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Agreement and Plan of Reorganization
Among
Keynote Systems, Inc.,
Big Red Acquisition Corporation,
Digital Content, L.L.C. and
Each of the Digital Content Members
AUGUST 18, 2000
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Agreement and Plan of Reorganization
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of August 18, 2000 (the "Agreement Date") by and among Keynote
Systems, Inc., a Delaware corporation ("Keynote"), Big Red Acquisition
Corporation, a Delaware corporation that is a wholly-owned subsidiary of Keynote
("Sub"), Digital Content, L.L.C., a Texas limited liability company ("Digital
Content") and each of the Digital Content Members (as defined in Section 1.8).
Recitals
A. The parties intend that, Sub will be merged with and into Digital
Content in a forward triangular merger, with Sub to be the surviving corporation
(the "Merger"), all pursuant to the terms and conditions of this Agreement and
applicable law. The parties also intend for the Merger to be treated as a
"purchase" transaction for accounting purposes.
B. Upon the Effective Time of the Merger, and subject to the terms and
conditions hereof, (i) the Digital Content Membership Interests (as defined
below) that are outstanding immediately prior to the effectiveness of the Merger
will be converted into the right to receive the Per Membership Interest
Consideration (as defined below) and (ii) Digital Content will be merged with
and into Sub, in each case, as provided in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
covenants and conditions contained herein, the parties hereby agree as follows:
ARTICLE 1
Certain Definitions
As used in this Agreement, the following terms will have the meanings set
forth below:
1.1 "Keynote Ancillary Agreements" means, collectively, each certificate
to be delivered by Keynote or an officer or officers of Keynote at the Closing
pursuant to Article 7 of this Agreement and each agreement (other than this
Agreement) which Keynote is to enter into as a party thereto pursuant to this
Agreement.
1.2 The "Effective Time" means the date and time on which the Merger first
becomes legally effective under the laws of the States of Delaware and Texas as
a result of the filing with the Delaware and Texas Secretaries of State of
Certificates of Merger in substantially the forms attached hereto as Exhibit A
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(the "Certificates of Merger") and any required related certificates pursuant
to, and in conformity with, the requirements of Section 252 of the Delaware
General Corporation Law ("Delaware Law") and Section 10.03 of the Texas Limited
Liability Company Act ("Texas Law").
1.3 "Encumbrance" means, with respect to any asset, any mortgage, deed of
trust, lien, pledge, charge, security interest, title retention devices,
collateral assignments, claims, charges, restrictions or other encumbrances of
any kind in respect of such asset.
1.4 "knowledge," when used with reference to (a) an individual, means the
actual knowledge after reasonable inquiry of such individual, or (b) a person
that is not an individual, means the collective actual knowledge of the officers
and directors of such party, after reasonable inquiry of the employees and
agents of such party.
1.5 "Legal Requirements" means any federal, state, local, municipal,
foreign or other law, statute, constitution, resolution, ordinance, code, edict,
decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Authority.
1.6 "Material Adverse Change" or "Material Adverse Effect," when used
with reference to any entity or group of related entities, means any event,
change, violation, inaccuracy, circumstance or effect (regardless of whether or
not such events or changes are inconsistent with the representations or
warranties made by such party in this Agreement) that is or is reasonably likely
to be, individually or in the aggregate, materially adverse to the condition
(financial or otherwise), capitalization, properties, employees, assets
(including intangible assets), business, operations or results of operations of
such entity and its subsidiaries, taken as a whole; provided, that in no event
shall (a) a change in the price of the publicly traded stock of Keynote; (b)
conditions affecting the industry generally in which Keynote operates or the
U.S. economy as a whole; (c) continuing losses of Keynote, provided, that such
losses do not materially increase between the Agreement Date and the Closing
constitute, in and of itself, a Material Adverse Change or Material Adverse
Effect in Keynote; provided further, that in no event shall (a) conditions
affecting the industry generally in which Digital Content operates or the U.S.
economy as a whole; (b) continuing losses of Digital Content, provided, that
such losses do not materially increase between the Agreement Date and the
Closing; or (c) any effect on Digital Content directly resulting from actions
not taken by Digital Content pursuant to Section 5.3 due to prior written
consent not being provided by Keynote following a written request from Digital
Content to Keynote to undertake such actions, constitute, in and of itself, a
Material Adverse Change or Material Adverse Effect in Digital Content.
1.7 "person" means any individual, corporation (including any
not-for-profit corporation), partnership, limited liability partnership, joint
venture, estate, trust, firm, company (including any limited liability company
or joint stock company), association, organization, entity or Governmental
Authority.
1.8 "Digital Content Members" or "Members" means, collectively, those
persons set forth on Schedule 2.1.1 to this Agreement.
1.9 "Sub Ancillary Agreements" means, collectively, each certificate
to be delivered by Sub or an officer or officers of Sub at the Closing pursuant
to Article 8 of this Agreement and each agreement (other than this Agreement)
which Sub is to enter into as a party thereto pursuant to this Agreement.
1.10 "Termination Date" means November 30, 2000.
1.11 "Digital Content Ancillary Agreements" means, collectively, the
Certificates of Merger, each certificate to be delivered by Digital Content or
an officer or officers of Digital Content at the Closing, and each other
agreement (other than this Agreement) which Digital Content is to enter into as
a party thereto pursuant to this Agreement.
1.12 "Digital Content Membership Interest" or "Membership Interest"
means each membership interest in Digital Content.
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Other capitalized terms defined elsewhere in this Agreement and not defined
in this Article 1 will have the meanings assigned to such terms in this
Agreement.
ARTICLE 2
Plan of Reorganization
2.1 Conversion of Membership Interests.
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2.1.1 Conversion of Membership Interests. As specified next to
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the name of each Digital Content Member, all of whom are listed on Schedule
2.1.1 attached hereto, which schedule may be updated as of the Closing, each
Digital Content Membership Interest that is issued and outstanding immediately
prior to the Effective Time, will, by virtue of the Merger and at the Effective
Time, and without further action on the part of any holder thereof, be converted
into the right to receive the Per Membership Interest Consideration (determined
in accordance with Section 2.1.2 hereof).
2.1.2 Certain Definitions. The "Initial Consideration" to be
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given in consideration for the conversion of all of the outstanding Digital
Content Membership Interests pursuant to Section 2.1.1 shall equal $15,000,000.
The "Initial Member Consideration" shall be equal to the Initial Consideration
less the expenses listed on Schedule 2.1.2(a) and any other expenses approved by
the Representative. The "Aggregate Consideration" to be given in consideration
for the conversion of all of the outstanding Digital Content Membership
Interests pursuant to Section 2.1.1 shall equal the Initial Consideration plus,
if applicable, the "Additional Consideration" as provided for in Schedule
2.1.2(b) to this Agreement. The "Initial Per Membership Interest Consideration"
to be given in consideration for the conversion of each Digital Content
Membership Interest shall be determined by dividing (i) the Initial Member
Consideration by (ii) the total number of Digital Content Membership Interests
issued and outstanding at the Effective Time. The "Additional Per Membership
Interest Consideration" shall be determined by dividing (i) the Additional
Consideration by (ii) the total number of Digital Content Membership Interests
issued and outstanding at the Effective Time. The Initial Per Membership
Interest Consideration and the Additional Per Membership Interest Consideration
are sometimes collectively referred to as the "Per Membership Interest
Consideration."
2.2 Escrow of Consideration. At the Effective Time, Keynote will withhold
from the Initial Consideration, $1.5 million of the Initial Consideration to be
issued to such Digital Content Members pursuant to Section 2.1.2 (such withheld
cash consideration being hereinafter referred to as the "Escrow Consideration"),
and will hold the Escrow Consideration as security for the Digital Content
Members' indemnification obligations for Damages (as defined in Section 11.2)
under Article 11 hereof. The Escrow Consideration will be held by Keynote,
subject to the terms and conditions of Article 11 hereof, until the Release Date
(as defined in Section 11.1 hereof).
2.3 Effects of the Merger. At and upon the Effective Time of the Merger:
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(a) the separate existence of Digital Content will cease and
Digital Content will be merged with and into Sub, and Sub will be the surviving
corporation of the Merger
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(sometimes hereinafter referred to as the "Surviving Corporation") pursuant to
the terms of this Agreement and the Certificates of Merger;
(b) the Certificate of Incorporation of Sub will be the
Certificate of Incorporation of the Surviving Corporation immediately after the
Effective Time;
(c) the Bylaws of Sub will be the Bylaws of the Surviving
Corporation immediately after the Effective Time;
(d) each Digital Content Membership Interest that is outstanding
immediately prior to the Effective Time will be converted into the right to
receive the Per Membership Interest Consideration as provided in this Article 2;
(e) the officers of the Surviving Corporation immediately after
the Effective Time will be those individuals who were the officers of Sub
immediately prior to the Effective Time, and each such individual shall,
immediately after the Effective Time, hold the same office or offices of the
Surviving Corporation as the office or offices that such individual held with
Sub immediately prior to the Effective Time;
(f) the members of the Board of Directors of the Surviving
Corporation immediately after the Effective Time will be the members of the
Board of Directors of Sub immediately prior to the Effective Time; and
(g) the Merger will, from and after the Effective Time, have all
of the effects provided by applicable law.
2.4 Further Assurances. If, at any time before or after the Effective
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Time, Keynote believes or is advised that any further instruments, deeds,
assignments or assurances are reasonably necessary or desirable to consummate
the Merger or to carry out the purposes and intent of this Agreement at or after
the Effective Time, then Keynote, the Surviving Corporation and their respective
officers and directors will execute and deliver all such proper deeds,
assignments, instruments and assurances and do all other things necessary or
desirable to consummate the Merger and to carry out the purposes and intent of
this Agreement.
ARTICLE 3
Representations and Warranties of Digital Content
Digital Content represents and warrants to Keynote that, except as set
forth in the schedule of exceptions addressed to Keynote from Digital Content
and dated as of the Agreement Date which has been delivered by Digital Content
to Keynote concurrently with the parties' execution of this Agreement (the
"Digital Content Disclosure Letter"), each of the representations, warranties
and statements contained in the following sections of this Article 3 is true and
correct as of the Agreement Date and will be true and correct on and as of the
Closing Date (as defined in Section 7.1 hereof). For all purposes of this
Agreement, the statements contained in the Digital Content Disclosure Letter and
its schedules shall also be deemed to be representations and warranties made and
given by Digital Content under Article 3 of this Agreement.
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3.1 Organization and Good Standing. Digital Content is a limited liability
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company validly formed, validly existing and in good standing under the laws of
the State of Texas and has continuously been in good standing under the laws of
the State of Texas at all times since its inception. Digital Content has the
corporate power and authority to own, operate and lease its properties and to
carry on its business as now conducted and as proposed to be conducted, and is
qualified to transact business, and is in good standing, in each jurisdiction
where the character of the properties owned, leased or operated by it or the
nature of its activities make such qualification necessary, except to the extent
that any failure to qualify would not individually or in the aggregate have a
Material Adverse Effect. Digital Content has delivered to Keynote true and
correct copies of the currently effective Certificate of Organization and
Regulations of Digital Content, each as amended to date. Digital Content is not
in violation of its Certificate of Organization or its Regulations.
3.2 Subsidiaries. Digital Content does not have any subsidiary or any
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equity or ownership interest, whether direct or indirect, in any corporation,
partnership, limited liability company, joint venture or other business entity.
Digital Content is not obligated to make nor bound by any agreement or
obligation to make any investment in or capital contribution in or on behalf of
any other entity.
3.3 Power, Authorization and Validity.
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3.3.1 Power and Authority. Subject to approval by Digital Content
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Members, Digital Content has all requisite power and authority to enter into,
execute, deliver and perform its obligations under, this Agreement and all
Digital Content Ancillary Agreements and to consummate the Merger. The Merger
and the execution, delivery and performance by Digital Content of this
Agreement, each of the Digital Content Ancillary Agreements and all other
agreements, transactions and actions contemplated hereby or thereby, have been
duly and validly approved and authorized by Digital Content's Managers or other
applicable governing body, and the Digital Content Members have executed and
delivered to Keynote Voting Agreements (as defined in Section 3.26) agreeing to
vote in favor of the Merger and have approved the execution, delivery and
performance by Digital Content of this Agreement, each of the Digital Content
Ancillary Agreements and all other agreements, transactions and actions
contemplated hereby or thereby.
3.3.2 No Consents. Except for approval of the Digital Content Members
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that may be required by Texas Law and the filing of the Certificates of Merger
with the Delaware and Texas Secretaries of State, no consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency, commission or other governmental authority (each, a
"Governmental Authority"), or any other person or entity, governmental or
otherwise (including any consent, approval, order, authorization, registration,
declaration or filing pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act")), is necessary or required to be made or
obtained by Digital Content to enable Digital Content to lawfully execute and
deliver, enter into, and to perform its obligations under, this Agreement and
each of the Digital Content Ancillary Agreements, or to consummate the Merger.
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3.3.3 Enforceability. This Agreement and each of the Digital Content
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Ancillary Agreements are, or when executed by Digital Content will be, and each
Voting Agreement is, valid and binding obligations of Digital Content and/or the
Digital Content Members, enforceable against Digital Content or the Digital
Content Members, as the case may be, in accordance with their respective terms,
subject to the effect of (a) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to rights
of creditors generally and (b) rules of law and equity governing specific
performance, injunctive relief and other equitable remedies.
3.4 Capitalization of Digital Content.
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3.4.1 Outstanding Securities. The authorized capital stock of Digital
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Content consists entirely of: 1,000 Digital Content Membership Interests, all of
which are issued and outstanding. The numbers of issued and outstanding Digital
Content Membership Interests held by each of the Digital Content Members and
each Member's percentage interest in Digital Content ("Percentage Interests")
are set forth in Schedule 2.1.1 to this Agreement. Digital Content holds no
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Membership Interests in treasury.
3.4.2 Valid Issuance. As of the Closing Date, there will have been no
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change in the authorized and outstanding capital stock of Digital Content as
represented in Section 3.4.1. All issued and outstanding Digital Content
Membership Interests have been duly authorized and validly issued, are fully
paid and nonassessable, are not subject to any preemptive right, right of first
refusal, right of first offer or right of rescission, and have been offered,
issued, sold and delivered by Digital Content in compliance with (a) all
registration or qualification requirements (or applicable exemptions therefrom)
of all applicable securities laws and, to the knowledge of Digital Content,
other applicable Legal Requirements and (b) all requirements set forth in
applicable agreements or instruments.
3.4.3 No Other Options, Warrants or Rights. Other than is set forth
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in Section 3.4.1 above, there are no options, warrants, convertible securities
or other securities, calls, commitments, conversion privileges, preemptive
rights, rights of first refusal, rights of first offer or other rights or
agreements outstanding to purchase or otherwise acquire (whether directly or
indirectly) any Digital Content Membership Interests or any securities
convertible into or exchangeable for any Digital Content Membership Interests or
any other securities, or obligating Digital Content to grant, issue, extend, or
enter into any such option, warrant, convertible security or other security,
call, commitment, conversion privilege, preemptive right, right of first
refusal, right of first offer or other right or agreement to obtain any Digital
Content Membership Interests or other securities, and there is no liability for
dividends or profits accrued but unpaid.
3.4.4 No Voting Arrangements or Registration Rights. Except as
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contemplated by the Voting Agreements, there are no voting agreements, voting
trusts or proxies applicable to any Digital Content Membership Interests or to
the conversion of Digital Content Membership Interests in the Merger pursuant to
any agreement or obligation to which Digital Content is a party or, to Digital
Content's knowledge, pursuant to any other agreement or obligation. Digital
Content is not under any obligation to register under the Securities Act any of
its presently outstanding Membership Interests or any stock or other securities
that may be subsequently issued.
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3.5 No Conflict. Neither the execution and delivery of this Agreement nor
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any of the Digital Content Ancillary Agreements by Digital Content, nor the
consummation of the Merger or any of the other transactions contemplated hereby
or thereby, will conflict with, or (with or without notice or lapse of time, or
both) result in a termination, breach, impairment or violation of, or constitute
a default under: (a) any provision of the Certificate of Organization or
Regulations of Digital Content as currently in effect; (b) any material federal,
state, local or foreign judgment, writ, decree, order, statute, rule or
regulation applicable to Digital Content or any of its material assets or
properties; or (c) any material instrument, agreement, contract, undertaking,
understanding, letter of intent, memorandum of understanding or commitment
(whether verbal or in writing) to which Digital Content is a party or by which
Digital Content or any of its material assets or properties are bound, except in
the case of (b) or (c) for any such conflicts, terminations, breaches,
impairments, violations or defaults which would not have a Material Adverse
Effect on Digital Content or which would not have a material adverse effect on
Digital Content's ability to consummate the Merger. Neither Digital Content's
entering into this Agreement nor the consummation of the Merger or the
transactions contemplated thereby will give rise to, or trigger the application
of, any rights of any third party that would come into effect upon the
effectiveness of the Merger. The consummation of the Merger by Digital Content
will not require the consent, release, waiver or approval of any third party
(including the consent of any party required to be obtained in order to keep any
agreement between such party and Digital Content in effect following the Merger
or to provide that Digital Content is not in breach or violation of any such
agreement following the Merger), other than the approval of this Agreement and
the Merger by Digital Content Members under Texas law except where the failure
to obtain such consent, release, waiver or approval would not have a Material
Adverse Effect on Digital Content.
3.6 Litigation. There is no action, suit, arbitration, mediation,
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proceeding, claim or investigation pending against Digital Content (or against
any officer, director, employee or agent of Digital Content in their capacity as
such or relating to their employment, services or relationship with Digital
Content) before any court, Governmental Authority or arbitrator, nor, to Digital
Content's knowledge, has any such action, suit, arbitration, mediation,
proceeding, claim or investigation been threatened. There is no judgment,
decree, injunction, rule or order of any court, Governmental Authority or
arbitrator outstanding against Digital Content. To Digital Content's knowledge,
there is no basis for any person to assert a claim against Digital Content based
upon: (a) Digital Content's negotiating or entering into this Agreement or any
Digital Content Ancillary Agreement or consummating the Merger or any of the
transactions contemplated by this Agreement or any Digital Content Ancillary
Agreement; (b) any confidentiality or similar agreement entered into by Digital
Content; (c) any claim that Digital Content has agreed to sell or dispose all or
any substantial portion of its assets or business to any party other than
Keynote, whether by way of merger, consolidation, sale of assets or otherwise;
(d) any wrongful failure by Digital Content to issue any of its stock or other
securities to any party; (e) ownership or rights to ownership of any Digital
Content Membership Interests or any other Digital Content securities; (f) any
rights as a Digital Content Member, including any option or preemptive rights or
rights to notice or to vote; or (g) any rights under any agreement among Digital
Content and its Members.
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3.7 Taxes.
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3.7.1 Digital Content has timely filed all federal, state, local and
foreign tax and information returns required to be filed by it, has timely paid
all taxes required to be paid by it for which payment is due, except to the
extent that an accrual or reserve for such taxes has been reflected in
accordance with GAAP (as defined below) on the Balance Sheet (as defined in
Section 3.8), has established an adequate accrual or reserve for the payment of
all taxes payable in respect of the periods subsequent to the periods covered by
its most recent applicable tax returns (which accrual or reserve as of the
Balance Sheet Date is fully reflected on the Balance Sheet and in any more
recent balance sheet of Digital Content provided by Digital Content to Keynote
on or before the Agreement Date), has made all necessary estimated tax payments,
and has no liability for taxes in excess of the amount so paid. All such returns
and reports are true, correct and complete, and Digital Content has provided
Keynote with true and correct copies of such returns and reports. Digital
Content is not delinquent in the payment of any tax or in the filing of any tax
returns, and no deficiencies for any tax have been threatened, claimed, proposed
or assessed against Digital Content or any of the officers, employees or agents
of Digital Content in their capacity as such. Digital Content has not received
any notification from the Internal Revenue Service or any other taxing authority
regarding any material issues that: (a) are currently pending before the
Internal Revenue Service or any other taxing authority (including but not
limited to any sales or use tax authority) regarding Digital Content, or (b) to
Digital Content's knowledge have been raised by the Internal Revenue Service or
other taxing authority and not yet finally resolved. No tax return of Digital
Content is under audit by the Internal Revenue Service or any state or local
taxing agency or authority and any such past audits (if any) have been completed
and fully resolved to the satisfaction of the applicable tax authority
conducting such audit and all taxes and any penalties or interest determined by
such audit to be due from Digital Content have been paid in full to the
applicable taxing authorities. No tax liens have been filed against Digital
Content or its Members and, to Digital Content's knowledge, no other tax liens
are currently in effect against any assets of Digital Content other than liens
which arise by operation of law for taxes not yet due and payable. There is not
in effect any waiver by Digital Content of any statute of limitations with
respect to any taxes or agreed to any extension of time for filing any tax
return which has not been filed; and Digital Content has not consented to extend
to a date later than the date hereof the period in which any tax may be assessed
or collected by any taxing authority. Digital Content is not a "personal holding
company" within the meaning of the Code. Digital Content has not filed any
election under Section 341(f) of the Code. Digital Content has withheld all
taxes, including but not limited to federal and state income taxes, FICA,
Medicare, FUTA and other taxes, required to be withheld, and paid such withheld
amounts to the appropriate tax authority within the time prescribed by law.
Since its inception, Digital Content has not been a "United States real property
holding corporation," as defined in Section 897(c)(2) of the Code, and in
Section 1.897-2(b) of the Treasury Regulations issued thereunder (the
"Regulations"), and Digital Content has filed with the Internal Revenue Service
all statements, if any, with its United States income tax returns which are
required under Section 1.897-2(h) of the Regulations.
3.7.2 For the purposes of this Section, the terms "tax" and "taxes"
include all federal, state, local and foreign income, alternative or add-on
minimum income, gains, franchise, excise, property, property transfer, sales,
use, employment, license, payroll, ad valorem, documentary, stamp, withholding,
occupation, recording, value added or transfer taxes,
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governmental charges, fees, customs duties, levies or assessments (whether
payable directly or by withholding), and, with respect to any such taxes, any
estimated tax, interest, fines and penalties or additions to tax and interest on
such fines, penalties and additions to tax.
3.8 Digital Content Financial Statements.
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3.8.1 Digital Content has delivered to Keynote as an attachment to
the Digital Content Disclosure Letter the consolidated balance sheet of Digital
Content as of June 30, 2000 (the "Balance Sheets"), and Digital Content's
consolidated statements of operations, statements of cash flows and statements
of changes in members' equity (or, as applicable, statement of changes in
members' interests) for the year ended December 31, 1999 and the six months
ended June 30, 2000 (all such financial statements of Digital Content and any
notes thereto are hereinafter collectively referred to as the "Digital Content
Financial Statements"). The Digital Content Financial Statements: (a) are
derived from and are in accordance with the books and records of Digital Content
and (b) fairly present the financial condition of Digital Content at the dates
therein indicated and the results of operations for the periods therein
specified, and (c) have been prepared on a basis consistent with prior periods
except for any absence of notes thereto. Digital Content has no material debt,
liability or obligation of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, except for those (a) shown on the
Balance Sheets, (b) that may have been incurred after June 30, 2000 (the
"Balance Sheet Date") in the ordinary course of Digital Content's business
consistent with its past practices, and (c) that are not material in amount,
either individually or collectively. All reserves established by Digital Content
that are set forth in or reflected in the Balance Sheet are adequate. At the
Balance Sheet Date, there were no material loss contingencies that are not
adequately provided for in the Balance Sheet. At the Closing Date, Digital
Content's Current Assets were and will be equal to or greater than its Total
Liabilities. For purposes of the preceding sentence, "Current Assets" shall mean
cash and other assets expected to be converted into cash within one year, and
"Total Liabilities" shall mean probable future sacrifices of economic benefits
arising from present obligations of Digital Content to transfer assets or
provide services to other persons in the future as a result of past
transactions.
3.8.2 Digital Content is not engaged in manufacturing (within the
meaning of the HSR Act) and Digital Content's Total Assets (as defined below)
(i) were less than Ten Million Dollars ($10,000,000) on the Balance Sheets as of
December 31, 1999 and on the date of the last regularly prepared balance sheet
of Digital Content prepared on or prior to the Agreement Date (the "Last Date")
and (ii) will not equal or exceed Ten Million Dollars ($10,000,000) at any time
during the time period commencing on the Last Date and ending on the earlier to
occur of (a) the Effective Time or (b) the date on which this Agreement is
terminated in accordance with the provisions of Article 10. As used herein, the
term "Digital Content's Total Assets" means Digital Content's total assets as
determined in accordance with generally accepted accounting principles applied
on a basis consistent with prior periods.
3.9 Title to Properties. Digital Content has good and marketable title to
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all of its assets and properties (including those shown on the Balance Sheet),
free and clear of all Encumbrances, other than liens for current taxes that are
not yet due and payable and except for liens which in the aggregate do not
secure more than $10,000 in liabilities. All machinery, vehicles, equipment
(including, without limitation, computers and webservers) and other tangible
personal property owned or leased by Digital Content or used in its business are
in good
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condition and repair, normal wear and tear excepted, and all leases of real or
personal property to which Digital Content is a party are fully effective and
afford Digital Content peaceful and undisturbed leasehold possession of the real
or personal property that is the subject of the lease and Digital Content is not
in breach of any such lease. Digital Content is not in violation of any zoning,
building, safety or environmental ordinance, regulation or requirement or other
law or regulation applicable to the operation of its owned or leased properties,
nor has Digital Content received any notice of violation of law with which it
has not complied. Digital Content does not own any real property. Item 3.9 to
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the Digital Content Disclosure Letter sets forth a complete and accurate list
and a brief description of all personal property owned or leased by Digital
Content with an individual value of $1,000 or greater. Digital Content owns no
real property.
3.10 Absence of Certain Changes. Since the Balance Sheet Date,
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Digital Content has operated its business in the ordinary course consistent with
its past practice, and since such date there has not been with respect to
Digital Content any:
(a) Material Adverse Change in Digital Content;
(b) amendment or change in the Certificate of Organization or
Regulations;
(c) incurrence, creation or assumption by Digital Content of
(i) any Encumbrance on any of the assets or properties of Digital Content, (ii)
any obligation or liability or any indebtedness for borrowed money, or (iii) any
contingent liability as a guarantor or surety with respect to the obligations of
others;
(d) grant or issuance of any options, warrants or other
rights to acquire from Digital Content, directly or indirectly, except as
described in Sections 3.4.1 and 3.4.2 hereof, or any offer, issuance or sale by
Digital Content of any debt or equity securities of Digital Content;
(e) any acceleration or release of any vesting condition to
the right to exercise any option, warrant or other right to purchase or
otherwise acquire any Digital Content Membership Interests, or any acceleration
or release of any right to repurchase Digital Content Membership Interests upon
the Member's termination of employment or services with Digital Content or
pursuant to any right of first refusal;
(f) payment or discharge by Digital Content of any
Encumbrance on any asset or property of Digital Content, or the payment or
discharge of any liability of Digital Content, in each case that was not either
shown on the Balance Sheets or incurred in the ordinary course of Digital
Content's business after the Balance Sheet Date in an amount not in excess of
$10,000 for any single liability to a particular creditor;
(g) 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 Digital Content other than a license of any product or
products of Digital Content made in the ordinary course of Digital Content's
business consistent with its past practice;
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(h) 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 Digital Content;
(i) declaration, setting aside or payment of any dividend on,
or the making of any other distribution in respect of, the capital stock of
Digital Content, or any split, combination or recapitalization of the capital
stock of Digital Content or any direct or indirect redemption, purchase or other
acquisition of any capital stock of Digital Content or any change in any rights,
preferences, privileges or restrictions of any outstanding security of Digital
Content;
(j) change or increase in the compensation payable or to
become payable to any of the officers, directors, Managers or employees of
Digital Content, or in any bonus or pension, insurance or other benefit payment
or arrangement (including without limitation Membership Interest awards,
Membership Interest appreciation rights or Membership Interest option grants)
made to or with any of such officers, employees or agents except in connection
with normal employee salary or performance reviews or otherwise in the ordinary
course of Digital Content's business consistent with its past practice and
except as contemplated in this Agreement;
(k) change with respect to the management, supervisory or
other key personnel of Digital Content;
(l) obligation or liability incurred by Digital Content to
any of its officers, directors, Managers or Members, except for normal and
customary compensation and expense allowances payable to officers in the
ordinary course of Digital Content's business consistent with its past practice;
(m) making by Digital Content of any loan, advance or capital
contribution to, or any investment in, any officer, director, Manager or Member
of Digital Content 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;
(n) entering into, amendment of, relinquishment, termination
or non-renewal by Digital Content of any contract, lease, transaction,
commitment or other right or obligation other than in the ordinary course of its
business consistent with its past practice; or any written or oral indication or
assertion by the other party thereto of any material problems with Digital
Content's services or performance under such contract, lease, transaction,
commitment or other right or obligation or its desire to so amend, relinquish,
terminate or not renew any such contract, lease, transaction, commitment or
other right or obligation;
(o) any cancellation or non-renewal of any material customer
contract or any material change in the manner in which Digital Content extends
discounts, credits or warranties to customers or otherwise deals with its
customers;
(p) entering into by Digital Content of any transaction,
contract or agreement that by its terms requires or contemplates a current
and/or future financial commitment, expense (inclusive of overhead expense) or
obligation on the part of Digital Content that involves in excess of $25,000 or
that is not entered into in the ordinary course of Digital Content's business,
11
or the conduct of any business or operations other than in the ordinary course
of Digital Content's business consistent with its past practice;
(q) any license, transfer or grant of a right under any Digital
Content IP Rights (as defined in Section 3.13 below), other than those licensed,
transferred or granted in the ordinary course of Digital Content's business
consistent with its past practices; or
(r) any agreement made by Digital Content to take any action which,
if taken prior to the Agreement Date, would have made any representation or
warranty of Digital Content set forth in Article 3 of this Agreement untrue or
incorrect as of the date when made.
3.11 Contracts and Commitments/Licenses and Permits. Item 3.11 to the
---------------------------------------------- ---------
Digital Content Disclosure Letter sets forth a list of each of the following
written or oral contracts, agreements, leases, licenses, permits, assignments,
mortgages, transactions, obligations, commitments or other instruments to which
Digital Content is a party or to which Digital Content or any of its assets or
properties is bound:
(a) any contract or agreement providing for payments (whether fixed,
contingent or otherwise) by or to Digital Content in an aggregate amount of
$25,000 or more;
(b) any dealer, distributor, OEM (Original Equipment Manufacturer),
VAR (Value Added Reseller), sales representative or similar agreement under
which any third party is authorized to sell, sublicense, lease, distribute,
market or take orders for, any product, service or technology of Digital
Content;
(c) any contract providing for the development of any software,
technology or intellectual property for (or for the benefit or use of) Digital
Content, or providing for the purchase or license of any software, technology or
intellectual property to (or for the benefit or use of) Digital Content, which
software, technology or intellectual property is in any manner used or
incorporated (or is contemplated by Digital Content to be used or incorporated)
in connection with any aspect or element of any product, service or technology
of Digital Content to the extent necessary for the conduct of the business of
Digital Content as presently conducted or contemplated;
(d) any joint venture or partnership contract or other agreement
which has involved, or is reasonably expected to involve, a sharing of profits,
expenses or losses with any other party;
(e) any contract or commitment in which Digital Content has granted
or received preferential customer pricing provisions or exclusive marketing or
distribution rights relating to any product, service, market or geographic
territory;
(f) any contract or commitment for or relating to the employment of
any officer, director, Manager, employee or consultant of Digital Content or any
other type of contract or understanding with any officer, director, Manager,
employee or consultant of Digital Content that is not immediately terminable by
Digital Content without cost or other liability;
12
(g) any indenture, mortgage, trust deed, promissory note, loan
agreement, security agreement, guarantee or other agreement or commitment for
the borrowing of money, for a line of credit or for a leasing transaction of a
type required to be capitalized in accordance with Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board;
(h) any lease or other agreement under which Digital Content is
lessee of or holds or operates any items of tangible personal property or real
property owned by any third party;
(i) any agreement that restricts Digital Content from: engaging in
any aspect of its business; participating or competing in any line of business
or market; freely setting prices for Digital Content's products, services or
technologies (including but not limited to most favored customer pricing
provisions); engaging in any business in any market or geographic area; or
soliciting potential employees, consultants, contractors or other suppliers or
customers;
(j) any Digital Content IP Rights Agreement (as defined in Section
3.13);
(k) any agreement relating to the sale, issuance, grant, exercise,
award, purchase, repurchase or redemption of any Membership Interests or other
securities of Digital Content or any options, warrants or other rights to
purchase or otherwise acquire any such Membership Interest, other securities or
options, warrants or other rights therefor;
(l) any contract with or commitment to any labor union; and
(m) any Governmental Permit (as defined in Section 3.14.3).
A true and complete copy of each agreement or document required by
subsections (a) through (m) of this Section to be listed on Item 3.11 to the
---------
Digital Content Disclosure Letter (such agreements and documents being
hereinafter collectively referred to as the "Digital Content Material
Agreements") and a copy of each Governmental Permit required by subsection (m)
of this Section to be listed on Item 3.11 to the Digital Content Disclosure
---------
Letter has been delivered to Keynote's legal counsel.
3.12 No Default; No Consent Required; No Restrictions. Digital Content is
------------------------------------------------
not in material breach or default under any Digital Content Material Agreement.
Digital Content is not a party to any government contracts or subcontracts.
Except as set forth in Item 3.12 to the Digital Content Disclosure Letter, no
---------
consent, notice or approval of any third party is required to ensure that,
following the Effective Time, any Digital Content Material Agreement will
continue to be in full force and effect without any breach or violation thereof
caused by virtue of the Merger or by any other transaction called for by this
Agreement or any Digital Content Ancillary Agreement. Digital Content is not a
party to, and no asset or property of Digital Content is bound or affected by,
any judgment, injunction, order, decree, contract, covenant or agreement
(noncompete or otherwise) that restricts or prohibits, purports to restrict or
prohibit, Digital Content or, following the Effective Time, the Surviving
Corporation or Keynote, from freely engaging in any business now conducted or
contemplated by Digital Content or from competing anywhere in the world
(including any contracts, covenants or agreements restricting the geographic
area in which Digital Content may sell, license, market, distribute or support
any
13
products or technology or provide services; or restricting the markets,
customers or industries that Digital Content may address in operating its
business; or restricting the prices which Digital Content may charge for its
products or technology or services), or includes any grants by Digital Content
of exclusive rights or licenses. No event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or would
reasonably be expected to, (a) result in a violation or breach of any of the
provisions of any Digital Content Material Agreement, or (b) to Digital
Content's knowledge, give any third party (i) the right to declare a default or
exercise any remedy under any Digital Content Material Agreement, (ii) the right
to a rebate, chargeback, penalty or change in delivery schedule or term under
any Digital Content Material Agreement, (iii) the right to accelerate the
maturity or performance of any obligation of Digital Content under any Digital
Content Material Agreement, or (iv) the right to cancel, terminate or modify any
Digital Content Material Agreement, except in each such case for such defaults,
acceleration rights, termination rights and other rights that have not had and
would not reasonably be expected to have individually or in the aggregate a
Material Adverse Effect on Digital Content. Digital Content has not received any
notice or other communication regarding any actual or possible violation or
breach of, or default under, any Digital Content Material Agreement.
3.13 Intellectual Property.
---------------------
3.13.1 Digital Content owns, or has the valid right or license to use,
possess, sell, license, copy, distribute, market, advertise and/or dispose of
all Intellectual Property (as defined below) to the extent necessary or required
for the conduct of the Digital Content Business (as defined below) (such
Intellectual Property being hereinafter collectively referred to as the "Digital
Content IP Rights"), and such rights to use, possess, sell, license, copy,
distribute, market, advertise and/or dispose of are sufficient for such conduct
of such business. As used herein, the term "Digital Content Business" means the
business of Digital Content as presently conducted, presently proposed to be
conducted. As used herein, the term "Intellectual Property" means, collectively,
all worldwide industrial and intellectual property rights, including, without
limitation, patents, patent applications, patent rights, trademarks, trademark
registrations and applications therefor, trade dress rights, trade names,
service marks, service xxxx registrations and applications therefor, Internet
domain names, Internet and World Wide Web URLs or addresses, copyrights,
copyright registrations and applications therefor, mask work rights, mask work
registrations and applications therefor, franchises, licenses, inventions, trade
secrets, know-how, customer lists, supplier lists, proprietary processes and
formulae, software source code and object code, algorithms, net lists,
architectures, structures, screen displays, photographs, images, layouts,
inventions, development tools, designs, blueprints, specifications, technical
drawings (or similar information in electronic format) and all documentation and
media constituting, describing or relating to the foregoing, including, without
limitation, manuals, programmers' notes, memoranda and records. As used in this
Section 3.13, "Digital Content-Owned IP Rights" means Digital Content IP Rights
which are owned or exclusively licensed to Digital Content; and "Digital
Content-Licensed IP Rights" means Digital Content IP Rights which are not
Digital Content-Owned IP Rights. By way of clarification, if a vendor grants
certain license rights to Digital Content, only the license rights granted by
the vendor to Digital Content is included under the term Digital Content-
Licensed IP Rights and Digital Content IP Rights.
14
3.13.2 Neither the execution, delivery and performance of this
Agreement, the Certificates of Merger, or the consummation of the Merger and the
other transactions contemplated by this Agreement and/or by Digital Content
Ancillary Agreements will, in accordance with their terms: (a) constitute a
material breach of or default under any instrument, contract, license or other
agreement governing any Digital Content IP Right to which Digital Content is a
party (collectively, the "Digital Content IP Rights Agreements"); (b) cause the
forfeiture or termination of, or give rise to a right of forfeiture or
termination of, any Digital Content IP Right; or (c) materially impair the right
of Digital Content or the Surviving Corporation to use, possess, sell or license
any Digital Content IP Right or portion thereof. There are no royalties,
honoraria, fees or other payments payable by Digital Content to any third person
(other than salaries payable to employees and independent contractors not
contingent on or related to use of their work product) as a result of the
ownership, use, possession, license-in, sale, marketing, advertising or
disposition of any Digital Content IP Rights by Digital Content to the extent
necessary for the conduct of the Digital Content Business and none will become
payable as a result of the consummation of the transactions contemplated by this
Agreement, in and of themselves, except for per copy license fees of less than
$1,000 for software generally commercially available to the public.
3.13.3 Neither the manufacture, marketing, license, sale, furnishing
or intended use of any product or service currently licensed, utilized, sold,
provided or furnished by Digital Content or currently under development by
Digital Content violates any license or agreement between Digital Content and
any third party or infringes or misappropriates any Intellectual Property Right
of any other party; and there is no pending or overtly threatened, claim or
litigation contesting the validity, ownership or right of Digital Content to
exercise any Digital Content IP Right nor, to the best knowledge of Digital
Content, is there any legitimate basis for any such claim, nor has Digital
Content received any notice asserting that any Digital Content IP Right or the
proposed use, sale, license or disposition thereof conflicts or will conflict
with the rights of any other party, nor, to the best knowledge of Digital
Content, is there any legitimate basis for any such assertion.
3.13.4 No current or former employee, consultant or independent
contractor of Digital Content: (a) is in material violation of any term or
covenant of any employment contract, patent disclosure agreement, invention
assignment agreement, non-disclosure agreement, noncompetition agreement or any
other contract or agreement with any other party by virtue of such employee's,
consultant's, or independent contractor's being employed by, or performing
services for, Digital Content or using trade secrets or proprietary information
of others without permission that would be likely to have a Material Adverse
Effect on Digital Content; or (b) has developed any technology, software or
other copyrightable, patentable, or otherwise proprietary work for Digital
Content that is subject to any agreement under which such employee, consultant
or independent contractor has assigned or otherwise granted to any third party
any rights (including without limitation Intellectual Property) in or to such
technology, software or other copyrightable, patentable or otherwise proprietary
work. The employment of any employee of Digital Content or the use by Digital
Content of the services of any consultant or independent contractor does not
subject Digital Content to any liability to any third party for improperly
soliciting such employee or consultant, or independent contractor to work for
Digital Content, whether such liability is based on contractual or other legal
obligations to such third party.
15
3.13.5 Digital Content has taken reasonably necessary and appropriate
steps to protect, preserve and maintain the secrecy and confidentiality of the
Digital Content IP Rights (in the case of Digital Content-Licensed IP Rights, to
the extent required by such third parties) and to preserve and maintain all
Digital Content's interests and proprietary rights in Digital Content IP Rights.
All officers, employees and consultants of Digital Content having access to
proprietary information of Digital Content, its customers or business partners
and inventions owned by Digital Content, have executed and delivered to Digital
Content an agreement regarding the protection of such proprietary information
and the assignment of Digital Content's inventions to Digital Content (in the
case of proprietary information of Digital Content's customer and business
partners, to the extent required by such customers and business partners); and
copies of all such agreements have been delivered to Keynote's counsel. Digital
Content has secured valid written assignments from all of Digital Content's
consultants, contractors and employees who were involved in, or who contributed
to, the creation or development of any Digital Content-Owned IP Rights, of the
rights to such contributions that may be owned by such persons or that Digital
Content does not already own by operation of law. No current or former employee,
officer, director, consultant or independent contractor of Digital Content has
any right, license, claim or interest whatsoever in or with respect to any
Digital Content IP Rights.
3.13.6 Item 3.13.6 to the Digital Content Disclosure Letter contains a
-----------
true and complete list of (i) all worldwide registrations made by or on behalf
of Digital Content of any patents, copyrights, mask works, trademarks, service
marks, Internet domain names or Internet or World Wide Web URLs or addresses
with any governmental or quasi-governmental authority; and (ii) all
applications, registrations, filings and other formal written governmental
actions made or taken pursuant to federal, state and foreign laws by Digital
Content to secure, perfect or protect its interest in Digital Content IP Rights,
including, without limitation, all patent applications, copyright applications,
and applications for registration of trademarks and service marks. All
registered patents, trademarks, service marks, Internet domain names, Internet
or World Wide Web URLs or addresses, and copyrights held by Digital Content are
valid, enforceable and subsisting.
3.13.7 Digital Content owns all right, title and interest in and to
all Digital Content-Owned IP Rights free and clear of all security interests,
liens, pledges, mortgages, assignments, claims, licenses, restrictions and
encumbrances (other than licenses and rights listed in Item 3.13.8). Digital
Content's right, license and interest in and to all Digital Content-Licensed IP
Rights are free and clear of all security interests, liens, pledges, mortgages,
assignments, claims, licenses, and encumbrances (other than licenses and rights
listed in Item 3.13.8).
3.13.8 Item 3.13.8 to the Digital Content Disclosure Letter contains a
-----------
true and complete list of (i) all licenses, sublicenses and other agreements as
to which Digital Content is a party and pursuant to which any person or entity
is authorized to use any Digital Content IP Rights, and (ii) all licenses,
sublicenses and other agreements as to which Digital Content is a party and
pursuant to which Digital Content is authorized to use any third party patents,
trademarks, Internet domain names, Internet or World Wide Web URLs or addresses,
or copyrights, including but not limited to software.
16
3.13.9 Neither Digital Content nor any other party acting on its
behalf, has disclosed or delivered to any party, or permitted the disclosure or
delivery to any escrow agent or other party, of any Digital Content Source Code
(as defined below). No event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or would reasonably
be expected to, result in the disclosure or delivery by Digital Content or any
other party acting on Digital Content's behalf to any party of any Digital
Content Source Code (as defined below). Item 3.13.9 of the Digital Content
-----------
Disclosure Letter identifies each contract, agreement and instrument (whether
written or oral) pursuant to which Digital Content has deposited, or is or may
be required to deposit, with an escrowholder or any other party, any Digital
Content Source Code and further describes whether the execution of this
Agreement or the consummation of the Merger or any of the other transactions
contemplated by this Agreement, in and of itself, would reasonably be expected
to result in the release from escrow of any Digital Content Source Code. As used
in this Section 3.13.9, "Digital Content Source Code" means, collectively, any
software source code, or any material portion or aspect of the software source
code, or any material proprietary information or algorithm contained in or
relating to any software source code, of any Digital Content-Owned IP Rights or
any other product marketed or currently proposed to be marketed by Digital
Content.
3.13.10 There is no unauthorized use, disclosure, infringement or
misappropriation of any Digital Content IP Rights by any third party, including
any employee or former employee of Digital Content. Digital Content has not
agreed to indemnify any person for any infringement of any Intellectual Property
of any third party by any product or service that has been sold, licensed to
third parties, leased to third parties, supplied, marketed, distributed, or
provided by Digital Content.
3.13.11 To Digital Content's knowledge, all software developed by
Digital Content and licensed by Digital Content to customers and all other
products manufactured, sold, licensed, leased or delivered by Digital Content to
customers and all services provided by Digital Content to customers on or prior
to the Closing Date conform in all material respects (to the extent required in
contracts with such customers) to applicable contractual commitments, express
and implied warranties, product specifications and product documentation and to
any representations provided to customers and Digital Content has no material
liability (and, to Digital Content's knowledge, there is no legitimate basis for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against Digital Content giving rise to any material
liability relating to the foregoing contracts that could have a Material Adverse
Effect on Digital Content) for replacement or repair thereof or other damages in
connection therewith in excess of any reserves therefor reflected on the Balance
Sheet.
3.13.12 All of the software, hardware or other technology developed,
owned, licensed and/or marketed or distributed by Digital Content to the extent
necessary for the conduct of the Digital Content Business are Year 2000
Compliant. "Year 2000 Compliant" means, to the extent related to date-related
errors, as applied to software, hardware or other technology, that: (i) such
software, hardware or other technology will operate and correctly store,
represent and process (including sort) all dates (including single and multi-
century formulas and leap year calculations), such that date-related errors will
not occur when the date being used is in the Year 2000, or in a year preceding
or following the Year 2000; (ii) such software, hardware or other technology has
been written and tested to support numeric and date transitions from the
17
twentieth century to the twenty-first century, and back (including without
limitation all calculations, aging, reporting, printing, displays, reversals,
disaster and vital records recoveries) without date-related error, corruption or
impact to current and/or future operations; and (iii) such software, hardware or
other technology will function without error or interruption related to any date
information, specifically including errors or interruptions from functions which
may involve date information from more than one century. Notwithstanding
anything to the contrary, the foregoing applies only if such software, hardware
or other technology receive properly formatted data.
3.13.13 No government funding; facilities of a university, college,
other educational institution or research center; or funding from third parties
(other than funds received in consideration for capital stock of Digital
Content) was used in the development of the computer software programs or
applications owned by the Company. No current or former employee, consultant or
independent contractor of Digital Content, who was involved in, or who
contributed to, the creation or development of any Digital Content IP Rights,
has performed services for the government, university, college, or other
educational institution or research center during a period of time during which
such employee, consultant or independent contractor was also performing services
for Digital Content.
3.14 Compliance with Laws.
--------------------
3.14.1 Digital Content has complied, and is now and at the Closing
Date will be in compliance with, all applicable federal, state or local laws,
ordinances, regulations, and rules, and all orders, writs, injunctions, awards,
judgments, and decrees, and to Digital Content's knowledge, all foreign laws,
ordinances, regulations and rules, applicable to it or to its assets,
properties, and business (and any regulations promulgated thereunder)
(collectively, "Applicable Law"), except for such noncompliance which,
individually or in the aggregate, would not have a Material Adverse Effect on
Digital Content. Digital Content holds all valid licenses and other governmental
permits that are necessary and/or legally required to be held by it to conduct
its business as presently conducted, except where the failure to hold such
licenses and permits would not individually or in the aggregate have a Material
Adverse Effect on Digital Content.
3.14.2 All materials, products and services distributed or marketed
by Digital Content have at all times made all disclosures to users or customers
required by Applicable Law and none of such disclosures made or contained in any
such materials have been inaccurate, misleading or deceptive, except where the
failure to make such disclosure or where such inaccurate, misleading or
deceptive disclosures, individually or in the aggregate, would not have a
Material Adverse Effect on Digital Content.
3.14.3 Digital Content holds all material permits, licenses and
approvals from, and has made all material filings with, government (and quasi-
governmental) agencies and authorities, that are necessary for Digital Content
to conduct its present business without any violation of Applicable Law
("Governmental Permits") and all such Governmental Permits are in full force and
effect. Digital Content has not received any notice or other communication from
any Governmental Authority regarding (a) any actual or possible violation of law
or any Governmental Permit or any failure to comply with any term or requirement
of any
18
Governmental Permit, or (b) any actual or possible revocation, withdrawal,
suspension, cancellation, termination or modification of any Governmental
Permit.
3.14.4 Neither Digital Content nor any officer, director, Manager,
Member, employee or agent of Digital Content has, for or on behalf of Digital
Content, (a) used any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, (b) made any unlawful
payment to foreign or domestic government officials or employees or to foreign
or domestic political parties or campaigns or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or (c) made any other payment
in violation of Applicable Law, which violation, for the purposes of clause (c)
only, does not have a Material Adverse Effect on Digital Content.
3.15 Certain Transactions and Agreements. None of the officers, directors,
-----------------------------------
Managers or Members of Digital Content and, to Digital Content's knowledge, none
of the employees of Digital Content, nor any member of their immediate families,
has any direct ownership interest in any firm or corporation that competes with,
or does business with, or has any contractual arrangement with, Digital Content
(except with respect to any interest in less than one percent of the stock of
any corporation whose stock is publicly traded). To Digital Content's knowledge,
none of the officers, directors, employees or Members of Digital Content, nor
any member of their immediate families, has any indirect ownership interest in
any firm or corporation that competes with, or does business with, or has any
contractual arrangement with, Digital Content (except with respect to any
interest in less than one percent of the stock of any corporation whose stock is
publicly traded). None of said officers, directors, employees or Members or any
member of their immediate families, is a party to, or otherwise directly or
indirectly interested in, any contract or informal arrangement with Digital
Content, except for normal compensation for services as an officer, director,
Manager or employee thereof that have been disclosed to Keynote and except for
agreements related to the purchase of Digital Content Membership Interests by
such persons. None of said officers, directors, employees, Members or family
members has any interest in any property, real or personal, tangible or
intangible (including but not limited to any Digital Content IP Rights or any
other Intellectual Property) that is used in, or that pertains to, the business
of Digital Content, except for the rights of a Member under the Certificate of
Formation and Operating Agreement.
3.16 Employees, ERISA and Other Compliance.
-------------------------------------
3.16.1 Digital Content is in compliance in all material respects with
all applicable laws, agreements and contracts relating to employment, employment
practices, immigration, wages, hours, and terms and conditions of employment,
including, but not limited to, employee compensation matters, and has correctly
classified employees as exempt employees and non-exempt employees under the Fair
Labor Standards Act, except to the extent that noncompliance or incorrect
classification of employees would not have a Material Adverse Effect on Digital
Content. A list of all current employees, officers and consultants of Digital
Content and their current title and/or job description and compensation is set
forth on Item 3.16.1(a) to the Digital Content Disclosure Letter. A list of all
--------------
former employees, officers and consultants of Digital Content is set forth on
Item 3.16.1(b) to the Digital Content Disclosure Letter. Digital Content does
--------------
not have any employment contracts or consulting agreements currently in effect
that are not
19
terminable at will (other than agreements with the sole purpose of providing for
the confidentiality of proprietary information or assignment of inventions).
3.16.2 Digital Content (a) is not now, nor has ever been, subject to
a union organizing effort, (b) is not subject to any collective bargaining
agreement with respect to any of its employees, (c) is not subject to any other
contract, written or oral, with any trade or labor union, employees' association
or similar organization or (d) has any current labor disputes. Digital Content
has no knowledge of any facts indicating that the consummation of the Merger or
any of the other transactions contemplated hereby will have a material adverse
effect on its relations with its current employees, and has no knowledge that
any of its key employees intends to leave their employ. All of the employees of
Digital Content are legally permitted to be employed by Digital Content in the
United States of America in their current job capacities.
3.16.3 Digital Content has no pension plan, which constitutes, or has
since the enactment of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), constituted, a "multiemployer plan" as defined in Section
3(37) of ERISA. No pension plan of Digital Content is subject to Title IV of
ERISA.
3.16.4 Digital Content has no employment, severance or other similar
contract, arrangement or policy (collectively, "employee benefit plans" as
defined in Section 3(3) of ERISA) and each plan or arrangement (written or oral)
providing for insurance coverage (including any self-insured arrangements),
workers' benefits, vacation benefits, severance benefits, disability benefits,
death benefits, hospitalization benefits, retirement benefits, deferred
compensation, profit-sharing, bonuses, Membership Interest options, Membership
Interest purchase, phantom stock, Membership Interest appreciation or other
forms of incentive compensation or post-retirement insurance, compensation or
benefits for employees, consultants or directors which is entered into,
maintained or contributed to by Digital Content and covers any employee or
former employee of Digital Content. Such contracts, plans and arrangements are
hereinafter collectively referred to as "Digital Content Benefit Arrangements."
(a) Each Digital Content Benefit Arrangement has been
maintained in compliance in all material respects with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
that are applicable to such Digital Content Benefit Arrangement, except to the
extent that noncompliance would not have a Material Adverse Effect on Digital
Content and, unless otherwise indicated in Item 3.16.4 to the Digital Content
-----------
Disclosure Letter, each such Digital Content Benefit Arrangement that is an
"employee pension benefit plan" as defined in Section 3(2) of ERISA which is
intended to qualify under Section 401(a) of the Code has received a favorable
determination letter that such plan satisfied the requirements of the Tax Reform
Act of 1986 (a copy of which letter(s) have been delivered to Keynote and its
counsel).
(b) Digital Content has delivered to Keynote or its counsel a
complete and correct copy and description of each Digital Content Benefit
Arrangement.
(c) Digital Content has timely filed and delivered to Keynote
and its counsel the most recent annual report (Form 5500) for each Digital
Content Benefit Arrangement that is an "employee benefit plan" as defined under
ERISA.
20
(d) Digital Content has not ever been a participant in any
"prohibited transaction," within the meaning of Section 406 of ERISA with
respect to any employee pension benefit plan (as defined in Section 3(2) of
ERISA) which Digital Content sponsors as employer or in which Digital Content
participates as an employer, which was not otherwise exempt pursuant to Section
408 of ERISA (including any individual exemption granted under Section 408(a) of
ERISA), or which could result in an excise tax under the Code.
(e) All contributions due from Digital Content with respect to
any of Digital Content Benefit Arrangements have been made or have been accrued
on Digital Content's financial statements (including without limitation the
Digital Content Financial Statements), and no further contributions will be due
or will have accrued thereunder as of the Closing Date.
(f) All individuals who, pursuant to the terms of any Digital
Content Benefit Arrangement, are entitled to participate in any such Digital
Content Benefit Arrangement, are currently participating in such Digital Content
Benefit Arrangement or have been offered an opportunity to do so and have
declined in writing.
(g) Digital Content will have no liability to any employee or
to any organization or any other entity as a result of the termination of any
employee leasing arrangement in excess of $10,000.
3.16.5 There has been no amendment to, written interpretation or
announcement (whether or not written) by Digital Content relating to, or change
in employee participation or coverage under, any Digital Content Benefit
Arrangement that would increase materially the expense of maintaining such
Digital Content Benefit Arrangement above the level of the expense incurred in
respect thereof during the calendar year 1999.
3.16.6 The group health plans (as defined in Section 4980B(g) of the
Code) that benefit employees of Digital Content are in compliance, in all
material respects, with the continuation coverage requirements of Section 4980B
of the Code as such requirements affect Digital Content and its employees. As of
the Closing Date, there will be no material outstanding, uncorrected violations
under the Consolidation Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), with respect to any of Digital Content Benefit Arrangements, covered
employees, or qualified beneficiaries that could result in a Material Adverse
Effect on Digital Content, or in a Material Adverse Effect on Keynote after the
Effective Time.
3.16.7 No benefit payable or which may become payable by Digital
Content pursuant to any Digital Content Benefit Arrangement or as a result of or
arising under this Agreement or the Certificates of Merger will constitute an
"excess parachute payment" (as defined in Section 280G(b)(1) of the Code) which
is subject to the imposition of an excise tax under Section 4999 of the Code or
which would not be deductible by reason of Section 280G of the Code. Digital
Content is not a party to any: (a) agreement with any executive officer or other
key employee thereof (i) the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction involving
Digital Content in the nature of the Merger or any of the other transactions
contemplated by this Agreement or any Digital Content Ancillary Agreement, (ii)
providing any term of employment or compensation guarantee,
21
or (iii) providing severance benefits or other benefits after the termination of
employment of such employee regardless of the reason for such termination of
employment; or (b) agreement or plan, including, without limitation, any
Membership Interest option plan, Membership Interest appreciation rights plan or
Membership Interest purchase plan, any of the benefits of which will be
increased, or the vesting of benefits of which will be accelerated, by the
occurrence of the Merger or any of the other transactions contemplated by this
Agreement or any Digital Content Ancillary Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement or any Digital Content Ancillary Agreement.
3.17 Company Documents. Digital Content has made available to Keynote or
-----------------
its legal counsel for examination all documents and information listed in the
Digital Content Disclosure Letter or in any schedule thereto or in any other
exhibit or schedule called for by this Agreement which have been requested by
Keynote or its legal counsel, including the following: (a) copies of Digital
Content's Certificate of Organization and Regulations as currently in effect;
(b) Digital Content's minute book containing all records of all proceedings,
consents, actions, and meetings of Digital Content Members, board of directors,
Managers or other applicable governing body, and any committees thereof; (c)
Digital Content's Membership Interest ledger, option ledger, and warrant ledger
and journal reflecting all Membership Interest issuances and transfers, and all
grants of options and warrants to purchase Digital Content Membership Interest
and other Digital Content securities; (d) all permits, orders, and consents
issued by, and filings by Digital Content with, any regulatory agency with
respect to Digital Content, or any securities of Digital Content, and all
applications for such permits, orders, and consents; and (e) all the Digital
Content Material Agreements.
3.18 No Brokers. Neither Digital Content nor any affiliate of Digital
----------
Content is obligated for the payment of any fees or expenses of any investment
banker, broker, finder or similar party in connection with the origin,
negotiation or execution of this Agreement or in connection with the Merger or
any other transaction contemplated by this Agreement, and Keynote will not incur
any liability, either directly or indirectly, to any such investment banker,
broker, finder or similar party as a result of, this Agreement, the Merger or
any act or omission of Digital Content, any of its employees, officers,
directors, Members, agents or affiliates.
3.19 Books and Records.
-----------------
3.19.1 The books, records and accounts of Digital Content (a) are in
all material respects true, complete and correct, (b) have been maintained in
accordance with good business practices on a basis consistent with prior years,
(c) are stated in reasonable detail and accurately and fairly reflect the
transactions and dispositions of the assets of Digital Content, and (d)
accurately and fairly reflect the basis for the Digital Content Financial
Statements.
3.19.2 Digital Content has devised and maintains a system of internal
accounting controls sufficient to provide reasonable assurances that: (a)
transactions are executed in accordance with management's general or specific
authorization; (b) transactions are recorded as necessary (i) to permit
preparation of true and accurate financial statements, and (ii) to maintain
accountability for assets; and (c) the amount recorded for assets on the books
and records of
22
Digital Content is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
3.20 Insurance. There is no material claim pending under any insurance
---------
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums due and payable
under all such policies and bonds have been timely paid and Digital Content is
otherwise in material compliance with the terms of such policies and bonds.
Digital Content has no knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies. All policies of
insurance now held by Digital Content have been provided to Keynote.
3.21 Environmental Matters.
---------------------
3.21.1 To Digital Content's knowledge, Digital Content is in material
compliance with all applicable Environmental Laws (as defined below), which
compliance includes the possession by Digital Content of all permits and other
governmental authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof. Digital Content has not
received any notice, or other communication (in writing or otherwise), whether
from a governmental body, citizens groups, employee or otherwise, that alleges
that Digital Content is not in compliance with any Environmental Law, and there
are no circumstances that may prevent or interfere with the compliance by
Digital Content with any current Environmental Law in the future. To Digital
Content's knowledge, no current or prior owner of any property leased or
possessed by Digital Content has received any notice or other communication (in
writing or otherwise), whether from a government body, citizens group, employee
or otherwise, that alleges that such current or prior owner or Digital Content
is not in compliance with any Environmental Law. All governmental authorizations
currently held by Digital Content pursuant to any Environmental Law (if any) are
identified in Item 3.21 of the Digital Content Disclosure Letter.
---------
3.21.2 For purposes of this Section 3.21: (a) "Environmental Law"
means any federal, state or local statute, law regulation or other legal
requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern (defined below); and (b) "Material of Environmental
Concern" include chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products and any other substance that is currently
regulated by an Environmental Law or that is otherwise a danger to health,
reproduction or the environment.
3.22 Board Actions. The Managers of Digital Content (a) has unanimously
-------------
determined that the Merger is in the best interests of the Digital Content
Members and is on terms that are fair to such Digital Content Members, and has
recommended the Merger to the Digital Content Members, and (b) will submit the
Merger, this Agreement, each of the Digital Content Ancillary Agreements and all
other agreements, transactions and actions contemplated hereby and thereby, to
the extent that Member approval is required thereof under Applicable Law and
Digital
23
Content's Certificate of Organization and Regulations, to the vote and approval
of Digital Content Members.
3.23 Vote Required. The affirmative vote of the holders of a majority of
-------------
the Digital Content Membership Interests that are issued and outstanding on the
Record Date (as defined below) is the only vote of the holders of any of the
Digital Content Membership Interests necessary to approve this Agreement, the
Merger, the Certificates of Merger, the Escrow Agreement (as defined in Section
9.13), the Digital Content Ancillary Agreements and the other transactions
contemplated by this Agreement and the Digital Content Ancillary Agreements. As
used in this Section 3.23, the term "Record Date" means the record date for
determining those Digital Content Members who are entitled to vote at the
Digital Content Members' meeting to approve the Merger under applicable law and
Digital Content's Certificate of Organization or Regulations.
3.24 Board Approval. The Managers of Digital Content have (i) approved this
--------------
Agreement, the Certificates of Merger, the Merger, the Escrow Agreement (as
defined in Section 9.12), the Digital Content Ancillary Agreements and the other
transactions contemplated by this Agreement and the Digital Content Ancillary
Agreements, (ii) determined that the Merger is in the best interests of the
Digital Content Members and is on terms that are fair to such Members and (iii)
voted to submit this Agreement, the Agreement of Merger, the Merger and the
transactions contemplated by this Agreement to the vote and approval of Digital
Content's Members.
3.25 No Existing Discussions. Neither Digital Content nor any director,
-----------------------
Manager, officer, Member, employee or agent of Digital Content is engaged,
directly or indirectly, in any discussions or negotiations with any third party
relating to any Alternative Transaction (as defined in Section 5.7).
3.26 Voting Agreement; Irrevocable Proxies. Simultaneously with the
-------------------------------------
execution of this Agreement, the persons and/or entities set forth on Schedule
--------
1.11 to the Digital Content Disclosure Letter have agreed in writing to vote for
----
approval of this Agreement and the Merger (and to vote against proposals
conflicting or inconsistent with this Agreement and the Merger) pursuant to a
voting agreement in the form attached hereto as Exhibit B ("Voting Agreement")
---------
and pursuant to Irrevocable Proxies in the form attached as Exhibit A thereto
---------
("Irrevocable Proxies").
3.27 Disclosure.
----------
(a) Neither this Agreement, its exhibits and schedules and the
Digital Content Disclosure Letter, nor any Digital Content Ancillary Agreements
delivered by Digital Content to Keynote under this Agreement, taken together,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein and therein, in
light of the circumstances under which such statements were made, not
misleading.
24
ARTICLE 4
Representations and Warranties of Keynote and Sub
Keynote and Sub hereby represent and warrant to Digital Content that,
except as set forth in the letter addressed to Digital Content from Keynote and
dated as of the Agreement Date which has been delivered by Keynote to Digital
Content concurrently herewith (the "Keynote Disclosure Letter"), each of the
following representations, warranties and statements contained in the following
Sections of this Article 4 are true and correct as of the Agreement Date and
will be true and correct on and as of the Closing Date. For all purposes of this
Agreement, the statements contained in the Keynote Disclosure Letter and its
schedules shall also be deemed to be representations and warranties made and
given by Keynote and Sub under Article 4 of this Agreement.
4.1 Organization and Good Standing. Keynote is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the corporate power and authority to own, operate and lease
its properties and to carry on its business as now conducted and as proposed to
be conducted. Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the corporate power
and authority to own, operate and lease its properties and to carry on its
business. Keynote owns all of the issued and outstanding capital stock of Sub.
Each of Keynote and Sub is duly qualified or licensed to do business in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing necessary,
except in such jurisdictions where the failure to be so duly qualified or
licensed would not have a Material Adverse Effect on Keynote. Keynote has made
available to Digital Content or its legal counsel, accurate and complete copies
of the Certificates of Incorporation and Bylaws of Keynote and Sub, as currently
in full force and effect. Neither Keynote nor Sub is in violation of its
Certificate of Incorporation or Bylaws.
4.2 Power, Authorization and Validity.
---------------------------------
4.2.1 Power and Authority. Keynote has all requisite corporate power
-------------------
and authority to enter into, execute, deliver and perform its obligations under,
this Agreement and all the Keynote Ancillary Agreements and to consummate the
Merger. The Merger and the execution, delivery and performance of this Agreement
and each of the Keynote Ancillary Agreements by Keynote have been duly and
validly approved and authorized by Keynote's Board of Directors in compliance
with applicable law (including the Delaware General Corporation Law) and
Keynote's Certificate of Incorporation and Bylaws. Neither the Merger nor the
execution, delivery and performance of this Agreement and each of the Keynote
Ancillary Agreements by Keynote requires the approval of Keynote's stockholders.
Sub has all requisite corporate power, capacity and authority to execute,
deliver and perform its obligations under, this Agreement and all the Sub
Ancillary Agreements and to consummate the Merger. The execution, delivery and
performance of this Agreement and each of the Sub Ancillary Agreements by Sub
have been duly and validly approved and authorized by Sub's Board of Directors
and its sole stockholder in compliance with Applicable Law and Sub's Certificate
of Incorporation and Bylaws.
4.2.2 No Consents. No consent, approval, order or authorization of,
-----------
or registration, declaration or filing with, any court, administrative agency,
commission or other
25
Governmental Authority is necessary or required to be made or obtained by
Keynote or Sub to enable Keynote and Sub to enter into, and to perform their
respective obligations under, this Agreement, the Keynote Ancillary Agreements
or the Sub Ancillary Agreements, respectively, and for Keynote and Sub to
consummate the Merger, except for the filing of the Certificates of Merger with
the Delaware Secretary of State as required by Delaware Law and with the Texas
Secretary of State as required by Texas Law.
4.2.3 Enforceability. This Agreement and the Keynote Ancillary
--------------
Agreements are, or when executed by Keynote will be, valid and binding
obligations of Keynote, enforceable against Keynote in accordance with their
respective terms, subject to the effect of (a) applicable bankruptcy and other
similar laws affecting the rights of creditors generally and (b) rules of law
and equity governing specific performance, injunctive relief and other equitable
remedies. This Agreement and the Sub Ancillary Agreements are, or when executed
by Sub will be, valid and binding obligations of Sub, enforceable against Sub in
accordance with their respective terms, subject to the effect of (a) applicable
bankruptcy and other similar laws affecting the rights of creditors generally
and (b) rules of law and equity governing specific performance, injunctive
relief and other equitable remedies.
4.3 No Conflict. Neither the execution and delivery of this Agreement nor
-----------
any of the Keynote Ancillary Agreements or Sub Ancillary Agreements by Keynote
or Sub, nor the consummation of the Merger or any of the other transactions
contemplated hereby or thereby, will conflict with, or (with or without notice
or lapse of time, or both) result in a termination, breach, impairment or
violation of or constitute a default under: (a) any provision of the Certificate
of Incorporation or Bylaws of Keynote or Sub as currently in effect; (b) any
federal, state, local or foreign judgment, writ, decree, order, statute, rule or
regulation applicable to Keynote or Sub or any of their respective material
assets or properties; or (c) any material note, bond, mortgage, indenture,
lease, license, permit, franchise, material instrument, agreement, or contract,
undertaking, understanding, letter of intent, memorandum of understanding or
commitment (whether verbal or in writing) to which Keynote is a party or by
which Keynote or its material assets or properties are bound, except in the case
of (b) and (c) for any such conflicts, terminations, breaches, impairments,
violations or defaults which would not have a Material Adverse Effect on Keynote
or a material adverse effect on Keynote's or Sub's ability to consummate the
Merger.
4.4 Litigation. As of the date hereof, there is no judgment, decree or
----------
order against Keynote that could prevent, enjoin, alter or materially delay any
of the transactions contemplated by this Agreement.
ARTICLE 5
Pre Closing Covenants of Digital Content
During the time period from the Agreement Date until the earlier to occur
of (a) the Effective Time or (b) the termination of this Agreement in accordance
with the provisions of Article 10, Digital Content covenants and agrees with
Keynote as follows:
5.1 Advice of Changes. Digital Content will promptly advise Keynote in
-----------------
writing of any (a) event occurring subsequent to the Agreement Date that would
render any representation or warranty of Digital Content contained in Article 3
of this Agreement, if made on or as of the
26
date of such event or the Closing Date, untrue or inaccurate and (b) Material
Adverse Change in Digital Content. Digital Content will immediately advise
Keynote if Digital Content's Current Assets (as defined in Section 3.8) equal or
exceed (or are at any time likely to equal or exceed) Ten Million Dollars
($10,000,000) at any time prior to the earlier to occur of (i) the termination
of this Agreement in accordance with Article 10 or (ii) the Effective Time.
5.2 Maintenance of Business. Digital Content will carry on and preserve
-----------------------
its business and its relationships with customers, advertisers, suppliers,
employees and others with whom Digital Content has contractual relations in
substantially the same manner as it has prior to the Agreement Date consistent
with past practices. If Digital Content becomes aware of a material
deterioration in the relationship with any key customer, key supplier or key
employee, it will promptly bring such information to the attention of Keynote in
writing and, if requested by Keynote, will exert reasonable commercial efforts
to promptly restore the relationship.
5.3 Conduct of Business. Digital Content will continue to conduct its
-------------------
business and maintain its business relationships in the ordinary and usual
course and Digital Content will not, without the prior written consent of
Keynote:
(a) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person other than in the ordinary course of business
consistent with past practice;
(b) lend any money, other than reasonable and normal advances to
employees for bona fide expenses that are incurred in the ordinary course of
Digital Content's business consistent with Digital Content's past practices;
(c) enter into any material transaction or agreement or take any
other action not in the ordinary course of Digital Content's business consistent
with Digital Content's past practices;
(d) grant any Encumbrance on any of its assets;
(e) sell, transfer or dispose of any of its assets except in the
ordinary course of Digital Content's business consistent with Digital Content's
past practices;
(f) enter into any material lease or contract for the purchase or
sale of any property, whether real or personal, tangible or intangible;
(g) pay any bonus, increased salary or special remuneration to any
officer, director, Manager, Member, employee or consultant (except for normal
salary increases consistent with Digital Content's past practices and not to
exceed 5% of such officer's, employee's or consultant's base annual
compensation, and except pursuant to arrangements disclosed in writing to
Keynote prior to the Agreement Date or disclosed in writing subsequent to the
Agreement Date and approved in writing by Keynote) or enter into any new
employment or consulting agreement with any such person;
(h) change any of its accounting methods;
27
(i) declare, set aside or pay any dividend or other distribution in
respect of its capital stock (including Membership Interests), redeem,
repurchase or otherwise acquire any of its capital stock or other securities
(except for the repurchase of Membership Interests from employees, directors,
Managers, consultants or contractors of Digital Content in connection with the
termination of their services with Digital Content at the original purchase
price of such Membership Interest), pay or distribute any cash or property to
any Member or security holder of Digital Content or make any other cash payment
to any Member or security holder of Digital Content that is unusual,
extraordinary, or not made in the ordinary course of Digital Content's business
consistent with its past practices;
(j) amend or terminate any contract, agreement or license to which
Digital Content is a party except those amended or terminated in the ordinary
course of Digital Content's business, consistent with its past practices, and
which are not material in amount or effect;
(k) waive or release any material right or claim except in the
ordinary course of Digital Content's business consistent with its past
practices;
(l) issue, sell, create or authorize any Membership Interests or any
other of its securities, or issue, grant or create any warrants, obligations,
subscriptions, options, convertible securities, or other commitments to issue
Membership Interests or any securities that are potentially exchangeable for, or
convertible into, Membership Interests;
(m) subdivide or split or combine or reverse split the outstanding
Membership Interests or enter into any recapitalization affecting the number of
outstanding Membership Interests or affecting any other of its securities;
(n) merge, consolidate or reorganize with, or acquire, or enter into
any other business combination with, any corporation, partnership, limited
liability company or any other entity (other than Keynote or Sub) or enter into
any negotiations, discussions or agreement for such purpose;
(o) amend its Certificate of Organization or Regulations;
(p) license any of its technology or Intellectual Property, or
acquire any Intellectual Property (or any license thereto) from any third party;
(q) materially change any insurance coverage;
(r) agree to any audit assessment by any tax authority or file any
federal or state income or franchise tax return unless copies of such returns
have first been delivered to Keynote for its review at a reasonable time prior
to filing;
(s) modify or change the exercise or conversion rights or exercise or
purchase prices of any Digital Content Membership Interests or other Digital
Content securities, or accelerate or otherwise modify (i) the right to exercise
any option, warrant or other right to purchase any Membership Interests or other
securities of Digital Content or (ii) the vesting or release of any Membership
Interests or other securities of Digital Content from any repurchase options or
rights of refusal held by Digital Content or any other party or any other
restrictions; or
28
(t) agree to do any of the things described in the preceding clauses
5.3(a) through 5.3(s).
5.4 Regulatory Approvals. Digital Content will promptly execute and file,
--------------------
or join in the execution and filing, of any application, notification or any
other document that may be necessary in order to obtain the authorization,
approval or consent of any Governmental Authority, whether federal, state, local
or foreign, which may be reasonably required, or which Keynote may reasonably
request, in connection with the consummation of the Merger or any other
transactions contemplated by this Agreement or any Digital Content Ancillary
Agreement. Digital Content will use diligent efforts to obtain, and to cooperate
with Keynote to promptly obtain, all such authorizations, approvals and
consents.
5.5 Necessary Consents. Digital Content will use diligent efforts to
------------------
promptly obtain such written consents and authorizations of third parties, give
notices to third parties and take such other actions as may be necessary or
appropriate in order to effect the consummation of the Merger and the other
transactions contemplated by this Agreement, to enable Keynote to carry on
Digital Content's business immediately after the Effective Time and to keep in
effect and avoid the breach, violation of, termination of, or adverse change to,
any agreement or contract to which Digital Content is a party or is bound or by
which any of its assets is bound.
5.6 Litigation. Digital Content will notify Keynote in writing promptly
----------
after learning of any claim, action, suit, arbitration, mediation, proceeding or
investigation by or before any court, arbitrator or arbitration panel, board or
governmental agency, initiated by or against it, or known by it to be threatened
against Digital Content or any of its officers, directors, employees or Members
in their capacity as such.
5.7 No Other Negotiations. Digital Content will not, and Digital Content
---------------------
will not authorize, encourage or permit any officer, director, employee,
Manager, Member, affiliate or agent of Digital Content or any attorney,
investment banker or other person on Digital Content's or their behalf to,
directly or indirectly: (i) solicit, initiate, encourage or induce the making,
submission or announcement of, any offer or proposal from any party concerning
any Alternative Transaction (as defined below) or take any other action that
could reasonably be expected to lead to an Alternative Transaction or a proposal
therefor; (ii) consider any inquiry, offer or proposal received from any party
concerning any Alternative Transaction (other than to respond to such inquiry,
offer or proposal by indicating that Digital Content is not interested in any
Alternative Transaction); (iii) furnish any information regarding Digital
Content to any person or entity in connection with or in response to any
inquiry, offer or proposal for or regarding any Alternative Transaction (other
than to respond to such inquiry, offer or proposal by indicating that Digital
Content is not interested in any Alternative Transaction); (iv) participate in
any discussions or negotiations with any person or entity with respect to any
Alternative Transaction (other than to respond to such inquiry, offer or
proposal by indicating that Digital Content is not interested in any Alternative
Transaction); (v) otherwise cooperate with, facilitate (with knowledge) or
encourage any effort or attempt by any person or entity (other than Keynote) to
effect any Alternative Transaction; or (vi) execute, enter into or become bound
by any letter of intent, agreement, commitment or understanding between Digital
Content and any third party that is related to, provides for or concerns any
Alternative Transaction. Digital Content will promptly notify Keynote orally and
in writing of any inquiries or proposals received by Digital Content,
29
directors, officers, Managers, Members, employees or agents regarding any
Alternative Transaction and will, identify the party making the inquiry or
proposal and the nature and terms of any inquiry or proposal. Any violation of
the restrictions set forth in this Section by any officer, director, Manager,
Member or employee of Digital Content or any attorney, investment banker or
other director or representative of Digital Content shall be deemed a breach of
this Section 5.7 by Digital Content. As used herein, the term "Alternative
Transaction" means any commitment, agreement or transaction involving or
providing for (a) the possible disposition of all or any substantial portion of
Digital Content's business, assets or capital stock, whether by way of merger,
consolidation, sale of assets, sale of Membership Interests, Membership Interest
exchange, tender offer and/or any other form of business combination, or (b) any
initial public offering of capital stock or other securities of Digital Content
pursuant to a registration statement filed under the Securities Act.
5.8 Access to Information. Digital Content will allow Keynote and its
---------------------
agents access at reasonable time to the files, books, records, technology,
contracts, personnel and offices of Digital Content, including, without
limitation, any and all information relating to Digital Content's taxes,
commitments, contracts, leases, licenses, financial condition and real, personal
and intangible property, subject to the terms and conditions of the Letter of
Intent between Digital Content and Keynote, dated July 14, 2000 (the "Letter of
Intent"). Digital Content will cause its accountants to cooperate with Keynote
and Keynote's agents (provided that, prior to any disclosure to such agents,
such agents are bound by the terms of a confidentiality agreement with
substantially similar restriction as included in the Letter of Intent to
restrict the use and disclosure of Digital Content's confidential information)
in making available all financial information reasonably requested by Keynote,
including without limitation the right to examine all working papers pertaining
to all financial statements prepared or audited by such accountants.
5.9 Satisfaction of Conditions Precedent. Digital Content will use its
------------------------------------
diligent efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Article 9, and Digital Content will use its
diligent efforts to cause the Merger and the other transactions contemplated by
this Agreement to be consummated in accordance with this Agreement.
5.10 Digital Content Employee Plans and Benefit Arrangements. Upon the
-------------------------------------------------------
request of Keynote, Digital Content will terminate any Digital Content Benefit
Plan and any leased employee arrangement or professional employee organization
immediately prior to the Effective Time.
5.11 Employment Agreements. Digital Content shall obtain from each of
---------------------
Xxxxxxx Xxxxxx and Xxx Xxxxx an executed employment agreement, substantially in
the form of Exhibit C to this Agreement (the "Employment Agreements"), each of
---------
which such agreements will include an agreement not to compete with the business
of Digital Content and Keynote (or any successor corporations) for a period of
three years following the termination of each such person's employment with Sub.
30
ARTICLE 6
Keynote Covenants
During the time period from the Agreement Date until the earlier to occur
of (a) the Effective Time or (b) the termination of this Agreement in accordance
with Article 10, Keynote covenants and agrees as follows:
6.1 Advice of Changes. Keynote will promptly advise Digital Content in
-----------------
writing of any (a) event that would render any representation or warranty of
Keynote or Sub contained in this Agreement or the Keynote Disclosure Letter, if
made on or as of the date of such event or the Closing Date, to be untrue or
inaccurate and (b) any breach of any covenant or obligation of Keynote or Sub
pursuant to this Agreement, any Keynote Ancillary Agreement or any Sub Ancillary
Agreement.
6.2 Regulatory Approvals. Keynote will execute and file, or join in the
--------------------
execution and filing, of any application, notification or other document that
may be necessary in order to obtain the authorization, approval or consent of
any governmental body, federal, state, local or foreign, which may be reasonably
required, in connection with the consummation of the Merger and the other
transactions contemplated by this Agreement and the Keynote Ancillary Agreements
and Sub Ancillary Agreements in accordance with the terms of this Agreement.
Keynote will use diligent efforts to obtain all such authorizations, approvals
and consents. Notwithstanding anything in this Agreement to the contrary,
neither Keynote nor any of its affiliates shall be under any obligation to make
proposals, execute or carry out agreements or submit to orders providing for the
sale or other disposition or holding separate (through the establishment of a
trust or otherwise) of any assets or categories of assets of Keynote, or any of
its affiliates or Digital Content, or imposing or seeking to impose any
limitation on the ability of Keynote or any of its subsidiaries or affiliates to
conduct their business or own such assets.
6.3 Satisfaction of Conditions Precedent. Keynote will use its diligent
------------------------------------
efforts to satisfy or cause to be satisfied all of the conditions precedent
which are set forth in Article 8, and Keynote will use its diligent efforts to
cause the transactions contemplated by this Agreement to be consummated in
accordance with the terms of this Agreement.
6.4 Indemnification.
---------------
(a) From and after the Effective Time, the Surviving Corporation
shall indemnify, defend and hold harmless each person who is now, or has been at
any time prior to the date of this Agreement or who becomes prior to Effective
Time, an officer, director or employee of Digital Content (the "Indemnified
Parties") in respect of acts or omissions occurring on or prior to the Effective
Time to the extent provided under Digital Content's Certificate of Organization
or Regulations and indemnification agreements in effect on the date hereof,
provided that such indemnification shall be subject to any limitation imposed
from time to time under applicable law.
(b) If the Surviving Corporation or any of its respective successors
or assigns (i) consolidates with or merges into any other person or entity and
shall not be the continuing or surviving person of such consolidation or merger,
or (ii) transfers all or substantially all of its properties and assets to any
person or entity, then and in each such case, proper provision shall be
31
made so that such successors or assigns of the Surviving Corporation shall
assume the obligations set forth in this Section 6.4.
6.5 Employee Benefit Plans. Keynote will provide benefits to employees of
----------------------
Digital Content as soon as reasonably practicable following the Effective Time
that are substantially identical in the aggregate to the benefits currently
provided to similarly situated employees of Keynote. From and after the
Effective Time, Keynote shall grant all employees of Digital Content credit for
all service (to the same extent as service with Keynote is taken into account
with respect to similarly situated employees of Keynote) with Digital Content
prior to the Effective Time for (a) eligibility and vesting purposes and (b) for
purposes of vacation accrual after the Effective Time as if such service with
Digital Content was service with Keynote.
ARTICLE 7
Closing Matters
7.1 The Closing. Subject to termination of this Agreement as provided in
-----------
Article 10 below, the closing of the transactions to consummate the Merger (the
"Closing") will take place at the offices of Fenwick & West LLP, Two Palo Alto
Square, Palo Alto, California at 10:00 a.m., Pacific Time on the second business
day after all of the conditions to Closing set forth in Sections 8 and 9 hereof
have been satisfied and/or waived in accordance with this Agreement, or on such
other day or at such other locations as Keynote and Digital Content may mutually
agree upon (the "Closing Date"). Concurrently with the Closing, the Certificates
of Merger will be filed with the Delaware and Texas Secretaries of State.
7.2 Exchange of Certificates.
------------------------
7.2.1 At the Effective Time, Digital Content Membership Interests
that are outstanding immediately prior thereto (other than Dissenting Membership
Interests for which dissenters rights have been or will be perfected in
accordance with Texas law), will, by virtue of the Merger and without further
action, cease to exist, and all such Membership Interests will be converted into
the right to receive from Keynote the Initial Per Membership Interest
Consideration and the Additional Per Membership Interest Consideration to which
such holder is entitled pursuant to Section 2.1.2, subject to the provisions of
Section 2.2 (regarding the withholding of Escrow Consideration). As soon as
practicable after the Effective Time (and in any event no later than ten (10)
business days after the Effective Time), the Surviving Corporation shall cause
to be mailed to each holder of record of a certificate which immediately prior
to the Effective Time represented outstanding Digital Content Membership
Interests (the "Digital Content Certificates") and which Membership Interests
were converted into the right to receive the Initial Per Membership Interest
Consideration pursuant to Section 2.1.2, (a) a letter of transmittal in
customary form (which shall specify that delivery shall be effected, and risk of
loss and title to the Digital Content Certificates shall pass, only upon
delivery of the Digital Content Certificates to Keynote and shall be in such
form and have such other provisions as Keynote may reasonably specify) and (b)
instructions for use in effecting the surrender of the Digital Content
Certificates in exchange for the Initial Per Membership Interest Consideration
and the Additional Per Membership Interest Consideration. Upon surrender of a
Digital Content Certificate for cancellation or upon delivery of an affidavit of
lost certificate and an indemnity in form and substance satisfactory to Keynote
(the "Affidavit") to Keynote or to such other agent or agents as
32
may be appointed by Keynote, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, (a)
Keynote will pay by check to each tendering holder of a Digital Content
Certificate or an Affidavit (a "Tendering Digital Content Holder") cash in the
amounts of the Initial Per Membership Interest Consideration and the Additional
Per Membership Interest Consideration to which such holder is entitled pursuant
to Section 2.1.2, subject to the provisions of Section 2.2 (regarding the
withholding of Escrow Consideration).
7.2.2 After the Effective Time there will be no further registration
of transfers on the stock transfer books of Digital Content or its transfer
agent of any Digital Content Membership Interests or other securities that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Digital Content Certificates or an Affidavit are presented for any reason,
they will be canceled and exchanged as provided in this Section 7.2.
7.2.3 Until Digital Content Certificates or an Affidavit representing
Digital Content Membership Interests that are outstanding immediately prior to
the Effective Time are surrendered pursuant to Section 7.2.1 above, such Digital
Content Certificates will be deemed, for all purposes, to evidence ownership of
the Per Membership Interest Consideration, subject to the provisions of Section
2.2 (regarding the withholding of Escrow Consideration).
7.3 Appraisal Rights. If holders of Digital Content Membership Interests
----------------
are entitled to appraisal rights pursuant to the Texas Law in connection with
the Merger, any Membership Interests held by Digital Content Members who
exercise and perfect such appraisal rights ("Dissenting Membership Interests")
shall not be converted into a right to receive the Per Membership Interest
Consideration, but shall be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Membership Interests pursuant to the Texas Law. Digital Content shall give
Keynote prompt notice (and in no event more than two business days) of any
demand received by Digital Content for appraisal of Digital Content Membership
Interests, and Keynote shall have the right to control all negotiations and
proceedings with respect to such demand. Digital Content agrees that, except
with the prior written consent of Keynote, it will not voluntarily make any
payment with respect to, or settle or offer to settle, any such demand for
appraisal. In the event that any Digital Content Member fails to make an
effective demand for payment or otherwise loses his status as a holder of
Dissenting Membership Interests (a "Dissenting Member"), Keynote shall, as of
the later of the Effective Time of the Merger or ten business days from the
occurrence of such event, issue and deliver, upon surrender by such Dissenting
Member of its Digital Content Certificate or Certificates, the Per Membership
Interest Consideration, without interest thereon, to which such Dissenting
Member would have been entitled to under Section 2.1.2 of this Agreement (less
the amount of cash consideration to be held in escrow with respect to such
Member pursuant to Section 2.2).
ARTICLE 8
Conditions to Obligations of Digital Content
Digital Content's obligations hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Digital Content, but only in a writing
signed by Digital Content):
33
8.1 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of Keynote and Sub set forth in Article 4 (a) that are qualified as
to materiality will be true and correct and (b) that are not qualified as to
materiality shall be true and correct in all material respects, in each case on
and as of the Closing with the same force and effect as if they had been made on
the Closing Date (except for any such representations or warranties that, by
their terms, speak only as of a specific date or dates, in which case such
representations and warranties that are qualified as to materiality shall be
true and correct, and such representations and warranties that are not qualified
as to materiality shall be true and correct in all material respects, on and as
of such specified date or dates), and at the Closing Digital Content will have
received a certificate to such effect executed by an officer of Keynote.
8.2 Covenants. Keynote will have performed and complied in all material
---------
respects with all of its covenants contained in Article 6 on or before the
Closing (to the extent that such covenants require performance by Keynote on or
before the Closing), and at the Closing Digital Content will have received a
certificate to such effect signed by an officer of Keynote.
8.3 Requisite Approvals. This Agreement will have been duly and validly
-------------------
approved by Keynote's Board of Directors in accordance with Applicable Law and
Keynote's Certificate of Incorporation and Bylaws, each as amended. This
Agreement will have been approved and adopted by Sub's Board of Directors and
sole stockholder in accordance with Applicable Law and Sub's Certificate of
Incorporation and Bylaws, each as amended.
8.4 Compliance with Law; No Legal Restraints; No Litigation. There will
-------------------------------------------------------
not be issued or enacted or adopted, or threatened in writing by any
Governmental Authority, any order, decree, temporary, preliminary or permanent
injunction, legislative enactment, statute, regulation, action or proceeding, or
any judgment or ruling by any Governmental Authority that prohibits or renders
illegal or imposes limitations on the Merger or any other material transaction
contemplated by this Agreement or any Keynote Ancillary Agreements or any Sub
Ancillary Agreements. No litigation or proceeding will be threatened or pending
for the purpose or with the probable effect of enjoining or preventing the
consummation of the Merger or any of the other material transactions
contemplated by this Agreement.
8.5 Government Consents. There will have been obtained at or prior to the
-------------------
Closing Date such permits or authorizations, and there will have been taken all
such other actions by any regulatory authority having jurisdiction over the
parties and the actions herein proposed to be taken, as may be required to
lawfully consummate the Merger.
8.6 Opinion of Keynote's Counsel. Digital Content will have received from
----------------------------
Fenwick & West LLP, counsel to Keynote, an opinion covering the matters set
forth in Exhibit D.
---------
ARTICLE 9
Conditions to Obligations of Keynote
The obligations of Keynote hereunder are subject to the fulfillment or
satisfaction on, and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Keynote, but only in a writing signed by
Keynote):
34
9.1 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of Digital Content set forth in Article 3 (a) that are qualified as
to materiality will be true and correct and (b) that are not qualified as to
materiality shall be true and correct in all material respects, in each case on
and as of the Closing with the same force and effect as if they had been made at
the Closing Date (except for any such representations or warranties that, by
their terms, speak only as of a specific date or dates, in which case such
representations and warranties that are qualified as to materiality shall be
true and correct, and such representations and warranties that are not qualified
as to materiality shall be true and correct in all material respects, on and as
of such specified date or dates), and at the Closing Keynote will have received
a certificate to such effect executed by Digital Content's President or Chief
Executive Officer.
9.2 Covenants. Digital Content will have performed and complied in all
---------
material respects with all of its covenants contained in Article 5 at or before
the Closing (to the extent that such covenants require performance by Digital
Content at or before the Closing), and at the Closing Keynote will have received
a certificate to such effect signed by Digital Content's President or Chief
Executive Officer.
9.3 No Material Adverse Change. There will not have been any Material
--------------------------
Adverse Change in Digital Content, whether or not resulting from a breach in any
representation, warranty or covenant in this Agreement, except for any Material
Adverse Change in Digital Content resulting from (i) the announcement of the
Merger or (ii) conditions affecting Digital Content's industry as a whole; at
the Closing Keynote will have received a certificate to such effect signed by
Digital Content's President or Chief Executive Officer.
9.4 Compliance with Law; No Legal Restraints; No Litigation. There will
-------------------------------------------------------
not be any issued, enacted or adopted, or threatened in writing by any
Governmental Authority any order, decree, temporary, preliminary or permanent
injunction, legislative enactment, statute, regulation, action, proceeding
judgment or ruling by any Governmental Authority that prohibits or renders
illegal or imposes limitations on: (a) the Merger or any other material
transaction contemplated by this Agreement or any Digital Content Ancillary
Agreement; or (b) Keynote's right (or the right of any Keynote subsidiary) to
own, retain, use or operate any of its products, properties or assets (including
equity, properties or assets of Digital Content) on or after consummation of the
Merger or seeking a disposition or divestiture of any such properties or assets.
No litigation or proceeding will be threatened or pending for the purpose or
with the probable effect of enjoining or preventing the consummation of any of
the transactions contemplated by this Agreement, or which could be reasonably
expected to have a Material Adverse Effect on Digital Content or Keynote.
9.5 Government Consents. There will have been obtained at or prior to the
-------------------
Closing Date such permits or authorizations, and there will have been taken all
such other actions by any governmental or regulatory authority having
jurisdiction over the parties and the actions herein proposed to be taken, as
may be required to consummate the Merger.
9.6 Opinion of Digital Content's Counsel. Keynote will have received from
------------------------------------
Kane, Russell, Xxxxxxx & Xxxxx, PC, counsel to Digital Content, an opinion
opining to the matters set forth in Exhibit E.
---------
35
9.7 Consents. Keynote will have received duly executed copies of all
--------
third-party consents, approvals, assignments, notices, waivers, authorizations
or other certificates (including those set forth in Item 3.12 to the Digital
Content Disclosure Letter) contemplated by this Agreement, the Digital Content
Disclosure Letter or deemed reasonably necessary to provide for the continuation
in full force and effect of any and all material contracts, agreements and
leases of Digital Content after the Merger and the preservation of Digital
Content's IP Rights and other assets and properties after the Merger and for
Keynote to consummate the Merger and the other transactions contemplated by this
Agreement, the Keynote Ancillary Agreements and the Digital Content Ancillary
Agreements, in each case, in form and substance satisfactory to Keynote.
9.8 Requisite Approvals. This Agreement, the Merger and the Digital
-------------------
Content Ancillary Agreements will have been duly and validly approved and
adopted, as required by applicable law and Digital Content's Certificate of
Formation and Operating Agreement, by (a) Digital Content's Board of Directors,
or other applicable governing body and (b) the valid and affirmative vote of at
least 95% of the outstanding Digital Content Membership Interests.
9.9 Continued Employment of Certain Personnel. Each of Xxxxxxx Xxxxxx and
-----------------------------------------
Xxx Xxxxx will have executed and delivered to Keynote Employment Agreements
substantially in the form attached hereto as Exhibit C.
---------
9.10 Invention Assignment and Confidentiality Agreements. Each of Digital
---------------------------------------------------
Content's current employees and consultants will have executed and delivered to
Keynote Invention Assignment and Confidentiality Agreements in the form attached
hereto as Exhibit F (the "Invention Assignment and Confidentiality Agreements").
9.11 Resignation of Managers, Directors and Officers. The Board of
-----------------------------------------------
Directors, Managers, or other applicable governing body, and the officers of
Digital Content in office immediately prior to the Effective Time of the Merger
will have resigned as the Board of Directors, Managers, or other applicable
governing body, or officers of the Surviving Corporation in writing effective as
of the Effective Time.
9.12 Limits on Dissenting Membership Interests. No more than five percent
-----------------------------------------
(5%) of the outstanding Digital Content Membership Interests taken together will
(a) not have affirmatively voted in favor of the Merger and the Agreement and
(b) accordingly be eligible to exercise or perfect any statutory appraisal
rights of dissenting Members under applicable law.
9.13 Escrow Agreement. Keynote will have received a copy of the Escrow
----------------
Agreement substantially in the form of Exhibit G executed by the Escrow
---------
Agent and the Representative (the "Escrow Agreement").
9.14 No Other Securities. All securities of Digital Content other than
-------------------
Digital Content Membership Interests will have been validly terminated.
9.15 Termination of Digital Content Benefit Plans. Pursuant to Section
--------------------------------------------
5.10, Digital Content shall have duly and effectively terminated such Digital
Content Benefit Plan as Keynote shall have requested Digital Content to
terminate in writing pursuant to documentation that is reasonably satisfactory
in form and substance to Keynote.
36
9.16 License to Digital Content Equipment. The owner(s) of the property or
------------------------------------
properties where Digital Content equipment and other property (the "Digital
Content Equipment") is located shall have executed a license granting to
Keynote, Sub and Digital Content a right of access to the Digital Content
Equipment.
ARTICLE 10
Termination of Agreement
10.1 Termination by Mutual Consent. This Agreement may be terminated at any
-----------------------------
time prior to the Effective Time by the mutual written consent of Keynote and
Digital Content.
10.2 Unilateral Termination.
----------------------
10.2.1 Either Keynote or Digital Content, by giving written notice to
the other, may terminate this Agreement if a court of competent jurisdiction or
other Governmental Authority shall have issued a nonappealable final order,
decree or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger.
10.2.2 Either Keynote or Digital Content, by giving written notice to
the other, may terminate this Agreement if the Merger shall not have been
consummated by midnight Pacific Time on the Termination Date; provided, however,
that the right to terminate this Agreement pursuant to this Section 10.2.2 shall
not be available to any party whose failure to perform in any material respect
any of its obligations or covenants under this Agreement results in the failure
of any condition set forth in Article 8 or Article 9 or if the failure of such
condition results from facts or circumstances that constitute a material breach
of a representation or warranty or covenant made under this Agreement by such
party.
10.2.3 Either Keynote or Digital Content may terminate this Agreement
at any time prior to the Effective Time if the other has committed (or, in the
case of a termination by Digital Content, Sub has committed) a material breach
of (a) any of its representations and warranties under Article 3 or Article 4 of
this Agreement, as applicable; or (b) any of its covenants under Article 5 or
Article 6 of this Agreement, as applicable, and has not cured such material
breach within ten days after the party seeking to terminate this Agreement has
given the other party written notice of the material breach and its intention to
terminate this Agreement pursuant to this Section 10.2.3.
10.2.4 No Liability for Termination. Termination of this Agreement by
----------------------------
a party (the "Terminating Party") in accordance with the provisions of this
Section 10 will not give rise to any obligation or liability on the part of the
Terminating Party on account of such termination; provided, however, that
nothing herein shall relieve a party from liability for a willful breach of this
Agreement. The provisions of Article 10 and Article 12 shall survive any
termination of this Agreement.
37
ARTICLE 11
Survival of Representations, Indemnification
and Remedies, Continuing Covenants
11.1 Survival of Representations. All representations, warranties and
---------------------------
covenants of the parties to this Agreement contained in this Agreement will
remain operative and in full force and effect, regardless of any investigation
made by or on behalf of any of the parties to this Agreement, until that date
(the "Release Date") which is the earlier of (a) the termination of this
Agreement in accordance with its terms or (b) six months from the date of
Closing; provided, however, that notwithstanding the foregoing, Keynote may seek
recovery of Special Damages (as defined in Section 11.2(c)) at any time prior to
the expiration of the applicable statute of limitations for the claim which
seeks recovery of such Special Damages.
11.2 Agreement to Indemnify.
----------------------
(a) The Digital Content Members will severally, but not jointly, on a
pro rata basis based upon their respective ownership interests in Digital
Content Membership Interests set forth besides their names on Schedule 2.1.1 to
this Agreement, indemnify and hold harmless, Keynote and the Surviving
Corporation and their respective officers, directors, agents, representatives,
stockholders and employees, and each person, if any, who controls or may control
Keynote or the Surviving Corporation within the meaning of the Securities Act or
the Exchange Act (each hereinafter referred to individually as a "Keynote
Indemnified Person" and collectively as "Keynote Indemnified Persons") from and
against any and all claims, demands, suits, actions, causes of actions, losses,
costs, damages, liabilities and expenses including, without limitation,
reasonable attorneys' fees, other professionals' and experts' reasonable fees
and court or arbitration costs (hereinafter collectively referred to as
"Damages") directly or indirectly incurred, resulting or and arising out of: (a)
any inaccuracy, misrepresentation, breach of, or default in, any of the
representations, warranties or covenants given or made by Digital Content in
this Agreement or in the Digital Content Disclosure Letter or in any certificate
delivered by or on behalf of Digital Content or an officer of Digital Content
pursuant hereto; or (b) any losses resulting from any claims by any former
employees or consultants of Digital Content. Except with respect to claims
arising from Member Damages (as defined below), which may be raised after the
Release Date, any claim of indemnity made by a Keynote Indemnified Person under
this Section 11.2(a) must be raised in a writing delivered to the Representative
(as defined below) by no later than the Release Date and, if raised by such
date, such claim shall survive the Release Date until final resolution thereof.
Escrow Consideration, other than Escrow Consideration having a value (calculated
pursuant to Section 11.3) equal to the amount of Damages asserted in any claim
(as defined in Section 11.5) which has not been resolved pursuant to the terms
hereof prior to the Release Date, shall be released to the Digital Content
Members on the Release Date or, in the case of any such withheld cash, upon the
resolution of such Claim(s) as defined in Section 11.5).
(b) Each Digital Content Member will severally (and not jointly)
indemnify and hold harmless Keynote Indemnified Persons from and against all
Damages incurred or suffered by any such persons or arising from, by reason of
or in connection with the failure of any Digital Content Member to have good,
valid and marketable title to the issued and outstanding Digital Content
Membership Interests held by such Member, free and clear of all Encumbrances,
38
or to have full right, capacity and authority to vote such Digital Content
Membership Interest in favor of the Merger and the other transactions
contemplated by this Agreement (collectively "Member Damages").
(c) The Digital Content Members will severally, but not jointly,
indemnify and hold harmless Keynote Indemnified Persons from and against all
Damages incurred or suffered by any such persons or arising from, by reasons of
or in connection with any fraudulent conduct or fraudulent misrepresentation
made by Digital Content in this Agreement or in any Digital Content Ancillary
Agreement ("Special Damages").
11.3 Limitation On Indemnity Obligation. Except with respect to claims for
----------------------------------
indemnification for Member Damages and Special Damages, the Escrow Consideration
shall constitute the sole and exclusive remedy of Keynote and the Surviving
Corporation with respect to Damages. In seeking indemnification for Damages
under Section 11.2, the Keynote Indemnified Persons shall first exercise their
remedies with respect to the Escrow Consideration and any other assets deposited
in escrow pursuant to the terms of Section 2.2 and Article 11 hereof and then,
solely with respect to Member Damages and Special Damages may seek recovery of
such Damages against any other assets of the Digital Content Member. Each
Digital Content Member agrees that claims for indemnification against such
person under this Article 11 may be satisfied by the forfeiture of such person's
Per Membership Interest Consideration as provided for in this Article 11 and
that no Keynote Indemnified Person shall have any obligation to exercise its
remedies against any other assets of such Digital Content Member prior to
exercising them against such Per Membership Interest Consideration.
11.4 Appointment of Representative. By voting in favor of the Merger, each
-----------------------------
of the Digital Content Members approves the designation of and designates
Xxxxxxx X. Xxxxxx as the Representative of the Digital Content Members and as
the attorney-in-fact and agent for and on behalf of each Digital Content Members
with respect to claims for indemnification under Article 11 and the taking by
the Representative of any and all actions and the making of any decisions
required or permitted to be taken by the Representative under this Agreement,
including, without limitation, the exercise of the power to: (a) authorize the
release or delivery to Keynote of cash and any other assets deposited in escrow
pursuant to the terms of Section 2.2 and Article 11 hereof in satisfaction of
indemnity claims by Keynote or any other Keynote Indemnified Person (as defined
herein) pursuant to Article 11; (b) agree to, negotiate, enter into settlements
and compromises of, demand arbitration of, and comply with orders of courts and
awards of arbitrators with respect to, such claims; (c) arbitrate, resolve,
settle or compromise any claim for indemnity made pursuant to Article 11; and
(d) take all actions necessary in the judgment of the Representative for the
accomplishment of the foregoing. The Representative will have authority and
power to act on behalf of each Digital Content Member with respect to the
disposition, settlement or other handling of all claims under Article 11 hereof
and all rights or obligations arising under Article 11. The Digital Content
Members will be bound by all actions taken and documents executed by the
Representative in connection with Article 11, and Keynote will be entitled to
rely on any action or decision of the Representative. In performing the
functions specified in this Agreement, the Representative will not be liable to
any Digital Content Member in the absence of gross negligence or willful
misconduct on the part of the Representative. The Digital Content Members shall
severally indemnify the Representative and hold him harmless against any loss,
liability or expense incurred without gross negligence or
39
willful misconduct on the part of the Representative and arising out of or in
connection with the acceptance or administration of his duties hereunder. Any
out-of-pocket costs and expenses reasonably incurred by the Representative in
connection with actions taken by the Representative pursuant to the terms of
Article 11 (including without limitation the hiring of legal counsel and the
incurring of legal fees and costs) will be paid by the Digital Content Members
to the Representative pro rata in proportion to their respective Per Membership
Interest Consideration as reflected in Schedule 2.1.1 to this Agreement, which
Digital Content Members shall be entitled to reimbursement by Keynote if Keynote
is determined to be a Non-Prevailing Party pursuant to Section 11.8(c)(i) below.
11.5 Notice of Claim. As used herein, the term "Claim" means a claim for
---------------
indemnification of Keynote or any other Keynote Indemnified Person for Special
Damages, Member Damages or Damages under Article 11. Keynote (and only Keynote)
may give notice of a Claim under this Agreement whether for its own Special
Damages, Member Damages or Damages or for Special Damages, Member Damages or
Damages incurred by any other Keynote Indemnified Person, and Keynote will give
written notice of a Claim executed by an officer of Keynote (a "Notice of
Claim") to the Representative promptly after Keynote becomes aware of the
existence of any potential claim by an Keynote Indemnified Person for indemnity
from the Digital Content Members or a Digital Content Member under Article 11,
but in any event before the Release Date arising from or relating to:
(a) (i) any inaccuracy, misrepresentation, breach of, or default in,
any of the representations, warranties or covenants given or made by Digital
Content in this Agreement or in the Digital Content Disclosure Letter or in any
certificate delivered by Digital Content or an officer of Digital Content
pursuant hereto, (ii) the incurring of any losses resulting from any claims by
any former employees or consultants of Digital Content, or (iii) any Special
Damages or Member Damages; or
(b) the assertion, whether orally or in writing, against Keynote or
against any other Keynote Indemnified Person of a claim, demand, suit, action,
arbitration, investigation, inquiry or proceeding brought by a third party
against such Indemnified Person that is based upon, or includes assertions that
would, if true, constitute (in each such case, a "Third-Party Claim"): (i) any
inaccuracy, misrepresentation, breach of, or default in, any of the
representations, warranties or covenants given or made by Digital Content in
this Agreement or in the Digital Content Disclosure Letter or in any certificate
delivered by or on behalf of Digital Content or an officer of Digital Content
pursuant hereto (if such inaccuracy, misrepresentation, breach or default
existed at the Closing Date), or (ii) any losses resulting from any claims by
any former employees or consultants of Digital Content.
Until the Release Date, no delay on the part of Keynote in giving the
Representative a Notice of Claim will relieve the Representative or any Digital
Content Member from any of its obligations under Article 11 unless (and then
only to the extent) that the Representative or the Digital Content Members are
materially prejudiced thereby.
11.6 Defense of Third-Party Claims.
-----------------------------
(a) Keynote shall defend any Third-Party Claim, and the costs and
expenses incurred by Keynote in connection with such defense (including but not
limited to reasonable
40
attorneys' fees, other professionals' and experts' fees and court or arbitration
costs) shall be included in the Special Damages, Member Damages or Damages for
which Keynote may seek indemnity pursuant to a Claim made by any Keynote
Indemnified Person hereunder.
(b) The Representative shall have the right to receive copies of all
pleadings, notices and communications with respect to the Third-Party Claim to
the extent that receipt of such documents by the Representative does not affect
any privilege relating to the Keynote Indemnified Person, and may participate in
settlement negotiations with respect to the Third-Party Claim. No Keynote
Indemnified Person shall enter into any settlement of a Third-Party Claim
without the prior written consent of the Representative (which consent shall not
be unreasonably withheld), provided, that if the Representative shall have
consented in writing to any such settlement, then the Representative shall have
no power or authority to object to any Claim by any Keynote Indemnified Person
for indemnity under Section 11.2 hereof for the amount of such settlement; and
the Digital Content Members will remain responsible to indemnify the Keynote
Indemnified Persons for all Special Damages, Member Damages or Damages they may
incur arising out of, resulting from or caused by the Third-Party Claim to the
fullest extent provided in Article 11 hereof.
11.7 Contents of Notice of Claim. Each Notice of Claim by Keynote given
-----------------------------
pursuant to Section 11.5 will contain the following information:
(a) that Keynote has incurred, paid or properly accrued (in accordance
with GAAP) or, in good faith, believes it will have to incur, pay or accrue (in
accordance with GAAP), Damages in an aggregate stated amount arising from such
Claim (which amount may be the amount of damages claimed by a third party in an
action brought against any Keynote Indemnified Person based on alleged facts,
which if true, would give rise to liability for Special Damages, Member Damages
or Damages to such Keynote Indemnified Person under Article 11); and
(b) a brief description, in reasonable detail (to the extent
reasonably available to Keynote), of the facts, circumstances or events giving
rise to the alleged Special Damages, Member Damages or Damages based on
Keynote's good faith belief thereof, including, without limitation, the identity
and address of any third-party claimant (to the extent reasonably available to
Keynote) and copies of any formal demand or complaint, the amount of Special
Damages, Member Damages or Damages, the date each such item was incurred, paid
or properly accrued, or the basis for such anticipated liability, and the
specific nature of the breach to which such item is related.
11.8 Resolution of Notice of Claim. Any Notice of Claim received by the
---------------------------------
Representative pursuant to Section 11.5 and Section 11.7 above will be resolved
as follows:
(a) Uncontested Claims. In the event that, within thirty calendar days
------------------
after a Notice of Claim is received by the Representative pursuant to Section
11.5 and Section 11.7, the Representative does not contest such Notice of Claim
in writing to Keynote as provided in Section 11.8(b) (an "Uncontested Claim"),
the Representative will be conclusively deemed to have consented, on behalf of
all Digital Content Members or a Digital Content Member (in the case of a claim
for Member Damages), to the recovery by the Keynote Indemnified Person of the
41
full amount of Damages specified in the Notice of Claim in accordance with this
Article 11, including the forfeiture of Escrow Consideration and any other
assets deposited in escrow pursuant to the terms of Section 2.5 and Article 11
hereof and, without further notice, to have stipulated to the entry of a final
judgment for damages against the Digital Content Members or a Digital Content
Member (in the case of a claim for Member Damages or Special Damages) for such
amount in any court having jurisdiction over the matter where venue is proper.
(b) Contested Claims. In the event that the Representative gives
----------------
Keynote written notice contesting all or any portion of a Notice of Claim (a
"Contested Claim") within the thirty day period specified in Section 11.8(a),
then: (i) such Contested Claim will be resolved by either (A) a written
settlement agreement executed by Keynote and the Representative or (B) in the
absence of such a written settlement agreement, by binding arbitration between
Keynote and the Representative in accordance with the terms and provisions of
Section 11.8(c).
(c) Arbitration of Contested Claims. Each of Keynote, Digital Content
-------------------------------
and the Digital Content Members agree that any Contested Claim will be submitted
to mandatory, final and binding arbitration before J.A.M.S./ENDISPUTE or its
successor ("J.A.M.S."), pursuant to the United States Arbitration Act, 9 U.S.C.,
Section 1 et seq. and that any such arbitration will be conducted in the venue
of the party that is not bringing the Contested Claim. Either Keynote or the
Representative may commence the arbitration process called for by this Agreement
by filing a written demand for arbitration with J.A.M.S. and giving a copy of
such demand to each of the other parties to this Agreement. The arbitration will
be conducted in accordance with the provisions of J.A.M.S' Streamlined
Arbitration Rules and Procedures in effect at the time of filing of the demand
for arbitration, subject to the provisions of this Section 11.8(c). The parties
will cooperate with J.A.M.S. and with each other in promptly selecting an
arbitrator from J.A.M.S.' panel of neutrals, and in scheduling the arbitration
proceedings in order to fulfill the provisions, purposes and intent of this
Agreement. The parties covenant that they will participate in the arbitration in
good faith, and that they will share in its costs in accordance with
subparagraph (i) below. The provisions of this Section 11.8(c) may be enforced
by any court of competent jurisdiction, and the party seeking enforcement will
be entitled to an award of all costs, fees and expenses, including attorneys'
fees, to be paid by the party against whom enforcement is ordered. Subject to
the provisions of subparagraph (vii) below, judgment upon the award rendered by
the arbitrator may be entered in any court having competent jurisdiction.
(i) Payment of Costs. Keynote on the one hand, and Digital
----------------
Content Members (through the Representative), on the other hand, will bear the
expense of deposits and advances required by the arbitrator in equal
proportions, but either party may advance such amounts, subject to recovery as
an addition or offset to any award. The arbitrator shall determine the party who
is the Prevailing Party and the party who is the Non-Prevailing Party. The Non-
Prevailing Party shall pay all reasonable costs, fees and expenses related to
the arbitration, including reasonable fees and expenses of attorneys,
accountants and other professionals incurred by the prevailing party, the fees
of each arbitrator and the administrative fee of the arbitration proceedings. If
such an award would result in manifest injustice, however, the arbitrator may
apportion such costs, fees and expenses between the parties in such a manner as
the arbitrator deems just and equitable.
42
(ii) Burden of Proof. Except as may be otherwise expressly
---------------
provided herein, for any Contested Claim submitted to arbitration, the burden of
proof will be as it would be if the claim were litigated in a judicial
proceeding governed by California law exclusively.
(iii) Award. Upon the conclusion of any arbitration proceedings
-----
hereunder, the arbitrator will render findings of fact and conclusions of law
and a final written arbitration award setting forth the basis and reasons for
any decision reached (the "Final Award") and will deliver such documents to the
Representative and Keynote, together with a signed copy of the Final Award.
Subject to the provisions of subparagraph (vii) below, the Final Award will
constitute a conclusive determination of all issues in question, binding upon
the Digital Content Members or a Digital Content Member (in the case of a claim
for Member Damages or Special Damages), the Representative and Keynote, and will
include an affirmative statement to such effect.
(iv) Timing. The Representative, Keynote and the arbitrator will
------
conclude each arbitration pursuant to this Section 11.8 as promptly as possible
for the Contested Claim being arbitrated.
(v) Terms of Arbitration. The arbitrator chosen in accordance
--------------------
with these provisions will not have the power to alter, amend or otherwise
affect the terms of these arbitration provisions or the provisions of this
Agreement.
(vi) Exclusive Remedy. Following the Effective Time, except as
----------------
specifically otherwise provided in this Agreement, arbitration conducted in
accordance with this Agreement will be the sole and exclusive remedy of the
parties for any Claim made pursuant to Article 11.
(vii) Allocation of Damages. An amount of the Escrow
---------------------
Consideration equal in value to the Damages owed to Keynote hereunder, as
finally determined under this Section 11.8(c), will automatically be forfeited
to Keynote, which forfeiture will be allocated among the Digital Content Members
based upon their respective Percentage Interests as set forth on Schedule 2.1.1,
except for Claims for Damages arising under Section 11.2(b) of the Merger
Agreement, which will only be allocated against the Digital Content Member's Per
Membership Interest Consideration to whom such Claim applies.
11.9 Distribution Upon Termination of Escrow Period. Within ten business
----------------------------------------------
days following the Release Date, Keynote shall deliver to the Digital Content
Members all of the Escrow Consideration in excess of any amount of Escrow
Consideration necessary to satisfy any unsatisfied or disputed claims for
Special Damages, Member Damages or Damages specified in any Notice of Claim
delivered to the Representative before the Release Date. As soon as all such
claims have been resolved, Keynote shall deliver to the Digital Content Members
all remaining Escrow Consideration not required to satisfy such claims.
11.10 Grant of Options. Immediately following the Closing, Keynote will
----------------
grant options to purchase Keynote Common Stock to the people and for the amounts
listed on Schedule 11.10.
11.11 Refund of Consideration. Each of Xxxxxxx Xxxxxx and Xxx Xxxxx agrees
-----------------------
(a) if his employment with Sub is terminated by him for any reason other than
Good Reason (as defined in his Employment Agreement with Sub) or is terminated
by Sub for Cause (as defined in
43
his Employment Agreement with Sub) at any time prior to the three month
anniversary of the Closing, he will refund to Keynote 50% of the Initial Per
Membership Consideration paid or to be paid to each such individual and forfeits
his right to receive his share of any Additional Consideration or Escrow
Consideration; and (b) if his employment with Sub is terminated by him for any
reason other than Good Reason (as defined in his Employment Agreement with Sub)
or is terminated by Sub for Cause (as defined in his Employment Agreement with
Sub) at any time after the three month anniversary of the Closing but before the
six month anniversary of the Closing, he will refund to Keynote 25% of the
Initial Per Membership Consideration paid or to be paid to each such individual
and forfeits his right to receive his share of any Additional Consideration or
Escrow Consideration; provided, however, that, each of Xxxxxxx Xxxxxx and Xxx
Xxxxx shall not be obligated to refund any of the Initial Per Membership
Consideration paid or to be paid to each such individual if his employment with
Sub is terminated at any time prior to the six month anniversary of the Closing
by reason of his death or permanent disability (as defined in Section 6.1 of his
Employment Agreement with Sub).
ARTICLE 12
Miscellaneous
12.1 Governing Law. The internal laws of the State of California,
-------------
irrespective of its choice of law principles, will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto; provided, however, that issues
involving the consummation and effects of the Merger shall be governed by the
laws of the State of Delaware.
12.2 Assignment; Binding Upon Successors and Assigns. Neither party hereto
-----------------------------------------------
may assign any of its rights or obligations hereunder without the prior written
consent of the other party hereto. This Agreement will be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. Any assignment in violation of this provision shall be void.
12.3 Severability. If any provision of this Agreement, or the application
------------
thereof, will for any reason and to any extent be invalid or unenforceable, then
the remainder of this Agreement and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
12.4 Counterparts. This Agreement may be executed in any number of
-------------
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all parties reflected hereon as signatories.
12.5 Other Remedies. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a party hereunder will be deemed
cumulative with and not
44
exclusive of any other remedy conferred hereby or by law on such party, and the
exercise of any one remedy will not preclude the exercise of any other. Keynote
and Digital Content agree that the indemnification and arbitration provisions
set forth in Article 11 shall be each such person's sole and exclusive remedy
with respect to any inaccuracy, misrepresentation, breach of, or default in, any
of the representations, warranties, covenants or agreements of any such party in
this Agreement, other than claims for Special Damages and Member Damages,
provided, that the foregoing shall not limit the parties' respective rights to
seek specific performance or other injunctive relief. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to seek an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction.
12.6 Amendment and Waivers. Any term or provision of this Agreement may be
---------------------
amended, and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only by a writing signed by the party to be bound thereby. The waiver by a party
of any breach hereof or default in the performance hereof will not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
This Agreement may be amended by the parties hereto as provided in this Section
at any time before or after approval of this Agreement by the Digital Content
Members, but, after such approval, no amendment will be made which by applicable
law requires the further approval of the Digital Content Members without
obtaining such further approval. At any time prior to the Effective Time, each
of Digital Content and Keynote, by action taken by its Board of Directors or
other applicable governing body, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other; (ii) waive any inaccuracies in the representations and warranties made to
it contained herein or in any document delivered pursuant hereto; and (iii)
waive compliance with any of the agreements or conditions for its benefit
contained herein. No such waiver or extension will be effective unless signed in
writing by the party against whom such waiver or extension is asserted. The
failure of any party to enforce any of the provisions hereof will not be
construed to be a waiver of the right of such party thereafter to enforce such
provisions.
12.7 Expenses. Each party will bear its respective legal, auditors' and
--------
financial advisors' fees and other expenses incurred with respect to this
Agreement, the Merger and the transactions contemplated hereby ("Transaction
Expenses"); provided, however, that Keynote shall pay up to $10,000 to Digital
Content's counsel for its legal fees in rendering its legal opinion to be
delivered pursuant to Section 9.6.
12.8 Attorneys' Fees. Should suit be brought to enforce or interpret any
---------------
part of this Agreement, the prevailing party will be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees to
be fixed by the court (including without limitation, costs, expenses and fees on
any appeal). The prevailing party will be entitled to recover its costs of suit,
regardless of whether such suit proceeds to final judgment.
12.9 Notices. All notices and other communications required or permitted
-------
under this Agreement will be in writing and will be either hand delivered in
person, sent by facsimile, sent
45
by certified or registered first class mail, postage pre-paid, or sent by
nationally recognized express courier service. Such notices and other
communications will be effective upon receipt if hand delivered or sent by
facsimile, five days after mailing if sent by mail, and one day after dispatch
if sent by express courier, to the following addresses, or such other addresses
as any party may notify the other parties in accordance with this Section:
If to Keynote:
Keynote Systems, Inc.
0000 Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attention: John Flavio
Fax Number: (000) 000-0000
with copies to:
Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Fax Number: (000) 000-0000
If to Digital Content:
Digital Content, L.L.C.
000 Xxxxxxx Xxxxx
Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Fax Number: (000) 000-0000
with a copy to:
Kane, Russell, Xxxxxxx & Xxxxx, PC
0000 Xxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Wm. X. Xxxxxxx, Esq.
Fax Number: (000) 000-0000
or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 12.9.
12.10 Construction of Agreement. This Agreement has been negotiated by the
-------------------------
respective parties hereto and their attorneys and the language hereof will not
be construed for or against either party. A reference to a Section or an exhibit
will mean a Section in, or exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Agreement which
will be considered as a whole. Unless otherwise indicated, the words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." Each reference herein to a law,
statute, regulation, document or agreement shall be deemed in each case to
include all amendments thereto.
12.11 No Joint Venture. Nothing contained in this Agreement will be deemed
----------------
or construed as creating a joint venture or partnership between any of the
parties hereto. No party is by virtue of this Agreement authorized as an agent,
employee or legal representative of any other party. No party will have the
power to control the activities and operations of any other and their status is,
and at all times will continue to be, that of independent contractors with
respect to each
46
other. No party will have any power or authority to bind or commit any other
party. No party will hold itself out as having any authority or relationship in
contravention of this Section.
12.12 Further Assurances. Each party agrees to cooperate fully with the
------------------
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
12.13 Third Party Beneficiary Rights. No provisions of this Agreement are
------------------------------
intended, nor will be interpreted, to provide or create any third party
beneficiary rights or any other rights of any kind in any client, customer,
affiliate, stockholder, partner or any party hereto or any other person or
entity unless specifically provided otherwise herein and, except as so provided,
all provisions hereof will be personal solely between the parties to this
Agreement.
12.14 Public Announcement. Upon the closing of the transaction
-------------------
contemplated by this Agreement, Keynote and Digital Content will issue a press
release approved by both parties announcing the Merger. Keynote may issue such
press releases, and make such other disclosures regarding the Merger, as it
determines are required under applicable securities laws or regulatory rules.
Prior to the publication of such mutually agreed press release, neither party
will make any public announcement relating to this Agreement or the transactions
contemplated hereby (except as may be required by law) and Digital Content will
use its reasonable efforts to prevent any trading in Keynote Common Stock by its
officers, directors, Managers, Members, employees and agents.
12.15 Disclosure Letter. The Digital Content Disclosure Letter shall be
-----------------
arranged in separate parts corresponding to the numbered and lettered sections
contained in Article 3, and the information disclosed in any numbered or
lettered part shall be deemed to relate to and to qualify only the particular
representation or warranty set forth in the corresponding numbered or lettered
section in Article 3, and shall not be deemed to relate to or to qualify any
other representation or warranty.
12.16 Confidentiality. Digital Content and Keynote each confirm that they
---------------
have entered into the Letter of Intent and that they are each bound by, and will
abide by, the provisions of such Letter of Intent (except that Keynote will
cease to be bound by the Letter of Intent after the Merger becomes effective).
If this Agreement is terminated, the Letter of Intent shall remain in full force
and effect and all copies of documents containing confidential information of a
disclosing party will be returned by the receiving party to the disclosing party
or be destroyed, as provided in the Letter of Intent.
12.17 Entire Agreement. This Agreement and the exhibits hereto constitute
----------------
the entire understanding and agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect hereto other than the Letter of Intent. The
express terms hereof control and supersede any course of performance or usage of
the trade inconsistent with any of the terms hereof.
47
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
KEYNOTE SYSTEMS, INC. DIGITAL CONTENT, L.L.C.
By: /s/ John Flavio By: /s/ Xxxxxxx Xxxxxx
------------------------ ---------------------------
Name: John Flavio Name: Xxxxxxx Xxxxxx
------------------------
Title: Vice President of Finance and Title: Manager
------------------------
Chief Financial Officer
BIG RED ACQUISITION REPRESENTATIVE
CORPORATION
By: /s/ John Flavio /s/ Xxxxxxx Xxxxxx
------------------------ ---------------------------
Name: Xxxxxxx Xxxxxx
Name: John Flavio
Title: President and
Chief Financial Officer
DIGITAL CONTENT MEMBERS:
/s/ Xxxxxxx Xxxxxx /s/ Xxxxxxx Xxxxx
------------------------ ---------------------------
Name: Xxxxxxx Xxxxxx Name: Xxxxxxx Xxxxx
/s/ Xxxxxx Xxxxxx /s/ Xxxxx Xxxxxxxx
------------------------ ---------------------------
Name: Xxxxxx Xxxxxx Name: Xxxxx Xxxxxxxx
/s/ Xxxxxxx Cipione /s/ Xxxxxx Xxxxxxx
------------------------ ---------------------------
Name: Xxxxxxx Cipione Name: Xxxxxx Xxxxxxx
[Signature Page to Agreement and Plan of Reorganization]
48
