AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG WYNDCREST DD HOLDINGS, INC. DD ACQUISITION SUBSIDIARY, INC. DIGITAL DOMAIN, INC. and CERTAIN PARTICIPATING STOCKHOLDERS Dated as of May 12, 2006
EXHIBIT
2.2
AMENDED
AND RESTATED
BY
AND AMONG
WYNDCREST
DD HOLDINGS, INC.
DD
ACQUISITION SUBSIDIARY, INC.
DIGITAL
DOMAIN, INC.
and
CERTAIN
PARTICIPATING STOCKHOLDERS
Dated
as of May 12, 2006
|
Table
of Contents
Page
ARTICLE
I : THE MERGER
|
1
|
1.1.
Effective Time of the Merger
|
1
|
1.2.
Closing
|
2
|
1.3.
Effects of the Merger
|
2
|
1.4.
Conversion of Company Stock and Sub Stock
|
2
|
1.5.
Merger Consideration
|
3
|
1.6.
Closing Deliveries
|
3
|
1.7.
No
Further Ownership Rights in Company Securities
|
5
|
ARTICLE
II : REPRESENTATIONS AND WARRANTIES OF COMPANY
|
5
|
2.1.
Organization and Qualification
|
5
|
2.2.
Certificate of Incorporation and Bylaws
|
5
|
2.3.
Capital Structure; Approval of Merger; Notice to
Stockholders
|
6
|
2.4.
No
Conflict; Required Filings and Consents
|
7
|
ARTICLE
II-A: REPRESENTATIONS AND WARRANTIES OF PARTICIPATING
STOCKHOLDERS
|
8
|
2A.1
Authority; No Conflict; Enforceability; Ownership
|
8
|
ARTICLE
III : REPRESENTATIONS OF PARENT AND SUB
|
8
|
3.1.
Organization and Qualification
|
8
|
3.2.
Authority
|
8
|
3.3.
No
Conflict; Required Filings and Consents
|
9
|
ARTICLE
IV : INTENTIONALLY OMITTED
|
9
|
ARTICLE
V : INTENTIONALLY OMITTED
|
9
|
ARTICLE
VI : ADDITIONAL AGREEMENTS
|
9
|
6.1.
Intentionally Omitted
|
9
|
6.2.
Intentionally Omitted
|
9
|
6.3.
Expenses
|
9
|
6.4.
Additional Agreements
|
9
|
6.5.
Public Announcements; Confidentiality
|
10
|
6.6.
Preparation and Filing of Tax Returns and Payment of Taxes
|
10
|
6.7.
Intentionally Omitted
|
11
|
6.8.
Non-Solicitation
|
11
|
6.9.
Technology Agreement Termination
|
11
|
6.10.
Termination of Agreements among Shareholders
|
12
|
ARTICLE
VII : INDEMNIFICATION
|
12
|
7.1.
Parent and Surviving Corporation Claims
|
12
|
7.2.
Participating Stockholder Claims
|
13
|
7.3.
Third Party Claims
|
13
|
7.4.
No
Waiver
|
14
|
7.5.
Binding Effect
|
14
|
7.6.
Remedies
|
15
|
7.7.
Basket and Cap
|
15
|
7.8.
No
Contribution
|
15
|
7.9.
Actions by Participating Stockholders; Stockholder
Committee
|
15
|
7.10.
Equitable Remedies
|
16
|
ARTICLE
VIII : INTENTIONALLY OMITTED
|
16
|
ARTICLE
IX : CERTAIN DEFINED TERMS.
|
16
|
ARTICLE
X : MISCELLANEOUS
|
18
|
10.1.
Entire Agreement
|
18
|
10.2.
Governing Law
|
18
|
10.3.
Notices
|
18
|
10.4.
Severability
|
23
|
10.5.
Assignment
|
23
|
10.6.
Counterparts
|
23
|
10.7.
Amendment
|
23
|
10.8.
Extension, Waiver
|
23
|
10.9.
Construction
|
24
|
10.10.
Jurisdiction and Venue; Waiver of Jury Trial
|
24
|
10.11.
Prevailing Party Attorneys’ Fees
|
25
|
ii
10.12.
Tax Treatment of Transactions
|
25
|
10.13.
General Release
|
25
|
10.14.
Acknowledgement Regarding Original Agreement
|
26
|
10.15.
Survival
|
26
|
iii
List
of Exhibits
Exhibit
A-1
|
Delaware
Certificate of Merger
|
Exhibit
A-2
|
Amended
Certificate of Incorporation of Company
|
Exhibit
A-3
|
Amended
Bylaws of Company
|
Exhibit
B
|
Form
of Note
|
Exhibit
C
|
Form
of Pledge Agreement
|
Exhibit
D
|
Form
of Guaranty
|
Exhibit
E
|
FIRPTA
Certificate
|
Exhibit
F
|
Participating
Stockholder Consent
|
Exhibit
G
|
Letter
of Transmittal
|
iv
Index
of Defined Terms
Page
(a)
|
Affiliate
|
16
|
(b)
|
Agreement
|
1
|
(c)
|
Assets
|
16
|
(d)
|
Board
|
7
|
(e)
|
Closing
|
2
|
(f)
|
Closing
Date
|
2
|
(g)
|
Common
Stock
|
2
|
(h)
|
Company
|
1
|
(i)
|
Company
Material Adverse Effect
|
16
|
(j)
|
Company
Options
|
6
|
(k)
|
Company
Securities
|
2
|
(l)
|
Company
Stock
|
2
|
(m)
|
Company
Subsidiary
|
5
|
(n)
|
Contract
|
17
|
(o)
|
Control
|
17
|
(p)
|
Covenant
Expiration Date
|
17
|
(q)
|
Delaware
Certificate of Merger
|
2
|
(r)
|
DGCL
|
1
|
(s)
|
Effective
Time
|
2
|
(t)
|
Excepted
Claims
|
14
|
(u)
|
Founders’
Shareholder Agreement
|
6
|
(v)
|
Governmental
Entities
|
7
|
(w)
|
Guaranteed
Amount
|
3
|
(x)
|
Guaranties
|
3
|
(y)
|
Guaranty
|
3
|
(z)
|
know
|
17
|
(aa)
|
knowledge
|
17
|
(bb)
|
known
|
17
|
(cc)
|
Law
|
7
|
(dd)
|
Lien
|
17
|
(ee)
|
LOI
|
10
|
(ff)
|
Loss
|
12
|
(gg)
|
Merger
|
1
|
(hh)
|
Merger
Consideration
|
3
|
(ii)
|
Note
|
3
|
(jj)
|
Notes
|
3
|
(kk)
|
Original
Agreement
|
1
|
(ll)
|
Parent
|
1
|
(mm)
|
Participating
Stockholder
|
17
|
(nn)
|
Percentage
Share
|
3
|
(oo)
|
Person
|
17
|
(pp)
|
Pledge
Agreement
|
3
|
(qq)
|
Pledge
Agreements
|
3
|
(rr)
|
Post-Closing
Patent
|
12
|
(ss)
|
Pre-Closing
Patents
|
11
|
(tt)
|
Preferred
Stock
|
2
|
(uu)
|
Releasees
|
25
|
(vv)
|
Releasing
Parties
|
25
|
(ww)
|
Shareholder
Agreements
|
6
|
(xx)
|
Shareholders’
Agreement
|
6
|
(yy)
|
Stock
Plan
|
6
|
(zz)
|
Stockholder
Committee
|
17
|
(aaa)
|
Stockholder
Consents
|
4
|
(bbb)
|
Sub
|
1
|
(ccc)
|
Subsidiaries
|
18
|
(ddd)
|
Subsidiary
|
18
|
(eee)
|
Surviving
Corporation
|
2
|
(fff)
|
Surviving
Obligations
|
15
|
(ggg)
|
Technology
Agreement
|
11
|
(hhh)
|
Third
Party Claim
|
13
|
(iii)
|
Transfer
Taxes
|
10
|
v
AMENDED
AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
THIS
AMENDED AND RESTATED AGREEMENT
AND PLAN OF REORGANIZATION, dated as of May
12,
2006 (this “Agreement”),
is made by and among WYNDCREST DD HOLDINGS, INC., a Delaware corporation
(“Parent”),
DD ACQUISITION SUBSIDIARY, INC., a wholly owned subsidiary of Parent and
a
Delaware corporation (“Sub”),
DIGITAL DOMAIN, INC., a Delaware corporation (“Company”),
and, as to certain specified Sections and Articles of this Agreement only,
the
Participating Stockholders. Certain capitalized terms used herein are defined
in
Article IX. An index of the terms defined herein can be found commencing
on page
v of this Agreement.
RECITALS
A. Reference
is hereby made to that certain Agreement and Plan of Reorganization dated
as of
February 21, 2006, by and among the Company, an Affiliate of Parent, Sub
and the
Participating Stockholders, which agreement expired in accordance with
its terms
on March 31, 2006 (the “Original
Agreement”).
B. The
Board
of Directors of each of the Company, Parent and Sub has approved the merger
(the
“Merger”)
of the
Sub with and into the Company in accordance with the terms and conditions
of
this Agreement and determined that the Merger is advisable and in the best
interests of its stockholders, and has approved, adopted and declared advisable
this Agreement and the transactions contemplated hereby.
C. The
Company, Parent and Sub desire to make certain representations, warranties,
covenants and agreements in connection with, and establish various conditions
precedent to, the Merger.
INTENDING
TO BE LEGALLY BOUND THEREBY,
and in consideration of the premises and the mutual representations, warranties,
covenants and agreements contained herein, Parent, Sub and the Company,
and the
Participating Stockholders as to the Sections and Articles of this Agreement
specified above their signatures hereto, hereby agree as follows:
ARTICLE
I :
THE
MERGER
1.1.
Effective
Time of the Merger.
Upon
the terms and subject to the conditions set forth in this Agreement, at
the
Effective Time (as defined infra)
Sub
shall be merged with and into the Company and the separate corporate existence
of Sub shall thereupon cease. The Company shall be the surviving corporation
in
the Merger, and the separate corporate existence of the Company with all
its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger. The Merger shall have the effects specified in the Delaware
General Corporation Law, as amended (the “DGCL”).
As
soon as practicable following the Closing (as defined infra),
the
Company and Parent will cause a Certificate of Merger in the form of
Exhibit A-1
attached
hereto (the “Delaware
Certificate of Merger”)
to be
executed, acknowledged and filed with the Secretary of State of the State
of
Delaware as provided in Section 251 of the DGCL. The Merger shall become
effective on the Closing Date (as defined infra)
at the
time when the Delaware Certificate of Merger has been duly filed with the
Secretary of State of the State of Delaware (the “Effective
Time”).
1
1.2.
Closing.
The
closing of the Merger (the “Closing”)
will
take place at 10:00 a.m., Los Angeles time, on May 8, 2006 (the
“Closing
Date”)
at the
offices of Xxxxx Xxxx LLP, 000 Xxxxxxxx, 0xx
Xxxxx,
Xxxxx Xxxxxx, Xxxxxxxxxx 00000, unless another time, date, or place is
agreed to
in writing by the parties.
1.3.
Effects
of the Merger.
At the
Effective Time, (i) Sub will be merged with and into the Company (the
Company after the Merger is sometimes referred to herein as the “Surviving
Corporation”),
(ii) the Certificate of Incorporation of the Company shall be amended in
its entirety to read as set forth in Exhibit
A-2
attached
hereto, (iii) the Bylaws of the Company shall be amended in their entirety
to read as set forth in Exhibit
A-3
attached
hereto, (iv) the directors of Sub will become the directors of the
Surviving Corporation, (v) the officers of Sub will become the officers of
the Surviving Corporation, and (vi) the outstanding certificates for the
issued and outstanding shares of capital stock of Sub shall thenceforth
represent that number of shares of Common Stock of the Surviving Corporation
determined pursuant to Section 1.4; and from and after the Effective Time,
the
Merger will have all the effects provided for by applicable law.
1.4.
Conversion
of Company Stock and Sub Stock.
As of
the Effective Time, each of the issued and outstanding shares of the Company’s
Series A Convertible Preferred Stock, par value $0.01 per share, Series
B
Convertible Preferred Stock, par value $0.01 per share, and Series C Convertible
Preferred Stock, par value $0.01 per share (collectively, the “Preferred
Stock”),
by
virtue of the Merger, without any action on the part of the holder thereof,
will
be converted into the right to receive the Merger Consideration (as defined
infra)
with
respect thereto as set forth in Section 1.5. The Preferred Stock and the
Common
Stock (as defined infra)
are
sometimes referred to together as “Company
Stock,”
and
the
issued and outstanding shares thereof, together with any unexercised options
to
purchase Common Stock, as “Company
Securities.”
At
the Effective Time, each of the issued
and
outstanding shares of the Company’s Common Stock, par value $0.01 per share
(“Common
Stock”),
shall be cancelled without any action on the part of the holder thereof,
and
without any payment by the Company to the holder thereof in respect thereof
being required. A
table
indicating the amount of Merger Consideration allocable to each holder
of
Company Stock is set forth on Schedule
1.4(a).
The
Stock Plan (as defined infra)
shall
not be terminated as a result of the Merger, and the Company Options (as
defined
infra)
outstanding immediately prior to the Effective Time shall continue to be
outstanding from and after the Effective Time in accordance with the provisions
of the Stock Plan and the respective terms of any option agreements entered
into
between the Company and the holders of such options prior to the Effective
Time.
As of the Effective Time, each of the issued and outstanding shares of
Sub’s
Common Stock, par value $.0001 per share, by virtue of the Merger, without
any
action on the part of the holder thereof, will be converted into one share
of
Common Stock of the Surviving Corporation.
2
1.5.
Merger
Consideration.
The
“Merger
Consideration”
consists of (i) cash in the aggregate amount of $4,500,000 payable at Closing
and (ii) an aggregate amount of $30,000,000 in original principal amount
of
promissory notes, issued by Sub in favor of the Participating Stockholders,
in
the form of Exhibit
B
attached
hereto (individually, a “Note”
and,
collectively, the “Notes”).
The
Notes shall have a maturity date of December 31, 2006, shall accrue interest
at
a rate of 10% per annum, and shall be secured by the collateral described
in the
Pledge Agreements executed by Parent in favor of the Participating Stockholders
in the form attached hereto as Exhibit
C
(individually, a “Pledge
Agreement”
and,
collectively, the “Pledge
Agreements”),
and
the payment obligations thereunder shall be guaranteed in the aggregate
amount
of $9,000,000 (the “Guaranteed
Amount”)
by
Xxxx X. Xxxxxx, pursuant to Guaranties in the form of Exhibit
D
attached
hereto (individually, a “Guaranty”
and,
collectively, the “Guaranties”).
Each
Participating Stockholder will be entitled to receive that percentage of
the
aggregate Merger Consideration as is set forth across from his or its name
on
Schedule
1.5
(each, a
“Percentage
Share”).
At
Closing, Parent shall transfer the cash portion of the Merger Consideration
to
the Participating Stockholders in accordance with their respective Percentage
Shares, Sub shall issue and deliver the Notes to the Participating Stockholders,
with the aggregate principal amount of such Notes to be allocated among
the
Participating Stockholders in accordance with their respective Percentage
Shares, Parent shall execute and deliver to each of the Participating
Stockholders the applicable Pledge Agreement, together with the stock
certificates evidencing all of the shares of the capital stock of the Surviving
Corporation constituting the collateral thereunder, with such shares to
be
allocated among the Participating Stockholders in accordance with their
respective Percentage Shares, and Xxxx X. Xxxxxx shall issue and deliver
the
Guaranties to the Participating Stockholders, with the Guaranteed Amount
to be
allocated among the Participating Stockholders in accordance with their
respective Percentage Shares. It is hereby acknowledged and agreed by the
Company that, upon and after the Effective Time, the Notes will ipso jure
become
obligations of the Company, as the Surviving Corporation in the
Merger.
1.6.
Closing
Deliveries.
(a)
Deliveries
by the Company.
At the
Closing, the Company will deliver to Parent each of the following:
(i) Opinions
of Counsel.
An
opinion dated as of the Closing Date of Milbank, Tweed, Xxxxxx & XxXxxx LLP,
counsel to the Company, and of Potter Xxxxxxxx & Xxxxxxx LLP, Delaware law
counsel to the Company, in each case, in form and substance satisfactory
to
Parent and its counsel;
(ii) FIRPTA
Certificate.
An
affidavit executed by the Company in the form of Exhibit
E
attached
hereto; and
3
(iii) Landlord
Consent.
A
written consent from the lessors under each of the Company’s real property
leases, in form and substance satisfactory to Parent and its
counsel.
(b)
Stockholder
Consents.
At the
Closing, each of the Participating Stockholders will deliver to Parent
his or
its executed written consent to the Merger and the transactions contemplated
by
this Agreement in the form attached hereto as Exhibit F
(collectively, the “Stockholder
Consents”).
(c)
Letter
of Transmittal; Merger Consideration.
At the
Closing, each Participating Stockholder will deliver to Parent a letter
of
transmittal in the form of Exhibit G
attached
hereto and instructions for its use in effecting the surrender of the Preferred
Stock held by him or it against payment therefor pursuant to the terms
of this
Article I. Upon surrender of the appropriate documents in respect of a
Participating Stockholder’s Preferred Stock to Parent, together with such letter
of transmittal duly executed, such Participating Stockholder will be entitled
to
receive on the Closing Date in exchange therefor such holder’s respective
Percentage Share of the Merger Consideration, the cash amount of which
will be
paid by Parent to each Participating Stockholder by wire transfer, and
the
surrendered securities will be canceled. No interest will be paid or accrued
on
the cash payable upon the surrender of such securities.
If
the
delivery of the Merger Consideration is to be made to an individual, a
partnership, a joint venture, a limited liability company, a corporation,
a
trust, an unincorporated organization or any other person other than the
Participating Stockholder in whose name Preferred Stock is registered on
the
stock records of the Company, it will be a condition of such delivery that
(i) the documentation representing such Preferred Stock so surrendered will
be properly endorsed or otherwise in proper form for transfer and (ii) the
Participating Stockholder requesting such delivery will pay any transfer
or
other taxes required by reason of the delivery to a person other than the
registered holder of the Preferred Stock surrendered or establish to the
satisfaction of Parent that such tax has been paid or is not applicable.
Until
surrendered in accordance with the provisions of this Section 1.6(c), each
issued and outstanding share of Preferred Stock will, from and after the
Effective Time, represent only the right to receive the Merger Consideration
provided for by this Article I with respect thereto, without any interest
on the
cash portion thereof.
(d)
Deliveries
by Parent.
At the
Closing, Parent will deliver, or, as applicable, cause Sub or Xxxx X. Xxxxxx
to
deliver, to each Participating Stockholder each of the following: (i) such
Participating Stockholder’s respective Percentage Share of the cash portion of
the Merger Consideration, by wire transfer in immediately available U.S.
currency funds, (ii) such Participating Stockholder’s Note, as executed by Sub,
(iii) such Participating Stockholder’s Guaranty, as executed by Xxxx X. Xxxxxx,
(iv) such Participating Stockholder’s Pledge Agreement, as executed by Parent
and (v) an opinion dated as of the Closing Date of Xxxxx Xxxx LLP, counsel
to
Parent, Sub and Xxxx X. Xxxxxx, with respect to the due execution, delivery
and
enforceability of the Note, the Pledge Agreement and the Guaranty executed
in
favor of such Participating Stockholder, in form and substance satisfactory
to
such Participating Stockholder and his or its counsel.
4
1.7.
No
Further Ownership Rights in Company Securities.
The
Merger Consideration to be delivered to the Participating Stockholders
at the
Closing as described herein will be deemed to have been delivered in full
satisfaction of all rights pertaining to the Company Securities respectively
accruing to the Participating Stockholders. From and after the Closing
Date,
there will be no transfers on the stock transfer books of the Company,
and as of
the Effective Time all shares of the Company Stock will be cancelled.
Specifically, upon consummation of the Merger, certificates that immediately
prior to the Effective Time represented outstanding Company Stock shall
cease to
represent any rights with respect thereto and, subject to applicable Law
(as
defined infra)
and
this Agreement, such certificates shall only represent the right to receive
the
Merger Consideration relating thereto, if any.
ARTICLE
II :
REPRESENTATIONS AND WARRANTIES OF COMPANY
The
Company hereby represents and warrants to Parent and Sub as follows as
of the
date of this Agreement:
2.1.
Organization
and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each Subsidiary of the Company
listed
on Schedule
2.1
is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation. Except as set forth in Schedule
2.1,
the
Company and each such Subsidiary (each, a “Company
Subsidiary”)
has
all requisite corporate power and authority to own, lease and operate its
Assets
and to carry on its business as it is now being conducted, and is duly
qualified
and in good standing to do business in each jurisdiction in which the nature
or
level of the business conducted by it, or the ownership, leasing or use
of its
Assets, makes such qualification necessary. Except as set forth in Schedule
2.1,
the
Company has no Subsidiaries, does not, directly or indirectly, own or control
any investment or interest (whether in the form of debt or equity) in any
other
person, and owns all of the issued and outstanding capital stock of or
other
equity interests in each Company Subsidiary.
2.2.
Certificate
of Incorporation and Bylaws.
The
Company has provided to Parent complete and correct copies of (i) the Company’s
Certificate of Incorporation and Bylaws, and the equivalent organizational
documents for each Company Subsidiary, in each case as amended or restated,
as
in effect as of the Closing Date, (ii) the minute books relating to all
meetings
of stockholders, board of directors and committees of the Company and each
Company Subsidiary, (iii) all stock transfer books of the Company and each
Company Subsidiary, and (iv) a list of the current officers and directors
of the
Company and each Company Subsidiary. The Company has made available to
Parent
complete and correct copies of all stock certificate books of the Company
and
each Company Subsidiary. Neither the Company nor any Company Subsidiary
is in
violation of any of the provisions of its Certificate of Incorporation
or Bylaws
(or equivalent organizational documents), in each case as amended or restated.
In addition, such minute books (containing the record of meetings of the
stockholders, the board of directors and any committees of the board of
directors), stock certificate books and stock transfer books of the Company
and
each Company Subsidiary accurately reflect the actions and matters required
to
be contained therein.
5
2.3.
Capital
Structure; Approval of Merger; Notice to Stockholders.
(a)
The
authorized capital stock of the Company consists of (i) 200,000,000 shares
of
Common Stock, of
which
2,304,350 shares are issued and outstanding, and (ii) 150,000,000 shares
of
Preferred Stock, of which 33,333,334 have been designated as Series A
Convertible Preferred Stock, of which 33,333,334 are issued and outstanding,
33,333,334 of which have been designated as Series B Convertible Preferred
Stock, of which 33,333,334 are issued and outstanding, and 33,333,334 of
which
have been designated as Series C Convertible Preferred Stock, of which
33,333,334 are issued and outstanding. As of the date hereof, 11,839,580
shares
of Common Stock are reserved for issuance upon the exercise of employee
stock
options under the Company’s 1995 Stock Option Plan (the “Stock
Plan”),
and
options for a total of 6,535,500 shares of Common Stock have been granted
and
remain outstanding under the Stock Plan (the “Company
Options”).
As to
the holder of any Company Option(s), Schedule
2.3(a)
sets
forth: (i) the name of the holder; (ii) the number of shares of Common
Stock
covered by such Company Option(s); (iii) the exercise price(s) applicable
to
such Company Option(s); (iv) the date(s) of grant applicable thereto; and
(v)
the number of Company Options vested, if any, applicable thereto. Other
than the
Company Options, there are no other outstanding options, warrants, rights
or
other securities convertible into or exercisable for any equity securities
of
the Company or any Company Subsidiary issued or, to the knowledge of the
Company, outstanding, and no Company Securities are held by the Company
in its
treasury. Other than the Company Securities, there are no outstanding securities
issued by the Company. True and complete copies of the Stock Plan, the
Shareholders’ Agreement dated as of February 20, 1996, as amended (the
“Shareholders’
Agreement”),
the
Founders’ Shareholder Agreement dated as of February 20, 1996 (the
“Founders’
Shareholder Agreement”),
and
the Registration Rights Agreement dated as of February 20, 1996 (together
with the Shareholders’ Agreement and the Founders’ Shareholder Agreement, the
“Shareholder
Agreements”),
in
each case as amended or restated, and all other agreements and instruments
setting forth the rights of all Company Securities, have been delivered
to
Parent or its counsel.
(b)
All
of
the issued and outstanding shares of the Company Stock are duly authorized,
validly issued, fully paid and non-assessable and not subject to preemptive
rights created by statute, the Company’s Certificate of Incorporation or Bylaws
or any agreement to which the Company is a party or bound, other than the
Shareholders’ Agreement. There are no bonds, debentures, notes or other
indebtedness, issued or outstanding which (i) have the right to vote (or
are
convertible or exercisable into securities having the right to vote) with
holders of Common Stock or Preferred Stock on any matter, or (ii) are or
will
become entitled to receive any payment as a result of the execution of
this
Agreement or the completion of the transactions contemplated hereby. Except
as
disclosed in Schedule
2.3(b),
there
are no options, warrants, calls or other rights (including subscription
rights
or registration rights), agreements, proxies, voting rights agreements,
voting
trusts, arrangements or commitments of any character, presently outstanding,
which (i) obligate the Company or any Company Subsidiary to issue, deliver
or
sell shares of its capital stock or debt securities, (ii) obligate the
Company
or any Company Subsidiary to grant, extend or enter into any such option,
warrant, call or other such right, agreement, proxy, voting trust, arrangement
or commitment, (iii) obligate the Company to repurchase, redeem or otherwise
acquire any shares of Company Stock, or (iv) to the knowledge of the Company,
relate to the issued capital stock of, or other outstanding equity interests
in,
the Company.
6
(c)
The
Company has all requisite corporate power and authority to execute and
deliver
this Agreement and, assuming due authorization by the Company’s stockholders, to
perform its obligations hereunder and to consummate the Merger. The Company’s
Board of Directors (the “Board”)
has
unanimously determined that this Agreement and the transactions contemplated
hereby are advisable and in the best interests of the stockholders of the
Company and has unanimously recommended that the stockholders of the Company
approve this Agreement and adopt the Merger. The action taken by the Board
constitutes approval of the Merger and the other transactions contemplated
hereby by the Board for purposes of Section 203 of the DGCL, such that the
restrictions of Section 203 of the DGCL do not apply to this Agreement or
the transactions contemplated by this Agreement. The execution and delivery
of
the Stockholder Consents, as delivered to Parent at Closing, constitute
approval
of this Agreement and the Merger by the stockholders of the Company in
accordance with the applicable provisions of the DGCL and the Company’s
Certificate of Incorporation and Bylaws. No other corporate proceeding
or
approval is required on the part of the Company to consummate the Merger.
This
Agreement has been duly executed and delivered by the Company and, assuming
the
due authorization, execution and delivery thereof by the other parties
hereto,
constitutes the legal, valid and binding obligation of the Company enforceable
in accordance with its terms.
2.4.
No
Conflict; Required Filings and Consents.
(a)
The
execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement by the Company will not, (i) conflict with
or
violate the Company’s Certificate of Incorporation or Bylaws, in each case as
amended or restated, or (ii) except as would not reasonably be expected
to have
a Company Material Adverse Effect, conflict with or violate any federal,
state,
foreign or local law, statute, ordinance, rule, regulation, order, guidance,
policy, judgment or decree (collectively, “Law”)
that
is applicable to the Company or by which any of its properties is bound
or to
which any of its properties is subject. None of the restrictions in any
“business combination,” “fair price,” “moratorium,” “control share acquisition”
or other similar anti-takeover statute or regulation under the Law of the
State
of Delaware or the State of California or other applicable Law is applicable
to
the Merger or any of the other transactions contemplated by this Agreement.
7
(b)
The
execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement by the Company will not, require the Company
to
obtain any consent, approval, authorization or permit of, or to make any
filing
with or notification to, any governmental, regulatory or quasi-governmental
authority, domestic or foreign (collectively, “Governmental
Entities”),
based
on applicable Law and/or other requirements of Governmental Entities, except
for
the filing of the Delaware Certificate of Merger with the Delaware Secretary
of
State.
ARTICLE
II-A: REPRESENTATIONS AND WARRANTIES OF PARTICIPATING
STOCKHOLDERS
2A.1 Authority;
No Conflict; Enforceability; Ownership.
Each
Participating Stockholder hereby represents and warrants, severally with
respect
to himself or itself only, to Parent and Sub as follows as of the date
of this
Agreement: (a) such Participating Stockholder has the legal capacity, power
and
authority to execute and deliver this Agreement and to perform his or its
obligations hereunder; (b) the execution of this Agreement by such Participating
Stockholder does not, and the performance by such Participating Stockholder
of
the obligations contemplated by this Agreement shall not, conflict with,
or
result in any violation of, any of its charter documents, if applicable,
and/or
any Law applicable to such Participating Stockholder; (c) assuming the
due
authorization, execution and delivery of the Agreement by the other parties
hereto, this Agreement constitutes the legal, valid and binding obligation
of
such Participating Stockholder in accordance with its terms; and (d) all
of the
Company’s issued and outstanding shares of Preferred Stock referenced in the
Letter of Transmittal delivered by such Participating Stockholder to Parent
at
the Closing are owned by him or it, and his or its entire holdings thereof
are
accurately set forth on said Letter of Transmittal.
ARTICLE
III :
REPRESENTATIONS OF PARENT AND SUB
The
Parent and Sub hereby represent and warrant, jointly and severally, to
the
Company and the Participating Stockholders as follows as of the date of
this
Agreement:
3.1.
Organization
and Qualification.
Parent
is a corporation and is duly organized, validly existing and in good standing
under the laws of the State of Delaware. Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Each of Parent and Sub has all requisite power and authority to own, lease
and
operate its Assets and to carry on its business as it is now being conducted,
and each is duly qualified and in good standing to do business in each
jurisdiction in which the nature or level of the business conducted by
it or the
ownership or leasing or its activities regarding its Assets or business
makes
such qualification necessary.
3.2.
Authority.
Parent
and Sub each have all requisite corporate power and authority to execute
and
deliver this Agreement, to perform its respective obligations hereunder
and to
consummate the transactions contemplated hereby. The execution and delivery
of
this Agreement and the consummation of the transactions contemplated hereby
have
been duly authorized by all necessary corporate action of Parent and Sub,
and no
other corporate proceeding on the part of either Parent or Sub is necessary
to
authorize this Agreement or to consummate the transactions contemplated
hereby.
This Agreement has been duly executed and delivered by Parent and Sub,
respectively, and, assuming the due authorization, execution and delivery
thereof by the Company and the other parties hereto, constitutes the legal,
valid and binding obligations of Parent and Sub, respectively, enforceable
in
accordance with its terms.
8
3.3.
No
Conflict; Required Filings and Consents.
(a)
The
execution and delivery of this Agreement by Parent and Sub do not, and
the
performance of this Agreement by them will not, (i) conflict with or violate
the
Certificate of Incorporation or Bylaws of Parent or Sub, (ii) conflict
with or
violate any Law applicable to Parent or Sub or by which any of their respective
Assets is bound, or (iii) result in any breach of, or constitute a default
(or
an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration
or
cancellation of, or require payment under, or result in the creation of
a Lien
on, any of the Assets of Parent or Sub pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or Sub is a party or by which
Parent or
Sub or any of their respective Assets is bound.
(b)
The
execution and delivery of this Agreement by Parent or Sub do not, and the
performance of this Agreement by Parent or Sub will not, require it to
obtain
any consent, approval, authorization or permit of, or to make any filing
with or
notification to, any Governmental Entities, except for the filing of the
Delaware Certificate of Merger with the Delaware Secretary of State.
ARTICLE
IV :
INTENTIONALLY OMITTED
ARTICLE
V :
INTENTIONALLY OMITTED
ARTICLE
VI :
ADDITIONAL AGREEMENTS
6.1.
Intentionally
Omitted.
6.2.
Intentionally
Omitted.
6.3.
Expenses.
Except
as expressly provided herein, each of the parties will bear all costs and
expenses, including, without limitation, fees and disbursements of attorneys,
accountants, consultants, and any other representative or agent retained
by such
party, incurred by such party in connection with this Agreement and the
transactions contemplated hereby.
6.4.
Additional
Agreements.
In case
at any time after the Effective Time any further action is reasonably necessary
or desirable to carry out the purposes of this Agreement or to vest the
Surviving Corporation with full title to all properties, Assets, rights,
approvals, immunities and franchises of the Company, the proper officers
and
directors (or similar officials) of each entity which is a party to this
Agreement and each individual who is a party to this Agreement will take
all
such reasonably necessary or desirable action.
9
6.5.
Public
Announcements; Confidentiality.
Neither
Parent, the Company nor either of the foregoing party’s representatives or
agents, will disseminate any press release or other announcement concerning
this
Agreement or the transactions contemplated hereby to any third party (except
to
the directors, officers and employees of the parties to this Agreement
whose
direct involvement is necessary for the consummation of the transactions
contemplated by this Agreement, or to the attorneys and accountants of
the
parties hereto, or as Parent determines in good faith to be required by
the
federal securities laws after consultation with the Company, or as expressly
provided for by this Agreement) without the prior written consent of such
other
party, which consent will not be unreasonably withheld or delayed. From
and
after the Effective Time, Parent and the Surviving Corporation shall maintain
in
confidence the identities of the Prior Parties (as defined in the Letter
of
Intent dated as of December 28, 2005, by and between the Company and an
Affiliate of Parent (the “LOI”)).
Notwithstanding the foregoing, Parent shall not be prohibited from discussing
this Agreement and the transactions contemplated hereby with potential
financing
sources on the terms permitted by the LOI.
6.6.
Preparation
and Filing of Tax Returns and Payment of Taxes.
(a)
Tax
Returns.
Parent
shall be responsible for causing the Company to prepare and timely file
all tax
returns of the Company that are required to be filed after the Effective
Time,
and shall cause the Company to pay all taxes required to be paid as reflected
thereon.
(b)
Cooperation
on Tax Matters.
Parent
and the Participating Stockholders will reasonably cooperate, as and to
the
extent reasonably requested by the other party, in connection with the
filing of
tax returns pursuant to this Section 6.6 and any audit, litigation or other
proceeding with respect to the taxes of the Company. Such cooperation will
include the retention and (upon the other party’s request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder; provided however, that neither any Participating
Stockholder nor Parent shall be required to provide to any other party
any
copies of its tax returns. The Participating Stockholders agree to provide
Parent upon the Closing with all Company books and records in their possession
with respect to tax matters relating to any taxable period before the Closing
(including any extensions thereof).
(c)
Transfer
Taxes.
All
transfer, documentary, sales, use, value added, stamp, registration and
other
such taxes and fees (including any penalties and interest) (“Transfer
Taxes”)
incurred by the Company in connection with this Agreement or the transactions
contemplated hereby (except to the extent solely incident to any financing
arrangements made by Parent or Sub in connection with effecting the Merger,
and
excluding any such taxes resulting from transactions effected after the
Effective Time), if any, shall be paid 50% by Parent and 50% by the
Participating Stockholders in accordance with their respective Percentage
Shares
when due, and the Participating Stockholders shall, at their own expense,
file
all necessary tax returns and other documentation with respect to all such
Transfer Taxes. All Transfer Taxes, if any, incurred by any Participating
Stockholder, individually as a Participating Stockholder, in connection
with
this Agreement or the transactions contemplated hereby, shall be paid by
such
Participating Stockholder when due.
10
6.7.
Intentionally
Omitted.
6.8.
Non-Solicitation.
Each
Participating Stockholder agrees that it will (a) during the period commencing
on the date hereof and expiring on the applicable Covenant Expiration Date,
refrain from, either alone or in conjunction with any other person, or
directly
or indirectly through its or his Affiliates, recruiting, employing, engaging
or
seeking to employ or engage any person who had been an employee of the
Company
or any of its Affiliates (other than International Business Machines Corporation
or Cox DDI, Inc.) at any time between January 1, 2006 and the Closing Date,
inclusive, (b) during the period commencing on the date hereof and expiring
on
the third anniversary of the Closing Date, refrain from, either alone or
in
conjunction with any other person, or directly or indirectly through its
or his
Affiliates, soliciting, inducing or attempting to induce any customer,
vendor,
supplier or other contracting counterparty of the Company to terminate
its, his
or her contractual relationship with the Company; provided that bidding
in good
faith for a contractual relationship with a customer of the Company (with
respect to work or services to be performed outside of the scope of the
Company’s existing contractual relationship with said customer) shall not in and
of itself be deemed violative of the forgoing clause (b). It is acknowledged
and
agreed that nothing in Section 6.8(a) shall prohibit any Participating
Stockholder or its or his Affiliates at any time following the first anniversary
of the Closing Date from (i) hiring any individual who responds to a generalized
solicitation for employees through regionally (no region being smaller
geographically than Southern California) or nationally directed media
advertisements, (ii) hiring any individual who approaches a Participating
Stockholder, or any Affiliate thereof, in request of employment without
any
solicitation whatsoever having been made by such Participating Stockholder
or
its or his Affiliate thereof, as the case may be, or (iii) hiring any individual
who had received notice of termination from the Company prior to the time
such
individual contacted the Participating Stockholder, or any Affiliate thereof,
with regard to prospective employment. For purposes of this Section 6.8
only,
the term “Affiliates,” solely when used of Cox DDI, Inc. and International
Business Machines Corporation, shall mean only their respective Subsidiaries
and
other controlled Affiliates.
6.9.
Technology
Agreement Termination.
Reference is hereby made to (a) that certain Technology Agreement dated
as of
April 23, 1993 between International Business Machines Corporation and
the
Company and (b) that certain Acknowledgement Regarding Technology Agreement
dated as of February 20, 1996 between such parties (collectively, the
“Technology
Agreement”).
International Business Machines Corporation and the Company hereby acknowledge
and agree that, as of the Closing Date, the Technology Agreement shall
be
terminated, without further action of the parties, and the only surviving
right
of International Business Machines Corporation thereunder shall be the
royalty-free right of International Business Machines Corporation to use
any
patents issued to the Company as of the Closing Date which it otherwise
would
have the royalty-free right to use under the Technology Agreement (the
“Pre-Closing
Patents”).
It is
further acknowledged and agreed by International Business Machines Corporation
that all Intellectual Property (except for such royalty-free rights under
the
Pre-Closing Patents) created under the Technology Agreement shall be owned
solely by the Company and, if (a) International Business Machines Corporation
has any rights thereto, it hereby assigns and transfers all of same to
the
Company (other than such royalty-free rights under the Pre-Closing Patents),
and
(b) the Company is issued any patent covering any such Intellectual Property
following the Closing Date (each a “Post-Closing
Patent”),
such
patent, as between International Business Machines Corporation and the
Company
and their respective Affiliates, shall be owned exclusively by the Company.
In
the event that the Company, in its sole discretion, elects to commercially
license to third-parties on a non-exclusive basis, one or more Post-Closing
Patents, International Business Machines Corporation shall have the right
to
license such Post-Closing Patents from the Company on terms comparable
to those
provided to the third-party licensees of such Post-Closing Patents.
11
6.10.
Termination
of Agreements among Shareholders.
Without
intending to derogate from the generality of Section 10.13, each of the
Company
and each Participating Stockholder hereby agrees and acknowledges that
each of
the Shareholder Agreements shall cease to be of any force and effect, and
no
party thereto shall have any rights or duties thereunder, from and after
the
Closing.
ARTICLE
VII :
INDEMNIFICATION
7.1.
Parent
and Surviving Corporation Claims.
From
and after the Effective Time, each Participating Stockholder shall, severally,
but not jointly, and, with respect to clauses (i) and (iv) infra,
in
proportion to his or its respective Percentage Share, defend, indemnify
and hold
harmless the Surviving Corporation and
Parent from and against any and all losses, damages, liabilities, claims,
demands, judgments, settlements, costs and expenses of any nature whatsoever
(including reasonable attorneys’ fees) (collectively, “Loss”),
resulting from or arising out of any: (i) breach of any representation
or
warranty of the Company contained in Article II; (ii) breach by and only
by such
Participating Stockholder of any representation or warranty of such
Participating Stockholder contained in Section 2A.1; (iii) breach by and
only by
such Participating Stockholder of any of his or its obligations pursuant
to
Sections 6.8 and 6.9; and (iv) failure of the stockholder information materials
in the form delivered in writing to Parent on the date hereof (in the form
so
delivered, the "Materials") to comply with the applicable provisions of
the
DGCL, including, without limitation, Sections 228(e) and 262(d)(2) thereof;
provided, however, that no Participating Stockholder shall have any liability
pursuant to this clause (iv) unless and only if (A) the Company properly
and
timely mails, in compliance with the applicable provisions of the DGCL,
the
Materials, in the form delivered on the date hereof (subject to the Company’s
obligation prior to such mailing to attach thereto as part of Annex C
thereof the financial statements of the Company for its 2004 and 2005 fiscal
years, as audited by PricewaterhouseCoopers (“PWC”), or, if such audited
financial statements for the Company’s 2005 fiscal year are not delivered by PWC
to the Company prior to the mailing of the Materials, the Company’s financial
statements for its 2004 fiscal year, as audited by PWC, and the Company’s
unaudited financial statements for its 2005 fiscal year, as prepared by
the
Company’s management most recently prior to the Closing), to all of the holders
of record of Common Stock at the respective addresses reflected in the
Company's
stock record books on the date hereof, (B) such Loss results solely from
the
demand of appraisal rights or quasi-appraisal rights by any such holder
after
the 20-day period referenced in Section 262(d)(2) of the DGCL, (C) the
demand by
such holder was permitted, notwithstanding the passage of such 20-day period,
solely as a result of the failure of the Materials to comply with the applicable
provisions of the DGCL, (D) such failure was not attributable to information
contained in or omitted from the Materials with respect to Parent or Sub
or any
of their Affiliates (exclusive of the Company), Parent's plans relating
to the
business, management or operations of the Company following the Closing,
or
prospects, forecasts or estimates for the Company following the Closing,
(E) such Loss or Third Party Claim (as defined infra)
related thereto is not in any way based upon, in whole or in part, information
disseminated or created by or on behalf of Parent or Sub or any of their
Affiliates (which shall not include the Company prior to the Closing) or
any of
their agents or representatives, whether prior to, on or after the date
hereof,
and (F) such failure was not attributable to historical financial
statements or financial projections of or related financial information
for the
Company contained in or omitted from the Materials. No claim for indemnification
pursuant to this Section 7.1 or Section 7.3 may be made subsequent to the
date
18 months after the Closing Date or in respect of a Loss for which Parent
or the
Surviving Corporation has otherwise been previously reimbursed by the
Participating Stockholders; provided, however, that the expiration period
hereunder that will apply to claims arising out of or based on breaches
of
Surviving Obligations (as defined infra)
and other Excepted Claims (as defined infra)
shall be the period ending on the final date of the statute of limitations
period
pertaining thereto under applicable Law.
12
7.2.
Participating
Stockholder Claims.
Parent,
Sub and the Surviving Corporation shall, jointly and severally, defend,
indemnify and hold harmless each of the Participating Stockholders from
and
against any Loss resulting from or arising out of any breach of any
representation, warranty, covenant or agreement of Parent or Sub contained
herein. No claim for indemnification pursuant to this Section 7.2 may be
made
subsequent to the date 18 months after the Closing Date or in respect of
a Loss
for which said Participating Stockholder had been previously reimbursed
by
Parent, or Sub or the Surviving Corporation.
7.3.
Third
Party Claims.
(a)
From
and
after the Effective Time, if any third party notifies Parent or the Surviving
Corporation with respect to any third party claim (a “Third
Party Claim”)
that
may give rise to a Loss subject to indemnification pursuant to Section
7.1, then
Parent will promptly notify in writing the Participating Stockholders thereof;
provided,
however,
that no
delay on the part of Parent in notifying the Participating Stockholders
will
relieve the Participating Stockholders from any obligation hereunder unless
(and
then solely to the extent that) the Participating Stockholders are prejudiced
by
such delay.
13
(b)
The
Participating Stockholders, through the Stockholder Committee, will have
the
right, at their sole cost and expense, to defend Parent against the Third
Party
Claim with counsel selected by the Stockholder Committee and reasonably
satisfactory to Parent, so long as: (i) the Stockholder Committee so notifies
Parent in writing within 15 days of the Third Party Claim becoming known
to all
of the Participating Stockholders, acknowledging that such claim is in
respect
of a Loss described in Section 7.1; (ii) the Third Party Claim involves
only
money damages and does not seek an injunction or other equitable relief
against
the Surviving Corporation; (iii) settlement of, or an adverse judgment
with
respect to, the Third Party Claim is not, in the good faith judgment of
Parent,
likely to establish a precedential custom or practice materially adverse
to the
continuing business interests of Parent; and (iv) the Participating Stockholders
conduct the defense of the Third Party Claim actively and
diligently.
(c)
So
long
as the Participating Stockholders are conducting the defense of the Third
Party
Claim in accordance with Section 7.3(b), (i) Parent may retain separate
co-counsel at its sole cost and expense and participate in the defense
of the
Third Party Claim; (ii) Parent will not consent to the entry of any judgment
or
enter into any settlement with respect to the Third Party Claim without
the
prior written consent of the Stockholder Committee (which consent will
not be
withheld or delayed unreasonably); and (iii) the Participating Stockholders
will
not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of Parent
(which consent will not be withheld or delayed unreasonably).
(d)
In
the
event that any of the conditions in Section 7.3(b) is or becomes unsatisfied,
(i) Parent may defend against the Third Party Claim in any manner it reasonably
may deem appropriate; provided,
however,
that
Parent will not consent to the entry of any judgment or enter into any
settlement or agreement to settle a Third Party Claim without the prior
written
consent of the Stockholder Committee, which consent will not be unreasonably
withheld; and (ii) the Participating Stockholders will remain responsible
for
any Loss that Parent actually suffers resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim to the extent
provided
in this Article VII.
7.4.
No
Waiver.
The
occurrence of the Closing will not in any way constitute a waiver by Parent
or
the Surviving Corporation of its rights to indemnification hereunder, regardless
of whether Parent or the Surviving Corporation had knowledge of any breach,
violation or failure of the condition constituting the basis of the Loss
at or
before the Closing, and regardless of whether such breach, violation or
failure
is deemed to be material.
7.5.
Binding
Effect.
The
indemnification obligations of the Participating Stockholders contained
in this
Article VII are an integral part of this Agreement, in the absence of which
Parent would not have entered into this Agreement.
14
7.6.
Remedies.
The
indemnity provisions contained in this Article VII shall, from and after
the
Closing, be the sole and exclusive remedy of Parent and Sub to satisfy
claims
for breach of any representation, warranty, covenant or other provision
of this
Agreement, except for claims (“Excepted
Claims”)
against a Participating Stockholder arising out of or based on (i) fraud
by said
Participating Stockholder or (ii) the breach by the Company or said
Participating Stockholder of any representation, warranty, covenant or
agreement
set forth in the following Sections (or identified portions thereof)
(collectively, the “Surviving
Obligations”):
Section 2.3 (Capital Structure; Approval of Merger; Notice to Stockholders),
the
first sentence of Section 2.4(a) (No Conflict), Section 6.8 (Non-Solicitation)
and Section 2A.1 (Authority, No Conflict; Enforceability; Ownership). From
and
after the Closing, the indemnity provisions contained in this Article VII
shall
be the sole and exclusive remedy of the Participating Stockholders to satisfy
claims for breach of any representation, warranty, covenant or other provision
of this Agreement, except for claims arising out of or based upon fraud.
7.7.
Basket
and Cap.
Other
than with respect to Excepted Claims, which are not subject to pecuniary
limitations except as provided below, Parent and the Surviving Corporation
will
not be entitled to seek indemnification under this Article VII unless and
until
the amount of all Losses subject to indemnification hereunder has accumulated
to
a threshold of $270,000.00, after which Parent and the Surviving Corporation
will be entitled to the full amount of all such Losses, including amounts
below
such threshold. With respect to all Losses under this Article VII other
than
Excepted Claims, recourse against any Participating Stockholder shall be
limited
solely to offsetting the amount of such Loss from the amounts otherwise
payable
under the Note issued to such Participating Stockholder, in a maximum aggregate
amount equal to nine percent (9%) of the original principal amount of such
Note.
With respect to all Losses under this Article VII that arise out of or
are based
upon Excepted Claims, recourse against any Participating Stockholder shall
be
limited solely to (1) first, offsetting from the amounts then remaining
payable
under the Note issued to such Participating Stockholder and (2) only thereafter
recovering from the cash amounts actually received by such Participating
Stockholder, provided,
however, that in no event shall the direct payment obligation (separate
and
apart from the right of offset contemplated hereby) of any single Participating
Stockholder pursuant to this Article VII exceed an amount equal to 100%
of the
Merger Consideration actually received in cash by such Participating
Stockholder.
7.8.
No
Contribution.
The
Participating Stockholders will have no right of contribution from the
Surviving
Corporation for amounts payable to Parent or Sub under this Article
VII.
7.9.
Actions
by Participating Stockholders; Stockholder Committee.
(a)
By
virtue
of their entering into this Agreement and accepting Merger Consideration,
the
Participating Stockholders agree that for all purposes under this Agreement,
the
Stockholder Committee shall act as the agent of and attorney-in-fact for
the
Participating Stockholders following the Closing. All actions taken by
the
Stockholder Committee pursuant to the terms of this Agreement shall be
binding
upon all Participating Stockholders and their successors as if expressly
confirmed and ratified in writing by each of them, including, but not limited
to, resolving any indemnification claims and obligations under this Article
VII.
The Parent, Sub or Surviving Corporation, as the case may by, shall have
the
absolute right in connection with any activities under this Agreement that
relate to the Participating Stockholders to rely upon any writing which
contains
the signatures of the members of Stockholder Committee representing a simple
voting majority (as determined pursuant to the definition of “Stockholder
Committee” in Article IX), and to disregard any writing that contains less than
that simple voting majority; provided, however, that the foregoing shall
not
affect any provision hereof that explicitly requires the approval of all
of the
Participating Stockholders.
15
(b)
A
decision, act, consent or instruction of the Stockholder Committee shall
constitute a decision of all the Participating Stockholders and shall be
final,
binding and conclusive upon each such Participating Stockholder, and Parent,
Sub
and the Surviving Corporation may rely upon any decision, act, consent
or
instruction of the Stockholder Committee as being the decision, act, consent
or
instruction of each and every such Participating Stockholder. Parent, Sub
and
the Surviving Corporation are hereby relieved from any liability to any
person
for any acts done by them in accordance with such decision, act, consent
or
instruction of the Stockholder Committee. Parent, Sub and the Surviving
Corporation may rely absolutely upon the genuineness and authorization
of the
signature and purported signature of any party upon any instruction, notice,
release, receipt or other document delivered to it pursuant to this Agreement
by
the Stockholder Committee.
7.10.
Equitable
Remedies.
Nothing
in this Article VII shall be construed to limit the non-pecuniary equitable
remedies of any party hereto in respect of any breach by any other party
after
the Closing of Section 6.4, Section 6.6(b) or (c), Section 6.8 or Section
6.9.
ARTICLE
VIII :
INTENTIONALLY OMITTED
ARTICLE
IX :
CERTAIN DEFINED TERMS. For
purposes of this Agreement, the following terms will have the meanings
respectively set forth below:
“Affiliate,”
with
respect to any person, means a second person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person.
“Assets”
means
any and all: (1) properties and contract rights; (2) intellectual property;
(3) data, text, images, sounds, codes, computer programs, software, databases,
mask works or the like and including collections and compilations of them
(whether or not all or part of such is intellectual property) and all other
information; (4) access or use rights; (5) all rights in Internet, worldwide
web
or similar addresses, uniform resource locators, domain names or the like
and
all applications and registrations therefor; and (6) other rights and assets
of
every nature whatsoever, whether real, personal or mixed, tangible or
intangible.
16
“Company
Material Adverse Effect”
means
any change or effect that, individually or when taken together with all
other
such changes or effects, is or is reasonably likely to be materially adverse
to
the business, properties, Assets, condition (financial or otherwise),
liabilities, operations or prospects of the Company and its Subsidiaries,
taken
as a whole, at the time of such change or effect. A Company Material Adverse
Effect will be deemed to exist if any event occurs prior to the Closing
which
causes or may reasonably be expected to cause or result in estimable monetary
loss to the Company and its Subsidiaries, taken as a whole, which, individually
or when aggregated with all other events, exceeds $150,000. The deemed
existence
of a Company Material Adverse Effect under such circumstances shall in
no way
affect the meaning of the word “material” and its variants as used in this
Agreement otherwise than as a component of “Company Material Adverse Effect.”
“Contract”
of
any
person means any contract, agreement, lease, license or instrument of any
type
whatsoever, whether written or oral, (i) to which such person is a party
and by
which such person either has made a binding undertaking to perform an obligation
or is entitled to any property, information or right, or (ii) by which
any of
the Assets of such person are bound.
“Control”
(including the terms “controlled,” “controlled by” and “under common control
with”) means the possession, directly or indirectly, of the power to direct
or
cause the direction of the management or policies of a person, whether
through
the ownership of stock, by Contract or otherwise.
“Covenant
Expiration Date” means
(a)
the first anniversary of the Closing Date, with respect to administrative
employees of the Company, and (b) the third anniversary of the Closing
Date,
with respect to creative and management employees of the Company.
“knowledge”
“know”
or
“known”
means,
with respect to a particular fact or other matter, that (i) an individual
is
actually aware of such fact or other matter or (ii) a prudent individual
could
be expected to discover or otherwise become aware of such fact or other
matter
in the course of conducting a reasonable investigation concerning the existence
of such fact or other matter; a person (other than an individual) will
be deemed
to have “knowledge” of a particular fact or other matter if any individual who
is serving, or who has at any time served, as a director, officer, partner,
executor or trustee of such person (or in any similar capacity) has, or
at any
time had, knowledge of such fact or other matter.
“Lien”
means
any lien, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, financing lease, pledge or security interest of any
kind or
type and whether arising by Contract or under Law.
“Participating
Stockholder”
means
each person who is a holder of Preferred Stock immediately prior to the
Closing.
“person”
means
an individual, a partnership, a corporation, a limited liability company,
an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, a Governmental Entity (or any department, agency, or political
subdivision thereof) or any other entity.
17
“Stockholder
Committee”
means
a
committee formed by the Participating Stockholders, having as its five
members
one individual designated by each of the Participating Stockholders (and
listed
on Schedule
9),
and
acting, for all purposes of this Agreement, pursuant to the written consent
of a
simple voting majority (5 out of 9 votes) of its members. Each member of
the
Stockholder Committee shall have a single vote, provided that the designees
of
Cox DDI, Inc. and International Business Machines Corporation shall each
have
three votes. Each Participating Stockholder can remove and replace its
designated member to the Stockholder Committee at any time upon notice
to the
other members, the Surviving Corporation and Parent.
“Subsidiary”
or
“Subsidiaries”
of
a
person, means any corporation, partnership, joint venture or other legal
entity
of which the person (either alone or through or together with any other
Subsidiary) owns, directly or indirectly, 50% or more of the capital stock
or
other equity interests which the holders thereof are generally entitled
to vote
for the election of the board of directors or other governing body of such
corporation or other legal entity.
ARTICLE
X :
MISCELLANEOUS
10.1.
Entire
Agreement.
This
Agreement, including the exhibits and schedules delivered pursuant to this
Agreement, contains all of the terms and conditions agreed upon by the
parties
relating to the subject matter of this Agreement and supersedes all prior
agreements, negotiations, correspondence, undertakings, and communications
of
the parties, whether oral or written, respecting that subject matter, including,
without limitation, the Original Agreement and the LOI.
10.2.
Governing
Law.
The
Merger will be governed by the law of the State of Delaware. Except as
may be
otherwise specified in the Notes, the Pledge Agreements and the Guaranties,
all
other aspects of this Agreement will be governed by, and construed in accordance
with, the laws of the State of California as applied to agreements entered
into
and entirely to be performed within that state.
10.3.
Notices.
All
notices and other communications given or made pursuant hereto will be
in
writing and will be deemed to have been duly given or made as of the date
delivered, mailed or faxed, and will be effective upon receipt, if delivered
personally, mailed by registered or certified mail (postage prepaid, return
receipt requested), or delivered by overnight delivery service (e.g., Federal
Express), to the parties at the following addresses, or upon transmission,
with
confirmation from the sender’s machine thereof, if faxed to the fax numbers
specified below:
(a)
If
to
Parent, Sub, or the Company after Closing:
18
Wyndcrest
DD Holdings, Inc.
000
Xxxxx
X.X. Xxxxxxx Xxx, Xxxxx 000
Xxxxxxx,
Xxxxxxx 00000
Attention:
Xxxx
X.
Xxxxxx
Phone
No.: (000)
000-0000
Fax
No.: (000)
000-0000
with
a copy to:
Xxxxx
Xxxx LLP
000
Xxxxxxxx, 0xx
Xxxxx
Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention:
D.
Xxxxxx
Xxxxxx
Phone
No.: (000)
000-0000
Fax
No.: (000) 000-0000
(b)
If
to the
Company prior to Closing:
Digital
Domain, Inc.
000
Xxxx
Xxxxxx
Xxxxxx,
Xxxxxxxxxx 00000
Attention:
General
Counsel
Phone
No.: (000)
000-0000
Fax
No.: (000)
000-0000
with
a copy to:
Milbank,
Tweed, Xxxxxx & XxXxxx LLP
000
X. Xxxxxxxx Xxxxxx
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxx X Xxxxxxxx
Phone
No: (000) 000-0000
Fax
No: (000) 000-0000
19
(c)
If
to the
Participating Stockholders, to each of the following:
Cox
DDI,
Inc.
0000
Xxxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
Attention:
Assistant Secretary
Phone
No.: (000) 000-0000
Fax
No.: (000)
000-0000
With
copies to
Cox
DDI,
Inc.
c/x
Xxx
Enterprises, Inc.
0000
Xxxxxxxxx Xxxxxxxx Xxxx
Xxxxxxx,
XX 00000
Attention:
General
Counsel
Phone
No.: (000)
000-0000
Fax
No.: (000)
000-0000
Dow,
Xxxxxx & Xxxxxxxxx, PLLC
0000
Xxx Xxxxxxxxx Xxx., XX,
Xxxxxxxxxx,
XX 00000-0000
Attention:
Xxxxxx
X.
X'Xxxxxxx, Esq.
Phone
No.: (000)
000-0000
Fax
No.: (000)
000-0000
and
Milbank,
Tweed, Xxxxxx & XxXxxx LLP
000
X. Xxxxxxxx Xxxxxx
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxx X Xxxxxxxx
Phone
No: (000) 000-0000
Fax
No: (000) 000-0000
20
International
Business Machines Corporation
Xxx
Xxxxxxx Xxxx
Xxxxxx,
Xxx Xxxx 00000
Attention:
Xxxxx
X.
Xxxxxxx
Phone
No.: (000)
000-0000
Fax
No.: (000)
000-0000
With
a
copies to
International
Business Machines Corporation
Xxx
Xxxxxxx Xxxx
Xxxxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxx
X. Xxxxxxxxx, Esq.
Phone
No.: (000)
000-0000
Fax
No.: (000)
000-0000
and
Milbank,
Tweed, Xxxxxx & XxXxxx LLP
000
X. Xxxxxxxx Xxxxxx
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxx X Xxxxxxxx
Phone
No: (000) 000-0000
Fax
No: (000) 000-0000
Xxxxx
Xxxx
0000
Xxxxx Xxxxxx Xxxx., #X
Xxxxxx,
XX 00000
Phone:
(000) 000-0000
Fax:
(000) 000-0000
With
copies to:
Xxxxxxxx
Forester LLP
0000
Xxxxxxx Xxxx Xxxx, Xxx. 0000
Xxx
Xxxxxxx, XX 00000
Attn:
M.
Xxxxxxx Xxxxxxxxx
Phone:
(000) 000-0000
Fax:
(000) 000-0000
and
Milbank,
Tweed, Xxxxxx & XxXxxx LLP
000
X. Xxxxxxxx Xxxxxx
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxx X Xxxxxxxx
Phone
No: (000) 000-0000
Fax
No: (000) 000-0000
21
Xxxxx
Xxxxxxx
c/o
Lightstorm Entertainment, Inc.
000
Xxxxx
Xxxxxx Xxxx.
Xxxxx
Xxxxxx, XX. 00000
Phone
310/000-0000
Fax
310/000-0000
With
copies to:
Xxxxxxxxx
Glusker Fields Claman Machtinger & Xxxxxxxx
1900
Ave.
of the Stars, Xxx. 0000
Xxx
Xxxxxxx, XX 00000
Attn:
Xxxxxxx Xxxxxxx
Phone
310/000-0000
Fax
310/000-0000
and
Milbank,
Tweed, Xxxxxx & XxXxxx LLP
000
X. Xxxxxxxx Xxxxxx
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxx X Xxxxxxxx
Phone
No: (000) 000-0000
Fax
No: (000) 000-0000
Xxxx
Xxxxxxx
00000
Xxxxxxxx Xxxx.
Xxxx
0000
Xxx
Xxxxxxx, XX 00000
Phone
No:
(000) 000-0000
Fax
No:
(000) 000-0000
With
copies to:
Xxxx
Xxxxxxx Studio
Attention:
Xxxxxx Xxxxxxxx
0000
Xxxxxxx Xxx.
Xxx
Xxxx,
XX 00000
Phone
818/000-0000
Fax
818/000-0000
22
Xxxxxxxxx
Xxxxxxx Fields Claman Machtinger & Xxxxxxxx
1900
Ave.
of the Stars, Xxx. 0000
Xxx
Xxxxxxx, XX 00000
Attn:
Xxxxxxx Xxxxxxx
Phone
310/000-0000
Fax
310/000-0000
and
Milbank,
Tweed, Xxxxxx & XxXxxx LLP
000
X. Xxxxxxxx Xxxxxx
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxx X Xxxxxxxx
Phone
No: (000) 000-0000
Fax
No: (000) 000-0000
Such
addresses and fax numbers may be changed, from time to time, by means of
a
notice given in the manner provided above.
10.4.
Severability.
If any
provision of this Agreement is held to be unenforceable for any reason,
it will
be modified rather than voided, if possible, in order to achieve the intent
of
the parties to this Agreement to the extent possible. In any event, all
other
provisions of this Agreement will be deemed valid and enforceable to their
full
extent.
10.5.
Assignment.
No party
to this Agreement may assign, by operation of law or otherwise, all or
any
portion of its rights, obligations, or liabilities under this Agreement
without
the prior written consent of each of the other parties hereto, which consent
may
be withheld in the absolute discretion of any party asked to grant such
consent.
Any attempted assignment in violation of this Section 10.5 will be voidable
and will entitle the other parties to this Agreement to terminate this
Agreement
at its option.
10.6.
Counterparts.
This
Agreement may be executed in two or more counterparts, each of which will
be
deemed an original and will bind the signatories, but all of which together
will
constitute but one and the same instrument.
10.7.
Amendment.
This
Agreement may be amended only by an instrument in writing signed by the
Company,
Parent, Sub, and the Participating Stockholders.
10.8.
Extension,
Waiver.
At any
time prior to the Effective Time, any party hereto may, to the extent legally
allowed: (i) extend the time for the performance of any of the obligations
or other acts of any other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in
any
document delivered pursuant hereto, and (iii) waive compliance with any of
the agreements, covenants or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension
or
waiver will be valid only if set forth in an instrument in writing signed
on
behalf of such party.
23
10.9.
Construction.
All
words used in this Agreement will be construed to be of such gender or
number as
the circumstances require. Unless otherwise expressly provided, the word
“including” does not limit the preceding words or terms.
10.10.
Jurisdiction
and Venue; Waiver of Jury Trial.
(a)
Except
as
may be otherwise specified in the Notes, the Pledge Agreements and the
Guaranties, the parties hereby irrevocably submit to the jurisdiction of
the
courts of the State of California located in Los Angeles County and the
Federal
courts of the United States of America located in Los Angeles County, California
solely in respect of the interpretation and enforcement of the provisions
of
this Agreement and of the documents referred to in this Agreement, and
in
respect of the transactions contemplated hereby, and hereby agree not to
assert,
as a defense in any action, suit or proceeding for the interpretation or
enforcement hereof or of any such document, that it is not subject thereto
or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be laid therein or that
this
Agreement or any such document may not be enforced in or by such courts,
and the
parties hereto irrevocably agree that all claims with respect to such action,
suit or proceeding shall be heard and determined in such a California State
or
Federal court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and, to the extent permitted
by
law, over the subject matter of such dispute, and agree that mailing of
process
or other papers in connection with any such action, suit or proceeding
in the
manner provided in Section 10.3 or in such other manner as may be permitted
by
law shall be valid and sufficient service thereof.
(b)
EACH
PARTY HERETO ACKNOWLEDGES AND AGREES, THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER
THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE
MAXIMUM EXTENT PERMITTED BY LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF
OR
RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT
OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING
WAIVER, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER,
(iii) IT MAKES THIS WAIVER VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO
ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.10(b).
24
10.11.
Prevailing
Party Attorneys’
Fees.
In any
judicial or arbitral action or proceeding commenced to construe or enforce
this
Agreement or the rights and duties of the parties hereunder, then the party
prevailing in that action will be entitled to recover its attorneys’ fees and
costs in that action or proceeding, as well as all costs and fees of any
appeal
or action to enforce any judgment entered therein.
10.12.
Tax
Treatment of Transactions.
The
parties agree that all transactions contemplated herein will be reported
for tax
purposes consistently with the manner in which such transactions are
characterized by this Agreement.
10.13.
General
Release.
Effective as of the Effective Time, each of the Participating Stockholders,
for
itself or himself and on behalf of its or his Affiliates and successors
and
assigns, and on behalf of its or his predecessors and successors in interest
(collectively referred to as the “Releasing
Parties”),
hereby releases and discharges each of the Surviving Corporation and each
other
Participating Stockholder and each of their respective parents, subsidiaries
and
any other Affiliates, and each of their respective directors, officers,
shareholders, agents, employees, heirs, legatees, devisees, executors,
administrators, personal representatives, predecessors, successors and
assigns,
past and present, and each of them (collectively referred to as the
“Releasees”)
from,
and covenants not to xxx or otherwise institute or cause to be instituted,
or
maintain any legal or administrative proceedings against any Releasee with
respect to, any and all Losses arising in any way from his or its status
as a
stockholder of the Company or his or its relationship to the Company or
to the
other Participating Stockholders in connection with the Company’s activities
during the period prior to the Effective Time, of whatever kind or nature,
at
law, in equity or otherwise, whether now known or unknown; provided, however,
that any and all such Losses arising solely in connection with this Agreement,
and those specific items listed on Schedule
10.13,
shall
not be subject to the foregoing release; and provided, further, that the
foregoing release shall not apply to any claims with respect to applicable
policies of directors and officers, employment practices, fiduciary and
employed
lawyers professional liability or comparable liability insurance as in
effect on
the Closing Date. Each Releasing Party hereby waives any and all rights
or
benefits which it or he may have under Section 1542 of the California Civil
Code, which provides that:
A
GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT
TO
EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN
BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE
DEBTOR.
Having
been fully informed of the provisions of California Civil Code Section
1542,
each Releasing Party hereby represents and warrants to the other parties
and
each Releasee that (a) it or he understands the effect of this waiver and
said
Civil Code Section in connection with this Agreement, (b) that it or he
is
represented and has been advised by an independent attorney in connection
with
this release and this Agreement, and (c) it or he has made such investigation
of
the facts and circumstances surrounding the matters addressed herein as
it or he
deems necessary. Each Releasing Party further represents and warrants that
it or
he has not assigned, sold, transferred, or otherwise disposed of any of
the
causes of action, claims, or other matters released pursuant to this Section
10.13.
25
10.14.
Acknowledgement
Regarding Original Agreement.
The
parties hereto acknowledge and agree that notwithstanding the prior execution
and mutual delivery of the Original Agreement, this Agreement is intended
to
amend, restate and supersede in their entirety all the terms and conditions
of
such Original Agreement.
10.15.
Survival.
The
representations, warranties and agreements contained in this Agreement,
other
than the Surviving Obligations and the provisions of Article VII and Article
X,
will terminate on the date which is 18 months after the Closing Date. The
Surviving Obligations and the provisions of Article VII and Article X will
terminate on the expiration date of the respective statutory limitation
period
pertaining thereto under applicable Law.
(The
remainder of this page has intentionally been left blank)
26
SIGNATURE PAGE - AMENDED AND RESTATED AGREEMENT AND
PLAN
OF REORGANIZATION
IN
WITNESS WHEREOF, the parties hereto have executed or caused this Amended
and
Restated Agreement and Plan of Reorganization to be duly executed as of
the date
first written above:
WYNDCREST
DD HOLDINGS, INC.
By:
_________________________________
Xxxx
X. Xxxxxx
Co-Chairman
|
DIGITAL
DOMAIN, INC.
By:
_________________________________
Its:
_________________________________
|
|
DD
ACQUISITION SUBSIDIARY, INC.
By:
_________________________________
Xxxx
X. Xxxxxx
Chairman
|
||
PARTICIPATING
STOCKHOLDERS:
By
executing below each of the undersigned agrees to be bound by
the
provisions of Sections 1.5, 1.6(b) and (c), 6.3, 6.4, 6.6, 6.8
and 6.10,
and Articles II-A, VII and X, and International Business Machines
Corporation additionally agrees to be bound by Section
6.9:
_________________________________
XXXXX
XXXXXXX
_________________________________
XXXXX
XXXX
_________________________________
XXXX
XXXXXXX
|
SIGNATURE
PAGE CON’T-
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
INTERNATIONAL
BUSINESS MACHINES CORPORATION
By:_________________________________
Its:
_________________________________
COX
DDI,
INC.
By:_________________________________
Its:
_________________________________