor") will have completed, executed and delivered to Activision prior to or
at the Closing a non-accredited investor agreement in the form attached hereto
as Exhibit A-4 ("Non-Accredited Investor Agreement"), and all of the
representations and other information contained in the Non-Accredited Investor
Agreement executed by such Non-Accredited Investor are true, complete and
correct in all respects.
(c) Each person that is a "purchaser representative" (a "Purchaser
Representative") as that term is defined in Section 501(h) of Regulation D of
the Securities Act will have completed, executed and delivered to Activision
prior to or at the Closing a purchaser representative questionnaire in the form
attached hereto as Exhibit A-5 ("Purchaser Representative Questionnaire").
3.8. Financial Statements; Undisclosed Liabilities. (a) Treyarch and the
Members have delivered to Activision an unaudited balance sheet of Treyarch as
of June 30, 2001 and as of December 31, 2000, and the related statements of
income and expense for the years then ended (collectively, the "Financial
Statements").
(b) The Financial Statements have been prepared in accordance with sound
accounting principles consistently followed throughout the periods indicated.
The Financial Statements are correct and complete in all material respects and
fairly present the financial position and the results of operations of Treyarch
as of the respective dates thereof and for the respective periods indicated.
Except as set forth in Schedule 3.8(b), Schedule 3.10 or elsewhere in this
Agreement or as disclosed, reflected or reserved against in the Financial
Statements, Treyarch does not have any liabilities, commitments or obligations
(secured or unsecured and whether accrued, absolute, contingent or otherwise and
whether due or to become due) which are not reflected on the Financial
Statements, other than any liabilities, commitments or obligations incurred
after the date of the Financial Statements in the ordinary course of business
and which do not have a Material Adverse Effect on Treyarch. The assets of
Treyarch are fairly valued on the Financial Statements.
3.9. Litigation. Except as set forth in Schedule 3.9 hereto, there are (i)
no continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which Treyarch or the Members is a party or by which
any of their respective properties or assets are bound or likely to be affected
and (ii) no actions, suits or proceedings pending against Treyarch or the
Members or to which any of their respective properties or assets are subject or,
to the knowledge of the Members, threatened against Treyarch or the Members or
to which any of their respective properties or assets are subject, at law or in
equity, that in each such case could, individually or in the aggregate, have a
Material Adverse Effect on Treyarch.
3.10. Absence of Certain Changes. Except as set forth in Schedule 3.10
hereto, since June 30, 2001, Treyarch has conducted its business only in the
ordinary course of such business and consistent with past practices and there
has not been any:
(a) material adverse change in the financial condition, properties, assets
(including intangible assets), businesses, operations or results of operations
of Treyarch;
(b) amendment or change in the Articles of Organization or Operating
Agreement of Treyarch;
(c) incurrence, creation or assumption by Treyarch of (i) any mortgage,
deed of trust, security interest, pledge, lien, title retention device,
collateral assignment, claim, charge, restriction or other
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encumbrance of any kind on any of the assets or properties of Treyarch; or (ii)
any obligation or liability of any indebtedness for borrowed money;
(d) issuance or sale of any debt or equity securities of Treyarch, or the
issuance or grant of any options, warrants or other rights to acquire from
Treyarch, directly or indirectly, any debt or equity securities of Treyarch;
(e) payment or discharge by Treyarch of any security interest, lien, claim,
or encumbrance of any kind on any asset or property of Treyarch, or the payment
or discharge of any liability that was not either shown or reflected on the
Financial Statements or Schedule 3.10 or incurred in the ordinary course of
Treyarch's business after June 30, 2001 in an amount in excess of $10,000 for
any single liability to a particular creditor;
(f) purchase, license, sale, assignment or other disposition or transfer,
or any agreement or other arrangement for the purchase, license, sale,
assignment or other disposition or transfer, of any of the assets, properties or
goodwill of Treyarch other than a license or sale of any product or products of
Treyarch made in the ordinary course of Treyarch's business;
(g) damage, destruction or loss of any property or asset, whether or not
covered by insurance, having (or likely with the passage of time to have) a
Material Adverse Effect on Treyarch;
(h) increase in the compensation payable or to become payable to any of the
officers, directors, or employees of Treyarch, or any bonus or pension,
insurance or other benefit payment or arrangement (including without limitation,
the Equity Sharing Plan (as defined below), and any stock awards, stock option
grants, stock appreciation rights or stock option grants) made to or with any of
such officers, employees or agents, other than the amounts set forth in Schedule
2.2(a), Schedule 2.3, amounts agreed to in the Letter of Intent, dated August
31, 2001 between Treyarch and Activision Publishing, or as otherwise approved by
Activision Publishing;
(i) obligation or liability incurred by Treyarch to any of its officers,
directors or stockholders except for normal and customary compensation and
expense allowances payable to officers in the ordinary course of Treyarch's
business consistent with past practice;
(j) making by Treyarch of any loan, advance or capital contribution to, or
any investment in, any officer, director or Member of Treyarch or any firm or
business enterprise in which any such person had a direct or indirect material
interest at the time of such loan, advance, capital contribution or investment;
(k) entering into, amendment of, relinquishment, termination or non-renewal
by Treyarch of any contract (other than the Software Development Agreement dated
as of August 20, 2001 with Visual Concepts, a copy of which has been provided to
Activision), lease, transaction, commitment or other right or obligation other
than in the ordinary course of its business or any written or oral indication or
assertion by the other party thereto of any material problems with Treyarch's
services or performance under such contract, lease, transaction, commitment or
other right or obligation or of such other party's demand to amend, terminate or
not renew any such contract, lease, transaction, commitment or other right or
obligation;
(l) material change in the manner in which Treyarch extends discounts,
credits or warranties to customers or otherwise deals with its customers;
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(m) entering into by Treyarch of any transaction, contract or agreement
that by its terms requires or contemplates a required minimum current and/or
future financial commitment, expenses (inclusive of overhead expenses) or
obligation on the part of Treyarch involving in excess of $10,000 (provided that
the amount of such financial commitments and expenses for all such transactions,
contracts or agreements does not exceed $50,000 in the aggregate) or that is not
entered into in the ordinary course of Treyarch's business, or the conduct of
any business or operations by Treyarch that is other than in the ordinary course
of Treyarch's business; or
(n) license, transfer or grant of a right under any Treyarch Intellectual
Property (as defined in Section 3.19 below), other than those licensed,
transferred or granted in the ordinary course of business consistent with its
past practices.
3.11. Taxes. Except as set forth in Schedule 3.11 hereto or where such
failure would not, individually or in the aggregate, have a Material Adverse
Effect on Treyarch:
(a) Treyarch has paid or caused to be paid all federal, state, local,
foreign, and other taxes, and all deficiencies, or other additions to tax,
interest, fines and penalties (collectively, "Taxes"), owed or accrued by it and
due and payable through the date hereof (including any Taxes payable pursuant to
Treasury Regulation 1.1502-6 (and any similar state, local or foreign
provision)).
(b) Treyarch has timely filed all federal, state, local and foreign tax
returns (collectively "Tax Returns") required to be filed by it through the date
hereof, and all such returns accurately set forth the amount of any taxable
income, and any state franchise taxes relating to the applicable period.
(c) Except as set forth in Schedule 3.11(c), Treyarch has withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, Member or other
party.
(d) The Financial Statements reflect adequate reserves for Taxes payable by
Treyarch for all taxable periods and portions thereof through the date of such
financial statements.
(e) Since the date of the Financial Statements, Treyarch has made
sufficient accrual for Taxes in accordance with sound accounting principles with
respect to periods for which Tax Returns have not been filed and has paid
sufficient estimated Taxes in respect thereof.
(f) There are no outstanding agreements, waivers or arrangements extending
the statutory period of limitations applicable to any claim for, or the period
for the collection or assessment of, Taxes due from Treyarch for any taxable
period and there have been no deficiencies proposed, assessed or asserted for
such Taxes.
(g) There are no closing agreements that could affect Taxes of Treyarch for
periods after the Effective Time pursuant to Section 7121 of the Code or any
similar provision under state, local or foreign tax laws.
(h) No audit or other proceedings by any court, governmental or regulatory
authority or similar authority has occurred, been asserted or is pending and
Treyarch has not received notice that any such audit or proceeding may be
commenced.
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(i) No election has been made or filed by or with respect to, and no
consent to the application of, Section 341(f)(2) of the Code has been made by or
with respect to, Treyarch or any of its properties or assets.
(j) Treyarch has not agreed to, or filed application for, or is required to
make, any changes or adjustment to its accounting methods, other than the filing
of an IRS Form 8832, pursuant to which Treyarch shall seek election to be taxed
as a corporation.
(k) There are no liens for Taxes (other than for current Taxes not yet due
and payable) upon the assets of Treyarch.
(l) Neither Treyarch nor any of its Subsidiaries (i) is a party to any
agreement providing for the allocation, sharing or indemnification of Taxes;
(ii) is required to include in income any adjustment pursuant to Section 481(a)
of the Code by reason of a voluntary change in accounting method initiated by
Treyarch or any Subsidiary, nor does Treyarch have any knowledge that the IRS
has proposed any such adjustment or change in accounting method; or (iii) is or
has been a United States real property holding company (as defined in Section
897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(ii) of the Code.
(m) Neither Treyarch nor any of its Subsidiaries has distributed the stock
of any company in a transaction satisfying the requirements of Section 355 of
the Code.
(n) All transactions that could give rise to an understatement of U.S.
federal income tax within the meaning of Section 6662 of the Code have been
adequately disclosed in accordance with Section 6662 of the Code.
(o) There is no contract, agreement, plan or arrangement covering any
Person that, individually or collectively, could give rise to, nor will the
consummation of the transactions contemplated hereby obligate Treyarch or any of
its Subsidiaries to make, the payment of any amount that would not be deductible
by Treyarch or any Subsidiary thereof by reason of Section 280G of the Code.
3.12. Books and Records. (a) The books of account and other financial
records of Treyarch are true, complete and correct in all material respects,
have been maintained in accordance with good business practices, and are
accurately reflected in all material respects in the financial statements
included in the Financial Statements.
(b) The minute books and other records of Treyarch that have been, or will
be prior to the Closing, made available to Activision, contain accurate records
of all meetings and accurately reflect all other action of the Managing Members
and Members.
3.13. Properties. (a) Treyarch does not own any real property. Schedule
3.13(a) hereto sets forth a list of all real property currently, or at any time
in the past five (5) years, owned or leased by Treyarch. With respect to all
real property currently leased by Treyarch, a copy of each lease and each
amendment thereto, has been made available to Activision prior to the Closing
Date. All such current leases are in full force and effect, are valid and
effective in accordance with their respective terms, and there is not any
existing material default or event of default under any such lease (or event
which with notice or lapse of time, or both, would constitute such a material
default) by Treyarch or, to the Members' knowledge, the landlord.
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(b) Treyarch has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any liens, except as reflected in the Financial
Statements or in Schedule 3.13(b) hereto and except for liens for taxes not yet
due and payable and such imperfections of title and encumbrances, if any, which
are not material in character, amount or extent, and which do not materially
detract from the value, or materially interfere with the present use, of the
property subject thereto or affected thereby.
(c) Prior to the execution of this Agreement, the Members have caused
Treyarch to have sold, assigned, transferred, conveyed or otherwise disposed of
all real property then owned by Treyarch and described on Schedule 3.13(a) (the
"Real Property") in the manner set forth on Schedule 3.13(c).
3.14. Environmental Matters. (i) Treyarch is not, and within applicable
statutes of limitation, has not been, in violation of any Environmental Law;
(ii) there has been no disposal, spill, discharge, or release of any Hazardous
Material on, at, or under any property presently or formerly owned, leased or
operated by Treyarch; (iii) there are no Hazardous Materials located in, at, on,
or under such facility or property, or at any other location, in either case
that could reasonably be expected to require investigation, removal, remedial or
corrective action by Treyarch or that would reasonably likely result in
liabilities of, or losses, damages or costs to Treyarch under any Environmental
Law; (iv) there is currently no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, investigation, notice or demand
letter or request for information pending or, to the knowledge of the Members,
threatened, which asserts liability under any Environmental Law against
Treyarch; (v) there has not been any underground or aboveground storage tank, or
any impoundment or other disposal area in each case containing Hazardous
Materials located at any property owned, leased, or operated by Treyarch at the
time of such ownership, lease, or operation; (vi) no asbestos or polychlorinated
biphenyls have been used or disposed of, or have been located at, on, or under
any property owned, leased, or operated by Treyarch at the time of such
ownership, lease, or operation; (vii) Treyarch has provided Activision with all
records and files available to Treyarch and the Members concerning the existence
of Hazardous Materials or any other environmental concern at properties, assets,
or facilities currently or formerly owned, operated or leased by Treyarch, any
present or former subsidiary, or predecessor in interest, or concerning
compliance by Treyarch with, or liability under, any Environmental Laws.
For purposes of this Agreement, "Environmental Law" means all federal,
state, and local laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, and decrees, now or previously in effect and regulating,
relating to, or imposing liability or standards of conduct concerning air
emissions, water discharges, noise emissions, the release or threatened release
of any Hazardous Material into the environment, the generation, handling,
treatment, storage, transport or disposal of any Hazardous Material, or
otherwise concerning pollution or the protection of the outdoor or indoor
environment, or human health or safety. "Hazardous Material" means any
pollutant, contaminant, or hazardous, toxic, medical, infectious or dangerous
waste, substance, constituent or material, defined or regulated as such in, or
for purposes of, any Environmental Law, including without limitation, any
asbestos, petroleum, oil, radioactive substance, polychlorinated biphenyls,
toxin, chemical, infectious or disease-causing agent, and any other substance
that can give rise to liability under any Environmental Law.
3.15. No Brokers. Neither Treyarch nor the Members has entered into any
contract, arrangement or understanding with any person or firm that may result
in the obligation of such entity or Activision to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby. Neither Treyarch nor the Members is aware of any claim for
payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
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3.16. Related Party Transactions. Except for the employment arrangements
described in Schedule 3.16 hereto, Treyarch is not a party to any transactions,
loans or other arrangements or understandings with its Members, directors and/or
officers (or any Member of their respective immediate families) that are in
effect as of the date of this Agreement and/or are currently proposed to be
carried out in the future. Schedule 3.16 hereto identifies and describes the
interest or interests, if any, in any property, real or personal, tangible or
intangible, used in or pertaining to the business of Treyarch, now held by any
Member, director and/or officer of Treyarch.
3.17. Contracts and Commitments. (a) Except as set forth in Schedule
3.17(a) hereto, Treyarch does not have, nor is Treyarch party to or bound by:
(i) any consulting or sales agreement, contract or commitment under which
any firm or other organization provides services to Treyarch;
(ii) any fidelity or surety bond or completion bond;
(iii) any agreement of indemnification or guaranty;
(iv) any agreement, contract, commitment, transaction or series of
transactions for any purpose other than in the ordinary course of Treyarch's
business relating to capital expenditures or commitments or long-term
obligations in excess of $10,000, other than the restricted interest bearing
account in the amount of approximately $170,000, which Treyarch has pledged as
security for its obligations under its facility lease;
(v) any agreement, contract or commitment relating to the disposition or
acquisition of assets or any interest in any business enterprise outside the
ordinary course of Treyarch's business;
(vi) any mortgages, indentures, loans or credit agreements, security
agreements or other arrangements or instruments relating to the borrowing of
money or extension of credit, including guaranties referred to in clause (iii)
hereof;
(vii) any purchase order or contract for the purchase of inventory or other
materials involving $10,000 or more;
(viii) any distribution, joint marketing or development agreement;
(ix) any assignment, license or other agreement with respect to any form of
intangible property; or
(x) any other agreement, contract or commitment that involves $10,000 or
more or is not cancelable without penalty in excess of $10,000 within thirty
(30) days (collectively, any of (i) through (x) above shall be known as
"Contracts").
(b) Except as would not individually or in the aggregate have a Material
Adverse Effect, all such Contracts are valid and binding on Treyarch and are in
full force and effect and enforceable against Treyarch in accordance with their
respective terms. Except as disclosed in Schedule 3.17(b) hereto, no approval or
consent of, or notice to any Person the failure of which to obtain would have
individually or in the
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aggregate a Material Adverse Effect is needed in order that such Contracts shall
continue in full force and effect in accordance with its terms without penalty,
acceleration or rights of early termination following the consummation of the
Merger. Except to the extent any of the following would not individually or in
the aggregate have a Material Adverse Effect, Treyarch is not in violation of,
breach of or default under any such Contract nor, to the Members' knowledge, is
any other party to any such Contract. Except as set forth in Schedule 3.17(b)
hereto, Treyarch is not in violation or breach of or default under any such
Contract (including leases of real property) relating to non-competition,
indebtedness, guarantees of indebtedness of any other person, employment, or
collective bargaining.
3.18. Employee Matters and Benefit Plans. (a) Definitions. With the
exception of the definition of "Affiliate" set forth in Section 3.18(a)(i) below
(which definition shall apply only to this Section 3.18), for purposes of this
Agreement, the following terms shall have the meanings set forth below:
(i) "Affiliate" shall mean any other Person under common control with or
otherwise required to be aggregated with Treyarch as set forth in Section
414(b), (c), (m) or (o) of the Code and the regulations thereunder;
(ii) "Employee" shall mean any current, former or retired employee,
officer, or director of Treyarch or any Affiliate;
(iii) "Employee Agreement" shall refer to any material management,
employment, severance, consulting, relocation, repatriation, expiration, visas,
work permit or similar agreement or contract between Treyarch or any Affiliate
and any Employee or consultant that is not an Employee Plan;
(iv) "Employee Plan" shall refer to any plan, program, policy, practice,
contract, agreement or other arrangement providing for compensation, severance,
termination pay, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits or remuneration of any kind, whether formal
or informal, funded or unfunded and whether or not legally binding, including
without limitation, each "employee benefit plan" within the meaning of Section
3(3) of ERISA (as defined below), which is or has been maintained, contributed
to, or required to be contributed to, by Treyarch or any Affiliate for the
benefit of any "Employee" (as defined above), and pursuant to which Treyarch or
any Affiliate has or may have any material liability contingent or otherwise;
(v) "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended;
(vi) "IRS" shall mean the Internal Revenue Service;
(vii) "Multiemployer Plan" shall mean any "Pension Plan" (as defined below)
which is a "multiemployer plan," as defined in Sections 3(37) and 4001(a)(3) of
ERISA; and
(viii) "Pension Plan" shall refer to each Employee Plan which is an
"employee pension benefit plan," within the meaning of Section 3(2) of ERISA.
(b) Schedule 3.18(b) hereto contains an accurate and complete list of each
Employee Plan (including for each such plan a description of any of the benefits
which will be increased or accelerated, by the occurrence of any of the
transactions contemplated by this Agreement) and each Employee Agreement of
Treyarch. Except as set forth in Schedule 3.18(b) hereto, neither Treyarch nor
any of its Affiliates has any announced plan or commitment, whether legally
binding or not, to establish any new Employee Plan or Employee Agreement, to
modify any Employee Plan or Employee Agreement (except to the extent required by
law or to conform any such Employee Plan or Employee Agreement to the
requirements of any applicable law, in each case as previously disclosed to
Treyarch in writing, or as required by this Agreement), or to enter into
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any Employee Plan or Employee Agreement, nor does it have any intention or
commitment to do any of the foregoing.
(c) Documents. Treyarch has provided to Activision correct and complete
copies of all material documents embodying or relating to each Employee Plan and
each Employee Agreement including: (i) all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Employee Plan; (iii) the two most recent annual reports
(Series 5500 and all schedules thereto), if any, required under ERISA or the
Code in connection with each Employee Plan or related trust; (iv) if the
Employee Plan is funded, the most recent annual and periodic accounting of
Employee Plan assets; (v) the most recent summary plan description together with
the most recent summary of material modifications, if any, required under ERISA
with respect to each Employee Plan; (vi) all IRS determination letters and
rulings relating to Employee Plans and copies of all applications and
correspondence to or from the IRS or the Department of Labor ("DOL") with
respect to any Employee Plan; (vii) all communications material to any Employee
or Employees relating to any Employee Plan and any proposed Employee Plans, in
each case, relating to any amendments, terminations, establishments, increases
or decreases in benefits, acceleration of payments or vesting schedules or other
events which would result in any material liability to Treyarch; and (viii) all
registration statements and prospectuses prepared in connection with each
Employee Plan.
(d) Employee Plan Compliance. (i) Except as set forth in Schedule 3.18(d)
hereto, Treyarch and each of its Affiliates has performed in all material
respects all obligations required to be performed by them under each Employee
Plan, and each Employee Plan has been established and maintained in all material
respects in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA and the Code; (ii) no "prohibited transaction," within the meaning of
Section 4975 of the Code or Section 406 of ERISA for which no class or statutory
exemption is available, has occurred with respect to any Employee Plan; (iii)
there are no material actions, suits or claims pending or, to the knowledge of
the Members, threatened or anticipated (other than routine claims for benefits)
against any Employee Plan or against the assets of any Employee Plan; (iv) such
Employee Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without material liability to
Treyarch or any of its Affiliates (other than ordinary administration expenses
typically incurred in a termination event); (v) there are no audits, inquiries
or proceedings pending or, to the knowledge of the Members, threatened by the
IRS or DOL with respect to any Employee Plan; (vi) Treyarch is not subject to
any penalty or tax with respect to any Employee Plan under Section 502(i) of
ERISA or Section 4975 through 4980B of the Code; (vii) all contributions,
including any top heavy contributions, required to be made prior to the Closing
by Treyarch or any ERISA Affiliate to any Employee Plan have been made or shall
be made on or before the Closing Date; and (viii) Treyarch and its Affiliates
are in compliance in all respects with the requirements of Parts 6 and 7 of
Subtitle B of Title I of ERISA and the regulations promulgated thereunder and
any similar state laws concerning group health care continuation coverage and
group health plan portability, access and renewability requirements,
respectively.
(e) Pension Plans. Neither Treyarch nor any of its Affiliates currently
maintain, sponsor, participate in or contribute to, nor have they ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has Treyarch or any of its Affiliates
contributed to, or been requested or obligated to contribute to, any
Multiemployer Plan.
(g) No Post-Employment Obligations. Except as set forth in Schedule 3.18(g)
hereto or as required by Part 6 of Subtitle B of Title I of ERISA, no Employee
Plan or any other employment agreement or
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arrangement to which Treyarch or its Affiliates is a party provides, or is
required to provide, life insurance, medical or other employee benefits to any
Employee upon his or her retirement or termination of employment for any reason,
and neither Treyarch nor any of its Affiliates has ever represented or promised
to, or contracted with (whether in oral or written form) to any Employee (either
individually or to Employees as a group) that such Employee(s) would be provided
with life insurance, medical or other employee welfare benefits upon their
retirement or termination of employment.
(h) Effect of Transaction. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Employee Plan, Employee Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee, other than pursuant to
the Equity Sharing Plan and except as set forth in Schedule 3.18(h) hereto.
(i) Employment Matters. Except as set forth in Schedule 3.18(i), and except
for any noncompliance as a result of Treyarch's treatment of employees as
salaried employees instead of hourly employees, Treyarch (i) is in compliance in
all respects with all applicable foreign, federal, state and local laws, rules
and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees except as would not individually or in the aggregate have a Material
Adverse Effect; (ii) has withheld all amounts required by law or by agreement to
be withheld from the wages, salaries, and other payments to Employees; (iii) is
not liable for any arrears of wages of any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice). No claims have
been asserted and no claims have been filed in court, with an administrative
agency or with an arbitrator concerning any employment related claims of any
nature against Treyarch and to the knowledge of the Members, no such claims have
been threatened.
(j) Labor. No work stoppage or labor strike against Treyarch is pending or,
to the knowledge of the Members, threatened. Treyarch is not involved in or, to
the knowledge of the Members, threatened with, any labor dispute, grievance,
administrative proceeding or litigation relating to labor, safety, employment
practices or discrimination matters involving any Employee, including, without
limitation, charges of unfair labor practices or discrimination complaints,
which, if adversely determined, would individually or in the aggregate have a
Material Adverse Effect. Treyarch has not engaged in any unfair labor practices
within the meaning of the National Labor Relations Act which would, individually
or in the aggregate, directly or indirectly have a Material Adverse Effect.
Neither Treyarch nor any of its Affiliates has ever been a party to any
agreement with any labor organization or union, and none of the Employees are
represented by any labor organization or union, nor have any Employees
threatened to organize or join a union or filed a petition for representation
with the National Labor Relations Board.
(k) Schedule 3.18(k) and Schedules 2.2(a) and 2.3 hereto set forth (i) the
aggregate amounts of bonus and severance payments that could be payable to
employees of Treyarch under existing Employee Agreements or Employee Plans on
account of the transactions contemplated by this Agreement (without regard to
termination of employment), other than pursuant to the Equity Sharing Plan, and
(ii) the aggregate amounts of severance obligations that could be payable to
employees of Treyarch under existing Employee Agreements and Employee Plans on
account of terminations of employment following the Effective Time, separately
stating the amounts that are payable by reason of a termination following a
change of control of Treyarch.
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(l) Schedule 3.18(l) sets forth a complete list of all persons who are
currently employees and consultants of Treyarch and all persons to whom Treyarch
has extended offers of employment and the compensation payable to all such
employees and consultants.
(m) Treyarch has continuously maintained, and continues to maintain, stop
loss insurance coverage for the self-insured portions of its Employee Plans as
set forth in Schedule 3.18(m).
3.19. Equity Sharing Plan. (a) Schedule 3.19(a) attaches documents relating
to the Equity Sharing Plan.
(b) Schedules 2.2(a) and 2.3 contain (i) a true and complete list of all of
the employees of Treyarch entitled to receive bonus payments under the Equity
Sharing Plan on account of the transactions contemplated by this Agreement, (ii)
a true and complete list of the amount of bonus payments each employee of
Treyarch is entitled to receive under the Equity Sharing Plan, and (iii) the
date each employee's award shall vest.
3.20. Intellectual Property. (a) For the purposes of this Agreement, the
following terms have the following definitions:
(i) "Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (a) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (b) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data, customer lists, proprietary processes and
formulae, all source and object code, algorithms, architectures, structures,
display screens, layouts, inventions, development tools and all documentation
and media constituting, describing or relating to the above, including, without
limitation, manuals, memoranda and records; (c) all copyrights, copyrights
registrations and applications therefor, copyrightable material including
derivative works, revisions, transformations and adaptations, material that is
subject to non-copyright disclosure protections, and all other rights
corresponding thereto throughout the world; (d) all industrial designs and any
registrations and applications therefor throughout the world; (e) all trade
names, logos, common law trademarks and service marks, trademark and service
xxxx registrations and applications therefor throughout the world; (f) all
proprietary databases and data collections and all rights therein throughout the
world; (g) domain names; (h) intellectual property rights acquired by license or
agreement; (i) damages or benefit derived from any action arising out of or
related to the foregoing, including laws controlling computer and Internet
rights;; and (j) any equivalent rights to any of the foregoing anywhere in the
world.
(ii) "Treyarch Intellectual Property" shall mean that Intellectual Property
owned by, licensed to, or used by Treyarch.
(iii) "Treyarch Registered Intellectual Property" means those United
States, international and foreign: (a) patents and patent applications
(including provisional applications); (b) registered trademarks and service
marks, applications to register trademarks or service marks, intent-to-use
applications, or other registrations or applications related to trademarks or
service marks; and (c) registered copyrights and applications for copyright
registration, in each case included in the Treyarch Intellectual Property. All
of the foregoing are listed in Schedule 3.20(a)(iii) hereto.
(b) Treyarch has disclosed accurately and completely all Treyarch
Intellectual Property to the Surviving Corporation. Treyarch is the exclusive
owner of all right, title and interest in and to Treyarch Intellectual Property
owned by Treyarch (with no breaks in the chain of title thereof) free and clear
of any
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claim, security interest, lien, pledge, option, charge or encumbrance of any
kind whatsoever. Treyarch's rights in such Treyarch Intellectual Property are in
full force and effect. Such Treyarch Intellectual Property has not been used or
enforced or failed to be used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of any of Treyarch's rights in and
to any Treyarch Intellectual Property.
(c) Schedule 3.20(c) hereto lists all non-routine proceedings or actions
known to the Members before any court, tribunal (including the United States
Patent and Trademark Office ("PTO") or equivalent authority anywhere in the
world) related to any Treyarch Intellectual Property. Except as set forth in
Schedule 3.20(c), no Treyarch Intellectual Property is the subject of any
non-routine proceeding or outstanding decree, order, judgment, agreement, or
stipulation restricting in any manner the use, transfer, or licensing thereof by
Treyarch, or which may affect the validity, use or enforceability of such
Treyarch Intellectual Property.
(d) With respect to each item of Treyarch Registered Intellectual Property,
any necessary registration, maintenance and renewal fees in connection with such
Treyarch Registered Intellectual Property have been paid and all necessary
documents and certificates in connection with such Treyarch Registered
Intellectual Property have been filed with the relevant patent, trademark or
copyright authorities in the United States or abroad for the purposes of
maintaining rights in such Treyarch Registered Intellectual Property.
(e) Treyarch has the right to use, market, distribute, sell and/or license
all Treyarch Intellectual Property used in its business as presently conducted
and as it is expected to be conducted as of the Effective Time, including
without limitation, all Intellectual Property used or to be used in the Treyarch
Products (as defined below), and such rights to use, market, distribute, sell
and/or license are sufficient for such conduct of its business.
(f) Neither the manufacture, development, publication, marketing, license,
sale, distribution or use intended by Treyarch of any software products
currently being licensed, produced or sold by Treyarch or currently under
development by Treyarch (the "Treyarch Products") violates any license or
agreement between Treyarch and any third party or infringes any Intellectual
Property right, moral right or right of publicity or privacy of any other party,
and there is no pending or, to the knowledge of the Members, threatened claim or
litigation contesting the validity, ownership or right to use, market,
distribute, sell, license or dispose of any Treyarch Intellectual Property nor,
to the knowledge of the Members, is there any basis for any such claim under
applicable law, nor has Treyarch received any notice asserting that any Treyarch
Intellectual Property or the proposed use, marketing, distribution, sale,
license or disposition thereof conflicts or will conflict with the rights of any
other party, nor, to the knowledge of the Members, is there any basis for any
such assertion under applicable law. Schedule 3.20(f) hereto sets forth a list
of all Treyarch Products.
(g) Treyarch has timely and satisfactorily complied with their respective
milestone delivery requirements under all material agreements, if any, pursuant
to which Treyarch has agreed with a person other than Activision or its
affiliates to program, design or develop, whether for original use or for
porting or conversion (for use on a different hardware platform or in a
different language), any software products or any part thereof, except where the
failure to so comply could not reasonably be expected to individually or in the
aggregate have a Material Adverse Effect with respect to Treyarch.
(h) Except as set forth in Schedule 3.20(h) hereto, to the extent that any
Intellectual Property has been developed or created by a third party for
Treyarch, Treyarch has a written agreement with such third party with respect
thereto and Treyarch thereby has obtained ownership of, and is the exclusive
owner of such Intellectual Property by operation of law or by valid assignment
or by agreement, as the case may be.
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(i) Schedule 3.20(i) hereto lists all material contracts, licenses and
agreements to which Treyarch is a party that are currently in effect (i) with
respect to Treyarch Intellectual Property licensed, transferred or offered to
any third party; or (ii) pursuant to which a third party has licensed or
transferred any Intellectual Property to Treyarch. Except as set forth in
Schedule 3.20(h) hereto, Treyarch has not transferred ownership of, or granted
any exclusive license with respect to, any Treyarch Intellectual Property, to
any third party.
(j) Except as set forth in Schedule 3.20(j) hereto, the contracts, licenses
and agreements listed in Schedule 3.20(i) are in full force and effect. The
consummation of the transactions contemplated by this Agreement will not violate
or result in the breach, modification, cancellation, termination, or suspension
of such contracts, licenses and agreements listed in Schedule 3.20(i) and will
not cause the forfeiture or termination or give rise to a right of forfeiture or
termination of any rights of Treyarch to any Treyarch Intellectual Property or
impair the right of Treyarch after the Effective Time to use, market,
distribute, sell or license any Treyarch Intellectual Property or portion
thereof. Treyarch is in material compliance with, and has not materially
breached any term of any of such contracts, licenses and agreements listed in
Schedule 3.20(i) and, to the knowledge of the Members, all other parties to such
contracts, licenses and agreements listed in Schedule 3.20(i) are in compliance
with, and have not breached any term of, such contracts, licenses and
agreements. Except as set forth in Schedule 3.20(j) hereto, following the
Effective Time, the Surviving Corporation will be permitted to exercise all of
Treyarch's rights under the contracts, licenses and agreements listed in
Schedule 3.20(i) to the same extent Treyarch would have been able to had the
transactions contemplated by this Agreement not occurred and without the payment
of any additional funds other than ongoing fees, royalties or payments which
Treyarch would otherwise be required to pay.
(k) Schedule 3.20(k) hereto lists all contracts, licenses and agreements
between Treyarch and any third party wherein or whereby Treyarch has agreed to,
or assumed any obligation or duty to warrant, indemnify, hold harmless or
otherwise assume or incur any obligation or liability with respect to the
infringement or misappropriation by Treyarch or such third party of the
Intellectual Property of any third party.
(l) Except as set forth in Schedule 3.20(l) hereto, (a) Treyarch has not
received any notice or claim (whether written, oral or otherwise) challenging
Treyarch's ownership or rights in the Treyarch Intellectual Property or claiming
that any other person or entity has any legal or beneficial ownership with
respect thereto; (b) all the Treyarch Intellectual Property owned by Treyarch
and embodied in its products are legally valid and enforceable without any
material qualification, limitation or restriction on their use; (c) to the
Members' knowledge, no third party is infringing or misappropriating any part of
the Treyarch Intellectual Property and (e) no Treyarch Intellectual Property
owned by Treyarch is subject to a final refusal of registration or is the
subject of any inter-partes proceedings.
(m) Treyarch has taken reasonable and practicable measures designed to
protect its rights in its confidential information and trade secrets or any
trade secrets or confidential information of third parties provided to Treyarch.
None of Treyarch, or any employees or, to the Members' knowledge, consultants of
Treyarch, has permitted any such confidential information or trade secrets to be
used, divulged or appropriated for the benefit of persons to the material
detriment of Treyarch.
(n) Schedule 3.20(n) hereto sets forth a list of all Internet domain names
used by Treyarch in its business (collectively, the "Domain Names"). Treyarch
has, and after the Effective Time the Surviving Corporation will have, a valid
registration and all material rights (free of any material restriction) in and
to the Domain Names, including, without limitation, all rights necessary to
continue to conduct Treyarch's business as it is currently conducted.
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3.21. Consents. No consent, approval or authorization of, or exemption by,
or filing with, any governmental authority or any third party is required to be
obtained or made by the Members in connection with the execution, delivery and
performance by the Members of this Agreement or the taking by the Members of any
other action contemplated hereby.
3.22. Insurance. Treyarch maintains, and has maintained or caused to be
maintained, without interruption, during its existence, policies or binders of
insurance covering such risk, and events, including personal injury, property
damage, and general liability in amounts set forth on Schedule 3.22 hereto, and
its current insurance policies will not terminate due to the consummation of the
transactions contemplated under this Agreement. Treyarch has provided Activision
prior to the Closing Date with true, complete and correct copies of all
insurance policies maintained currently by Treyarch and all such policies are
listed on Schedule 3.22 hereto.
3.23. Relationships with Suppliers, Licensors and Customers. No current
licensee, licensor, distributor, customer of Treyarch or supplier to Treyarch
has notified Treyarch of an intention to terminate or substantially alter its
existing business relationship with Treyarch, nor has any licensor under a
license agreement with Treyarch notified Treyarch of an intention to terminate
or substantially alter Treyarch's rights under such license, which termination
or alteration would have a Material Adverse Effect.
3.24. Bank Accounts. Schedule 3.24 hereto contains (a) a true and complete
list of names and locations of all banks, trust companies, securities brokers,
and other financial institutions at which Treyarch has an account or safe
deposit box or maintains a banking, custodial, trading, trust, or other similar
relationship, (b) a true and complete list and description of each such account,
box and relationship, (c) a list of all signatories for each such account and
box and (d) a list of all compensating balances required with respect to each
such account.
3.25. Material Compliance with Agreements. Treyarch is in material
compliance with, and has not materially breached any term of, any software
development agreements between Activision Publishing and Treyarch listed in
Schedule 3.20(h).
3.26. Disclosure. No representation, warranty, statement or information
made or furnished by the Members, including but not limited to those contained
in this Agreement, the Schedules hereto and each other instrument furnished or
to be furnished to Activision pursuant hereto or in connection with the
transactions contemplated hereby, contains or shall contain any statement of a
material fact that was untrue when made or omits or shall omit any material fact
necessary to make the information contained in such representation, statement or
information not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACTIVISION
Activision hereby represents and warrants to Treyarch and the Members as
follows:
4.1. Organization. Activision is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Merger
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Activision and Merger
Subsidiary have all requisite corporate power and authority to carry on their
businesses as they are now being conducted, and to execute, deliver and perform
this Agreement and to consummate the transactions contemplated hereby.
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4.2. Corporate Power and Authority; Effect of Agreement. The execution,
delivery and performance by Activision of this Agreement and the consummation by
Activision of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of Activision. Each of Activision and
Merger Subsidiary has delivered to Treyarch true and complete copies of the
resolutions of the Board of Directors of Activision and Merger Subsidiary,
respectively, and the resolutions of the sole Shareholder of Merger Subsidiary,
authorizing the execution, delivery and performance of this Agreement, the
Merger and the transactions contemplated hereby. No vote of the Activision
stockholders is required to approve the issuance of the Activision Common Stock
as contemplated by this Agreement. This Agreement has been duly and validly
executed and delivered by Activision and constitutes the valid and binding
obligation of Activision, enforceable against Activision in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws affecting creditors' rights generally and general principles of equity.
4.3. Capitalization. (a) The authorized capital stock of Activision
consists of 125,000,000 shares of Activision Common Stock, 4,500,000 shares of
Preferred Stock, $.000001 par value (the "Activision Preferred Shares") and
500,000 shares of Series A Junior Preferred Stock, $.000001 par value (the
"Activision Junior Preferred Shares"). As of September 26, 2001, there were
33,284,104 shares of Activision Common Stock issued and outstanding, no
Activision Preferred Shares issued and outstanding and no Activision Junior
Preferred Shares issued and outstanding. All such outstanding shares of
Activision are duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. Except as described in the Activision SEC Reports (as
defined in Section 4.5), Activision has no outstanding bonds, debentures, notes
or other obligations the holders of which have or upon the happening of certain
events would have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the stockholders of
Activision on any matter. Except as described in the Activision SEC Reports and
in other filings made by Activision with the Securities and Exchange Commission
(the "SEC"), there are no existing options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements, stock appreciation rights
or similar derivative securities or instruments or commitments which obligate
Activision to issue, transfer or sell any Shares of Activision Common Stock or
make any payments in lieu thereof other than options or warrants granted to
employees, directors, consultants and licensors after the date of the most
recent Activision SEC Report.
(b) The Activision Shares to be issued pursuant to this Agreement will,
upon issuance in accordance with this Agreement, be duly authorized, validly
issued, fully paid and nonassessable and free of preemptive rights of any
nature.
4.4. No Violation. The execution, delivery and performance by Activision of
this Agreement and the consummation by Activision of the transactions
contemplated hereby will not, with or without the giving of notice or the lapse
of time, or both, conflict with or violate (i) any provision of law, rule or
regulation to which Activision is subject, (ii) any order, judgment, injunction
or decree binding upon or applicable to Activision or binding upon the assets or
properties of Activision, (iii) violate any provision of the Amended and
Restated Certificate of Incorporation, as amended, or the Amended and Restated
Bylaws of Activision, as amended; except, in each case, for violations which in
the aggregate would not materially hinder or impair the consummation of the
transactions contemplated hereby, or (iv) other than the filings provided for in
this Agreement, require any consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority which has not been obtained or made, except where the failure to
obtain any such consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority would not
individually or in the aggregate have a Material Adverse Effect on Activision.
4.5. SEC Documents. Activision has timely filed with the SEC all forms,
reports and documents required to be filed by Activision since March 31, 2001
under the Securities Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder (the
"Securities Laws"), including, without limitation, (i) the Annual Report on form
10-K, (ii) all Quarterly
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Reports on form 10-Q, (iii) all proxy statements relating to meetings of
stockholders (whether annual or special), (iv) all Current Reports on form 8-K
and (v) all other reports, schedules, registration statements and other
documents, each as amended (collectively, the "Activision SEC Reports"), all of
which were prepared in compliance in all material respects with the applicable
requirements of the Exchange Act and the Securities Act. As of their respective
dates, the Activision SEC Reports (i) complied as to form in all material
respects with the applicable requirements of the Securities Laws and (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets of Activision included in or
incorporated by reference into the Activision SEC Reports (including the related
notes and schedules) fairly presents the consolidated financial position of
Activision and its consolidated subsidiaries as of its date and each of the
consolidated statements of operations, cash flows and Members' equity included
in or incorporated by reference into the Activision SEC Reports (including any
related notes and schedules) fairly presents the results of operations, cash
flows and Members' equity, as the case may be, of Activision and its
consolidated subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments which would
not be material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein and except, in the case of the unaudited
statements, as permitted by Form 10-Q pursuant to Section 13 or 15(d) of the
Exchange Act.
4.6. Absence of Certain Changes. Except as set forth in Schedule 4.6, and
except as disclosed in or contemplated by the SEC Reports, since June 30, 2001,
Activision has conducted its business in the ordinary course of such business
and consistent with past practices and there has not been any:
(a) change, event or condition (whether or not covered by insurance) that
has resulted in, or might reasonably be expected to result in, a Material
Adverse Effect;
(b) acquisition, sale or transfer of any material asset of Activision or
any of its subsidiaries other than in the ordinary course of business;
(c) declaration, setting aside or payment of any dividend on, or the making
of any other distribution in respect of, the shares of Activision Common Stock
or the shares of capital stock of any of its subsidiaries, or any direct or
indirect redemption, purchase or other acquisition by Activision or any of its
subsidiaries of any such shares;
(d) entering into, material amendment or termination of, or default under,
any material contract to which Activision or any of its subsidiaries is a party
or by which it is bound except in the ordinary course of business; or
(e) agreement by Activision or any of its subsidiaries to do any of the
things described in the preceding clauses (a) through (d).
4.7. Material Compliance with Agreements. Activision Publishing is in
material compliance with, and has not materially breached any term of, any
software development agreements between Activision Publishing and Treyarch
listed in Schedule 3.20(h).
4.8. No Brokers. Activision has not entered into any contract, arrangement
or understanding with any person or firm that may result in the obligation of
Activision or Treyarch to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
Activision is not aware of any claim for payment
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of any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
ARTICLE V
CONDITIONS TO CLOSING
5.1. Conditions to Treyarch's and the Members' Performance. The obligation
of Treyarch and the Members to consummate and effect the Merger and the other
transactions contemplated herein shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions, unless waived by the Members:
(a) Activision shall have performed all obligations, taken all necessary
corporate actions, and complied with all terms, conditions, agreements and
covenants required by this Agreement to be performed or complied with by it on
or prior to the Closing Date, and the Members shall have received a certificate,
dated the Closing Date, signed on behalf of Activision by the Chief Executive
Officer, Co-Chairman, President or General Counsel of Activision to the
foregoing effect.
(b) As of the Closing Date, except as disclosed in the Activision SEC
Reports filed prior to the date of this Agreement, since June 30, 2001 there
shall not have occurred any change, circumstance or event, concerning Activision
and its Subsidiaries taken as a whole that has had or could be reasonably likely
to have a Material Adverse Effect on Activision, and the Members shall have
received a certificate dated the Closing Date signed on behalf of Activision by
the Chief Executive Officer, Co-Chairman, President or General Counsel of
Activision to the foregoing effect.
(c) Activision shall have delivered to Treyarch a certificate of the
Secretary of Activision certifying that attached thereto is a true and complete
copy of the resolutions of the Board of Directors of Activision authorizing the
execution, delivery and performance of this Agreement, the Merger and the
transactions contemplated hereby.
(d) Merger Subsidiary shall have delivered to Treyarch a certificate of the
Secretary of Merger Subsidiary certifying that attached thereto is a true and
complete copy of the resolutions of the Board of Directors and the sole
shareholder of Merger Subsidiary authorizing the execution, delivery and
performance of this Agreement, the Merger and the transactions contemplated
hereby.
(e) No statute, rule or regulation or injunction or order of any court or
administrative agency of competent jurisdiction shall be in effect as of the
Closing Date which prohibits Activision from consummating the Merger.
(f) Activision shall have executed and delivered the employment agreements
substantially in the form attached hereto as Exhibit B-1 and proprietary
information agreements substantially in the form attached hereto as Exhibit B-2
with each of the Principal Members.
(g) Activision and the Escrow Agent shall have executed and delivered the
Warranty Escrow Agreement (as defined in Section 6.2) substantially in the form
of Exhibit C attached hereto.
(h) Activision shall have amended its Internal Project Bonus Plan to
incorporate the modifications to such Plan set forth in Exhibit D hereto.
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(i) At the Closing, Activision shall deliver, or cause to be delivered, a
letter to Activision's transfer agent authorizing such transfer agent to deliver
certificates representing Activision Common Stock issued in the names of the
Members in accordance with their respective interests as set forth in Schedule
2.2(a) and bearing restrictive legends under the Securities Act, subject to the
provisions of Sections 6.1 and 6.2 of this Agreement (and the Warranty Escrow
Agreement) which require that certificates for Activision Common Stock be issued
to the Members in such denominations as required to meet the requirements of the
Warranty Escrow Agreement and deposited with the Escrow Agent.
(j) At the Closing, Activision shall deliver, or cause to be delivered, a
letter to Activision's transfer agent authorizing such transfer agent to deliver
certificates representing Activision Common Stock issued in the names of the
Employee Holders in accordance with their respective interests under the Equity
Sharing Plan as set forth in Schedule 2.3 and bearing restrictive legends under
the Securities Act, subject to the provisions of Sections 6.1 and 6.2 of this
Agreement (and the Warranty Escrow Agreement) which require that certificates
for Activision Common Stock be issued to the Employee Holders in such
denominations as required to meet the requirements of the Warranty Escrow
Agreement and deposited with the Escrow Agent.
5.2. Conditions to Activision's and Merger Subsidiary's Performance. The
obligation of Activision and Merger Subsidiary to consummate and effect the
Merger and the other transactions contemplated herein shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions, unless
waived by Activision:
(a) Treyarch and the Members shall have performed all obligations, taken
all necessary actions, and complied with all terms, conditions, agreements and
covenants required by this Agreement to be performed or complied with by it on
or prior to the Closing Date, and Activision shall have received a certificate,
dated the Closing Date, signed on behalf of Treyarch by the Members to the
foregoing effect.
(b) As of the Closing Date, except as disclosed in the Financial Statements
or in Schedule 3.10, since June 30, 2001 there shall not have occurred any
change, circumstance or event, concerning Treyarch that has had or could be
reasonably likely to have a Material Adverse Effect on Treyarch, and Activision
shall have received a certificate dated the Closing Date signed on behalf of
Treyarch by the Managing Member of Treyarch to the foregoing effect.
(c) Treyarch shall have delivered to Activision a certificate of the
Managing Members of Treyarch certifying that attached thereto is a true and
complete copy of the resolutions of the Managing Members authorizing the
execution, delivery and performance of this Agreement, the Merger and the
transactions contemplated hereby.
(d) No statute, rule or regulation or injunction or order of any court or
administrative agency of competent jurisdiction shall be in effect as of the
Closing Date which prohibits the Members from consummating the Merger.
(e) Treyarch shall have delivered to Activision a certificate of good
standing of Treyarch issued by the Secretary of State of California, dated as of
a date not more than five (5) days prior to the Closing Date.
(f) Each of the Principal Members (other than Xxxx Xxxxxxxxx and Xxxxx
Xxxxxxxxxx) and up to twenty-four (24) additional employees of Treyarch to be
designated by Treyarch with the approval of Activision Publishing ("Other Key
Employees") shall have executed and delivered employment agreements in
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the form attached hereto as Exhibit B-1 and proprietary information agreements
in the form attached hereto as Exhibit B-2.
(g) Activision shall have received from each of the Members and each of the
Employee Holders an executed copy of an investment letter substantially in the
form of Exhibit A-1 attached hereto ("Investment Letter").
(h) Activision shall have received from each Member an executed copy of the
lock-up agreement substantially in the form of Exhibit A-2 attached hereto
("Lock-Up Agreement").
(i) Every Member that is an Accredited Investor shall have completed and
executed, in a manner reasonably satisfactory to Activision, the Accredited
Investor Agreement.
(j) Every Member that is a Non-Accredited Investor shall have completed and
executed, in a manner reasonably satisfactory to Activision, the Non-Accredited
Investor Agreement.
(k) Each person that shall be a Purchaser Representative in connection with
the Merger shall have completed and executed, in a manner reasonably
satisfactory to Activision, the Purchaser Representative Questionnaire, and
shall have provided such other information as Activision shall reasonably
request in connection with the Purchaser Representative Questionnaire.
(l) The Members shall have delivered to Activision all consents required as
described in Schedule 3.20, if any.
(m) Each Employee Member shall have executed the Member Side Agreement
substantially in the form of Exhibit E attached hereto.
(n) Treyarch shall have terminated the Equity Sharing Plan and each
Employee Holder shall have executed a release and waiver of any rights under the
Equity Sharing Plan substantially in the form of Exhibit F attached hereto.
(o) The Representative shall have executed and delivered the Warranty
Escrow Agreement substantially in the form of Exhibit C attached hereto.
(p) Activision shall have received a legal opinion of Keesal, Young &
Xxxxx, counsel to Treyarch, in the form and substance agreed upon by the parties
prior to the Closing.
(q) Treyarch shall have sold, assigned, transferred or conveyed the Real
Property.
ARTICLE VI
COVENANTS AND OTHER AGREEMENTS
6.1. Restrictions on Sale of Activision Shares. The Members acknowledge and
agree that Activision Shares will be issued to the Members and Employee Holders
without registration under the Securities Act, based upon the "private offering
exemption", in reliance upon appropriate written representations from the
Members and Employee Holders (as set forth in their respective Investment
Letters and their respective Accredited Investment Agreements or Non-Accredited
Investor Agreements, as applicable), further evidenced by restrictive legends on
the certificates representing Activision Shares and "stop transfer" instructions
to
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Activision's transfer agent. Subject to Activision's obligations under Section
6.3(a), Activision Shares will be "restricted securities" within the meaning of
the Securities Act and related rules and regulations.
6.2. Share Holdback. (a) In order to insure that the representations,
warranties and covenants made by the Members under this Agreement are not
breached, and in order to provide a nonexclusive source of indemnification of
Activision pursuant to Article 7, Treyarch and the Members agree that twenty-two
percent (22%) of the total number of Activision Shares issued pursuant to this
Agreement (which number shall include the Activision Shares issued to the
Employee Holders in connection with the Equity Sharing Plan) (the "Holdback
Shares") shall be deposited in an Escrow Account (the "Escrow Account") pursuant
to a Warranty Escrow Agreement substantially in the form attached hereto as
Exhibit C (the "Warranty Escrow Agreement") on or promptly following the date of
the Closing. Subject to any releases from escrow pursuant to Section 6.2(c),
such Holdback Shares shall be held in the Escrow Account during such period of
time as set forth in the Warranty Escrow Agreement. Any dividends and
distributions with respect to such Holdback Shares while held in the Escrow
Account also shall be retained in the Escrow Account until such Holdback Shares
are released from escrow pursuant to Section 6.2(c) or (in the event such
Holdback Shares are not released) until the expiration of the Performance Hold
Period (as defined in the Warranty Escrow Agreement) for the account of the
Members and Employee Holders. Any offsets or deductions made from the Holdback
Shares on account of any breach of this Agreement or otherwise pursuant to this
Section 6.2 shall be made at such time as set forth in the Escrow Agreement, and
the value per share of such Holdback Shares shall be the Maximum Price. All
Holdback Shares subject to such offset or deduction shall be canceled by
Activision, and the remaining Holdback Shares, together with any dividends paid
or distributions made with respect to such Holdback Shares that have not been
canceled, shall be then delivered to the Members and the Employee Holders in
accordance with their respective interests pursuant to the terms of this Section
6.2 and the Warranty Escrow Agreement. Notwithstanding the foregoing, Treyarch
and the Members shall remain severally liable in accordance with Article 7 as
follows: (A) with respect to any Claim for indemnification made by Activision
prior to the first anniversary of the date of this Agreement, the Holdback
Shares held in the Escrow Account pursuant to the provisions of this Section 6.2
shall not be deemed the sole source of recourse by Activision against the
Employee Members and Xxxxx Xxxxxxxxxx for indemnification under this Agreement;
and (B) with respect to any Claim for indemnification made by Activision prior
to the expiration of the Indemnification Hold Period (as defined in the Warranty
Escrow Period), the Holdback Shares held in the Escrow Account pursuant to the
provisions of this Section 6.2 shall not be deemed the sole source of recourse
by Activision against Xxxx Xxxxxxxxx, Don Likeness and Xxxxx Xxxxxxx for
indemnification under this Agreement.
(b) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "Activision Products" shall mean Xxxxx Xxxxxx'x Pro Surfer, Spider-Man
and Minority Report;
(ii) "Applicable Holdback Shares" shall mean (A) with respect to
Spider-Man, the Spider-Man Holdback Shares, (B) with respect to Minority Report,
the Minority Report Holdback Shares and (C) with respect to Xxxxx Xxxxxx'x Pro
Surfer, the Xxxxx Xxxxxx Holdback Shares, as applicable.
(iii) "Development Agreements" shall mean (A) the ProSurfer Agreement; (B)
the Minority Report Agreement; and (C) the Spider-Man Agreements;
(iv) "Employee Bonus Group" shall mean the Spider-Man Bonus Group, the
Minority Report Bonus Group and the Xxxxx Xxxxxx Bonus Group.
(v) "Expected Net Revenue" shall mean the following: (1) for the Spider-Man
Playstation 2 version, $31,999,216; (2) for the Spider-Man Microsoft X-Box
version, $8,812,737; (3) for the
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Spider-Man Nintendo GameCube version, $7,752,751; (4) for the Xxxxx Xxxxxx'x Pro
Surfer Playstation 2 version, $13,346,738; (5) for the Xxxxx Xxxxxx'x Pro Surfer
Microsoft X-Box version, $5,027,400; (6) for the Minority Report Playstation 2
version, $16,456,358; (7) for the Minority Report Microsoft X-Box version,
$10,193,620; (8) for the Minority Report Nintendo GameCube version, $10,111,738.
(vi) "Final Date" with respect to a Development Agreement shall mean the
code release date scheduled under such Development Agreement.
(vii) "Xxxxx Xxxxxx Bonus Group" shall mean the Xxxxx Xxxxxx Group and the
Non-Activision Bonus Group.
(viii) "Xxxxx Xxxxxx Group" shall mean those Treyarch employees and
Employee Members identified in a notice to Activision Publishing by Don Likeness
and Xxxxx Xxxxxxx (or their successors in the Treyarch Corporation) as having
worked on Xxxxx Xxxxxx'x Pro Surfer, which notice shall be subject to the
approval of Activision Publishing, such approval not to be unreasonably
withheld.
(ix) "Xxxxx Xxxxxx Holdback Shares" shall mean twenty percent (20%) of the
Holdback Shares initially deposited in the Escrow Account pursuant to Section
6.2(a).
(x) "Xxxxx Xxxxxx'x Pro Surfer" shall mean the software product known as
Xxxxx Xxxxxx'x Pro Surfer (Playstation 2 and X-Box versions) developed pursuant
to the terms of the Pro Surfer Agreement.
(xi) "Minority Report" shall mean the software product known as Minority
Report (Playstation 2, Microsoft X-Box and Nintendo GameCube versions) developed
pursuant to the terms of the Minority Report Agreement.
(xii) "Minority Report Agreement" shall mean the Software Development
Agreement dated as of July 3, 2001, between Activision Publishing and Treyarch.
(xiii) "Minority Report Bonus Group" shall mean the Minority Report Group
and the Non-Activision Bonus Group.
(xiv) "Minority Report Group" shall mean those Treyarch employees and
Employee Members identified in a notice to Activision Publishing by Don Likeness
and Xxxxx Xxxxxxx (or their successors in the Treyarch Corporation) as having
worked on Minority Report, which notice shall be subject to the approval of
Activision Publishing, such approval not to be unreasonably withheld.
(xv) "Minority Report Holdback Shares" shall mean forty percent (40%) of
the Holdback Shares initially deposited in the Escrow Account pursuant to
Section 6.2(a).
(xvi) "Non-Activision Bonus Group" shall mean those Treyarch employees and
Employee Members identified in a notice to Activision Publishing by Don Likeness
and Xxxxx Xxxxxxx (or their successors in the Treyarch Corporation) as the
Treyarch employees and Employee Members who have not worked on any Activision
Product, which notice shall be subject to the approval of Activision Publishing,
such approval not to be unreasonably withheld.
(xvii) "P&L Revenue Shortfall" with respect to an Activision Product shall
mean the Expected Net Revenue for such Activision Product minus the Product Net
Revenue for such Activision
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Product, which P&L Revenue Shortfall shall be increased by ten percent (10%) for
every additional month that Treyarch fails to deliver such completed Activision
Product after the Final Date.
(xviii) "Product Net Revenue" with respect to an Activision Product shall mean
the aggregate revenue actually received by Activision Publishing from all sales
of all versions of such Activision Product during the first year after the
commercial release of each version of the Activision Product, less all returns,
price protections, price allowances and xxxx-xxxxx.
(xix) "ProSurfer Agreement" shall mean the Software Development Agreement
dated as of June 8, 2001, between Activision Publishing and Treyarch.
(xx) "Spider-Man" shall mean the software product known as Spider-Man
(Playstation 2, Microsoft X-Box and Nintendo Gamecube versions) developed
pursuant to the terms of the respective Spider-Man Agreement for such version.
(xxi) "Spider-Man Agreements" shall mean (A) the Software Development
Agreement dated as of December 11, 2000, between Activision Publishing and
Treyarch, (B) the Software Development Agreement dated as of March 15, 2001,
between Activision Publishing and Treyarch, and (C) the Software Development
Agreement dated as of March 15, 2001, between Activision Publishing and
Treyarch.
(xxii) "Spider-Man Bonus Group" shall mean the Spider-Man Group and the
Non-Activision Bonus Group.
(xxiii) "Spider-Man Group" shall mean those Treyarch employees and Employee
Members identified in a notice to Activision Publishing by Don Likeness and
Xxxxx Xxxxxxx (or their successors in the Treyarch Corporation) as having worked
on Spider-Man, which notice shall be subject to the approval of Activision
Publishing, such approval not to be unreasonably withheld.
(xxiv) "Spider-Man Holdback Shares" shall mean forty percent (40%) of the
Holdback Shares initially deposited in the Escrow Account pursuant to Section
6.2(a).
(c) Development Agreement Holdback. Treyarch and the Members agree that,
subject to the terms and conditions set forth in this Section 6.2 and the
Warranty Escrow Agreement, the Members will be entitled to receipt of the
Applicable Holdback Shares on the terms set forth below:
(i) Upon the occurrence of all of the following: (A) acceptance by
Activision Publishing of each version of Spider-Man pursuant to the terms of
such version's respective Spider-Man Agreement, provided that Treyarch is not
late with delivery of any version of Spider-Man by more than fifteen (15) days
after the Final Date; (B) achievement by the PlayStation 2 version of Spider-Man
within the first three (3) months of its first commercial release of a minimum
averaged rating of at least eighty percent (80%) from XxxxXxxxxxxx.xxx or, if
XxxxXxxxxxxx.xxx is not then in business in substantially its current fashion,
an average ranking of eighty percent (80%) or above from EGM, GamePro, OPM, Next
Generation, Xxxxxxxxxx.xxx and XXX.xxx (collectively, the "Alternative Ranking
Sources") and if any of the Alternative Ranking Sources is not then in business
in substantially its current fashion, then it shall be replaced with such
sources, if any, as shall be mutually agreed between Activision and the
Representative; and (C) the achievement by the Microsoft X-Box and Nintendo
Gamecube versions of Spider-Man of at least seventy-five percent (75%) minimum
averaged ranking from the same sources, the Members shall become entitled to
54.55% of the Spider-Man Holdback Shares (the "Member Spider-Man Allocation"),
and the Spider-Man Bonus Group shall become entitled to 44.45% of the Spider-Man
Holdback Shares (the "Employee Spider-
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Man Allocation"). The Spider-Man Holdback Shares shall be distributed as
follows: (1) in the event Activision has not made a Claim under the Warranty
Escrow Agreement prior to the date the Members and Spider-Man Bonus Group become
entitled to such Spider-Man Holdback Shares, the Spider-Man Holdback Shares
shall be released from the Escrow Account and the Member Spider-Man Allocation
shall be distributed to the Members in accordance with their percentage
ownership interest in the holdback amount as reflected on Schedule 2.2(a) and
the Employee Spider-Man Allocation shall be distributed to the Spider-Man Bonus
Group in accordance with the joint written direction of Xxxxx Xxxxxxx and Don
Likeness (or their successors in the Treyarch Corporation), which joint written
direction shall be subject to the approval of Activision Publishing, such
approval not to be unreasonably withheld, provided that no less than twenty
percent (20%) of the Employee Spider-Man Allocation shall be allocated to the
Non-Activision Bonus Group; and (2) in the event that Activision has made a
Claim under the Warranty Escrow Agreement prior to the date the Members and
Spider-Man Bonus Group become entitled to such Spider-Man Holdback Shares, the
number of Spider-Man Holdback Shares shall be reduced by the amount equal to
forty percent (40%) of (A) the Losses (as defined in Section 7.2 below) divided
by (B) the Maximum Price and such reduction shall be applied proportionally to
the Member Spider-Man Allocation and Employee Spider-Man Allocation. Any
Spider-Man Holdback Shares remaining after the reduction in clause (2) of the
preceding sentence shall be released from the Escrow Account and the Member
Spider-Man Allocation shall be distributed to the Members in accordance with
their percentage ownership interest in the holdback amount as reflected on
Schedule 2.2(a) and the Employee Spider-Man Allocation shall be distributed to
the Spider-Man Bonus Group in accordance with the joint written direction of
Xxxxx Xxxxxxx and Don Likeness (or their successors in the Treyarch
Corporation), which joint written direction shall be subject to the approval of
Activision Publishing, such approval not to be unreasonably withheld, provided
that no less than twenty percent (20%) of the Employee Spider-Man Allocation
shall be allocated to the Non-Activision Bonus Group. In the event that the
Claim described in clause (2) of this subsection is Finally Resolved (as defined
in the Warranty Escrow Agreement) in an amount ("Final Amount') less than the
Losses set forth in such Claim, then the Members and Spider-Man Bonus Group
shall become entitled to such number of Spider-Man Holdback Shares equal to
forty percent (40%) of (A) the Losses set forth in such Claim minus the Final
Amount divided by (B) the Maximum Price, and such Spider-Man Holdback Shares
shall be released from the Escrow Account and shall be distributed in accordance
with this Section 6.2(c)(i).
(ii) Upon the occurrence of all of the following: (A) acceptance by
Activision Publishing of Minority Report pursuant to the terms of the Minority
Report Agreement, provided that Treyarch is not late with delivery of any
version of Minority Report by more than fifteen (15) days after the Final Date;
(B) achievement by the PlayStation 2 version of Minority Report within the first
three (3) months of its first commercial release of a minimum averaged rating of
at least eighty percent (80%) from XxxxXxxxxxxx.xxx or if XxxxXxxxxxxx.xxx is
not then in business in substantially its current fashion, an average ranking of
eighty percent (80%) or above from the Alternative Ranking Sources and if any of
the Alternative Ranking Sources is not then in business in substantially its
current fashion, then it shall be replaced with such sources, if any, as shall
be mutually agreed between Activision and the Representative; and (C)
achievement by the Microsoft X-Box and Nintendo Gamecube versions of Minority
Report of at least seventy-five percent (75%) minimum averaged ranking from the
same sources, the Members shall become entitled to 54.55% of the Minority Report
Holdback Shares (the "Member Minority Report Allocation") and the Minority
Report Bonus Group shall become entitled to 44.45% of the Minority Report
Holdback Shares (the "Employee Minority Report Allocation"). The Minority Report
Holdback Shares shall be distributed as follows: (1) in the event Activision has
not made a Claim under the Warranty Escrow Agreement prior to the date the
Members and Minority Report Bonus Group become entitled to such Minority Report
Holdback Shares, the Minority Report Holdback Shares shall be released from the
Escrow Account and the Member Minority Report Allocation shall be distributed to
the Members in accordance with their percentage ownership interest in the
holdback amount as reflected on Schedule 2.2(a) and the Employee Minority Report
Allocation shall be distributed to the Minority Report Bonus Group in accordance
with the joint written direction of Xxxxx Xxxxxxx and Don
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Likeness (or their successors in the Treyarch Corporation), which joint written
direction shall be subject to the approval of Activision Publishing, such
approval not to be unreasonably withheld, provided that no less than twenty
percent (20%) of the Employee Minority Report Allocation shall be allocated to
the Non-Activision Bonus Group; (2) in the event that Activision has made a
Claim under the Warranty Escrow Agreement prior to the date the Members and
Minority Report Bonus Group become entitled to such Minority Report Holdback
Shares, the number of Minority Report Holdback Shares shall be reduced in
proportion to the Member Minority Report Allocation and Employee Minority Report
Allocation by the amount equal to forty percent (40%) of (A) the Losses (as
defined in Section 7.2 below) divided by (B) the Maximum Price and such
reduction shall be applied proportionally to the Member Minority Report
Allocation and Employee Minority Report Allocation. Any Minority Report Holdback
Shares remaining after the reduction in clause (2) of the preceding sentence
shall be released from the Escrow Account and the Member Minority Report
Allocation shall be distributed to the Members in accordance with their
percentage ownership interest in the holdback amount as reflected on Schedule
2.2(a) and the Employee Minority Report Allocation shall be distributed to the
Minority Report Bonus Group in accordance with the joint written direction of
Xxxxx Xxxxxxx and Don Likeness (or their successors in the Treyarch
Corporation), which joint written direction shall be subject to the approval of
Activision Publishing, such approval not to be unreasonably withheld, provided
that no less than twenty percent (20%) of the Employee Minority Report
Allocation shall be allocated to the Non-Activision Bonus Group. In the event
that the Claim described in clause (2) of this subsection is Finally Resolved
(as defined in the Warranty Escrow Agreement) in an amount ("Final Amount') less
than the Losses set forth in such Claim, then the Members and Minority Report
Bonus Group shall become entitled to such number of Minority Report Holdback
Shares equal to forty percent (40%) of (A) the Losses set forth in such Claim
minus the Final Amount divided by (B) the Maximum Price and such Minority Report
Holdback Shares shall be released from the Escrow Account and shall be
distributed in accordance with this Section 6.2(c)(ii).
(iii) Upon the occurrence of all of the following: (A) acceptance by
Activision Publishing of Xxxxx Xxxxxx'x Pro Surfer pursuant to the terms of the
ProSurfer Agreement, provided that Treyarch is not late with delivery of any
version of Xxxxx Xxxxxx'x Pro Surfer by more than fifteen (15) days after the
Final Date; (B) achievement by the PlayStation 2 version of Xxxxx Xxxxxx'x Pro
Surfer within the first three (3) months of its first commercial release of a
minimum averaged rating of at least eighty percent (80%) from XxxxXxxxxxxx.xxx
or if XxxxXxxxxxxx.xxx is not then in business in substantially its current
fashion, an average ranking of eighty percent (80%) or above from the
Alternative Ranking Sources and if any of the Alternative Ranking Sources is not
then in business in substantially its current fashion, then it shall be replaced
with such sources, if any, as shall be mutually agreed between Activision and
the Representative; and (C) achievement by the X-Box version of Xxxxx Xxxxxx'x
Pro Surfer of at least seventy-five percent (75%) minimum averaged ranking from
the same sources, the Members shall become entitled to 54.55% of the Xxxxx
Xxxxxx Holdback Shares (the "Member Xxxxx Xxxxxx Allocation") and the Xxxxx
Xxxxxx Bonus Group shall become entitled to 44.45% of the Xxxxx Xxxxxx Holdback
Shares (the "Employee Xxxxx Xxxxxx Allocation"). The Xxxxx Xxxxxx Holdback
Shares shall be distributed as follows: (1) in the event Activision has not made
a Claim under the Warranty Escrow Agreement prior to the date the Members and
Xxxxx Xxxxxx Bonus Group become entitled to such Xxxxx Xxxxxx Holdback Shares,
the Xxxxx Xxxxxx Holdback Shares shall be released from the Escrow Account and
the Member Xxxxx Xxxxxx Allocation shall be distributed to the Members in
accordance with their percentage ownership interest in the holdback amount as
reflected on Schedule 2.2(a) and the Employee Xxxxx Xxxxxx Allocation shall be
distributed to the Xxxxx Xxxxxx Bonus Group in accordance with the joint written
direction of Xxxxx Xxxxxxx and Don Likeness (or their successors in the Treyarch
Corporation), which joint written direction shall be subject to the approval of
Activision Publishing, such approval not to be unreasonably withheld, provided
that no less than twenty percent (20%) of the Employee Xxxxx Xxxxxx Allocation
shall be allocated to the Non-Activision Bonus Group; (2) in the event that
Activision has made a Claim under the Warranty Escrow Agreement prior to the
date the Members and Xxxxx Xxxxxx Bonus Group become entitled to such Xxxxx
Xxxxxx Holdback Shares, the number of Xxxxx Xxxxxx Holdback Shares shall be
reduced in proportion to the Member Xxxxx Xxxxxx Allocation and Employee Xxxxx
Xxxxxx Allocation by the
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amount equal to twenty percent (20%) of (A) the Losses (as defined in Section
7.2 below) divided by (B) the Maximum Price. Any Xxxxx Xxxxxx Holdback Shares
remaining after the reduction in clause (2) of the preceding sentence shall be
released from the Escrow Account and the Member Xxxxx Xxxxxx Allocation shall be
distributed to the Members in accordance with their percentage ownership
interest in the holdback amount as reflected on Schedule 2.2(a) and the Employee
Xxxxx Xxxxxx Allocation shall be distributed to the Xxxxx Xxxxxx Bonus Group in
accordance with the joint written direction of Xxxxx Xxxxxxx and Don Likeness
(or their successors in the Treyarch Corporation), which joint written direction
shall be subject to the approval of Activision Publishing, such approval not to
be unreasonably withheld, provided that no less than twenty percent (20%) of the
Employee Xxxxx Xxxxxx Allocation shall be allocated to the Non-Activision Bonus
Group. In the event that the Claim described in clause (2) of this subsection is
Finally Resolved (as defined in the Warranty Escrow Agreement) in an amount
("Final Amount') less than the Losses set forth in such Claim, then the Members
and Xxxxx Xxxxxx Bonus Group shall become entitled to such number of Xxxxx
Xxxxxx Holdback Shares equal to forty percent (40%) of (A) the Losses set forth
in such Claim minus the Final Amount divided by (B) the Maximum Price and such
Xxxxx Xxxxxx Holdback Shares shall be released from the Escrow Account and shall
be distributed in accordance with this Section 6.2(c)(iii).
(iv) If Treyarch does not meet the conditions set forth in subsections (i),
(ii) or (iii), as applicable, with respect to a particular Activision Product,
then the Employee Bonus Group shall forfeit in its entirety its Employee
Spider-Man Allocation, Employee Minority Report Allocation, or Employee Xxxxx
Xxxxxx Allocation, as applicable, and the Members shall become entitled, subject
to the provisions of this Section 6.2(c)(iv), to such Employee Spider-Man
Allocation, Employee Minority Report Allocation, or Employee Xxxxx Xxxxxx
Allocation, as applicable, in addition to the Member Spider-Man Allocation,
Member Minority Report Allocation, or Member Xxxxx Xxxxxx Allocation, as
applicable. In the event that Treyarch does not meet the conditions set forth in
subsections (i), (ii) or (iii), as applicable, with respect to a particular
Activision Product, then Any Applicable Holdback Shares shall be distributed to
the Members as follows:
(A) In the event there is a P&L Revenue Shortfall for such Activision
Product, the Members shall forfeit, and Activision shall be entitled to obtain a
release from the Escrow Account and to cancel, the number of the Applicable
Holdback Shares for such Activision Product equal to (x) the P&L Revenue
Shortfall divided by (y) the Maximum Price, rounded to the nearest number of
whole shares of Activision Common Stock (the "Shortfall Holdback Shares"). If
the number of Shortfall Holdback Shares exceeds the number of Applicable
Holdback Shares for such Activision Product, then all of the Applicable Holdback
Shares for such Activision Product shall be released to Activision and
cancelled.
(B) In the event the number of Applicable Holdback Shares for such
Activision Product exceeds the number of Shortfall Holdback Shares calculated
pursuant to clause (A) above, then the Members shall be entitled to the number
of Applicable Holdback Shares for such Activision Product equal to the
Applicable Holdback Shares minus the Shortfall Holdback Shares (the "Remaining
Applicable Holdback Shares"). The Remaining Applicable Holdback Shares shall no
longer be subject to the development agreement holdback provisions of this
Section 6.2(c), and shall be shall be distributed as follows: (1) in the event
Activision has not made a Claim under the Warranty Escrow Agreement prior to the
expiration of the Indemnification Hold Period, the Remaining Applicable Holdback
Shares shall be released from the Escrow Account and distributed to the Members
in proportion to their respective ownership interests in Treyarch as set forth
on Schedule 2.2(a); (2) in the event that Activision has made a Claim under the
Warranty Escrow Agreement prior to the expiration of the Indemnification Hold
Period, the number of Remaining Applicable Holdback Shares shall be reduced by
the amount equal to the Applicable Percentage of (A) the Losses (as defined in
Section 7.2 below) divided by (B) the Maximum Price. Any Remaining Applicable
Holdback Shares remaining after the reduction in clause (2) of the preceding
sentence shall be released from the Escrow Account and distributed to the
Members in proportion to their respective ownership interests in Treyarch as set
forth on Schedule 2.2(a). For purposes of this clause (B), the "Applicable
Percentage" shall mean forty
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percent (40%) each in the case of the Spider-Man Holdback Shares and Minority
Report Holdback Shares and twenty percent (20%) in the case of the Xxxxx Xxxxxx
Holdback Shares.
(C) In the event there is no P&L Revenue Shortfall for such Activision
Product, then the Members shall be entitled to all of the Applicable Holdback
Shares for such Activision Product, and the Applicable Holdback Shares for such
Activision Product shall no longer be subject to the development agreement
holdback provisions of this Section 6.2(c) and shall be shall be distributed as
follows: (1) in the event Activision has not made a Claim under the Warranty
Escrow Agreement prior to the expiration of the Indemnification Hold Period, the
Applicable Holdback Shares shall be released from the Escrow Account and
distributed to the Members in proportion to their respective ownership interests
in Treyarch as set forth on Schedule 2.2(a); (2) in the event that Activision
has made a Claim under the Warranty Escrow Agreement prior to prior to the
expiration of the Indemnification Hold Period, the number of Applicable Holdback
Shares shall be reduced by the amount equal to the Applicable Percentage of (A)
the Losses (as defined in Section 7.2 below) divided by (B) the Maximum Price.
Any Applicable Holdback Shares remaining after the reduction in clause (2) of
the preceding sentence shall be released from the Escrow Account and distributed
to the Members in proportion to their respective ownership interests in Treyarch
as set forth on Schedule 2.2(a). For purposes of this clause (B), the
"Applicable Percentage" shall mean forty percent (40%) each in the case of the
Spider-Man Holdback Shares and Minority Report Holdback Shares and twenty
percent (20%) in the case of the Xxxxx Xxxxxx Holdback Shares.
(D) Activision shall have the right to obtain a release of any Applicable
Holdback Shares that are subject to the provisions of this Section 6.2(c) by
delivery in a timely manner of a Release Notice (as defined in the Warranty
Escrow Agreement) to the Representative (as defined below) and the Escrow Agent
in accordance with the Warranty Escrow Agreement.
(E) Neither the Employee Holders nor the Non-Activision Bonus Group shall
be entitled to any of either (A) the Remaining Applicable Holdback Shares to
which the Members would be entitled under Section 6.2(c)(iv)(B), or (B) the
Applicable Holdback Shares to which the Members would be entitled under Section
6.2(c)(iv)(C).
(v) Each Member's entitlement to the Applicable Holdback Shares pursuant to
Section 6.2(c) shall be subject to the terms and conditions of such Member's
Employment Agreement. Any Applicable Holdback Shares which have been forfeited
by a Member pursuant to the terms of such Member's Employment Agreement shall be
allocated pro rata among the other Members in proportion to such other Members'
percentage ownership interest in Treyarch.
6.3. Registration of Activision Shares. (a) Activision agrees to use its
reasonable best efforts to file with the SEC, as soon as practicable after the
Closing Date but (subject to Section 6.3(b)) in no event later than thirty (30)
days after the Closing Date, a registration statement on Form S-3, or on such
other form as may be available, registering under the Securities Act, pursuant
to Rule 415 under the Securities Act ("Rule 415") (if available), the offer and
sale in the future of all of the Activision Shares issued by Activision to the
Members pursuant to this Agreement. Activision further agrees to (a) use its
commercially reasonable efforts to cause such registration statement to be
declared effective by the SEC as soon as practicable, (b) maintain the
effectiveness of such registration or successor registration statement filed by
Activision for the purpose of registering the shares of Activision Common Stock
(such registration statements being collectively referred to as the
"Registration Statement") until Activision Shares are eligible to be resold
without restriction on disposition pursuant to the Securities Act and its
related rules and regulations, (c) update the prospectus included in the
Registration Statement (the "Prospectus") from time to time as may be necessary
to assure that the Prospectus does not make any untrue statement of a material
fact or omit to state a material fact necessary in order to make the Prospectus
not misleading, and (d) provide such number of copies of the Registration
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Statement and the Prospectus (as so updated) to the Members as they may
reasonably request in order to facilitate the public sale or other disposition
of Activision Shares covered by such Registration Statement.
(b) Delay of Registration. The Members hereby agree that, at any time prior
to December 31, 2001, the filing of the Registration Statement and its
effectiveness may be subject to delay, postponement or any lock-up or other
conditions as the representative of the managing underwriter pursuant to any
underwritten offering of Activision Common Stock (including the offering
contemplated in the Registration Statement on Form S-3 (Registration No.
333-66280) filed by Activision on July 30, 2001) shall reasonably determine;
provided, however, that the maximum number of Activision Shares that shall be
subject to any lock-up shall not exceed two-thirds (2/3) of the aggregate number
of Activision Shares not subject to Section 6.2, less any Activision Shares
which have been sold, pledged, transferred by gift, hypothecated or otherwise
disposed of prior the date of such lock-up. In connection with the foregoing,
each Member shall execute and deliver the Lock-Up Agreement.
(c) Costs and Expenses. Activision shall bear the costs incurred for its
legal counsel, accounting and all other costs and expenses in connection with
such registration including keeping the Registration Statement effective,
excluding Treyarch's brokers' commissions and underwriters' fees, which may be
incurred in connection with the preparation and filing of the Registration
Statement pursuant to Section 6.3(a).
(d) Cooperation and Indemnification. (i) The Members agree that they will
provide all required cooperation and furnish all necessary information and enter
into such agreements customarily required of Selling Stockholders in connection
with the preparation of the Registration Statement filed under the terms of this
Section 6.3, and the Members will represent and warrant the accuracy and
completeness of all written information regarding the Members which is furnished
by the Members for inclusion in the Registration Statement and will indemnify
and hold Activision, and its directors, officers, shareholders, and underwriters
harmless from and against any liability, loss or damage (including costs and
reasonable attorneys' fees), incurred by or sustained by, or asserted against,
any of them, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in the information provided by the
Members or based on any omission (or alleged omission) to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(ii) Activision shall indemnify and hold the Members harmless from and
against any liability, loss or damage (including costs and reasonable attorneys'
fees) incurred by or sustained by, or asserted against, any of them, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in the Registration Statement, or based on any omission (or
alleged omission) to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, except to the extent
such untrue statement of material fact (or alleged untrue statement) or omission
(or alleged omission) related to information regarding the Members which is
furnished by the Members for inclusion in the Registration Statement.
6.4. Further Assurances. Each party hereto shall, at the request of the
other party and at such other party's expense, execute and deliver any further
instruments or documents and take all such further action as such other party
may reasonably request in order to effectuate the consummation of the Merger.
If, at any time or from time to time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of this Agreement and
to vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of either of the
Constituent Corporations, the officers of the Surviving Corporation are fully
authorized in the name of each Constituent Corporation or otherwise to take, and
shall take, all such lawful and necessary action.
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6.5. Confidentiality. Following the Closing, the Members shall keep
confidential all information concerning the business, operations, properties,
assets and financial affairs of Treyarch and may disclose such information only
upon receipt of prior written consent from Activision, as required by law, or if
such disclosure is required (a) in connection with the Members' filing of any
state or federal income tax returns, or (b) by order of any judicial or
administrative authority; provided, however, the Members shall not be required
to keep confidential information that (x) is or becomes generally available to
the public other than as a result of disclosure by the Members, (y) is or
becomes available to the Members on a nonconfidential basis from a source other
than Activision or (z) the Members or any of their affiliates is required to
disclose pursuant to applicable law, rule, regulation or subpoena.
6.6. Publicity. Activision and the Principal Members shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any transaction contemplated herein
and shall not issue any such press release or make any such public statement
without the prior consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party, issue such press release or make such public
statement as may be required by law or the rules of the applicable stock
exchange if it has used its reasonable best efforts to consult with the other
party and to obtain such party's consent but has been unable to do so in a
timely manner.
6.7. Member Approval. Each of the Members has voted in favor of the
approval and adoption of this Agreement and the transactions contemplated hereby
and the approval of the Merger.
6.8. Employment Matters. (a) Employees employed by Treyarch immediately
prior to the Effective Time shall be employed by Activision Publishing
immediately after the Effective Time on such terms and conditions of employment
as may be determined by Activision Publishing in its sole discretion, provided
that all such employees shall be eligible to participate in the Activision
Publishing Internal Project Bonus Plan as modified pursuant to Exhibit D hereto.
Nothing herein is intended or shall be construed to provide for a guarantee of
employment or shall otherwise affect the "at will" employment status of the
employees of Activision Publishing after the Effective Time.
(b) Prior to or contemporaneous with the Effective Time, Activision
Publishing shall enter into employment contracts with the Principal Members
(other than Xxxx Xxxxxxxxx and Xxxxx Xxxxxxxxxx) and the Other Key Employees and
such contracts shall contain terms and conditions of employment that are
mutually acceptable to Activision Publishing and Treyarch.
ARTICLE VII
SURVIVAL; INDEMNIFICATION; REPRESENTATIVE
7.1. Survival. Except as otherwise set forth in this Section 7.1, the
representations and warranties made in this Agreement or in any agreement,
certificate or other document executed at or prior to the Effective Time in
connection herewith (each an "Ancillary Document") shall survive until February
28, 2003 (the "Survival Date"). No investigation by Activision or on
Activision's behalf heretofore or hereafter conducted shall affect the
representations, warranties or covenants of the Members set forth in this
Agreement.
7.2. Indemnification by the Members. (a) To the fullest extent permitted by
law, the Members shall, severally and not jointly, defend, indemnify and hold
harmless Activision, Activision Publishing and Merger Subsidiary, and all
officers, directors and stockholders of Activision, Activision Publishing and
Merger Subsidiary, and their heirs, personal and legal representatives,
guardians, successors and assigns ("Activision
-32-
Indemnified Parties"), from and against any and all claims, losses, liabilities,
taxes, interest, fines, penalties, suits, actions, proceedings, demands,
damages, costs and expenses (including reasonable attorneys', accountants' and
experts' fees and court costs) of every kind and nature (collectively, "Losses")
arising out of or resulting from any breach by Treyarch or the Members of any
representation, warranty, agreement or covenant made by them in this Agreement.
The Members' liability to indemnify any Activision Indemnified Parties shall be
in proportion to his or her respective ownership interest in Treyarch as of the
Closing Date.
(b) Notwithstanding the provisions of Section 7.2(a) hereof, in no event
shall any Employee Member be liable under Section 7.2(a) for an amount in excess
of the number of Activision Shares such Employee Member receives under Section
2.2(a) hereto multiplied by the Maximum Price ("Maximum Employee Member
Indemnification").
7.3. Indemnification Procedures. (a) Promptly after receipt by an
Activision Indemnified Party under this Section of notice of the commencement of
any action or the incurrence of any Loss, such Activision Indemnified Party
will, if a claim in respect of such action is to be made against any
indemnifying party under this Section, notify the indemnifying party in writing
of the commencement of such action. Upon receipt of such notice the indemnifying
party or parties shall have the right to assume and control the defense of such
action with counsel of its choice, subject to the approval of the Activision
Indemnified Party, which approval shall not be unreasonably withheld. The
Activision Indemnified Parties shall have the right to participate in the
defense of any action and to be represented by counsel of its or their own
selection in connection with such action and to be kept fully and completely
informed by the indemnifying party and its counsel as to the status of the
action at all stages of the proceedings in such action, all at the Activision
Indemnified Party's cost and expense. The Activision Indemnified Party shall
cooperate with the indemnifying party in any defense which the indemnifying
party assumes. Activision shall be entitled to settle any action solely for
monetary damages with respect to which it controls the defense subject to the
prior consent of the Representative, which consent shall not be unreasonably
withheld. The Representative shall be entitled to settle any action solely for
monetary damages with respect to which it controls the defense, subject to the
prior consent of Activision which consent shall not be unreasonably withheld.
The failure to notify an indemnifying party promptly of the commencement of any
such action will not relieve him or her or it of any liability that he or she
may have to any Activision Indemnified Party.
(b) The Members' liability under Section 7.1 shall be several, not joint,
and shall be in proportion to their respective ownership interests in Treyarch
as set forth in Schedule 2.2(a) (subject to the limitation on liability of the
Employee Members under Section 7.2(b)). Any claim for indemnification shall be
settled in the following manner:
(i) first, delivery by Activision of a Claim Notice (as defined the
Warranty Escrow Agreement) for the number of Escrow Shares (as defined in the
Warranty Escrow Agreement) equal to the number of Applicable Holdback Shares
calculated pursuant to clause (2) of the second sentence of Section
6.2(c)(i),(ii) or (iii), as applicable;
(ii) then, in the event the amount of the Losses exceeds the number of
Escrow Shares determined pursuant to clause (i) above, delivery by the
Representative of cash or other property in the amount equal to (A) the Losses
minus (B) the amount determined pursuant to clause (i) above.
(c) In the event any claims settled by delivery of a Claim Notice under
Section 7.3(b)(i) are settled with Escrow Shares which the Members and Employee
Holders are not yet entitled to receive pursuant to Section 6.2(c) and
ultimately will not have become entitled to receive pursuant to Section 6.2(c)
("Unearned Escrow Shares"), Activision shall be entitled to seek reimbursement
from the Members for the amount ("Shortfall Amount") equal to the number of
Unearned Escrow Shares multiplied by the Maximum Price. Any
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claims for reimbursement will be made in accordance with the procedures set
forth in this Section 7.3. The Members agree that Activision shall not seek
reimbursement for such Shortfall Amount from the Employee Holders. The Members
further agree that Activision may seek reimbursement for such Shortfall Amount
at any time, including, without limitation, after the Survival Date.
(d) Claims for Indemnification. No claim for indemnification will be valid
unless a Claim Notice (as defined the Warranty Escrow Agreement) shall have been
delivered pursuant to the Warranty Escrow Agreement on or prior to February 28,
2003, after which date the obligation to indemnify shall terminate with respect
to any claim except those which were specifically identified in a Claim Notice
prior to such date.
7.4. Claims Resolution Procedure. The parties shall act in good faith as
expeditiously as possible to resolve any and all claims for indemnification. To
the extent any claims are not Finally Resolved (as defined in the Warranty
Escrow Agreement) on or before February 28, 2003 (the "Claims Resolution Date"),
then the claims shall be resolved in accordance with the following arbitration
procedure:
(a) Each of Activision, on the one hand, and the Representative, on the
other hand, shall select and appoint an arbitrator within five (5) days after
the Claims Resolution Date to finally settle all unresolved claims. An
arbitrator shall be selected and appointed by notice from one party to the
other. The two arbitrators so selected shall select a third arbitrator and give
written notice to the parties hereto of such selection within ten (10) days
after the Claims Resolution Date. If the two arbitrators cannot agree on a third
arbitrator within such ten (10) day period, then each of them shall nominate one
person to serve as the third arbitrator and the third arbitrator shall be
selected from the two nominees by toss of coin. No arbitrator shall be an
officer, director, employee, affiliate or relative of either Activision,
Treyarch, the Representative, or the Members.
(b) The arbitration shall be conducted jointly by the three arbitrators,
who shall review all submissions by the parties with respect to the claim and
make an award, by majority vote, within forty-five (45) days after the Claims
Resolution Date, which award, when signed by each of the arbitrators, shall be
final and binding on the parties. Unless otherwise determined by the arbitrators
by majority vote, (i) no hearings shall be held, and the decision shall be
rendered based on written submissions by the parties, and (ii) all written
submissions must be made by the parties within five (5) days after the date on
which the third arbitrator is appointed. Once the award is made, a claim shall
be Finally Resolved for purposes of the Warranty Escrow Agreement.
(c) If either party shall refuse or neglect to select and appoint an
arbitrator within five (5) days after the Claims Resolution Date in accordance
with Section 7.5(a), then the arbitrator so appointed by the first party, acting
alone as the sole arbitrator, shall proceed to arbitrate and resolve all claims,
and such arbitrator's award in writing signed by such arbitrator shall be final
and binding on the parties.
(d) All expenses of the arbitration shall be shared equally by Activision,
on the one hand, and the Representative, on the other, provided that the
arbitrator(s) shall have the right to award fees and expenses to the prevailing
party in the arbitration if they deem it appropriate under the circumstances,
and except that each party shall bear the costs and fees of the arbitrator
appointed by such party. The parties hereto agree that they will cooperate in
good faith to allow any arbitration hereunder to occur promptly and be concluded
as quickly as is reasonably possible.
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(e) Judgment of any arbitration conducted hereunder may be entered on the
arbitrators' award in any court having jurisdiction, and each party hereby
consents to the jurisdiction of the California state courts sitting in Los
Angeles County for this purpose.
7.5. Representative. (a) Xxxx Xxxxxxxxx is hereby appointed as the
Representative to act as representative to the Members and to carry out the
duties set forth in this Agreement and the Warranty Escrow Agreement; to give
and receive notices and communications for and on behalf of the Members; to
prosecute and defend litigation and claims for indemnification under this
Agreement and the Warranty Escrow Agreement; to settle disputes; to agree to,
negotiate, enter into settlements and compromises of, and demand and pursue
arbitration and comply with orders of courts and awards of arbitrators with
respect to claims; and to take all actions necessary or appropriate in the
judgment of the Representative for the accomplishment of the foregoing to
effectuate and carry out the terms and purposes of the transactions contemplated
by this Agreement and the Warranty Escrow Agreement. If Xxxx Xxxxxxxxx is or
becomes unavailable to act as the Representative, then Xxxxx Xxxxxxxxxx shall be
appointed successor Representative. If Xxxxx Xxxxxxxxxx is or becomes
unavailable to act as the Representative, then a successor Representative shall
be designated by the holders of a majority in interest of the Escrowed Property
on the date such successor Representative is designated.
(b) Notwithstanding any other provision herein to the contrary, Activision
shall be able to rely conclusively on the instructions and decisions of the
Representative as to any matter requiring action or decision by the Members
under this Agreement and the Warranty Escrow Agreement, and the Members shall
not have any cause of action against Activision for any action taken by
Activision in reliance upon the instructions or decisions of the Representative.
(c) In furtherance of the foregoing, the Representative may by written
notice to the Escrow Agent, with a copy to Activision, request payment for or
reimbursement of any and all reasonable legal fees and expenses paid or payable
by the Representative in connection with any matters requiring any action by the
Representative as provided in this Agreement (collectively, "Reimbursement
Amounts"), including, without limitation, the defense and/or settlement of any
claims and the Warranty Escrow Agreement, and the Escrow Agent shall be
authorized to release from time to time from the Escrow Account an amount equal
to such fees and expenses so requested unless, within ten (10) days after such
notice Activision objects to such payment by delivery of notice to the
Representative and the Escrow Agent, in which case such fees and expenses will
not be disbursed absent (1) agreement between the Representative and the
Activision or (2) a judgment of the arbitrators in connection with the
resolution of a claim that such fees are reasonable and are not required to be
reimbursed by Activision. Any notice or other communication to be delivered to
the Representative shall be delivered pursuant to Section 8.3. The Members
acknowledge and agree that no Member shall have any right to object, dissent,
protest or otherwise contest or have any cause of action against the
Representative for any amounts paid to or by the Representative pursuant to this
Section 7.5(c).
(d) In the event that the Reimbursement Amounts to be paid to the
Representative pursuant to Section 7.5(c) exceed the amounts in the Escrow
Account, in addition to the Reimbursement Amounts, the Representative may by
written notice to each Member, seek reimbursement for such excess amount. Each
Member agrees to reimburse the Representative in proportion to such Member's
proportionate percentage ownership interest in Treyarch within ten (10) days of
the receipt by such Member of such notice from the Representative pursuant to
this Section 7.5(d).
(e) All actions, decisions and instructions of the Representative shall be
conclusive and binding upon all of the Members and no Member shall have any
right to object, dissent, protest or otherwise contest the same or have any
cause of action against the Representative for any action taken, decision made
or
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instruction given by the Representative under this Agreement and the Warranty
Escrow Agreement, except for fraud or willful misconduct by the Representative.
(f) In acting as the representative of the Members, the Representative may
rely upon, and shall not be liable to any Member for acting or refraining from
acting upon, an opinion of counsel, certificate of auditors or other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, arbitrator's award, appraisal, bond or other paper or document reasonably
believed by him to be genuine and to have been signed or presented by the proper
party or parties. The Representative shall incur no liability to any Member or
other Person with respect to any action taken or suffered by the Representative
in his capacity as Representative in reliance upon any note, direction,
instruction, consent, statement or other documents believed by him to be
genuinely and duly authorized, nor for any other action or inaction except his
own fraud or willful misconduct and the Representative shall be indemnified and
held harmless by the Members from all losses, costs, and expenses which the
Representative may incur as a result of involvement in any legal proceedings
arising from the performance of his duties hereunder. The Representative may
perform his duties as Representative either directly or by or through his agents
or attorneys, and the Representative shall not be responsible to the Members for
any misconduct or negligence on the part of any agent or attorney appointed with
reasonable care by him hereunder.
ARTICLE VIII
MISCELLANEOUS
8.1. Assignment; Binding Effect; Benefit. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties; provided, however, that Activision may
assign its rights, interests or obligations hereunder to any affiliate provided
that Activision remains obligated hereunder and such assignment does not alter
the rights, interests or obligations of the Members hereunder. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns. No
assignment permitted under this Agreement shall relieve any such assignor of any
of his, her or its obligations under this Agreement and any assignee shall
assume in writing all of the undertakings of assignor under this Agreement.
Notwithstanding anything contained in this Agreement to the contrary, nothing in
this Agreement, expressed or implied, is intended to confer on any person other
than the parties hereto or their respective heirs, surviving corporations,
executors, administrators and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
8.2. Entire Agreement. This Agreement (including the Exhibits and Schedules
annexed hereto), and any documents delivered by the parties in connection
herewith constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior negotiations, agreements and
understandings, whether written or oral, among the parties with respect thereto.
No addition to or modification of any provision of this Agreement shall be
binding upon any party hereto unless made in writing and signed by all parties
hereto.
8.3. Notices. Any notice required to be given hereunder shall be in writing
and shall be sent by facsimile transmission (confirmed by any of the methods
that follow), courier service (with proof of service), hand delivery or
certified or registered mail (return receipt requested and first-class postage
prepaid) and addressed as follows:
If to the Treyarch Treyarch Invention LLC
or the Members: 0000 Xxxxx Xxxx Xxxxxxxxx
Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Attn: Don Likeness
Tel.: (000) 000-0000
Fax: (000) 000-0000
With a copy to (which shall
not constitute notice): Xxxx Xxxxxxxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000
Tel.: (000) 000-0000
If to the Representative: Xxxx Xxxxxxxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000
Tel.: (000) 000-0000
With a copy to (which shall
not constitute notice): Don Likeness
Treyarch Invention LLC
0000 Xxxxx Xxxx Xxxxxxxxx
Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
If to Activision and Activision, Inc.
Merger Subsidiary: 0000 Xxxxx Xxxx xxxxxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxxx Xxxx, Esq.
Tel.: (000) 000-0000
Fax: (000) 000-0000
With a copy to (which shall: Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx
not constitute notice) & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Tel.: (000) 000-0000
Fax: (000) 000-0000
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date received.
8.4. Amendment. This Agreement may not be amended except by an instrument
in writing signed by or on behalf of each of the parties hereto.
8.5. Governing Law. This Agreement has been executed and delivered by the
parties in California, and shall be governed by and construed in accordance with
the laws of the State of California without regard to its rules of conflict of
laws. All parties consent to the exercise of personal jurisdiction over them in
California and agree that any lawsuit arising out of or relating to this
Agreement shall be brought exclusively in a court of competent subject matter
jurisdiction located within the County of Los Angeles, State of California.
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8.6. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.
8.7. Headings. All of the Section and Article headings in this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
8.8. Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
8.9. No Party Deemed Drafter. The parties agree that no one party shall be
deemed to be the drafter of this Agreement and that in the event this Agreement
is ever construed by a court of law or equity, such court shall not construe
this Agreement or any provision of this Agreement against any party as the
drafter of the Agreement. The parties, and each of them, acknowledge that all
parties have contributed substantially and materially to the preparation of this
Agreement.
8.10. Incorporation. The Schedules and Exhibits hereto and referred to
herein are hereby incorporated herein and made a part hereof for all purposes as
if fully set forth herein.
8.11. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
8.12. Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders.
8.13. Specific Performance. The parties hereto agree that any material
breach or attempted or threatened breach of the provisions of this Agreement
could result in irreparable injury to the parties for which no adequate remedy
at law would exist, and damages would be difficult to determine, and consent to
specific performance of the terms hereof, without limiting the applicability of
any other remedy at law or equity.
8.14. Expenses. The parties agree that Activision shall bear all costs and
expenses incurred by it and Merger Subsidiary, and the Members shall bear all
costs and expenses incurred by them and Treyarch, in connection with negotiating
and completing this Agreement and the transactions contemplated hereby,
including, without limiting the generality of the foregoing, attorneys' and
accountants' fees and expenses. Notwithstanding the foregoing, the parties agree
that Activision shall pay the attorneys' fees incurred by the Members in
connection with this Agreement up to a maximum aggregate amount of $10,000.
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[SIGNATURE PAGE FOLLOWS.]
-39-
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf as of the date first above written.
ACTIVISION, INC.
By: /s/ Xxxxxx Xxxx
--------------------------------
Name: Xxxxxx Xxxx
Title: Senior Vice President
and General Counsel
ACTIVISION PUBLISHING, INC.
By: /s/ Xxxxxx Xxxx
--------------------------------
Name: Xxxxxx Xxxx
Title: Senior Vice President
and General Counsel
TREYARCH ACQUISITION, INC.
By: /s/ Xxxxxx Xxxx
--------------------------------
Name: Xxxxxx Xxxx
Title: Senior Vice President
and General Counsel
TREYARCH INVENTION LLC
By: /s/ Don Likeness
--------------------------------
Name: Don Likeness
Title: Managing Member
PRINCIPAL MEMBERS
By: /s/ Don Likeness
--------------------------------
Don Likeness
By: /s/ Xxxxx Xxxxxxx
--------------------------------
Xxxxx Xxxxxxx
By: /s/ Xxxx Xxxxxxxxx
--------------------------------
Xxxx Xxxxxxxxx
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By: /s/ Xxxxx Xxxxxxxxxx
--------------------------------
Xxxxx Xxxxxxxxxx
REPRESENTATIVE
By: /s/ Xxxx Xxxxxxxxx
--------------------------------
Xxxx Xxxxxxxxx
-41-
================================================================================
AGREEMENT AND PLAN OF MERGER
among
ACTIVISION, INC.,
ACTIVISION PUBLISHING, INC.,
TREYARCH ACQUISITION, INC.,
TREYARCH INVENTION LLC
and
DON LIKENESS, XXXXX XXXXXXX, XXXX XXXXXXXXX,
XXXXX XXXXXXXXXX ,
And the
PERSONS LISTED ON SCHEDULE 1 HERETO
as the Members,
and XXXX XXXXXXXXX,
as the Representative
Dated as of September 28, 2001
================================================================================
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER 1
1.1. The Merger 1
1.2. The Closing 2
1.3. Effective Time 2
1.4. Articles of Incorporation; By-Laws 2
1.5. Directors and Officers 2
1.6. Dissenting Shares 2
1.7. Tax Consequences 2
ARTICLE II CONVERSION OF SHARES; MERGER CONSIDERATION 3
2.1. Conversion of Merger Subsidiary Shares 3
2.2. Merger Consideration 3
2.3. Employees 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF TREYARCH AND THE MEMBERS 4
3.1. Organization 4
3.2. Authorization, Validity and Effect of Agreement 5
3.3. Capitalization 5
3.4. No Subsidiaries 5
3.5. Other Interests 5
3.6. No Violation 5
3.7. Investment Intent 6
3.8. Financial Statements; Undisclosed Liabilities 6
3.9. Litigation 7
3.10. Absence of Certain Changes 7
3.11. Taxes 8
3.12. Books and Records 10
3.13. Properties 10
3.14. Environmental Matters 10
3.15. No Brokers 11
3.16. Related Party Transactions 11
3.17. Contracts and Commitments 11
3.18. Employee Matters and Benefit Plans 12
3.19. Equity Sharing Plan 16
3.20. Intellectual Property 16
3.21. Consents 19
3.22. Insurance 19
3.23. Relationships with Suppliers, Licensors and Customers 19
3.24. Bank Accounts 19
3.25. Material Compliance with Agreements 19
3.26. Disclosure 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACTIVISION 20
4.1. Organization 20
4.2. Corporate Power and Authority; Effect of Agreement 20
4.3. Capitalization 20
4.4. No Violation 21
4.5. SEC Documents 21
4.6. Absence of Certain Changes 21
4.7. Material Compliance with Agreements 22
4.8. No Brokers 22
ARTICLE V CONDITIONS TO CLOSING 22
5.1. Conditions to Treyarch's and the Members' Performance 22
5.2. Conditions to Activision's and Merger Subsidiary's Performance 23
ARTICLE VI COVENANTS AND OTHER AGREEMENTS 25
6.1. Restrictions on Sale of Activision Shares 25
6.2. Share Holdback 25
6.3. Registration of Activision Shares 32
6.4. Further Assurances 33
6.5. Confidentiality 34
6.6. Publicity 34
6.7. Member Approval 34
6.8. Employment Matters 34
ARTICLE VII SURVIVAL; INDEMNIFICATION; REPRESENTATIVE 34
7.1. Survival 34
7.2. Indemnification by the Members 35
7.3. Indemnification Procedures 35
7.4. Claims Resolution Procedure 36
7.5. Representative 37
ARTICLE VIII MISCELLANEOUS 38
8.1. Assignment; Binding Effect; Benefit 38
8.2. Entire Agreement 39
8.3. Notices 39
8.4. Amendment 40
8.5. Governing Law 40
8.6. Counterparts 40
8.7. Headings 40
8.8. Waivers 40
8.9. No Party Deemed Drafter 40
8.10. Incorporation 40
8.11. Severability 41
8.12. Interpretation 41
8.13. Specific Performance 41
8.14. Expenses 41
