Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
among
ACTIVISION, INC.,
ACTIVISION PUBLISHING, INC.,
SHABA ACQUISITION, INC.,
SHABA GAMES, LLC,
THE PERSONS LISTED ON EXHIBIT A HERETO
as the Members
Dated as of March 26, 2002
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Table of Contents
Page
ARTICLE I THE MERGER.....................................................1
1.1. The Merger.....................................................1
1.2. The Closing....................................................2
1.3. Effective Time.................................................2
1.4. Certificate of Incorporation; By-Laws..........................2
1.5. Directors and Officers.........................................2
1.6. Dissenting Shares..............................................2
ARTICLE II MERGER CONSIDERATION; CONVERSION OF SHARES; TAX TREATMENT......3
2.1. Merger Consideration...........................................3
2.2. Conversion of Merger Subsidiary Shares.........................3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SHABA AND THE MEMBERS........4
3.1. Organization...................................................4
3.2. Authorization, Validity and Effect of Agreement................4
3.3. Capitalization.................................................4
3.4. No Subsidiaries................................................5
3.5. Other Interests................................................5
3.6. No Violation...................................................5
3.7. Investment Intent..............................................5
3.8. Financial Statements; Undisclosed Liabilities..................6
3.9. Litigation.....................................................6
3.10. Absence of Certain Changes.....................................6
3.11. Taxes..........................................................8
3.12. Books and Records..............................................9
3.13. Properties.....................................................9
3.14. Environmental Matters.........................................10
3.15. No Brokers....................................................11
3.16. Related Party Transactions....................................11
3.17. Contracts and Commitments.....................................11
3.18. Employee Matters and Benefit Plans............................12
3.19. Intellectual Property.........................................16
3.20. Consents......................................................19
3.21. Insurance.....................................................20
3.22. Relationships with Suppliers, Licensors and Customers.........20
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Table of Contents
(continued)
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3.23. Bank Accounts.................................................20
3.24. Material Compliance with Agreements...........................20
3.25. Disclosure....................................................20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACTIVISION..................20
4.1. Organization..................................................20
4.2. Corporate Power and Authority; Effect of Agreement............21
4.3. Capitalization................................................21
4.4. No Violation..................................................21
4.5. SEC Documents.................................................22
4.6. Absence of Certain Changes....................................23
4.7. Material Compliance with Agreements...........................23
4.8. No Brokers....................................................23
ARTICLE V DELIVERIES AT CLOSING.........................................24
5.1. Deliveries by Activision......................................24
5.2. Deliveries by Shaba and/or the Members........................24
ARTICLE VI COVENANTS AND OTHER AGREEMENTS................................25
6.1. Restrictions on Sale of Activision Shares.....................25
6.2. Share Holdback................................................26
6.3. Registration of Activision Shares.............................31
6.4. Further Assurances............................................34
6.5. Confidentiality...............................................34
6.6. Publicity.....................................................34
6.7. Member Approval...............................................34
6.8. Employment Matters............................................34
6.9. Articles and Bylaws of Merger Subsidiary......................35
6.10. Tax Returns and Shaba Information.............................35
ARTICLE VII SURVIVAL; INDEMNIFICATION.....................................35
7.1. Survival......................................................35
7.2. Indemnification by the Members; Limitation of Liability.......36
7.3. Indemnification Procedures....................................36
7.4. Claims Resolution Procedure...................................37
7.5. Actions by Members............................................38
ARTICLE VIII MISCELLANEOUS.................................................38
8.1. Assignment; Binding Effect; Benefit...........................38
8.2. Entire Agreement..............................................39
8.3. Notices.......................................................39
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Table of Contents
(Continued)
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8.4. Amendment.....................................................40
8.5. Governing Law.................................................40
8.6. Counterparts..................................................40
8.7. Headings......................................................40
8.8. Waivers.......................................................40
8.9. No Party Deemed Drafter.......................................40
8.10. Incorporation.................................................41
8.11. Severability..................................................41
8.12. Interpretation................................................41
8.13. Specific Performance..........................................41
8.14. Expenses......................................................41
8.15. Attorneys' Fees...............................................41
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), is made and entered
into as of March 26, 2002, among Activision, Inc., a Delaware corporation
("Activision"), Activision Publishing, Inc., a Delaware corporation ("Activision
Publishing"), Shaba Acquisition, Inc., a Delaware corporation and a wholly owned
subsidiary of Activision ("Merger Subsidiary"), Shaba Games, LLC, a California
limited liability company ("Shaba") and the persons listed on Exhibit A hereto
(the "Members"). Shaba and Merger Subsidiary are sometimes referred to herein as
the "Constituent Corporations."
W I T N E S S E T H:
WHEREAS, each Member owns the membership interest in Shaba (the "Membership
Interests) set forth opposite such Member's name on Exhibit A hereto, which
Membership Interests, in the aggregate, constitute 100% of the outstanding
membership interests in Shaba; and
WHEREAS, the respective Boards of Directors of Activision and Merger
Subsidiary and the Managers and Members of Shaba each have determined that a
business combination among Shaba, Activision and Merger Subsidiary is fair to
and in the best interests of their respective companies and stockholders or
members, as the case may be, and, accordingly, have approved this Agreement and
agreed to effect the merger provided for herein upon the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. On the terms and subject to the conditions contained in
this Agreement, at the Effective Time (as defined in Section 1.3 hereof), Shaba
shall be merged with and into Merger Subsidiary in accordance with this
Agreement and the separate existence of Shaba shall thereupon cease (the
"Merger"). Merger Subsidiary shall be the surviving corporation in the Merger
(Merger Subsidiary, after the Effective Time, is sometimes hereinafter referred
to as the "Surviving Corporation"). From and after the Effective Time, all the
rights and property of each of the Constituent Corporations shall vest in the
Surviving Corporation and the Surviving Corporation shall be subject to all the
debts and liabilities of the Constituent Corporations. The Merger shall have the
effects provided in this Agreement and the applicable provisions of the Delaware
General Corporation Law ("DGCL") and the California Xxxxxxx-Xxxxxx Limited
Liability Company Act ("LLCA").
1.2. The Closing. On the terms and subject to the conditions of this
Agreement, the closing of the Merger (the "Closing") shall be held at the
offices of Activision, 0000 Xxxxx Xxxx Xxxxxxxxx, Xxxxx Xxxxxx, Xxxxxxxxxx, at
10:00 a.m., local time, on the date hereof. The date on
which the Closing occurs is hereinafter referred to as the "Closing Date." All
transactions required to occur at the Closing shall be deemed to have occurred
simultaneously, and no such transaction shall be deemed to have occurred until
all have occurred.
1.3. Effective Time. On the Closing Date, (i) the parties hereto shall
cause an Agreement of Merger and officers' certificates satisfying the
requirements of Section 17552 of the LLCA to be properly executed, verified and
delivered for filing in accordance with the LLCA and (ii) a Certificate of
Merger satisfying the requirements of Section 252 of the DGCL to be properly
executed, verified and delivered for filing in accordance with the DGCL. The
Merger shall become effective upon the acceptance for record of the Agreement of
Merger by the Secretary of State of the State of California in accordance with
the LLCA and the acceptance for record of Certificate of Merger by the Secretary
of State of the State of Delaware in accordance with the DGCL (but not earlier
than the Closing Date) or at such later time which the parties hereto shall have
agreed upon and designated in such filings in accordance with applicable law as
the effective time of the Merger (the "Effective Time").
1.4. Certificate of Incorporation; By-Laws. (a) Certificate of
Incorporation. The Certificate of Incorporation of Merger Subsidiary in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation (except that the name of the
Surviving Corporation shall be "Shaba Games, Inc."), until duly amended in
accordance with applicable law.
(b) By-Laws. The By-laws of Merger Subsidiary in effect immediately prior
to the Effective Time shall be the By-laws of the Surviving Corporation (except
that the name of the Surviving Corporation shall be "Shaba Games, Inc."), until
duly amended in accordance with its terms or the Certificate of Incorporation of
the Surviving Corporation and as provided by applicable law.
1.5. Directors and Officers. (a) Directors. The directors of Merger
Subsidiary immediately prior to the Effective Time shall, from and after the
Effective Time, be the directors of the Surviving Corporation until their
successors shall have been duly elected and appointed or qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and By-laws or as otherwise provided.
(b) Officers. The officers of Merger Subsidiary immediately prior to the
Effective Time shall, from and after the Effective Time, be the officers of the
Surv.ving Corporation until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
By-laws or as otherwise provided.
1.6. Dissenting Shares. By virtue of their approval of this Agreement and
the transactions contemplated hereby, as evidenced by their execution of this
Agreement, the
Members acknowledge that they shall have no dissenters' rights of appraisal set
forth in Section 17601 of the LLCA (the "Appraisal Rights").
ARTICLE II
MERGER CONSIDERATION; CONVERSION OF SHARES; TAX TREATMENT
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2.1. Merger Consideration. (a) At the Effective Time, by virtue of the
Merger and without any action on the part of Activision, Merger Subsidiary,
Shaba or the Members, subject to Section 6.2, the Membership Interest of each
Member outstanding immediately prior to the Effective Time shall be converted
into and represent the right to receive the number of the shares of Common
Stock, par value $.000001 per share, of Activision (the "Activision Common
Stock") set forth opposite such Member's name on Exhibit A. The 327,586 shares
of Activision Common Stock to be issued in connection with the Merger are
sometimes referred to as the "Activision Shares." Such Membership Interests,
when so converted, shall no longer be outstanding, and shall automatically be
canceled and shall cease to exist and each Member shall cease to have any rights
with respect thereto, except the right to receive the Activision Shares as
provided herein.
(b) Within five business days of the Effective Time, Activision shall
deliver, or cause to be delivered, to each Member, a certificate representing
the number of Activision Shares to which such Member is entitled hereto minus
the number of Warranty Escrow Shares and Product Escrow Shares (each capitalized
term as defined in Section 6.2(a)) set forth opposite the name of such Member on
Exhibit A hereto to be deposited in the Escrow Account pursuant to Section 6.2.
No interest shall be paid or will accrue on any Activision Shares deliverable to
the Members pursuant hereto.
2.2. Conversion of Merger Subsidiary Shares. At the Effective Time, each
share of common stock, $.01 par value per share, of Merger Subsidiary, issued
and outstanding immediately prior to the Effective Time will become one fully
paid and nonassessable share of common stock, $.01 par value per share, of the
Surviving Corporation, and such shares will be the only shares of capital stock
of the Surviving Corporation that are issued and outstanding immediately after
the Effective Time. From and after the Effective Time, each certificate
theretofore representing shares of common stock of Merger Subsidiary will be
deemed for all purposes to evidence ownership and to represent the same number
of shares of common stock of the Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHABA AND THE MEMBERS
Shaba and the Members, jointly and severally, hereby represent and warrant
to Activision, Activision Publishing and the Merger Subsidiary as follows
(except that the representation set forth in Section 3.3(b) shall be made by
each Member individually with respect to himself or herself or itself):
3.1. Organization. Shaba is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of California.
Shaba has all requisite power and authority to carry on its business as it is
now being conducted and to own or lease and to operate its properties. Except as
set forth in Schedule 3.1, Shaba is not qualified to transact business as a
foreign corporation or other entity in any jurisdiction, and neither the nature
of the property owned or leased by it nor the nature of the business conducted
by it makes any such qualification necessary, other than such failures which do
not and would not individually or in the aggregate have a Material Adverse
Effect on Shaba. True, complete and correct copies of the articles of
organization and operating agreement of Shaba have previously been delivered or
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made available to Activision. For purposes of this Agreement, "Material Adverse
Effect" with respect to a person or entity shall mean a material adverse effect
on the business, assets, properties, condition (financial or otherwise) or
results of operations of such person or entity (in the case of Activision,
Activision and its Subsidiaries taken as a whole), or on the ability of any
person or entity timely to consummate the transactions contemplated hereby.
3.2. Authorization, Validity and Effect of Agreement. Each of Shaba and the
Members have all requisite power and authority to execute, deliver and perform
this Agreement and to consummate their respective obligations and the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Shaba and the Members and the consummation of the transactions
contemplated hereby have been duly authorized by any and all necessary action of
Shaba and by the Members and no other action on the part of Shaba or the Members
is necessary to authorize the execution, delivery and performance of this
Agreement by Shaba or the Members and the consummation of the transactions
contemplated hereby other than the merger filings referred to in Section 1.3
hereof. This Agreement has been duly and validly executed and delivered by Shaba
and the Members and, assuming the due execution hereof by Activision, Activision
Publishing, and the Merger Subsidiary, constitutes the valid and binding
obligation of Shaba and each Member, enforceable against Shaba and each Member
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws affecting creditors' rights generally and
general principles of equity.
3.3. Capitalization. (a) Exhibit A hereto sets forth the Membership
Interest in Shaba owned by each Member, which Membership Interests, in the
aggregate, constitute 100% of the outstanding membership or other equity
interests in Shaba. There are no other Members of Shaba. Except as set forth in
Schedule 3.3, there are outstanding no securities convertible into, exchangeable
for, or carrying the right to acquire, equity securities of Shaba, and no
subscriptions, warrants, options, calls, rights (pre-emptive or other) or other
arrangements or commitments obligating Shaba to issue or dispose of any of its
equity securities or any ownership interest therein
(b) Each Member owns the Membership Interest set forth opposite such
Member's name on Exhibit A hereto.
3.4. No Subsidiaries. Shaba does not have any direct or indirect
Subsidiaries. For purposes of this Agreement, "Subsidiary" when used with
respect to any party shall mean any corporation, partnership, limited liability
company, joint venture, business trust or other entity, of which such party or a
Subsidiary of such party, directly or indirectly, owns or controls at least a
majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization.
3.5. Other Interests. Shaba does not own, directly or indirectly, any
interest or investment (whether equity or debt) in any corporation, partnership,
limited liability company, joint venture, business trust or other entity (other
than investments in short-term investment securities).
3.6. No Violation. The execution, delivery and performance by Shaba and the
Members of this Agreement do not, and the consummation by Shaba and the Members
of the
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transactions contemplated hereby will not, with or without the giving of
notice or the lapse of time, or both, conflict with or violate (i) any provision
of law, rule or regulation to which the Members or Shaba are subject, (ii) any
order, judgment, injunction or decree binding upon or applicable to the Members
or Shaba or binding upon the assets or properties of the Members or Shaba, (iii)
any provision of the articles of organization or the operating agreement of
Shaba, or (iv) other than the consents and filings provided for in this
Agreement, require any consent, approval or authorization of, or declaration,
filing or registration with, any governmental or regulatory authority which has
not been obtained or made, except where the failure to obtain any such consent,
approval or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority would not individually or in the aggregate
have a Material Adverse Effect on Shaba.
3.7. Investment Intent. The Activision Shares to be issued to each Member
in connection with the Merger is being acquired by such Member for such Member's
own account, for investment purposes only and not with a view to the
distribution of such shares or with any present intention of distributing any of
such shares within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), or reselling in violation of any other applicable securities
laws, it being understood that the Activision Shares to be issued to the Members
under this Agreement have not been registered under the Securities Act, and
therefore cannot be sold unless registered under the Securities Act or unless an
exemption from registration is available, and also subject to further
restrictions under the provisions of Sections 6.1 and 6.2 hereof and the
Warranty Escrow Agreement (as defined in Section 6.2).
3.8. Financial Statements; Undisclosed Liabilities. (a) Shaba and the
Members have delivered to Activision an unaudited balance sheet of Shaba as of
February 28, 2002 and the related statements of income and expense for the
periods then ended (collectively, the "Financial Statements").
(b) Except as set forth in Schedule 3.8(b) , the Financial Statements are
correct and complete in all material respects and fairly present the financial
position and the results of operations of Shaba as of the date thereof and for
the period indicated. Except as set forth in Schedule 3.8(b), Schedule 3.10 or
elsewhere in this Agreement or as disclosed, reflected or reserved against in
the Financial Statements, Shaba does not have any liabilities, commitments or
obligations (secured or unsecured and whether accrued, absolute, contingent or
otherwise and whether due or to become due) which are not reflected on the
Financial Statements, other than any liabilities, commitments or obligations
incurred after the date of the Financial Statements in the ordinary course of
business and which do not have a Material Adverse Effect on Shaba.
3.9. Litigation. Except as set forth in Schedule 3.9 hereto, there are (i)
no continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which Shaba or the Members is a party or by which any
of their respective properties or assets are bound or likely to be affected and
(ii) no actions, suits or proceedings pending against Shaba or the Members or to
which any of their respective properties or assets are subject or, to the
knowledge of the Members, threatened against Shaba or the Members or to which
any of their respective properties or assets are subject, at law or in equity,
that in each such case could, individually or in the aggregate, have a Material
Adverse Effect on Shaba.
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3.10. Absence of Certain Changes. Except as set forth in Schedule 3.10
hereto, since February 28, 2002, Shaba has conducted its business only in the
ordinary course of such business and consistent with past practices and there
has not been any:
(a) material adverse change in the financial condition, properties, assets
(including intangible assets), businesses, operations or results of operations
of Shaba;
(b) amendment or change in the articles of organization or operating
agreement of Shaba;
(c) incurrence, creation or assumption by Shaba of (i) any mortgage, deed
of trust, security interest, pledge, lien, title retention device, collateral
assignment, claim, charge, restriction or other encumbrance of any kind on any
of the assets or properties of Shaba; or (ii) any obligation or liability of any
indebtedness for borrowed money;
(d) issuance or sale of any debt or equity securities of Shaba, or the
issuance or grant of any options, warrants or other rights to acquire from
Shaba, directly or indirectly, any debt or equity securities of Shaba;
(e) payment or discharge by Shaba of any security interest, lien, claim, or
encumbrance of any kind on any asset or property of Shaba, or the payment or
discharge of any liability that was not either shown or reflected on the
Financial Statements or Schedule 3.10 or incurred in the ordinary course of
Shaba's business after February 28, 2002, in an amount in excess of $10,000 for
any single liability to a particular creditor;
(f) purchase, license, sale, assignment or other disposition or transfer,
or any agreement or other arrangement for the purchase, license, sale,
assignment or other disposition or transfer, of any of the assets, properties or
goodwill of Shaba other than a license or sale of any product or products of
Shaba made in the ordinary course of Shaba's business and the transactions
contemplated by this Agreement;
(g) damage, destruction or loss of any property or asset, whether or not
covered by insurance, having (or likely with the passage of time to have) a
Material Adverse Effect on Shaba;
(h) increase in the compensation payable or to become payable to any of the
officers, directors, or employees of Shaba, or any bonus or pension, insurance
or other benefit payment or arrangement, and any stock awards, stock option
grants, stock appreciation rights or stock option grants) made to or with any of
such officers, employees or agents, other than the amounts agreed to in the
Letter of Intent, dated February 15, 2002, between Shaba and Activision, or as
otherwise approved by Activision Publishing;
(i) obligation or liability incurred by Shaba to any of its officers,
directors or stockholders except for normal and customary compensation and
expense allowances payable to officers in the ordinary course of Shaba's
business consistent with past practice;
(j) making by Shaba of any loan, advance or capital contribution to, or any
investment in, any officer, director or Member of Shaba or any firm or business
enterprise in
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which any such person had a direct or indirect material interest at the time of
such loan, advance, capital contribution or investment;
(k) entering into, amendment of, relinquishment, termination or non-renewal
by Shaba of any contract, lease, transaction, commitment or other right or
obligation other than in the ordinary course of its business or any written or
oral indication or assertion by the other party thereto of any material problems
with Shaba's services or performance under such contract, lease, transaction,
commitment or other right or obligation or of such other party's demand to
amend, terminate or not renew any such contract, lease, transaction, commitment
or other right or obligation;
(l) material change in the manner in which Shaba extends discounts, credits
or warranties to customers or otherwise deals with its customers;
(m) entering into by Shaba of any transaction, contract or agreement
(excluding any agreement for professional services entered into in connection
with this Agreement) that by its terms requires or contemplates a required
minimum current and/or future financial commitment, expenses (inclusive of
overhead expenses) or obligation on the part of Shaba involving in excess of
$10,000 (provided that the amount of such financial commitments and expenses for
all such transactions, contracts or agreements does not exceed $50,000 in the
aggregate) or that is not entered into in the ordinary course of Shaba's
business, or the conduct of any business or operations by Shaba that is other
than in the ordinary course of Shaba's business; or
(n) license, transfer or grant of a right under any Shaba Intellectual
Property (as defined in Section 3.19 below), other than those licensed,
transferred or granted in the ordinary course of business consistent with its
past practices.
3.11. Taxes. Except as set forth in Schedule 3.11 hereto or where such
failure would not, individually or in the aggregate, have a Material Adverse
Effect on Shaba:
(a) Shaba has paid or caused to be paid all federal, state, local, foreign,
and other taxes, and all deficiencies, or other additions to tax, interest,
fines and penalties (collectively, "Taxes"), owed or accrued by it and due and
payable through the date hereof (including any Taxes payable pursuant to
Treasury Regulation 1.1502-6 (and any similar state, local or foreign
provision)).
(b) Shaba has timely filed all federal, state, local and foreign tax
returns (collectively "Tax Returns") required to be filed by it through the date
hereof, and all such returns accurately set forth the amount of any taxable
income, and any state franchise taxes relating to the applicable period.
(c) At all times during its existence, Shaba has been taxable as a
partnership for federal income tax purposes and has never filed an election to
be taxed as a corporation.
(d) Except as set forth in Schedule 3.11(d), Shaba has withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, Member or other
party.
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(e) Except as set forth in Schedule 3.11(e) the Financial Statements
reflect adequate reserves for Taxes payable by Shaba for all taxable periods and
portions thereof through the date of such financial statements.
(f) There are no outstanding agreements, waivers or arrangements extending
the statutory period of limitations applicable to any claim for, or the period
for the collection or assessment of, Taxes due from Shaba for any taxable period
and there have been no deficiencies proposed, assessed or asserted for such
Taxes.
(g) There are no closing agreements that could affect Taxes of Shaba for
periods after the Effective Time pursuant to Section 7121 of the Internal
Revenue Code of 1986, as amended (the "Code") or any similar provision under
state, local or foreign tax laws.
(h) No audit or other proceedings by any court, governmental or regulatory
authority or similar authority has occurred, been asserted or is pending and
Shaba has not received notice that any such audit or proceeding may be
commenced.
(i) Shaba has not agreed to, or filed application for, or is required to
make, any changes or adjustment to its accounting methods.
(j) There are no liens for Taxes (other than for current Taxes not yet due
and payable) upon the assets of Shaba.
(k) Neither Shaba nor any of its Subsidiaries (i) is a party to any
agreement providing for the allocation, sharing or indemnification of Taxes;
(ii) is required to include in income any adjustment pursuant to Section 481(a)
of the Code by reason of a voluntary change in accounting method initiated by
Shaba or any Subsidiary, nor does Shaba have any knowledge that the IRS has
proposed any such adjustment or change in accounting method; or (iii) is or has
been a United States real property holding company (as defined in Section
897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(ii) of the Code.
(l) All transactions that could give rise to an understatement of U.S.
federal income tax within the meaning of Section 6662 of the Code have been
adequately disclosed in accordance with Section 6662 of the Code.
(m) There is no contract, agreement, plan or arrangement covering any
Person that, individually or collectively, could give rise to, nor will the
consummation of the transactions contemplated hereby obligate Shaba or any of
its Subsidiaries to make, the payment of any amount that would not be deductible
by Shaba or any Subsidiary thereof by reason of Section 280G of the Code.
3.12. Books and Records. (a) The books of account and other financial
records of Shaba are true, complete and correct in all material respects, have
been maintained in accordance with good business practices, and are accurately
reflected in all material respects in the financial statements included in the
Financial Statements.
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(b) The minutes of meetings of Shaba that have been made available to
Activision prior to the Closing Date, contain accurate records of such meetings
and accurately reflect all actions of the Managers and Members taken at such
meetings.
3.13. Properties. (a) Shaba does not own any real property. Schedule
3.13(a) hereto sets forth a true, complete and correct list of all real property
currently, or at any time in the past five (5) years, owned or leased by Shaba.
With respect to all real property currently leased by Shaba, a copy of each
lease and each amendment thereto, has been made available to Activision prior to
the Closing Date. All such current leases are in full force and effect, are
valid and effective in accordance with their respective terms, and there is not
any existing material default or event of default under any such lease (or event
which with notice or lapse of time, or both, would constitute such a material
default) by Shaba or, to the Members' knowledge, the landlord.
(b) Shaba has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its tangible properties and
assets, real, personal and mixed, used or held for use in its business, free and
clear of any liens, except as reflected in the Financial Statements or in
Schedule 3.13(b) hereto and except for liens for taxes not yet due and payable
and such imperfections of title and encumbrances, if any, which are not material
in character, amount or extent, and which do not materially detract from the
value, or materially interfere with the present use, of the property subject
thereto or affected thereby.
3.14. Environmental Matters. (i) Shaba is not, and within applicable
statutes of limitation, has not been, in violation of any Environmental Law
which violation could reasonably be expected to result in a Material Adverse
Effect; (ii) there has been no disposal, spill, discharge, or release of any
Hazardous Material by Shaba, or to the knowledge of the Members, by any third
party, on, at, or under any property presently or formerly owned, leased or
operated by Shaba; (iii) Shaba has caused no Hazardous Materials to be located
in, at, on, or under such facility or property, or at any other location, in
either case that could reasonably be expected to require investigation, removal,
remedial or corrective action by Shaba or that would reasonably likely result in
liabilities of, or losses, damages or costs to Shaba under any Environmental
Law; (iv) there is currently no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, investigation, notice or demand
letter or request for information pending or, to the knowledge of the Members,
threatened, which asserts liability under any Environmental Law against Shaba;
(v) to the knowledge of the Members there has not been any underground or
aboveground storage tank, or any impoundment or other disposal area in each case
containing Hazardous Materials located at any property owned, leased, or
operated by Shaba at the time of such ownership, lease, or operation; (vi) no
asbestos or polychlorinated biphenyls have been used or disposed of by Shaba, or
have been caused by Shaba to be located at, on, or under any property owned,
leased, or operated by Shaba at the time of such ownership, lease, or operation;
and (vii) Shaba has provided Activision with all records and files available to
Shaba and the Members concerning the existence of Hazardous Materials or any
other environmental concern at properties, assets, or facilities currently or
formerly owned, operated or leased by Shaba, any present or former subsidiary,
or predecessor in interest, or concerning compliance by Shaba with, or liability
under, any Environmental Laws.
For purposes of this Agreement, "Environmental Law" means all federal,
state, and local laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, and decrees, now or
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previously in effect and regulating, relating to, or imposing liability or
standards of conduct concerning air emissions, water discharges, noise
emissions, the release or threatened release of any Hazardous Material into the
environment, the generation, handling, treatment, storage, transport or disposal
of any Hazardous Material, or otherwise concerning pollution or the protection
of the outdoor or indoor environment, or human health or safety. "Hazardous
Material" means any pollutant, contaminant, or hazardous, toxic, medical,
infectious or dangerous waste, substance, constituent or material, defined or
regulated as such in, or for purposes of, any Environmental Law, including
without limitation, any asbestos, petroleum, oil, radioactive substance,
polychlorinated biphenyls, toxin, chemical, infectious or disease-causing agent,
and any other substance that can give rise to liability under any Environmental
Law.
3.15. No Brokers. Neither Shaba nor the Members has entered into any
contract, arrangement or understanding with any person or firm that may result
in the obligation of such entity or Activision to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby. Neither Shaba nor the Members is aware of any claim for
payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
3.16. Related Party Transactions. Except for the employment arrangements
described in Schedule 3.16 hereto, Shaba is not a party to any transactions,
loans or other arrangements or understandings with its Members, managers,
managing members and/or officers (or any member of their respective immediate
families or any Trustee or beneficiary of any Member) that are in effect as of
the date of this Agreement and/or are currently proposed to be carried out in
the future. Schedule 3.16 hereto identifies and describes the interest or
interests, if any, in any property, real or personal, tangible or intangible,
used in or pertaining to the business of Shaba, now held by any Member,
managers, managing members and/or officer of Shaba.
3.17. Contracts and Commitments. (a) Except as set forth in Schedule
3.17(a) hereto, Shaba does not have, nor is Shaba party to or bound by:
(i) any consulting or sales agreement, contract or commitment under
which any firm or other organization provides services to Shaba;
(ii) any fidelity or surety bond or completion bond;
(iii) any agreement of indemnification or guaranty (other than
nondisclosure agreements);
(iv) any agreement, contract, commitment, transaction or series of
transactions for any purpose other than in the ordinary course of Shaba's
business relating to capital expenditures or commitments or long term
obligations in excess of $10,000;
(v) any agreement, contract or commitment relating to the disposition
or acquisition of assets or any interest in any business enterprise outside
the ordinary course of Shaba's business (other than the transactions
contemplated by this Agreement);
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(vi) any mortgages, indentures, loans or credit agreements, security
agreements or other arrangements or instruments relating to the borrowing
of money or extension of credit, including guaranties referred to in clause
(iii) hereof;
(vii) any purchase order or contract for the purchase of inventory or
other materials involving $10,000 or more;
(viii) any distribution, joint marketing or development agreement;
(ix) any assignment, license or other agreement with respect to any
form of intangible property; or
(x) any other agreement, contract or commitment that involves $10,000
or more (excluding any agreement for professional services entered into in
connection with the transactions contemplated by this Agreement) or is not
cancelable without penalty in excess of $10,000 within thirty (30) days
(collectively, any of (i) through (x) above shall be known as "Contracts").
(b) Except as would not individually or in the aggregate have a Material
Adverse Effect on Shaba, all such Contracts are valid and binding on Shaba and
are in full force and effect and enforceable against Shaba in accordance with
their respective terms. Except as disclosed in Schedule 3.17(b) hereto, no
approval or consent of, or notice to any Person the failure of which to obtain
would have individually or in the aggregate a Material Adverse Effect is needed
in order that such Contracts shall continue in full force and effect in
accordance with its terms without penalty, acceleration or rights of early
termination following the consummation of the Merger. Except to the extent any
of the following would not individually or in the aggregate have a Material
Adverse Effect, Shaba is not in violation of, breach of or default under any
such Contract nor, to the Members' knowledge, is any other party to any such
Contract. Except as set forth in Schedule 3.17(b) hereto, Shaba is not in
violation or breach of or default under any such Contract (including leases of
real property) relating to non-competition, indebtedness, guarantees of
indebtedness of any other person, employment, or collective bargaining.
3.18. Employee Matters and Benefit Plans. (a) Definitions. With the
exception of the definition of "Affiliate" set forth in Section 3.18(a)(i) below
(which definition shall apply only to this Section 3.18), for purposes of this
Agreement, the following terms shall have the meanings set forth below:
(i) "Affiliate" shall mean any other Person under common control with
or otherwise required to be aggregated with Shaba as set forth in Section
414(b), (c), (m) or (o) of the Code and the regulations thereunder;
(ii) "Employee" shall mean any current, former or retired employee,
officer, or director of Shaba or any Affiliate;
(iii) "Employee Agreement" shall refer to any material management,
employment, severance, consulting, relocation, repatriation, expiration,
visas, work permit or
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similar agreement or contract between Shaba or any Affiliate and any Employee or
consultant that is not an Employee Plan;
(iv) "Employee Plan" shall refer to any plan, program, policy,
practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether formal or informal, funded or unfunded
and whether or not legally binding, including without limitation, each
"employee benefit plan" within the meaning of Section 3(3) of ERISA (as
defined below), which is or has been maintained, contributed to, or
required to be contributed to, by Shaba or any Affiliate for the benefit of
any "Employee" (as defined above), and pursuant to which Shaba or any
Affiliate has or may have any material liability contingent or otherwise;
(v) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended;
(vi) "IRS" shall mean the Internal Revenue Service;
(vii) "Multiemployer Plan" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Sections 3(37) and
4001(a)(3) of ERISA; and
(viii) "Pension Plan" shall refer to each Employee Plan which is an
"employee pension benefit plan," within the meaning of Section 3(2) of
ERISA.
(b) Schedule 3.18(b) hereto contains a true, complete and correct list of
each Employee Plan (including for each such plan a description of any of the
benefits which will be increased or accelerated, by the occurrence of any of the
transactions contemplated by this Agreement) and each Employee Agreement of
Shaba. Except as set forth in Schedule 3.18(b) hereto, neither Shaba nor any of
its Affiliates has any announced plan or commitment, whether legally binding or
not, to establish any new Employee Plan or Employee Agreement, to modify any
Employee Plan or Employee Agreement (except to the extent required by law or to
conform any such Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Shaba in writing, or as
required by this Agreement), or to enter into any Employee Plan or Employee
Agreement, nor does it have any intention or commitment to do any of the
foregoing.
(c) Documents. Shaba has provided to Activision true, complete and correct
copies of all material documents embodying or relating to each Employee Plan and
each Employee Agreement including: (i) all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Employee Plan; (iii) the two most recent annual reports
(Series 5500 and all schedules thereto), if any, required under ERISA or the
Code in connection with each Employee Plan or related trust; (iv) if the
Employee Plan is funded, the most recent annual and periodic accounting of
Employee Plan assets; (v) the most recent summary plan description together with
the most recent summary of material modifications, if any, required under ERISA
with respect to each Employee Plan; (vi) all IRS determination letters and
rulings relating to Employee Plans and copies of all applications and
correspondence to or from the IRS or the Department of Labor ("DOL") with
respect to any
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Employee Plan; (vii) all communications material to any Employee or Employees
relating to any Employee Plan and any proposed Employee Plans, in each case,
relating to any amendments, terminations, establishments, increases or decreases
in benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to Shaba; and (viii) all registration
statements and prospectuses prepared in connection with each Employee Plan.
(d) Employee Plan Compliance. (i) Except as set forth in Schedule 3.18(d)
hereto, Shaba and each of its Affiliates has performed in all material respects
all obligations required to be performed by them under each Employee Plan, and
each Employee Plan has been established and maintained in all material respects
in accordance with its terms and in compliance with all applicable laws,
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code; (ii) no "prohibited transaction," within the meaning of Section 4975
of the Code or Section 406 of ERISA for which no class or statutory exemption is
available, has occurred with respect to any Employee Plan; (iii) there are no
material actions, suits or claims pending or, to the knowledge of the Members,
threatened or anticipated (other than routine claims for benefits) against any
Employee Plan or against the assets of any Employee Plan; (iv) such Employee
Plan can be amended, terminated or otherwise discontinued after the Effective
Time in accordance with its terms, without material liability to Shaba or any of
its Affiliates (other than ordinary administration expenses typically incurred
in a termination event); (v) there are no audits, inquiries or proceedings
pending or, to the knowledge of the Members, threatened by the IRS or DOL with
respect to any Employee Plan; (vi) Shaba is not subject to any penalty or tax
with respect to any Employee Plan under Section 502(i) of ERISA or Section 4975
through 4980B of the Code; (vii) all contributions, including any top heavy
contributions, required to be made prior to the Closing by Shaba or any ERISA
Affiliate to any Employee Plan have been made or shall be made on or before the
Closing Date; and (viii) Shaba and its Affiliates are in compliance in all
respects with the requirements of Parts 6 and 7 of Subtitle B of Title I of
ERISA and the regulations promulgated thereunder and any similar state laws
concerning group health care continuation coverage and group health plan
portability, access and renewability requirements, respectively.
(e) Pension Plans. Neither Shaba nor any of its Affiliates currently
maintain, sponsor, participate in or contribute to, nor have they ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has Shaba or any of its Affiliates
contributed to, or been requested or obligated to contribute to, any
Multiemployer Plan.
(g) No Post Employment Obligations. Except as set forth in Schedule 3.18(g)
hereto or as required by Part 6 of Subtitle B of Title I of ERISA, no Employee
Plan or any other employment agreement or arrangement to which Shaba or its
Affiliates is a party provides, or is required to provide, life insurance,
medical or other employee benefits to any Employee upon his or her retirement or
termination of employment for any reason, and neither Shaba nor any of its
Affiliates has ever represented or promised to, or contracted with (whether in
oral or written form) to any Employee (either individually or to Employees as a
group) that such Employee(s)
-13-
would be provided with life insurance, medical or other employee welfare
benefits upon their retirement or termination of employment.
(h) Effect of Transaction. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Employee Plan, Employee Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee, except as set forth in
Schedule 3.18(h) hereto.
(i) Employment Matters. Except as set forth in Schedule 3.18(i), and except
for any noncompliance as a result of Shaba's treatment of employees as salaried
employees instead of hourly employees, Shaba (i) is in compliance in all
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees except
as would not individually or in the aggregate have a Material Adverse Effect;
(ii) has withheld all amounts required by law or by agreement to be withheld
from the wages, salaries, and other payments to Employees; (iii) is not liable
for any arrears of wages of any taxes or any penalty for failure to comply with
any of the foregoing; and (iv) is not liable for any payment to any trust or
other fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the normal
course of business and consistent with past practice). No claims have been
asserted and no claims have been filed in court, with an administrative agency
or with an arbitrator concerning any employment related claims of any nature
against Shaba and to the knowledge of the Members, no such claims have been
threatened.
(j) Labor. No work stoppage or labor strike against Shaba is pending or, to
the knowledge of the Members, threatened. Shaba is not involved in or, to the
knowledge of the Members, threatened with, any labor dispute, grievance,
administrative proceeding or litigation relating to labor, safety, employment
practices or discrimination matters involving any Employee, including, without
limitation, charges of unfair labor practices or discrimination complaints,
which, if adversely determined, would individually or in the aggregate have a
Material Adverse Effect. Shaba has not engaged in any unfair labor practices
within the meaning of the National Labor Relations Act which would, individually
or in the aggregate, directly or indirectly have a Material Adverse Effect.
Neither Shaba nor any of its Affiliates has ever been a party to any agreement
with any labor organization or union, and none of the Employees are represented
by any labor organization or union, nor have any Employees threatened to
organize or join a union or filed a petition for representation with the
National Labor Relations Board.
(k) Schedule 3.18(k) hereto sets forth (i) the aggregate amounts of bonus
and severance payments that could be payable to employees of Shaba under
existing Employee Agreements or Employee Plans on account of the transactions
contemplated by this Agreement (without regard to termination of employment),
and (ii) the aggregate amounts of severance obligations that could be payable to
employees of Shaba under existing Employee Agreements and Employee Plans on
account of terminations of employment following the Effective Time,
-14-
separately stating the amounts that are payable by reason of a termination
following a change of control of Shaba.
(l) Schedule 3.18(l) sets forth a true, complete and correct list of all
persons who are currently employees and consultants of Shaba and all persons to
whom Shaba has extended offers of employment and the compensation payable to all
such employees and consultants.
3.19. Intellectual Property. (a) For the purposes of this Agreement, the
following terms have the following definitions:
(i) "Intellectual Property" shall mean any or all of the following and
all rights in, arising out of, or associated therewith: (a) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and continuations
in part thereof; (b) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data, customer lists, proprietary processes and formulae,
all source and object code, algorithms, architectures, structures, display
screens, layouts, inventions, development tools and all documentation and media
constituting, describing or relating to the above, including, without
limitation, manuals, memoranda and records; (c) all copyrights, copyrights
registrations and applications therefor, copyrightable material including
derivative works, revisions, transformations and adaptations, material that is
subject to non-copyright disclosure protections, and all other rights
corresponding thereto throughout the world; (d) all industrial designs and any
registrations and applications therefor throughout the world; (e) all trade
names, logos, common law trademarks and service marks, trademark and service
xxxx registrations and applications therefor throughout the world; (f) all
proprietary databases and data collections and all rights therein throughout the
world; (g) domain names; (h) intellectual property rights acquired by license or
agreement; (i) damages or benefit derived from any action arising out of or
related to the foregoing, including laws controlling computer and Internet
rights;; and (j) any equivalent rights to any of the foregoing anywhere in the
world.
(ii) "Shaba Intellectual Property" shall mean that Intellectual
Property owned by, licensed to, or used by Shaba.
(iii) "Shaba Registered Intellectual Property" means those United
States, international and foreign: (a) patents and patent applications
(including provisional applications); (b) registered trademarks and service
marks, applications to register trademarks or service marks, intent to use
applications, or other registrations or applications related to trademarks
or service marks; and (c) registered copyrights and applications for
copyright registration, in each case included in the Shaba Intellectual
Property. All of the foregoing are listed in Schedule 3.19(a)(iii) hereto.
(b) Shaba has disclosed accurately and completely all Shaba Intellectual
Property to the Surviving Corporation. Shaba is the exclusive owner of all
right, title and interest in and to Shaba Intellectual Property owned by Shaba
(with no breaks in the chain of title thereof) free and clear of any claim,
security interest, lien, pledge, option, charge or encumbrance of any kind
whatsoever. Shaba's rights in such Shaba Intellectual Property are in full force
and effect. Such Shaba Intellectual Property has not been used or enforced or
failed to
-15-
be used or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of any of Shaba's rights in and to any Shaba
Intellectual Property.
(c) Schedule 3.19(c) hereto sets forth a true, complete and correct list of
all non routine proceedings or actions known to the Members before any court,
tribunal (including the United States Patent and Trademark Office ("PTO") or
equivalent authority anywhere in the world) related to any Shaba Intellectual
Property. Except as set forth in Schedule 3.19(c), no Shaba Intellectual
Property is the subject of any non routine proceeding or outstanding decree,
order, judgment, agreement, or stipulation restricting in any manner the use,
transfer, or licensing thereof by Shaba, or which may affect the validity, use
or enforceability of such Shaba Intellectual Property.
(d) With respect to each item of Shaba Registered Intellectual Property,
any necessary registration, maintenance and renewal fees in connection with such
Shaba Registered Intellectual Property have been paid and all necessary
documents and certificates in connection with such Shaba Registered Intellectual
Property have been filed with the relevant patent, trademark or copyright
authorities in the United States for the purposes of maintaining rights in such
Shaba Registered Intellectual Property.
(e) Shaba has the right to use, market, distribute, sell and/or license all
Shaba Intellectual Property used in its business as presently conducted and as
it is expected to be conducted as of the Effective Time, including without
limitation, all Intellectual Property used or to be used in the Shaba Products
(as defined below), and such rights to use, market, distribute, sell and/or
license are sufficient for such conduct of its business.
(f) Except as set forth on Schedule 3.19 (f)(i), neither the manufacture,
development, publication, marketing, license, sale, distribution or use intended
by Shaba of any software products currently being licensed, produced or sold by
Shaba or currently under development by Shaba (the "Shaba Products") violates
any license or agreement between Shaba and any third party or to the knowledge
of the Members infringes any Intellectual Property right, moral right or right
of publicity or privacy of any other party, and there is no pending or, to the
knowledge of the Members, threatened claim or litigation contesting the
validity, ownership or right to use, market, distribute, sell, license or
dispose of any Shaba Intellectual Property nor, to the knowledge of the Members,
is there any basis for any such claim under applicable law, nor has Shaba
received any notice asserting that any Shaba Intellectual Property or the
proposed use, marketing, distribution, sale, license or disposition thereof
conflicts or will conflict with the rights of any other party, nor, to the
knowledge of the Members, is there any basis for any such assertion under
applicable law. Schedule 3.19(f)(ii) hereto sets forth a true, complete and
correct list of all Shaba Products.
(g) Shaba has timely and satisfactorily complied with its milestone
delivery requirements under all material agreements, if any, pursuant to which
Shaba has agreed with a person other than Activision or its affiliates to
program, design or develop, whether for original use or for porting or
conversion (for use on a different hardware platform or in a different
language), any software products or any part thereof, except where the failure
to so comply could not reasonably be expected to individually or in the
aggregate have a Material Adverse Effect with respect to Shaba.
-16-
(h) Except as set forth in Schedule 3.19(h) hereto, to the extent that any
Intellectual Property has been developed or created by a third party for Shaba,
Shaba has a written agreement with such third party with respect thereto and
Shaba thereby has obtained ownership of, and is the exclusive owner of such
Intellectual Property by operation of law or by valid assignment or by
agreement, as the case may be.
(i) Schedule 3.19(i) hereto sets forth a true, complete and correct list of
all material contracts, licenses and agreements to which Shaba is a party that
are currently in effect (i) with respect to Shaba Intellectual Property
licensed, transferred or offered to any third party; or (ii) pursuant to which a
third party has licensed or transferred any Intellectual Property to Shaba.
Except as set forth in Schedule 3.19(h) hereto, Shaba has not transferred
ownership of, or granted any exclusive license with respect to, any Shaba
Intellectual Property, to any third party.
(j) Except as set forth in Schedule 3.19(j) hereto, the contracts, licenses
and agreements listed in Schedule 3.19(i) are in full force and effect. The
consummation of the transactions contemplated by this Agreement will not violate
or result in the breach, modification, cancellation, termination, or suspension
of such contracts, licenses and agreements listed in Schedule 3.19(i) and will
not cause the forfeiture or termination or give rise to a right of forfeiture or
termination of any rights of Shaba to any Shaba Intellectual Property or impair
the right of Shaba after the Effective Time to use, market, distribute, sell or
license any Shaba Intellectual Property or portion thereof. Shaba is in material
compliance with, and has not materially breached any term of any of such
contracts, licenses and agreements listed in Schedule 3.19(i) and, to the
knowledge of the Members, all other parties to such contracts, licenses and
agreements listed in Schedule 3.19(i) are in compliance with, and have not
breached any term of, such contracts, licenses and agreements. Except as set
forth in Schedule 3.19(j) hereto, following the Effective Time, the Surviving
Corporation will be permitted to exercise all of Shaba's rights under the
contracts, licenses and agreements listed in Schedule 3.19(i) to the same extent
Shaba would have been able to had the transactions contemplated by this
Agreement not occurred and without the payment of any additional funds other
than ongoing fees, royalties or payments which Shaba would otherwise be required
to pay.
(k) Schedule 3.19(k) hereto sets forth a true, complete and correct list of
all contracts, licenses and agreements between Shaba and any third party (other
than nondisclosure agreements) wherein or whereby Shaba has agreed to, or
assumed any obligation or duty to warrant, indemnify, hold harmless or otherwise
assume or incur any obligation or liability with respect to the infringement or
misappropriation by Shaba or such third party of the Intellectual Property of
any third party.
(l) Except as set forth in Schedule 3.19(l) hereto, (i) Shaba has not
received any notice or claim (whether written, oral or otherwise) challenging
Shaba's ownership or rights in the Shaba Intellectual Property or claiming that
any other person or entity has any legal or beneficial ownership with respect
thereto; (ii) all the Shaba Intellectual Property owned by Shaba and embodied in
its products are legally valid and enforceable without any material
qualification, limitation or restriction on their use; (iii) to the Members'
knowledge, no third party is infringing or misappropriating any part of the
Shaba Intellectual Property, and (iv) no Shaba Intellectual Property owned by
Shaba is subject to a final refusal of registration or is the subject of any
inter-partes proceedings.
-17-
(m) Shaba has taken reasonable and practicable measures designed to protect
its rights in its confidential information and trade secrets or any trade
secrets or confidential information of third parties provided to Shaba. None of
Shaba, or any employees or, to the Members' knowledge, consultants of Shaba, has
permitted any such confidential information or trade secrets to be used,
divulged or appropriated for the benefit of persons to the material detriment of
Shaba.
(n) Schedule 3.19(n) hereto sets forth a true, complete and correct list of
all Internet domain names used by Shaba in its business (collectively, the
"Domain Names"). Shaba has, and after the Effective Time the Surviving
Corporation will have, a valid registration and all material rights (free of any
material restriction) in and to the Domain Names, including, without limitation,
all rights necessary to continue to conduct Shaba's business as it is currently
conducted.
3.20. Consents. Except as set forth in Schedule 3.20, no consent, approval
or authorization of, or exemption by, or filing with, any governmental authority
or any third party is required to be obtained or made by the Members in
connection with the execution, delivery and performance by the Members of this
Agreement or the taking by the Members of any other action contemplated hereby.
3.21. Insurance. Shaba maintains, and has maintained or caused to be
maintained, without interruption, during its existence, policies or binders of
insurance covering such risk, and events, including personal injury, property
damage, and general liability in amounts set forth on Schedule 3.21 hereto, and
its current insurance policies will not terminate due to the consummation of the
transactions contemplated under this Agreement. Shaba has provided Activision
prior to the Closing Date with true, complete and correct copies of all
insurance policies maintained currently by Shaba and all such policies are
listed on Schedule 3.21 hereto.
3.22. Relationships with Suppliers, Licensors and Customers. No current
licensee, licensor, distributor, customer of Shaba or supplier to Shaba has
notified Shaba of an intention to terminate or substantially alter its existing
business relationship with Shaba, nor has any licensor under a license agreement
with Shaba notified Shaba of an intention to terminate or substantially alter
Shaba's rights under such license, which termination or alteration would have a
Material Adverse Effect on Shaba.
3.23. Bank Accounts. Schedule 3.23 hereto contains a true, complete and
correct (i) list of names and locations of all banks, trust companies,
securities brokers, and other financial institutions at which Shaba has an
account or safe deposit box or maintains a banking, custodial, trading, trust,
or other similar relationship, (ii) list and description of each such account,
box and relationship, (iii) list of all signatories for each such account and
box and (iv) list of all compensating balances required with respect to each
such account.
3.24. Material Compliance with Agreements. Shaba is in material compliance
with, and has not materially breached any term of, any software development
agreements between Activision Publishing and Shaba.
3.25. Disclosure. No representation, warranty, statement or information
made or furnished by the Members in this Agreement or the Schedules hereto
contains any statement of a material fact that was untrue when made or omits any
material fact necessary to make the information contained in such
representation, statement or information not misleading.
-18-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACTIVISION
Activision hereby represents and warrants to Shaba and the Members as
follows:
4.1. Organization. Activision is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Activision, Activision
Publishing, and Merger Subsidiary have all requisite corporate power and
authority to carry on their businesses as they are now being conducted, and to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby.
4.2. Corporate Power and Authority; Effect of Agreement. The execution,
delivery and performance by Activision of this Agreement and the consummation by
Activision of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of Activision. No vote of the
Activision stockholders is required to approve the issuance of the Activision
Shares as contemplated by this Agreement. This Agreement has been duly and
validly executed and delivered by Activision and constitutes the valid and
binding obligation of Activision, enforceable against Activision in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws affecting creditors' rights generally and general principles
of equity.
4.3. Capitalization. (a) The authorized capital stock of Activision
consists of (i) 125,000,000 shares of Activision Common Stock, (ii) 3,750,000
shares of Preferred Stock, $.000001 par value per share (the "Activision
Preferred Shares"), and (iii) 1,250,000 shares of Series A Junior Preferred
Stock, $.000001 par value per share (the "Activision Junior Preferred Shares").
As of March 21, 2002, there were 56,392,787 shares of Activision Common Stock
issued and outstanding, no Activision Preferred Shares issued and outstanding
and no Activision Junior Preferred Shares issued and outstanding. All such
outstanding shares of Activision are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. Except as described in the
Activision SEC Reports (as defined in Section 4.5), Activision has no
outstanding bonds, debentures, notes or other obligations the holders of which
have or upon the happening of certain events would have the right to vote (or
which are convertible into or exercisable for securities having the right to
vote) with the stockholders of Activision on any matter. Except as described in
the Activision SEC Reports and in other filings made by Activision with the
Securities and Exchange Commission (the "SEC"), there are no existing options,
warrants, calls, subscriptions, convertible securities, or other rights,
agreements, stock appreciation rights or similar derivative securities or
instruments or commitments which obligate Activision to issue, transfer or sell
any Shares of Activision Common Stock or make any payments in lieu thereof other
than options or warrants granted to employees, directors, consultants and
licensors after the date of the most recent Activision SEC Report.
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(b) The Activision Shares to be issued pursuant to this Agreement will,
upon issuance in accordance with this Agreement, be duly authorized, validly
issued, fully paid and nonassessable and free of preemptive rights of any
nature.
4.4. No Violation. The execution, delivery and performance by Activision,
Activision Publishing, and Merger Subsidiary of this Agreement and the
consummation by Activision, Activision Publishing, and Merger Subsidiary of the
transactions contemplated hereby will not, with or without the giving of notice
or the lapse of time, or both, conflict with or violate (i) any provision of
law, rule or regulation to which Activision, Activision Publishing, and Merger
Subsidiary are subject, (ii) any order, judgment, injunction or decree binding
upon or applicable to Activision or binding upon the assets or properties of
Activision, Activision Publishing, and Merger Subsidiary, (iii) violate any
provision of their respective Certificates of Incorporation, as amended, or
Bylaws, as amended, or (iv) other than the filings provided for in this
Agreement, require any consent, approval or authorization of, or declaration,
filing or registration with, any governmental or regulatory authority which has
not been obtained or made, except where the failure to obtain any such consent,
approval or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority would not individually or in the aggregate
have a Material Adverse Effect on Activision, Activision Publishing, or Merger
Subsidiary, as applicable.
4.5. SEC Documents. Activision has timely filed with the SEC all forms,
reports and documents required to be filed by Activision since March 31, 2001
under the Securities Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder
(collectively, the "Securities Laws"), including, without limitation, (i) the
Annual Report on form 10-K, (ii) all Quarterly Reports on form 10-Q, (iii) all
proxy statements relating to meetings of stockholders (whether annual or
special), (iv) all Current Reports on form 8-K and (v) all other reports,
schedules, registration statements and other documents, each as amended
(collectively, the "Activision SEC Reports"), all of which were prepared in
compliance in all material respects with the applicable requirements of the
Exchange Act and the Securities Act. As of their respective dates, the
Activision SEC Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets of Activision included in or incorporated by
reference into the Activision SEC Reports (including the related notes and
schedules) fairly presents the consolidated financial position of Activision and
its consolidated subsidiaries as of its date and each of the consolidated
statements of operations, cash flows and stockholders' equity included in or
incorporated by reference into the Activision SEC Reports (including any related
notes and schedules) fairly presents the results of operations, cash flows and
stockholders' equity, as the case may be, of Activision and its consolidated
subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year end audit adjustments which would not be
material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein and except, in the case of the unaudited
statements, as permitted by Form 10 Q pursuant to Section 13 or 15(d) of the
Exchange Act.
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4.6. Absence of Certain Changes. Except as set forth in Schedule 4.6, and
except as disclosed in or contemplated by the SEC Reports, since December 31,
2001, Activision has conducted its business in the ordinary course of such
business and consistent with past practices and there has not been any:
(a) change, event or condition (whether or not covered by insurance) that
has resulted in, or might reasonably be expected to result in, a Material
Adverse Effect;
(b) acquisition, sale or transfer of any material asset of Activision or
any of its subsidiaries other than in the ordinary course of business;
(c) declaration, setting aside or payment of any dividend on, or the making
of any other distribution in respect of, the capital stock of Activision or the
shares of capital stock of any of its subsidiaries, any splits, combination, or
recapitalization of the capital stock of Activision, or any direct or indirect
redemption, purchase or other acquisition by Activision or any of its
subsidiaries of any such shares or any change in any rights, preferences,
privileges or restrictions of any outstanding security of Activision;
(d) entering into, material amendment or termination of, or default under,
any material contract to which Activision or any of its subsidiaries is a party
or by which it is bound except in the ordinary course of business;
(e) agreement by Activision or any of its subsidiaries to do any of the
things described in the preceding clauses (a) through (d); or
(f) agreement or arrangement made by Activision to take any action after
the date hereof which, if taken prior to the date hereof, would have made any
representation or warranty set forth in Article IV of this Agreement untrue or
incorrect as of the date when made.
4.7. Material Compliance with Agreements. Activision Publishing is in
material compliance with, and has not materially breached any term of, any
software development agreements between Activision Publishing and Shaba.
4.8. No Brokers. Activision has not entered into any contract, arrangement
or understanding with any person or firm that may result in the obligation of
Activision or Shaba to pay any finder's fees, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby.
Activision is not aware of any claim for payment of any finder's fees, brokerage
or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby.
ARTICLE V
DELIVERIES AT CLOSING
5.1. Deliveries by Activision. At the Closing on the date hereof, the
following documents were delivered and actions taken by or on behalf of
Activision:
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(a) Activision delivered to Shaba a certificate of the Secretary of
Activision certifying that attached thereto is a true, complete and correct copy
of the resolutions of the Board of Directors of Activision authorizing the
execution, delivery and performance of this Agreement, the Merger and the
transactions contemplated hereby.
(b) Merger Subsidiary delivered to Shaba a certificate of the Secretary of
Merger Subsidiary certifying that attached thereto is a true, complete and
correct copy of the resolutions of the Board of Directors and the sole
shareholder of Merger Subsidiary authorizing the execution, delivery and
performance of this Agreement, the Merger and the transactions contemplated
hereby.
(c) Activision executed and delivered the employment agreements
substantially in the form attached hereto as Exhibit B-1 and proprietary
information agreements substantially in the form attached hereto as Exhibit B-2
with each of Xxxxxxxxxxx Xxxxxx and Xxxxxxx Xxxxxxxx and each of the six
additional employees of Shaba set forth on Exhibit B 3 ("Other Key Employees").
(d) Activision and the Escrow Agent executed and delivered the Warranty
Escrow Agreement (as defined in Section 6.2) substantially in the form of
Exhibit C attached hereto.
(e) Activision amended its Internal Project Bonus Plan to incorporate the
modifications to such Plan set forth in Exhibit D hereto.
(f) Activision delivered, or caused to be delivered, a letter to
Activision's transfer agent authorizing such transfer agent to deliver
certificates representing Activision Common Stock issued in the names of the
Members in accordance with their respective interests as set forth in Exhibit A
and bearing restrictive legends under the Securities Act, subject to the
provisions of Sections 6.1 and 6.2 of this Agreement (and the Warranty Escrow
Agreement) which require that certificates for Activision Common Stock be issued
to the Members in such denominations as required to meet the requirements of the
Warranty Escrow Agreement and deposited with the Escrow Agent.
5.2. Deliveries by Shaba and/or the Members. At the Closing on the date
hereof, the following documents were delivered and action taken by or on behalf
of Shaba and/or the Members, as the case may be:
(a) Shaba delivered to Activision a certificate of the Managers of Shaba
certifying that attached thereto is a true, complete and correct copy of the
resolutions of the Managers and the Members authorizing the execution, delivery
and performance of this Agreement, the Merger and the transactions contemplated
hereby.
(b) Shaba delivered to Activision a certificate of good standing of Shaba
issued by the Secretary of State of California, dated as of a date not more than
five (5) days prior to the Closing Date.
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(c) Each of Xxxxxxxxxxx Xxxxxx, Xxxxxxx Xxxxxxxx and the Other Key
Employees executed and delivered employment agreements in the form attached
hereto as Exhibit B-1 and proprietary information agreements in the form
attached hereto as Exhibit B-2.
(d) The Members have executed and delivered the Warranty Escrow Agreement
substantially in the form of Exhibit C attached hereto.
(e) Each of the Members executed an investment letter substantially in the
form of Exhibit E-1 attached hereto ("Investment Letter").
(f) Each Member that is an "accredited investor" ("Accredited Investor"),
as that term is defined in Rule 501(a) of Regulation D of the Securities Act,
completed and executed an accredited investor agreement substantially in the
form attached hereto as Exhibit E 2, ("Accredited Investor Agreement").
(g) Each Member that is not an Accredited Investor completed and executed a
non-accredited investor agreement substantially in the form attached hereto as
Exhibit E-3 ("Non-Accredited Investor Agreement").
(h) The Members delivered to Activision all consents required as described
in Schedule 3.20, if any.
(i) Activision received a legal opinion of Donahue, Gallagher, Xxxxx & Wood
LLP, counsel to Shaba, in the form attached hereto as Exhibit F.
(j) Activision received a legal opinion of Xxxxxx Xxxxxxxx Xxxxxxx & Share
LLP, tax counsel to Shaba, in the form attached hereto as Exhibit G.
ARTICLE VI
COVENANTS AND OTHER AGREEMENTS
6.1. Restrictions on Sale of Activision Shares. The Members acknowledge and
agree that Activision Shares will be issued to the Members without registration
under the Securities Act, based upon the "private offering exemption," in
reliance upon appropriate written representations from the Members (as set forth
in their respective Investment Letters and their respective Accredited
Investment Agreements or Non-Accredited Investor Agreements, as applicable),
further evidenced by restrictive legends on the certificates representing
Activision Shares and "stop transfer" instructions to Activision's transfer
agent. Subject to Activision's obligations under Section 6.3(a) or Section
6.3(b), Activision Shares, and Xxx Xxxxxxx Employee Allocation and Xxxxx Xxxxxx
Employee Allocation, if any, will be "restricted securities" within the meaning
of the Securities Act and related rules and regulations.
6.2. Share Holdback. (a) In order to insure that the representations,
warranties and covenants made by the Members under this Agreement are not
breached, and in order to provide a nonexclusive source of indemnification of
Activision pursuant to Article 7, Shaba and the Members agree that 32,759 of the
Activision Shares, constituting ten percent (10%) thereof, (the "Warranty Escrow
Shares") shall be deposited in an Escrow Account (the "Escrow Account")
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pursuant to a Warranty Escrow Agreement substantially in the form attached
hereto as Exhibit C (the "Warranty Escrow Agreement") within five business days
of the Effective Time. Shaba and the Members further agree that 68,965 of the
Activision Shares, constituting an additional 21.05% thereof, (the "Product
Escrow Shares") shall be deposited in the Escrow Account and shall be released
in accordance with the product delivery and revenue requirements set forth in
this Section 6.2 and in the Warranty Escrow Agreement. Subject to any releases
from escrow pursuant to Section 6.2(c) and the Warranty Escrow Agreement, such
Warranty Escrow Shares and Product Escrow Shares (collectively, the "Escrow
Shares") shall be held in the Escrow Account during such period of time as set
forth in the Warranty Escrow Agreement. Any dividends or distributions with
respect to the Escrow Shares while held in the Escrow Account also shall be
retained in the Escrow Account until the release of such Escrow Shares pursuant
to the Warranty Escrow Agreement. Any offsets or deductions made from the Escrow
Shares on account of any breach of this Agreement or otherwise pursuant to this
Section 6.2 shall be made at such time as set forth in the Warranty Escrow
Agreement, and the value per share of such Escrow Shares shall be $29 (subject
to adjustment for any stock splits, reverse splits, recapitalizations or similar
transactions occurring after the Closing) (as adjusted, the "Offset Price"). All
Escrow Shares subject to such offset or deduction shall be canceled by
Activision, and the remaining Escrow Shares, together with any dividends paid or
distributions made with respect to such Escrow Shares that have not been
canceled, shall be then delivered to the Members in accordance with their
respective interests pursuant to the terms of this Section 6.2 and the Warranty
Escrow Agreement. Notwithstanding the foregoing, Warranty Escrow Shares held in
the Escrow Account pursuant to the provisions of this Section 6.2(a) shall not
be deemed the sole source of recourse by Activision for indemnification under
this Agreement, and Shaba and the Members remain severally liable in accordance
with Article 7. The parties hereto agree that the Members shall have the right
to satisfy any claim for indemnification by an Activision Indemnified Party (as
defined in Section 7.2) with cash or other property in lieu of Warranty Escrow
Shares.
(b) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "Activision Products" shall mean Xxxxx Xxxxxx'x Pro Wakeboarder and Xxx
Xxxxxxx'x Pro BMX 3.
(ii) "Applicable Employee Allocation" shall mean the Xxx Xxxxxxx Employee
Allocation or the Xxxxx Xxxxxx Employee Allocation.
(iii) "Applicable Payments" shall mean the Xxx Xxxxxxx Payment or the Xxxxx
Xxxxxx Payment.
(iv) "Applicable Product Escrow Shares" shall mean (A) with respect to Xxx
Xxxxxxx'x Pro BMX 3, the Xxx Xxxxxxx Escrow Shares and (B) with respect to Xxxxx
Xxxxxx'x Pro Wakeboarder, the Xxxxx Xxxxxx Escrow Shares, as applicable.
(v) "Expected Net Revenue" shall mean the following: (1) for Xxx Xxxxxxx'x
Pro BMX 3, $31,408,695; (2) for Xxxxx Xxxxxx'x Pro Wakeboarder, $23,000,000.
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(vi) "Xxx Xxxxxxx Employees" shall mean those employees identified in a
notice to Activision Publishing by the senior production executives of the
Surviving Corporation as having worked on Xxx Xxxxxxx'x Pro BMX 3, which notice
shall be subject to the approval of Activision Publishing, such approval not to
be unreasonably withheld.
(vii) "Xxx Xxxxxxx Employee Allocation" shall mean the number of shares of
Activision Common Stock issued to the Xxx Xxxxxxx Employees pursuant to Section
6.2(c) equal to $125,000 divided by the average closing price of Activision
Common Stock on the Nasdaq National Market over the three day trading period
ending on the business day prior to the date Activision provides notice to the
Escrow Agent to release Xxx Xxxxxxx Escrow Shares pursuant to Section 6.2(c).
(viii) "Xxx Xxxxxxx Escrow Shares" shall mean 43.75% of the Product Escrow
Shares initially deposited in the Escrow Account pursuant to Section 6.2(a).
(ix) "Xxx Xxxxxxx Final Date" shall mean September 1, 2003; provided,
however, that such date shall be extended to the extent a delay in performance
is caused by an act of God, war, terrorism, earthquake or other natural
disaster, or any similar force majeure event.
(x) "Xxx Xxxxxxx Payment" shall mean $125,000.
(xi) "Xxx Xxxxxxx'x Pro BMX 3" shall mean the software product known as Xxx
Xxxxxxx'x Pro BMX 3 (Playstation 2, Microsoft X-Box and Nintendo GameCube
versions).
(xii) "P&L Revenue Shortfall" with respect to an Activision Product shall
mean the Expected Net Revenue for such Activision Product minus the Product Net
Revenue for such Activision Product.
(xiii) "Product Net Revenue" with respect to an Activision Product shall
mean the aggregate revenue actually received by Activision Publishing (or any
successor or assignee of the right to receive such revenues) from all sales of
all versions of such Activision Product during the first year after the
commercial release of each version of the Activision Product, less all returns,
price protections, price allowances and xxxx-xxxxx during such year.
(xiv) "Xxxxx Xxxxxx Agreement" shall mean the Software Development
Agreement dated as of December 7, 2000, between Activision Publishing and Shaba,
as amended on June 30, 2001 and January 10, 2002.
(xv) "Xxxxx Xxxxxx Employees" shall mean those employees identified in a
notice to Activision Publishing by the senior production executives of the
Surviving Corporation as having worked on Xxxxx Xxxxxx'x Pro Wakeboarder, which
notice shall be subject to the approval of Activision Publishing, such approval
not to be unreasonably withheld.
(xvi) "Xxxxx Xxxxxx Employee Allocation" shall mean the number of shares of
Activision Common Stock issued to the Xxxxx Xxxxxx Employees pursuant to Section
6.2(c) equal to $125,000 divided by the average closing price of Activision
Common Stock on
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the Nasdaq National Market over the three day trading period ending on the
business day prior to the date Activision provides notice to the Escrow Agent to
release Xxxxx Xxxxxx Escrow Shares pursuant to Section 6.2(c).
(xvii) "Xxxxx Xxxxxx Escrow Shares" shall mean 56.25% of the Product Escrow
Shares initially deposited in the Escrow Account pursuant to Section 6.2(a).
(xviii) "Xxxxx Xxxxxx Final Date" shall mean October 15, 2002; provided,
however, that such date shall be extended to the extent a delay in performance
is caused by an act of God, war, terrorism, earthquake or other natural
disaster, or any similar force majeure event.
(xix) "Xxxxx Xxxxxx Payment" shall mean $125,000.
(xx) "Xxxxx Xxxxxx'x Pro Wakeboarder" shall mean the software product known
as Xxxxx Xxxxxx'x Pro Wakeboarder (Playstation 2, Microsoft X-Box and Nintendo
GameCube versions) developed pursuant to the terms of the Xxxxx Xxxxxx
Agreement.
(c) Development Agreement Holdback. Shaba and the Members agree that,
subject to the terms and conditions set forth in this Section 6.2 and the
Warranty Escrow Agreement, the Members will be entitled to receipt of the
Applicable Product Escrow Shares on the terms set forth below:
(i) Upon the occurrence of all of the following: (A) acceptance not later
than the Xxx Xxxxxxx Final Date by each of Sony Computer Entertainment Inc.
and/or its affiliates, Nintendo of America Inc. and/or its affiliates, and
Microsoft Corporation and/or its affiliates (collectively, the "Third Party
Manufacturers") of the respective U.S. version of Xxx Xxxxxxx'x Pro BMX 3 (the
scope, function and features of which the parties hereto agree shall be
commensurate with those of Xxx Xxxxxxx'x Pro BMX 2 and other entertainment
software products in Activision's extreme sports line of products); (B)
achievement by the PlayStation 2 version of Xxx Xxxxxxx'x Pro BMX 3 within the
first three (3) months of its first commercial release of a minimum averaged
rating of at least 82% from XxxxXxxxxxxx.xxx or if XxxxXxxxxxxx.xxx is not then
in business in substantially its current fashion, an average ranking of 82% or
above from GamePro, Electronic Gaming Monthly, Game Informer, Xxxxxxxxxx.xxx and
XXX.xxx (collectively, the "Alternative Ranking Sources") (it being agreed that
the one highest and one lowest ratings shall not be included in the
determination of the average rating) and if any of the Alternative Ranking
Sources is not then in business in substantially its current fashion, then it
shall be replaced with such sources, if any, as shall be mutually agreed among
Activision and the Members; and (C) achievement by the Microsoft X-Box and
Nintendo GameCube versions of Xxx Xxxxxxx'x Pro BMX 3 of at least 77% minimum
averaged rating, which rating shall be determined as provided in clause (B)
above, the Members shall become entitled to the Xxx Xxxxxxx Escrow Shares and
the Xxx Xxxxxxx Employees shall become entitled to the Xxx Xxxxxxx Employee
Allocation or the Xxx Xxxxxxx Payment, as set forth below. Upon the satisfaction
of the conditions set forth in this paragraph, Activision shall, in accordance
with the terms of the Warranty Escrow Agreement, promptly notify the Escrow
Agent to release the Xxx Xxxxxxx Escrow Shares from the Escrow Account. The Xxx
Xxxxxxx Escrow Shares released from the Escrow Account shall be distributed to
the Members in accordance with their respective percentage Membership Interest
as set forth on Exhibit A.
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Upon satisfaction of the conditions set forth in this paragraph, Activision
shall, at its option, either (i) make the Xxx Xxxxxxx Payment to the Xxx Xxxxxxx
Employees or (ii) issue and distribute to the Xxx Xxxxxxx Employees such number
of shares of Activision Common Stock equal to the Xxx Xxxxxxx Employee
Allocation. The Xxx Xxxxxxx Payment or the Xxx Xxxxxxx Employee Allocation, as
applicable, shall be distributed to the Xxx Xxxxxxx Employees in accordance with
the joint written direction of the senior production executives of the Surviving
Corporation, which joint written direction shall be subject to the approval of
Activision Publishing, such approval not to be unreasonably withheld.
(ii) Upon the occurrence of all of the following: (A) acceptance not later
than the Xxxxx Xxxxxx Final Date by each of the Third Party Manufacturers of the
respective U.S. version of Xxxxx Xxxxxx'x Pro Wakeboarder pursuant to the terms
of the Xxxxx Xxxxxx Agreement; (B) achievement by the PlayStation 2 version of
Xxxxx Xxxxxx'x Pro Wakeboarder within the first three (3) months of its first
commercial release of a minimum averaged rating of at least 82% from
XxxxXxxxxxxx.xxx or, if XxxxXxxxxxxx.xxx is not then in business in
substantially its current fashion, an average ranking of 82% or above from the
Alternative Ranking Sources (it being agreed that the one highest and one lowest
ratings shall not be included in the determination of the average rating) and if
any of the Alternative Ranking Sources is not then in business in substantially
its current fashion, then it shall be replaced with such sources, if any, as
shall be mutually agreed among Activision and the Members; and (C) the
achievement by the Microsoft X-Box and Nintendo GameCube versions of Xxxxx
Xxxxxx'x Pro Wakeboarder of at least 77% minimum averaged rating, which rating
shall be determined as provided in clause (B) above, the Members shall become
entitled to the Xxxxx Xxxxxx Escrow Shares and the Xxxxx Xxxxxx Employees shall
become entitled to the Xxxxx Xxxxxx Employee Allocation or the Xxxxx Xxxxxx
Payment, as set forth below. Upon the satisfaction of the conditions set forth
in this paragraph, Activision shall, in accordance with the terms of the
Warranty Escrow Agreement, promptly notify the Escrow Agent to release the Xxxxx
Xxxxxx Escrow Shares from the Escrow Account. The Xxxxx Xxxxxx Escrow Shares
released from the Escrow Account shall be distributed to the Members in
accordance with their respective percentage Membership Interest as set forth on
Exhibit A. Upon satisfaction of the conditions set forth in this paragraph,
Activision shall, at its option, either (i) make the Xxxxx Xxxxxx Payment to the
Xxxxx Xxxxxx Employees or (ii) issue and distribute to the Xxxxx Xxxxxx
Employees such number of shares of Activision Common Stock equal to the Xxxxx
Xxxxxx Employee Allocation. The Xxxxx Xxxxxx Payment or the Xxxxx Xxxxxx
Employee Allocation, as applicable, shall be distributed to the Xxxxx Xxxxxx
Employees in accordance with the joint written direction of the senior
production executives of the Surviving Corporation, which joint written
direction shall be subject to the approval of Activision Publishing, such
approval not to be unreasonably withheld.
(iii) In the event that all the conditions set forth in subsections (i) or
(ii), as applicable, are not satisfied with respect to the applicable Activision
Product, then the Applicable Product Escrow Shares shall be distributed as
follows:
(A) In the event there is a P&L Revenue Shortfall for such
Activision Product, the Members shall forfeit, and Activision shall be
entitled to obtain a release from the Escrow Account and to cancel,
the number of the Applicable Product Escrow Shares for such Activision
Product (the "Shortfall Shares") equal to (x) the P&L Revenue
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Shortfall divided by (y) the Offset Price. If the number of Shortfall Shares
exceeds the number of Applicable Product Escrow Shares for such Activision
Product, then (i) all of the Applicable Product Escrow Shares for such
Activision Product shall be released to Activision and cancelled and (ii)
Activision shall be under no obligation to distribute the Applicable Payments or
issue the Applicable Employee Allocations.
(B) In the event the number of Applicable Product Escrow Shares
for such Activision Product exceeds the number of Shortfall Shares calculated
pursuant to clause (A) above, then the Members shall be entitled to the number
of Applicable Product Escrow Shares for such Activision Product equal to the
Applicable Product Escrow Shares minus the Shortfall Shares for such Activision
Product (the "Remaining Applicable Product Escrow Shares"). The Remaining
Applicable Product Escrow Shares shall no longer be subject to the development
agreement holdback provisions of this Section 6.2(c), and shall be released from
the Escrow Account and distributed to the Members in accordance with the
irrespective percentage Membership Interest as set forth on Exhibit A. Not later
than thirty days (30) after the date of the distribution to the Members pursuant
to this clause (B), Activision shall distribute to the Xxx Xxxxxxx Employees or
the Xxxxx Xxxxxx Employees, as applicable, either cash or shares of Activision
Common Stock, at its option. In the event of a cash distribution, Activision
shall distribute such amount of cash equal to the product of (i) the Applicable
Payments and (ii) a fraction, the numerator of which is equal to the Remaining
Applicable Product Escrow Shares and the of which is equal to the Applicable
Product Escrow Shares. In the event of a distribution of Activision Common
Stock, Activision shall issue and distribute such number of shares of Activision
Common Stock equal to the product of (i) the Applicable Employee Allocation and
(ii) a fraction, the numerator of which is equal to the Remaining Applicable
Product Escrow Shares and the denominator of which is equal to the Applicable
Product Escrow Shares. Any such distributions shall be made in each case in
accordance with the joint written direction of the senior production executives
of the Surviving Corporation, which joint written direction shall be subject to
the approval of Activision Publishing, such approval not to be unreasonably
withheld.
(C) In the event there is no P&L Revenue Shortfall (as shall be
determined at the end of each quarter commencing with the month end following
the commercial release of such Activision Product), then the Members shall be
entitled to all of the Applicable Product Escrow Shares for such Activision
Product, and the Applicable Product Escrow Shares for such Activision Product
shall no longer be subject to the development agreement holdback provisions of
this Section 6.2(c) and shall be released from the Escrow Account and
distributed to the Members in accordance with their respective percentage
Membership Interest as set forth on Exhibit A. Not later than thirty days (30)
after the date of the distribution to the Members pursuant to this clause (C),
Activision shall distribute to the Xxx Xxxxxxx Employees or the Xxxxx Xxxxxx
Employees, as applicable, either cash or shares of Activision Common Stock, at
its option. In the event of a cash distribution, Activision shall make the
Applicable Payments. In the event of a distribution of Activision Common Stock,
Activision shall issue and distribute such number of shares of Activision Common
Stock equal to the Applicable Employee Allocation. Any such distribution shall
be made in each case in accordance with the joint written direction of the
senior production executives of the Surviving Corporation, which joint written
direction shall be subject to the approval of Activision Publishing, such
approval not to be unreasonably withheld.
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(iv) Activision shall have the right to obtain a release of any Applicable
Product Escrow Shares that are subject to the provisions of this Section 6.2(c)
by delivery in a timely manner of a Release Notice (as defined in the Warranty
Escrow Agreement) to the Members and the Escrow Agent in accordance with the
Warranty Escrow Agreement.
6.3. Registration of Activision Shares. (a) Activision agrees to use its
reasonable best efforts to file with the SEC, as soon as practicable after the
Closing Date but (subject to Section 6.3(c)) in no event later than thirty (30)
days after the Closing Date, a registration statement on Form S 3, or on such
other form as may be available, registering under the Securities Act, pursuant
to Rule 415 under the Securities Act ("Rule 415") (if available), the offer and
sale in the future of all of the Activision Shares issued by Activision to the
Members pursuant to this Agreement. In the event that Activision exercises its
option to issue to the Xxx Xxxxxxx Employees or the Xxxxx Xxxxxx Employees the
Applicable Allocation, Activision agrees to use its reasonable best efforts to
file with the SEC, as soon as practicable after the date of the issuance of the
Applicable Allocation but (subject to Section 6.3(b)) in no event later than
thirty (30) days after the date of such issuance, a registration statement on
Form S 3, or on such other form as may be available, registering under the
Securities Act, pursuant to Rule 415 (if available), the offer and sale in the
future of all of the Applicable Allocation issued by Activision to the Xxx
Xxxxxxx Employees or the Xxxxx Xxxxxx Employees, as applicable, pursuant to this
Agreement. Activision further agrees to (a) use its commercially reasonable
efforts to cause such registration statement to be declared effective by the SEC
as soon as practicable, (b) maintain the effectiveness of such registration or
successor registration statement filed by Activision for the purpose of
registering the shares of Activision Common Stock (such registration statements
being collectively referred to as the "Registration Statement") until Activision
Shares are eligible to be resold without restriction on disposition pursuant to
the Securities Act and its related rules and regulations, (c) update the
prospectus included in the Registration Statement (the "Prospectus") from time
to time as may be necessary to assure that the Prospectus does not make any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the Prospectus not misleading, and (d) provide such number of
copies of the Registration Statement and the Prospectus (as so updated) to the
Members as they may reasonably request in order to facilitate the public sale or
other disposition of Activision Shares covered by such Registration Statement.
(b) Employee Registration. In the event that Activision exercises its
option to issue to the Xxx Xxxxxxx Employees or the Xxxxx Xxxxxx Employees the
Applicable Allocation, Activision agrees to use its reasonable best efforts to
file with the SEC, as soon as practicable after the date of the issuance of the
Applicable Allocation but (subject to Section 6.3(c)) in no event later than
thirty (30) days after the date of such issuance, a registration statement on
Form S 3, or on such other form as may be available, registering under the
Securities Act, pursuant to Rule 415 (if available), the offer and sale in the
future of all of the Applicable Allocation issued by Activision to the Xxx
Xxxxxxx Employees or the Xxxxx Xxxxxx Employees, as applicable, pursuant to this
Agreement. Activision further agrees to (a) use its commercially reasonable
efforts to cause such registration statement to be declared effective by the SEC
as soon as practicable, (b) maintain the effectiveness of such registration or
successor registration statement filed by Activision for the purpose of
registering the shares of Activision Common Stock (such registration statements
being collectively referred to as the "Employee Registration Statement") until
the Applicable Allocation are eligible to be resold without
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restriction on disposition pursuant to the Securities Act and its related rules
and regulations, (c) update the prospectus included in the Employee Registration
Statement (the "Employee Prospectus") from time to time as may be necessary to
assure that the Employee Prospectus does not make any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
Prospectus not misleading, and (d) provide such number of copies of the Employee
Registration Statement and the Employee Prospectus (as so updated) to the Xxx
Xxxxxxx Employees or the Xxxxx Xxxxxx Employees, as applicable, as they may
reasonably request in order to facilitate the public sale or other disposition
of the Applicable Allocation covered by such Employee Registration Statement
(c) Delay of Registration. The Members hereby agree that the filing of the
Registration Statement or the Employee Registration Statement, if any, and its
effectiveness may be subject to delay, postponement or any lock-up or other
conditions as the representative of the managing underwriter pursuant to any
underwritten offering of Activision Common Stock.
(d) Costs and Expenses. Activision shall bear the costs incurred for its
legal counsel, accounting and all other costs and expenses in connection with
such registration including keeping the Registration Statement or the Employee
Registration Statement, if any, effective, which may be incurred in connection
with the preparation and filing of the Registration Statement pursuant to
Section 6.3(a) or the Employee Registration Statement, if any, pursuant to
Section 6.3(b). Activision shall have no responsibility for the payment of the
brokers' commissions of the Xxx Xxxxxxx Employees or the Xxxxx Xxxxxx Employees,
as applicable.
(e) Cooperation and Indemnification.
(i) The Members agree that they will provide all required cooperation
and furnish all necessary information and enter into such agreements
customarily required of selling stockholders in connection with the
preparation of the Registration Statement filed under the terms of this
Section 6.3, and the Members will represent and warrant the accuracy and
completeness of all written information regarding the Members which is
furnished by the Members for inclusion in the Registration Statement and
will indemnify and hold Activision, and its directors, officers,
shareholders, and underwriters harmless from and against any liability,
loss or damage (including costs and reasonable attorneys' fees), incurred
by or sustained by, or asserted against, any of them, arising out of or
based on any untrue statement (or alleged untrue statement) of a material
fact contained in the information provided by the Members or based on any
omission (or alleged omission) to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
(ii) Activision shall indemnify and hold the Members harmless from and
against any liability, loss or damage (including costs and reasonable attorneys'
fees) incurred by or sustained by, or asserted against, any of them, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in the Registration Statement, or based on any omission (or
alleged omission) to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, except to the extent
such untrue statement of material fact (or alleged untrue statement) or omission
(or alleged omission) related to information regarding the Members which is
furnished by the Members for inclusion in the Registration Statement.
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6.4. Further Assurances. Each party hereto shall, at the request of the
other party and at such other party's expense, execute and deliver any further
instruments or documents and take all such further action as such other party
may reasonably request in order to effectuate the consummation of the Merger.
If, at any time or from time to time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of this Agreement and
to vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of either of the
Constituent Corporations, the officers of the Surviving Corporation are fully
authorized in the name of each Constituent Corporation or otherwise to take, and
shall take, all such lawful and necessary action.
6.5. Confidentiality. Following the Closing, the Members shall keep
confidential all information concerning the business, operations, properties,
assets and financial affairs of Shaba and may disclose such information only
upon receipt of prior written consent from Activision, as required by law, or if
such disclosure is required (a) in connection with the Members' filing of any
state or federal income tax returns, or (b) by order of any judicial or
administrative authority; provided, however, the Members shall not be required
to keep confidential information that (x) is or becomes generally available to
the public other than as a result of disclosure by the Members, (y) is or
becomes available to the Members on a nonconfidential basis from a source other
than Activision or (z) the Members or any of their affiliates is required to
disclose pursuant to applicable law, rule, regulation or subpoena.
6.6. Publicity. Activision and the Members shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to this Agreement or any transaction contemplated herein and shall not
issue any such press release or make any such public statement without the prior
consent of the other party, which consent shall not be unreasonably withheld;
provided, however, that a party may, without the prior consent of the other
party, issue such press release or make such public statement as may be required
by law or the rules of the applicable stock exchange if it has used its
reasonable best efforts to consult with the other party and to obtain such
party's consent but has been unable to do so in a timely manner.
6.7. Member Approval. Each Member, by execution of this Agreement,
acknowledges and agrees that such Member has voted in favor of the approval and
adoption of this Agreement and the transactions contemplated hereby and the
approval of the Merger.
6.8. Employment Matters. Employees employed by Shaba immediately prior to
the Effective Time shall be employed by Activision Publishing immediately after
the Effective Time on such terms and conditions of employment as may be
determined by Activision Publishing in its sole discretion, provided that all
such employees shall be eligible to participate in the Activision Publishing
Internal Project Bonus Plan as modified by the terms of the bonus plan set forth
in Exhibit D hereto. Nothing herein is intended or shall be construed to provide
for a guarantee of employment or shall otherwise affect the "at will" employment
status of the employees of Activision Publishing after the Effective Time.
6.9. Articles and Bylaws of Merger Subsidiary. Activision and Merger
Subsidiary shall not, for a period of four (4) years after the Closing Date,
take any action to alter or impair any exculpatory or indemnification provisions
in the Certificate of Incorporation or Bylaws of
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the Merger Subsidiary that may benefit any individual who served as an officer
or manager of Shaba at any time, except for any changes that may be required to
conform with changes in applicable law.
6.10. Tax Returns and Shaba Information. The Tax Matters Member of Shaba
(as defined in the operating agreement of Shaba) shall cause to be prepared all
Shaba tax returns for all tax periods ending on or before the Closing Date,
including returns which are due after the Closing Date. The Tax Matters Member
shall have sole responsibility and authority to respond to any audit or other
inquiries from a governmental authority regarding tax matters in respect of the
period prior to the Closing Date. Neither Activision nor any of its subsidiaries
shall amend any tax return filed by Shaba unless required to file such amended
returns by law or government authority. Activision agrees to maintain and
preserve, for a period of five (5) years from the date of this Agreement, all
books, records, and other documents pertaining to the business of Shaba prior to
the Closing Date and make the same available for inspection or copying by the
Members at the expense of the Members during business hours and upon reasonable
prior written notice.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
7.1. Survival. (a) Except as otherwise set forth in this Section 7.1, the
representations and warranties made in this Agreement (other than the
representations and warranties set forth in Section 3.11) or in any agreement,
certificate or other document executed at or prior to the Effective Time in
connection herewith (each an "Ancillary Document," it being understood that the
term "Ancillary Document" shall not include any employment agreements or
proprietary information agreements entered into by the Members in connection
herewith) shall survive until eighteen (18) months after the date of this
Agreement (the "Survival Date"), after which time such representations and
warranties shall terminate and shall be of no further force and effect.
(b) The representations and warranties set forth in Section 3.11 of this
Agreement shall survive until three (3) years after the date of this Agreement
(the "Tax Survival Date"), after which time such representations and warranties
shall terminate and shall be of no further force and effect.
(c) No investigation by Activision or on Activision's behalf heretofore or
hereafter conducted shall affect the representations, warranties or covenants of
the Members set forth in this Agreement. No investigation by Shaba or the
Members or on their behalf heretofore or hereafter conducted shall affect the
representations, warranties or covenants of Activision, Activision Publishing,
or Merger Subsidiary set forth in this Agreement.
7.2. Indemnification by the Members; Limitation of Liability. To the
fullest extent permitted by law, the Members shall, severally and not jointly,
defend, indemnify and hold harmless Activision, Activision Publishing and Merger
Subsidiary, and all officers, directors and stockholders of Activision,
Activision Publishing and Merger Subsidiary, and their successors and permitted
assigns ("Activision Indemnified Parties"), from and against any and all claims,
losses, liabilities, taxes, interest, fines, penalties, suits, actions,
proceedings, demands, damages, costs and expenses (including reasonable
attorneys', accountants' and experts' fees and court costs) of every kind and
nature (collectively, "Losses") arising out of or resulting from any
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breach by Shaba or the Members of any representation, warranty, agreement or
covenant made by any of them in this Agreement or any Ancillary Document;
provided, however, that recovery by the Activision Indemnified Parties from the
Members in respect of all Losses shall be limited to an aggregate amount of
$9,500,000.
7.3. Indemnification Procedures. (a) Promptly after receipt by an
Activision Indemnified Party under this Section of notice of the commencement of
any action or the incurrence of any Loss, such Activision Indemnified Party
will, if a claim in respect of such action is to be made against any
indemnifying party under this Section, notify the indemnifying party in writing
of the commencement of such action. Such notice shall include the amount of such
claim and a reasonably detailed statement as to the basis for the assertion of
the claim. Upon receipt of such notice the indemnifying party or parties shall
have the right to assume and control the defense of such action with counsel of
its choice, subject to the approval of the Activision Indemnified Party, which
approval shall not be unreasonably withheld. The Members hereby agree that
Xxxxxx Xxxxxx and Xxxxxx Xxxxxx shall at all times be primarily responsible for
the assumption and control of any such defense on behalf of the Members;
provided, however, that the foregoing shall not create any individual liability
on the part of Xxxxxx Xxxxxx and Xxxxxx Xxxxxx for any such indemnification
claim nor make them responsible for advancing costs or legal fees in connection
with any such defense. The Activision Indemnified Parties shall have the right
to participate in the defense of any action and to be represented by counsel of
its or their own selection in connection with such action and to be kept fully
and completely informed by the indemnifying party and its counsel as to the
status of the action at all stages of the proceedings in such action, all at the
Activision Indemnified Party's cost and expense. The Activision Indemnified
Party shall cooperate with the indemnifying party in any defense which the
indemnifying party assumes. Activision shall be entitled to settle any action
solely for monetary damages with respect to which it controls the defense.
Xxxxxx Xxxxxx and Xxxxxx Xxxxxx, on behalf of the Members, shall be entitled to
settle any action solely for monetary damages with respect to which they control
the defense, subject to the prior consent of Activision which consent shall not
be unreasonably withheld. The failure to notify an indemnifying party promptly
of the commencement of any such action will not relieve him or her or it of any
liability that he, she, or it may have to any Activision Indemnified Party
except to the extent the indemnifying party has suffered actual prejudice
thereby.
(b) The Members' liability under Section 7.2 shall be several, not joint,
and shall be in proportion to their respective Membership Interest as set forth
in Exhibit A. Subject to the limitations in this Article VII, any claim for
indemnification shall be settled in the following manner:
(i) Activision shall deliver a Claim Notice (as defined the Warranty
Escrow Agreement) for the number of Warranty Escrow Shares equal to the
Losses divided by the Offset Price, provided, however, that the Members
shall have the right to satisfy any claim for indemnification with cash or
other property in lieu of Warranty Escrow Shares;
(ii) in the event the Members elect to satisfy such claim for
indemnification with cash or other property, the Members shall deliver such
cash or other property in an amount equal to the Losses;
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(iii) in the event the Members elect to satisfy such claim for
indemnification with Warranty Escrow Shares and the amount of the Losses
exceeds the amount represented by the Warranty Escrow Shares determined
pursuant to clause (i) above, the Members shall deliver cash or other
property in the amount equal to (A) the Losses minus (B) the amount
determined by multiplying the Offset Price by the number of Warranty Escrow
Shares determined pursuant to clause (i) above.
(c) No claim for indemnification will be valid unless a Claim Notice (as
defined the Warranty Escrow Agreement) shall have been delivered pursuant to the
Warranty Escrow Agreement on or prior to the Survival Date or the Tax Survival
Date, as applicable, after which date the obligation to indemnify shall
terminate with respect to any claim except those which were specifically
identified in a Claim Notice prior to such date.
7.4. Claims Resolution Procedure. The parties shall act in good faith as
expeditiously as possible to resolve any and all claims for indemnification. To
the extent any claims are not Finally Resolved (as defined in the Warranty
Escrow Agreement) on or before the Survival Date or the Tax Survival Date (the
"Claims Resolution Date"), then the claims shall be resolved in accordance with
the following arbitration procedure:
(a) Each of Activision, on the one hand, and the Members, on the other
hand, shall select and appoint an arbitrator within thirty (30) days after the
Claims Resolution Date to finally settle all unresolved claims. An arbitrator
shall be selected and appointed by notice from one party to the other. The two
arbitrators so selected shall select a third arbitrator and give written notice
to the parties hereto of such selection within ten (10) days after the Claims
Resolution Date. If the two arbitrators cannot agree on a third arbitrator
within such ten (10) day period, then each of them shall nominate one person to
serve as the third arbitrator and the third arbitrator shall be selected from
the two nominees by toss of coin. No arbitrator shall be an officer, director,
employee, affiliate or relative of, or have any prior business or personal
relationship with, either Activision, or any subsidiary thereof, any of their
respective officers and directors, Shaba or the Members.
(b) The arbitration shall be conducted jointly by the three arbitrators,
who shall review all submissions by the parties with respect to the claim and
make an award, by majority vote, within forty-five (45) days after the Claims
Resolution Date, which award, when signed by each of the arbitrators, shall be
final and binding on the parties. Unless otherwise determined by the arbitrators
by majority vote, (i) no hearings shall be held, and the decision shall be
rendered based on written submissions by the parties, and (ii) all written
submissions must be made by the parties within fourteen (14) business days after
the date on which the third arbitrator is appointed. Once the award is made, a
claim shall be Finally Resolved for purposes of the Warranty Escrow Agreement.
(c) If either party shall refuse or neglect to select and appoint an
arbitrator within five (5) days after the Claims Resolution Date in accordance
with Section 7.5(a), then the arbitrator so appointed by the first party, acting
alone as the sole arbitrator, shall proceed to arbitrate and resolve all claims,
and such arbitrator's award in writing signed by such arbitrator shall be final
and binding on the parties.
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(d) All expenses of the arbitration shall be initially shared equally by
Activision, on the one hand, and the Members, on the other, provided that the
arbitrator(s) shall award legal fees and expenses and the costs of arbitration
to the prevailing party or parties in the arbitration. The parties hereto agree
that they will cooperate in good faith to allow any arbitration hereunder to
occur promptly and be concluded as quickly as is reasonably possible.
(e) Judgment of any arbitration conducted hereunder may be entered on the
arbitrators' award in any court having jurisdiction, and each party hereby
consents to the jurisdiction of the California state courts sitting in Los
Angeles County for this purpose.
7.5. Actions by Members. Any action required or permitted to be taken by
the Members pursuant to this Article VII may be taken by the Members that held,
immediately prior to the Closing, not less than a majority of the Membership
Interests, and Activision shall be entitled to rely on a writing executed by
such Members.
ARTICLE VIII
MISCELLANEOUS
8.1. Assignment; Binding Effect; Benefit. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties; provided, however, that Activision may
assign its rights, interests or obligations hereunder to any affiliate provided
that Activision remains obligated hereunder and such assignment does not alter
the rights, interests or obligations of the Members hereunder. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns. No
assignment permitted under this Agreement shall relieve any such assignor of any
of his, her or its obligations under this Agreement and any assignee shall
assume in writing all of the undertakings of assignor under this Agreement.
Notwithstanding anything contained in this Agreement to the contrary, nothing in
this Agreement, expressed or implied, is intended to confer on any person other
than the parties hereto or their respective heirs, executors, administrators,
successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
8.2. Entire Agreement. This Agreement (including the Exhibits and Schedules
annexed hereto), and any documents delivered by the parties in connection
herewith constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior negotiations, agreements and
understandings, whether written or oral, among the parties with respect thereto,
including, without limitation, the Letter of Intent, dated February 15, 2002,
between Shaba and Activision. No addition to or modification of any provision of
this Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
8.3. Notices. Any notice required to be given hereunder shall be in writing
and shall be deemed delivered (i) upon delivery if sent by facsimile
transmission (confirmed by any of the methods that follow), (ii) upon delivery
if sent by overnight courier service (with proof of service) or hand delivery
and (iii) three days after mailing by certified or registered mail (return
receipt requested and first-class postage prepaid) and addressed as follows:
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If to Xxxxx Xxxxx Games, LLC
or the Members: 00 Xxxxxxx Xxx
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Garret and Xxxxxx Xxxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
With a copy to (which shall Donahue, Gallagher, Xxxxx & Xxxxx,LLP
not constitute notice): 000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx,Xxxxxxxxxx 00000
Tel.: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxx, Esq. and
Xxxx X. Xxxx, Esq.
If to Activision and Activision, Inc.
Merger Subsidiary:3100 Xxxxx Xxxx Xxxxxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxxx Xxxx, Esq.
Tel.: (000) 000-0000
Fax: (000) 000-0000
With a copy to (which shall Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx
ot constitute notice): & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Tel.: (000) 000-0000
Fax: (000) 000-0000
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date received.
8.4. Amendment. This Agreement may not be amended except by an instrument
in writing signed by or on behalf of each of the parties hereto.
8.5. Governing Law. This Agreement has been executed and delivered by the
parties in California, and shall be governed by and construed in accordance with
the laws of the State of California without regard to its rules of conflict of
laws. All parties consent to the exercise of personal jurisdiction over them in
California and agree that any lawsuit arising out of or relating to this
Agreement shall be brought exclusively in a court of competent subject matter
jurisdiction located within the County of Los Angeles, State of California.
8.6. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto. In
the event that any signature is delivered by facsimile transmission, such
signature shall
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create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.
8.7. Headings. All of the Section and Article headings in this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
8.8. Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
8.9. No Party Deemed Drafter. The parties agree that no one party shall be
deemed to be the drafter of this Agreement and that in the event this Agreement
is ever construed by a court of law or equity, such court shall not construe
this Agreement or any provision of this Agreement against any party as the
drafter of the Agreement.
8.10. Incorporation. The Schedules and Exhibits hereto and referred to
herein are hereby incorporated herein and made a part hereof for all purposes as
if fully set forth herein.
8.11. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
8.12. Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders.
8.13. Specific Performance. The parties hereto agree that any material
breach or attempted or threatened breach of the provisions of this Agreement
could result in irreparable injury to the parties for which no adequate remedy
at law would exist, and damages would be difficult to determine, and consent to
specific performance of the terms hereof without the posting of bond or any
security, without limiting the applicability of any other remedy at law or
equity.
8.14. Expenses. The parties agree that Activision shall bear all costs and
expenses incurred by it and Merger Subsidiary, and the Members shall bear all
costs and expenses incurred by them and Shaba, in connection with negotiating
and completing this Agreement and the transactions contemplated hereby,
including, without limiting the generality of the foregoing, attorneys' and
accountants' fees and expenses.
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8.15. Attorneys' Fees. In any litigation arising out of or related to this
Agreement, the party or parties that do not prevail shall pay the prevailing
party or parties' costs and expenses (including court costs and reasonable
attorneys' fees) incurred in such litigation.
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf as of the date first above written.
ACTIVISION, INC.
By:/s/ Xxxxxx X. Xxxx
----------------------------
Name: Xxxxxx X. Xxxx
Title: Senior VP and General Counsel
ACTIVISION PUBLISHING, INC.
By:/s/ Xxxxxx X. Xxxx
----------------------------
Name: Xxxxxx X. Xxxx
Title: Senior VP and General Counsel
SHABA ACQUISITION,INC.
By:/s/ Xxxxxx X. Xxxx
----------------------------
Name: Xxxxxx X. Xxxx
Title: Senior VP and General Counsel
SHABA GAMES, LLC
By:/s/ Xxxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxxx . Xxxxxx
Title: Manager
MEMBERS
/s/ Xxxxxxxxxxx Xxxxxx
______________________________
Xxxxxxxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxxxx
______________________________
Xxxxxxx Xxxxxxxx
/s/ Xxxxxxx X'Xxxxxxx
______________________________
Xxxxxxx X'Xxxxxxx
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/s/ Xxx Xxxxxxxx
______________________________
Xxx Xxxxxxxx
/s/ Xxxxx Xxxxxx
______________________________
Xxxxx Xxxxxx
/s/ Xxxxxx X. X'Xxxx
______________________________
Xxxxxx X. O'Xxxx
Xxxxxx Family Revocable Trust, under
Agreement dated as of July 27, 1987
By:/s/ Xxxxxx Xxxxxx
___________________________
Xxxxxx Xxxxxx, Trustee
By:/s/ Xxxxxx Xxxxxx
___________________________
Xxxxxx Xxxxxx, Trustee
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