AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
and entered into as of March 3, 1999 among Expert Software, Inc., a
Delaware corporation ("Expert"), Activision, Inc., a Delaware
corporation ("Activision"), and Expert Acquisition Corp., a
Delaware corporation and wholly-owned subsidiary of Activision
("Merger Subsidiary").
RECITALS
WHEREAS, the respective Boards of Directors of Expert,
Activision and Merger Subsidiary each have determined that a
business combination between Expert, Activision and Merger
Subsidiary is fair to and in the best interests of their respective
companies and stockholders and accordingly have approved this
Agreement and agreed to effect the merger provided for herein upon
the terms and subject to the conditions set forth herein; and
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained
herein, the parties hereto hereby agree as follows:
1. 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), Expert shall be merged with and into Merger
Subsidiary in accordance with this Agreement and the separate
corporate existence of Expert 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 properties, rights,
privileges, powers and franchises both of a public and of a private
nature of Expert and Merger Subsidiary shall vest in the Surviving
Corporation and all debts, liabilities and duties of Expert and
Merger Subsidiary shall become the debts, liabilities and duties of
the Surviving Corporation. The Merger shall have the effects
provided in this Agreement and the applicable provisions of the
Delaware General Corporation Law ("DGCL").
1.2. The Closing. On the terms and subject to the conditions
of this Agreement, the closing of the Merger (the "Closing") shall
take place at the offices of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP, 1290 Avenue of the Americas, New York, New York, at
10:00 a.m., local time, on (a) the first business day immediately
following the day on which the last of the conditions set forth in
Article 7 shall be fulfilled or waived in accordance herewith, or
(b) at such other time, date or place as the parties hereto may
otherwise agree. Unless the parties shall otherwise agree, the
parties shall use their reasonable best efforts to cause the
Closing to occur as soon as possible after the Special Meeting (as
defined in Section 6.2). The date on which the Closing occurs is
hereinafter referred to as the "Closing Date."
1.3. Effective Time. If all the conditions to the Merger set
forth in Article 7 shall have been fulfilled or waived in
accordance herewith, and this Agreement shall not have been
terminated as provided in Article 8, the parties hereto shall cause
a Certificate of Merger satisfying the requirements of the DGCL to
be properly executed, verified and delivered for filing in
accordance with the DGCL on the Closing Date. The Merger shall
become effective upon the acceptance for record of the 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 filing 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 "Expert Software, 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 "Expert Software, Inc."), until duly amended
in accordance with applicable law.
1.5. Directors and Officers.
a. Directors. The directors of Merger Subsidiary
immediately prior to the Effective Time, shall automatically become
the directors of the Surviving Corporation as of the Effective Time.
b. Officers. The officers of Merger Subsidiary
immediately prior to the Effective Time shall automatically become
the officers of the Surviving Corporation as of the Effective Time.
1.6. Tax Consequences. If the Section 2.3 Election is not
made, it is intended by the parties hereto that the Merger will
constitute a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), and the
parties shall report the Merger consistent therewith. The parties
hereto hereby adopt this Agreement as a "plan of reorganization"
within the meaning of Section 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
2. CONVERSION OF SHARES
2.1. Conversion of Merger Subsidiary Shares. At the
Effective Time, each share of common stock, $1.00 par value per
share, of Merger Subsidiary that is issued and outstanding
immediately prior to the Effective Time will remain one share of
common stock, $1.00 par value per share, of the Surviving
Corporation that is issued and outstanding immediately after the
Effective Time, and such shares will be the only shares of capital
stock of the Surviving Corporation that are issued and outstanding
immediately after the Effective Time.
2.2. Conversion of Expert Shares.
a. Except as provided in Section 2.3, at the Effective
Time, by virtue of the Merger and without any action on the part of
Activision, Merger Subsidiary, Expert or the holder thereof, each
issued and outstanding share of common stock, par value $.01 per
share, of Expert (each an "Expert Share" and collectively, the
"Expert Shares") shall be converted into the right to receive a
number of shares of common stock, par value $.000001 per share, of
Activision (the "Activision Common Stock"), equal to the Exchange
Ratio (as hereinafter defined) and cash, to the extent set forth in
Section 2.2(f). The shares of Activision Common Stock to be issued
in connection with the Merger are sometimes referred to as the
"Activision Shares."
b. The Exchange Ratio shall be equal to (i) $2.65,
divided by (ii) the Activision Per Share Market Value. For
purposes of the foregoing, the "Activision Per Share Market Value"
shall be the arithmetic average of the per share closing sales
prices of Activision Common Stock as reported on the Nasdaq
National Market ("NASDAQ") (or such other national securities
exchange or automated quotation system which is then the principal
place of listing or quotation of shares of Activision Common Stock)
on the ten (10) trading days ending on and including the trading
day which is two (2) trading days immediately prior to the date of
the Special Meeting (as defined in Section 6.2) which will be held
in accordance with the provisions of Section 6.2 for the purpose of
approving this Agreement and the transactions contemplated hereby.
c. Notwithstanding anything to the contrary set forth
in Section 2.2(b), (i) in no event shall the number of Activision
Shares to be issued in connection with the Merger exceed 20% of the
total number of shares of Activision Common Stock issued and
outstanding at the Effective Time (the "Maximum Activision Share
Issuance"), and (ii) in no event shall the Exchange Ratio be higher
than (x) the Maximum Activision Share Issuance, divided by (y) the
total number of Expert Shares issued and outstanding as at the
Effective Time (other than Cancelled Expert Shares, as hereinafter
defined).
d. Each Expert Share held in Expert's treasury, if
any, and each Expert Share owned by Activision or by any direct or
indirect subsidiary of Expert or Activision immediately prior to
the Effective Time (collectively, "Cancelled Expert Shares") shall,
at the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, be canceled and retired
and cease to exist and no payment shall be made with respect
thereto.
e. No fractional shares of Activision Common Stock
shall be issued pursuant to this Agreement. In lieu of the
issuance of any fractional shares of Activision Common Stock
pursuant to this Agreement, each holder of Expert Shares shall be
paid an amount in cash (without interest), rounded to the nearest
cent, determined by multiplying (i) the Activision Per Share Market
Value by (ii) the fractional amount of a share of Activision Common
Stock which such holder would otherwise be entitled to receive
under this Article 2.
f. Notwithstanding the provisions of Section 2.2(b),
in the event:
(i) the Activision Per Share Market Value is less than
$10.00, Activision shall fix the Exchange Ratio at .2650
and pay the holders of Expert Shares, in addition to the
number of shares of Activision Common Stock determined
based on an Exchange Ratio of .2650, cash equal to the
Shortfall Cash Payment (as defined below) in lieu of the
number of Activision Shares that would have been issued
had the Exchange Ratio been computed in accordance with
Section 2.2(b), and
(ii) the provisions of Section 2.2(c) are applicable and
the Exchange Ratio is calculated in accordance with such
section, Activision shall pay to the holders of Expert
Shares, in addition to the number of shares of Activision
Common Stock determined based on the Exchange Ratio
determined pursuant to Section 2.2(c), cash equal to the
Shortfall Cash Payment in lieu of the number of
Activision Shares that would have been issued had the
Exchange Ratio been computed in accordance with Section
2.2(b).
In the case of clause (i) or (ii), the cash payment on
account of any Expert Share (the "Shortfall Cash Payment") shall be
equal to the Activision Per Share Market Value multiplied by the
fraction of a share of Activision Common Stock determined by
subtracting the Exchange Ratio computed under clause (i) or (ii),
as applicable, from the Exchange Ratio calculated under Section
2.2(b). Notwithstanding the foregoing provisions of this Section
2.2(f), (a) in the event Section 2.2(f)(i) is applicable, the total
of all Cash Shortfall Payments, and any cash payable in lieu of
fractional shares, with respect to all Expert Shares shall not
exceed 60% of the total Exchange Merger Consideration (as
hereinafter defined), and the Exchange Ratio computed in accordance
with Section 2.2(f)(i) shall be adjusted so that Activision Shares
are issued in lieu of any portion of the Cash Shortfall Payment
that could not be made due to this clause (a), and (b) in the event
Section 2.2(f)(ii) is applicable, the total of all Cash Shortfall
Payments, and any cash payable in lieu of fractional shares, shall
not exceed 60% of the total Exchange Merger Consideration, but the
Exchange Ratio shall not be adjusted and no other payments of cash,
Activision Common Stock or any other forms of consideration shall
be payable to holders of Expert Shares.
2.3. Election by Activision to Pay Cash Consideration.
Activision shall have the right, exercisable at any time on or
before March 25, 1999, on notice to Expert, to elect to pay cash
consideration to the holders of Expert Shares in lieu of issuance
of Activision Shares pursuant to Section 2.2 (the "Section 2.3
Election"). Activision shall have the right to extend the March
25, 1999 outside date to April 1, 1999 if Activision has been and
continues to make good faith efforts to secure any necessary
financing. In the event of a Section 2.3 Election, at the
Effective Time, by virtue of the Merger and without any action on
the part of Activision, Merger Subsidiary, Expert or the holder
thereof, each issued and outstanding Expert Share (other than
Dissenting Common Stock as defined in Section 2.6) shall be
converted into the right to receive $2.65 per share, in cash,
without interest. The provisions of Section 2.2(d) shall apply in
the event of any such election by Activision. The amount of cash
payable with respect to each Expert Share is hereinafter referred
to as the "Per Share Cash Consideration," and the aggregate Per
Share Cash Consideration payable is referred to as the "Aggregate
Cash Consideration."
2.4. Conversion of Expert Employee Stock Options and Warrants.
a. At the Effective Time, each option or warrant,
whether vested or unvested, to purchase Expert Shares which is then
outstanding and unexercised (an "Expert Option" or an "Expert
Warrant," as the case may be) shall cease to represent a right to
acquire shares of Expert Common Stock and shall be converted
automatically into an option or warrant to acquire, under the same
terms and conditions as were applicable to such Expert Option or
Expert Warrant immediately prior to the Effective Time, shares of
Activision Common Stock, and Activision shall assume each Expert
Option and Expert Warrant and each option plan or agreement
pursuant to which any such Expert Option and Expert Warrant were
granted; provided, however, that from and after the Effective time,
(i) the number of shares of Activision Common Stock purchasable
upon exercise of such Expert Option or Expert Warrant shall be
equal to the number of shares of Expert Common Stock that were
purchasable under such Expert Option or Expert Warrant immediately
prior to the Effective Time multiplied by the Exchange Ratio,
(without adjustment pursuant to Sections 2.2(c) or 2.2(f)) rounding
to the nearest whole share, and (ii) the per share exercise price
under each such Expert Option and Expert Warrant shall be adjusted
by dividing the per share exercise price of each such Expert Option
and Expert Warrant by the Exchange Ratio (without adjustment
pursuant to Section 2.2(c) or (f)), rounding to the nearest cent.
The terms of each Expert Option and Expert Warrant shall, in
accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, stock dividend,
recapitalization or other similar transaction with respect to
Activision Common Stock on or subsequent to the Effective Time.
Notwithstanding the foregoing, the number of shares and the per
share exercise price of each Expert Option which is intended to be
an "incentive stock option" (as defined in Section 422 of the Code)
shall be adjusted in accordance with the requirements of Section
424 of the Code. Accordingly, with respect to any incentive stock
options, fractional shares shall be rounded down to the nearest
whole number of shares and where necessary the per share exercise
price shall be rounded up to the nearest cent.
b. As soon as practicable after the Effective Time,
Activision shall deliver to each holder of an outstanding Expert
Option or Expert Warrant an appropriate notice setting forth such
holder's rights pursuant thereto, and such Expert Option and Expert
Warrant shall continue in effect on the same terms and conditions
(including antidilution provisions).
c. At or prior to the Effective Time, Activision shall
reserve for issuance the number of shares of Activision Common
Stock necessary to satisfy Activision's obligations under Section
2.4(a). At or prior to the Effective Time, Activision shall file
with the Securities and Exchange Commission ("SEC") a registration
statement on Form S-8 (to the extent such form is available) under
the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Activision Common Stock subject to Expert
Options and Expert Warrants assumed pursuant to Section 2.4(a)
hereof, and shall use its reasonable best efforts to maintain the
current status of the prospectus contained therein, as well as
comply with any applicable state securities or "blue sky" laws, for
so long as such options and warrants remain outstanding.
2.5. Adjustments. If at any time during the period between
the date of this Agreement and the Effective Time, any change in
the Expert Shares or Activision Common Stock shall occur by reason
of any reclassification, recapitalization, stock dividend, stock
split or combination, exchange or readjustment of shares, or any
stock dividend thereon with the record date during such period, the
Exchange Ratio or the Per Share Cash Consideration, as applicable,
shall be appropriately adjusted.
2.6. Dissenting Expert Stockholders. Notwithstanding any
provision of this Agreement to the contrary, if required by the
DGCL but only to the extent required thereby, shares of Expert
Common Stock which are issued and outstanding immediately prior to
the Effective Time and which are held by holders of such shares of
Expert Common Stock who have properly exercised appraisal rights
with respect thereto (the "Dissenting Common Stock") in accordance
with Section 262 of the Delaware General Corporation Law ("DGCL)
will not be exchangeable for the right to receive the Cash Merger
Consideration, and holder of such shares of Dissenting Common Stock
will be entitled to receive payment of the appraised value of such
shares of Dissenting Common Stock in accordance with the provisions
of such Section 262 unless and until such holders fail to perfect
or effectively withdraw or lose their rights to appraisal and
payment under the DGCL. If, after the Effective Time, any such
holder fails to perfect or effectively withdraws or loses such
right, such shares of Dissenting Common Stock will thereupon be
treated as if they had been converted into and have become
exchangeable for, at the Effective Time, the right to receive the
Cash Merger Consideration, without any interest thereon.
Notwithstanding anything to the contrary contained in this Section
2.6, if the Merger is not consummated, then the right of any
stockholder to be paid the fair value of such stockholder's
Dissenting Common Stock pursuant to Section 262 of the DGCL shall
cease. Expert will give Activision prompt notice of any demands
and withdrawals of such demands received by Expert for appraisals
of shares of Dissenting Common Stock. Expert shall not, except
with the prior written consent of Activision, make any payment with
respect to any demands for appraisal or offer to settle or settle
any such demands.
3. EXCHANGE OF SHARES
3.1. Exchange of Certificates.
a. Prior to the Effective Time, Activision shall
designate Continental Stock Transfer & Trust Company, or such other
bank or trust company as shall be reasonably acceptable to Expert,
to act as Exchange Agent in connection with the Merger (the
"Exchange Agent"). At, or immediately prior to, the Effective Time,
Activision will take all steps necessary to deposit with the
Exchange Agent for the benefit of the holders of Expert Shares (i)
certificates representing the aggregate number of shares of
Activision Common Stock issuable pursuant to Section 2.2 in
exchange for outstanding Expert Shares, cash in lieu of fractional
shares of Activision Common Stock, and any Cash Shortfall Payment,
or (ii) if Activision shall have made the Section 2.3 Election, the
Aggregate Cash Consideration (the shares or cash referred to in
clause (i) or (ii), as applicable, being hereinafter referred to as
the "Exchange Fund").
b. Promptly after the Effective Time, Activision and
the Surviving Corporation shall cause the Exchange Agent to mail to
each person who was a record holder, as of the Effective Time, of
an outstanding certificate or certificates which immediately prior
to the Effective Time represented Expert Shares (the
"Certificates"), a form letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent), instructions for use in
effecting the surrender of the Certificates in exchange for (i)
certificates evidencing Activision Shares, cash in lieu of
fractional shares in accordance with Section 2.2(e) and any Cash
Shortfall Payment, or (ii) the Per Share Cash Consideration, if
Activision has made the Section 2.3 Election. Upon surrender to
the Exchange Agent of a Certificate, together with such letter of
transmittal duly executed, and any other required documents, the
holder of such Certificate shall be entitled to receive in exchange
therefor (A) (i) a certificate representing the number of whole
shares of Activision Common Stock, if any, to which such holder
shall be entitled pursuant to Section 2.2, (ii) a check
representing the amount of cash in respect of fractional shares, if
any, to which such holder shall be entitled in accordance with
Section 2.2(e), (iii) any dividends or other distributions to which
such holder is entitled pursuant to Section 3.1(c), and (iv) a
check representing the amount of any Cash Shortfall Payment to
which such holder shall be entitled pursuant to Section 2.2(f) (the
Activision Shares and cash paid pursuant to Sections 2.2(e), 2.2(f)
and 3.1(c) being referred to, collectively as the "Exchange Merger
Consideration"), or (B) if Activision has made the Section 2.3
Election, a check representing the Per Share Cash Consideration to
which such holder shall be entitled (such cash payment is referred
to as the "Cash Merger Consideration" and the Exchange Merger
Consideration and the Cash Merger Consideration are sometimes
referred to as the "Applicable Merger Consideration"), and such
Certificate shall forthwith be canceled. No interest will be paid
or accrued on the Applicable Merger Consideration or payable upon
the surrender of the Certificates. If payment is to be made to a
person other than the person in whose name the Certificate
surrendered is registered, it shall be a condition of payment that
the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer as determined by the Exchange
Agent, and that the person requesting such payment shall pay any
transfer, or other taxes required by reason of the payment to a
person other than the registered holder of the Certificate
surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable.
Until surrendered in accordance with the provisions of this Section
3.1, each Certificate (other than Certificates representing
Canceled Expert Shares and other than Certificates representing
Dissenting Common Stock) shall represent for all purposes only the
right to receive the Applicable Merger Consideration, without any
interest thereon. In the event of a transfer of ownership of
Expert Shares which is not registered in the stock transfer records
of Expert, the amount and type of Applicable Merger Consideration
may be issued to such a transferee if the certificate representing
Expert Shares is presented to the Exchange Agent, accompanied by
all documents required to evidence and effect such transfer and to
evidence that any applicable stock transfer taxes have been paid.
c. No dividends or other distributions declared or
made after the Effective Time with respect to shares of Activision
Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to
the shares of Activision Common Stock they are entitled to receive
until the holder of such Certificate shall surrender such
Certificate. Subject to applicable law, following surrender of any
such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Activision Common Stock
issued in exchange therefor, without interest, at the time of such
surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect
to such whole shares of Activision Common Stock.
d. Any portion of the Exchange Fund that remains
unclaimed by the former stockholders of Expert one year after the
Effective Time shall be returned to Activision (provided that
Activision shall issue such shares of Activision Common Stock
and/or pay such cash in accordance with this Article 3 to former
stockholders of Expert who thereafter surrender their
Certificates), subject to the provisions and effect of applicable
abandoned property, escheat or similar laws. Any former
stockholders of Expert who have not theretofore complied with this
Article 3 shall thereafter look only to Activision for issuance or
payment of the Applicable Merger Consideration, without any
interest thereon. Neither the Surviving Corporation, the Exchange
Agent nor Activision shall be liable to any holder of an Expert
Share for any consideration set forth in Section 2.2 or Section 2.3
hereof delivered in respect of such Expert Share to a public
official pursuant to any abandoned property, escheat or other
similar law.
e. After the Effective Time there shall be no
registration on the share transfer books of the Surviving
Corporation of transfers of the Expert Shares which were
outstanding immediately prior to the Effective Time, and as of the
Effective Time, the share ledger of Expert shall be closed. All
Applicable Merger Consideration paid upon the surrender of
Certificates in accordance with the terms of this Article 3 shall
be deemed to have been paid in full satisfaction of all rights
pertaining to the Expert shares previously evidenced by
Certificates. After the Effective Time, the holders of Expert
Shares outstanding at the Effective Time shall cease to have any
rights with respect to such Expert Shares except as provided herein
or by applicable law. If, after the Effective Time, certificates
evidencing Expert Shares are presented to the Surviving
Corporation, they shall be canceled and exchanged for the
Applicable Merger Consideration as provided in this Article 3.
f. In the event any Certificates shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for
such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, (i) such shares of
Activision Common Stock as may be required pursuant to Section 2.2,
cash for fractional shares, as may be required by Section 2.2(e)
and any dividends or distributions payable pursuant to Section
3.1(c), or (ii) the Cash Merger Consideration, if Activision has
made the Section 2.3 Election, provided, however, that Activision
may, in its discretion and as a condition precedent to the issuance
and/or payment thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made
against Activision, the Surviving Corporation or the Exchange Agent
with respect to the Certificates alleged to have been lost, stolen
or destroyed.
4. REPRESENTATIONS AND WARRANTIES OF EXPERT
Expert hereby represents and warrants to Activision and Merger
Subsidiary as follows:
4.1. Organization; Good Standing; Authority; Compliance With
Law.
a. Expert is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now
conducted. Expert is duly licensed or qualified and is in good
standing to transact business as a foreign corporation in each
jurisdiction in which the character of the properties owned or
leased by it therein or in which the nature of its business makes
such qualification or licensing necessary, except where the failure
to be so licensed or qualified would not have, individually or in
the aggregate, an Expert Material Adverse Effect. For purposes of
this Agreement, an "Expert Material Adverse Effect" means a
material adverse effect on the business, assets (including
intangible assets), financial condition or results of operations of
Expert and the Expert Subsidiaries (as defined below) taken as a
whole; provided, however, that none of the following shall be
deemed by itself or by themselves, either alone or in combination,
to constitute an Expert Material Adverse Effect: (i) conditions
generally affecting the industry in which Expert operates,
including, without limitation, actual or proposed changes in law or
regulations or (ii) any effect that is related to a general drop in
stock prices in the United States resulting from political or
economic turmoil.
b. Each of the Expert Subsidiaries is a corporation or
partnership duly incorporated or organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation
or organization, has the corporate or partnership power and
authority to own its properties and to carry on its business as it
is now being conducted, and is duly qualified to transact business
and is in good standing in each jurisdiction in which the ownership
of its property or the conduct of its business requires such
qualification, except for jurisdictions in which such failure to be
so qualified or to be in good standing would not, individually or
in the aggregate, have an Expert Material Adverse Effect.
c. Except as set forth in Section 4.1(c) of the
disclosure letter delivered at or prior to the execution hereof to
Activision, which shall refer to the relevant sections of this
Agreement (the "Expert Disclosure Letter"), the business of Expert
and the Expert Subsidiaries has been operated in compliance with
all laws, ordinances, regulations and orders of all governmental
entities, except for violations which would not have, individually
or in the aggregate, an Expert Material Adverse Effect. Expert and
the Expert Subsidiaries have all permits, certificates, licenses,
approvals, consents and other authorizations (collectively,
"Government Approvals") of all governmental agencies, entities,
commissions, boards, bureaus, tribunals, officials or authorities,
whether Federal, state or local (collectively, "Governmental
Agencies"), required by law with respect to the operation of their
businesses, except those the absence of which would not,
individually or in the aggregate, have an Expert Material Adverse
Effect or prevent or delay consummation of the Merger. All such
Government Approvals are in full force and effect, and, Expert and
the Expert Subsidiaries are in compliance with all conditions and
requirements of the Government Approvals and with all rules and
regulations relating thereto, other than failures that would not
have an Expert Material Adverse Effect. Expert has not received
any notices of violations of any Federal, state and local laws,
regulations and ordinances relating to its business, operations or
assets which, if it were determined that a violation had occurred,
would have an Expert Material Adverse Effect.
d. The certificate of incorporation or other charter
documents, bylaws, organizational documents and partnership,
shareholder, joint venture or similar agreements (and in each such
case, all amendments thereto) of Expert and each of the Expert
Subsidiaries are listed in Section 4.1(d) of the Expert Disclosure
Letter, true and correct copies of which have previously been
delivered or made available to Activision and its counsel.
4.2. Authorization, Validity and Effect of Agreements.
Expert has the requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The Board of Directors of Expert has approved
this Agreement, the Merger, and the transactions contemplated by
this Agreement and has unanimously agreed to recommend that the
holders of Expert Shares adopt and approve this Agreement, the
Merger, and the transactions contemplated by this Agreement at the
Special Meeting (as defined in Section 6.2). Expert has taken all
action necessary to exempt the transactions contemplated by this
Agreement from the operation of any "fair price," "moratorium,"
"control share acquisition," or other similar anti-takeover statute
or regulation enacted under the state or federal laws of the
United States. As of the date hereof, each director and executive
officer of Expert and each entity that is a stockholder of Expert
and that has a representative on the Board of Directors has
indicated that he, she or it intends to vote all Expert Shares
that he, she or it controls to approve this Agreement, the Merger,
and the transactions contemplated by this Agreement at the Special
Meeting. Subject only to the approval of this Agreement and the
transactions contemplated hereby by the holders of a majority of
the outstanding Expert Shares and the filing and acceptance for
record of appropriate merger documents as required by the DGCL, the
execution by Expert of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly
authorized by all requisite action on the part of Expert. Assuming
this Agreement constitutes a valid and binding obligation of
Activision and Merger Subsidiary, this Agreement constitutes the
valid and legally binding obligation of Expert, enforceable against
Expert in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating
to creditors' rights and general principles of equity.
4.3. Capitalization. The authorized capital stock of Expert
consists of 30,000,000 Expert Shares and 1,000,000 shares of
preferred stock, par value $.01 per share (the "Expert Preferred
Shares") of which 25,000 shares are designated as Series A Junior
Participating Cumulative Preferred Stock. As of the date hereof,
there are not more than 7,627,881 Expert Shares issued and
outstanding and no Expert Preferred Shares issued and outstanding.
All such outstanding shares of Expert are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights.
Except as set forth in Section 4.3 of the Expert Disclosure Letter,
Expert 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 Expert on any matter. Except as set
forth in Section 4.3 of the Expert Disclosure Letter, 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 Expert to issue, transfer or sell any Expert Shares
or make any payments in lieu thereof, and Section 4.3 of the Expert
Disclosure Letter sets forth the exercise prices of all such
options, warrants or other rights or securities, the weighted
average exercise price of which is not less than $1.26 per share.
Except as set forth in Section 4.3 of the Expert Disclosure Letter,
there are no agreements or understandings to which Expert or any
Expert Subsidiary is a party with respect to the voting of any
Expert Shares or which restrict the transfer of any such shares,
nor does Expert have knowledge of any such agreements or
understandings with respect to the voting of any such shares or
which restrict the transfer of any such shares. There are no
outstanding contractual obligations of Expert or any Expert
Subsidiary to repurchase, redeem or otherwise acquire any Expert
Shares or any other securities of Expert or any Expert Subsidiary.
Except as set forth in Section 4.3 of the Expert Disclosure Letter,
neither Expert nor any Expert Subsidiary is under any obligation,
contingent or otherwise, by reason of any agreement to register any
of their securities under the Securities Act. Expert has delivered
to Activision complete and correct copies of all Expert option
plans and all forms of options issued pursuant to any Expert option
plan, including all amendments thereto. Section 4.3 of the Expert
Disclosure Letter contains a complete and correct list setting
forth as of the date hereof (i) the number of options and warrants
outstanding, (ii) the dates on which such options or warrants were
granted, (iii) the dates on which such options or warrants shall
vest and (iv) the exercise or conversion price of each outstanding
option or warrant, as the case may be.
4.4. Subsidiaries. Section 4.4 of the Expert Disclosure
Letter lists all Subsidiaries of Expert (the "Expert Subsidiaries"
and, individually, an "Expert Subsidiary"). Except as set forth in
Section 4.4 of the Expert Disclosure Letter, Expert owns directly
or indirectly all of the outstanding shares of capital stock or
other equity interests of each of the Expert Subsidiaries. All of
the outstanding shares of capital stock in each of the Expert
Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Section 4.4 of the Expert
Disclosure Letter, all of the outstanding shares of capital stock
of each of the Expert Subsidiaries owned, directly or indirectly,
by Expert are owned free and clear of all liens, pledges, security
interests, claims or other encumbrances. Except as set forth in
Section 4.4 of the Expert Disclosure Letter, there are no options,
warrants, calls, subscriptions, convertible securities, or other
rights, agreements or commitments which obligate Expert or any
Expert Subsidiary to issue, transfer or sell any shares of capital
stock of any Expert Subsidiary. The following information for each
Expert Subsidiary is set forth in Section 4.4 of the Expert
Disclosure Letter: (i) its name and jurisdiction of incorporation;
(ii) its authorized capital stock; and (iii) the name of each
stockholder and the number of issued and outstanding shares of
capital stock held by it.
4.5. Other Interests. Except for interests in the Expert
Subsidiaries, neither Expert nor any Expert Subsidiary owns
directly or indirectly any interest or investment (whether equity
or debt) in any corporation, partnership, joint venture, business,
trust or other entity (other than investments in short-term
investment securities).
4.6. No Violation. Except as set forth in Section 4.6 of the
Expert Disclosure Letter, neither the execution and delivery by
Expert of this Agreement nor the consummation by Expert of the
transactions contemplated by this Agreement in accordance with its
terms will: (i) conflict with or result in a breach of any
provisions of Expert's Certificate of Incorporation or Bylaws; (ii)
violate, result in a breach of any provision of, or constitute a
default under, or require any approval or consent under or result
in the termination or in a right of termination or cancellation of,
or accelerate the performance required by or result in a material
adverse change to, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties owned or
leased by Expert under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust or any
license, franchise, permit, lease, contract, agreement or other
instrument to which Expert or any of the Expert Subsidiaries is a
party, or by which Expert or any of the Expert Subsidiaries or any
of the properties owned or leased by Expert is bound or affected,
except for any of the foregoing matters in this clause which,
individually or in the aggregate, would not have an Expert Material
Adverse Effect; (iii) contravene or conflict with or constitute a
violation of any provision of any law, rule, regulation, judgment,
injunction, order or decree binding upon or applicable to Expert or
any Expert Subsidiary; or (iv) other than the filings provided for
in this Agreement, required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 0000 (xxx "XXX Xxx"), the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the Securities Act or
applicable state securities and "Blue Sky" laws (collectively, the
"Regulatory Filings"), 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 have an Expert
Material Adverse Effect.
4.7. SEC Documents. Since December 31, 1996, Expert has
timely filed with the Securities and Exchange Commission ("SEC")
all forms, reports and documents required to be filed by Expert
since December 31, 1996 under the Securities Act, the Exchange Act
and the rules and regulations promulgated thereunder (the
"Securities Laws"), including, without limitation, (i) all Annual
Reports 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 "Expert SEC
Reports"), all of which were prepared in compliance in all material
respects with the applicable requirements of the Exchange Act or
the Securities Act, as applicable. Expert has no knowledge that
any Expert SEC Reports required to be filed with the SEC prior to
December 31, 1996 have not been filed. As of their respective
dates, except as set forth in Section 4.11 of the Expert Disclosure
Letter, the Expert 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.
4.8. Financial Statements. Except as set forth in Section
4.11 of the Expert Disclosure Letter, each of the consolidated
balance sheets of Expert included in or incorporated by reference
into the Expert SEC Reports (including the related notes and
schedules) fairly presents the consolidated financial position of
Expert and the Expert 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 Expert 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 Expert and the Expert 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
applicable law. Except as set forth in Section 4.11 of the Expert
Disclosure Letter, the consolidated balance sheet as of December
31, 1998 of Expert (which is set forth in Section 4.8 of the Expert
Disclosure Letter) delivered to Activision prior to the date hereof
(including the related notes and schedules) (the "Recent Balance
Sheet") fairly presents the consolidated financial position of
Expert and the Expert Subsidiaries as of its date and the
consolidated statements of operations, cash flows and stockholders'
equity for the year ended December 31, 1998 of Expert delivered to
Activision prior to the date hereof (including any related notes
and schedules) (together with the Recent Balance Sheet, the "Recent
Financial Statements") fairly present the results of operations,
cash flows and shareholders' equity, as the case may be, of Expert
and the Expert Subsidiaries for the periods set forth therein, in
each case in accordance with generally accepted accounting
principles consistently applied during the periods involved.
4.9. Litigation. Except as set forth in Section 4.9 of the
Expert Disclosure Letter, there are (i) no continuing orders,
injunctions or decrees of any court, arbitrator or governmental
authority to which Expert or any Expert Subsidiary is a party or by
which any of its properties or assets are bound or likely to be
affected and (ii) no actions, suits or proceedings pending against
Expert or any Expert Subsidiary or to which any of their respective
properties or assets are subject or, to the knowledge of Expert,
threatened against Expert or any Expert Subsidiary 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 an Expert Material Adverse Effect.
4.10. Absence of Certain Changes. Except as set forth in
Section 4.10 of the Expert Disclosure Letter, since December 31,
1998, Expert and the Expert Subsidiaries have conducted their
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 Expert or any of the Expert
Subsidiaries;
b. amendment or change in the Certificate of
Incorporation or By-Laws of Expert or in any similar organizational
documents of any Expert Subsidiaries;
c. incurrence, creation or assumption by Expert or any
of the Expert Subsidiaries 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 Expert or any of the
Expert Subsidiaries; or (ii) any obligation or liability of any
indebtedness for borrowed money;
d. issuance or sale of any debt or equity securities
of Expert or any of the Expert Subsidiaries, or the issuance or
grant of any options, warrants or other rights to acquire from
Expert or any of the Expert Subsidiaries, directly or indirectly,
any debt or equity securities of Expert or any of the Expert
Subsidiaries (except upon the exercise of then outstanding Expert
Options and Expert Warrants);
e. payment or discharge by Expert or any of the Expert
Subsidiaries of any security interest, lien, claim, or encumbrance
of any kind on any asset or property of Expert or any of the Expert
Subsidiaries, or the payment or discharge of any liability that was
not either shown or reflected on the Recent Balance Sheet or
incurred in the ordinary course of Expert's business after the
December 31, 1998 in an amount in excess of $50,000 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 Expert
other than a license or sale of any product or products of Expert
or any of the Expert Subsidiaries made in the ordinary course of
Expert's business;
g. damage, destruction or loss of any property or
asset, whether or not covered by insurance, having (or likely with
the passage of time to have) an Expert Material Adverse Effect;
h. declaration, setting aside or payment of any
dividend on, or the making of any other distribution in respect of,
the capital stock of Expert, any split, combination or
recapitalization of the capital stock of Expert or any direct or
indirect redemption, purchase or other acquisition of the capital
stock of Expert or any change in any rights, preferences,
privileges or restrictions of any outstanding security of Expert;
i. increase in the compensation payable or to become
payable to any of the officers, directors, or employees of Expert
or any of the Expert Subsidiaries, or any bonus or pension,
insurance or other benefit payment or arrangement (including
without limitation stock awards, stock option grants, stock
appreciation rights or stock option grants) made to or with any of
such officers, employees or agents;
j. obligation or liability incurred by Expert or any
of its Subsidiaries 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
Expert's business consistent with past practice;
k. making by Expert or any of the Expert Subsidiaries
of any loan, advance or capital contribution to, or any investment
in, any officer, director or stockholder of Expert or any Expert
Subsidiary or any firm or business enterprise in which any such
person had a direct or indirect material interest at the time of
such loan, advance, capital contribution or investment;
l. entering into, amendment of, relinquishment,
termination or non-renewal by Expert or any Expert Subsidiary 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 Expert's or any Expert Subsidiary'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;
m. material change in the manner in which Expert or
any Expert Subsidiary extends discounts, credits or warranties to
customers or otherwise deals with its customers;
n. entering into by Expert or any of the Expert
Subsidiaries of any transaction, contract or agreement that by its
terms requires or contemplates a required minimum current and/or
future financial commitment, expenses (inclusive of overhead
expenses) or obligation on the part of Expert or any of the Expert
Subsidiaries involving in excess of $50,000 (provided that the
amount of such financial commitments and expenses for all such
transactions, contracts or agreements does not exceed $150,000 in
the aggregate) or that is not entered into in the ordinary course
of Expert's business, or the conduct of any business or operations
by Expert or any Expert Subsidiary that is other than in the
ordinary course of Expert's or such Expert Subsidiary's business; or
o. license, transfer or grant of a right under any
Expert Intellectual Property (as defined in Section 4.20 below),
other than those licensed, transferred or granted in the ordinary
course of business consistent with its past practices.
4.11. Taxes. Except as set forth in Section 4.11 of the
Expert Disclosure Letter or where such failure would not have,
individually or in the aggregate, an Expert Material Adverse Effect:
a. Expert and each of the Expert Subsidiaries 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 Sec. 1.1502-6 (and any similar
state, local or foreign provision)).
b. Expert and each of the Expert Subsidiaries has
timely filed all federal, state, local and foreign tax returns
(collectively "Tax Returns") required to be filed by any of them
through the date hereof, and all such returns accurately set forth
the amount of any Taxes relating to the applicable period.
c. Expert and each of the Expert Subsidiaries 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, shareholder or other party.
d. The Recent Financial Statements reflect adequate
reserves for Taxes payable by Expert and each Expert Subsidiary for
all taxable periods and portions thereof through the date of such
financial statements.
e. Since the date of the Recent Financial Statements,
each of Expert and the Expert Subsidiaries has made sufficient
accrual for Taxes in accordance with generally accepted accounting
principles with respect to periods for which Tax Returns have not
been filed.
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 Expert or any Expert Subsidiary 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 Expert or any Expert Subsidiary for periods after the
Effective Time pursuant to Section 7121 of the Code or any similar
provision under state, local or foreign tax laws.
h. No audit or other proceedings by any court,
governmental or regulatory authority or similar authority has
occurred, been asserted or is pending and none of Expert or any
Expert Subsidiary has received notice that any such audit or
proceeding may be commenced.
i. No election has been made or filed by or with
respect to, and no consent to the application of, Section 341(f)(2)
of the Code has been made by or with respect to, Expert, any Expert
Subsidiary or any of their properties or assets.
j. None of Expert or any Expert Subsidiary has agreed
to, or filed application for, or is required, to make any changes
or adjustment to its accounting method.
k. There is no contract, agreement, plan or
arrangement covering any person that, individually or collectively,
could give rise to the payment of any amount that would not be
deductible by Expert or any Expert Subsidiary by reason of Section
280G or Section 162(m) of the Code.
4.12. Books and Records.
a. The books of account and other financial records of
Expert and each of the Expert Subsidiaries 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 Expert SEC Reports and the Recent Financial
Statements.
b. The minute books and other records of Expert and
each of the Expert Subsidiaries that have been, or will be prior to
the Closing, made available to Activision, contain accurate records
of all meetings and accurately reflect all other action of the
stockholders and Board of Directors and any committees of the Board
of Directors of Expert and each of the Expert Subsidiaries.
4.13. Properties.
a. None of Expert or any of the Expert Subsidiaries
owns any real property, nor have they ever owned any real
property. Section 4.13(a) of the Expert Disclosure Letter sets
forth a list of all real property currently, or at any time in the
past five years, leased by Expert or any of the Expert
Subsidiaries, and, with respect to all real property currently
leased by Expert or any of the Expert Subsidiaries, the name of the
lessor, the date of the lease and each amendment thereto and the
aggregate annual rental and/or other fees payable under any such
lease. All such current leases are, to the knowledge of Expert, in
full force and effect, are valid and effective in accordance with
their respective terms, and there is not to the knowledge of Expert
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).
b. Expert and each of its Subsidiaries 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
Recent Financial Statements or in Section 4.13(b) of the Expert
Disclosure Letter 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.
4.14. Environmental Matters. Except as set forth in Section
4.14 of the Expert Disclosure Letter, neither Expert nor any of its
Subsidiaries is in violation of any laws, regulations, judgments or
consent decrees relating to hazardous substances or hazardous waste
(collectively, "Environmental Laws") which violation could
reasonably be expected to result in an Expert Material Adverse
Effect. Except as set forth in Section 4.14 of the Expert
Disclosure Letter, neither Expert, any of the Expert Subsidiaries,
nor, to the knowledge of Expert, any third party, has used,
released, discharged, generated, manufactured, produced, stored, or
disposed of in, on, or under or about its owned or leased property
or other assets, or transported thereto or therefrom, any hazardous
substances or hazardous wastes, including asbestos, lead and
petroleum, during the period of Expert's or the Expert Subsidiary's
ownership or lease of such property in a manner that could
reasonably be expected to subject Expert or any Expert Subsidiary
to a material liability under the Environmental Laws. None of
Expert or any of the Expert Subsidiaries has received written
notice from any governmental authority that any property owned or
leased by Expert or any of the Expert Subsidiaries is in violation
of any Environmental Laws. There is no pending civil, criminal or
administrative suit or other legal proceeding against Expert or any
of the Expert Subsidiaries with respect to any Environmental Laws.
Expert has provided Activision complete copies of all
environmental reports, assessments and studies in Expert's
possession and control with respect to properties owned or leased
by Expert or any Expert Subsidiary. As used in this Agreement, the
terms "hazardous substances" and "hazardous wastes" shall have the
meanings set forth in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, and the regulations
thereunder; the Resource Conservation and Recovery Act, as amended,
and the regulations thereunder; the Federal Clean Water Act, as
amended, and the regulations thereunder; the Clean Air Act, 42
U.S.C. Sections 7401 et seq.; the Federal Insecticide, Fungicide
and Rodenticide Act, 7 U.S.C. Sections 136 et seq.; the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. Sections 11001
et seq.; the Occupational Safety and Health Act of 1970; the
Hazardous Materials Transportation Act, as amended by the Hazardous
Materials Transportation Authorization Act of 1994, 49 U.S.C.
Sections 5101 et seq.; the Toxic Substances Control Act, 15 U.S.C.
Sections 2601 et seq.; the Oil Pollution Act of 1990, 33 U.S.C.
Sections 2701 et seq.; as each of these may be amended from time to
time; and any and state or local analogues to any of these statutes.
4.15. No Brokers. Neither Expert nor any of the Expert
Subsidiaries has entered into any contract, arrangement or
understanding with any person or firm that may result in the
obligation of such entity or Activision or Merger Subsidiary 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, except that Expert has retained Xxxxx Xxxxxxx Inc. ("Xxxxx
Xxxxxxx") pursuant to an engagement letter to act as its financial
advisor in connection with the transactions contemplated by this
Agreement. Expert 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 other than fees payable to Xxxxx Xxxxxxx as set forth in
Section 4.15 of the Expert Disclosure Letter, which shall not
exceed $650,000 plus expenses not in excess of $25,000.
4.16. Opinion of Financial Advisor. The Board of Directors of
Expert has received the opinion of Xxxxx Xxxxxxx, to the effect
that, as of the date hereof, the consideration to be received in
the Merger by the Expert stockholders is fair from a financial
point of view to holders of the Expert Shares.
4.17. Related Party Transactions. Section 4.17 of the Expert
Disclosure Letter sets forth all arrangements, agreements and
contracts or understandings entered into by Expert or any of the
Expert Subsidiaries (which are or will be in effect as of or after
the date of this Agreement) with (i) any consultant (X) involving
payments in excess of $60,000 or (Y) which may not be terminated at
will by Expert or the Expert Subsidiary which is a party thereto
without penalty, or (ii) any person who is an officer, director or
affiliate of Expert or any of the Expert Subsidiaries. All such
documents are listed in Section 4.17 of the Expert Disclosure
Letter and the copies of such documents, which have previously been
provided or made available to Activision and its counsel, are true
and correct copies. Except as disclosed in Section 4.17 of the
Expert Disclosure Letter, Expert (including all Expert
Subsidiaries) has not made any payments to, received any services
from, or is dependent on any services of, any affiliate of Expert
other than services provided by officers and directors in such
capacities and payments to such officers and directors of Expert in
such capacities.
4.18. Contracts and Commitments.
a. Except as set forth in Section 4.18(a) of the
Expert Disclosure Letter, neither Expert nor any of the Expert
Subsidiaries has, or is party to or is bound by:
(i) any consulting or sales agreement, contract or
commitment under which any firm or other organization provides
services to Expert or any of the Expert Subsidiaries;
(ii) any fidelity or surety bond or completion bond;
(iii) any agreement of indemnification or guaranty;
(iv) any agreement, contract, commitment,
transaction or series of transactions for any purpose other than in
the ordinary course of Expert's or any of the Expert Subsidiaries'
business relating to capital expenditures or commitments or
long-term obligations in excess of $50,000;
(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 Expert's or any
of the Expert Subsidiaries' business.
(vi) any mortgages, indentures, loans or credit
agreements, security agreements or other arrangements or
instruments relating to the borrowing of money or extension of
credit, including guaranties referred to in clause (iii) hereof:
(vii) any purchase order or contract for the
purchase of inventory or other materials involving $50,000 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 $50,000 or more or is not cancelable without penalty
in excess of $50,000 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 an Expert Material Adverse Effect, all such
Contracts are valid and binding on Expert and are in full force and
effect and enforceable against Expert in accordance with their
respective terms. Except as disclosed in Section 4.18(b) of the
Expert Disclosure Letter, no approval or consent of, or notice to
any Person the failure of which to obtain would have an Expert
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 transactions contemplated by this
Agreement. Except to the extent any of the following would not
individually or in the aggregate have an Expert Material Adverse
Effect, Expert is not in violation of, breach of or default under
any such Contract nor, to Expert's knowledge, is any other party to
any such Contract. Except as set forth in Section 4.18 of the
Expert Disclosure Letter, Expert 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.
4.19. Employee Matters and Benefit Plans.
a. Definitions. With the exception of the definition
of "Affiliate" set forth in Section 4.19(a)(i) below (which
definition shall apply only to this Section 4.19), 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
Expert or any Subsidiary 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 Expert or any Subsidiary
or any Affiliate:
(iii) "Employee Agreement" shall refer to any
material management, employment, severance, consulting, relocation,
repatriation, expiration, visas, work permit or similar agreement
or contract between Expert or any Subsidiary 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 Expert or any of its Subsidiaries or any
Affiliate for the benefit of any "Employee" (as defined below), and
pursuant to which Expert or any Subsidiary 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 Expert
and Subsidiary Employee Plan which is an "employee pension benefit
plan," within the meaning of Section 3(2) of ERISA.
b. Section 4.19(b) of the Expert Disclosure Letter
contains an accurate and complete list of each Employee Plan
(including for each such plan a description of any of the benefits
of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement of the value of any of the benefits
of which will be calculated on the basis of any transactions
contemplated by this Agreement) and each Employee Agreement of
Expert. Except as set forth in Section 4.19(b) of the Expert
Disclosure Letter, neither Expert nor any of its Subsidiaries or
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 Expert 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. Expert has provided to Activision
correct and complete copies of all material documents embodying or
relating to each Employee Plan and each Employee Agreement
including: (i) all amendments thereto and written interpretations
thereof; (ii) the most recent annual actuarial valuations, if any,
prepared for each Employee Plan; (iii) the three most recent annual
reports (Series 5500 and all schedules thereto), if any, required
under ERISA or the Code in connection with each Employee Plan or
related trust; (iv) if the Employee Plan is funded, the most recent
annual and periodic accounting of Employee Plan assets; (v) the
most recent summary plan description together with the most recent
summary of material modifications, if any, required under ERISA
with respect to each Employee Plan; (vi) all IRS determination
letters and rulings relating to Employee Plans and copies of all
applications and correspondence to or from the IRS or the
Department of Labor ("DOL") with respect to any Employee Plan;
(vii) all communications material to any Employee or Employees
relating to any Employee Plan and any proposed Employee Plans, in
each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of
payments or vesting schedules or other events which would result in
any material liability to Expert or any Expert Subsidiary; and
(viii) all registration statements and prospectuses prepared in
connection with each Employee Plan.
d. Employee Plan Compliance. (i) Except as set forth
in Section 4.19(d) of the Expert Disclosure Letter, Expert and each
of the Expert Subsidiaries and 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 Expert,
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 Expert or any of the
Expert Subsidiaries 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 Expert, threatened by the IRS or DOL with respect
to any Employee Plan; (vi) neither Expert nor any of its
Subsidiaries is subject to any penalty or tax with respect to any
Employee Plan under Section 402(i) of ERISA or Section 4975 through
4980 of the Code; and (vii) all contributions, including any top
heavy contributions, required to be made prior to the Closing by
Expert or any ERISA Affiliate to any Employee Plan have been made
or shall be made on or before the Closing Date.
e. Pension Plans. Neither Expert nor any of the
Expert Subsidiaries or 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 Expert or any
of the Expert Subsidiaries or Affiliates contributed to or been
requested or obligated to contribute to any Multiemployer Plan.
g. No Post-Employment Obligations. Except as set
forth in Section 4.19(g) of the Expert Disclosure Letter or as
required by local, state or federal law, no Employee Plan or any
other employment agreement or arrangement to which Expert 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 Expert
and each of the Expert Subsidiaries has never represented, promised
or contracted (whether in oral or written form) to any Employee
(either individually or to Employees as a group) that such
Employee(s) would be provided with life insurance, medical or other
employee welfare benefits upon their retirement or termination of
employment.
h. Effect of Transaction. The execution of this
Agreement and the consummation of the transactions contemplated
hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any
Employee Plan, Employee Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to
any Employee, except as set forth in Schedule 4.19(h) of the Expert
Disclosure Letter.
i. Employment Matters. Expert and each of the Expert
Subsidiaries (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 have an Expert 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).
j. Labor. No work stoppage or labor strike against
Expert or any Expert Subsidiary is pending or, to the knowledge of
Expert, threatened. Neither Expert nor any of the Expert
Subsidiaries is involved in or, to the knowledge of Expert,
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 an Expert Material Adverse
Effect. Neither Expert nor any of the Expert Subsidiaries has
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 an Expert Material Adverse
Effect. Neither Expert nor any of the Expert Subsidiaries or
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. Section 4.19(k) of the Expert Disclosure Letter
sets forth (i) the aggregate amounts of bonus and severance
payments that could be payable to employees of Expert 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 Expert
under existing Employee Agreements and Employee Plans on account of
terminations of employment following the Effective Time, separately
stating the amounts that are payable by reason of a termination
following a change of control of Expert.
4.20. Intellectual Property.
a. For the purposes of this Agreement, the following
terms have the following definitions:
(i) "Intellectual Property" shall mean any or all
of the following and all rights in, arising out of, or associated
therewith: (a) all United States, international and foreign
patents and applications therefor and all reissues, divisions,
renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (b) all inventions (whether
patentable or not), invention disclosures, improvements, trade
secrets, proprietary information, know how, technology, technical
data, customer lists, proprietary processes and formulae, all
source and object code, algorithms, architectures, structures,
display screens, layouts, inventions, development tools and all
documentation and media constituting, describing or relating to the
above, including, without limitation, manuals, memoranda and
records; (c) all copyrights, copyrights registrations and
applications therefor, 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; and (g)
any equivalent rights to any of the foregoing anywhere in the world.
(ii) "Expert Intellectual Property" shall mean that
Intellectual Property owned by, licensed to, or used by Expert or
any of the Expert Subsidiaries.
(iii) "Expert 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. All of the foregoing are listed in Section
4.20(a)(iii) of the Expert Disclosure Letter.
b. Section 4.20(b) of the Expert Disclosure Letter
lists all non-routine proceedings or actions known to Expert before
any court, tribunal (including the United States Patent and
Trademark Office ("PTO") or equivalent authority anywhere in the
world) related to any Expert Intellectual Property. No Expert
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 Expert or any of the Expert Subsidiaries, or which may affect
the validity, use or enforceability of such Expert Intellectual
Property.
c. With respect to each item of Expert Registered
Intellectual Property, necessary registration, maintenance and
renewal fees in connection with such Expert Registered Intellectual
Property have been made and all necessary documents and
certificates in connection with such Expert Registered Intellectual
Property have been filed with the relevant patent, trademark or
copyright authorities in the United States or abroad for the
purposes of maintaining such Expert Registered Intellectual
Property.
d. Expert and each Expert Subsidiary has the right to
use, market, distribute, sell or license all Expert 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 Expert Products (as defined below), and such rights to use,
market, distribute, sell or license are sufficient for such conduct
of their respective businesses.
e. Neither the manufacture, development, publication,
marketing, license, sale, distribution or use intended by the
Expert or any of the Expert Subsidiaries of any software products
currently being licensed, produced or sold by Expert or any of the
Expert Subsidiaries or currently under development or consideration
by Expert or any of the Expert Subsidiaries (the "Expert Products")
violates any license or agreement between Expert or any of the
Expert Subsidiaries and any third party or infringes any
Intellectual Property right, moral right or right of publicity or
privacy of any other party, and there is no pending or, to the
knowledge of Expert, threatened claim or litigation contesting the
validity, ownership or right to use, market, distribute, sell,
license or dispose of any Expert Intellectual Property nor, to the
knowledge of Expert, is there any basis for any such claim under
applicable law, nor has Expert or any of the Expert Subsidiaries
received any notice asserting that any Expert 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 Expert, is there any
basis for any such assertion under applicable law. Section 4.20(e)
of the Expert Disclosure Letter sets forth a list of all Expert
Products.
f. Expert and the Expert Subsidiaries have timely and
satisfactorily complied with their respective milestone delivery
requirements under all material agreements pursuant to which Expert
or any of the Expert Subsidiaries, as the case may be, has agreed
to program, design or develop on behalf of a third party, 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 have an Expert
Material Adverse Effect.
g. Except as set forth in Section 4.20(g) of the
Expert Disclosure Letter, to the extent that any work, invention,
or material has been developed or created by a third party for
Expert or any of the Expert Subsidiaries, Expert and each of the
Expert Subsidiaries has a written agreement with such third party
with respect thereto and Expert and each of the Expert Subsidiaries
thereby has obtained ownership of, and is the exclusive owner of,
or has a valid license to use, all Expert Intellectual Property in
such work, material or invention by operation of law or by valid
assignment or by agreement, as the case may be.
h. Section 4.20(h) of the Expert Disclosure Letter
lists all material contracts, licenses and agreements to which
Expert or any of the Expert Subsidiaries is a party that are
currently in effect (i) with respect to Expert Intellectual
Property licensed or offered to any third party; or (ii) pursuant
to which a third party has licensed or transferred any Intellectual
Property to Expert or any of the Expert Subsidiaries. Except as
set forth in Section 4.20(h) of the Expert Disclosure Letter,
neither Expert nor any of the Expert Subsidiaries has transferred
ownership of, or granted any exclusive license with respect to, any
Expert Intellectual Property, to any third party.
i. Except as set forth in Section 4.20(i) of the
Expert Disclosure Letter, the contracts, licenses and agreements
listed in Section 4.20(h) 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 Section 4.20(i) and will not
cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any rights of Expert to any Expert
Intellectual Property or impair the right of Expert or any of the
Expert Subsidiaries or the Surviving Corporation to use, market,
distribute, sell or license any Expert Intellectual Property or
portion thereof. Expert and each of the Expert Subsidiaries is in
material compliance with, and has not materially breached any term
any of such contracts, licenses and agreements listed in Section
4.20(i) and, to the knowledge of Expert, all other parties to such
contracts, licenses and agreements listed in Section 4.20(i) are in
compliance with, and have not breached any term of, such contracts,
licenses and agreements. Except as set forth in Section 4.20(i) of
the Expert Disclosure Letter, following the Effective Time the
Surviving Corporation will be permitted to exercise all of Expert's
and each of the Expert Subsidiaries', if any, rights under the
contracts, licenses and agreements listed in Section 4.20(h) to the
same extent Expert and such Expert Subsidiary 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 Expert or such Expert Subsidiary
would otherwise be required to pay.
j. Section 4.20(j) of the Expert Disclosure Letter
lists all contracts, licenses and agreements between Expert or any
of its Subsidiaries and any third party wherein or whereby Expert
or any of its Subsidiaries has agreed to, or assumed, other than in
the ordinary course of business, 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 Expert or any of the Expert Subsidiaries or
such third party of the Intellectual Property of any third party.
k. Except as set forth in Section 4.20(k) of the
Expert Disclosure Letter, (a) Expert and each of the Expert
Subsidiaries (including each of their executive officers, directors
and, to the knowledge of Expert, employees) has not received any
notice or claim (whether written, oral or otherwise) challenging
Expert's ownership or rights in the Expert Intellectual Property or
claiming that any other person or entity has any legal or
beneficial ownership with respect thereto; (b) all the Expert
Intellectual Property rights owned by Expert and embodied in its
products are legally valid and enforceable without any material
qualification, limitation or restriction on their use, and Expert
has not received any notice or claim (whether written or oral)
challenging the validity or enforceability of any of the Expert
Intellectual Property rights; and (c) to Expert's knowledge, no
third party is infringing or misappropriating any part of the
Expert Intellectual Property.
l. Expert and each of the Expert Subsidiaries has
taken reasonable and practicable measures designed to protect their
respective rights in their respective confidential information and
trade secrets or any trade secrets or confidential information of
third parties provided to Expert or any of the Expert
Subsidiaries. None of Expert or any of the Expert Subsidiaries, or
any employees or, to Expert's knowledge, consultants of Expert or
any of the Expert Subsidiaries, 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 Expert or
any of the Expert Subsidiaries.
m. Section 4.20(n) of the Expert Disclosure Letter
sets forth a list of all Internet domain names used by Expert in
its business (collectively, the "Domain Names"). Expert 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 Expert's
business as it is currently conducted.
4.21. Anti-Takeover Plan. Except for the Shareholders' Rights
Agreement dated November 9, 1995 between Expert and The First
National Bank of Boston (the "Rights Agreement") or as set forth in
Section 4.21 of the Expert Disclosure Letter, neither Expert nor
any Expert Subsidiary has in effect any plan, scheme, device or
arrangement, commonly or colloquially known as a "poison pill" or,
an "anti-takeover" plan or any similar plan, scheme, device or
arrangement. Under the Rights Agreement, as a result of the Merger
or the execution of this Agreement, neither Activision nor any
stockholder of Activision or any Affiliate or Associate (as such
terms are defined in the Rights Agreement) of Activision or of any
such stockholder of Activision will become an "Acquiring Person";
no "Stock Acquisition Date" or "Distribution Date" (as such terms
are defined in the Rights Agreement) will occur; and the holders of
any rights issued pursuant to the Rights Agreement will not be
entitled to receive any benefits under the Rights Agreement as a
result of the approval, execution or delivery of this Agreement or
the consummation of the transactions contemplated hereby. From and
after the date of this Agreement until the Effective Time, Expert
shall not take any action that would cause, as a result of the
Merger or the execution of this Agreement, Activision or any
stockholder of Activision or any Affiliate or Associate of
Activision or of any such stockholder to become an "Acquiring
Person" under the Rights Agreements, or that would cause a "Stock
Acquisition Date" or "Distribution Date" to occur or give the
holders of any Rights (as such term is defined in the Rights
Agreement) any benefits under the Rights Agreement, as a result of
the Merger or any of the transactions contemplated by this
Agreement.
4.22. Shareholder Vote Required. The only vote of the holders
of any class or shares of capital stock of Expert necessary to
approve the Merger and the transactions contemplated by this
Agreement is the affirmative vote of holders of a majority of the
outstanding Expert Shares.
4.23. Undisclosed Liabilities. Except as and to the extent
reflected, reserved against or otherwise disclosed in The Recent
Financial Statements (including the notes thereto) or as set forth
in Section 4.23 of the Expert Disclosure Letter, neither Expert nor
any Expert Subsidiary had, at December 31, 1998, any liabilities or
obligations of any kind, whether accrued, absolute, asserted or
unasserted, contingent or otherwise, whether or not such
liabilities would have been required to be reflected in a balance
sheet prepared in accordance with generally accepted accounting
principles consistently applied, which would have, individually or
in the aggregate, an Expert Material Adverse Effect.
4.24. Insurance. Expert 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, errors and
omissions and general liability in amounts Expert reasonably
believes adequate for its business and operations, and its current
insurance policies (other than directors' and officers' insurance)
will not terminate due to the consummation of the Merger. Section
4.24 of the Expert Disclosure Letter sets forth a summary of all
current insurance policies (including, without limitation, limits,
deductibles and terms) maintained by Expert and the Expert
Subsidiaries.
4.25. Tax Treatment. To Expert's knowledge, neither Expert
nor any of the Expert Subsidiaries has taken any action or engaged
in any activities that would preclude the treatment of the Merger
as a reorganization under Section 368(a) of the Code. In addition,
neither Expert nor any of the Expert Subsidiaries has any plan or
intention to take any action or engage in any activities that would
preclude the treatment of the Merger as a reorganization under
Section 368(a) of the Code.
4.26. Relationships with Suppliers, Licensors and Customers.
No current distributor, customer of Expert or supplier to Expert or
any of the Expert Subsidiaries has notified Expert or such Expert
Subsidiary of an intention to terminate or substantially alter its
existing business relationship with Expert or such Expert
Subsidiary, nor has any licensor under a license agreement with
Expert or any of the Expert Subsidiaries notified Expert or such
Expert Subsidiary of an intention to terminate or substantially
alter Expert's or such Expert Subsidiary's rights under such
license, which termination or alteration would have an Expert
Material Adverse Effect.
4.27. Bank Accounts. Section 4.27 of the Expert Disclosure
Letter contains (a) a true and complete list of names and locations
of all banks, trust companies, securities brokers, and other
financial institutions at which Expert and each Expert Subsidiary
has an account or safe deposit box or maintains a banking,
custodial, trading, trust, or other similar relationship, (b) a
true and complete list and description of each such account, box
and relationship, (c) a list of all signatories for each such
account and box and (d) a list of all compensating balances
required with respect to each such account.
4.28. Year 2000 Problem. Except as set forth in Section 4.28
of the Expert Disclosure Letter, each hardware, software and
firmware product used by Expert or any Expert Subsidiary in its
business and all Expert Products (collectively, the "Software")
will accurately process date data (including, but not limited to,
calculating, comparing and sequencing) from, into and between the
twentieth and twenty-first centuries, including, without
limitation, leap year calculations, without a decrease in the
functionality of the Software except for such inaccuracies that do
not have an Expert Material Adverse Effect. Except as set forth in
Section 4.28 of the Expert Disclosure Letter, the Software is
designed to be used prior to, during and after the calendar year
2000 A.D. and will operate during each such time period without
error relating to date data, specifically including any error
relating to, or the product of, date data which represents or
references different centuries or more than one century except for
such errors as do not have an Expert Material Adverse Effect.
Without limiting the generality of the foregoing, except as set
forth in Section 4.28 of the Expert Disclosure Letter, the Software
(a) will not abnormally end or provide invalid or incorrect results
as a result of date data, specifically including date data which
represents or references different centuries or more than one
century and (b) has been designed to ensure year 2000
compatibility, including, but not limited to, date data century
recognition, calculations which accommodate same century and
multi-century formulas and date values, and date data interface
values that reflect the century.
5. REPRESENTATIONS AND WARRANTIES OF ACTIVISION AND MERGER SUBSIDIARY
Activision and Merger Subsidiary hereby represent and
warrant to Expert as follows:
5.1. Organization; Good Standing; Authority; Compliance
With Law.
a. Activision is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and Merger Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware. Each of Activision and Merger Subsidiary has all
requisite power and authority to own, lease and operate its
properties and to carry on its business as now conducted.
Activision is duly licensed or qualified and is in good standing to
transact business as a foreign corporation in each jurisdiction in
which the character of the properties owned or leased by it therein
or in which the nature of its business makes such qualification or
licensing necessary, except where the failure to be so licensed or
qualified would not have, individually or in the aggregate, an
Activision Material Adverse Effect. For purposes of this
Agreement, an "Activision Material Adverse Effect," means a
material adverse effect on the business, assets (including
intangible assets), financial condition or results of operations of
Activision and its Material Activision Subsidiaries (as defined
below), taken as a whole.
b. Each of Activision's material Subsidiaries (the
"Material Activision Subsidiaries") is a corporation or partnership
duly incorporated or formed, validly existing and in good standing
under the laws of its jurisdiction of incorporation or formation,
has the corporate or partnership power and authority to own its
properties and to carry on its business as it is now being
conducted, and is duly qualified to transact business and is in
good standing in each jurisdiction in which the ownership of its
property or the conduct of its business requires such
qualification, except for jurisdictions in which such failure to be
so qualified or to be in good standing would not have, individually
or in the aggregate, an Activision Material Adverse Effect. Each
of the Material Activision Subsidiaries is wholly-owned, directly
or indirectly, by Activision (other than directors' qualifying
shares).
c. Except as described in the Activision SEC Reports
(as defined below), the business of Activision and the Material
Activision Subsidiaries has been operated in compliance with all
laws, ordinances, regulations and orders of all governmental
entities, except for violations which would not have, individually
or in the aggregate, an Activision Material Adverse Effect.
Activision and the Material Activision Subsidiaries have all
Government Approvals of all Governmental Agencies, required by law
with respect to the operation of their businesses, except those the
absence of which would not, individually or in the aggregate, have
an Activision Material Adverse Effect or prevent or delay
consummation of the Merger. All such Government Approvals are in
full force and effect, and Activision and the Material Activision
Subsidiaries are in compliance with all conditions and requirements
of the Government Approvals and with all rules and regulations
relating thereto other than failures that would not have an
Activision Material Adverse Effect. Activision has not received
any notices of violations of any Federal, state and local laws,
regulations and ordinances relating to its business, operations or
assets which, if it were determined that a violation had occurred,
would have an Activision Material Adverse Effect.
d. The Certificate of Incorporation or other charter
documents and Bylaws (and in each such case, all amendments
thereto) of Activision are described in the Activision SEC Reports,
and true and correct copies have previously been delivered or made
available to Expert and its counsel.
5.2. Authorization, Validity and Effect of Agreements.
Activision and Merger Subsidiary each has the requisite corporate
power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. To the extent
required by law, the Board of Directors of each of Activision and
Merger Subsidiary have approved this Agreement, the Merger, and the
transactions contemplated by this Agreement. No vote of the
Activision stockholders is required to approve the issuance of the
Activision Common Stock as contemplated by this Agreement. The
execution by Activision and Merger Subsidiary of this Agreement and
the consummation of the transactions contemplated by this Agreement
have been duly authorized by all requisite action on the part of
Activision and Merger Subsidiary. Assuming this Agreement
constitutes a valid and binding obligation of expert, this
Agreement constitutes the valid and legally binding obligation of
Activision and Merger Subsidiary, enforceable against Activision
and Merger Subsidiary in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
5.3. Capitalization. (a) The authorized capital stock of
Activision consists of 50,000,000 shares of Activision Common
Stock and 5,000,000 shares of preferred stock, $.000001 par value
(the "Activision Preferred Shares"). As of the date hereof, there
are not more than 22,509,792 shares of Activision Common Stock
issued and outstanding and no Activision Preferred Shares issued
and outstanding. All such outstanding shares of Activision are
duly authorized, validly issued, fully paid, nonassessable and free
of preemptive rights. The authorized capital stock of Merger
Subsidiary consists of 1,000 shares of common stock, par value
$1.00. As of the date hereof, 100 shares of common stock of Merger
Subsidiary are issued and outstanding, fully paid and
non-assessable and owned by Activision. Except as described in the
Activision SEC Reports, 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, 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 granted to employees, directors and
consultants after the date of the most recent SEC Report.
(b) The shares of Activision Common Stock to be issued
pursuant to the Merger will be duly authorized, validly issued,
fully paid and unassessable and free of preemptive rights of any
nature.
(c) As of the date hereof, Activision has outstanding
and effective three employee or director stock purchase or option
plans, each of which has been approved and adopted by the Board of
Directors of Activision and approved by the stockholders of
Activision: (i) the 1991 Stock Option and Stock Award Plan (the
"Option Plan"), (ii) the Employee Stock Purchase Plan (the "ESPP"),
and (iii) the 1998 Incentive Plan (the "Incentive Plan"). The
Option Plan, as amended, authorizes the granting of options and
other awards with respect to an aggregate of 7,566,677 shares of
Activision Common Stock. As at December 31, 1998, no shares were
available for grant under the Option Plan. The Incentive Plan
authorizes the granting of options and other awards with respect to
an aggregate of 3,000,000 shares of Activision Common Stock. As at
December 31, 1998, there were an aggregate of 1,667,950 remaining
shares of Activision Common Stock reserved and available for grant
under the Incentive Plan. The Option Plan and the ESPP are
described in Activision's Annual Report on Form 10-K for the fiscal
year ended March 31, 1998. The Incentive Plan is described in
Activision's definitive proxy statement for its annual meeting of
stockholders held on September 23, 1998.
5.4. No Violation. Neither the execution and delivery by
Activision and Merger Subsidiary of this Agreement nor the
consummation by Activision and Merger Subsidiary of the
transactions contemplated by this Agreement in accordance with its
terms will: (i) conflict with or result in a breach of any
provisions of Activision's or Merger Subsidiary's respective
certificate of incorporation or by-laws; (ii) violate, result in a
breach of any provision of, or constitute a default under, or
require any approval or consent under or result in the termination
or in a right of termination or cancellation of, or accelerate the
performance required by or result in a material adverse change to,
or result in the creation of any lien, security interest, charge or
encumbrance upon any of Activision's or Merger Subsidiary's
properties under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust or any license,
franchise, permit, lease, contract, agreement or other instrument
to which Activision or Merger Subsidiary is a party, or by which
Activision or Merger Subsidiary or any of their properties is bound
or affected, except for any of the foregoing matters in this clause
which, individually or in the aggregate, would not have an
Activision Material Adverse Effect; (iii) contravene or conflict
with or constitute a violation of any provision of any law, rule,
regulation, judgment, injunction, order or decree binding upon or
applicable to Activision or Merger Subsidiary; or (iv) other than
the filings provided for in this Agreement and the Regulatory
Filings, 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 have an Activision
Material Adverse Effect.
5.5. Tax Treatment. Neither Activision nor Merger Subsidiary
has taken any action or engaged in any activities that would
preclude the treatment of the Merger as a reorganization under
Section 368(a) of the Code other than, if applicable, making a
Section 2.3 Election. In addition, neither Activision nor Merger
Subsidiary has engaged in or planned to engage in any activities
that would preclude the treatment of the Merger as a reorganization
under Section 368(a) of the Code.
5.6. SEC Documents. Since March 31, 1997, Activision has
timely filed with the SEC all forms, reports and documents
required to be filed by Activision since March 31, 1997 under the
Securities Laws, including, without limitation, (i) all Annual
Reports 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. Activision has no knowledge that any
Activision SEC Reports required to be filed with the SEC prior to
March 31, 1997 have not been filed. As of their respective dates,
except as set forth in Section 5.6 of the disclosure letter
delivered at or prior to the execution hereof to Expert, which
shall refer to the relevant sections of this Agreement (the
"Activision Disclosure Letter"), 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 shareholders' 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 shareholders' 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.
5.7. Financial Statements. Except as set forth in Section
5.7 of the Activision Disclosure Letter, 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 the Material Actvision 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 the Material Activision 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 applicable law.
5.8. Litigation. Except as set forth in Section 5.8 of the
Activision Disclosure Letter, there are (i) no continuing orders,
injunctions or decrees of any court, arbitrator or governmental
authority to which Activision or any Material Activision Subsidiary
is a party or by which any of its properties or assets are bound or
likely to be affected and (ii) no actions, suits or proceedings
pending against Activision or any Material Activision Subsidiary as
to which any of their respective properties or assets are subject
or, to the knowledge of Activision threatened against Activision or
any Material Activision Subsidiary 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 an Activision Material Adverse Effect.
5.9. Absence of Certain Changes. Except as disclosed in the
Activision SEC Reports filed with the SEC prior to the date hereof,
since December 31, 1998, Activision and the Material Activision
Subsidiaries have conducted their 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 Activision and the Material
Activision Subsidiaries, taken as a whole, provided, however, that
none of the following, in and of itself, shall constitute a
material adverse change within the meaning of this clause (a): (i)
a change in the market price of Activision Common Stock; (ii) a
report of quarterly or fiscal year earnings for any period that are
lower than the comparable previous period or lower than analysts'
expectations, provided, that this clause (ii) shall not be
applicable with respect to a fiscal quarter if Activision reports a
net loss for such fiscal quarter in excess of $.05 per share on a
fully diluted basis; and (iii) the consummation by Activision or
its subsidiaries of an acquisition, disposition, financing or
similar transaction approved by Activision's Board of Directors;
b. amendment or change in the Certificate of
Incorporation or By-Laws of Activision;
c. except as set forth in Section 5.9(c) of the
Activision Disclosure Letter, issuance or sale of any debt or
equity securities of Activision or any of its Subsidiaries, other
than exercises of stock options, or any options, warrants or other
rights to acquire from Activision or any of its Subsidiaries,
directly or indirectly, any debt or equity securities of Activision
or any of its Subsidiaries, other than the granting of stock
options to employees, directors and consultants;
d. 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 of
Activision set forth in Article 5 of this Agreement untrue or
incorrect as of the date when made; or
e. declaration, setting aside or payment of any
dividend on, or the making of any other distribution in respect of,
the capital stock of Activision, any split, combination or
recapitalization of the capital stock of Activision or any direct
or indirect redemption, purchase or other acquisition of the
capital stock of Activision or any change in any rights,
preferences, privileges or restrictions of any outstanding security
of Activision.
5.10. Ownership of Expert Shares. As of the date hereof, and
during the three (3) year period immediately preceding the date
hereof, neither Activision nor, to Activision's knowledge, any
affiliate or associate (as defined in Section 203 of the DGCL)
thereof, is an "interested stockholder" of Expert within the
meaning of Section 203 of the DGCL.
5.11. No Brokers. Neither Activision nor Merger Subsidiary
has entered into any contract, arrangement or understanding with
any person or firm which may result in the obligation of such
entity or Expert 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 Activision nor Merger
Subsidiary is aware of any claim for payment directly by Activision
or Merger Subsidiary 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.
5.12. Intellectual Property. Except as set forth in Section
5.12 of the Activision Disclosure Letter, Activision owns or is
licensed or otherwise possesses legally enforceable rights to use,
sufficient patents, trademarks, trade names, trade secrets, service
marks, copyrights, and any applications therefor, schematics,
methodologies, technology, know-how, computer software programs or
applications, and tangible or intangible proprietary information or
material that are required for the conduct of business of
Activision as currently conducted and contemplated (the "Activision
Intellectual Property Rights"), except where the failure to own,
license or otherwise possess such rights is not reasonably likely
to have an Activision Material Adverse Affect. Except as set forth
in the Activision Disclosure Letter or as would otherwise not have
an Activision Material Adverse Effect, either individually or in
the aggregate, no claims with respect to Activision Intellectual
Property Rights have been asserted or are, to Activision's
knowledge, threatened by any person. To Activision's knowledge,
all U.S. registered copyrights, issued patents and trademarks held
by Activision are valid and subsisting and have been properly
maintained and renewed in accordance with all applicable provisions
of law and administrative regulations of the United States and
other jurisdictions, as applicable, except where the failure to
maintain and renew the same has not and is not reasonably likely to
have an Activision Material Adverse Effect. Except as set forth in
Section 5.12 of the Activision Disclosure Letter, to Activision's
knowledge, the present and contemplated business, activities and
products of Activision do not infringe any intellectual property of
any other person. Except as set forth in Section 5.12 of the
Activision Disclosure Letter, no proceeding charging Activision
with infringement of the intellectual property rights of any other
person has been filed or, to Activision's knowledge, is threatened
to be filed.
5.13. Anti-Takeover Matters. Activision has taken all action
necessary to exempt the transactions contemplated by this Agreement
from the operation of any "fair price," "moratorium," "control
share acquisition," or other similar anti-takeover statute or
regulation enacted under the state or federal laws of the United
States. Neither Activision nor any Material Activision Subsidiary
has in effect any plan, scheme, device or arrangement commonly or
colloquially known as a "poison pill" or an "anti-takeover" plan or
any similar plan, scheme, device or arrangement.
5.14. No Shareholder Vote Required. No vote of the holders of
any class of capital stock of Activision is required to approve the
Merger.
5.15. Undisclosed Liabilities. Except as set forth in Section
5.15 of the Activision Disclosure Letter and except as and to the
extent reflected, reserved against or otherwise disclosed in
Activision's consolidated balance sheet dated December 31, 1998
(including the notes thereto), Activision and its consolidated
subsidiaries did not, at December 31, 1998, have any liabilities or
obligations of any kind, whether accrued, absolute, asserted or
unasserted, contingent or otherwise, whether or not such
liabilities would have been required to be reflected in a balance
sheet prepared in accordance with generally accepted accounting
principles consistently applied, which would have, individually or
in the aggregate, an Activision Material Adverse Effect.
5.16. Continuity of Business Enterprise. It is the present
intention of Activision to continue at least one significant
historic business line of Expert, or to use at least a significant
portion of Expert's historic assets in a business, in each case
within the meaning of the United States Treasury Regulations
Section 1.368-1(d).
6. COVENANTS AND OTHER AGREEMENTS
6.1. Conduct of Businesses.
a. General. During the period from the date of this
Agreement until the Effective Time, except as specifically
permitted by this Agreement, unless the other party has consented
in writing thereto:
(i) Expert and Activision shall use their
reasonable best efforts, and shall cause their respective
Subsidiaries to use their reasonable best efforts, to preserve
intact their business organizations and goodwill;
(ii) Expert and Activision shall confer on a
regular basis with one or more representatives of the other to
report on material operational matters relating to the business of
Expert and the Expert Subsidiaries;
(iii) Activision will cooperate with and, at the
request of Expert, provide reasonable assistance to Expert to seek
to reduce or avoid disruptions to Expert's business that may result
from or arise out of the announcement or pendency of the
transactions contemplated hereby; provided that Expert shall
reimburse Activision for any costs and expenses directly incurred
by Activision in connection with providing any such assistance
(such as personnel expenses for any Activision employees that may
be used by Expert in connection with its business), and Activision
shall not be required to incur any material expenses or liabilities
in connection with such cooperation or assistance;
(iv) Expert and Activision shall promptly notify
the other of any material emergency or other material change in the
condition (financial or otherwise), business, properties, assets,
liabilities or the normal course of its businesses or in the
operation of their properties, any material governmental
complaints, investigations or hearings (or communications
indicating that the same may be contemplated);
(v) Expert and Activision shall promptly deliver
to the other true and correct copies of any report, statement or
schedule filed with the SEC subsequent to the date of this
Agreement; and
(vi) In the event either party becomes aware that
any of its respective representations or warranties set forth in
Sections 4 and 5 hereof will not be true and correct in all
material respects on the Closing Date as if made at and as of the
Closing Date, such party shall give prompt written notice thereof
to the other party, and shall give access to all appropriate
information related thereto that is in its possession or control.
b. Conduct by Expert. Prior to the Closing Date,
without the prior consent of Activision, Expert:
(i) Shall, and shall cause each Expert Subsidiary
to, conduct its operations according to their usual, regular and
ordinary course in substantially the same manner as heretofore
conducted and keep available the services of its officers and
employees;
(ii) Shall not amend Expert's Certificate of
Incorporation or By-laws, and shall cause each Expert Subsidiary
not to amend its certificates of incorporation, bylaws or
equivalent organizational documents;
(iii) Shall not, and shall cause each Expert
Subsidiary not to, (A) issue or authorize for issue any Expert
Shares (except for shares issued upon the exercise of currently
outstanding share options therefor) or any security convertible
into or exercisable for the foregoing, effect any share split,
reverse share split, share dividend, recapitalization or other
similar transaction or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for Expert
Shares or shares of any Expert Subsidiary, (B) grant, confer or
award any option, warrant, conversion right or other right not
existing on the date hereof to acquire, redeem or repurchase any
Expert Shares, except that Expert may grant options to purchase up
to an aggregate of 40,000 Expert Shares under the Expert 1992 Stock
Option Plan or the Expert 1997 Stock Option Plan to new or
replacement employees provided such options (x) do not provide for
accelerated vesting upon a change of control, (y) provide for an
exercise price no less than fair market value at the date of grant,
and (z) otherwise contain terms that are consistent with Expert's
past practice, (C) increase any compensation or enter into or amend
any employment agreement with any of its present or future
officers, directors or employees except that Expert may engage in
its annual compensation review process consistent with past
practice and make appropriate increases in compensation not in
excess of 5% in the aggregate and not in excess of 5% in the
aggregate for any department or similar business unit, provided
that Expert shall consult with Activision prior to effecting any
such compensation increases, (D) adopt any new employee benefit
plan or (except as contemplated in this Agreement) amend any
existing Employee Plan or severance or termination pay policies in
any material respect, except for changes which are less favorable
to participants in such plans; or (E) authorize, declare, set aside
or pay any dividends or make any other distribution or payments
with respect to any Expert Shares, directly or indirectly redeem,
purchase or otherwise acquire any Expert Shares or shares of any of
the Expert Subsidiaries, or make any commitment for any such action;
(iv) Shall not, and shall not permit any of the
Expert Subsidiaries to, pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by,
the Recent Financial Statements (or the notes thereto) or incurred
after the date thereof in the ordinary course of business
consistent with past practice;
(v) Shall not, and shall not permit any of the
Expert Subsidiaries to, enter into or amend, modify or terminate
any contract which may result in total fixed or guaranteed payments
or liability by or to it in excess of $100,000 other than contracts
for expenses of attorneys and accountants incurred in connection
with the Merger;
(vi) Shall not, and shall not permit any of the
Expert Subsidiaries to, enter into any contract with any officer,
trustee, director, consultant or affiliate of Expert or any of the
Expert Subsidiaries;
(vii) Shall, and shall cause each Expert Subsidiary
to, timely prepare, in a manner consistent with past practice, and
file all Tax Returns required to be filed the due date of which
(including reasonable extensions) occurs on or before the Effective
Time and pay all Taxes due with respect to any such Tax Returns;
(viii) Shall not make or rescind any express or
deemed election relating to Taxes, settle or compromise any claim,
suit, litigation, proceeding, investigation, audit or controversy
relating to Taxes (unless required by law);
(ix) Shall not enter into, terminate or materially
amend or renew any contract other than with third parties in the
ordinary course of operating its business consistent with past
practice; and
(x) Shall not incur any indebtedness or other
obligation for borrowed money other than trade payables and other
accruals made in the ordinary course of business consistent with
past practice; provided, however, that Activision shall not
unreasonably withhold its consent to borrowings by Expert under its
existing line of credit with First National Bank of Boston for
working capital purposes.
6.2. Meeting of Stockholders. Expert will take all action
necessary in accordance with applicable law and its Certificate of
Incorporation, to convene a special meeting of its stockholders
(the "Special Meeting") as promptly as practicable to consider and
vote upon the approval of this Agreement and the transactions
contemplated hereby. The Board of Directors of Expert shall
recommend that its stockholders approve this Agreement and the
transactions contemplated hereby and Expert shall use its
reasonable best efforts to obtain such approval; provided, however,
that nothing contained in this Section 6.2 shall prohibit the
Directors of Expert from failing to make such recommendation or
using their reasonable best efforts to obtain such approval if the
Directors of Expert have determined in good faith, based upon the
advice of its outside legal counsel, that such action is necessary
for such Directors to comply with their fiduciary duties to
Expert's stockholders under applicable law.
6.3. Filings; Other Action.
a. Subject to the terms and conditions herein
provided, Expert and Activision shall: (i) to the extent required,
promptly, but in no event later than March 31, 1999, make their
respective filings and thereafter make any other required
submissions under the HSR Act with respect to the Merger; (ii) use
all reasonable best efforts to cooperate with one another in (x)
determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective
Time from, governmental or regulatory authorities of the United
States, the several states and any third parties in connection with
the execution and delivery of this Agreement, the consummation of
the transactions contemplated by this Agreement and (y) timely
making all such filings and timely seeking all such consents,
approvals, permits or authorizations; (iii) use all reasonable best
efforts to obtain in writing any consents required from third
parties to effectuate the Merger, such consents to be in form
reasonably satisfactory to Expert and Activision; and (iv) use all
reasonable best efforts to take, or cause to be taken, all other
actions and do, or cause to be done, all other things necessary,
proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement. If, at any time after
the Effective Time, any further action is necessary or desirable to
carry out the purpose of this Agreement, the proper officers and
directors Activision and Expert shall take all such necessary
action.
b. As promptly as practicable following the date
hereof, but in no event prior to March 31, 1999 or such earlier
date as Activision makes the Section 2.3 Election or definitively
notifies Expert in writing that it will not make such election, and
in any event prior to April 30, 1999, Expert and Activision shall
prepare and file with the SEC (with appropriate requests for
confidential treatment, unless the parties hereto otherwise agree)
under the Exchange Act, a proxy statement/prospectus (or in the
event Activision makes the Section 2.3 Election, a proxy statement)
and forms of proxies (such proxy statement/prospectus or proxy
statement and forms of proxy, together with any amendments or
supplements thereto, the "Proxy Statement") relating to the Special
Meeting and the vote of the stockholders of Expert with respect to
this Agreement and the transactions contemplated by this
Agreement. Promptly after clearance by the SEC of the Proxy
Statement, unless Activision has made the Section 2.3 Election,
Activision shall prepare and thereafter file with the SEC under the
Securities Act a registration statement on Form S-4 (such
registration statement, together with any amendments or supplements
thereto, the "Form S-4"), in which the Proxy Statement will be
included as a prospectus, in connection with the registration under
the Securities Act of the Activision Shares to be issued to the
stockholders of Expert in the Merger (such Activision Shares
referred to herein as the "Registered Securities"). Activision and
Expert will cause the Proxy Statement and the Form S-4 to comply as
to form in all material respects with the applicable provisions of
the Securities Act and the Exchange Act and the rules and
regulations thereunder. Each of Activision, on the one hand, and
Expert, on the other hand, shall furnish all information about
itself and its business and operations and all necessary financial
information to the other as the other may reasonably request in
connection with the preparation of the Proxy Statement and if
applicable the Form S-4. If applicable, Activision shall use its
reasonable best efforts, and Expert will cooperate with it, to have
the Form S-4 declared effective by the SEC as promptly as
practicable (including clearing the Proxy Statement with the SEC).
Each of Activision and Expert agrees promptly to correct any
information provided by it for use in the Proxy Statement and if
applicable the Form S-4 if and to the extent that such information
shall have become false or misleading in any material respect, and
each of the parties hereto further agrees to take all steps
necessary to amend or supplement the Proxy Statement and if
applicable the Form S-4 and to cause the Proxy Statement and if
applicable the Form S-4, as so amended or supplemented, to be filed
with the SEC and to be disseminated to the Expert stockholders, in
each case as and to the extent required by applicable federal and
state securities laws and the DGCL. Each of Activision and Expert
agrees that the information provided by it for inclusion in the
Proxy Statement and if applicable the Form S-4 and each amendment
or supplement thereto at the time of mailing of the Proxy Statement
or effectiveness of the Form S-4 will not include 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
therein, in light of the circumstances under which they were made,
not misleading. Each of Activision and Expert will advise the
other parties, and deliver copies (if any) to them, promptly after
receipt thereof, of (i) any request by or correspondence or
communication from the SEC with respect to the Proxy Statement and
if applicable the Form S-4, (ii) any responses thereto and
(iii) notice of the time when the Form S-4 has become effective or
any supplement or amendment has been filed, the issuance of any
stop order, and the suspension of the qualification of the
Registered Securities for offering or sale in any jurisdiction.
Expert shall use its best efforts to timely mail the Proxy
Statement to its stockholders.
6.4. Access to Information.
a. Upon reasonable notice and subject to restrictions
contained in confidentiality agreements by which Expert and
Activision are bound, Expert and Activision shall (and shall cause
their respective subsidiaries to) afford to the officers,
employees, accountants, counsel and other representatives of the
other reasonable access, during normal business hours during the
period prior to the Effective Time, to all their properties, books,
contracts, commitments and records and permit such persons to make
such inspections as they may reasonably require and, during such
period, each of Expert and Activision shall (and shall cause their
respective subsidiaries to) furnish promptly to the other all
information concerning its business, properties and personnel as
the other may reasonably request; provided that if a party is
withholding information because it is obligated to do so pursuant
to a confidentiality agreement by which it is bound, the party
shall give the other notice of such withholding.
b. All such information shall be Evaluation Material,
as defined in the Non-Disclosure Agreement (as defined in Section
9.5), except as otherwise provided in such Non-Disclosure
Agreement. In the event of termination of this Agreement for any
reason each party shall promptly return all Evaluation Material
obtained from the other, and any copies made of, or reports or
analyses based on, such Evaluation Material, to the other and not
use any such Evaluation Material for any purpose that would be
competitive with or cause material harm to the other.
6.5. Publicity. Activision and Expert 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.
6.6. Listing of Activision Common Stock. Activision shall
use its reasonable best efforts to cause the Activision Shares to
be listed, upon official notice of issuance, on NASDAQ prior to the
Effective Time.
6.7. Further Action. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the
conditions of performance set forth herein or the waiver thereof,
perform such further acts and execute such documents as may
reasonably be required to effect the Merger. In connection with
the Closing, Expert and each Expert Subsidiary shall use its
reasonable best efforts to deliver to Activision such bills of
sale, assignments, certificates, affidavits and indemnities as are
required to effectuate the consummation of the transactions
described herein.
6.8. Tax Treatment. The parties hereto shall provide any
certificates, representations, or information reasonably requested
by counsel for the parties for the purpose of rendering the tax
opinions, if applicable, described in Sections 7.2(d) and 7.3(d).
Unless and until Activision makes a Section 2.3 Election, no party
shall take any action either prior to or after the Effective Time
that could reasonably be expected to cause the Merger to fail to
qualify as a "reorganization" under Section 368(a) of the Code.
Expert covenants that at the time of the Merger, its assets will
satisfy the "substantially all" test within the meaning of Revenue
Procedure 77-37, 1977-2 C.B. 568.
6.9. Other Offers. From the date hereof until the termination
of this Agreement, Expert and the Expert Subsidiaries will not, and
will use their best efforts to cause their officers, directors,
employees, controlling stockholders, agents or representatives
(including, without limitation, any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to,
directly or indirectly, (i) take any action to solicit, initiate,
encourage or facilitate any inquiries or the making or
implementation of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) with respect
to a merger, acquisition, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the
assets or any equity securities of, Expert or any of the Expert
Subsidiaries (any such proposal or offer being hereinafter referred
to as an "Acquisition Proposal") or (ii) engage in any negotiations
concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal. Expert will promptly cease and
cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to
any of the foregoing and will take the necessary steps to inform
the individuals or entities referred to above of the obligations
undertaken in this Section 6.9. Expert will notify Activision
promptly if any such inquiries or proposals are received by, any
such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, it;
provided, however, that nothing contained in this Section 6.9 shall
prohibit the Board of Directors of Expert from (i) furnishing
information to or entering into discussions or negotiations with,
any person or entity that makes an unsolicited bona fide proposal
to acquire Expert pursuant to a merger, consolidation, share
exchange, purchase of a substantial portion of the assets or stock,
business combination or other similar transaction, if, and only to
the extent that, (A) the Board of Directors of Expert determines in
good faith that such action is required for the Board of Directors
to comply with its fiduciary duties to stockholders under
applicable law as advised by outside legal counsel to Expert,
(B) prior to furnishing such information to, or entering into
discussions or negotiations with, such person or entity, Expert
provides written notice to Activision to the effect that it is
furnishing information to, or entering into discussions or
negotiations with, such person or entity, and (C) subject to any
confidentiality agreement with such person or entity (which the
Board of Directors of Expert determined in good faith was required
to be executed in order for the Board of Directors to comply with
its fiduciary duties to stockholders imposed by law as advised by
outside legal counsel to Expert), Expert keeps Activision informed
of the status (not the terms) of any such discussions or
negotiations; and (ii) to the extent applicable, complying with
Rules 14d-9 and 14e-2 promulgated under the Exchange Act with
regard to an Acquisition Proposal. Notwithstanding anything to the
contrary in this Agreement, the Board of Directors of Expert shall
be permitted from time to time to take the following actions in the
circumstances described below: (i) to withdraw or modify in a
material and negative respect its approval or recommendation of
this Agreement or the Merger in a manner adverse to Activision or
(ii) to approve or recommend or enter into an agreement with
respect to an Acquisition Proposal if, in each such case, (x) an
Acquisition Proposal is publicly proposed, publicly disclosed or
communicated to Expert and (y) the Board of Directors of Expert
determines in good faith, based on the advice of its outside legal
counsel, that such action is required in order to comply with its
fiduciary duties to the stockholders of Expert. No action by the
Board of Directors of Expert permitted by the preceding sentence
(each, a "Permitted Action") shall constitute a breach of this
Agreement by Expert, provided that such Permitted Action shall give
rise to the rights of Activision set forth in Section 8.3. hereof.
6.10. Notice of Certain Events.
a. Expert shall as promptly as reasonably practicable
notify Activision of: (i) any notice or other communication from
any person alleging that the consent of such person (or another
person) is or may be required in connection with the transactions
contemplated by this Agreement; (ii) any notice or other
communication from any governmental or regulatory agency or
authority in connection with the transactions contemplated by this
Agreement; (iii) any actions, suits, claims, investigations or
proceedings commenced or threatened against, relating to or
involving or otherwise affecting Expert or any Expert Subsidiary
that, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 4.9 or which
relate to the consummation of the transactions contemplated by this
Agreement; and (iv) of any fact or occurrence between the date of
this Agreement and the Effective Time of which it becomes aware
which makes any of its representations and warranties contained in
this Agreement untrue in any material respect (without regard to
any materiality qualification contained in such representation or
warranty) or causes any breach of its obligations under this
Agreement in any material respect (without regard to any
materiality qualification contained in such obligation).
b. Each of Activision and Merger Subsidiary shall as
promptly as reasonably practicable notify Expert of: (i) any notice
or other communication from any person alleging that the consent of
such person (or another person) is or may be required in connection
with the transactions contemplated by this Agreement, (ii) any
notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions
contemplated by this Agreement; (iii) any actions, suits, claims,
investigations or proceedings commenced or threatened against,
relating to or involving or otherwise affecting Activision or
Merger Subsidiary that, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to Section
5.8 or which relate to the consummation of the transactions
contemplated by this Agreement; and (iv) of any fact or occurrence
between the date of this Agreement and the Effective Time of which
it becomes aware which makes any of its representations and
warranties contained in this Agreement untrue in any material
respect (without regard to any materiality qualification contained
in such representation or warranty) or causes any breach of its
obligations under this Agreement in any material respect (without
regard to any materiality qualification contained in such
obligation).
6.11. Affiliate Letters. Unless Activision makes the Section
2.3 Election, at least 30 days prior to the Closing Date, Expert
shall deliver to Activision a list of names and addresses of the
executive officers, directors and those persons who were, in
Expert's reasonable judgment, at the record date for the Special
Meeting, "Affiliates" (each such person, an "Affiliate") of Expert
within the meaning of Rule 145 of the rules and regulations
promulgated under the Securities Act. Expert shall use its
reasonable best efforts to deliver or cause to be delivered to
Activision prior to the Closing Date, from each of the Affiliates
of Expert identified in the foregoing list, an Affiliate Letter in
the form attached hereto as Exhibit A. Activision shall be entitled
to place legends as specified in such Affiliate Letters on the
certificates evidencing any Activision Shares to be received by
such Affiliates pursuant to the terms of this Agreement and to
issue appropriate stock transfer instructions to the transfer agent
for the Activision Common Stock consistent with the terms of such
Affiliate Letter.
6.12. Termination of Amended and Restated Stockholders'
Agreement. Expert shall obtain on or before the Closing Date the
approval of the stockholders of Expert parties to that certain
Amended and Restated Stockholders' Agreement dated October 31, 1995
(the "Stockholders' Agreement"), holding a majority of the
Registrable Securities (as defined in the Stockholders' Agreement)
outstanding to amend the Stockholders' Agreement to provide that it
shall terminate upon the consummation of the transactions
contemplated by this Agreement.
6.13. Indemnification and Insurance.
a. The By-Laws and Certificate of Incorporation of the
Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the By-Laws and Certificate of
Incorporation of Expert, which provisions shall not be amended,
repealed or otherwise modified for a period of six (6) years from
the Effective Time in any manner that would adversely affect the
rights thereunder as of the Effective Time of individuals who at
the Effective Time were directors, officers, employees or agents of
the Company, unless such modification is required after the
Effective Time by law.
b. Notwithstanding the foregoing, the Surviving
Corporation shall, to the fullest extent permitted under applicable
law or under the Surviving Corporation's Certificate of
Incorporation or By-Laws, indemnify and hold harmless, each
present and former director, officer or employee of Expert or any
of its Subsidiaries (collectively, the "Indemnified Parties")
against any costs or expenses (including attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, (x) arising out of or pertaining
to the transactions contemplated by this Agreement or (y) otherwise
with respect to any acts or omissions occurring at or prior to the
Effective Time, to the same extent as provided in Expert's
Certificate of Incorporation or By-Laws or any applicable contract
or agreement as in effect on the date hereof, in each case for a
period of six (6) years after the Effective Time. In the event of
any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) the Indemnified
Parties may retain as its counsel Xxxxxxx, Procter & Xxxx LLP, or
other counsel reasonably satisfactory to the Surviving
Corporation, (ii) after the Effective Time, the Surviving
Corporation shall advance to the Indemnified Party the reasonable
fees and expenses of such counsel, and other reasonable costs
incurred in the defense of such matter, and (iii) the Surviving
Corporation will cooperate in the defense of any such matter;
provided, however, that the Surviving Corporation shall not be
liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld); and provided,
further, that, in the event that any claim or claims for
indemnification are asserted or made within such six (6) year
period, all rights to indemnification in respect of any such claim
or claims shall continue until the disposition of any and all such
claims. The Indemnified Parties as a group may retain only one law
firm to represent them in each applicable jurisdiction with respect
to any single action unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties, in which case
each Indemnified Person with respect to whom such a conflict exists
(or group of such Indemnified Persons who among them have no such
conflict) may retain one separate law firm in each applicable
jurisdiction.
c. This Section 6.13 shall survive the consummation of
the Merger at the Effective Time, is intended to benefit Expert,
the Surviving Corporation and the Indemnified Parties, shall be
binding on all successors and assigns of the Surviving Corporation
and Activision and shall be enforceable by the Indemnified Parties.
d. Activision shall, until the sixth anniversary of
the Effective Time, cause to be maintained in effect, to the extent
available, the policies of directors' and officers' liability
insurance maintained by Expert and the Expert Subsidiaries as of
the date hereof (or policies of at least the same coverage and
amounts containing terms that are not less advantageous to the
insured parties) with respect to claims arising from facts that
occurred on or prior to the Effective Time, including without
limitation all claims based upon, arising out of, directly or
indirectly resulting from, in consequence of, or in any way
involving the Merger and any and all related events. In lieu of
the purchase of such insurance by Activision, Activision may
purchase a six-year extended reporting period endorsement
("Reporting Tail Coverage") under Expert's existing directors' and
officers' liability insurance coverage, providing that such
Reporting Tail Coverage shall extend the directors' and officers'
liability coverage in force as of the date hereof for a period of
at least six (6) years from the Effective Time for any claim based
upon, arising out of, directly or indirectly resulting from, in
consequence of, or any way involving wrongful acts or omissions
occurring or prior to the Effective Time, including without
limitation all claims based upon, arising out of, directly or
indirectly resulting from, in consequence of, or any way involving
the Merger or any and all related events. Expert shall cooperate
with Activision in obtaining such insurance coverage.
6.14. Employee Matters. As soon as practicable after the
Effective Time, Activision or the Surviving Corporation shall
provide the employees of Expert ("Expert Employees") with the same
401(k) plan, health, dental, stock option plan, stock purchase
plan, life insurance, vacation, disability plan, dependent care
plan, travel accident plan, accidental death and dismemberment
plan, education reimbursement plan and other benefits, if any, as
Activision then provides generally to its employees. With respect
to the provision of such benefits to Expert Employees, all prior
service of the Expert Employees with Expert shall be recognized
under such plans for purposes of eligibility and vesting, and all
prior service of the Expert Employees with Expert shall be
recognized for purposes of determining such employees' vacation
entitlement under Activision's vacation plans and policies and for
purposes of vesting under Activision's 401(k) plan. Neither
Activision nor the Surviving Corporation shall treat any Expert
Employees as a "new" employee for purposes of any exclusion under
any health, dental or vision plan of Activision or the Surviving
Corporation, as the case may be, for a pre-existing medical
condition.
6.15. Employment Agreements; Non-Competition Agreements.
Contemporaneously with the execution of this Agreement, each of
Xxxxxxx Xxxxxxx, Xxxxx Xxxxxxx and four (4) additional Senior
Employees of Expert have executed employment agreements in forms
approved by Activision, and Xxxxxxx Xxxxxxx and Xxxxx Xxxxxxx have
executed a non-competition agreement in form approved by
Activision. Expert shall use its reasonable best efforts, subject
to the covenants contained in this Agreement, including Section
6.1(b)(iii), to cause such agreements to be in full force and
effect as of the Closing Date.
7. CONDITIONS
7.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the
Merger and the other transactions contemplated herein shall be
subject to the fulfillment at or prior to the Closing Date of the
following conditions, any or all of which may be waived, in whole
or in part by the parties hereto, to the extent permitted by
applicable law:
a. Shareholder Approval. This Agreement and the
transactions contemplated hereby shall have been approved by the
requisite vote of stockholders of Expert.
b. HSR Act. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or
been terminated.
c. Effectiveness of the Registration Statement;
Clearance of the Proxy Statement. Unless Activision shall have made
the Section 2.3 Election, the Registration Statement on Form S-4
shall have been declared effective by the SEC under the Securities
Act. In the event Activision shall have made the Section 2.3
Election, the Proxy Statement shall have been cleared by the SEC.
No stop order suspending the effectiveness of the Registration
Statement (if applicable) shall have been issued by the SEC, and no
proceeding for that purpose and no similar proceeding in respect of
the Proxy Statement shall have been initiated or, to the knowledge
of Activision or Expert, threatened by the SEC.
d. Governmental Actions. None of the parties hereto
shall be subject to any order, ruling or injunction of a court of
competent jurisdiction which restrains or prohibits the
consummation of the transactions contemplated by this Agreement (an
"Injunction"). In the event any such Injunction shall have been
issued, each party agrees to use its reasonable best efforts to
have any such Injunction lifted, stayed or reversed.
7.2. Conditions to Obligations of Expert to Effect the
Merger. The obligation of Expert to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the
following conditions, unless waived by Expert:
a. Each of the representations and warranties of
Activision contained in this Agreement shall be true and correct as
of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date, except to the extent that any
changes, circumstances or events making such representations and
warranties not true or correct would not, individually or in the
aggregate, constitute an Activision Material Adverse Effect
(without regard to any materiality qualification contained in such
representation or warranty), and Expert shall have received a
certificate, dated the Closing Date, signed on behalf of Activision
by the Co-Chairman, President, Chief Financial Officer or General
Counsel of Activision to the foregoing effect.
b. Activision shall have performed or complied in all
material respects (without regard to any materiality qualification
contained in such representation or warranty) with all agreements
and covenants required by this Agreement to be performed or
complied with by it on or prior to the Closing Date, and Expert
shall have received a certificate, dated the Closing Date, signed
on behalf of Activision by the Co-Chairman, President, Chief
Financial Officer or General Counsel of Activision to the foregoing
effect.
c. From the date of this Agreement through the
Effective Time and, except as disclosed in the Activision
Disclosure Letter and the Activision SEC Reports filed prior to the
date of this Agreement, since December 31, 1998 there shall not
have occurred any change, circumstance or event concerning
Activision and its consolidated subsidiaries, taken as a whole,
that has had or could be reasonably likely to have an Activision
Material Adverse Effect, and Expert shall have received a
certificate, dated the Closing Date, signed on behalf of Activision
by the Co-Chairman, President, Chief Financial Officer or General
Counsel of Activision to the foregoing effect; provided, however,
that for purposes of this Section 7.2(c), (i) a change in the
market price of the Activision Common Stock; (ii) a report of
quarterly or fiscal year earnings for any period that are lower
than the comparable previous period or lower than analysts'
expectations (provided that this clause (ii) shall not be
applicable with respect to a fiscal quarter if Activision reports a
net loss for such fiscal quarter in excess of $.05 per share on a
fully diluted basis); or (iii) the consummation by Activision or
its affiliates of an acquisition, disposition, financing or similar
transaction approved by Activision's Board of Directors, in each
case in and of itself, shall not be deemed an Activision Material
Adverse Effect.
d. Unless Activision shall have made the Section 2.3
Election, Expert shall have received a written opinion from its
counsel, Xxxxxxx, Procter & Xxxx LLP, in form and substance
reasonably satisfactory to it, to the effect that the Merger will
constitute a tax free reorganization within the meaning of Section
368(a) of the Code and such opinion shall not have been withdrawn;
provided, however, that if such counsel does not render such
opinion, this condition shall nonetheless be deemed to be satisfied
with respect to Expert if counsel to Activision renders such
opinion to Expert. Each party agrees to make all reasonable
representations as requested by such counsel for the purpose of
rendering such opinion.
e. Activision shall have caused the Activision Shares
to be listed, subject to official notice of issuance, on NASDAQ.
7.3. Conditions to Obligation of Activision and Merger
Subsidiary to Effect the Merger. The obligations of Activision and
Merger Subsidiary to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following
conditions, unless waived by Activision:
a. Each of the representations and warranties of
Expert contained in this Agreement shall be true and correct as of
the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date, except to the extent that any
changes, circumstances or events making such representations and
warranties not true or correct would not, individually or in the
aggregate, constitute an Expert Material Adverse Effect (without
regard to any materiality qualification contained in such
representation or warranty), and Activision shall have received a
certificate, dated the Closing Date, signed on behalf of Expert by
the Chief Executive Officer of the President of Expert to the
foregoing effect. Notwithstanding any provision of this Agreement
to the contrary, a breach or violation of the representations and
warranties of Expert set forth in the first five sentences of
Section 4.3 or of the covenants set forth in Section
6.1(b)(iii)(A), (B), (D) and (E) shall be deemed to have an Expert
Material Adverse Effect.
b. Expert shall have performed or complied in all
material respects (without regard to any materiality qualification
contained in such representation or warranty) with all agreements
and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time, and
Activision shall have received a certificate, dated the Closing
Date, signed on behalf of Expert by the Chief Executive Officer or
the President of Expert to the foregoing effect.
c. From the date of this Agreement through the
Effective Time and, except as disclosed in the Expert Disclosure
Letter or in the Expert SEC Reports filed prior to the date of this
Agreement, since December 31, 1998 there shall not have occurred
any change, circumstance or event, concerning Expert, any of the
Expert Subsidiaries, that has had or could be reasonably likely to
have an Expert Material Adverse Effect and Activision shall have
received a certificate, dated the Closing Date, signed on behalf of
Expert by the Chief Executive Officer or the President of Expert to
the foregoing effect.
d. Unless Activision has made the Section 2.3
Election, Activision shall have received a written opinion from its
counsel, Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP, in form
and substance reasonably satisfactory to it, to the effect that the
Merger will constitute a tax free reorganization within the meaning
of Section 368(a) of the Code and such opinion shall not have been
withdrawn; provided, however, that if such counsel does not render
such opinion, this condition shall nonetheless be deemed to be
satisfied with respect to Activision if counsel to Expert renders
such opinion to Activision. Each party agrees to make all
reasonable representations as requested by such counsel for the
purpose of rendering such opinion.
e. As of the Closing Date, neither Xxxxxxx Xxxxxxx nor
Xxxxx Xxxxxxx shall have terminated their employment with Expert
and the respective employment agreements and non-competition
agreement of Xxxxxxx Xxxxxxx and Xxxxx Xxxxxxx described in Section
6.15 shall be in full force and effect.
f. Activision shall have received from each of the
persons named in the list provided pursuant to Section 6.12 hereof
an executed copy of an Affiliate Letter substantially in the form
of Exhibit A attached hereto.
g. The Stockholders' Agreement shall have been
terminated as set forth in Section 6.13 hereof.
h. In the event Activision shall have made the Section
2.3 Election, holders of no more than 5% of the Expert Shares shall
have demanded an appraisal of their shares under Section 262 of the
DGCL.
8. TERMINATION
8.1. Termination. This Agreement may be terminated and
abandoned at any time prior to the Effective Time, whether before
or after approval and adoption of this Agreement by the
stockholders of Expert:
a. by mutual written consent of Activision and Expert;
b. by either Activision or Expert if any United States
federal or state court of competent jurisdiction or other
governmental entity shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and non-appealable, provided
that the party seeking to terminate shall have used its best
efforts to appeal such order, decree, ruling or other action;
c. by Activision upon a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the
part of Expert and as a result of such breach the conditions set
forth in Section 7.3(a) or Section 7.3(b), as the case may be,
would not then be satisfied; provided, that if such breach is
capable of being cured within ten (10) business days after written
notice to Expert, Activision shall not have the right to terminate
this Agreement under this Section 8.1(c) unless such breach has not
been so cured;
d. by Expert upon a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the
part of Activision or Merger Subsidiary and as a result of such
breach the conditions set forth in Section 7.2(a) or Section
7.2(b), as the case may be, would not then be satisfied; provided,
that if such breach is capable of being cured within ten (10)
business days after written notice to Activision, Expert shall not
have the right to terminate this Agreement under this Section
8.1(d) unless such breach has not been so cured;
e. by Activision or Expert, if the Board of Directors
of Expert shall have taken any Permitted Action in accordance with
the provisions of Section 6.9;
f. by Expert if (i) the Board of Directors of Expert
pursuant to Section 6.9 withdraws or modifies its approval or
recommendation of this Agreement or (ii) Expert enters into a
definitive agreement providing for the implementation of an
Acquisition Proposal in accordance with the provisions of Section
6.9;
g. by either Activision or Expert, if the Merger shall
not have been consummated on or before August 31, 1999 (other than
due to the failure of the party seeking to terminate this Agreement
to perform its obligations under this Agreement required to be
performed by it at or prior to the Effective Time or a breach by
such party of this Agreement);
h. by Activision if the Board of Directors of Expert
shall have failed to recommend, or shall have withdrawn, modified
or amended in any material and negative respects its approval or
recommendations of the Merger or shall have resolved to do any of
the foregoing; provided, however, that such failure, withdrawal,
modification or amendment has not been due to or the result of
Activision's or the Merger Subsidiary's breach of any of their
obligations hereunder;
i. by Activision or Expert if this Agreement and the
transactions contemplated hereby shall have failed to receive the
requisite vote for approval and adoption by the stockholders of
Expert upon the holding of a duly convened stockholders meeting;
j. by Activision if Expert suffers an Expert Material
Adverse Effect, or by Expert if Activision suffers an Activision
Material Adverse Effect; or
k. by either party, if the other party becomes
insolvent or seeks protection under any bankruptcy, receivership,
trust deed, creditors arrangement, composition or comparable
proceeding, or if any such proceeding is instituted against such
other party (and not dismissed within sixty (60) days).
The right of any party hereto to terminate this
Agreement pursuant to this Section 8.1 shall remain operative and
in full force and effect regardless of any investigation made by or
on behalf of any party hereto, any person controlling any such
party or any of their respective employees, officers, directors,
agents, representatives or advisors, whether prior to or after the
execution of this Agreement.
8.2. Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section 8.1 hereof,
this Agreement shall forthwith become void and have no effect,
without any liability on the part of any party hereto or its
affiliates, directors, officers or stockholders and all rights and
obligations of any party hereto shall cease except for the
agreements contained in Section 8.3, Section 8.4 and Section 9.5;
provided, however, that nothing contained in this Section 8.2 shall
relieve any party from liability for any breach of this Agreement.
8.3. Expenses and Termination Fees.
a. Except as set forth in this Section 8.3, all fees
and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such expenses, whether or not the Merger is consummated;
provided, however, that Expert and Activision shall share equally
all SEC filing fees and printing expenses incurred in connection
with the printing and filing of the Proxy Statement and the Form
S-4 and any amendments or supplements thereto.
b. Expert shall pay Activision a termination fee equal
to $1,100,000 (the "Termination Fee") upon the earliest to occur of
the following events:
(i) an Acquisition Proposal is commenced, publicly
proposed, publicly disclosed or communicated to Expert after the
date of this Agreement, and (A) the Board of Directors of Expert
takes any Permitted Action under Section 6.9, and (B) this
Agreement is terminated by Activision or Expert pursuant to Section
8.1(e) or by Expert pursuant to Section 8.1(f);
(ii) the termination of this Agreement by
Activision pursuant to Section 8.1(h); or
(iii) the termination of this Agreement by either
Activision or Expert pursuant to Section 8.1(i) and an Acquisition
Proposal by a person other than Activision or Merger Subsidiary
exists at the time of such termination and at the time of such
termination the required approval of the stockholders of Expert had
not been obtained, provided that within 12 months of such
termination Expert or its stockholders accept, publicly announce or
enter into a letter of intent or binding agreement with respect to
such Acquisition Proposal.
Expert's payment of the Termination Fee pursuant to this Section
8.3 shall be the sole and exclusive remedy of Activision against
Expert and any of the Expert Subsidiaries and their respective
directors, officers, employees, agents, advisors or other
representatives with respect to the occurrences giving rise to such
payment.
c. The Termination Fee shall be paid by Expert to
Activision (i) in the event the Termination Fee is
payable pursuant to Section 8.3(b)(i) or (ii), within ten
(10) days after the date of termination of this
Agreement; or (ii) in the event the Termination Fee is
payable pursuant to Section 8.3(b)(iii), within ten (10)
days of acceptance, public announcement, or the entering
into of a letter of intent or binding agreement with
respect to such Acquisition Proposal.
8.4. Extension; Waiver. At any time prior to the Effective
Time, any party hereto, by action taken by its Board of Directors,
may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations
and warranties made to such party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with
any of the agreements 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 shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
9. GENERAL PROVISIONS
9.1. Nonsurvival of Representations, Warranties and
Agreements. All representations, warranties, certifications and
agreements in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate as of the Effective Time
and shall not survive the Merger, provided, however, that the
agreements contained in Article 2, Article 3, the last sentence of
Section 6.3(a), Sections 6.13, 6.14 and 8.3 and this Article 9
shall survive the Merger.
9.2. Notices. Any notice required to be given hereunder shall
be in writing and shall be sent by facsimile transmission
(confirmed by any of the methods that follow), courier service
(with proof of service), hand delivery or certified or registered
mail (return receipt requested and first-class postage prepaid) and
addressed as follows:
If to Activision: Activision, Inc.
0000 Xxxxx Xxxx Xxxxxxxxx
Xxxxx Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxx
Tel.: (000) 000-0000
Fax:(000) 000-0000
With a copy to: Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
Avenue of the Americas
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Tel.: (000) 000-0000
Fax:(000) 000-0000
If to Expert: Expert Software, Inc.
Xxxxxxx Xxxx
Xxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000-0000
Attn: Xxxxxxx Xxxxxxx
Tel.: (000) 000-0000
Fax:(000) 000-0000
With a copy to: Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxx X. Xxxx III, P.C.
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.
9.3. 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, Activision and Merger
Subsidiary may each assign their respective 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 Expert 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 Surviving Corporations and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for
the provisions of Sections 2.2, 2.4 and 6.13, nothing in this
Agreement, expressed or implied, is intended to confer on any
person other than the parties hereto or their respective heirs,
surviving corporations, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of
this Agreement.
9.4. Entire Agreement. This Agreement, the Expert Disclosure
Letter 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
agreements and understandings among the parties with respect
thereto except that the Non-Disclosure Agreement (as hereinafter
defined) shall remain in effect and shall be binding upon
Activision and Expert in accordance with its terms. 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.
9.5. Confidentiality. Activision and Expert understand and
agree that they are and shall remain bound by and subject to the
terms of the non-disclosure agreement, dated as of February 18,
1999, by and between Activision and Expert (the "Non-Disclosure
Agreement").
9.6. Amendment. This Agreement may be amended by the parties
hereto, by action taken by their respective authorized person,
persons or governing bodies, at any time before or after approval
of matters presented in connection with the Merger by the
stockholders of Expert, but after any such stockholder approval, no
amendment shall be made which by law requires the further approval
of stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
9.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware
without regard to its rules of conflict of laws. Each of
Activision and Expert hereby irrevocably and unconditionally
consent to submit to the exclusive jurisdiction of the courts of
the State of Delaware and the United States of America located in
the State of Delaware (the "Delaware Courts") for any litigation
arising out of or relating to this Agreement and the transactions
contemplated hereby (and agree not to commence any litigation
relating thereto except in such courts), consent to the service of
process in such Delaware Courts, waive any objection to the laying
of venue of any such litigation in the Delaware Courts and agree
not to plead or claim in any Delaware Court that such litigation
brought therein has been brought in any inconvenient forum.
9.8. Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which so executed
and delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument. Each counterpart
may consist of a number of copies hereof each signed by less than
all, but together signed by all of the parties hereto. In the event
that any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) the same
with the same force and effect as if such facsimile signature were
the original thereof.
9.9. Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only, and shall be
given no substantive or interpretive effect whatsoever.
9.10. 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.
9.11. Incorporation. The Expert Disclosure Letter and the
Activision Disclosure Letter and all Schedules attached hereto and
thereto and referred to herein and therein are hereby incorporated
herein and made a part hereof for all purposes as if fully set
forth herein.
9.12. 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.
9.13. Interpretation and Certain Definitions.
a. 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.
b. As used in this Agreement, the word "Subsidiary" or
"Subsidiaries" when used with respect to any party means any
corporation, partnership, joint venture, business trust or other
entity, of which 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.
c. As used in this Agreement, the word "Person" means
an individual, a corporation, a partnership, an association, a
joint-stock company, a trust, a limited liability company, any
unincorporated organization or any other entity.
d. As used in this Agreement unless otherwise
indicated, the word "Affiliate" shall have the meaning set forth in
Rule 12b-2 of the Exchange Act.
9.14. Specific Performance. The parties hereto agree that if
any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached,
irreparable damage would occur, no adequate remedy at law would
exist, and damages would be difficult to determine, and that the
parties shall be entitled to specific performance of the terms
hereof, without the posting of any bond whatsoever in addition to
any other remedy at law or equity.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and
year first written above.
EXPERT SOFTWARE, INC.
By:/s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title: Chief Executive Officer
ACTIVISION, INC.
By:/s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: Co-Chairman
EXPERT ACQUISITION CORP.
By:/s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: President
CERTIFICATIONS
It is hereby certified that all of the outstanding shares of
each class of capital stock of Expert Acquisition Corp. entitled
to vote on this Agreement and Plan of Merger have been voted for
the adoption of such Agreement.
By:
Title: Secretary
It is hereby certified that of the
issued and outstanding shares of each class of capital stock of
Expert Software, Inc. have voted in favor of the adoption of this
Agreement and Plan of Merger and such number of shares represents
% of the issued and outstanding shares of Expert
Software, Inc. entitled to vote for the adoption of such
Agreement.
By:
Title: Secretary
EXHIBIT A
FORM OF AFFILIATE LETTER
Activision, Inc.
0000 Xxxxx Xxxx Xxxxxxxxx
Xxxxx Xxxxxx, XX 00000
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be
deemed to be an "affiliate" of Expert Software, Inc., a Delaware
corporation (the "Company"), as the term "affiliate" is defined
for purposes of paragraphs (c) and (d) of Rule 145 of the rules
and regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger dated as of March 2, 1999 (the
"Agreement"), among the Company, Activision, Inc., a Delaware
corporation (the "Purchaser"), and Expert Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of the
Purchaser ("Merger Sub"), Merger Sub will be merged with and into
the Company (the "Merger").
As a result of the Merger, I may receive shares of Common
Stock, par value $.000001 per share, of the Purchaser (the
"Purchaser Securities") in exchange for shares owned by me of
Common Stock, par value $.01 per share, of the Company.
I represent, warrant and covenant to the Purchaser that in the
event I receive any Purchaser Securities as a result of the
Merger:
I shall not make any sale, transfer or other disposition of the
Purchaser Securities in violation of the Act or the Rules and
Regulations.
I have carefully read this letter and the Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise
dispose of the Purchaser Securities to the extent I felt
necessary with my counsel or counsel for the Company.
I have been advised that the issuance of Purchaser Securities
to me pursuant to the Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4.
However, I have also been advised that, because at the time the
Merger was submitted for a vote of the stockholders of the
Company, I may be deemed to have been an affiliate of the Company
and the distribution by me of the Purchaser Securities has not
been registered under the Act, I may not sell, transfer or
otherwise dispose of the Purchaser Securities issued to me in the
Merger unless (i) such sale, transfer or other disposition has
been registered under the Act, (ii) such sale, transfer or other
disposition is made in conformity with Rule 145 promulgated by
the Commission under the Act, or (iii) in the opinion of counsel
reasonably acceptable to the Purchaser, or pursuant to a "no
action" letter obtained by the undersigned from the staff of the
Commission, such sale, transfer or other disposition is otherwise
exempt from registration under the Act.
I understand that Activision is under no obligation to register
the sale, transfer or other disposition of the Purchaser
Securities by me or on my behalf under the Act or, except as
expressly set forth in the Agreement, to take any other action
necessary in order to make compliance with an exemption from such
registration available.
I also understand that stop transfer instructions will be given
to the Purchaser's transfer agents with respect to Purchaser
Securities and that there will be placed on the certificates
representing the Purchaser Securities issued to me, or any
substitutions therefor, a legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE
ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED
IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
____________, BETWEEN THE REGISTERED HOLDER HEREOF AND
ACTIVISION INC., A COPY OF WHICH AGREEMENT IS ON FILE
AT THE PRINCIPAL OFFICES OF ACTIVISION, INC.
I also understand that unless the transfer by me of my
Purchaser Securities has been registered under the Act or is a
sale made in conformity with the provisions of Rule 145, the
Purchaser reserves the right to put the following legend on the
certificates issued to my transferee:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN
A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR
RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF
WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
OR IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933.
It is understood and agreed that the legends set forth in
paragraphs E and F above shall be removed by delivery of
substitute certificates without such legend if such legend is not
required for purposes of the Act or this Affiliate Letter. It is
understood and agreed that such legends and the stop orders
referred to above will be removed if (i) one year shall have
elapsed from the date the undersigned acquired the Purchaser
Securities received in the Merger and the provisions of Rule
145(d)(2) are then available to the undersigned, (ii) two years
shall have elapsed from the date the undersigned acquired the
Purchaser Securities received in the Merger and the provisions of
Rule 145(d)(3) are then available to the undersigned, or (iii)
the Purchaser has received either an opinion of counsel, which
opinion of counsel shall be reasonably satisfactory to the
Purchaser or a "no action" letter obtained by the undersigned
from the staff of the Commission, to the effect that the
restrictions imposed by Rule 145 under the Act no longer apply to
the undersigned.
Execution of this letter should not be considered an
admission on my part that I am an "affiliate" of the Company as
described in the first paragraph of this letter or as a waiver of
any rights I have to object to any claim that I am such an
affiliate on or after the date of this letter.
Very truly yours,
Name:
Accepted this day of
, 1999 by
ACTIVISION, INC.
By:
Name:
Title:
