<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
MICROPROSE, INC.
(NAME OF SUBJECT COMPANY)
NEW HIAC CORP.
HASBRO, INC.
(BIDDERS)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
59513V 20 6
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
PHILLIP H. WALDOKS, ESQ.
SENIOR VICE PRESIDENT --
CORPORATE LEGAL AFFAIRS
AND SECRETARY
HASBRO, INC.
32 W. 23RD STREET
NEW YORK, NY 10010
TELEPHONE: (212) 645-2400
FACSIMILE: (212) 741-0663
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPY TO:
HOWARD L. ELLIN, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NY 10022
TELEPHONE: (212) 735-3000
FACSIMILE: (212) 735-2000
------------------------
CALCULATION OF FILING FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
TRANSACTION VALUATION* $34,694,418 AMOUNT OF FILING FEE $6,939
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Estimated for purposes of calculating the amount of the filing fee only. This
amount assumes the purchase of 5,782,403 shares of common stock, $.001 par
value (the "Shares"), of MicroProse, Inc. at a price of $6.00 per Share in
cash. Such number of Shares represents the 5,753,598 Shares outstanding as of
August 11, 1998 and assumes the issuance prior to the consummation of the
Offer of 28,805 Shares upon the exercise or conversion of outstanding options
and warrants and the conversion of securities convertible into Shares that
have an exercise or conversion price of less than $6.00. The amount of the
filing fee calculated in accordance with Regulation 240.0-11 of the
Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of
the value of the transaction.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11 (a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: Not applicable.
Form or Registration No.: Not applicable.
Filing Party: Not applicable.
Date Filed: Not applicable.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
14D-1
CUSIP NO. 59513V 20 6
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------
1. Names of Reporting Persons S.S. or I.R.S. Identification
Nos. of Above Persons NEW HIAC CORP.
- ---------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [ ]
- ---------------------------------------------------------------------------
3. SEC Use only
- ---------------------------------------------------------------------------
4. Source of Funds AF
- ---------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Item 2(e) or 2(f) [ ]
- ---------------------------------------------------------------------------
6. Citizenship or Place of Organization DELAWARE
- ---------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
NONE
- ---------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes
Certain Shares [ ]
- ---------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
- ---------------------------------------------------------------------------
10. Type of Reporting Person CO
- ---------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
14D-1
CUSIP NO. 59513V 20 6
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------
1. Names of Reporting Persons S.S. or I.R.S. Identification
Nos. of Above Persons HASBRO, INC.
- ---------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [ ]
- ---------------------------------------------------------------------------
3. SEC Use only
- ---------------------------------------------------------------------------
4. Source of Funds WC
- ---------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Item 2(e) or 2(f) [ ]
- ---------------------------------------------------------------------------
6. Citizenship or Place of Organization RHODE ISLAND
- ---------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned By Each Reporting Person
NONE
- ---------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes
Certain Shares [ ]
- ---------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
- ---------------------------------------------------------------------------
10. Type of Reporting Person CO
- ---------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by New HIAC Corp., a Delaware corporation ("Purchaser") and a wholly
owned subsidiary of Hasbro, Inc., a Rhode Island corporation ("Parent"), to
purchase all of the outstanding shares of common stock, par value $.001 per
share (the "Common Stock") including the associated preferred stock purchase
rights issued pursuant to the Rights Agreement, dated as of February 6, 1996, by
and between the Company and Chemical Mellon Shareholder Services, L.L.C. (the
"Rights" and, together with the Common Stock, the "Shares"), of MicroProse,
Inc., a Delaware corporation (the "Company"), at $6.00 per Share, net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated August 14, 1998 (the "Offer to
Purchase"), a copy of which is attached hereto as Exhibit (a)(1), and in the
related Letter of Transmittal, a copy of which is attached hereto as Exhibit
(a)(2) (which, as amended or supplemented from time to time, together constitute
the "Offer").
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is MicroProse, Inc. and the address of
its principal executive offices is 2490 Mariner Loop, Suite 100, Alameda, CA
94501. The telephone number of the Company at such location is (510) 864-4440.
(b) The information set forth in the "INTRODUCTION" of the Offer to
Purchase is incorporated herein by reference.
(c) The information set forth in "Price Range of the Shares; Dividends on
the Shares" of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by Purchaser and Parent. The
information set forth in the "INTRODUCTION" and "Certain Information Concerning
Parent and Purchaser" of the Offer to Purchase is incorporated herein by
reference. The name, business address, present principal occupation or
employment, the material occupations, positions, offices or employments for the
past five years and citizenship of each director and executive officer of Parent
and Purchaser and the name, principal business and address of any corporation or
other organization in which such occupations, positions, offices and employments
are or were carried on are set forth in Schedule I to the Offer to Purchase and
incorporated herein by reference.
(e)-(f) During the last five years, neither Purchaser nor Parent nor, to
the best knowledge of Purchaser and Parent, any of the persons listed in
Schedule I to the Offer to Purchase (i) have been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which any such person was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)(1) Other than the transactions described in Item 3(b) below, neither
Purchaser nor Parent nor, to the best knowledge of Purchaser and Parent,
any of the persons listed in Schedule I to the Offer to Purchase have entered
into any transaction with the Company, or any of the Company's affiliates which
are corporations, since the commencement of the Company's third full fiscal year
preceding the date of this Statement, the aggregate amount of which was equal to
or greater than one percent of the consolidated revenues of the Company for (i)
the fiscal year in which such transaction occurred or (ii) the portion of the
current fiscal year which has occurred if the transaction occurred in such year.
(a)(2) Other than the transactions described in Item 3(b) below, neither
Purchaser nor Parent nor, to the best knowledge of Purchaser and Parent, any of
the persons listed in Schedule I to the Offer to Purchase have entered into any
transaction since the commencement of the Company's third full fiscal year
preceding
4
<PAGE> 5
the date of this Statement with the executive officers, directors or affiliates
of the Company which are not corporations, in which the aggregate amount
involved in such transaction or in a series of similar transactions, including
all periodic installments in the case of any lease or other agreement providing
for periodic payments or installments, exceeded $40,000.
(b) The information set forth in the "INTRODUCTION," "Certain Information
Concerning Parent and Purchaser," "Background of the Offer; Purpose of the Offer
and the Merger; The Merger Agreement and Certain Other Agreements" and "Plans
for the Company; Other Matters" of the Offer to Purchase is incorporated herein
by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in the "INTRODUCTION" and "Source and
Amount of Funds" of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDERS.
(a)-(e) The information set forth in the "INTRODUCTION," "Background of the
Offer; Purpose of the Offer and the Merger; The Merger Agreement and Certain
Other Agreements" and "Plans for the Company; Other Matters" of the Offer to
Purchase is incorporated herein by reference.
(f)-(g) The information set forth in the "INTRODUCTION," "Effect of the
Offer on the Market for the Shares; Stock Listing; Exchange Act Registration;
Margin Regulations" of the Offer to Purchase is incorporated herein by
reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the "INTRODUCTION," "Certain
Information Concerning Parent and Purchaser" and "Background of the Offer;
Purpose of the Offer and the Merger; The Merger Agreement and Certain Other
Agreements" of the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the "INTRODUCTION," "Source and Amount of
Funds," "Background of the Offer; Purpose of the Offer and the Merger; The
Merger Agreement and Certain Other Agreements," "Plans for the Company; Other
Matters" and "Fees and Expenses" of the Offer to Purchase is incorporated herein
by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "Fees and Expenses" of the Offer to Purchase
is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not applicable.
ITEM 10. ADDITIONAL INFORMATION.
(a) Except as disclosed in Items 3 and 7 above, there are no present or
proposed material contracts, arrangements, understandings or relationships
between Purchaser or Parent, or to the best knowledge of Purchaser and Parent,
any of the persons listed in Schedule I to the Offer to Purchase, and the
Company, or any of its executive officers, directors, controlling persons or
subsidiaries.
5
<PAGE> 6
(b)-(c) The information set forth in the "INTRODUCTION," "Conditions to the
Offer" and "Certain Legal Matters" of the Offer to Purchase is incorporated
herein by reference.
(d) The information set forth in "Effect of the Offer on the Market for the
Shares; Stock Listing; Exchange Act Registration; Margin Regulations" and
"Certain Legal Matters" of the Offer to Purchase is incorporated herein by
reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, to the extent not otherwise incorporated herein by reference, is
incorporated herein by reference.
ITEM 11. MATERIALS TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase dated August 14, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Press Release of Parent dated August 12, 1998.
(a)(8) Press Release of Parent dated August 14, 1998.
(a)(9) Summary Advertisement.
(b) None.
(c)(1) Agreement and Plan of Merger, dated as of August 11, 1998, by and
among Parent, Purchaser and the Company.
(c)(2) Stock Option Agreement, dated as of August 11, 1998, by and between
Parent and the Company.
(c)(3) Software Distribution and Loan Agreement, dated as of August 11,
1998, by and between Hasbro Interactive, Inc. ("Hasbro
Interactive"), a Delaware corporation and a wholly owned subsidiary
of Parent, and the Company.
(c)(4) Confidentiality Agreement, dated as of June 16, 1998, by and between
Hasbro Interactive and the Company (as amended).
(d) None.
(e) Not applicable.
(f) None.
6
<PAGE> 7
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: August 14, 1998
NEW HIAC CORP.
BY: /s/ PHILLIP H. WALDOKS
------------------------------------
NAME: PHILLIP H. WALDOKS
TITLE: Secretary
HASBRO, INC.
BY: /s/ PHILLIP H. WALDOKS
------------------------------------
NAME: PHILLIP H. WALDOKS
TITLE: Senior Vice
President -- Corporate Legal
Affairs and Secretary
7
<PAGE> 8
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE NO.
- ------- ----------
<S> <C> <C>
(a)(1) Offer to Purchase, dated August 14, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Press Release of Parent dated August 12, 1998.
(a)(8) Press Release of Parent dated August 14, 1998.
(a)(9) Summary Advertisement.
(c)(1) Agreement and Plan of Merger, dated as of August 11, 1998,
by and among Parent, Purchaser and the Company.
(c)(2) Stock Option Agreement, dated as of August 11, 1998, by and
between Parent and the Company.
(c)(3) Software Distribution Agreement, dated as of August 11,
1998, by and between Hasbro Interactive, Inc. ("Hasbro
Interactive"), a Delaware corporation and a wholly owned
subsidiary of Parent, and the Company.
(c)(4) Confidentiality Agreement, dated as of June 16, 1998, by and
between Hasbro Interactive and the Company (as amended).
(d) None.
(e) Not Applicable.
(f) None.
</TABLE>
8
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
MICROPROSE, INC.
AT
$6.00 NET PER SHARE
BY
NEW HIAC CORP.,
A WHOLLY OWNED SUBSIDIARY OF
HASBRO, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, SEPTEMBER 11, 1998, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
AS OF AUGUST 11, 1998, BY AND AMONG HASBRO, INC. ("PARENT"), NEW HIAC CORP.
("PURCHASER") AND MICROPROSE, INC. (THE "COMPANY"). THE BOARD OF DIRECTORS OF
THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER (EACH AS DEFINED
HEREIN), AND HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR
TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT
TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED HEREIN) THAT
NUMBER OF SHARES WHICH, WHEN ADDED TO THE SHARES BENEFICIALLY OWNED BY PARENT OR
PURCHASER (IF ANY), REPRESENTS AT LEAST 50.1% OF THE SHARES OUTSTANDING (ON A
FULLY DILUTED BASIS) ON THE DATE SHARES ARE ACCEPTED FOR PAYMENT. THE OFFER IS
ALSO SUBJECT TO THE OTHER CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE
SECTION 14.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares (as defined herein) should either (i) complete and sign the enclosed
Letter of Transmittal (or facsimile thereof) in accordance with the Instructions
in the Letter of Transmittal, have such stockholder's signature thereon
guaranteed (if required by Instruction 1 to the Letter of Transmittal), mail or
deliver the Letter of Transmittal (or a facsimile thereof) and any other
required documents to the Depositary (as defined herein) and either deliver the
certificates for such Shares to the Depositary or tender such Shares pursuant to
the procedure for book-entry transfer set forth in Section 3 of this Offer to
Purchase or (ii) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such stockholder.
Any stockholder whose Shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee to tender such Shares.
Any stockholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available, or who cannot comply with
the procedures for book-entry transfer on a timely basis, or who cannot deliver
all required documents to the Depositary prior to the expiration of the Offer,
may tender such Shares by following the procedures for guaranteed delivery set
forth in Section 3 of this Offer to Purchase.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth on the back cover of this Offer to Purchase. Requests for additional
copies of this Offer to Purchase, the Letter of Transmittal, the Notice of
Guaranteed Delivery and other tender offer materials may be directed to the
Dealer Manager, the Information Agent or brokers, dealers, commercial banks or
trust companies.
------------------------
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
August 14, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION................................................ 1
THE OFFER................................................... 4
1. Terms of the Offer..................................... 4
2. Acceptance for Payment and Payment..................... 5
3. Procedures for Tendering Shares........................ 6
4. Withdrawal Rights...................................... 9
5. Certain U.S. Federal Income Tax Consequences........... 9
6. Price Range of the Shares; Dividends................... 10
7. Effect of the Offer on the Market for the Shares; Stock
Listing; Exchange Act Registration; Margin
Regulations............................................ 10
8. Certain Information Concerning the Company............. 12
9. Certain Information Concerning Parent and Purchaser.... 14
10. Sources and Amount of Funds............................ 15
11. Background of the Offer; Purpose of the Offer and the
Merger; the Merger Agreement and Certain Other
Agreements............................................. 15
12. Plans for the Company; Other Matters................... 27
13. Dividends and Distributions............................ 29
14. Conditions to the Offer................................ 30
15. Certain Legal Matters.................................. 31
16. Fees and Expenses...................................... 34
17. Miscellaneous.......................................... 34
SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
OF PARENT AND PURCHASER................................. I-1
</TABLE>
<PAGE> 3
To the Holders of Common Stock of
MICROPROSE, INC.:
INTRODUCTION
New HIAC Corp., a Delaware corporation ("Purchaser") and a wholly owned
subsidiary of Hasbro, Inc., a Rhode Island corporation ("Parent"), hereby offers
to purchase all outstanding shares of common stock, par value $.001 per share
(the "Common Stock"), including the associated preferred stock purchase rights
issued pursuant to the Rights Agreement (as defined below) (the "Rights" and,
together with the Common Stock, the "Shares"), of MicroProse, Inc., a Delaware
corporation (the "Company"), at a price of $6.00 per Share, net to the seller in
cash, without interest (the "Offer Price"), upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, as amended or supplemented from time to time, collectively
constitute the "Offer").
Tendering stockholders of record who tender Shares directly will not be
obligated to pay brokerage fees or commissions or, except as set forth in
Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase
of Shares by Purchaser pursuant to the Offer. Stockholders who hold their Shares
through a bank or broker should check with such institution as to whether they
charge any service fees. Purchaser will pay all fees and expenses of Bear,
Stearns & Co. Inc. ("Bear Stearns"), which is acting as the Dealer Manager (in
such capacity, the "Dealer Manager"), BankBoston, N.A., which is acting as the
Depositary (in such capacity, the "Depositary") and D.F. King & Co., Inc., which
is acting as Information Agent (in such capacity, the "Information Agent"),
incurred in connection with the Offer and in accordance with the terms of the
agreements entered into between Purchaser and/or Parent and each such person.
See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND THE MERGER, AND HAS UNANIMOUSLY DETERMINED THAT THE
TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
COMPANY'S STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
Piper Jaffray Inc. ("Piper Jaffray"), financial advisor to the Company, has
delivered to the Company Board its opinion, dated as of August 11, 1998 (the
"Financial Advisor Opinion"), to the effect that, as of such date and based upon
and subject to certain matters stated therein, the cash consideration to be
received by the public holders of Shares (other than Parent and its affiliates)
pursuant to the Offer and the Merger is fair to such holders from a financial
point of view. A copy of the Financial Advisor Opinion is attached as an exhibit
to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), which has been filed by the Company with the Securities and
Exchange Commission (the "Commission") in connection with the Offer and which is
being mailed to holders of Shares herewith. Holders of Shares are urged to, and
should, read the Financial Advisor Opinion carefully.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED HEREIN) THAT
NUMBER OF SHARES WHICH, WHEN ADDED TO THE SHARES BENEFICIALLY OWNED BY PARENT OR
PURCHASER (IF ANY), REPRESENTS AT LEAST 50.1% OF THE SHARES OUTSTANDING (ON A
FULLY DILUTED BASIS) ON THE DATE SHARES ARE ACCEPTED FOR PAYMENT (THE "MINIMUM
CONDITION"). THE OFFER IS ALSO SUBJECT TO THE OTHER CONDITIONS SET FORTH IN THIS
OFFER TO PURCHASE. SEE SECTION 14. As used in this Offer to Purchase, "fully
diluted basis" takes into account the conversion or exercise of all outstanding
options, warrants and other rights and securities exercisable or convertible
into shares of Common Stock. The Company has represented and warranted to Parent
and Purchaser that, as of August 11, 1998, there were 5,753,598 Shares issued
and outstanding, 754,677 Shares were issuable pursuant to the exercise of
options ("Options"), 20,591 Shares were issuable pursuant to the Company's
employee stock purchase plan (the "ESPP"), 4,080 Shares were issuable pursuant
to the exercise of warrants (the "Warrants"),
<PAGE> 4
19,608 Shares were issuable upon conversion of the Company's Series A
Convertible Preferred Stock (the "Series A Preferred") and 393,245 Shares were
issuable upon conversion of the Company's 6.5% Convertible Subordinated Notes
due 2002 (the "Convertible Notes"). The Merger Agreement provides, among other
things, that the Company will not, without the prior written consent of Parent,
issue any additional Shares (except upon the exercise or conversion of
outstanding Options, Warrants, Series A Preferred and Convertible Notes). Based
on the foregoing and assuming the issuance of Shares issuable pursuant to the
ESPP and upon the exercise or conversion of outstanding Options, Warrants,
Series A Preferred and Convertible Notes, Purchaser believes that the Minimum
Condition will be satisfied if 3,479,845 Shares are validly tendered and not
withdrawn prior to the Expiration Date (as hereinafter defined).
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of August 11, 1998 (the "Merger Agreement"), by and among Parent, Purchaser
and the Company. Pursuant to the Merger Agreement and the Delaware General
Corporation Law, as amended (the "DGCL"), as soon as practicable after the
completion of the Offer and satisfaction or waiver, if permissible, of all
conditions, including the purchase of Shares pursuant to the Offer (sometimes
referred to herein as the "consummation" of the Offer) and the approval and
adoption of the Merger Agreement by the stockholders of the Company (if required
by applicable law), Purchaser shall be merged with and into the Company (the
"Merger") and the Company will be the surviving corporation in the Merger (the
"Surviving Corporation"). At the effective time of the Merger (the "Effective
Time"), each Share then outstanding (other than Shares held by (i) the Company
or any of its subsidiaries, (ii) Parent or any of its subsidiaries including
Purchaser and (iii) stockholders who properly perfect their dissenters' rights
under the DGCL, will be converted into the right to receive $6.00 in cash or any
higher price per Share paid in the Offer (the "Merger Consideration"), without
interest. The Merger Agreement is more fully described in Section 11.
The Company has entered into a Stock Option Agreement, dated as of August
11, 1998 (the "Stock Option Agreement"), with Parent pursuant to which the
Company has granted to Parent an irrevocable option (the "Stock Option") to
purchase up to the number of fully paid and nonassessable Shares as equals 19.9%
of the Shares issued and outstanding immediately prior to the grant of the Stock
Option, at a purchase price of $6.00 per Share, exercisable upon the occurrence
of certain events. The Stock Option Agreement is described more fully in Section
11.
The Merger Agreement provides that, upon the purchase by Purchaser of a
majority of the Shares pursuant to the Offer and from time to time thereafter,
Parent shall be entitled to designate such number of directors, rounded up to
the next whole number, on the Company Board so that the percentage of Parent's
nominees on the Company Board equals the percentage of outstanding Shares
beneficially owned by Parent and its affiliates. The Company shall, at such
time, upon the request of Purchaser promptly use its best efforts to take all
action necessary to cause such persons designated by Parent to be elected to the
Company Board, if necessary, by increasing the size of the Company Board or
securing resignations of incumbent directors or both.
Consummation of the Merger is conditioned upon, among other things, the
approval and adoption by the requisite vote of stockholders of the Company of
the Merger Agreement, if required by applicable law and the Company's Amended
and Restated Certificate of Incorporation (the "Certificate of Incorporation").
See Section 14. Under the DGCL and pursuant to the Certificate of Incorporation,
the affirmative vote of the holders of a majority of the outstanding Shares is
the only vote of any class or series of the Company's capital stock that would
be necessary to approve the Merger Agreement and the Merger at a meeting of the
Company's stockholders. If the Minimum Condition is satisfied and Purchaser
purchases at least a majority of the outstanding Shares in the Offer, Purchaser
will be able to effect the Merger without the affirmative vote of any other
stockholder. Pursuant to the Merger Agreement, Parent and Purchaser have agreed
to vote the Shares acquired by them pursuant to the Offer in favor of the
Merger. See Section 12. The Merger Agreement is more fully described in Section
11.
2
<PAGE> 5
Under Section 253 of the DGCL, if a corporation owns at least 90% of the
outstanding shares of each class of a subsidiary corporation, the corporation
holding such stock may merge such subsidiary into itself, or itself into such
subsidiary, without any action or vote on the part of the board of directors or
the stockholders of such other corporation (a "short-form merger"). In the event
that Purchaser acquires in the aggregate at least 90% of the outstanding Shares
pursuant to the Offer or otherwise, then, at the election of Parent, a short-
form merger could be effected without any further approval of the Company Board
or the stockholders of the Company. In the Merger Agreement, Parent, Purchaser
and the Company have agreed that, notwithstanding that all conditions to the
Offer are satisfied or waived as of the scheduled Expiration Date, Purchaser may
extend the Offer for a period not to exceed twenty (20) business days, subject
to certain conditions, if the Shares tendered pursuant to the Offer are less
than 90% of the outstanding Shares. Even if Purchaser does not own 90% of the
outstanding Shares following consummation of the Offer, Parent or Purchaser
could seek to purchase additional shares in the open market or otherwise in
order to reach the 90% threshold and employ a short-form merger. The per share
consideration paid for any Shares so acquired may be greater or less than the
Offer Price. Parent presently intends to effect a short-form merger, if
permitted to do so under the DGCL, pursuant to which Purchaser will be merged
with and into the Company. See Section 12.
The Company has distributed one Right for each outstanding Share pursuant
to the Rights Agreement, dated as of February 6, 1996, between the Company and
Chemical Mellon Shareholder Services, L.L.C., as Rights Agent, as amended (the
"Rights Agreement"). The Company has represented in the Merger Agreement that it
has taken all action which may be necessary under the Company Rights Agreement
so that (i) the Offer is deemed to be a Permitted Offer (as defined in the
Rights Agreement), (ii) the execution and delivery of the Merger Agreement and
the Stock Option Agreement (and any amendments thereto) and the consummation of
the Merger and the Transactions contemplated thereby will not cause (x) Parent
and/or Purchaser to constitute an Acquiring Person (as defined in the Rights
Agreement), (y) the Rights (as defined in the Rights Agreement) to become
exercisable or (z) a Distribution Date, Section 13 Event, Triggering Event or a
Share Acquisition Date (as each such term is defined in the Rights Agreement) to
occur, and (iii) that the Final Expiration Date (as such term is defined in the
Rights Agreement) and the expiration of the Rights shall occur upon the
acceptance for payment of Shares pursuant to the Offer.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
3
<PAGE> 6
THE OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of such extension or
amendment), Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date, and not withdrawn in accordance with
Section 4. The term "Expiration Date" shall mean 12:00 Midnight, New York City
time, on Friday, September 11, 1998, unless and until Purchaser, in accordance
with the terms of the Merger Agreement, shall have extended the period of time
during which the Offer is open, in which event the term "Expiration Date" shall
mean the latest time and date at which the Offer, as so extended by Purchaser,
shall expire. In the Merger Agreement, Parent and Purchaser have agreed that if
all conditions to Purchaser's obligation to accept for payment and pay for
Shares pursuant to the Offer are not satisfied on the scheduled Expiration Date,
Purchaser may, in its sole discretion, extend the Offer for additional periods;
provided, however, that Purchaser may not extend the Offer beyond November 30,
1998 without the consent of the Company.
The Offer is conditioned upon the satisfaction of the Minimum Condition,
the expiration or termination of all waiting periods imposed by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the other conditions set forth in Section 14. If such conditions are
not satisfied prior to the Expiration Date, Purchaser reserves the right,
subject to the terms of the Merger Agreement and subject to complying with
applicable rules and regulations of the Commission, to (i) decline to purchase
any Shares tendered in the Offer and terminate the Offer and return all tendered
Shares to the tendering stockholders, (ii) waive any or all conditions to the
Offer (except the Minimum Condition) and, to the extent permitted by applicable
law, purchase all Shares validly tendered, (iii) extend the Offer and, subject
to the right of stockholders to withdraw Shares until the Expiration Date,
retain all Shares which have been tendered during the period or periods for
which the Offer is extended or (iv) subject to the next sentence, amend the
Offer. The Merger Agreement provides that Purchaser will not decrease the Offer
Price, change the form of consideration to be paid in the Offer, decrease the
number of Shares sought in the Offer, amend any other condition to the Offer in
any manner adverse to the holders of the Shares or impose additional conditions
to the Offer without the written consent of the Company. Purchaser has agreed
that if all of the conditions set forth in Section 14 have not been satisfied on
any scheduled Expiration Date then, provided that all such conditions are
reasonably capable of being satisfied, Purchaser shall extend the Offer from
time to time until such conditions are satisfied or waived, provided that
Purchaser shall not be required to extend the Offer beyond October 15, 1998.
The Merger Agreement requires Purchaser to accept for payment and pay for
all Shares validly tendered and not withdrawn pursuant to the Offer if all
conditions to the Offer are satisfied on the Expiration Date. However, if,
immediately prior to the scheduled Expiration Date, all conditions to the Offer
are satisfied but the number of Shares tendered and not withdrawn pursuant to
the Offer constitutes less than 90% of the Shares outstanding, Purchaser may
extend the Offer for a period not to exceed twenty (20) business days. As used
in this Offer to Purchase, "business day" has the meaning set forth in Rule
14d-1 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
Any extension, amendment or termination of the Offer will be followed as
promptly as practicable by public announcement thereof, the announcement in the
case of an extension to be issued no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date in
accordance with Rules 14d-4(c), 14d-6(d) and 14e-1(d) under the Exchange Act.
Without limiting the obligation of Purchaser under such Rule or the manner in
which Purchaser may choose to make any public announcement, Purchaser currently
intends to make announcements by issuing a press release to the Dow Jones News
Service.
If Purchaser extends the Offer, or if Purchaser (whether before or after
its acceptance for payment of Shares) is delayed in its purchase of, or payment
for, Shares or is unable to pay for Shares pursuant to the Offer for any reason,
then, without prejudice to Purchaser's rights under the Offer, the Depositary
may retain tendered Shares on behalf of Purchaser, and such Shares may not be
withdrawn except to the extent tendering
4
<PAGE> 7
stockholders are entitled to withdrawal rights as described in Section 4.
However, the ability of Purchaser to delay the payment for Shares which
Purchaser has accepted for payment is limited by Rule 14e-1(c) under the
Exchange Act, which requires that a bidder pay the consideration offered or
return the securities deposited by, or on behalf of, holders of securities
promptly after the termination or withdrawal of the Offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances then existing, including
the relative materiality of the changed terms or information. In a public
release, the Commission has stated its view that an offer must remain open for a
minimum period of time following a material change in the terms of the Offer and
that waiver of a material condition, such as the Minimum Condition, is a
material change in the terms of the Offer. The release states that an offer
should remain open for a minimum of five (5) business days from the date a
material change is first published, or sent or given to security holders and
that, if material changes are made with respect to information not materially
less significant than the offer price and the number of shares being sought, a
minimum of ten (10) business days may be required to allow adequate
dissemination and investor response. The requirement to extend the Offer will
not apply to the extent that the number of business days remaining between the
occurrence of the change and the then-scheduled Expiration Date equals or
exceeds the minimum extension period that would be required because of such
amendment. If, prior to the Expiration Date, Purchaser increases the
consideration offered to holders of Shares pursuant to the Offer, such increased
consideration will be paid to all holders whose Shares are purchased in the
Offer whether or not such Shares were tendered prior to such increase.
The Company has provided Purchaser with the Company's stockholder lists and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares and will be furnished to brokers, dealers,
banks and similar persons whose names, or the names of whose nominees, appear on
the stockholder lists or, if applicable, who are listed as participants in a
clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT.
Upon the terms and subject to the conditions to the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and will pay for, as soon as
practicable after the Expiration Date, all Shares validly tendered prior to the
Expiration Date and not properly withdrawn in accordance with Section 4.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to Purchaser and not
withdrawn, if, as and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares. Payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from Purchaser and
transmitting payment to tendering stockholders. In all cases, payment for Shares
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates for such Shares (or a timely Book
Entry Confirmation (as defined below) with respect thereto), (ii) a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message (as defined below), and (iii) any other documents required by
the Letter of Transmittal. Accordingly, payment may be made to tendering
stockholders at different times if delivery of the Shares and other required
documents occur at different times. The per share consideration paid to any
holder of Shares pursuant to the Offer will be the highest per share
consideration paid to any other holder of such Shares pursuant to the Offer.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY
PURCHASER
5
<PAGE> 8
FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT.
The Purchaser expressly reserves the right, in its sole discretion, to
delay acceptance for payment of, or payment for, Shares in order to comply in
whole or in part with any applicable law. If Purchaser is delayed in its
acceptance for payment of, or payment for, Shares or is unable to accept for
payment or pay for Shares pursuant to the Offer for any reason, then, without
prejudice to Purchaser's rights under the Offer (including such rights as are
set forth in Sections 1 and 14) (but subject to compliance with Rule 14e-1(c)
under the Exchange Act), the Depositary may, nevertheless, on behalf of
Purchaser, retain tendered Shares, and such Shares may not be withdrawn except
to the extent tendering stockholders are entitled to exercise, and duly
exercise, withdrawal rights as described in Section 4.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted representing more Shares than are
tendered, certificates evidencing Shares not tendered or not accepted for
purchase will be returned to the tendering stockholder, or such other person as
the tendering stockholder shall specify in the Letter of Transmittal, as
promptly as practicable following the expiration, termination or withdrawal of
the Offer. In the case of Shares delivered by book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 3, such Shares will be credited to such account
maintained at the Book-Entry Transfer Facility as the tendering stockholder
shall specify in the Letter of Transmittal, as promptly as practicable following
the expiration, termination or withdrawal of the Offer. If no such instructions
are given with respect to Shares delivered by book-entry transfer, any such
Shares not tendered or not purchased will be returned by crediting the account
at the Book-Entry Transfer Facility designated in the Letter of Transmittal as
the account from which such Shares were delivered.
Purchaser reserves the right to transfer or assign, in whole or, from time
to time, in part, to one or more of its affiliates, the right to purchase Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve Purchaser of its obligations under the Offer and will in no way
prejudice the rights of tendering stockholders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURES FOR TENDERING SHARES.
Valid Tender. For Shares to be validly tendered pursuant to the Offer,
either (i) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees, or in the
case of a book-entry transfer, an Agent's Message (as defined below), and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either certificates evidencing tendered Shares must be
received by the Depositary at one of such addresses or such Shares must be
delivered to the Depositary pursuant to the procedures for book-entry transfer
set forth below and a Book-Entry Confirmation (as defined below) must be
received by the Depositary, in each case prior to the Expiration Date, or (ii)
the tendering stockholder must comply with the guaranteed delivery procedures
described below.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two (2) business days after the date
of this Offer to Purchase. Any financial institution that is a participant in
the Book-Entry Transfer Facility's system may make book-entry delivery of Shares
by causing the Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with such Book-Entry Transfer Facility's
procedures for such transfer. However, although delivery of Shares may be
effected through book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message (as defined below), and any other required documents must, in
any case, be transmitted to, and received by, the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering stockholder must comply with the guaranteed
delivery procedures described below. The confirmation of a book-entry transfer
of Shares into the Depositary's account at the Book-Entry Transfer Facility as
described above is referred to herein as a "Book-Entry Confirmation."
6
<PAGE> 9
DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO THE
BOOK-ENTRY TRANSFER FACILITY WILL NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that Purchaser
may enforce such agreement against such participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
the Book Entry Transfer Facility's systems whose name appears on a security
position listing as the owner of the Shares) of Shares tendered therewith and
such registered holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on the
Letter of Transmittal or (ii) if such Shares are tendered for the account of a
financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (each, an
"Eligible Institution" and, collectively, "Eligible Institutions"). In all other
cases, all signatures on Letters of Transmittal must be guaranteed by an
Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If
the certificates for Shares are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made, or
certificates for Shares not tendered or not accepted for payment are to be
returned, to a person other than the registered holder of the certificates
surrendered, then the tendered certificates for such Shares must be endorsed or
accompanied by appropriate stock powers, in either case, signed exactly as the
name or names of the registered holders or owners appear on the certificates,
with the signatures on the certificates or stock powers guaranteed as aforesaid.
See Instruction 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received by
the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for (or a Book-Entry Confirmation with respect
to) such Shares, together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message,
and any other required documents, are received by the Depositary within
three (3) trading days after the date of execution of such Notice of
Guaranteed Delivery. A "trading day" is any day on which the Nasdaq
National Market (the "Nasdaq National Market"), operated by the National
Association of Securities Dealers, Inc. (the "NASD"), is open for business.
7
<PAGE> 10
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mailed to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering stockholder and
Purchaser upon the terms and subject to the conditions of the Offer.
Appointment. By executing the Letter of Transmittal as set forth above
(including delivery through an Agent's Message), the tendering stockholder will
irrevocably appoint designees of Parent as such stockholder's attorneys-in-fact
and proxies in the manner set forth in the Letter of Transmittal, each with full
power of substitution, to the full extent of such stockholder's rights with
respect to the Shares tendered by such stockholder and accepted for payment by
Purchaser and with respect to any and all non-cash dividends, distributions,
rights, other Shares or other securities issued or issuable in respect of such
Shares on or after August 11, 1998 (collectively, "Distributions"). All such
proxies will be considered coupled with an interest in the tendered Shares. Such
appointment will be effective if, as and when, and only to the extent that,
Purchaser accepts for payment Shares tendered by such stockholder as provided
herein. All such powers of attorney and proxies will be irrevocable and will be
deemed granted in consideration of the acceptance for payment by Purchaser of
Shares tendered in accordance with the terms of the Offer. Upon such
appointment, all prior powers of attorney, proxies and consents given by such
stockholder with respect to such Shares (and any and all Distributions) will,
without further action, be revoked and no subsequent powers of attorney,
proxies, consents or revocations may be given by such stockholder (and, if
given, will not be deemed effective). The designees of Parent will thereby be
empowered to exercise all voting and other rights with respect to such Shares
(and any and all Distributions), including, without limitation, in respect of
any annual or special meeting of the Company's stockholders (and any adjournment
or postponement thereof), actions by written consent in lieu of any such meeting
or otherwise, as each such attorney-in-fact and proxy or his substitute shall in
his sole discretion deem proper. Purchaser reserves the right to require that,
in order for Shares to be deemed validly tendered, immediately upon Purchaser's
acceptance for payment of such Shares, Purchaser must be able to exercise full
voting, consent and other rights with respect to such Shares (and any and all
Distributions), including voting at any meeting of stockholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by Purchaser, in its sole discretion, which
determination will be final and binding. Purchaser reserves the absolute right
to reject any or all tenders of any Shares determined by it not to be in proper
form or the acceptance for payment of which, or payment for which, may, in the
opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the
absolute right, in its sole discretion, subject to the provisions of the Merger
Agreement, to waive any defect or irregularity in any tender of Shares of any
particular stockholder, whether or not similar defects or irregularities are
waived in the case of other stockholders. No tender of Shares will be deemed to
have been validly made until all defects or irregularities relating thereto have
been cured or waived. None of Purchaser, Parent, the Dealer Manager, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. Subject to the terms of the
Merger Agreement, Purchaser's interpretation of the terms and conditions of the
Offer in this regard (including the Letter of Transmittal and the instructions
thereto) will be final and binding.
Backup Withholding. Under the "backup withholding" provisions of federal
income tax law, unless a tendering registered holder, or its assignee (in either
case, the "Payee"), satisfies the conditions described in Instruction 10 of the
Letter of Transmittal or is otherwise exempt, the cash payable as a result of
the Offer may be subject to backup withholding tax at a rate of 31% of the gross
proceeds. To prevent backup withholding, each Payee should complete and sign the
Substitute Form W-9 provided in the Letter of Transmittal. See Instruction 10 to
the Letter of Transmittal.
8
<PAGE> 11
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4 or as provided by applicable
law, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer
may be withdrawn pursuant to the procedures set forth below at any time prior to
the Expiration Date and, unless theretofore accepted for payment and paid for by
Purchaser pursuant to the Offer, may also be withdrawn at any time after October
12, 1998.
To be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase. Any such notice of withdrawal
must specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder of the
Shares to be withdrawn, if different from the name of the person who tendered
the Shares. If certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such certificates, the serial numbers shown on such certificates must
be submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been delivered pursuant to
the procedures for book-entry transfer as set forth in Section 3, any notice of
withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares and
otherwise comply with such Book-Entry Transfer Facility's procedures.
Withdrawals of tendered Shares may not be rescinded, and any Shares
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by again following one of the
procedures described in Section 3 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
which determination will be final and binding. None of Purchaser, Parent, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
5. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES.
The following is a general summary of certain U.S. federal income tax
consequences of the Offer and the Merger relevant to a beneficial holder of
Shares whose Shares are tendered and accepted for payment pursuant to the Offer
or whose Shares are converted to cash in the Merger (a "Holder"). The discussion
is based on the Internal Revenue Code of 1986, as amended (the "Code"),
regulations issued thereunder, judicial decisions and administrative rulings,
all of which are subject to change, possibly with retroactive effect. The
following does not address the U.S. federal income tax consequences to all
categories of Holders that may be subject to special rules (e.g., holders who
acquired their Shares pursuant to the exercise of employee stock options or
other compensation arrangements with the Company, holders who perfect their
appraisal rights under the DGCL, foreign holders, insurance companies and
tax-exempt organizations), nor does it address the federal income tax
consequences to persons who do not hold the Shares as "capital assets" within
the meaning of Section 1221 of the Code (generally, property held for
investment). Holders should consult their own tax advisors regarding the U.S.
federal, state, local and foreign income and other tax consequences of the Offer
and the Merger.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for U.S. federal income tax purposes and may also be a
taxable transaction under applicable state, local and foreign income and other
tax laws. In general, a Holder who sells Shares pursuant to the Offer or
receives cash in exchange for Shares pursuant to the Merger will recognize gain
or loss for federal income tax purposes equal to the difference, if any, between
the amount of cash received and the Holder's adjusted tax basis in the Shares
sold pursuant to the Offer or surrendered for cash pursuant to the Merger. Gain
or loss will be determined separately for each block of Shares (i.e., Shares
acquired at the same cost in a single transaction) tendered pursuant to the
Offer or surrendered for cash pursuant to the Merger. Such gain or loss will be
long-term capital gain or loss if the Holder has held the Shares for more than
one year at the time of the consummation of the Offer or the Merger. Under
recently adopted amendments to the Code, capital gains recognized by an
9
<PAGE> 12
individual investor (or an estate or certain trusts) upon a disposition of a
Share that has been held for more than one year generally will be subject to a
maximum tax rate of 20% or, in the case of a Share that has been held for one
year or less, will be subject to tax at ordinary income rates. Certain
limitations apply to the use of capital losses.
6. PRICE RANGE OF THE SHARES; DIVIDENDS.
The Shares are traded through the Nasdaq National Market under the symbol
"MPRS". The following table sets forth, for each of the fiscal quarters
indicated, the high and low reported closing sales price per Share on the Nasdaq
National Market as restated to reflect the 5 to 1 reverse stock split effected
by the Company on May 11, 1998.
<TABLE>
<CAPTION>
COMMON STOCK
-----------------
HIGH LOW
------- ------
<S> <C> <C>
Fiscal Year Ended March 31, 1997
First Quarter ended June 30, 1996......................... $ 43.10 $26.85
Second Quarter ended September 30, 1996................... 36.25 19.35
Third Quarter ended December 31, 1996..................... 38.75 24.35
Fourth Quarter ended March 31, 1997....................... 47.50 33.10
Fiscal Year Ended March 31, 1998
First Quarter ended June 30, 1997......................... $ 34.70 $22.20
Second Quarter ended September 30, 1997................... 27.80 20.00
Third Quarter ended December 31, 1997..................... 35.55 9.40
Fourth Quarter ended March 31, 1998....................... 13.75 7.50
Fiscal Year Ending March 31, 1999
First Quarter ended June 30, 1998......................... $ 10.78 $ 4.06
Second Quarter through August 13, 1998.................... 5.72 2.94
</TABLE>
On August 11, 1998, the last full trading day prior to the public
announcement of the execution of the Merger Agreement by the Company, Parent and
Purchaser, the last reported sales price of the Shares on the Nasdaq National
Market was $4.56 per Share. On August 13, 1998, the last full trading day prior
to the commencement of the Offer, the last reported sales price of the Shares on
the Nasdaq National Market was $5.72 per Share. Stockholders are urged to obtain
a current market quotation for the shares.
The Company did not declare or pay any cash dividends during any of the
periods indicated in the above table. The agreements governing the Company's
indebtedness contain provisions which currently prohibit the Company from
declaring or paying dividends with respect to the Shares. In addition, under the
terms of the Merger Agreement, the Company is not permitted to declare or pay
dividends with respect to the Shares without the prior written consent of Parent
and Parent does not intend to consent to any such declaration or payment.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK LISTING; EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS.
Market for the Shares. The purchase of Shares by Purchaser pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
will reduce the number of holders of Shares, which, depending upon the number of
Shares so purchased, could adversely affect the liquidity and market value of
the remaining Shares held by stockholders. Purchaser cannot predict whether the
reduction in the number of Shares that might otherwise trade publicly would have
an adverse or beneficial effect on the market price for, or marketability of,
the Shares or whether it would cause future market prices to be greater or less
than the Offer Price.
Nasdaq Quotation. Depending upon the number of Shares purchased pursuant
to the Offer, the Shares may no longer meet the requirements of the NASD for
continued inclusion on the Nasdaq National Market, which requires that an issuer
either (i) have at least 750,000 publicly held shares, held by at least 400
round lot shareholders, with a market value of at least $5,000,000, have at
least 2 market makers, have net tangible assets of at least $4 million, and have
a minimum bid price of $1 or (ii) have at least 1,100,000 publicly held shares,
held by at least 400 round lot shareholders, with a market value of at least
$15,000,000, have a minimum bid price of $5, have at least 4 market makers and
have either (A) a market capitalization of at least $50,000,000 or (B) total
assets and revenues each of at least $50,000,000. If the Nasdaq National
10
<PAGE> 13
Market was to cease to publish quotations for the Shares, it is possible that
the Shares would continue to trade in the over-the-counter market and that price
or other quotations would be reported by other sources. The extent of the public
market for such Shares and the availability of such quotations would depend,
however, upon such factors as the number of stockholders and/or the aggregate
market value of such securities remaining at such time, the interest in
maintaining a market in the Shares on the part of securities firms, the possible
termination of registration under the Exchange Act as described below, and other
factors. Purchaser cannot predict whether the reduction in the number of Shares
that might otherwise trade publicly would have an adverse or beneficial effect
on the market price for, or marketability of, the Shares or whether it would
cause future market prices to be greater or lesser than the Offer Price.
The Company was notified in February 1998 by the Nasdaq Stock Market that
the Company was no longer in compliance with the net tangible assets requirement
or the alternative minimum bid price requirement for continued listing on the
Nasdaq National Market. Pursuant to National Association of Securities Dealers
Marketplace Rules, the Company was given a period of 90 days to regain
compliance with the minimum bid price requirement, which calls for a minimum
common stock bid price of $5.00 per share. On May 11, 1998, the Company's
stockholders approved a one for five reverse stock split whereby each five
shares of the Company's outstanding common stock were automatically converted
into one share (the "Reverse Stock Split"). During the fourth quarter of fiscal
1998, prior to the Reverse Stock Split, the Company's common stock traded
between $2.75 and $1.50 per share. On May 12, 1998, following the Reverse Stock
Split, the Company's common stock opened at a bid price of $9.38 per share.
Subsequently, the Company's common stock price continued to trade at a price
above the $5.00 minimum bid price for a period of 18 days. On May 19, 1998, and
June 3, 1998, the Company received notice from Nasdaq that the Company was not
in compliance with either the market capitalization requirement or the minimum
bid price requirement for continued listing on the Nasdaq National Market. The
delisting of the Shares from the Nasdaq National Market would give the holders
of the Company's approximately $32,000,000 of outstanding Convertible Notes the
right to require the Company to repurchase such notes at 100% of the principal
amount.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more holders
of record. Termination of registration of the Shares under the Exchange Act
would substantially reduce the information required to be furnished by the
Company to its stockholders and to the Commission and would make certain
provisions of the Exchange Act no longer applicable to the Company, such as the
short-swing profit recovery provisions of Section 16(b), the requirement of
furnishing a proxy statement pursuant to Section 14(a) in connection with
stockholders' meetings and the related requirement of furnishing an annual
report to stockholders and the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 or Rule 144A
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
may be impaired or eliminated.
Margin Regulations. The Shares are presently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which status has the effect, among other things, of
allowing brokers to extend credit on the collateral of the Shares. Depending
upon factors similar to those described above regarding stock exchange listing
and market quotations, it is possible that, following the Offer, the Shares
would no longer constitute "margin securities" for the purposes of the margin
regulations of the Federal Reserve Board and therefore could no longer be used
as collateral for loans made by brokers. In addition, if registration of the
Shares under the Exchange Act were terminated, the Shares would no longer
constitute "margin securities."
Purchaser currently intends to seek delisting of the Shares from the Nasdaq
National Market and the termination of the registration of the Shares under the
Exchange Act as soon after the completion of the Offer as the requirements for
such delisting and termination are met. If the Nasdaq National Market listing
and the Exchange Act registration of the Shares are not terminated prior to the
Merger, then the Shares will be delisted from the Nasdaq National Market and the
registration of the Shares under the Exchange Act will be terminated following
the consummation of the Merger.
11
<PAGE> 14
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
General. The information concerning the Company contained in this Offer to
Purchase, including that set forth below under the caption "Selected Financial
Information," has been furnished by the Company or has been taken from or based
upon publicly available documents and records on file with the Commission and
other public sources. Neither Parent, Purchaser nor the Dealer Manager assumes
responsibility for the accuracy or completeness of the information concerning
the Company contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to
Parent, Purchaser or the Dealer Manager.
The Company is a developer, producer and publisher of entertainment
software for personal computers ("PC's") and certain console platforms. The
Company creates, acquires or licenses properties with mass-market appeal and
develops branded products based on these properties. A range of advanced
technologies is incorporated into these products, such as multiplayer
networking, simulation, real-time response and three dimension ("3D")
texture-mapped graphics to enhance each product's distinctive characteristics.
The Company also distributes entertainment software and related products
published by third parties. The Company primarily develops products in the
categories of Simulation, Strategy, and 3D Action. The Company's most popular
products to date include the FALCON(R) series, GRAND PRIX series, MAGIC: THE
GATHERING(R), MASTER OF ORION(TM) II, the CIVILIZATION(TM) Series, the STAR
TREK(TM) series, TOP GUN(TM): FIRE AT WILL!(TM), WORMS II(R) and THE X-COM(R)
series. The Company is a Delaware corporation with its principal executive
offices at 2490 Mariner Square Loop, Suite 100, Alameda, California 94501.
Selected Financial Information. Set forth below is certain selected
consolidated financial information with respect to the Company, excerpted or
derived from the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1998 and its Quarterly Report on Form 10-Q for the quarter ended June
30, 1998 filed with the Commission pursuant to the Exchange Act.
More comprehensive financial information is included in such reports and in
other documents filed by the Company with the Commission. The following summary
is qualified in its entirety by reference to such reports and other documents
and all of the financial information (including any related notes) contained
therein. Such reports and other documents may be inspected and copies may be
obtained from the Commission in the manner set forth below.
12
<PAGE> 15
MICROPROSE, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(UNAUDITED) FISCAL YEARS ENDED
-------------------- -----------------------------------
JUNE 30, JUNE 30, MARCH 31, MARCH 31, MARCH 31,
1998 1997 1998 1997 1996
-------- -------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Revenues....................... $ 12,195 $13,580 $ 60,009 $100,253 $ 59,694
Income (Loss) from Operations...... (7,047) (5,415) (29,583) 4,380 (35,524)
Net Income (Loss).................. (7,815) (8,312) (33,141) 7,988 (39,841)
Basic Income (Loss) per Share...... (1.36) (1.48) (5.86) 1.45 (8.49)
Diluted Income (Loss) per Share.... (1.36) (1.48) (5.86) 1.39 (8.49)
BALANCE SHEET DATA:
Total Assets....................... $ 35,327 $69,321 $ 43,829 $ 80,305 $ 65,922
Total Liabilities.................. 52,793 55,762 53,371 58,707 74,837
Stockholders' Equity (Deficit)..... (17,466) 13,559 (9,542) 21,598 (8,915)
</TABLE>
Other Financial Information. During the course of the discussions between
Parent and the Company that led to the execution of the Merger Agreement, the
Company provided Parent with certain information about the Company and its
financial performance which is not publicly available. The information provided
included financial projections for the Company as an independent company (i.e.,
without regard to the impact to the Company of a transaction with Parent), which
included the following: projections of revenue, earnings before income and taxes
("EBIT") and net income of approximately $98.1 million, $3.3 million and $1.0
million, respectively, for fiscal 1999. The foregoing information was prepared
by the Company solely for internal use and not for publication or with a view to
complying with the published guidelines of the SEC regarding projections or with
the guidelines established by the American Institute of Certified Public
Accountants and are included in this Offer to Purchase only because they were
furnished to Parent. The foregoing information is "forward-looking" and
inherently subject to significant uncertainties and contingencies, many of which
are beyond the control of the Company, including industry performance, general
business and economic conditions, changing competition, adverse changes in
applicable laws, regulations or rules governing environmental, tax or accounting
matters and other matters. One cannot predict whether the assumptions made in
preparing the foregoing information will be accurate, and actual results may be
materially higher or lower than those contained described above. The inclusion
of this information should not be regarded as an indication that Parent,
Purchaser, the Company or anyone who received this information considered it a
reliable predictor of future events, and this information should not be relied
on as such. None of Parent, Purchaser or the Company assumes any responsibility
for the validity, reasonableness, accuracy or completeness of the projections
and the Company has made no representation to Parent or Purchaser regarding the
financial information described above.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports, proxy statements and other information with the Commission
relating to its business, financial condition and other matters. Information as
of particular dates concerning the Company's directors and officers, their
remuneration, options granted to them, the principal holders of the Company's
securities and any material interests of such persons in transactions with the
Company is required to be disclosed in proxy statements distributed to the
Company's stockholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located at
Seven World Trade Center, Suite 1300, New York, NY 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such
information should be obtainable by mail, upon payment of the Commission's
customary charges, by writing to the Commission's principal office at 450 Fifth
Street, N.W., Washington,
13
<PAGE> 16
D.C. 20549. The Commission also maintains a website on the internet at
http://www.sec.gov that contains reports, proxy statements and other information
relating to the Company which have been filed via the Commission's EDGAR System.
9. CERTAIN INFORMATION CONCERNING PARENT AND PURCHASER.
Parent and Purchaser. Parent is a Rhode Island corporation and (with its
subsidiaries) is a leading global designer, manufacturer and marketer of a
diverse line of toy products and related items. Included in its offerings are
games, including traditional board and card, hand-held electronic and
interactive CD-ROM, and puzzles, preschool, boys' action and girls' toys, dolls,
plush products and infant products. The Company also licenses various
tradenames, characters and other property rights for use in connection with the
sale by others of noncompeting toys and non-toy products.
Purchaser is a newly incorporated Delaware corporation organized in
connection with the Offer and the Merger and has not carried on any activities
other than in connection with the Offer and the Merger. All of the outstanding
capital stock of Purchaser is owned directly by Parent. Until immediately prior
to the time Purchaser purchases Shares pursuant to the Offer, it is not
anticipated that Purchaser will have any significant assets or liabilities or
engage in activities other than those incident to its formation and
capitalization and the transactions contemplated by the Offer and the Merger.
The principal offices of Purchaser and Parent are located at 1027 Newport
Avenue, Pawtucket, Rhode Island 02861. The telephone number of Parent and
Purchaser at such location is (401) 431-8697.
For certain information concerning the executive officers and directors of
Parent and Purchaser, see Schedule I.
Except as set forth in this Offer to Purchase, neither Purchaser nor
Parent, nor, to the best knowledge of Purchaser or Parent, any of the persons
listed on Schedule I, nor any associate or majority owned subsidiary of any of
the foregoing, beneficially owns or has a right to acquire any Shares, and
neither Purchaser nor Parent nor, to the best of knowledge of Purchaser or
Parent, any of the persons or entities referred to above, nor any of the
respective executive officers, directors or subsidiaries of any of the
foregoing, has effected any transaction in the Shares during the past 60 days.
Except as set forth in this Offer to Purchase, neither Purchaser nor Parent
has any contract, arrangement, understanding or relationship with any other
person with respect to any securities of the Company, including, but not limited
to, any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any securities of the Company, joint ventures, loan or
option arrangements, puts or calls, guarantees of loans, guarantees against loss
or the giving or withholding of proxies.
Except as set forth in this Offer to Purchase, none of Purchaser, Parent,
any of their respective affiliates, nor, to the best knowledge of Purchaser or
Parent, any of the persons listed on Schedule I, has had, since March 31, 1995,
any business relationships or transactions with the Company or any of its
executive officers, directors or affiliates that would require to be reported
under the rules of the Commission. Except as set forth in this Offer to
Purchase, since March 31, 1995 there have been no contacts, negotiations or
transactions between Purchaser, Parent, any of their respective affiliates or,
to the best knowledge of Purchaser, Parent, any of the persons listed on
Schedule I, and the Company or its affiliates concerning a merger, consolidation
or acquisition, tender offer or other acquisition of securities, election of
directors or a sale or other transfer of a material amount of assets.
Available Information. Parent is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports, proxy statements and other information with the Commission
relating to its business, financial condition and other matters. Information as
of particular dates concerning Parent's directors and officers, their
remuneration, options granted to them, the principal holders of Parent's
securities and any material interests of such persons in transactions with
Parent is required to be disclosed in proxy statements distributed to Parent's
stockholders and filed with the Commission. Such reports, proxy statements and
other information should be available for inspection at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of
14
<PAGE> 17
the Commission located at Seven World Trade Center, Suite 1300, New York, NY
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661. Copies of such information should be obtainable by mail, upon payment of
the Commission's customary charges, by writing to the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also
maintains a website at http://www.sec.gov that contains reports, proxy
statements and other information relating to Parent which have been filed via
the EDGAR System. Such materials should also be available at the offices of the
American Stock Exchange ("Amex"), 86 Trinity Place, New York, NY 10006.
10. SOURCES AND AMOUNT OF FUNDS.
The Offer is not conditioned upon any financing arrangements. The total
amount of funds required by Purchaser to consummate the Offer and the Merger,
including the redemption, refinancing, or payment of approximately $35.3 million
of debt and redeemable preferred stock of by the Company and the fees and
expenses of the Offer and the Merger, is estimated to be approximately $72.0
million. Purchaser will obtain all such funds from Parent in the form of capital
contributions and/or loans. Parent will provide such funds through a combination
of its cash on hand and short term borrowings, including but not limited to,
commercial paper.
11. BACKGROUND OF THE OFFER; PURPOSE OF THE OFFER AND THE MERGER; THE MERGER
AGREEMENT AND CERTAIN OTHER AGREEMENTS.
Background of the Offer.
On May 19, 1998, the Company released fourth quarter and fiscal 1998
results. In that press release the Company's management indicated that the
Company can best prosper and leverage its assets in combination with another
company or through a strategic investment from a partner. As a result, the
Company Board authorized management to investigate strategic alternatives for
the Company.
On or about June 14, 1998, Ron Parkinson, Vice President of Finance of
Hasbro Interactive, was contacted by a representative of Piper Jaffray. After
signing a confidentiality agreement on June 16, 1998, Hasbro Interactive, a
wholly-owned subsidiary of Parent, was offered the opportunity to evaluate
materials supplied by the Company regarding a potential business transaction.
On June 29, 1998, Tom Dusenberry, President of Hasbro Interactive, Mr.
Parkinson, Tony Parks, Vice President of Research and Development and John
Sutyak, Director of New Business Development for Hasbro Interactive met with
Gilman Louie, Chairman of the Board, Stephen Race, Chief Executive Officer, M.
Kip Welch, Vice President and General Counsel, John Belchers, Chief Financial
Officer and other representatives of the Company. The parties observed the
product line in development and discussed the possibility of a transaction
between the companies and the possible synergy between Hasbro Interactive and
the Company.
On July 2, 1998, Phillip H. Waldoks, Senior Vice President -- Corporate
Legal Affairs and Secretary of Parent, and Mr. Welch discussed arrangements for
access by representatives of Parent and Hasbro Interactive to a data room
prepared by representatives of the Company in Palo Alto.
On July 7, 1998, representatives of Piper Jaffray contacted representatives
of Bear Stearns to discuss, among other things, the negotiations between the
parties and to determine the timing of the process going forward.
On July 10, 1998, Mr. Dusenberry and Mr. Harold P. Gordon, Vice Chairman of
Parent, met with Mr. Race, Mr. Louie, Mr. Belchers and Mr. Timothy Christian,
Managing Director, Europe/Asia Pacific of the Company. They discussed the common
strategic goals and expressed interest to move forward with a possible
acquisition.
From July 13, 1998 through July 15, 1998, Mr. Parks visited the studios of
the Company in the United States to review the technology of the two businesses
and discuss the status of products under development.
15
<PAGE> 18
On July 16, 1998, Mr. Dusenberry and Mr. Barry Jafrato, Managing Director
of International Operations for Hasbro Interactive, met with Mr. Christian and
the senior team of the Company in Europe to view the operations in Europe and
discuss the potential synergies.
On July 27, 1998, Mr. Race and Mr. Louie traveled to Beverly, Massachusetts
to meet with Messrs. Dusenberry, Parkinson, Sutyak, John Hurlbut, Vice President
of Marketing, Bob Sadacca, Vice President Administration and Jim Adams, Vice
President of Sales of Hasbro Interactive to answer questions on the Company's
operations and current performance. Mr. Dusenberry then accompanied Mr. Race and
Mr. Louie to the corporate offices of Parent for a meeting with Mr. Alan
Hassenfeld, Chairman of the Board and Chief Executive Officer, John T. O'Neill,
Executive Vice President and Chief Financial Officer, and Mr. Gordon for a
strategic discussion of the potential transaction. Both parties agreed, on July
27, 1998 to amend the confidentiality agreement.
On August 4, 1998 and August 5, 1998 Mr. Jafrato visited the Company
operations in the United Kingdom and Germany for to assess strategies for
integrating these operations into Hasbro Interactive.
From July 8, 1998 to August 11, 1998, Parent's and Hasbro Interactive's
representatives conducted due diligence in a data room prepared by
representatives of the Company in Palo Alto, remotely on data supplied by the
Company, public information and using industry data, and on site at the
Company's executive offices in California, the United Kingdom and Germany.
Negotiations for a potential merger and the related agreements took place
between members of senior management of the Parent, Hasbro Interactive, their
legal advisors, senior management and representatives of the Company and its
legal advisors between July 29, 1998 and August 11, 1998. Such negotiations were
completed on August 11, 1998 when Parent and the Company executed and delivered
the Merger Agreement.
On or about August 11, 1998, Hasbro Interactive offered senior positions at
Hasbro Interactive to Mr. Louie and Mr. Christian, contingent on the closing of
the acquisition of the Company. Mr. Christian also agreed to terminate his
Service Agreement with the Company in exchange for the sum of approximately
L275,000 which would have been due thereunder, contingent upon the closing of
the acquisition of the Company.
On August 12, 1998 Parent announced the signing of the Merger Agreement. On
August 14, 1998 pursuant to the terms of the Merger Agreement, Parent and
Purchaser commenced the Offer.
Purpose of the Offer and the Merger. The purpose of the Offer and the
Merger is to enable Parent to acquire control of, and the entire equity interest
in, the Company. The Offer is being made pursuant to the Merger Agreement and is
intended to increase the likelihood that the Merger will be effected. The
purpose of the Merger is to acquire all of the outstanding Shares not purchased
pursuant to the Offer.
Stockholders of the Company who sell their Shares in the Offer will cease
to have any equity interest in the Company and any right to participate in its
earnings and future growth. If the Merger is consummated, non-tendering
stockholders will no longer have an equity interest in the Company and instead
will have only the right to receive cash consideration pursuant to the Merger
Agreement or to exercise statutory appraisal rights under Section 262 of the
DGCL. See Section 12. Similarly, after selling their Shares in the Offer or the
subsequent Merger, stockholders of the Company will not bear the risk of any
decrease in the value of the Company.
The primary benefits of the Offer and the Merger to the stockholders of the
Company are that such stockholders are being afforded an opportunity to sell all
of their Shares for cash at a price which represents a premium of approximately
32% over the closing market price of the Shares on August 11, 1998, the last
full trading day prior to the initial public announcement that the Company,
Purchaser and Parent had executed the Merger Agreement and a more substantial
premium over recent historical trading prices.
16
<PAGE> 19
Merger Agreement
The following is a summary of certain provisions of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full text
of the Merger Agreement filed with the Commission as an exhibit to the Schedule
14D-1 and is incorporated herein by reference. Capitalized terms not otherwise
defined below shall have the meanings set forth in the Merger Agreement. The
Merger Agreement may be examined, and copies obtained, as set forth in Section 9
of this Offer to Purchase.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and Purchaser with
respect to, among other things, corporate organization, subsidiaries, capital
stock, options or other rights to acquire Shares, authority to enter into the
Merger Agreement, required consents, no conflicts between the Merger Agreement
and applicable laws and certain agreements to which the Company or its assets
may be subject, financial statements, filings with the Commission, disclosures
in proxy statement and tender offer documents, absence of certain changes or
events, litigation, absence of changes in benefit plans, employee benefit plans,
tax matters, no excess non-deductible payments, compliance with applicable laws,
environmental matters, intellectual property, owned and leased real property,
material contracts, labor and employment matters, product liability,
applicability of state takeover statutes, brokers' and finders' fees, votes
required to approve the Merger Agreement, undisclosed liabilities, receipt of
the Financial Advisor Opinion, Year 2000, Company Rights Agreement, absence of
questionable payments and full disclosure.
In the Merger Agreement, each of Parent and Purchaser has made customary
representations and warranties to the Company with respect to, among other
things, corporate organization, authority to enter into the Merger Agreement,
required consents, no conflicts between the Merger Agreement and the certificate
of incorporation and by-laws of Parent and Purchaser or laws applicable to
Parent or Purchaser, disclosures in proxy statement and tender offer documents,
prior activities by Purchaser and brokers' and finders' fees.
Conditions to the Merger. The respective obligations of Parent and
Purchaser, on the one hand, and the Company, on the other hand, to effect the
Merger are subject to the satisfaction of each of the following conditions, any
and all of which may be waived in whole or in part by the Company, Parent or
Purchaser, as the case may be, to the extent permitted by applicable law: (i)
the Merger Agreement shall have been approved and adopted by the requisite vote
of the holders of Shares, if required by applicable law and the Certificate of
Incorporation, in order to consummate the Merger; (ii) any waiting period
applicable to the Merger under the HSR Act shall have expired or been earlier
terminated; (iii) no statute, rule, regulation, order, decree or injunction
shall have been enacted, promulgated or issued by any governmental entity
precluding, restraining, enjoining or prohibiting consummation of the Merger;
and (iv) Parent, Purchaser or their affiliates shall have purchased Shares
pursuant to the Offer; provided, that the condition contained in the preceding
clause (iv) shall be deemed to have been satisfied with respect to the
obligation of Parent and Purchaser to effect the Merger if Purchaser fails to
accept for payment or pay for Shares pursuant to the Offer in violation of the
terms of the Offer or of the Merger Agreement.
The Company Board. Promptly after (i) the purchase of and payment for any
Shares by Purchaser or any of its affiliates as a result of which Purchaser and
its affiliates own beneficially at least a majority of the then outstanding
Shares and (ii) compliance with Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, whichever shall occur later, Parent shall be entitled to
designate such number of directors, rounded up to the next whole number, on the
Company's Board of Directors as is equal to the product of the total number of
directors on such Board (giving effect to any increase in the size of such
Board) multiplied by the percentage that the number of Shares beneficially owned
by Purchaser (including Shares so accepted for payment) bears to the total
number of Shares then outstanding. In furtherance thereof, the Company shall,
upon request of Parent, use its best efforts promptly either to increase the
size of its Board of Directors or to secure the resignations of such number of
its incumbent directors, or both, as is necessary to enable such designees of
Parent to be so elected or appointed to the Company's Board of Directors, and
the Company shall take all actions available to the Company to cause such
designees of Parent to be so elected or appointed. At such time, the Company
shall, if requested by Parent, also take all action necessary to cause Persons
designated by Parent to constitute at least the same percentage (rounded up to
the next whole
17
<PAGE> 20
number) as is on the Company's Board of Directors of (i) each committee of the
Company's Board of Directors, (ii) each board of directors (or similar body) of
each Subsidiary of the Company and (iii) each committee (or similar body) of
each such board.
The Company shall promptly take all actions required pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to
fulfill its obligations under this Section, including mailing to stockholders
the information required by such Section 14(f) and Rule 14f-1 (or, at Parent's
request, furnishing such information to Parent for inclusion in the Offer
Documents initially filed with the SEC and distributed to the stockholders of
the Company) as is necessary to enable Parent's designees to be elected to the
Company's Board of Directors. Parent or Purchaser will supply the Company any
information with respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f) and Rule 14f-1. The
provisions of this Section are in addition to and shall not limit any rights
which Purchaser, Parent or any of their affiliates may have as a holder or
beneficial owner of Shares as a matter of applicable Law with respect to the
election of directors or otherwise.
Notwithstanding the foregoing, the parties to the Merger Agreement shall
use their respective reasonable best efforts to ensure that at least two of the
members of the Board shall, at all times prior to the Effective Time be,
Continuing Directors. From and after the time, if any, that Parent's designees
constitute a majority of the Company's Board of Directors, any amendment or
modification of this Agreement, any amendment to the Company's Certificate of
Incorporation or By-Laws inconsistent with the Merger Agreement, any termination
of the Merger Agreement by the Company, any extension of time for performance of
any of the obligations of Parent or Purchaser under the Merger Agreement, any
waiver of any condition to the Company's obligations under the Merger Agreement
or any of the Company's rights under the Merger Agreement or other action by the
Company under the Merger Agreement may be effected only by the action of a
majority of the Continuing Directors of the Company, which action shall be
deemed to constitute the action of any committee specifically designated by the
Board of Directors of the Company to approve the actions contemplated by the
Merger Agreement and the Transactions and the full Board of Directors of the
Company; provided, that, if there shall be no Continuing Directors, such actions
may be effected by majority vote of the entire Board of Directors of the
Company.
Stockholders' Meeting. If required by applicable Law in order to
consummate the Merger, the Company, acting through the Company Board, shall, in
accordance with applicable Law, its Certificate of Incorporation and By-laws:
(i) as promptly as practicable following the acceptance for payment and purchase
of Shares by Purchaser pursuant to the Offer, duly call, give notice of, convene
and hold a special meeting of its stockholders (the "Special Meeting") for the
purposes of considering and taking action upon the approval of the Merger and
the approval and adoption of the Merger Agreement; (ii) prepare and file with
the Commission a preliminary proxy or information statement relating to the
Merger and the Merger Agreement and (x) obtain and furnish the information
required to be included in the Proxy Statement (as defined below) and, after
consultation with Parent, respond promptly to any comments made by the
Commission with respect to the preliminary proxy or information statement and
cause a definitive proxy or information statement, including any amendment or
supplement thereto (the "Proxy Statement") to be mailed to its stockholders at
the earliest practicable date; provided that no amendment or supplement to the
Proxy Statement will be made by the Company without consultation with Parent and
its counsel and (y) use its reasonable best efforts to obtain the necessary
approvals of the Merger and the Merger Agreement by its stockholders; and (iii)
unless the Merger Agreement has been terminated in accordance with the
provisions of the section titled "Termination" below, subject to its rights
pursuant to the section titled "No Solicitation" below, include in the Proxy
Statement the recommendation of the Company Board that stockholders of the
Company vote in favor of the approval of the Merger and the approval and
adoption of the Merger Agreement. Parent has agreed to vote, or cause to be
voted, all of the Shares then owned by it, Purchaser or any of its other
subsidiaries in favor of the approval of the Merger and the approval and
adoption of the Merger Agreement.
Options. The Merger Agreement provides that immediately prior to the
Effective Time, each then outstanding option to purchase any shares of capital
stock of the Company (in each case, an "Option"), whether or not then
exercisable, shall be cancelled by the Company and in consideration of such
cancellation and except to the extent that Parent or the Purchaser and the
holder of any such Option otherwise agree, the Company (or, at Parent's option,
the Purchaser) shall pay to such holders of Options an amount in respect
18
<PAGE> 21
thereof equal to the product of (A) the excess, if any, of the Offer Price over
the exercise price of each such Option and (B) the number of Shares previously
subject to the Option immediately prior to its cancellation (such payment to be
net of withholding taxes and without interest). The Company shall use
commercially reasonable efforts to obtain the consent of each holder of an
Option as to whom Parent reasonably requests a consent be obtained to the
transactions above no later than the Effective Time in a form acceptable to
Parent. The Company shall provide to each holder of Options any required notice
(in a form acceptable to Parent) under the applicable Option Plan.
The Company shall take all actions necessary and appropriate so that (i) no
purchase rights are acquired after the date hereof under the Company's Employee
Stock Purchase Plan and (ii) all stock option or other equity based plans
maintained with respect to the Shares, including, without limitation, the
Company's Employee Stock Purchase Plan and those plans listed in the Merger
Agreement hereof ("Option Plans"), shall terminate as of the Effective Time and
the provisions in any other Benefit Plan providing for the issuance, transfer or
grant of any capital stock of the Company or any interest in respect of any
capital stock of the Company shall be deleted as of the Effective Time, and the
Company shall use its best efforts to ensure that following the Effective Time
no holder of an Option or any participant in any Option Plan shall have any
right thereunder to acquire any capital stock of the Company, Parent, Purchaser
or the Surviving Corporation.
Interim Operations. The Merger Agreement provides that after the date of
the Merger Agreement and prior to the time the designees of Parent have been
elected to or appointed to, and shall constitute a majority of, the Company
Board pursuant to the applicable provisions of the Merger Agreement (the
"Appointment Date"), and except (i) as expressly contemplated by the Merger
Agreement, (ii) as set forth in the applicable section of the disclosure
schedule thereto or (iii) as agreed in writing by Parent:
(a) the Company shall and shall cause its Subsidiaries to carry on
their respective businesses in the ordinary course;
(b) the Company shall and shall cause its Subsidiaries to use all
commercially reasonable efforts consistent with good business judgment to
preserve intact their current business organizations, keep available the
services of their current officers and key employees and preserve their
relationships consistent with past practice with desirable customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them to the end that their goodwill and ongoing businesses
shall be unimpaired in all material respects at the Effective Time;
(c) neither the Company nor any of its Subsidiaries shall, directly or
indirectly, amend its Certificate of Incorporation or By-laws or similar
organizational documents;
(d) officers of the Company and its Subsidiaries shall confer at such
times as Parent may reasonably request with one or more representatives of
Parent to report material operational matters and the general status of
ongoing operations;
(e) neither the Company nor any of its Subsidiaries shall: (i)(A)
declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to the Company's capital stock or that
of its Subsidiaries, except that a wholly-owned Subsidiary of the Company
may declare and pay a dividend or make advances to its parent or the
Company or (B) redeem, purchase or otherwise acquire directly or indirectly
any of the Company's capital stock or that of its Subsidiaries; (ii) issue,
sell, pledge, dispose of or encumber any additional shares of, or
securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of capital
stock of any class of the Company or its Subsidiaries, other than Shares
issued upon the exercise of Options outstanding on the date of the Merger
Agreement in accordance with the Option Plans as in effect on the date of
the Merger Agreement; or (iii) split, combine or reclassify the outstanding
capital stock of the Company or of any of the Subsidiaries of the Company;
(f) except as permitted by the Merger Agreement, neither the Company
nor any of its Subsidiaries shall acquire or agree to acquire (A) by
merging or consolidating with, or by purchasing a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization or
division thereof (including entities which are
19
<PAGE> 22
subsidiaries of the Company) or (B) any assets, including real estate,
except purchases in the ordinary course of business consistent with past
practice;
(g) neither the Company nor any of its Subsidiaries shall make any new
capital expenditure or expenditures, which individually exceed $50,000 and
in the aggregate exceed $150,000;
(h) neither the Company nor any of its Subsidiaries shall, except in
the ordinary course of business and except as otherwise permitted by the
Merger Agreement, amend or terminate any Company material contract where
such amendment or termination would have a Material Adverse Effect on the
Company, or waive, release or assign any material rights or claims;
(i) neither the Company nor any of its Subsidiaries shall transfer,
lease, license, sell, mortgage, pledge, dispose of, or encumber any
property or assets other than in the ordinary course of business and
consistent with past practice;
(j) neither the Company nor any of its Subsidiaries shall: (i) enter
into any employment or severance agreement with or grant any severance or
termination pay to any officer, director or key employee of the Company or
any its Subsidiaries; or (ii) hire or agree to hire any new or additional
key employees or officers;
(k) neither the Company nor any of its Subsidiaries shall, except as
required to comply with applicable Law or expressly provided in the Merger
Agreement, (A) adopt, enter into, terminate, amend or increase the amount
or accelerate the payment or vesting of any benefit or award or amount
payable under any Benefit Plan or other arrangement for the current or
future benefit or welfare of any director, officer or current or former
employee, except to the extent necessary to coordinate any such Benefit
Plans with the terms of the Merger Agreement, (B) increase in any manner
the compensation or fringe benefits of, or pay any bonus to, any director,
officer or employee, (C) pay any benefit not provided for under any Benefit
Plan, (D) grant any awards under any bonus, incentive, performance or other
compensation plan or arrangement or Benefit Plan (including the grant of
stock options, stock appreciation rights, stock-based or stock-related
awards, performance units or restricted stock, or the removal of existing
restrictions in any Benefit Plans or agreements or awards made thereunder)
or (E) take any action to fund or in any other way secure the payment of
compensation or benefits under any employee plan, agreement, contract or
arrangement or Benefit Plan;
(l) neither the Company nor any of its Subsidiaries shall: (i) incur
or assume any long-term debt or, except in the ordinary course of business,
incur or assume any short-term indebtedness in amounts not consistent with
past practice; (ii) incur or modify any material indebtedness or other
liability except as set forth on the applicable section of the disclosure
schedule to the Merger Agreement; (iii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business and consistent with past practice; (iv) make any loans,
advances or capital contributions to, or investments in, any other person
(other than to wholly owned Subsidiaries of the Company or customary loans
or advances to employees in the ordinary course of business in accordance
with past practice); (v) settle any claims other than in the ordinary
course of business, in accordance with past practice and without admission
of liability; or (vi) enter into any material commitment or transaction;
(m) neither the Company nor any of its Subsidiaries shall change any
of the accounting principles used by it unless required by generally
accepted accounting principles;
(n) neither the Company nor any of its Subsidiaries shall make any tax
election, amend any tax return, make a claim for any tax refund or settle
or compromise any tax liability (whether with respect to amount or timing);
(o) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of any such claims, liabilities or
obligations in the ordinary course of business and consistent with past
practice, of any such claims, liabilities or obligations which are
20
<PAGE> 23
reflected or reserved against in, or contemplated by, the consolidated
financial statements (or the notes thereto) of the Company and its
consolidated Subsidiaries; or except in the ordinary course of business
consistent with past practice, waive the benefits of, or agree to modify in
any manner, any confidentiality, standstill or similar agreement to which
the Company or any of its Subsidiaries is a party;
(p) neither the Company nor any of its Subsidiaries shall (by action
or inaction) amend, renew, terminate or cause to be extended any lease,
agreement or arrangement relating to any of the leased properties or enter
into any lease, agreement or arrangement with respect to real property;
(q) neither the Company nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing,
or to authorize, recommend, propose or announce an intention to do any of
the foregoing; and
(r) neither the Company nor any of its Subsidiaries shall take any
action that the Company knows at the time of taking such action would
result in any of the conditions to the Offer, as set forth in the Merger
Agreement, not being satisfied (subject to the Company's right to take
action specifically permitted by the Merger Agreement).
No Solicitation. Pursuant to the Merger Agreement, the Company has agreed
that it shall not, nor shall it permit any of its Subsidiaries to, nor shall it
authorize (and shall use its best efforts not to permit) any officer, director
or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, (i) solicit or
initiate, or encourage, directly or indirectly, any inquires or the submission
of, any Takeover Proposal (as defined below), (ii) participate in any
discussions or negotiations regarding, or furnish to any Person any information
or data with respect to or access to the properties of, or take any other action
to knowingly facilitate the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal or (iii) enter into any
agreement with respect to any Takeover Proposal or approve or resolve to approve
any Takeover Proposal; provided that nothing contained in the applicable
provisions of the Merger Agreement shall prohibit the Company or the Company
Board from (A) taking and disclosing to the Company's stockholders a position
with respect to a tender or exchange offer by a third party pursuant to Rules
14d-9 and 14e-2 promulgated under the Exchange Act, or (B) making such
disclosure to the Company's stockholders as, in the good faith judgment of the
Company Board, after receiving written advice from outside counsel, is required
under applicable Law, provided that the Company may not, except as permitted by
the following paragraph, withdraw or modify, or propose to withdraw or modify,
its position with respect to the Offer or the Merger or approve or recommend, or
propose to approve or recommend any Takeover Proposal, or enter into any
agreement with respect to any Takeover Proposal. Upon execution of the Merger
Agreement, the Company will immediately cease any existing activities,
discussions or negotiations with any parties conducted prior to the date of the
Merger Agreement with respect to any of the foregoing. Notwithstanding the
foregoing, prior to the time of acceptance of Shares for payment pursuant to the
Offer, the Company may furnish information concerning its business, properties
or assets to any Person or group and may negotiate and participate in
discussions and negotiations with such Person or group concerning a Takeover
Proposal if: (x) such Person or group has submitted a Superior Proposal; and (y)
the Company Board determines, based upon the written opinion of its independent
legal counsel, that the failure to participate in such discussions or
negotiations or to furnish such information would cause a breach of such Board's
fiduciary duties under applicable Law. The Company will promptly (but in no case
later than 24 hours) notify Parent of the existence of any proposal, discussion,
negotiation or inquiry received by the Company regarding any Takeover Proposal,
and the Company will promptly communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry which it may receive regarding any Takeover
Proposal (and will promptly provide to Parent copies of any written materials
received by the Company in connection with such proposal, discussion,
negotiation or inquiry) and the identity of the party making such proposal or
inquiry or engaging in such discussion or negotiation. The Company will promptly
provide to Parent any non-public information concerning the Company provided to
any other Person which was not previously provided to Parent. The Company will
keep Parent fully informed of the status and details of any such Takeover
Proposal and of any amendments or proposed amendments to any Takeover Proposal
and will promptly notify Parent (but in no case later than 24 hours) of any
determination by the Company Board that a Superior Proposal has been made.
21
<PAGE> 24
Pursuant to the Merger Agreement, except as set forth in this paragraph,
neither the Company Board nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent or
Purchaser, the approval or recommendation by the Company Board or any such
committee of the Offer, the Merger Agreement or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Takeover Proposal or (iii)
enter into any agreement with respect to any Takeover Proposal. Notwithstanding
the foregoing, subject to compliance with this paragraph prior to the time of
acceptance for payment of Shares pursuant to the Offer, the Company Board may
withdraw or modify its approval or recommendation of the Offer, the Merger
Agreement or the Merger, approve or recommend a Superior Proposal (as defined
below), or enter into an agreement with respect to a Superior Proposal, in each
case at any time after the third business day following Parent's receipt of
written notice from the Company advising Parent that the Company Board has
received a Superior Proposal which it intends to accept, specifying the material
terms and conditions of such Superior Proposal, identifying the person making
such Superior Proposal, but only if the Company shall have caused its financial
and legal advisors to negotiate with Parent promptly following delivery of such
notice and through such three business day period to make such adjustments to
the terms and conditions of the Merger Agreement as would enable the Company to
proceed with the Transactions on such adjusted terms. The term "Takeover
Proposal" means any bona fide proposal or offer, whether in writing or
otherwise, from any Person other than Parent, Purchaser or any affiliates
thereof (a "Third Party") to acquire beneficial ownership (as defined under Rule
13(d) of the Exchange Act) of all or a material portion of the assets of the
Company and its subsidiaries, taken as whole, or 50% or more of any class of
equity securities of the Company pursuant to a merger, consolidation or other
business combination, sale of shares of capital stock, sale of assets, tender
offer, exchange offer or similar transaction with respect to the Company,
including any single or multi-step transaction or series of related
transactions, which is structured to permit such Third Party to acquire
beneficial ownership of any material portion of the assets of the Company and
its subsidiaries, taken as a whole, or 50% or more of the equity interest in the
Company. The term "Superior Proposal" means an unsolicited bona fide proposal by
a Third Party to acquire, directly or indirectly, for consideration consisting
of cash and/or securities, more than a majority of the Shares then outstanding
or all or substantially all of the assets of the Company, and otherwise on terms
which the Company Board determines in good faith to be more favorable to the
Company's stockholders than the Offer and the Merger, based on advice of the
Company's independent financial advisor, for which financing, to the extent
required, is then committed or which, in the good faith reasonable judgment of
the Company Board (based on advice from the Company's independent financial
advisor that the value of the Consideration provided for in such proposal is
superior to the value of the consideration provided for in the Offer and the
Merger), for which financing, to the extent required, is then committed or
which, in the good faith reasonable judgment of the Company Board, based on
advice from the Company's independent financial advisor, is reasonably capable
of being financed by such party.
Termination. The Merger Agreement may be terminated and the Merger
contemplated therein may be abandoned at any time prior to the Effective Time,
whether before or after approval of matters presented in connection with the
Merger by the stockholders of the Company (provided, however, that if Shares are
purchased pursuant to the Offer, neither Parent nor Purchaser may in any event
terminate the Merger Agreement):
(a) By the mutual written consent of Parent and the Company; provided,
however, that if Parent shall have a majority of the directors pursuant to
the applicable provisions of the Merger Agreement, such consent of the
Company may only be given if approved by the Continuing Directors.
(b) By either of Parent or the Company if (i) a statute, rule or
executive order shall have been enacted, entered or promulgated prohibiting
the Transactions on the terms contemplated by the Merger Agreement or (ii)
any governmental entity shall have issued an order, decree or ruling or
taken any other action (which order, decree, ruling or other action the
parties to the Merger Agreement shall use their reasonable efforts to
lift), in each case permanently restraining, enjoining or otherwise
prohibiting the Transactions contemplated by the Merger Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable.
22
<PAGE> 25
(c) By either of Parent or the Company if at least that number of
Shares required by the Minimum Condition to be tendered shall not have been
purchased in the Offer on or before November 30, 1998; provided, that the
party seeking to terminate the Merger Agreement pursuant to the applicable
section shall not have breached in any material respect its obligations
under the Merger Agreement in any manner that shall have proximately
contributed to the failure to consummate the Offer on or before such date;
(d) By the Company: (i) if the Company has entered into an agreement
with respect to a Superior Proposal or has approved or recommended a
Superior Proposal in accordance with the Merger Agreement, provided the
Company has complied with all provisions thereof, including the notice
provisions therein, and that it simultaneously terminates the Merger
Agreement and makes simultaneous payment to the Parent of the Expenses and
the Termination Fee; or (ii) if Parent or Purchaser shall have terminated
the Offer or the Offer expires without Parent or Purchaser, as the case may
be, purchasing any Shares pursuant thereto; provided that the Company may
not terminate the Merger Agreement pursuant to this clause (d)(ii) if the
Company is in material breach of the Merger Agreement or the Stock Option
Agreement; or (iii) if Parent, Purchaser or any of their affiliates shall
have failed to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer,
provided, that the Company may not terminate the Merger Agreement pursuant
to this clause (d) (iii) if the Company is in material breach of the Merger
Agreement or the Stock Option Agreement; or (iv) if there shall be a breach
by Parent or Purchaser of any of its representations, warranties, covenants
or agreements contained in the Merger Agreement which breach is incapable
of being cured or is not cured within 10 days of notice from the Company to
Parent, except, in each case, where such breach does not have a material
adverse effect on the ability of Parent or Purchaser to consummate the
Offer or the Merger.
(e) By Parent or Purchaser: (i) (A) if prior to the purchase of the
Shares pursuant to the Offer, the Company Board shall have withdrawn, or
modified or changed in a manner adverse to Parent or Purchaser its approval
or recommendation of the Offer, the Merger Agreement or the Merger or shall
have recommended or approved a Takeover Proposal (provided that the Company
merely providing notice to Parent pursuant to the Merger Agreement shall
not in itself constitute a recommendation or approval of a Takeover
Proposal); or (B) there shall have been a material breach of any provision
of the section of the Merger Agreement regarding No Solicitation; or (ii)
if Parent or Purchaser shall have terminated the Offer without Parent or
Purchaser purchasing any Shares thereunder, provided that Parent or
Purchaser may not terminate the Merger Agreement pursuant to this clause
(e) (ii) if Parent or Purchaser is in material breach of the Merger
Agreement; or (iii) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions set forth in the Section 14 below, Parent, Purchaser or any of
their affiliates shall have failed to commence the Offer on or prior to
five business days following the date of the initial public announcement of
the Offer; or (iv) if the Company receives a Takeover Proposal from any
Person (other than Parent or Purchaser), and the Company Board takes a
neutral position or makes no recommendation with respect to such Takeover
Proposal after a reasonable amount of time (and in no event more than ten
business days following such receipt) has elapsed for the Company's Board
of Directors to review and make a recommendation with respect to such
Takeover Proposal; or (v) if there shall be a breach by the Company of any
of its representations, warranties, covenants or agreements contained in
the Merger Agreement or the Stock Option Agreement which breach is
incapable of being cured or is not cured within 10 days of notice from
Parent to the Company, except, in each case, where such breach (without
giving effect to any limitation as to "materiality" or "material adverse
effect" set forth therein) does not have a Material Adverse Effect on the
Company or a materially adverse effect on the ability of the Company to
consummate the Offer or the Merger.
Termination Fee. Pursuant to the Merger Agreement, if (x) Parent or
Purchaser terminates the Merger Agreement pursuant to clauses (e)(i) or (e)(iv)
under the heading "Termination" above or (y) the Company terminates this
Agreement pursuant to clause (d)(i) under the heading "Termination" above, then
in each case, the Company shall pay, or cause to be paid to Parent, at the time
of termination, an amount
23
<PAGE> 26
equal to $2,500,000 (the "Termination Fee") and an amount equal to Parent's and
Purchaser's actual and documented reasonable out-of-pocket expenses incurred by
Parent or Purchaser in connection with the Offer, the Merger, the Merger
Agreement and the consummation of the Transactions, including, without
limitation, the reasonable fees and expenses payable to all attorneys,
accountants, banks, investment banking firms, and other financial institutions
and Persons and their respective agents and counsel incurred in connection with
the Transactions or arranging or committing to provide or providing any
financing for, the Transactions (the "Expenses"). In addition, if the Merger
Agreement is terminated by either Parent or the Company pursuant to clause (c)
under the heading "Termination" above, by Parent pursuant to clause (e)(ii)
under the heading "Termination" above (other than if such termination is a
result of the failure to satisfy the conditions set forth in paragraphs (a)(i),
(a)(ii), (a)(v), (a)(vii), (a)(viii), (b) or (c) of the conditions to the Offer
contained in Section 14 below) or clause (e)(v) under the heading "Termination"
above (other than by reason of a breach of the section in the Merger Agreement
regarding No Solicitation) or by the Company pursuant to clause (d)(ii) under
the heading "Termination" above (other than if such termination is a result of
the failure to satisfy the conditions set forth in paragraphs (a)(i), (a)(ii),
(a)(v), (a)(vii), (a)(viii), (b) or (c) of the conditions to the Offer contained
in Section 14 below) and at the time of such termination, Parent is not in
material breach of the Merger Agreement, then the Company shall pay to Parent,
at the time of termination, the Expenses, and, if the Company shall thereafter,
within 12 months after such termination, enter into an agreement with respect to
a Takeover Proposal, then the Company shall pay the Termination Fee concurrently
with entering into any such agreement. Any payments required to be made pursuant
to this Section shall be made by wire transfer of same day funds to an account
designated by Parent. Pursuant to the Merger Agreement and security agreements
entered into by Parent and Hasbro Interactive with the Company and certain of
its subsidiaries, the Termination Fee payable under the Merger Agreement if (x)
Parent or Purchaser terminates the Merger Agreement pursuant to paragraphs
(e)(i) or (e)(iv) under the heading "Termination" above or (y) the Company
terminates the Merger Agreement pursuant to paragraph (d)(i) under the heading
"Termination" above (the "Immediately Payable Termination Fee"), shall be
secured by the Company's assets.
Indemnification. The Merger Agreement provides that the Company shall, to
the fullest extent permitted under applicable Delaware law or under the
Certificate of Incorporation or By-Laws and regardless of whether the Merger
becomes effective, indemnify and hold harmless, and, after the Effective Time,
the Surviving Corporation shall, to the fullest extent permitted under
applicable Delaware law, indemnify and hold harmless, each present and former
director, officer or employee of the Company or any of its Subsidiaries
(collectively, the "Indemnified Parties") against any costs or expenses
(including reasonable attorneys' fees), judgments, losses, claims, damages and
liabilities incurred in connection with, and amounts paid in settlement of, any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative and wherever asserted, brought or filed, (x)
arising out of or pertaining to the Transactions contemplated by the Merger
Agreement or (y) otherwise with respect to any acts or omissions or alleged acts
or omissions occurring at or prior to the Effective Time, in each case for a
period of six years after the date of the Merger Agreement. In the event of any
such claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (i) any counsel retained by the Indemnified Parties
for any period after the Effective Time must be reasonably satisfactory to the
Surviving Corporation, (ii) after the Effective Time, the Surviving Corporation
shall pay the reasonable fees and expenses of such counsel, promptly after
statements therefor are received, 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 or
delayed); and provided, further, that, in the event any claims for
indemnification are asserted or made within such six 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 shall
be reimbursed for the costs of only one law firm to represent them 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. The indemnity agreements of the Surviving Corporation
in this paragraph shall extend, on the same terms to, and shall inure to the
benefit of and shall be enforceable by, each person or entity who controls, or
in the past controlled, any present or former director, officer or employee of
the Company or any of its subsidiaries.
24
<PAGE> 27
The Merger Agreement provides that for a period of three years after the
Effective Time, Parent shall cause the Surviving Corporation to maintain in
effect, if available, directors' and officers' liability insurance covering
those persons who are currently covered by the Company's directors' and
officers' liability insurance policy (a copy of which has been made available to
Parent) on terms (including the amounts of coverage and the amounts of
deductibles, if any) that are no less favorable to the terms now applicable to
them under the Company's current policies; provided, however, that in no event
shall Parent or the Surviving Corporation be required to expend in excess of
150% of the annual premium currently paid by the Company for such coverage; and
provided further, that if the premium for such coverage exceeds such amount,
Parent or the Surviving Corporation shall purchase a policy with the greatest
coverage available for such 150% of the annual premium. The Merger Agreement
further provides that the foregoing indemnification provisions shall survive the
consummation of the Merger at the Effective Time, is intended to benefit the
Company, the Surviving Corporation and the Indemnified Parties, shall be binding
on all successors and assigns the Surviving Corporation and shall be enforceable
by the Indemnified Parties.
Stock Option Agreement
The following is a summary of certain provisions of the Stock Option
Agreement. This summary is not a complete description of the terms and
conditions of the Stock Option Agreement and is qualified in its entirety by
reference to the full text of the Stock Option Agreement filed with the
Commission as an exhibit to the Schedule 14D-1 and is incorporated herein by
reference. Capitalized terms not otherwise defined below shall have the meanings
set forth in the Stock Option Agreement. The Stock Option Agreement may be
examined, and copies obtained, as set forth in Section 9 of this Offer to
Purchase.
Grant of Option. The Stock Option Agreement provides for the grant by the
Company to Parent of an irrevocable option (the "Stock Option") to purchase up
to 19.9% of the number of Shares (the "Option Shares") issued at the time of the
grant of the Stock Option, at a price of $6.00 per Share (the "Exercise Price"),
payable in cash in accordance with the terms of the Stock Option Agreement. The
payment obligations of the Issuer, including the Cash-Out Right shall be secured
by the Issuer's assets pursuant to the Security Agreement between Grantee,
Hasbro Interactive Inc. and Issuer.
Exercise of Option. The Stock Option Agreement provides that the Stock
Option may be exercised by Parent, in whole or in part, at any time or from time
to time after the Merger Agreement is terminated pursuant to a Triggering Event
(as defined below). For the purposes of the Stock Option Agreement, "Triggering
Event" means any termination of the Merger Agreement which could entitle Parent
to the Termination Fee under the Merger Agreement.
Cash Payment. If, at any time during the period commencing on the
occurrence of a Triggering Event and ending on the termination of the Option in
accordance with Section 2, Parent sends to the Company a notice indicating
Parent's election to exercise its right (the "Cash-Out Right") pursuant to this
Section, then the Company shall pay to Parent, in exchange for the cancellation
of the Option with respect to such number of Option Shares as Parent specifies
an amount in cash equal to such number of Option Shares multiplied by the
difference between (i) the average closing price for the 5 trading days
commencing on the 12th Nasdaq trading day immediately preceding the date of
notice, per share of Issuer Common Stock as reported on the Nasdaq National
Market (or, if not listed on the Nasdaq, as reported on any other national
securities exchange or national securities quotation system on which the Shares
are listed or quoted, as reported in The Wall Street Journal (Northeast
edition), or, if not reported thereby, any other authoritative source) (the
"Closing Price") and (ii) the Exercise Price. Notwithstanding the termination of
the Option, Parent will be entitled to exercise its rights under this Section if
it has exercised such rights in accordance with the terms hereof prior to the
termination of the Option. Pursuant to the Stock Option Agreement and security
agreements entered into by Parent and Hasbro Interactive with the Company and
certain of its subsidiaries, the Cash-Out Right, when payable in connection with
the Immediately Payable Termination Fee (the "Immediately Payable Cash-Out
Right"), is secured by the Company's assets. If Parent receives in aggregate (i)
the Termination Fee pursuant to the Merger Agreement, (ii) amounts from the sale
or other disposition of the Option Shares, and (iii) the Cash Out Right in
excess of the sum of (A) $3,500,000 plus (B) the amounts paid by Parent to
purchase any Option Shares, then all such excess amounts shall be remitted by
Parent to the Company. If any payment by the Company pursuant to the Cash Out
25
<PAGE> 28
Right or payment of the Termination Fee pursuant to the Merger Agreement would
cause Parent to become obligated to remit amounts pursuant to this Section, then
the Company shall have the right to reduce such payments such that no such
obligation would arise.
Termination of Option. The Stock Option Agreement provides that the Stock
Option will terminate upon the earlier of: (i) the consummation of the Offer;
(ii) six months after the date on which a Triggering Event occurs; or (iii)
termination of the Merger Agreement in accordance with its terms prior to the
occurrence of a Triggering Event, unless, in the case of clauses (ii) and (iii),
the Grantee could be entitled to receive termination fees following such time or
termination upon the occurrence of certain events, in which case the Option will
not terminate until the later of (x) six months following the time such
termination fees become payable and (y) the expiration of the period in which
the Grantee has such right to receive termination fees.
Registration Rights. The Stock Option Agreement provides that Grantee,
within three years, may, by written notice (the "Registration Notice") to the
Issuer, request the Issuer to register under the Securities Act all or any part
of the Shares beneficially owned by Grantee (the Registrable Securities) in
order to permit the sale or other disposition of such securities pursuant to (a)
a shelf registration or (b) a bona fide firm commitment underwritten public
offering in which Grantee shall have the right to select the managing
underwriter and shall effect as wide a distribution of such Registrable
Securities as is reasonably practicable and shall use reasonable best efforts to
prevent any person or group from purchasing through such offering shares
representing more than 3% of the outstanding Shares on a fully diluted basis.
The Stock Option Agreement provides that if the Issuer effects a registration
under the Securities Act of Shares for its own account or for any other
stockholders of the Issuer (other than on Form S-4 or Form S-8, or any successor
form), it will allow Grantee the right to participate in such registration, and
such participation will not affect the obligation of the Issuer to effect demand
registration statements for Grantee under the Stock Option Agreement, except
that, if the managing underwriters of such offering advise the Issuer in writing
that in their opinion the number of Shares requested to be included in such
registration exceeds the number which can be sold in such offering, the Issuer
will include that portion of the Shares requested to be included therein equal
to the product obtained by multiplying (i) the number of shares which the
underwriter has informed the Issuer can be included in the offering and (ii) the
percentage obtained by dividing (x) the total number of Shares of Issuer Common
Stock held by Parent and (y) the total number of Shares of the Company
outstanding.
Adjustment upon Changes in Capitalization. The Stock Option Agreement
provides that in the event of any change in Shares by reason of stock dividends,
stock splits, mergers (other than the Merger), recapitalizations, combinations,
exchange of shares or the like, the type and number of shares or securities
subject to the Stock Option, and the Exercise Price per share, will be adjusted
appropriately and proper provision will be made so that Grantee will receive
upon exercise of the option the number and class of shares or other securities
or property that Grantee would have received with respect to Issuer Common Stock
if the Option has been exercised immediately prior to such event or the record
date therefor, as applicable.
Software Distribution and Loan Agreement
The following is a summary of certain provisions of the Software
Distribution and Loan Agreement (the "Software Distribution and Loan
Agreement"), dated as of August 11, 1998, by and between Hasbro Interactive,
Inc., a Delaware corporation and a wholly owned subsidiary of Parent, and the
Company. This summary is not a complete description of the terms and conditions
of the Software Distribution and Loan Agreement and is qualified in its entirety
by reference to the full text of the Software Distribution and Loan Agreement
filed with the Commission as an exhibit to the Schedule 14D-1 and is
incorporated herein by reference. Capitalized terms not otherwise defined below
shall have the meanings set forth in the Software Distribution and Loan
Agreement. The Software Distribution and Loan Agreement may be examined, and
copies obtained, as set forth in Section 9 of this Offer to Purchase.
Pursuant to the Software Distribution and Loan Agreement, the Company and
Hasbro Interactive have agreed that Hasbro Interactive will be the exclusive
distributor of the Company's computer software products in the United States and
Canada through March 2001 and that the Company will provide manufacturing and
26
<PAGE> 29
marketing services and promotion for such computer software products. In
consideration of its distribution of the Company's computer software products,
the agreement provides that Hasbro Interactive is entitled to retain a monthly
service fee (the "Service Fee") equal to 17.5% of "Net Receipts," which is
defined as, for any period, monies received by Hasbro Interactive from its
customers in respect of sales of the Company's computer software products, less
customary trade discounts, price protection and monies credited to customers'
accounts for sales returns, in each case during such period.
In addition, pursuant to the Software Distribution and Loan Agreement, as a
financial accommodation to the Company, Hasbro Interactive has agreed to make
available up to $5,500,000 in loans to the Company, subject to the terms and
conditions set forth therein. Such loans are secured by a lien on the Company's
assets, mature on the six month anniversary of the agreement, bear interest at
12% per annum and have a mandatory monthly principal prepayment obligation equal
to 32.5% of Net Receipts in each month. The agreement provides that each
mandatory prepayment of principal shall be deducted from the consideration due
to the Company each month under the agreement, following deduction of the
Service Fee and accrued interest then payable.
In connection with securing such loans and the Immediately Payable
Termination Fee payable under the Merger Agreement and the Immediately Payable
Cash-Out Right payable under the Stock Option Agreement, the Company and certain
of its subsidiaries have entered into security agreements with Parent and Hasbro
Interactive granting a security interest in the securable assets of the Company
and such subsidiaries.
Confidentiality Agreement
The following is a summary of certain provisions of the Confidentiality
Agreement entered into on June 16, 1998 by Hasbro Interactive and the Company,
as amended on July 27, 1998 (the "Confidentiality Agreement"). This summary is
not a complete description of the terms and conditions of the Confidentiality
Agreement and is qualified in its entirety by reference to the full text of the
Confidentiality Agreement filed with the Commission as an exhibit to the
Schedule 14D-1 and is incorporated herein by reference. Capitalized terms not
otherwise defined below shall have the meanings set forth in the Confidentiality
Agreement. The Confidentiality Agreement may be examined, and copies obtained,
as set forth in Section 9 of this Offer to Purchase.
Pursuant to the terms of the Confidentiality Agreement, the Company and
Hasbro Interactive agreed to provide, among other things, for the confidential
treatment of their discussions regarding the Offer and the Merger and the
exchange of certain confidential information concerning the Company. The
Confidentiality Agreement is incorporated herein by reference and a copy of it
has been filed with the Commission as an exhibit to the Schedule 14D-1. Parent
further agreed that, for a period of six (6) months from the date the
Confidentiality Agreement was amended, Hasbro Interactive would not entice away
or in any matter encourage or solicit any officer, employee, agent,
representative, customer or supplier of the Company with whom Hasbro Interactive
comes into contact in connection with its consideration of a transaction to
discontinue such person's relationship with the Company, subject to certain
exceptions.
12. PLANS FOR THE COMPANY; OTHER MATTERS.
PLANS FOR THE COMPANY
Parent is conducting a detailed review of the Company and its business and
operations with a view towards determining how to optimally realize any
potential synergies which exist between the operations of the Company and those
of Parent. Such review is not expected to be completed until after the
consummation of the Merger, and, following such review, Parent will consider
what, if any, changes would be desirable in light of the circumstances then
existing.
If, as and to the extent that Purchaser acquires control of the Company,
Parent and Purchaser intend to conduct a detailed review of the Company and its
assets, corporate structure, capitalization, operations, properties, policies,
management and personnel and to consider and determine what, if any, changes
would be desirable in light of the circumstances which then exist. Such changes
could include, among other things, changes in the Company's business, corporate
structure, certificate of incorporation, by-laws, capitalization, management or
dividend policy.
27
<PAGE> 30
Assuming the Minimum Condition is satisfied and Purchaser purchases Shares
pursuant to the Offer, Parent intends to promptly exercise its rights under the
Merger Agreement to obtain majority representation on, and control of, the
Company Board. See "Merger Agreement-Company Board" above. Parent will exercise
such rights by causing the Company to elect to the Company Board one or more of
Messrs. Gordon, Dusenberry and Waldoks. Information with respect to such
directors is contained in Schedule I hereto and in the Schedule 14D-9. The
Merger Agreement provides that, upon the purchase of and payment for any Shares
by Parent or any of its subsidiaries pursuant to the Offer, Parent shall be
entitled to designate such number of directors, rounded up to the next whole
number, on the Company Board such that the percentage of its designees on the
Company Board shall equal the percentage of the outstanding Shares beneficially
owned by Parent and its affiliates. See Section 11. The Merger Agreement
provides that the directors of Purchaser and the officers of the Company at the
Effective Time of the Merger will, from and after the Effective Time, be the
initial directors and officers, respectively, of the Surviving Corporation.
Purchaser or an affiliate of Purchaser may, following the consummation or
termination of the Offer, seek to acquire additional Shares through open market
purchases, privately negotiated transactions, a tender offer or exchange offer
or otherwise, upon such terms and at such prices as it shall determine, which
may be more or less than the price to be paid pursuant to the Offer. Purchaser
and its affiliates also reserve the right to dispose of any or all Shares
acquired by them, subject to the terms of the Merger Agreement.
Except as disclosed in this Offer to Purchase, and except as may be
effected in connection with the integration of operations referred to above,
neither Parent nor Purchaser has any present plans or proposals that would
result in an extraordinary corporate transaction, such as a merger,
reorganization, liquidation, relocation of operations, or sale or transfer of a
material amount of assets, involving the Company or any of its subsidiaries, or
any material changes in the Company's capitalization, corporate structure,
business or composition of its management or the Company Board.
OTHER MATTERS
Stockholder Approval. Under the DGCL, the approval of the Company Board
and the affirmative vote of the holders of a majority of the outstanding Shares
are required to adopt and approve the Merger Agreement and transactions
contemplated thereby. The Company has represented in the Merger Agreement that
the execution and delivery of the Merger Agreement by the Company and the
consummation by the Company of the transactions contemplated by the Merger
Agreement have been duly authorized by all necessary corporate action on the
part of the Company, subject to the approval of the Merger by the Company's
stockholders in accordance with the DGCL. In addition, the Company has
represented that the affirmative vote of the holders of a majority of the
outstanding Shares is the only vote of the holders of any class or series of the
Company's capital stock which is necessary to approve the Merger Agreement and
the transactions contemplated thereby, including the Merger. Therefore, unless
the Merger is consummated pursuant to the short-form merger provisions under the
DGCL described below (in which case no further corporate action by the
stockholders of the Company will be required to complete the Merger), the only
remaining required corporate action of the Company will be the approval of the
Merger Agreement and the transactions contemplated thereby by the affirmative
vote of the holders of a majority of the Shares. The Merger Agreement provides
that Parent will vote, or cause to be voted, all of the Shares then owned by
Parent, Purchaser or any of Parent's other subsidiaries and affiliates in favor
of the approval of the Merger and the adoption of the Merger Agreement. In the
event that Parent, Purchaser and Parent's other subsidiaries acquire in the
aggregate at least a majority of the Shares entitled to vote on the approval of
the Merger and the Merger Agreement, they would have the ability to effect the
Merger without the affirmative votes of any other stockholders.
Short-Form Merger. Section 253 of the DGCL provides that, if a corporation
owns at least 90% of the outstanding shares of each class of another
corporation, the corporation holding such stock may merge itself into such
corporation without any action or vote on the part of the board of directors or
the stockholders of such other corporation (a "short-form merger"). In the event
that Parent, Purchaser and any other subsidiaries of Parent acquire in the
aggregate at least 90% of the outstanding Shares, pursuant to the Offer or
otherwise, then, at the election of Parent, a short-form merger could be
effected without any approval of the
28
<PAGE> 31
Company Board or the stockholders of the Company, subject to compliance with the
provisions of Section 253 of the DGCL. In the Merger Agreement, Parent,
Purchaser and the Company have agreed that, notwithstanding that all conditions
to the Offer are satisfied or waived as of the scheduled Expiration Date,
Purchaser may extend the Offer for a period not to exceed ten business days,
subject to certain conditions, if the Shares tendered pursuant to the Offer are
less than 90% of the outstanding Shares. Even if Parent and Purchaser do not own
90% of the outstanding Shares following consummation of the Offer, Parent and
Purchaser could seek to purchase additional shares in the open market or
otherwise in order to reach the 90% threshold and employ a short-form merger.
The per share consideration paid for any Shares so acquired may be greater or
less than that paid in the Offer. Parent presently intends to effect a
short-form merger if permitted to do so under the DGCL.
Appraisal Rights. Holders of the Shares do not have appraisal rights in
connection with the Offer. However, if the Merger is consummated, holders of the
Shares at the Effective Time will have certain rights pursuant to the provisions
of Section 262 of the DGCL including the right to dissent and demand appraisal
of, and to receive payment in cash of the fair value of, their Shares. Under
Section 262 of the DGCL, dissenting stockholders of the Company who comply with
the applicable statutory procedures will be entitled to receive a judicial
determination of the fair value of their Shares (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) and to
receive payment of such fair value in cash, together with a fair rate of
interest thereon, if any. Any such judicial determination of the fair value of
the Shares could be based upon factors other than, or in addition to, the price
per Share to be paid in the Merger or the market value of the Shares. The value
so determined could be more or less than the price per Share to be paid in the
Merger.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS UNDER THE
DGCL DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE
FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY APPRAISAL RIGHTS AVAILABLE
UNDER THE DGCL. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT
ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL.
Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger or another business
combination following the purchase of Shares pursuant to the Offer in which
Purchaser seeks to acquire the remaining Shares not held by it. Purchaser
believes, however, that Rule 13e-3 will not be applicable to the Merger because
it is anticipated that the Merger would be effected within one year following
consummation of the Offer and in the Merger stockholders would receive the same
price per Share as paid in the Offer. If Rule 13e-3 were applicable to the
Merger, it would require, among other things, that certain financial information
concerning the Company, and certain information relating to the fairness of the
proposed transaction and the consideration offered to minority stockholders in
such a transaction, be filed with the Commission and disclosed to minority
stockholders prior to consummation of the transaction.
13. DIVIDENDS AND DISTRIBUTIONS.
As described above, the Merger Agreement provides that from August 11, 1998
until such time as the designees of Parent have been elected to, and shall
constitute a majority of, the Company Board, without the prior written consent
of Parent, neither the Company nor any of its subsidiaries shall: (i)(A)
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to the Company's capital stock or that of its
subsidiaries, except that a wholly-owned subsidiary of the Company may declare
and pay a dividend or make advances to its parent or the Company or (B) redeem,
purchase or otherwise acquire directly or indirectly any of the Company's
capital stock or that of its subsidiaries; (ii) issue, sell, pledge, dispose of
or encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire, any shares of capital stock of any class of the Company or its
subsidiaries, other than Shares issued upon the exercise of Options outstanding
on August 11, 1998; or (iii) split, combine or reclassify the outstanding
capital stock of the Company or of any of the subsidiaries of the Company.
29
<PAGE> 32
14. CONDITIONS TO THE OFFER.
The Offer is subject to the Minimum Condition being satisfied by 12:00
Midnight on Friday, September 11, 1998 or such later date as the Offer may be
extended in accordance with the terms of the Merger Agreement. Purchaser has
agreed that if all of the conditions set forth herein have not been satisfied on
any scheduled Expiration Date then, provided that all such conditions are
reasonably capable of being satisfied, Purchaser shall extend the Offer from
time to time until such conditions are satisfied or waived, provided that
Purchaser shall not be required to extend the Offer beyond October 15, 1998.
Notwithstanding any other provision of the Offer, subject to the terms of the
Merger Agreement, Purchaser shall not be required to accept for payment any
Shares if (i) any applicable waiting period under the HSR Act has not expired or
been terminated, or (ii) at any time on or after the date of the Merger
Agreement and prior to the Expiration Date, any of the following events shall
occur and shall not result from the material breach by Parent or Purchaser of
any of their obligations under the Merger Agreement:
(a) there shall be threatened in writing or pending any suit, action
or proceeding (i) seeking to prohibit or impose any material limitations on
Parent's or Purchaser's ownership or operation (or that of any of their
respective Subsidiaries or Affiliates) of all or a material portion of
their or the Company's businesses or assets, (ii) seeking to compel Parent
or Purchaser or their respective Subsidiaries and Affiliates to dispose of
or hold separate any material portion of the business or assets of the
Company or Parent and their respective Subsidiaries, in each case taken as
a whole, (iii) challenging the acquisition by Parent or Purchaser of any
Shares pursuant to the Offer or the Stock Option Agreement, (iv) seeking to
restrain or prohibit the making or consummation of the Offer or the Merger
or the performance of any of the other Transactions, (v) seeking to obtain
from the Company any damages that would be reasonably likely to have a
Material Adverse Effect on the Company, (vi) seeking to impose material
limitations on the ability of Purchaser, or rendering Purchaser unable, to
accept for payment, pay for or purchase some or all of the Shares pursuant
to the Offer and the Merger, (vii) seeking to impose material limitations
on the ability of Purchaser or Parent effectively to exercise full rights
of ownership of the Shares, including, without limitation, the right to
vote the Shares purchased by it on all matters properly presented to the
Company's stockholders, or (viii) which otherwise is reasonably likely to
have a Material Adverse Effect on the Company or, as a result of the
Transactions, Parent and its Subsidiaries, which, in the case of any of the
foregoing, is reasonably likely to succeed on the merits; or
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger
of applicable waiting periods under the HSR Act, that is reasonably likely
to result, directly or indirectly, in any of the consequences referred to
in clauses (i) through (viii) of paragraph (a) above; or
(c) there shall have occurred (1) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange,
the American Stock Exchange or in the Nasdaq National Market System, for a
period in excess of three hours (excluding suspensions or limitations
resulting solely from physical damage or interference with such exchanges
not related to market conditions), (2) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (3) any limitation or proposed
limitation (whether or not mandatory) by any United States governmental
authority or agency that has a material adverse effect generally on the
extension of credit by banks or other financial institutions, (4) any
change in general financial bank or capital market conditions which has a
material adverse effect the ability of financial institutions in the United
States to extend credit or syndicate loans, (5) any decline in either the
Dow Jones Industrial Average or the Standard & Poor's Index of 500
Industrial Companies by an amount in excess of 15% measured from the close
of business on the date of this Agreement or (6) in the case of any of the
situations in clauses (1) through (5) inclusive, existing at the time of
the commencement of the Offer, a material acceleration or worsening
thereof; or
(d) the representations and warranties of the Company set forth in the
Merger Agreement shall not be true and accurate as of the date of
consummation of the Offer as though made on or as of such date
30
<PAGE> 33
(except for those representations and warranties that address matters only
as of a particular date or only with respect to a specific period of time
which need only be true and accurate as of such date or with respect to
such period) or the Company shall have breached or failed to perform or
comply with any obligation, agreement or covenant required by the Merger
Agreement to be performed or complied with by it except, in each case where
the failure of such representations and warranties to be true and accurate
(without giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein), or the failure to perform or comply
with such obligations, agreements or covenants, do not, individually or in
the aggregate, have a Material Adverse Effect on the Company or a
materially adverse effect on the ability to consummate the Offer or the
Merger; or
(e) there shall have occurred a Material Adverse Effect on the
Company; or
(f) the Company Board (i) shall have withdrawn, or modified or changed
in a manner adverse to Parent or Purchaser (including by amendment of the
Schedule 14D-9) its recommendation of the Offer, the Merger Agreement, or
the Merger, (ii) shall have recommended a Takeover Proposal, (iii) shall
have adopted any resolution to effect any of the foregoing, or (iv) shall
have taken a neutral position or made no recommendation with respect to a
Takeover Proposal received from any Person (other than Parent or Purchaser)
after a reasonable amount of time (and in no event more than ten business
days following such receipt) has elapsed for the Company Board to review
and make a recommendation with respect to such Takeover Proposal; or
(g) any party to the Stock Option Agreement other than Purchaser and
Parent shall have breached or failed to perform any of its agreements under
such agreement or breached any of its representations and warranties in
such agreements or any such agreement shall not be valid, binding and
enforceable, except for such breaches or failures or failures to be valid,
binding and enforceable that do not materially and adversely affect the
benefits expected to be received by Parent and Purchaser under the Merger
Agreement or the Stock Option Agreement;
(h) the Merger Agreement shall have been terminated in accordance with
its terms; or
(i) the Company pursuant to or within the meaning of Title 11, U.S.
Code or any similar Federal or state law for the relief of debtors
("Bankruptcy Law"): (1) commences a voluntary case, (2) consents to the
entry of an order for relief against it in an involuntary case, (3)
consents to the appointment of a receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law ( a "Custodian") of it or for all
or substantially all of its property, (4) makes a general assignment for
the benefit of its creditors, or (5) generally is not paying its debts as
they become due; or (6) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that: (x) is for relief against the
Company in an involuntary case, (y) appoints a Custodian of the Company or
for all or substantially all of the property of the Company, or (z) orders
the liquidation of the Company, and the order or decree remains unstayed
and in effect for 60 days;
which in the reasonable good faith judgment of Parent or Purchaser, in any such
case, and regardless of the circumstances (including any action or inaction by
Parent or Purchaser) giving rise to such condition makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment of or payments
for Shares.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be waived by Parent or Purchaser, in whole or in part, at any time and
from time to time, in the sole discretion of Parent or Purchaser (except for the
Minimum Condition). The failure by Parent or Purchaser at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
15. CERTAIN LEGAL MATTERS.
General. Except as described in this Section 15, based on information
provided by the Company, none of the Company, Purchaser or Parent is aware of
any license or regulatory permit that appears to be material to the business of
the Company and its subsidiaries, taken as a whole, that might be adversely
affected by the acquisition of Shares by Parent or Purchaser pursuant to the
Offer, the Merger or otherwise, except as set
31
<PAGE> 34
forth above, of any approval or other action by any governmental, administrative
or regulatory agency or authority, domestic or foreign, that would be required
prior to the acquisition of Shares by Purchaser pursuant to the Offer, the
Merger or otherwise. Should any such approval or other action be required,
Purchaser and Parent presently contemplate that such approval or other action
will be sought, except as described below under "State Antitakeover Statutes."
While, except as otherwise described in this Offer to Purchase, Purchaser does
not presently intend to delay the acceptance for payment of, or payment for,
Shares tendered pursuant to the Offer pending the outcome of any such matter,
there can be no assurance that any such approval or other action, if needed,
would be obtained or would be obtained without substantial conditions or that
failure to obtain any such approval or other action might not result in
consequences adverse to the Company's business or that certain parts of the
Company's business might not have to be disposed of, or other substantial
conditions complied with, in the event that such approvals were not obtained or
such other actions were not taken or in order to obtain any such approval or
other action. If certain types of adverse action are taken with respect to the
matters discussed below, Purchaser could decline to accept for payment, or pay
for, any Shares tendered. See Section 14 for certain conditions to the Offer,
including conditions with respect to governmental actions.
State Antitakeover Statutes. Section 203 of the DGCL, in general,
prohibits a Delaware corporation, such as the Company, from engaging in a
"Business Combination" (defined as a variety of transactions, including mergers)
with an "Interested Stockholder" (defined generally as a person that is the
beneficial owner of 15% or more of the outstanding voting stock of the subject
corporation) for a period of three years following the date that such person
became an Interested Stockholder unless, prior to the date such person became an
Interested Stockholder, the board of directors of the corporation approved
either the Business Combination or the transaction that resulted in the
stockholder becoming an Interested Stockholder. The provisions of Section 203 of
the DGCL are not applicable to any of the transactions contemplated by the
Merger Agreement or the Stock Option Agreement, since the Merger Agreement, the
Stock Option Agreement and the transactions contemplated thereby were approved
by the Company Board prior to the execution thereof.
A number of states have adopted laws and regulations that purport to apply
to attempts to acquire corporations that are incorporated in such states, or
whose business operations have substantial economic effects in such states, or
which have substantial assets, security holders, employees, principal executive
offices or principal places of business in such states. In Edgar v. MITE Corp.,
the Supreme Court of the United States (the "Supreme Court") invalidated on
constitutional grounds the Illinois Business Takeover statute, which, as a
matter of state securities law, made certain corporate acquisitions more
difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the
Supreme Court held that the State of Indiana may, as a matter of corporate law
and, in particular, with respect to those aspects of corporate law concerning
corporate governance, constitutionally disqualify a potential acquiror from
voting on the affairs of a target corporation without the prior approval of the
remaining stockholders. The state law before the Supreme Court was by its terms
applicable only to corporations that had a substantial number of stockholders in
the state and were incorporated there.
Parent and Purchaser do not believe that the antitakeover laws and
regulations of any state other than the State of Delaware will by their terms
apply to the Offer, and, except as set forth above with respect to Section 203
of the DGCL, neither Parent nor Purchaser has attempted to comply with any state
antitakeover statute or regulation. Purchaser reserves the right to challenge
the applicability or validity of any state law purportedly applicable to the
Offer and nothing in this Offer to Purchase or any action taken in connection
with the Offer is intended as a waiver of such right. If it is asserted that any
state antitakeover statute is applicable to the Offer and an appropriate court
does not determine that it is inapplicable or invalid as applied to the Offer,
Purchaser might be required to file certain information with, or to receive
approvals from, the relevant state authorities, and Purchaser might be unable to
accept for payment or pay for Shares tendered pursuant to the Offer or may be
delayed in consummating the Offer. In such case, Purchaser may not be obligated
to accept for payment, or pay for, any Shares tendered pursuant to the Offer.
See Section 14.
Antitrust. The Offer and the Merger are subject to the HSR Act, which
provides that certain acquisition transactions may not be consummated unless
certain information has been furnished to the
32
<PAGE> 35
Antitrust Division of the Department of Justice (the "DOJ") and the Federal
Trade Commission (the "FTC") and certain waiting period requirements have been
satisfied.
Parent and the Company expect to file soon their Notification and Report
Forms with respect to the Offer under the HSR Act. The waiting period under the
HSR Act with respect to the Offer will expire at 11:59 p.m., New York City time,
on the fifteenth day after the date Parent's form is filed unless early
termination of the waiting period is granted. However, the DOJ or the FTC may
extend the waiting period by requesting additional information or documentary
material from Parent or the Company. If such a request is made, such waiting
period will expire at 11:59 p.m., New York City time, on the tenth day after
substantial compliance by Parent with such request. Only one extension of the
waiting period pursuant to a request for additional information is authorized by
the HSR Act. Thereafter, such waiting period may be extended only by court order
or with the consent of Parent. In practice, complying with a request for
additional information or material can take a significant amount of time. In
addition, if the DOJ or the FTC raises substantive issues in connection with a
proposed transaction, the parties frequently engage in negotiations with the
relevant governmental agency concerning possible means of addressing those
issues and may agree to delay consummation of the transaction while such
negotiations continue. The Purchaser will not accept for payment Shares tendered
pursuant to the Offer unless and until the waiting period requirements imposed
by the HSR Act with respect to the Offer have been satisfied. See Section 14.
The FTC and the DOJ frequently scrutinize the legality under the Antitrust
Laws of transactions such as Purchaser's acquisition of Shares pursuant to the
Offer and the Merger. At any time before or after Purchaser's acquisition of
Shares, the DOJ or the FTC could take such action under the Antitrust Laws as it
deems necessary or desirable in the public interest, including seeking to enjoin
the acquisition of Shares pursuant to the Offer or otherwise seeking divestiture
of Shares acquired by Purchaser or divestiture of substantial assets of Parent
or its subsidiaries. Private parties, as well as state governments, may also
bring legal action under the Antitrust Laws under certain circumstances. Based
upon an examination of information provided by the Company relating to the
businesses in which Parent and the Company are engaged, Parent and Purchaser
believe that the acquisition of Shares by Purchaser will not violate the
Antitrust Laws. Nevertheless, there can be no assurance that a challenge to the
Offer or other acquisition of Shares by Purchaser on antitrust grounds will not
be made or, if such a challenge is made, of the result. See Section 14 for
certain conditions to the Offer, including conditions with respect to litigation
and certain government actions.
As used in this Offer to Purchase, "Antitrust Laws" shall mean and include
the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the
Federal Trade Commission Act, as amended, and all other Federal and state
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines, and other laws that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade.
Federal Reserve Board Regulations. Regulations G, U and X (the "Margin
Regulations") of the Federal Reserve Board restrict the extension or maintenance
of credit for the purpose of buying or carrying margin stock, including the
Shares, if the credit is secured directly or indirectly by margin stock. Such
secured credit may not be extended or maintained in an amount that exceeds the
maximum loan value of all the direct and indirect collateral securing the
credit, including margin stock and other collateral. The financing of the Offer
will not be directly or indirectly secured by the Shares or other securities
which constitute margin stock. Accordingly, all financing for the Offer will be
in full compliance with the Margin Regulations.
33
<PAGE> 36
16. FEES AND EXPENSES.
Parent has engaged Bear Stearns to act as the Dealer Manager in connection
with the Offer. No fee is payable to Bear Stearns for its services as the Dealer
Manager, however, Parent and Bear Stearns are in discussions regarding the
compensation of Bear Stearns with respect to a financial advisory fee or other
fee in connection with other services provided by Bear Stearns in connection
with the Offer. Parent has agreed to reimburse Bear Stearns for all reasonable
out-of-pocket fees, expenses and costs, including reasonable fees and expenses
of legal counsel, and to indemnify Bear Stearns and certain related persons
against certain liabilities and expenses in connection with the Offer, including
certain liabilities under the federal securities laws. Bear Stearns has from
time to time provided investment banking services to Parent. E. John Rosenwald,
Jr., Vice Chairman of The Bear Stearns Companies Inc., is a Director of Parent.
Purchaser and Parent have retained D.F. King & Co. Inc. to serve as the
Information Agent and BankBoston, N.A. to serve as the Depositary in connection
with the Offer. The Information Agent may contact holders of Shares by personal
interview, mail, telephone, telex, telegraph and other methods of electronic
communication and may request brokers, dealers, commercial banks, trust
companies and other nominees to forward the Offer materials to beneficial
holders. The Information Agent and the Depositary will each receive reasonable
and customary compensation for their services, be reimbursed for certain
reasonable out-of-pocket expenses and be indemnified against certain liabilities
in connection with their services, including certain liabilities and expenses
under the federal securities laws.
Except as set forth above, neither Parent nor Purchaser will pay any fees
or commissions to any broker or dealer or other person or entity in connection
with the solicitation of tenders of Shares pursuant to the Offer. Brokers,
dealers, banks and trust companies will be reimbursed by Purchaser for customary
mailing and handling expenses incurred by them in forwarding the Offer materials
to their customers.
17. MISCELLANEOUS.
Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If Purchaser becomes aware of any valid state statute prohibiting the
making of the Offer or the acceptance of the Shares pursuant thereto, Purchaser
shall make a good faith effort to comply with such statute or seek to have such
statute declared inapplicable to the Offer. If, after such good faith effort,
Purchaser cannot comply with such state statute, the Offer will not be made to
(nor will tenders be accepted from or on behalf of) holders of Shares in such
state.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR PURCHASER NOT CONTAINED HEREIN OR IN THE
LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Purchaser and Parent have filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act, together with exhibits,
furnishing certain additional information with respect to the Offer. In
addition, the Company has filed with the Commission the Schedule 14D-9 pursuant
to Rule 14d-9 under the Exchange Act, setting forth its recommendation with
respect to the Offer and the reasons for its recommendation and furnishing
certain additional related information. Such Schedules and any amendments
thereto, including exhibits, should be available for inspection and copies
should be obtainable in the same manner set forth in Section 9 of this Offer to
Purchase (except that such material will not be available at the regional
offices of the Commission).
NEW HIAC CORP.
August 14, 1998
34
<PAGE> 37
SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT AND PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of each
director and executive officer of Parent. Unless otherwise indicated, each such
person is a citizen of the United States of America and the business address of
each such person is c/o Hasbro, Inc. 1027 Newport Avenue, Pawtucket, RI 02861.
Unless otherwise indicated, each occupation set forth opposite an individual's
name refers to employment with Parent. Unless otherwise indicated, each such
person has held his or her present occupation as set forth below, or has been an
executive officer at Parent for the past five years.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
<S> <C>
DONAL A. BARKSDALE........................ Mr. Barksdale has been Chief Information Officer since
1997. Prior thereto, he was Senior Director of
Applications Development at Anheuser Busch from 1996 to
1997. Prior thereto, he was Vice President and Director
of Information Systems at General Electric Company.
ALAN R. BATKIN............................ Mr. Batkin is Vice Chairman of Kissinger Associates,
Director since 1992 Inc. (geopolitical strategic consulting firm) and a
director of PEC Israel Economic Corporation. Mr. Batkin
is a member of both the Executive Committee and the
Compensation and Stock Option Committee.
HAROLD P. GORDON.......................... Mr. Gordon has been Vice Chairman since 1995. Prior
Director since 1988 thereto, he was a Partner at Stikeman, Elliott (law
firm). He is a director of Alliance Communications
Corporation, Fonorola Inc. and G.T.C. Transcontinental
Group, Ltd. Mr. Gordon is a citizen of Canada.
ALEX GRASS................................ Mr. Grass has been the Chairman of the Executive
Director since 1981 Committee of Rite Aid Corporation (drug store chain)
since 1995. Prior thereto, he was the Chairman of the
Board and Chief Executive Officer of Rite Aid
Corporation. He is Chairman of the Board of SuperRite
Corporation. Mr. Grass is a member of both the Audit and
the Compensation and Stock Option Committees.
ALAN G. HASSENFELD........................ Mr. Hassenfeld has been Chairman of the Board, President
Director since 1978 and Chief Executive Officer since 1989. Mr. Hassenfeld
is Chairman of the Executive Committee.
SYLVIA K. HASSENFELD...................... Mrs. Hassenfeld is the former Chairman, since 1996 and
Director since 1983 prior thereto, she was the Chairman of the Board of the
American Jewish Joint Distribution Committee, Inc.
("JDC") since 1993. Prior thereto, she was President of
JDC. Mrs. Hassenfeld is Chair of the Nominating and
Governance Committee.
RICHARD B. HOLT........................... Mr. Holt has been Senior Vice President and Controller
since 1992.
VIRGINIA H. KENT.......................... Ms. Kent has been President of Global Brands and Product
Development since 1996. Prior thereto, she was General
Manager, Girls/Boys/Nerf from 1994 to 1996. Prior
thereto, she was Senior Vice President of Marketing for
the Kenner Products Division.
</TABLE>
I-1
<PAGE> 38
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
<S> <C>
ADAM KLEIN................................ Mr. Klein has been President of Global Marketing &
Strategy since 1998. Prior thereto, he was Executive
Vice President -- Global Strategy & Development from
1996 to 1998. Prior thereto, he was President, Klein &
Co., a consulting firm specializing in managing
strategic change.
MARIE JOSEE KRAVIS........................ Mrs. Kravis has been a Senior Fellow of the Hudson
Director since 1995 Institute (public policy analysis) since 1994. Prior
thereto, she was Executive Director of the Hudson
Institute of Canada. She is a Visiting Fellow of the
Council on Foreign Relations. She is also a director of
the Canadian Imperial Bank of Commerce, Ford Motor
Company, Hollinger International, Inc., The Seagram
Company, Ltd. and Unimedia Inc. Mrs. Kravis is a member
of the Compensation and Stock Option Committee. Mrs.
Kravis is a citizen of the United States, Canada and
Switzerland.
CLAUDINE B. MALONE........................ Ms. Malone is the President of Financial and Management
Director since 1992 Consulting, Inc., and a director of Dell Computer
Corporation, Hannaford Brothers Co., Houghton Mifflin
Company, Lafarge Corp., The Limited, Inc., Lowe's
Companies, Inc., Mallinckrodt Group, Inc., Science
Applications International Corporation and Union Pacific
Resources Corporation. Ms. Malone is a member of the
Audit Committee.
MORRIS W. OFFIT........................... Mr. Offit is Chairman and Chief Executive Officer of
Director since 1995 Offitbank (investment management) and a director of
Cantel Industries, Inc. and Mercantile Bankshares
Corporation. Mr. Offit is a member of the Audit
Committee.
JOHN T. O'NEILL........................... Mr. O'Neill has been Executive Vice President and Chief
Executive Officer since 1989. Mr. O'Neill is a Trustee
of the Galaxy Funds.
NORMA T. PACE............................. Mrs. Pace has been the President of Paper Analytics
Director since 1984 Associates (economic consulting) since 1995. She is also
the Senior Economic Advisor for the WEFA Group (economic
consulting and planning). She is a director of
Engleghard Corporation. Mrs. Pace is Chair of the Audit
Committee and a member of the Executive Committee.
CYNTHIA S. REED........................... Mrs. Reed has been Senior Vice President and General
Counsel since 1995. Prior thereto, she was Vice
President-Legal.
E. JOHN ROSENWALD, JR..................... Mr. Rosenwald is the Vice Chairman of the Board of The
Director since 1983 Bear Stearns Companies Inc. (investment bankers) and a
director of Cendant Corporation. Mr. Rosenwald is a
member of the Executive Committee.
</TABLE>
I-2
<PAGE> 39
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
<S> <C>
CARL SPIELVOGEL........................... Mr. Spielvogel has been the Chairman and Chief Executive
Director since 1992 Officer of Carl Spielvogel Associates, Inc.
(international investments) since 1997. Prior thereto,
he was Chairman of the Board and Chief Executive Officer
of United Auto Group, Inc. (operator of
multiple-franchise auto dealerships) from 1994 to 1997.
Prior thereto, Mr. Spielvogel was Chairman of the Board
and Chairman of the Executive Committee of Backer
Spielvogel Bates Worldwide, Inc. (advertising) during
1994. Prior thereto, he was Chairman and Chief Executive
Officer of Backer Spielvogel Bates Worldwide, Inc. He is
a director of Data Broadcasting Inc. and Culligan Water
Systems, Inc. Mr. Spielvogel is Chairman of the
Compensation and Stock Option Committee.
PRESTON ROBERT TISCH...................... Mr. Tisch has been the Co-Chairman and Co-Chief
Director since 1993 Executive Officer of Loews Corporation since 1994. Prior
thereto, he was President and Co-Chief Executive Officer
of Loews Corporation. He is also a director of Bulova
Watch Company, Inc., CNA Financial Corporation, Loews
Corporation, Rite Aid Corporation and Chairman of the
Board of the N.Y. Football Giants. Mr. Tisch is a member
of the Nominating and Governance Committee.
MARTIN R. TRUEB........................... Mr. Trueb has been Senior Vice President and Treasurer
since 1997. Prior thereto, Mr. Trueb was Assistant
Treasurer of Amway Corporation from 1995 to 1997. Prior
thereto, he was Director of International Treasury at
RJR Nabisco, Inc.
ALFRED J. VERRECCHIA...................... Mr. Verrecchia has been the Executive Vice President and
Director since 1992 President of Global Operations since 1996. Prior
thereto, he was Chief Operating Officer of Domestic Toy
Operations. Mr. Verrecchia is also a director of Old
Stone Corporation.
GEORGE B. VOLANAKIS....................... Mr. Volanakis has been President of European Sales and
Marketing since 1998. Prior thereto, he was President
and CEO of the ERTL Company Inc. (a toy and hobby
manufacturer and marketer). Mr. Volanakis is a director
of Zindart Ltd.
PHILLIP H. WALDOKS........................ Mr. Waldoks has been Senior Vice President -- Corporate
Legal Affairs and Secretary since 1995. Prior thereto,
he was Senior Vice President -- Corporate Legal Affairs.
E. DAVID WILSON........................... Mr. Wilson has been President of Hasbro Americas since
1996. Prior thereto, he was President of the Hasbro
Games Group from 1995 to 1996. Prior thereto, he was
President of Milton Bradley Company.
PAUL WOLFOWITZ............................ Mr. Wolfowitz has been the Dean of Paul H. Nitze School
Director since 1995 of Advanced International Studies at the Johns Hopkins
University since 1994. Prior thereto, he was a
Distinguished Visiting Fellow, at the National Defense
University and the George F. Kennan Professor of
National Security Strategy, at the National War College
during 1993. Prior thereto, Mr. Wolfowitz was
Undersecretary of Defense for Policy, U.S. Department of
Defense. Prior thereto, he was U.S. Ambassador to the
Republic of Indonesia. He is a director of eleven mutual
funds of the Dreyfus Corporation. Mr. Wolfowitz is a
member of the Nominating and Governance Committee.
</TABLE>
I-3
<PAGE> 40
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of each
director and executive officer of Purchaser. Other than Mr. Gordon, who is a
Canadian citizen, each such person is a citizen of the United States of America,
and the business address of each such person is c/o Hasbro, Inc., 1027 Newport
Avenue, Pawtucket, RI 02861. Unless otherwise indicated, each occupation set
forth opposite an individual's name refers to employment with Parent. Unless
otherwise indicated, each such person has held his or her present occupation as
set forth below, or has been an executive officer at Parent, or the organization
indicated, for the past five years.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
<S> <C>
THOMAS R. DUSENBERRY....... Director of Purchaser. Mr. Dusenberry has been President
of Hasbro Interactive, Inc. since 1995. Prior thereto, he
was Vice President of New Product Acquisitions for the
Hasbro Games Group from 1994 to 1995. Prior thereto, he
was Director of New Product Acquisitions for the Parker
Brothers Division.
HAROLD P. GORDON........... Director and President of Purchaser. See Part 1 of this
Schedule I.
RICHARD B. HOLT............ Controller of the Purchaser. See Part 1 of this Schedule
I.
JOHN T. O'NEILL............ Chief Financial Officer of the Purchaser. See Part 1 of
this Schedule I.
MARTIN R. TRUEB............ Treasurer of the Purchaser. See Part 1 of this Schedule I.
PHILLIP H. WALDOKS......... Director and Secretary of Purchaser. See Part 1 of this
Schedule I.
</TABLE>
I-4
<PAGE> 41
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary, at the applicable address set forth below:
The Depositary for the Offer is:
BANKBOSTON, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Delivery:
BankBoston, N.A. Securities Transfer & Reporting BankBoston, N.A.
Attention: Corporate Services, Inc. Attention: Corporate
Reorganization c/o Boston EquiServe L.P. Reorganization
P.O. Box 8029 1 Exchange Plaza 150 Royall Street
Boston, MA 02266-8029 55 Broadway, 3rd Floor Canton, MA 02021
New York, NY 10006
</TABLE>
By Facsimile Transmission: (781) 575-2233 or (781) 575-2232
(For Eligible Institutions Only)
Confirm Facsimile by Telephone: (800) 733-5001
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
the other tender offer materials may be directed to the Information Agent or the
Dealer Manager at their respective addresses and telephone numbers set forth
below. Stockholders may also contact their broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
CALL TOLL FREE: (800) 848-3409
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
CALL TOLL FREE: (877) 260-9674
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
MICROPROSE, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 14, 1998
OF
NEW HIAC CORP.,
A WHOLLY OWNED SUBSIDIARY OF
HASBRO, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, SEPTEMBER
11, 1998, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
BANKBOSTON, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Delivery:
BankBoston, N.A. Securities Transfer & Reporting BankBoston, N.A.
Attention: Corporate Services, Inc. Attention: Corporate
Reorganization c/o Boston EquiServe L.P. Reorganization
P.O. Box 8209 1 Exchange Plaza 150 Royall Street
Boston, MA 02266-8029 55 Broadway, 3rd Floor Canton, MA 02021
New York, NY 10006
</TABLE>
By Facsimile Transmission: (781) 575-2233 or (781) 575-2233
(For Eligible Institutions Only)
Confirm Facsimile by Telephone: (800) 733-5001
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER
THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
THE INSTRUCTIONS CONTAINED WITHIN THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used by stockholders of MicroProse,
Inc. if certificates for Shares (as such term is defined below) are to be
forwarded herewith or, unless an Agent's message (as defined in Instruction 2
below) is utilized, if delivery of Shares is to be made by book-entry transfer
to an account maintained by the Depositary at the Book-Entry Transfer Facility
(as defined in and pursuant to the procedures set forth in Section 3 of the
Offer to Purchase). Stockholders who deliver Shares by book-entry transfer are
referred to herein as "Book-Entry Stockholders" and other stockholders who
deliver shares are referred to herein as "Certificate Stockholders."
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver either the certificates for, or a Book-Entry Confirmation (as
defined in Section 3 of the Offer to Purchase) with respect to, their Shares and
all other documents required hereby to the Depositary prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase) must tender their Shares
pursuant to the guaranteed delivery procedures set forth in Section 3 of the
Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY WILL NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE> 2
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE
THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY
DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution
- --------------------------------------------------------------------------------
Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s)
- --------------------------------------------------------------------------------
Window Ticket Number (if any)
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-----------------------------------------------------------------
Name of Institution that Guaranteed Delivery
------------------------------------------------------------------------
If delivered by Book-Entry Transfer, check box: [ ]
Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARES TENDERED
APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
<S> <C> <C> <C>
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total Shares
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) NEED NOT BE COMPLETED BY BOOK-ENTRY STOCKHOLDERS.
(2) UNLESS OTHERWISE INDICATED, IT WILL BE ASSUMED THAT ALL SHARES REPRESENTED
BY SHARE CERTIFICATES DELIVERED TO THE DEPOSITARY ARE BEING TENDERED
HEREBY. SEE INSTRUCTION 4.
- --------------------------------------------------------------------------------
2
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to New HIAC Corp., a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Hasbro, Inc., a Rhode Island
corporation ("Parent"), the above-described shares of common stock, par value
$.001 per share (the "Common Stock"), including the associated preferred stock
purchase rights (the "Rights" and, together with the Common Stock, the
"Shares"), of MicroProse, Inc., a Delaware corporation (the "Company"), pursuant
to Purchaser's offer to purchase all of the outstanding Shares at a price of
$6.00 per Share, net to the seller in cash, without interest thereon (the "Offer
Price") upon the terms and subject to the conditions set forth in the Offer to
Purchase dated August 14, 1998, and in this Letter of Transmittal (which,
together with any amendments or supplements thereto or hereto, collectively
constitute the "Offer"). The undersigned understands that Purchaser reserves the
right to transfer or assign, in whole at any time, or in part from time to time,
to one or more of its affiliates, the right to purchase all or any portion of
the Shares tendered pursuant to the Offer, but any such transfer or assignment
will not relieve Purchaser of its obligations under the Offer and will in no way
prejudice the rights of tendering stockholders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer. Receipt of the
Offer is hereby acknowledged.
The Company has distributed one Right for each outstanding Share pursuant
to the Rights Agreement (as defined in the Offer to Purchase). The Rights are
currently evidenced by and trade with certificates evidencing the Common Stock.
The Company has taken such action so as to make the Rights Agreement
inapplicable to Parent, Purchaser and their respective affiliates and associates
in connection with the transactions contemplated by the Merger Agreement and the
Stock Option Agreement (as such terms are defined in the Offer to Purchase).
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of August 11, 1998 (the "Merger Agreement"), by and among Parent, Purchaser
and the Company.
Upon the terms and subject to the conditions of the Offer (and if the Offer
is extended or amended, the terms of any such extension or amendment), subject
to, and effective upon, acceptance for payment of, and payment for, the Shares
tendered herewith in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby (and any and all non-cash dividends, distributions, rights, other Shares
or other securities issued or issuable in respect thereof on or after August 11,
1998 (collectively, "Distributions")) and irrevocably constitutes and appoints
the Depositary the true and lawful Agent and attorney-in-fact of the undersigned
with respect to such Shares (and all Distributions), with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (i) deliver certificates for such Shares (and any
and all Distributions), or transfer ownership of such Shares (and any and all
Distributions) on the account books maintained by the Book-Entry Transfer
Facility, together, in any such case, with all accompanying evidences of
transfer and authenticity, to or upon the order of Purchaser, (ii) present such
Shares (and any and all Distributions) for transfer on the books of the Company,
and (iii) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares (and any and all Distributions), all in accordance with
the terms of the Offer.
By executing this Letter of Transmittal, the undersigned hereby irrevocably
appoints Harold P. Gordon, John T. O'Neill, Martin R. Trueb, Richard B. Holt and
Phillip H. Waldoks in their respective capacities as officers of Purchaser, and
any individual who shall thereafter succeed to any such office of Purchaser, and
each of them, the attorneys-in-fact and proxies of the undersigned, each with
full power of substitution, to vote at any annual or special meeting of the
Company's stockholders or any adjournment or postponement thereof or otherwise
in such manner as each such attorney-in-fact and proxy or his substitute shall
in his sole discretion deem proper with respect to, to execute any written
consent concerning any matter as each such attorney-in-fact and proxy or his
substitute shall in his sole discretion deem proper with respect to, and to
otherwise act as each such attorney-in-fact and proxy or his substitute shall in
his sole discretion deem proper with respect to, all of the Shares (and any and
all Distributions) tendered hereby and accepted for payment by Purchaser. This
appointment will be effective if and when, and only to the extent that,
Purchaser accepts such Shares for payment pursuant to the Offer. This power of
attorney and proxy are irrevocable and are granted in consideration of the
acceptance for payment of such Shares in accordance with the terms of the Offer.
Such acceptance for payment shall,
3
<PAGE> 4
without further action, revoke any prior powers of attorney and proxies granted
by the undersigned at any time with respect to such Shares (and any and all
Distributions), and no subsequent powers of attorney, proxies, consents or
revocations may be given by the undersigned with respect thereto (and, if given,
will not be deemed effective). Purchaser reserves the right to require that, in
order for Shares or other securities to be deemed validly tendered, immediately
upon Purchaser's acceptance for payment of such Shares, Purchaser must be able
to exercise full voting, consent and other rights with respect to such Shares
(and any and all Distributions), including voting at any meeting of the
Company's stockholders.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, that the undersigned owns the Shares
tendered hereby within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that the
tender of the tendered Shares complies with Rule 14e-4 under the Exchange Act,
and that when the same are accepted for payment by Purchaser, Purchaser will
acquire good, marketable and unencumbered title thereto and to all
Distributions, free and clear of all liens, restrictions, charges and
encumbrances and the same will not be subject to any adverse claims. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Depositary or Purchaser to be necessary or desirable to complete
the sale, assignment and transfer of the Shares tendered hereby and all
Distributions. In addition, the undersigned shall remit and transfer promptly to
the Depositary for the account of Purchaser all Distributions in respect of the
Shares tendered hereby, accompanied by appropriate documentation of transfer,
and, pending such remittance and transfer or appropriate assurance thereof,
Purchaser shall be entitled to all rights and privileges as owner of each such
Distribution and may withhold the entire purchase price of the Shares tendered
hereby or deduct from such purchase price, the amount or value of such
Distribution as determined by Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, personal
representatives, trustees in bankruptcy, successors and assigns of the
undersigned. Except as stated in the Offer, this tender is irrevocable.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in the
Instructions hereto will constitute a binding agreement between the undersigned
and Purchaser upon the terms and subject to the conditions of the Offer (and if
the Offer is extended or amended, the terms or conditions of any such extension
or amendment). Without limiting the foregoing, if the price to be paid in the
Offer is amended in accordance with the Merger Agreement, the price to be paid
to the undersigned will be the amended price notwithstanding the fact that a
different price is stated in this Letter of Transmittal. The undersigned
recognizes that under certain circumstances set forth in the Offer to Purchase,
Purchaser may not be required to accept for payment any of the Shares tendered
hereby.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of all Shares purchased and/or return any
certificates for Shares not tendered or accepted for payment in the name(s) of
the registered holder(s) appearing above under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price of all Shares purchased and/or
return any certificates for Shares not tendered or not accepted for payment (and
any accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing above under "Description of Shares Tendered." In the event
that the boxes entitled "Special Payment Instructions" and "Special Delivery
Instructions" are both completed, please issue the check for the purchase price
of all Shares purchased and/or return any certificates evidencing Shares not
tendered or not accepted for payment (and any accompanying documents, as
appropriate) in the name(s) of, and deliver such check and/or return any such
certificates (and any accompanying documents, as appropriate) to, the person(s)
so indicated. Unless otherwise indicated herein in the box entitled "Special
Payment Instructions," please credit any Shares tendered herewith by book-entry
transfer that are not accepted for payment by crediting the account at the
Book-Entry Transfer Facility designated above. The undersigned recognizes that
Purchaser has no obligation, pursuant to the "Special Payment Instructions," to
transfer any Shares from the name of the registered holder thereof if Purchaser
does not accept for payment any of the Shares so tendered.
4
<PAGE> 5
[ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN
HAVE BEEN LOST, DESTROYED OR STOLEN AND SEE INSTRUCTION 11.
NUMBER OF SHARES REPRESENTED BY LOST, DESTROYED OR STOLEN CERTIFICATES:
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
accepted for payment is to be issued in name of someone other than the
undersigned, if certificates for Shares not tendered or not accepted for
payment are to be issued in the name of someone other than the undersigned
or if Shares tendered hereby and delivered by book-entry transfer that are
not accepted for payment are to be returned by credit to an account
maintained at a Book-Entry Transfer Facility other than the account
indicated above.
Issue check and/or Share certificate(s) to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address
---------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9)
Credit Shares delivered by book-entry transfer and not purchased to the
Book-Entry Transfer Facility account.
------------------------------------------------------------
(ACCOUNT NUMBER)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment is to be sent to someone other than the undersigned
or to the undersigned at an address other than that shown under
"Description of Shares Tendered."
Mail check and/or Share certificates to:
Name
-----------------------------------------------------
(PLEASE PRINT)
Address
---------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9)
------------------------------------------------------------
5
<PAGE> 6
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF STOCKHOLDER(S))
Dated:
- ------------------------ ,1998
(Must be signed by registered holder(s) exactly as name(s) appear(s) on the
Share certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please provide the following information
and see Instruction 5.)
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Name of Firm
- --------------------------------------------------------------------------------
Capacity (full title)
- --------------------------------------------------------------------------------
(SEE INSTRUCTION 5)
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
- ---------------------------------------------------------------------------
Taxpayer Identification or Social Security Number
- -----------------------------------------------------------
(SEE SUBSTITUTE FORM W-9)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
- --------------------------------------------------------------------------------
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Title
- --------------------------------------------------------------------------------
Name of Firm
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
- ---------------------------------------------------------------------------
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this Section, includes any
participant in any of the Book-Entry Transfer Facility's systems whose name
appears on a security position listing as the owner of the Shares) of Shares
tendered herewith, unless such registered holder(s) has completed either the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (b) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(each, an "Eligible Institution"). In all other cases, all signatures on this
Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by stockholders of
the Company either if Share certificates are to be forwarded herewith or, unless
an Agent's Message is utilized, if delivery of Shares is to be made by
book-entry transfer pursuant to the procedures set forth herein and in Section 3
of the Offer to Purchase. For a stockholder validly to tender Shares pursuant to
the Offer, either (a) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), together with any required signature
guarantees or an Agent's Message (in connection with book-entry transfer) and
any other required documents, must be received by the Depositary at one of its
addresses set forth herein prior to the Expiration Date and either (i)
certificates for tendered Shares must be received by the Depositary at one of
such addresses prior to the Expiration Date or (ii) Shares must be delivered
pursuant to the procedures for book-entry transfer set forth herein and in
Section 3 of the Offer to Purchase and a Book-Entry Confirmation must be
received by the Depositary prior to the Expiration Date or (b) the tendering
stockholder must comply with the guaranteed delivery procedures set forth herein
and in Section 3 of the Offer to Purchase.
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot comply with the book-entry
transfer procedures on a timely basis may tender their Shares by properly
completing and duly executing the Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedure set forth herein and in Section 3 of the Offer to
Purchase.
Pursuant to such guaranteed delivery procedures, (i) such tender must be
made by or through an Eligible Institution, (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
Purchaser, must be received by the Depositary prior to the Expiration Date and
(iii) the certificates for all tendered Shares, in proper form for transfer (or
a Book-Entry Confirmation with respect to all tendered Shares), together with a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof), with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and any other required documents must
be received by the Depositary within three trading days after the date of
execution of such Notice of Guaranteed Delivery. A "trading day" is any day on
which the Nasdaq National Market is open for business.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that Purchaser
may enforce such agreement against the participant.
The signatures on this Letter of Transmittal cover the Shares tendered
hereby.
THE METHOD OF DELIVERY OF THE SHARES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. THE SHARES
WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF DELIVERY IS BY
7
<PAGE> 8
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. All tendering stockholders, by executing
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the number of Shares tendered and the Share
certificate numbers with respect to such Shares should be listed on a separate
signed schedule attached hereto.
4. PARTIAL TENDERS. (Not applicable to stockholders who tender by
book-entry transfer). If fewer than all the Shares evidenced by any Share
certificate delivered to the Depositary herewith are to be tendered hereby, fill
in the number of Shares that are to be tendered in the box entitled "Number of
Shares Tendered." In any such case, new certificate(s) for the remainder of the
Shares that were evidenced by the old certificates will be sent to the
registered holder, unless otherwise provided in the appropriate box on this
Letter of Transmittal, as soon as practicable after the Expiration Date or the
termination of the Offer. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificate(s) without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are held of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any Share certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of the authority of such person so to act must be
submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Share certificates or
separate stock powers are required unless payment or certificates for Shares not
tendered or not accepted for payment are to be issued in the name of a person
other than the registered holder(s). Signatures on any such Share certificates
or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by certificates listed and
transmitted hereby, the Share certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the Share certificates. Signature(s) on any
such Share certificates or stock powers must be guaranteed by an Eligible
Institution.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the transfer and
sale of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or if
certificates for Shares not tendered or not accepted for payment are to be
registered in the name of, any person other than the registered holder(s), or if
tendered certificates are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of any stock transfer
taxes (whether imposed on the registered holder(s) or such other person) payable
on account of the transfer to such other person will be deducted from the
purchase price of such Shares purchased unless evidence satisfactory to
Purchaser of the payment of such taxes, or exemption therefrom, is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Share certificates evidencing the
Shares tendered hereby.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares accepted for payment is to be issued in the name of, and/or
Share certificates for Shares not accepted for payment or not tendered are to be
issued in the name of and/or returned to, a person other than the signer of this
Letter of Transmittal or if a check is
8
<PAGE> 9
to be sent, and/or such certificates are to be returned, to a person other than
the signer of this Letter of Transmittal, or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Any stockholder(s) delivering Shares by book-entry transfer may request that
Shares not purchased be credited to such account maintained at the Book-Entry
Transfer Facility as such stockholder(s) may designate in the box entitled
"Special Payment Instructions." If no such instructions are given, any such
Shares not purchased will be returned by crediting the account at the Book-Entry
Transfer Facility designated above as the account from which such Shares were
delivered.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent or the Dealer Manager at their respective
addresses and phone numbers set forth below, or from brokers, dealers,
commercial banks or trust companies.
9. WAIVER OF CONDITIONS. Subject to the Merger Agreement, Purchaser
reserves the absolute right in its sole discretion to waive, at any time or from
time to time, any of the specified conditions of the Offer, in whole or in part,
in the case of any Shares tendered.
10. BACKUP WITHHOLDING. In order to avoid "backup withholding" of federal
income tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such stockholder's correct taxpayer identification number ("TIN") on
Substitute Form W-9 in this Letter of Transmittal and certify, under penalties
of perjury, that such TIN is correct and that such stockholder is not subject to
backup withholding.
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding can be credited against the federal income tax liability
of the person subject to the backup withholding, provided that the required
information is given to the IRS. If backup withholding results in an overpayment
of tax, a refund can be obtained by the stockholder upon filing an income tax
return.
The stockholder is required to give the Depositary the TIN (i.e., social
security number or employer identification number) of the record owner of the
Shares. If the Shares are held in more than one name or are not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified TIN is
provided to the Depositary. However, such amounts will be refunded to such
stockholder if a TIN is provided to the Depositary within 60 days.
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign stockholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for more instructions.
11. LOST, DESTROYED OR STOLEN SHARE CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary by checking the box immediately preceding the
special payment/special delivery instructions and indicating the number of
Shares lost. The stockholder will then be instructed as to the steps that must
be taken in order to replace the Share certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Share certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) TOGETHER WITH
ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN
AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY
9
<PAGE> 10
PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED SHARES MUST BE
RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT TO THE
PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE EXPIRATION DATE,
OR THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES FOR GUARANTEED
DELIVERY.
IMPORTANT TAX INFORMATION
Under Federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payer) with such
stockholder's correct taxpayer identification number on Substitute Form W-9
below. If such stockholder is an individual, the taxpayer identification number
is his social security number. If a tendering stockholder is subject to backup
withholding, such stockholder must cross out item (2) of the Certification box
on the Substitute Form W-9. If the Depositary is not provided with the correct
taxpayer identification number, the stockholder may be subject to a $50 penalty
imposed by the Internal Revenue Service. In addition, payments that are made to
such stockholder with respect to Shares purchased pursuant to the Offer may be
subject to backup withholding.
Certain stockholders (including, among others, all corporations, and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that stockholder must submit a statement, signed under
penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Depositary. Exempt stockholders, other than
foreign individuals, should furnish their TIN, write "Exempt" on the face of the
Substitute Form W-9 below, and sign, date and return the Substitute Form W-9 to
the Depositary. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct taxpayer
identification number by completing the form contained herein certifying that
the taxpayer identification number provided on Substitute Form W-9 is correct
(or that such stockholder is awaiting a taxpayer identification number).
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidance on which number to report.
If the tendering stockholder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, such stockholder
should write "Applied For" in the space provided for in the TIN in Part 1, and
sign and date the Substitute Form W-9. If "Applied For" is written in Part I and
the Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% on all payments of the purchase price until a TIN is provided to
the Depositary.
10
<PAGE> 11
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PAYOR'S NAME: BANKBOSTON, N.A.
- ---------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN IN THE BOX AT -------------------------------
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW Social Security Number
DEPARTMENT OF THE TREASURY (If awaiting TIN write
INTERNAL REVENUE SERVICE "Applied For")
OR
-------------------------------
Employer Identification Number
(If awaiting TIN write
"Applied For")
------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
PAYER'S REQUEST FOR PART 2 -- CERTIFICATE -- Under penalties of perjury, I certify that:
TAXPAYER IDENTIFICATION (1) The number shown on this form is my correct Taxpayer Identification Number (or I
NUMBER ("TIN") am waiting for a number to be issued for me), and
(2) I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
---------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because of
under-reporting interest or dividends on your tax returns. However, if after being
notified by the IRS that you are subject to backup withholding, you receive another
notification from the IRS that you are no longer subject to backup withholding, do not
cross out such item (2). (Also see instructions in the enclosed Guidelines).
---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
SIGNATURE ---------------------- DATE , 1998 Part 3 -- Awaiting TIN [ ]
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY CASH PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a Taxpayer Identification Number to the Depositary by the time of
payment, 31% of all reportable payments made to me thereafter will be withheld,
but that such amounts will be refunded to me if I provide a certified Taxpayer
Identification Number to the Depositary within sixty (60) days.
<TABLE>
<S> <C>
Signature Date , 1998
------------------------------------------------ ---------------------------------
</TABLE>
11
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
MICROPROSE, INC.
TO
NEW HIAC CORP.,
A WHOLLY OWNED SUBSIDIARY OF
HASBRO, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or a form substantially equivalent
hereto, must be used to accept the Offer (as defined below) if certificates
representing shares of Common Stock, par value $.001 per share (the "Common
Stock"), including the associated preferred stock purchase rights (the "Rights"
and, together with the Common Stock, the "Shares"), of MicroProse, Inc., a
Delaware corporation, are not immediately available, if the procedure for
book-entry transfer cannot be completed prior to the Expiration Date (as defined
in Section 1 of the Offer to Purchase), or if time will not permit all required
documents to reach the Depositary prior to the Expiration Date. Such form may be
delivered by hand, transmitted by facsimile transmission or mailed to the
Depositary. See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
BANKBOSTON, N.A.
By Hand:
Securities Transfer & Reporting Services, Inc.
c/o Boston EquiServe L.P.
1 Exchange Plaza
55 Broadway, 3rd Floor
New York, NY 10006
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission: By Overnight Delivery:
BankBoston, N.A. (781) 575-2233 or BankBoston, N.A.
Attention: (781)575-2232 Attention:
Corporate Reorganization (for Eligible Institutions Only) Corporate Reorganization
P.O. Box 8209 150 Royall Street
Boston, MA 02266-8029 Canton, MA 02021
</TABLE>
Confirm Facsimile by Telephone:
(800) 733-5001
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE NUMBER OTHER THAN
AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION"
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to New HIAC Corp., a Delaware corporation
and a wholly owned subsidiary of Hasbro, Inc., a Rhode Island corporation, upon
the terms and subject to the conditions set forth in Purchaser's Offer to
Purchase dated August 14, 1998 and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, constitute the "Offer"),
receipt of which is hereby acknowledged, the number of shares set forth below of
common stock, par value $.001 per share (the "Common Stock"), including the
associated preferred stock purchase rights (the "Rights" and, together with the
Common Stock the "Shares"), of MicroProse, Inc., a Delaware corporation,
pursuant to the guaranteed delivery procedures set forth in Section 3 of the
Offer to Purchase.
Number of Shares:
--------------------------------------
Certificate Nos. (if available):
------------------------------------------------------------
------------------------------------------------------------
Check box if Shares will be tendered by book-entry transfer: [ ]
Account Number:
----------------------------------------
Dated: , 1998
---------
Name(s) of Record Holder(s):
------------------------------------------------------------
------------------------------------------------------------
PLEASE PRINT
Address(es):
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
ZIP CODE
Area Code and Tel. No.:
------------------------------------------------------------
------------------------------------------------------------
Signature(s):
------------------------------------------------------------
------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program, guarantees to deliver to the Depositary
either certificates representing the Shares tendered hereby, in proper form for
transfer, or confirmation of book-entry transfer of such Shares into the
Depositary's accounts at The Depository Trust Company, in each case with
delivery of a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or an Agent's
Message, and any other documents required by the Letter of Transmittal, within
three trading days (as defined in the Offer to Purchase) after the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
<TABLE>
<S> <C>
Name of Firm: -----------------------------------------
-----------------------------------------------
AUTHORIZED SIGNATURE
Address:
------------------------------------------------ Name:
-----------------------------------------------
PLEASE PRINT
Title:
- -------------------------------------------------------- -----------------------------------------------
ZIP CODE
Area Code and Tel. No.: ------------------------------- Dated:
-------------------------------------------- , 1998
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD
BE SENT ONLY WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
MICROPROSE, INC.
AT
$6.00 NET PER SHARE
BY
NEW HIAC CORP.,
A WHOLLY OWNED SUBSIDIARY OF
HASBRO, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, SEPTEMBER
11, 1998, UNLESS THE OFFER IS EXTENDED.
August 14, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies And Other Nominees:
We have been appointed by New HIAC Corp., a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Hasbro, Inc., a Rhode Island
corporation ("Parent"), to act as Dealer Manager in connection with Purchaser's
offer to purchase all outstanding shares of common stock, par value $.001 per
share (the "Common Stock"), including the associated preferred stock purchase
rights (the "Rights" and, together with the Common Stock, the "Shares"), of
MicroProse, Inc., a Delaware corporation (the "Company"), at $6.00 per Share,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated August 14, 1998 (the "Offer to Purchase")
and in the related Letter of Transmittal (which, together with any amendments or
supplements thereto, constitute the "Offer") enclosed herewith. Please furnish
copies of the enclosed materials to those of your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee.
The Offer is conditioned upon, among other things there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in the Offer
to Purchase) that number of Shares which, when added to the Shares beneficially
owned by Parent and Purchaser (if any), represents at least 50.1% of the Shares
outstanding (on a fully diluted basis) on the date Shares are accepted for
payment. The Offer is also subject to other conditions set forth in the Offer to
Purchase.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Offer to Purchase dated August 14, 1998;
2. Letter of Transmittal for your use in accepting the Offer and
tendering Shares and for the information of your clients;
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares and all other required documents cannot be
delivered to the Depositary, or if the procedures for book-entry transfer
cannot be completed, by the Expiration Date (as defined in the Offer to
Purchase);
4. A letter which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Offer;
5. A letter to stockholders of the Company from Stephen M. Race,
Chief Executive Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 dated August 14,
1998, which has been filed by the Company with the Securities and Exchange
Commission;
<PAGE> 2
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. A return envelope addressed to BankBoston, N.A. (the
"Depositary").
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and pay for Shares which are
validly tendered prior to the Expiration Date and not theretofore properly
withdrawn when, as and if Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance of such Shares for payment pursuant to the
Offer. Payment for Shares purchased pursuant to the Offer will in all cases be
made only after timely receipt by the Depositary of (i) certificates for such
Shares, or timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company, pursuant to the procedures
described in Section 3 of the Offer to Purchase, (ii) a properly completed and
duly executed Letter of Transmittal (or a properly completed and manually signed
facsimile thereof) or an Agent's Message in connection with a book-entry
transfer and (iii) all other documents required by the Letter of Transmittal.
Purchaser will not pay any fees or commissions to any broker or dealer or
other person (other than the Dealer Manager, the Depositary and the Information
Agent as described in the Offer to Purchase) for soliciting tenders of Shares
pursuant to the Offer. Purchaser will, however, upon request, reimburse brokers,
dealers, commercial banks and trust companies for customary mailing and handling
costs incurred by them in forwarding the enclosed materials to their customers.
Purchaser will pay or cause to be paid all stock transfer taxes applicable
to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of the
Letter of Transmittal.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, SEPTEMBER 11, 1998 UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase) in connection with a book-entry transfer of Shares, and any other
required documents, should be sent to the Depositary, and certificates
representing the tendered Shares should be delivered or such Shares should be
tendered by book-entry transfer, all in accordance with the Instructions set
forth in the Letter of Transmittal and in the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or to complete the
procedures for delivery by book-entry transfer prior to the expiration of the
Offer, a tender may be effected by following the guaranteed delivery procedures
specified in Section 3 of the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed materials may be obtained from, the
Information Agent or the Dealer Manager at their respective addresses and
telephone numbers set forth on the back cover of the Offer to Purchase.
Very truly yours,
BEAR, STEARNS & CO. INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF PARENT, PURCHASER, THE COMPANY, THE INFORMATION AGENT, THE
DEPOSITARY, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS
ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
MICROPROSE, INC.
AT
$6.00 NET PER SHARE IN CASH
BY
NEW HIAC CORP.,
A WHOLLY OWNED SUBSIDIARY OF
HASBRO, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, SEPTEMBER
11, 1998, UNLESS THE OFFER IS EXTENDED.
To Our Clients: August 14, 1998
Enclosed for your consideration are the Offer to Purchase dated August 14,
1998 and the related Letter of Transmittal (which, together with any amendments
or supplements thereto, collectively constitute the "Offer") in connection with
the offer by New HIAC Corp., a Delaware corporation ("Purchaser"), and a wholly
owned subsidiary of Hasbro, Inc., a Rhode Island corporation ("Parent"), to
purchase for cash all outstanding shares of common stock, par value $.001 per
share (the "Common Stock"), including the associated preferred stock purchase
rights (the "Rights" and together with the Common Stock, the "Shares"), of
MicroProse, Inc., a Delaware corporation (the "Company"). We are the holder of
record of Shares held for your account. A tender of such Shares can be made only
by us as the holder of record and pursuant to your instructions. The enclosed
Letter of Transmittal is furnished to you for your information only and cannot
be used by you to tender Shares held by us for your account.
We request instructions as to whether you wish us to tender any or all of
the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer.
Your attention is invited to the following:
1. The offer price is $6.00 per Share, net to you in cash without
interest.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company has unanimously approved the
Merger Agreement (as defined in the Offer to Purchase) and the transactions
contemplated thereby, including the Offer and the Merger (as defined in the
Offer to Purchase), and has unanimously determined that the Offer and the
Merger are fair to, and in the best interests of, the Company's stockholders
and unanimously recommends that stockholders accept the Offer and tender
their Shares pursuant to the Offer.
4. The Offer and withdrawal rights expire at 12:00 Midnight, New York
City time, on September 11, 1998 unless the Offer is extended.
5. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the Expiration Date (as defined
in the Offer to Purchase) that number of Shares which, when added to the
Shares beneficially owned by Parent and Purchaser (if any), represents at
least 50.1% of the Shares outstanding (on a fully diluted basis) on the date
Shares are accepted for payment. The Offer is also subject to other
conditions set forth in the Offer to Purchase.
6. Any stock transfer taxes applicable to the sale of Shares to
Purchaser pursuant to the Offer will be paid by Purchaser, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
Except as disclosed in the Offer to Purchase, Purchaser is not aware of any
state in which the making of the Offer is prohibited by administrative or
judicial action pursuant to any valid state statute. In any jurisdiction in
which the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer will be deemed to be made on behalf of
Purchaser by one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form set forth
on the reverse side of this letter. An envelope to return your instructions to
us is enclosed. If you authorize the tender of your Shares, all such Shares will
be tendered unless otherwise specified on the reverse side of this letter. Your
instructions should be forwarded to us in ample time to permit us to submit a
tender on your behalf prior to the expiration of the Offer.
<PAGE> 2
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MICROPROSE, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated August 14, 1998 and the related Letter of Transmittal in
connection with the Offer by New HIAC Corp., a Delaware corporation and a wholly
owned subsidiary of Hasbro, Inc., a Rhode Island corporation, to purchase all
outstanding shares of common stock, par value $.001 per share (the "Common
Stock"), including the associated preferred stock purchase rights (the "Rights"
and together with the Common Stock, the "Shares"), of MicroProse, Inc., a
Delaware corporation.
This will instruct you to tender the number of Shares indicated below (or
if no number is indicated below, all Shares) held by you for the account of the
undersigned, upon the terms and subject to the conditions set forth in the
Offer.
<TABLE>
<S> <C>
Number of Shares to be Tendered:*
Shares
Dated: ____________________, 1998 ---------------------------------------------
---------------------------------------------
SIGNATURE(S)
---------------------------------------------
PRINT NAME(S)
---------------------------------------------
---------------------------------------------
ADDRESS(ES)
---------------------------------------------
AREA CODE AND TELEPHONE NUMBER
---------------------------------------------
TAX ID OR SOCIAL SECURITY NUMBER
</TABLE>
-----------------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
2
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- ------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(2)
3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, either
person(2)
4. Custodian account of a minor The minor(3)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if
the minor is the
only contributor,
the minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent
minor, or incompetent person person(4)
7. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust
under State law
- ------------------------------------------------------------
- ------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ------------------------------------------------------------
8. Sole proprietorship account The owner(5)
9. A valid trust, estate, or pension Legal entity (Do
trust not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(1)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other tax- The organization
exempt organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school district,
or prison) that receives
agricultural program payments
- ------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the legal trust, estate, or pension trust.
(2) List first and circle the name of the person whose number you furnish.
(3) Circle the minor's name and furnish the minor's social security number.
(4) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(5) Show the name of the owner.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you don't have a TIN or you don't know your number, obtain Internal Revenue
Service Form SS-5, Application for a Social Security Number Card, or Form SS-4,
Application for Employer Identification Number, at your local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a) or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER, IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE> 1
For Immediate Release
Contact: Hasbro MicroProse
Wayne Charness: News Media Angela Edwards
401-727-5983 510-864-4336
Renita O'Connell: Investor Relations Virginia Turner
401-727-5401 510-864-4431
Dana Henry: Hasbro Interactive
978-921-3759
[HASBRO LETTERHEAD]
HASBRO, INC. ANNOUNCES DEFINITIVE AGREEMENT TO ACQUIRE MICROPROSE, INC.
Pawtucket, R.I. August 12, 1998 -- Hasbro, Inc. [ASE:HAS] announced
today that it has entered into a definitive agreement to acquire MicroProse,
Inc. [NASDAQ:MPRS], a 17-year veteran publisher of popular simulation, 3-D
action and strategy games for the personal computer. The purchase price is $6.00
per common share of MicroProse, payable in cash. The total value of the
transaction is approximately $70 million, including assumed debt and redeemable
preferred stock. Closing is expected in September of 1998.
The agreement calls for a wholly owned subsidiary of Hasbro to commence a tender
offer no later than August 18, 1998 for all of MicroProse's outstanding common
shares. The offer will be conditioned upon, among other things, the expiration
or earlier termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976 and the tender of a majority
of the shares outstanding on a fully diluted basis of common stock of
MicroProse. Following the consummation of the offer, Hasbro's subsidiary will be
merged with MicroProse and any remaining MicroProse common shares will be
converted into the right to receive $6.00 per share in cash.
-more-
<PAGE> 2
Page Two
Prior to a one-time charge in 1998 relating to the purchased in-process research
and development expenses of MicroProse. Hasbro expects the transaction will not
be dilutive to earnings this year, and will be accretive beginning in 1999.
Hasbro will combine the activities of MicroProse with Hasbro Interactive, its
leading entertainment software publishing arm.
"This acquisition is an incredible opportunity to combine the complementary
talents of Hasbro Interactive and MicroProse," said Alan G. Hassenfeld, Chairman
and CEO of Hasbro, Inc. "MicroProse brings us great people, especially in
Research and Development, and a strong international operation, which is very
important to us as we continue to aggressively pursue the international
marketplace."
"The acquisition of MicroProse will significantly enhance Hasbro Interactive in
three key strategic growth areas: brands and content, R&D assets, and European
distribution," noted Tom Dusenberry, President of Hasbro Interactive, Inc. "We
will now compete in virtually all major PC game categories. We also look forward
to expanding many of MicroProse's games to multiple hardware platforms."
MicroProse has more games in the Computer Gaming World's Hall of Fame than any
other publisher. The company has 10 Computer Gaming World Hall of Fame honors
including awards for the legendary Civilization(R) series; the Falcon(R) flight
simulation franchise; X-Com(R), the best-selling science fiction computer game
line; and Gunship(R), Master of Orion(R), and Master of Magic(R). Other key
brand franchises include the multi-million unit selling MechWarrior(R) line,
Magic the Gathering(R), Star Trek(TM) Next Generation the series, the Grand Prix
racing line, F-15 Strike Eagle(R), and Worms(R).
-more-
<PAGE> 3
Page Three
MicroProse has technologies that are critical to PC entertainment software
development, including 3-D simulation, artificial game intelligence, and
networked game-play capabilities.
Gilman G. Louie, Chairman of MicroProse, said, "We're excited about joining
Hasbro Interactive and the many growth opportunities we can pursue together.
Both organizations have clear strengths that will complement each other
greatly."
Hasbro, Inc. is a worldwide leader in the design, manufacture and marketing of
toys, games, interactive software, puzzles and infant products. Both
internationally and in the U.S., its Playskool(R) , Kenner(R), Tonka(R),
OddzOn(R), Super Soaker(R), Milton Bradley(R), Parker Brothers(R), Tiger(TM) and
Hasbro Interactive(TM) products, provide children and families with the highest
quality and most recognizable toys and games in the world.
Hasbro Interactive, Inc. is a leading all-family interactive games publisher,
formed in 1995 to bring to life on the computer the deep library of toy and
board games of parent company Hasbro, Inc. Hasbro Interactive has since expanded
its charter to include original and licensed games for the PC, the
Playstation(R) and Nintendo(R) 64 game consoles and for multi-player gaming over
the Internet. Headquartered in Beverly, Massachusetts, Hasbro Interactive has
offices in the U.K., France, Germany, Japan and Canada. For additional
information, visit Hasbro Interactive's Web site at www.hasbro-interactive.com.
MicroProse, Inc. is a leading developer and publisher of interactive
entertainment software for use on CD-ROM-based personal computers. The company
has four development studios located in Alameda, California; Hunt Valley,
Maryland; Chapel Hill, North Carolina; and Chipping Sodbury, England. Products
are available nationally and internationally and are sold through major
distributors, retailers, and mass merchants. Product and company information is
available for download from the MicroProse(R) Web site at www.microprose.com.
-more-
<PAGE> 4
Page Four
Hasbro: Certain statements contained in this release contain "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements are inherently subject to known and
unknown risks and uncertainties. The Company's actual actions or results may
differ materially from those expected or anticipated in the forward-looking
statements. Specific factors that might cause such a difference include, but are
not limited to, the timely manufacture and shipping by the Company of new and
continuing products and their acceptance by customers and consumers in a
competitive product environment; economic conditions and currency fluctuations
in the various markets in which the Company operates throughout the world; the
continuing trend of increased concentration of the Company's revenues in the
second half and fourth quarter of the year, together with increased reliance by
retailers on quick response inventory management techniques, which increases the
risk of underproduction of popular items, overproduction of less popular items
and failure to achieve tight and compressed shipping schedules; the impact of
competition on revenues, margins and other aspects of the Company's business;
third party actions or approvals that could delay, modify or increase the cost
of implementation of, the Company's Global Integration and Profit Enhancement
program; and the risk that anticipated benefits of acquisitions may not occur or
be delayed or reduced in their realization. The Company undertakes no obligation
to make any revisions to the forward-looking statements contained in this
release or to update them to reflect events or circumstances occurring after the
date of this release.
MicroProse: The statements contained in this release that are not historical
facts are "forward-looking statements." The company cautions readers of this
press release that a number of important factors could cause such company's
actual future results to differ materially from those expressed in any such
forward-looking statements. These important factors, and other factors that
could affect the company are described in MicroProse's Annual Report on Form
10-K for the fiscal year ended March 31, which was filed with the United States
Securities and Exchange Commission. Readers of this press release are referred
to such filings.
(R), (TM) and (C) 1998 Paramount Television, All Rights Reserved. STAR TREK and
related marks are trademarks of Paramount Pictures.
Magic: The Gathering, is a registered trademark of Wizards of the Coast, Inc.
WORMS2 (C) Team 17 Software Ltd. All rights reserved.
Falcon, Civilization, X-COM, Master of Orion, Gunship and F-15 Strike Eagle are
trademarks of MicroProse, Inc. or its affiliates.
###
<PAGE> 1
FOR IMMEDIATE RELEASE
Contact: Hasbro MicroProse
Wayne Charness: News Media Angela Edwards
401-727-5983 510-864-4336
Renita O'Connell: Investor Relations Virginia Turner
401-727-5401 510-864-4431
HASBRO, INC. ANNOUNCES
COMMENCEMENT OF TENDER OFFER FOR
MICROPROSE, INC.
PAWTUCKET, RI, August 14, 1998 -- Hasbro, Inc. (ASE: HAS) announced today
that New HIAC Corp., its wholly owned subsidiary, has commenced a cash tender
offer to purchase all of the outstanding shares of MicroProse, Inc. (NASDAQ:
MPRS) at a price of $6.00 per share.
The offer is being made pursuant to the previously announced merger
agreement among New HIAC Corp., Hasbro, Inc. and MicroProse, Inc. The offer is
conditioned upon, among other things, the tender of at least 50.1% of the shares
of common stock outstanding on a fully diluted basis and the expiration or
earlier termination of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976. The offer and withdrawal rights are
scheduled to expire at 12:00 midnight, New York City time, on Friday, September
11, 1998, unless the offer is extended. Bear, Stearns & Co. Inc. is acting as
the Dealer Manager and D.F. King & Co. is acting as the Information Agent in
connection with the offer.
Hasbro, Inc. is a worldwide leader in the design, manufacture and
marketing of toys, games, interactive software, puzzles and infant products.
Both internationally and in the U.S., its Playskool[R], Kenner[R], Tonka[R],
OddzOn[R], Super Soaker[R], Milton Bradley[R], Parker Brothers[R], Tiger[TM]
and Hasbro Interactive products, provide children and families with the highest
quality and most recognizable toys and games in the world.
MicroProse, Inc. is a leading developer and publisher of entertainment
software for use on CD-ROM-based personal computers (PC's). The Company has
four development studios located in Alameda, California; Hunt Valley, Maryland;
Chapel Hill, North Carolina; and Chipping Sodbury, England. Products are
available nationally and internationally and are sold through major
distributors, retailers and mass merchants. Product and company information is
available for download from the MicroProse Web site at www.microprose.com.
This press release is neither an offer to purchase nor a solicitation of
an offer to sell securities. The tender offer is made only through the Offer to
Purchase and the related Letter of Transmittal which is being mailed to
stockholders today. Additional copies of such documents can be obtained by
contacting the Information Agent at (800) 755-3107.
<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase, dated August
14, 1998, and the related Letter of Transmittal, and is being made to all
holders of Shares. The Offer is not being made to (nor will tenders be accepted
from or on behalf of) holders of Shares in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the laws
of such jurisdiction or any administrative or judicial action pursuant thereto.
In any jurisdiction where securities, blue sky or other laws require the Offer
to be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of New HIAC Corp. by Bear, Stearns & Co. Inc. or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All of the Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
MicroProse, Inc.
at
$6.00 Net Per Share
by
New HIAC Corp.
a Wholly Owned Subsidiary of
Hasbro, Inc.
New HIAC Corp., a Delaware corporation ("Purchaser") and a wholly owned
subsidiary of Hasbro, Inc., a Rhode Island corporation ("Parent"), is offering
to purchase all of the outstanding shares of Common Stock, par value $.001 per
share (the "Shares"), of MicroProse, Inc., a Delaware corporation (the
"Company"), at a price of $6.00 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated August 14, 1998 (the "Offer to Purchase") and in the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, SEPTEMBER 11, 1998, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, there being validly tendered
and not withdrawn prior to the Expiration Date (as defined in the Offer to
Purchase) that number of Shares which, when added to the Shares beneficially
owned by Parent or Purchaser (if any), represents at least 50.1% of the Shares
outstanding (on a fully diluted basis) on the date Shares are accepted for
payment. The Offer is also subject to the other conditions set forth in the
Offer to Purchase. See Section 14 of the Offer to Purchase.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of
August 11, 1998 (the "Merger Agreement"), by and among Parent, Purchaser and the
Company. The Merger Agreement provides that, as soon as practicable after the
completion of the Offer and satisfaction or waiver, if permissible, of all
conditions
-1-
<PAGE> 2
contained in the Merger Agreement, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), Purchaser will be merged
with and into the Company (the "Merger"). Following the consummation of the
Merger, the Company will continue as the surviving corporation and will be a
direct wholly owned subsidiary of Parent. At the effective time of the Merger
(the "Effective Time"), each Share issued and outstanding immediately prior to
the Effective Time (other than Shares held by any subsidiary of the Company or
in the treasury of the Company, or by Parent, Purchaser or any other subsidiary
of Parent, which Shares will be cancelled, and other than Shares, if any, held
by stockholders who perfect their appraisal rights under the DGCL) will be
converted into the right to receive $6.00 in cash (or such higher price paid
pursuant to the Offer) without interest thereon.
In connection with the execution of the Merger Agreement, Parent and the Company
have entered into a Stock Option Agreement, dated as of August 11, 1998 (the
"Option Agreement"), pursuant to which the Company has granted to Parent an
irrevocable option to purchase up to the number of Shares as equals 19.9% of the
Company's Shares outstanding on the date thereof.
The Board of Directors of the Company has unanimously approved the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger, and has unanimously determined that the Offer and the Merger are fair
to, and in the best interests of, the Company's Stockholders and unanimously
recommends that stockholders accept the Offer and tender their Shares pursuant
to the Offer. For purposes of the Offer, Purchaser will be deemed to have
accepted for payment, and thereby purchased, Shares properly tendered to
Purchaser and not withdrawn as, if and when Purchaser gives oral or written
notice to the Depositary (as defined in the Offer to Purchase) of its acceptance
for payment of such Shares. Upon the terms and subject to the conditions of the
Offer, payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for tendering stockholders for the purpose of receiving payment
from Purchaser and transmitting payment to tendering stockholders. In all cases,
payment for Shares accepted for payment pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) certificates for such Shares (or a
confirmation of a book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility (as defined in the Offer to
Purchase)), (ii) a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message (as defined in the Offer to
Purchase), and (iii) any other documents required by the Letter of Transmittal.
The per Share consideration paid to any stockholder pursuant to the Offer will
be the highest per Share consideration paid to any other stockholder pursuant to
the Offer. Under no circumstances will interest be paid on the purchase price to
be paid by Purchaser for such Shares, regardless of any extension of the Offer
or any delay in making such payment.
The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on
Friday, September 11, 1998, unless and until Purchaser (in accordance with the
terms of the
-2-
<PAGE> 3
Merger Agreement), shall have extended the period of time during which the Offer
is open, in which event the term "Expiration Date" shall mean the latest time
and date at which the Offer, as so extended by Purchaser shall expire. Subject
to the applicable rules and regulations of the Securities and Exchange
Commission and to applicable law, Purchaser expressly reserves the right, in its
sole discretion (subject to the terms of the Merger Agreement), at any time and
from time to time, to extend for any reason the period of time during which the
Offer is open, including the occurrence of any of the events specified in
Section 14 of the Offer to Purchase, by giving oral or written notice of such
extension to the Depositary; provided, however, that Purchaser cannot extend the
Offer beyond November 30, 1998 without the consent of the Company. Any such
extension will be followed by a public announcement thereof by no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
right of a tendering stockholder to withdraw such stockholder's Shares. Without
limiting the manner in which Purchaser may choose to make any public
announcement, Purchaser will have no obligation to publish, advertise or
otherwise communicate any such announcement other than by issuing a press
release to the Dow Jones News Service or otherwise as may be required by
applicable law.
Except as otherwise provided below, tenders of Shares made pursuant to the Offer
are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any
time prior to the Expiration Date and, unless theretofore accepted for payment
pursuant to the Offer, may also be withdrawn at any time after October 12, 1998,
or such later time as may apply if the Offer is extended. For a withdrawal to be
effective, a written, telegraphic or facsimile transmission notice of withdrawal
must be timely received by the Depositary at one of its addresses set forth in
the Offer to Purchase. Any such notice of withdrawal must specify the name of
the person having tendered the Shares to be withdrawn, the number of Shares to
be withdrawn and the name of the registered holder of the Shares to be
withdrawn, if different from the name of the person who tendered the Shares. If
certificates evidencing such Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and, unless such Shares have been tendered for the
account of an Eligible Institution (as defined in the Offer to Purchase), the
signatures on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Shares have been delivered pursuant to the procedures for
book-entry transfer set forth in Section 3 of the Offer to Purchase, any notice
of withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares and
otherwise comply with the Book-Entry Transfer Facility's procedures. Withdrawals
of tenders of Shares may not be rescinded, and any Shares properly withdrawn
will thereafter be deemed not validly tendered for purposes of the Offer.
However, withdrawn Shares may be retendered by again following one of the
procedures described in Section 3 of the
-3-
<PAGE> 4
Offer to Purchase at any time prior to the Expiration Date. All questions as to
the form and validity (including time of receipt) of notices of withdrawal will
be determined by Purchaser, in its sole discretion, whose determination will be
final and binding.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d-6
under the Securities Exchange Act of 1934, as amended, is contained in the Offer
to Purchase and is incorporated herein by reference.
The Company has provided Purchaser with the Company's stockholder lists and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase, the related Letter of Transmittal and other
relevant documents will be mailed to record holders of Shares whose names appear
on the stockholder list, and will be furnished to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the Company's stockholder lists, or, if applicable, who are
listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain important
information and should be read carefully before any decision is made with
respect to the Offer.
Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer documents may be directed
to the Information Agent or the Dealer Manager (each as defined in the Offer to
Purchase), at their respective addresses and telephone numbers set forth below,
and copies will be furnished promptly at Purchaser's expense. Neither of Parent
or Purchaser will pay any fees or commissions to any broker or dealer or other
person other than the Dealer Manager and the Information Agent for soliciting
tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Call Toll Free: (800) 755-3107
The Dealer Manager for the Offer is:
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Call Toll Free: (877) 260-9674
August 14, 1998
-4-
<PAGE> 1
================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
HASBRO, INC.,
NEW HIAC CORP.
and
MICROPROSE, INC.
dated as of
August 11, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
THE OFFER AND MERGER..........................2
Section 1.1 The Offer........................................................2
Section 1.2 Company Actions..................................................3
Section 1.3 SEC Documents....................................................4
Section 1.4 Directors........................................................5
Section 1.5 The Merger.......................................................7
Section 1.6 Effective Time...................................................7
Section 1.7 Closing..........................................................8
ARTICLE II
CONVERSION OF SECURITIES........................8
Section 2.1 Conversion of Capital Stock......................................8
Section 2.2 Exchange of Certificates.........................................9
Section 2.3 Withholding Taxes...............................................11
Section 2.5 Appraisal Rights................................................12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............12
Section 3.1 Organization, Standing and Corporate Power......................12
Section 3.2 Subsidiaries....................................................13
Section 3.3 Capital Structure...............................................13
Section 3.4 Authority; Noncontravention; Company Action.....................15
Section 3.5 SEC Documents; Financial Statements..............................16
Section 3.6 Schedule 14D-9; Offer Documents; Proxy Statement................17
Section 3.7 Absence of Certain Changes or Events............................18
Section 3.8 Litigation......................................................18
Section 3.9 Absence of Changes in Benefit Plans; SEC Disclosure.............18
Section 3.10 Employee Benefits; ERISA.......................................19
Section 3.11 Taxes...........................................................21
Section 3.12 No Excess Nondeductible Payments...............................22
Section 3.13 Compliance with Applicable Laws................................23
Section 3.14 Intellectual Property..........................................25
i
<PAGE> 3
Section 3.15 Properties.....................................................28
Section 3.16 Contracts......................................................29
Section 3.17 Labor Relations................................................30
Section 3.18 Products Liability.............................................30
Section 3.19 Applicability of State Takeover Statutes.......................31
Section 3.20 Voting Requirements............................................31
Section 3.21 Brokers........................................................31
Section 3.22 Opinion of Financial Advisor...................................31
Section 3.23 Year 2000......................................................31
Section 3.24 Company Rights Agreement.......................................32
Section 3.25 Absence of Questionable Payments...............................33
Section 3.26 Full Disclosure................................................33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER.........................33
Section 4.1 Organization, Standing and Corporate Power......................33
Section 4.2 Authority; Noncontravention.....................................34
Section 4.3 Proxy Statement; Offer Documents................................35
Section 4.4 Operations of Purchaser.........................................35
Section 4.5 Brokers.........................................................35
ARTICLE V
COVENANTS................................35
Section 5.1 Interim Operations of the Company...............................35
Section 5.2 Access; Confidentiality.........................................39
Section 5.3 Special Meeting, Proxy Statement................................39
Section 5.4 Reasonable Efforts; Notification................................40
Section 5.5 No Solicitation.................................................41
Section 5.6 Publicity.......................................................43
Section 5.7 Transfer Taxes..................................................43
Section 5.8 State Takeover Laws.............................................44
Section 5.9 Indemnification and Insurance...................................44
ARTICLE VI
CONDITIONS................................45
ii
<PAGE> 4
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger......45
ARTICLE VII
TERMINATION...............................46
Section 7.1 Termination.....................................................46
Section 7.2 Effect of Termination...........................................49
ARTICLE VIII
MISCELLANEOUS..............................49
Section 8.1 Fees and Expenses........................................49
Section 8.2 Amendment and Modification...............................50
Section 8.3 Nonsurvival of Representations and Warranties............50
Section 8.4 Notices..................................................50
Section 8.5 Interpretation...........................................51
Section 8.6 Counterparts.............................................52
Section 8.7 Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership..................................52
Section 8.8 Severability.............................................53
Section 8.9 Governing Law............................................53
Section 8.10 Assignment...............................................53
Section 8.11 Enforcement..............................................53
Section 8.12 Extension; Waiver........................................54
Section 8.13 Procedure for Termination, Amendment, Extension
or Waiver............................................54
Section 8.14 Certain Undertakings of Parent...........................54
Section 8.15 Definitions..............................................54
ANNEX A
CONDITIONS TO THE OFFER................................................A-1
iii
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 11, 1998, by and
among HASBRO, INC., a Rhode Island corporation ("Parent"), NEW HIAC CORP., a
Delaware corporation and a wholly-owned Subsidiary of Parent ("Purchaser"), and
MICROPROSE, INC., a Delaware corporation (the "Company").
WHEREAS, the Board of Directors of each of Parent, Purchaser and
the Company have approved, and deem it fair to, advisable and in the best
interests of their respective stockholders to consummate, the acquisition of the
Company by Parent and Purchaser upon the terms and subject to the conditions set
forth herein;
WHEREAS, in furtherance thereof, it is proposed that Purchaser
make a cash tender offer to acquire all shares of the issued and outstanding
common stock, $.001 par value, of the Company (the "Shares") (including the
related Preferred Stock Purchase Rights (as herein defined)) for $6.00 per
share, net to the seller in cash, upon the terms and subject to the conditions
set forth herein;
WHEREAS, also in furtherance of such acquisition, the Board of
Directors of each of Parent, Purchaser and the Company and the sole stockholder
of Purchaser have approved this Agreement and the Merger (as herein defined)
following the Offer (as herein defined) pursuant to which Purchaser shall merge
with and into the Company and outstanding Shares shall be converted into the
right to receive the Offer Price (as herein defined) in cash, without interest,
all in accordance with the DGCL (as herein defined) and upon the terms and
subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company has determined that
the consideration to be paid for each Share in the Offer and the Merger is fair
to the holders of such Shares and has resolved to recommend that the holders of
such Shares tender their Shares pursuant to the Offer and approve and adopt this
Agreement and the Merger upon the terms and subject to the conditions set forth
herein;
WHEREAS, the Company, Parent and Purchaser desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger; and
1
<PAGE> 6
WHEREAS, as a condition and inducement to Parent's and Purchaser's
entering into this Agreement and incurring the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, Parent is
entering into an Option Agreement (the "Company Option Agreement") with the
Company pursuant to which, among other things, the Company has granted Parent an
option to purchase up to 19.9% of the Shares issued and outstanding as of the
date hereof;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer.
(a) As promptly as practicable (but in no event later than five
business days after the public announcement of the execution hereof), Purchaser
shall commence (within the meaning of Rule 14d-2 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) a tender offer (the "Offer") for
all of the outstanding Shares (including the related Preferred Stock Purchase
Rights) at a price of $6.00 per Share, net to the seller in cash (such price, or
such higher price per Share as may be paid in the Offer, being referred to
herein as the "Offer Price"), subject to the conditions set forth in Annex A
hereto.
(b) The obligations of Purchaser to accept for payment and to pay
for any Shares validly tendered on or prior to the expiration of the Offer and
not withdrawn shall be subject only to the conditions set forth in Annex A
hereto. The Offer shall be made by means of an offer to purchase (the "Offer to
Purchase") containing the terms set forth in this Agreement and the conditions
set forth in Annex A hereto.
(c) Purchaser expressly reserves the right to modify the terms of
the Offer; provided, that, without the Company's prior written consent,
Purchaser shall not decrease the Offer Price, change the form of consideration
to be paid in the Offer, or decrease the number of Shares sought or amend any
other condition of the Offer in any manner adverse to the holders of the Shares
(other than with respect to insignificant changes or amendments and subject to
the third to last sentence of this
2
<PAGE> 7
Section 1.1) or impose additional conditions without the written consent of the
Company; provided further, however, that, if on the initial scheduled expiration
date of the Offer, which shall be 20 business days after the date that the Offer
is commenced, all conditions to the Offer shall not have been satisfied or
waived, Purchaser may, from time to time until such time as all such conditions
are satisfied or waived, in its sole discretion, extend the expiration date
provided, however, that the expiration date of the Offer may not be extended
beyond November 30, 1998. Parent and Purchaser agree that if all of the
conditions set forth on Annex A hereto are not satisfied on any scheduled
expiration date of the Offer then, provided that all such conditions are
reasonably capable of being satisfied, Purchaser shall extend the Offer from
time to time until such conditions are satisfied or waived, provided that
Purchaser shall not be required to extend the Offer beyond October 15, 1998. In
addition, the Offer Price may be increased and the Offer may be extended to the
extent required by applicable Law in connection with such increase, in each case
without the consent of the Company. Purchaser shall, on the terms and subject to
the prior satisfaction or waiver of the conditions of the Offer, accept for
payment and pay for Shares validly tendered as promptly as practicable;
provided, however, that if, immediately prior to the initial expiration date of
the Offer, the Shares validly tendered and not withdrawn pursuant to the Offer
equal less than 90% of the outstanding Shares, Purchaser may extend the Offer
for a period not to exceed 20 business days, notwithstanding that all conditions
to the Offer are satisfied as of such expiration date of the Offer. Parent shall
provide or cause to be provided to Purchaser on a timely basis the funds
necessary to accept for payment and pay for any Shares that Purchaser becomes
obligated to accept for payment, and pay for, pursuant to the Offer.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors of the Company, at a meeting duly called
and held, has (i) unanimously determined that each of the Agreement, the Company
Option Agreement, the Offer and the Merger (as defined in Section 1.5) are fair
to and in the best interests of the stockholders of the Company, (ii)
unanimously approved this Agreement, the Company Option Agreement, the Offer,
the acquisition of Shares pursuant to the Offer and the Merger for purposes of
Section 203 of the DGCL (the "Section 203 Approval"), (iii) received the opinion
of Piper Jaffray, Inc. ("Piper Jaffray"), financial advisor to the Company, to
the effect that the Offer Price to be received by holders of Shares pursuant to
the Offer and the Merger Consideration (as defined in Section 2.1(c)) pursuant
to the Merger is fair to the
3
<PAGE> 8
holders of Shares from a financial point of view as of the date of such opinion,
(iv) approved this Agreement and the Company Option Agreement and the
transactions contemplated hereby and thereby, including the Offer and the Merger
(collectively, the "Transactions") and (v) resolved to recommend that the
stockholders of the Company accept the Offer, tender their Shares thereunder to
Purchaser and approve and adopt this Agreement and the Merger. The Company has
been advised by each of its directors and by each executive officer who as of
the date hereof is actually aware (to the knowledge of the Company) of the
Transactions that each such Person either intends to tender pursuant to the
Offer all Shares owned by such Person or vote all Shares owned by such Person in
favor of the Merger.
(b) In connection with the Offer, the Company will promptly
furnish or cause to be furnished to Purchaser mailing labels, security position
listings and any available listings or computer files containing the names and
addresses of all holders of record of the Shares as of a recent date, and shall
furnish Purchaser with such additional information (including, but not limited
to, updated lists of holders of the Shares and their addresses, mailing labels
and lists of security positions) and such assistance as Purchaser or its agents
may reasonably request in communicating the Offer to the record and beneficial
holders of the Shares. Subject to the requirements of applicable Law, and except
for such steps as are necessary to disseminate the Offer Documents (as defined
in Section 1.3(a)) and any other documents necessary to consummate the Merger,
Purchaser and its affiliates and associates shall hold in confidence the
information contained in any such labels, listings and files and all other
information delivered pursuant to this Section 1.2(b), will use such information
only in connection with the Offer and the Merger and, if this Agreement shall be
terminated, will deliver to the Company all copies, extracts or summaries of
such information in their possession or the possession of their agents.
Section 1.3 SEC Documents.
(a) On the date the Offer is commenced, Parent and Purchaser shall
file with the United States Securities and Exchange Commission (the "SEC") a
Tender Offer Statement on Schedule 14D-1 in accordance with the Exchange Act
with respect to the Offer (together with all amendments and supplements thereto
and including the exhibits thereto, the "Schedule 14D-1"). Purchaser shall
provide the Schedule 14D-1 to the Company prior to filing such that the Company
shall have a reasonable opportunity to comment thereon and the Company shall
provide such comments to Purchaser promptly following receipt thereof. The
Schedule 14D-1 will include, as exhibits, the Offer to Purchase and a form of
letter of transmittal
4
<PAGE> 9
(collectively, together with any amendments and supplements thereto, the "Offer
Documents"). Concurrently with the filing of the Schedule 14D-1 by Parent and
Purchaser, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 in accordance with the Exchange Act (together with
all amendments and supplements thereto and including the exhibits thereto, the
"Schedule 14D-9"), which shall, except as otherwise provided herein, contain the
recommendation referred to in clause (v) of Section 1.2(a) hereof.
(b) Parent and Purchaser will take all steps necessary to ensure
that the Offer Documents, and the Company will take all steps necessary to
ensure that the Schedule 14D-9, will comply in all material respects with the
provisions of applicable Federal and state securities Laws. Each of Parent and
Purchaser will take all steps necessary to cause the Offer Documents, and the
Company will take all steps necessary to cause the Schedule 14D-9, to be filed
with the SEC and to be disseminated to holders of the Shares, in each case as
and to the extent required by applicable Federal and state securities Laws. Each
of Parent and Purchaser, on the one hand, and the Company, on the other hand,
will promptly correct any information provided by it for use in the Offer
Documents and the Schedule 14D-9 if and to the extent that it shall have become
false and misleading in any material respect and Purchaser will take all steps
necessary to cause the Offer Documents, and the Company will take all steps
necessary to cause the Schedule 14D-9, as so corrected to be filed with the SEC
and to be disseminated to holders of the Shares, in each case as and to the
extent required by applicable Federal and state securities Laws. Parent and its
counsel shall be given a reasonable opportunity to review and comment upon the
Schedule 14D-9 and all amendments and supplements thereto prior to their filing
with the SEC or dissemination to stockholders of the Company. The Company agrees
to provide Parent and its counsel with copies of any written comments that the
Company or its counsel may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly after the receipt of such comments and each of Parent
and Purchaser agrees to provide the Company and its counsel with copies of any
written comments that Parent, Purchaser or their counsel may receive from the
SEC or its staff with respect to the Offer Documents promptly after the receipt
of such comments.
Section 1.4 Directors.
(a) Promptly after (i) the purchase of and payment for any Shares
by Purchaser or any of its affiliates as a result of which Purchaser and its
affiliates own beneficially at least a majority of then outstanding Shares and
(ii)
5
<PAGE> 10
compliance with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, whichever shall occur later, Parent shall be entitled to designate
such number of directors, rounded up to the next whole number, on the Company's
Board of Directors as is equal to the product of the total number of directors
on such Board (giving effect to any increase in the size of such Board pursuant
to this Section 1.4) multiplied by the percentage that the number of Shares
beneficially owned by Purchaser (including Shares so accepted for payment)
bears to the total number of Shares then outstanding. In furtherance thereof,
the Company shall, upon request of Parent, use its best efforts promptly either
to increase the size of its Board of Directors or to secure the resignations of
such number of its incumbent directors, or both, as is necessary to enable such
designees of Parent to be so elected or appointed to the Company's Board of
Directors, and the Company shall take all actions available to the Company to
cause such designees of Parent to be so elected or appointed. At such time, the
Company shall, if requested by Parent, also take all action necessary to cause
Persons designated by Parent to constitute at least the same percentage (rounded
up to the next whole number) as is on the Company's Board of Directors of (i)
each committee of the Company's Board of Directors, (ii) each board of directors
(or similar body) of each Subsidiary of the Company and (iii) each committee (or
similar body) of each such board.
(b) The Company shall promptly take all actions required pursuant
to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in
order to fulfill its obligations under Section 1.4(a), including mailing to
stock holders the information required by such Section 14(f) and Rule 14f-1 (or,
at Parent's request, furnishing such information to Parent for inclusion in the
Offer Documents initially filed with the SEC and distributed to the stockholders
of the Company) as is necessary to enable Parent's designees to be elected to
the Company's Board of Directors. Parent or Purchaser will supply the Company
any information with respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f) and Rule 14f-1. The
provisions of this Section 1.4 are in addition to and shall not limit any rights
which Purchaser, Parent or any of their affiliates may have as a holder or
beneficial owner of Shares as a matter of applicable Law with respect to the
election of directors or otherwise.
(c) Notwithstanding the provisions of this Section 1.4, the
parties hereto shall use their respective reasonable best efforts to ensure that
at least two of the members of the Board shall, at all times prior to the
Effective Time (as defined in Section 1.6 hereof) be, Continuing Directors. From
and after the time, if any, that Parent's designees constitute a majority of the
Company's Board of Direc-
6
<PAGE> 11
tors, any amendment or modification of this Agreement, any amendment to the
Company's Certificate of Incorporation or By-Laws inconsistent with this
Agreement, any termination of this Agreement by the Company, any extension of
time for performance of any of the obligations of Parent or Purchaser hereunder,
any waiver of any condition to the Company's obligations hereunder or any of the
Company's rights hereunder or other action by the Company hereunder may be
effected only by the action of a majority of the Continuing Directors of the
Company, which action shall be deemed to constitute the action of any committee
specifically designated by the Board of Directors of the Company to approve the
actions contemplated hereby and the Transactions and the full Board of Directors
of the Company; provided, that, if there shall be no Continuing Directors, such
actions may be effected by majority vote of the entire Board of Directors of the
Company.
Section 1.5 The Merger. (a) Subject to the terms and conditions of this
Agreement, and in accordance with the DGCL, at the Effective Time (as defined in
Section 1.6 hereof), the Company and Purchaser shall consummate a merger (the
"Merger") pursuant to which (x) Purchaser shall be merged with and into the
Company and the separate corporate existence of Purchaser shall thereupon cease
and (y) the Company shall be the surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation") and shall continue to be
governed by the Laws of the State of Delaware.
(b) Pursuant to the Merger, at the Effective Time, (x) the
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be the certificate of incorporation of the Surviving
Corporation and (y) the By-Laws of the Company, as in effect immediately prior
to the Effective Time, shall be the by-laws of the Surviving Corporation, each
until thereafter changed or amended as provided therein and by the DGCL.
(c) The directors of Purchaser at the Effective Time shall be the
initial directors of the Surviving Corporation until their respective successors
are duly elected and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's certificate of
incorporation and by-laws. The officers of Purchaser at the Effective Time shall
be the initial officers of the Surviving Corporation until their respective
successors are duly elected and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
certificate of incorporation and by-laws.
7
<PAGE> 12
(d) The Merger shall have the effects specified in the applicable
provisions of the DGCL.
Section 1.6 Effective Time. Subject to the terms and conditions of this
Agreement, Parent, Purchaser and the Company will cause a certificate of merger
or, if applicable, a certificate of ownership and merger (as applicable, the
"Certificate of Merger"), to be executed and filed on the date of the Closing
(as defined in Section 1.7) (or on such other date as Parent and the Company may
agree) with the Secretary of State of Delaware (the "Secretary of State") as
provided in the DGCL. The Merger shall become effective on the date on which the
Certificate of Merger has been duly filed with the Secretary of State or such
time as is agreed upon by the parties and specified in the Certificate of
Merger, and such time is hereinafter referred to as the "Effective Time."
Section 1.7 Closing. The closing of the Merger (the "Closing") shall
take place at 10:00 a.m., local time, on a date to be specified by the parties,
which shall be no later than the second business day after satisfaction or
waiver of all of the conditions set forth in Article VI hereof (the "Closing
Date"), at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third
Avenue, New York, New York, 10022, unless another date or place is agreed to in
writing by the parties hereto.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
Shares or any shares of capital stock of Purchaser:
(a) Purchaser Capital Stock. Each issued and outstanding share of
common stock, par value $.01 per share, of Purchaser shall be converted into and
become one fully paid and nonassessable share of common stock, par value $.01
per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Purchaser-Owned Stock. All
Shares that are owned by the Company or any Subsidiary of the Company and any
Shares owned by Parent, Purchaser or any Subsidiary of Parent or Purchaser
8
<PAGE> 13
shall be cancelled and retired and shall cease to exist and no consideration
shall be delivered in exchange therefor.
(c) Exchange of Shares. Each issued and outstanding Share (other
than Shares to be cancelled in accordance with Section 2.1(b) and Dissenting
Shares (as herein defined)) shall be converted into the right to receive the
Offer Price in cash, without interest (the "Merger Consideration"). All such
Shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
therefor upon the surrender of such certificate in accordance with Section 2.2,
without interest.
(d) Redemption of Preferred Stock. Upon the consummation of the
Offer, the Company shall redeem, out of funds provided by Parent or Purchaser,
all issued and outstanding Series A Preferred Shares (as herein defined) at the
Series A Redemption Price (as defined in the Company's Certificate of
Incorporation) in accordance with the applicable provisions of the Company's
Certificate of Incorporation.
Section 2.2 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall
designate a bank, trust company or other Person, reasonably acceptable to the
Company, to act as agent for the holders of the Shares in connection with the
Merger (the "Paying Agent") to receive the funds to which holders of the Shares
shall become entitled pursuant to Section 2.1(c). Parent shall, from time to
time, make available to the Paying Agent funds in amounts and at times necessary
for the payment of the Merger Consideration as provided herein. All interest
earned on such funds shall be paid to Parent.
(b) Exchange Procedures. As soon as reasonably practicable after
the Effective Time, Parent shall cause the Paying Agent to mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding Shares (the "Certificates") whose Shares
were converted into the right to receive the Merger Consideration pursuant to
Section 2.1, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Paying Agent and shall be in such
form not inconsistent with this Agreement as
9
<PAGE> 14
Parent may specify) and (ii) instructions for use in surrendering the
Certificates in exchange for payment of the Merger Consideration. Upon surrender
of a Certificate for cancellation to the Paying Agent, together with such
letter of transmittal, duly executed, and such other documents as may reasonably
be required by the Paying Agent, Parent shall cause the Paying Agent to pay to
the holder of such Certificate the Merger Consideration, and the Certificate so
surrendered shall forthwith be cancelled. In the event of a surrender of a
Certificate representing Shares which are not registered in the transfer records
of the Company under the name of the Person surrendering such Certificate,
payment may be made to a Person other than the Person in whose name the
Certificate so surrendered is registered if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the Person requesting
such payment shall pay any transfer or other Taxes required by reason of payment
to a Person other than the registered holder of such Certificate or establish to
the satisfaction of the Paying Agent that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration which the
holder thereof has the right to receive in respect of such Certificate pursuant
to the provisions of this Article II. No interest shall be paid or will accrue
on the Merger Consideration payable to holders of Certificates pursuant to the
provisions of this Article II.
(c) Transfer Books; No Further Ownership Rights in Shares. At the
Effective Time, the stock transfer books of the Company shall be closed and
thereafter there shall be no further registration of transfers of the Shares on
the records of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of the Shares outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to such
Shares, except as otherwise provided for herein or by applicable Law. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be cancelled and exchanged as provided in this Article
II.
(d) Termination of Fund; No Liability. At any time following six
months after the Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar Laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates, without any
10
<PAGE> 15
interest thereon. Notwithstanding the foregoing, none of Parent, the Surviving
Corporation or the Paying Agent shall be liable to any holder of a Certificate
for Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar Law.
(e) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Paying Agent shall pay in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration pursuant to this Agreement.
Section 2.3 Withholding Taxes. Parent and Purchaser shall be entitled
to deduct and withhold, or cause the Paying Agent to deduct and withhold, from
the Offer Price or the Merger Consideration payable to a holder of Shares
pursuant to the Offer or the Merger any withholding and stock transfer Taxes and
such amounts as are required under the Code, or any applicable provision of
state, local or foreign Tax law. Parent shall take appropriate steps to minimize
such Taxes. To the extent that amounts are so withheld by Parent or Purchaser,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Shares in respect of which such deduction
and withholding was made by Parent or Purchaser.
Section 2.4 Stock Options. (a) Immediately prior to the Effective Time,
each then outstanding option to purchase any shares of capital stock of the
Company (in each case, an "Option"), whether or not then exercisable, shall be
cancelled by the Company and in consideration of such cancellation and except to
the extent that Parent or the Purchaser and the holder of any such Option
otherwise agree, the Company (or, at Parent's option, the Purchaser) shall pay
to such holders of Options an amount in respect thereof equal to the product of
(A) the excess, if any, of the Offer Price over the exercise price of each such
Option and (B) the number of Shares previously subject to the Option immediately
prior to its cancellation (such payment to be net of withholding taxes and
without interest). The Company shall use commercially reasonable efforts to
obtain the consent of each holder of an Option as to whom Parent reasonably
requests a consent be obtained to the transactions contemplated by this Section
2.4 no later than the Effective Time in a form acceptable to Parent. The Company
shall provide to each holder of Options any
11
<PAGE> 16
required notice (in a form acceptable to Parent) under the applicable Option
Plan (as defined herein).
(b) The Company shall take all actions necessary and appropriate
so that (i) no purchase rights are acquired after the date hereof under the
Company's Employee Stock Purchase Plan and (ii) all stock option or other equity
based plans maintained with respect to the Shares, including, without
limitation, the Company's Employee Stock Purchase Plan and those plans listed in
Section 3.3 hereof ("Option Plans"), shall terminate as of the Effective Time
and the provisions in any other Benefit Plan providing for the issuance,
transfer or grant of any capital stock of the Company or any interest in respect
of any capital stock of the Company shall be deleted as of the Effective Time,
and the Company shall use its best efforts to ensure that following the
Effective Time no holder of an Option or any participant in any Option Plan
shall have any right thereunder to acquire any capital stock of the Company,
Parent, Purchaser or the Surviving Corporation.
Section 2.5 Appraisal Rights. Notwithstanding anything in this
Agreement to the contrary, Shares (the "Dissenting Shares") that are issued and
outstanding immediately prior to the Effective Time and which are held by
stockholders who did not vote in favor of the Merger and who comply with all of
the relevant provisions of Section 262 of the DGCL (the "Dissenting
Stockholders") shall not be converted into or be exchangeable for the right to
receive the Merger Consideration, unless and until such holders shall have
failed to perfect or shall have effectively withdrawn or lost their rights to
appraisal under the DGCL. If any Dissenting Stockholder shall have failed to
perfect or shall have effectively withdrawn or lost such right, such holder's
Shares shall thereupon be converted into and become exchangeable for the right
to receive, as of the Effective Time, the Merger Consideration without any
interest thereon. The Company shall give Parent (i) prompt notice of any written
demands for appraisal of any Shares, attempted withdrawals of such demands and
any other instruments served pursuant to the DGCL and received by the Company
relating to stockholders' rights of appraisal, and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for appraisal
under the DGCL. Neither the Company nor the Surviving Corporation shall, except
with the prior written consent of Parent, voluntarily make any payment with
respect to, or settle or offer to settle, any such demand for payment. If any
Dissenting Stockholder shall fail to perfect or shall have effectively withdrawn
or lost the right to dissent, the Shares held by such Dissenting Stockholder
shall thereupon be treated as though such Shares had been converted into the
right to receive the Merger Consideration pursuant to Section 2.1(c).
12
<PAGE> 17
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser as follows:
Section 3.1 Organization, Standing and Corporate Power. Each of the
Company and each of its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the Laws of the jurisdiction in which it is
organized and has the requisite corporate power and authority to carry on its
business as is now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
qualified or licensed (individually or in the aggregate) would not have a
Material Adverse Effect on the Company. The Company has delivered to Parent
complete and correct copies of the Certificate of Incorporation of the Company
and By-Laws of the Company, in each case as amended to the date of this
Agreement, and has made available the certificates of incorporation and by-laws
or other organizational documents of its Subsidiaries, in each case as amended
as of the date of this Agreement. The respective certificates of incorporation
and by-laws or other organizational documents of the Subsidiaries of the Company
do not contain any provision limiting or otherwise restricting the ability of
the Company to control such Subsidiaries.
Section 3.2 Subsidiaries. (a) Exhibit 21.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1998 and Schedule 3.2 of
the disclosure schedule delivered by the Company to Parent at or prior to the
execution of this Agreement (the "Company Disclosure Schedule") together
include the names, jurisdictions of incorporation and capitalization of all of
the Subsidiaries of the Company. All the outstanding shares of capital stock of,
or other equity interests in, each Subsidiary of the Company have been validly
issued and are fully paid and nonassessable and are owned directly or indirectly
by the Company, free and clear of all Liens and free of any other restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests).
13
<PAGE> 18
(b) The Company does not directly or indirectly beneficially own
any securities or other beneficial ownership interests in any other entity
(including through joint ventures or partnership arrangements) other than (i)
the Subsidiaries of the Company or (ii) as disclosed on Schedule 3.2 of the
Company Disclosure Schedule.
Section 3.3 Capital Structure. The authorized capital stock of the
Company consists of 40,000,000 Shares and 9,000,000 shares of preferred stock,
par value $.001 per share (the "Preferred Shares") of which 4,000,000 shares
have been designated as Series A Convertible Preferred Stock (the "Series A
Preferred Shares"), 750,000 shares have been designated as Series B Preferred
Stock (the "Series B Preferred Shares"), 1,168,860 shares have been designated
as Series B-1 Preferred Stock (the "Series B-1 Preferred Shares") and 40,000
shares have been designated as Series B Participating Preferred Stock (the
"Series B Participating Preferred Shares"). As of the date hereof, (i) 5,753,598
Shares were issued and outstanding, 2,000,000 Series A Preferred Shares were
issued and outstanding, no Series B Preferred Shares were issued and
outstanding, no Series B-1 Preferred Shares were issued and out standing and no
Series B Participating Preferred Shares were issued and outstanding, (ii) 16,583
Shares were reserved for issuance upon exercise of outstanding Options pursuant
to the Company's 1991 Stock Option Plan with an exercise price range of a
minimum exercise price of $25.00 and a maximum price of $53.75, (iii) 10,193
Shares were reserved for issuance upon exercise of outstanding Options pursuant
to the Company's 1992 Stock Option Plan with an exercise price range of a
minimum exercise price of $1.95 and a maximum price of $26.88, (iv) 64,310
Shares were reserved for issuance upon exercise of outstanding Options pursuant
to the Company's 1994 Stock Option Plan with an exercise price range of a
minimum exercise price of $6.56 and a maximum price of $66.25, (v) 89,228 Shares
were reserved for issuance upon exercise of outstanding Options pursuant to the
1996 Stock Option Plan with an exercise price range of a minimum exercise price
of $10.00 and a maximum price of $26.84, (vi) 59,000 Shares were reserved for
issuance upon exercise of outstanding Options pursuant to the 1998 Non-statutory
Stock Option Plan with an exercise price range of a minimum exercise price of
$9.85 and a maximum price of $10.32, (vii) 120,000 Shares were reserved for
issuance pursuant to the Company's Employee Stock Purchase Plan; (viii) Options
to purchase a total of 754,677 Shares were issued and outstanding at a weighted
average exercise price of $20.30 per Share, of which 308,284 were exercisable;
(ix) 4,080 Shares were reserved for issuance upon exercise of the warrants (the
"Warrants"), expiring July 13, 1999, held by Paragon Software Corporation or
certain noteholders thereof, with an exercise price of $69.40 per Share, (x)
393,245 Shares were reserved for issuance
14
<PAGE> 19
upon conversion of the Company's 6.5% Convertible Subordinated Notes due 2002
(the "Convertible Notes") and (xi) 366,715 Shares were issued and are held in
the Company's treasury. Except as set forth above or on Schedule 3.3 of the
Company Disclosure Schedule, as of the date of this Agreement: (i) no shares of
capital stock or other voting securities of the Company are issued, reserved for
issuance or outstanding; (ii) there are no stock appreciation rights, phantom
stock units, restricted stock grants, contingent stock grants or Benefit Plans
(as defined in Section 3.10 hereof) which grant awards of any of the foregoing,
and there are no other outstanding contractual rights to which the Company is a
party the value of which is based on the value of Shares; (iii) all outstanding
shares of capital stock of the Company are, and all Shares which may be issued
will be, when so issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights; and (iv) there are no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company may vote. Except for the
Preferred Stock Purchase Rights, and except as set forth above, as of the date
of this Agreement, there are no outstanding securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which the Company or any of its Subsidiaries is a party or by which any of
them is bound obligating the Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company or of any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no programs in
place, nor any outstanding contractual obligations of the Company or any of its
Subsidiaries, to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of its Subsidiaries. Schedule 3.3 of the Company
Disclosure Schedule accurately sets forth information regarding the current
exercise price, date of grant and number of granted Options for each holder of
Options pursuant to any Company Option Plan. Following the Effective Time, no
holder of Options will have any right to receive shares of common stock of the
Surviving Corporation upon exercise of Options.
Section 3.4 Authority; Noncontravention; Company Action. The Company
has the requisite corporate power and authority to enter into this Agreement
and the Company Option Agreement and, subject to approval of this Agreement by
the holders of a majority of the outstanding Shares, to consummate the Merger
contemplated by this Agreement. The execution, delivery and performance of this
Agreement and the Company Option Agreement by the Company and the
15
<PAGE> 20
consummation by the Company of the Transactions have been duly authorized by all
necessary corporate action on the part of the Company, subject, in the case of
the Merger, to approval of this Agreement by the holders of a majority of the
outstanding Shares. This Agreement has been duly executed and delivered by the
Company and, assuming this Agreement constitutes the valid and binding
obligation of Parent and Purchaser, constitutes the valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except that (i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar Laws now or hereafter in effect
relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
Except as set forth on Schedule 3.4 of the Company Disclosure Schedule, the
execution, delivery and performance of this Agreement and the Company Option
Agreement do not, and the consummation of the Transactions (including the
changes in the composition of the Board of Directors of the Company) and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or result in
the creation of any Lien upon any of the properties or assets of the Company or
any of its Subsidiaries under, or result in the termination of, or require that
any consent be obtained or any notice be given with respect to, (i) the
Certificate of Incorporation or By-laws of the Company or the comparable charter
or organizational documents of any of its Subsidiaries, (ii) any loan or credit
agreement note, bond, mortgage, indenture, lease or other agreement, instrument
or Permit applicable to the Company or any of its Subsidiaries or their
respective properties or assets, (iii) any Law applicable to the Company or any
of its Subsidiaries or their respective properties or assets or (iv) any
licenses to which the Company or any of its Subsidiaries is a party, other than,
in the case of clauses (ii), (iii) and (iv), any such conflicts, violations,
defaults, rights, Liens, losses of a material benefit, consents or notices that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company and its Subsidiaries taken as a whole. No consent, approval, order
or authorization of, or registration, declaration or filing with, any
Governmental Entity or any other Person, is required by the Company or any of
its Subsidiaries in connection with the execution and delivery of this Agreement
by the Company or the consummation by the Company of the Transactions, except
for (i) the filings, permits, authorizations, consents and approvals set forth
in Section 3.4 of the Company Disclosure Schedule, or as may be required under,
and other applicable requirements of, the Securities Act, the Exchange Act, the
HSR Act, any applicable state securities or "blue sky" Laws and the DGCL, and
16
<PAGE> 21
(ii) such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not,
individually or in the aggregate, (x) impair, in any material respect, the
ability of the Company to perform its obligations under this Agreement, (y)
prevent or significantly delay the consummation of the Transactions or (z) have
a Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
The Board of Directors of the Company has taken all appropriate action so that
neither Parent nor Purchaser will be an "interested stockholder" within the
meaning of Section 203 of the DGCL by virtue of Parent, Purchaser and the
Company entering into this Agreement or the Company Option Agreement or any
other agreement contemplated hereby or thereby and consummating the
Transactions.
Section 3.5 SEC Documents; Financial Statements. The Company has filed
all SEC Documents required to be filed by it since April 1, 1993 (the "Company's
SEC Documents"). As of their respective dates, (i) the Company's SEC Documents
complied in all material respects with the requirements of the Securities Act,
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such SEC Documents, and (ii) none of
the Company's SEC Documents contained at the time of their filing any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company's SEC Documents, as of the
dates of such SEC Documents, are true and complete and complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles ("GAAP") in the United
States applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto) and fairly presented the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except (i) as set forth on Schedule 3.5 of
the Company Disclosure Schedule, (ii) as set forth in the Company's SEC
Documents filed and publicly available prior to the date of this Agreement,
(iii) for liabilities and obligations incurred in the ordinary course of
business consistent with past practice since the date of the most recent
consolidated balance sheet included in the Company's SEC Documents filed and
publicly available prior to the date of this Agreement and (iv) for performance
obligations under contracts entered into prior to the date hereof or entered
into in compliance with Section 5.1 hereof, neither the
17
<PAGE> 22
Company nor any of its Subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise).
Section 3.6 Schedule 14D-9; Offer Documents; Proxy Statement. Neither
the Schedule 14D-9, any other document required to be filed by the Company with
the SEC in connection with the Transactions, nor any information supplied by the
Company for inclusion in the Offer Documents shall, at the respective times the
Schedule 14D-9, any such other filings by the Company, the Offer Documents or
any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to stockholders of the Company, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will not, on the date the Proxy Statement
(including any amendment or supplement thereto) is first mailed to stockholders
of the Company, contain any untrue statement of a material fact, or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
are made, not misleading or shall, at the time of the Special Meeting (as
hereinafter defined) or at the Effective Time, omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Special Meeting which shall have become
false or misleading in any material respect. The Schedule 14D-9, any other
document required to be filed by the Company with the SEC in connection with the
Transactions and the Proxy Statement will, when filed by the Company with the
SEC, comply as to form in all material respects with the applicable provisions
of the Exchange Act and the rules and regulations thereunder. Notwithstanding
the foregoing, the Company makes no representation or warranty with respect to
the statements made in any of the foregoing documents based on and in conformity
with information supplied by or on behalf of Parent or Purchaser specifically
for inclusion therein.
Section 3.7 Absence of Certain Changes or Events. Except as set forth
in the Company's SEC Documents or on Schedule 3.7 of the Company Disclosure
Schedule, since March 31, 1998, the Company and its Subsidiaries have con ducted
their respective businesses in the ordinary course in all material respects, and
there has not been any Material Adverse Change in the Company and its
Subsidiaries, taken as a whole.
18
<PAGE> 23
Section 3.8 Litigation. Except as set forth in the Company's SEC
Documents or on Schedule 3.8 of the Company Disclosure Schedule or to the extent
reserved for as reflected on the Company's financial statements for the year
ended March 31, 1998, there are (i) no suits, actions or proceedings pending or,
to the knowledge of the Company, threatened against the Company or any of its
Subsidiaries that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on the Company, (ii) no complaints,
lawsuits, charges or other proceedings pending or, to the knowledge of the
Company, threatened in any forum by or on behalf of any present or former
employee of the Company or any of its Subsidiaries, any applicant for employment
or classes of the foregoing alleging breach of any express or implied contract
of employment, any applicable Law governing employment or the termination
thereof or other discriminatory, wrongful or tortious conduct in connection with
the employment relationship that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on the Company, (iii)
no judgments, decrees, injunctions or orders of any Governmental Entity or
arbitrator outstanding against the Company that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on the
Company and (iv) no orders, writs, judgments, injunctions, decrees,
determinations or awards applicable to the Trademarks or the Other Intellectual
Property.
Section 3.9 Absence of Changes in Benefit Plans; SEC Disclosure. Except
as disclosed on Schedule 3.9 of the Company Disclosure Schedule, there has not
been any adoption or amendment by the Company or any of its Subsidiaries or any
ERISA Affiliate (as defined in Section 3.10 hereof) of any Benefit Plan since
March 31, 1998. Except as disclosed on Schedule 3.9 of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has any formal plan or
commitment to create any additional Benefit Plan or make any material
modification or changes to any existing Benefit Plan that would affect any
employee or terminated employee of the Company or a Subsidiary of the Company.
All employment, consulting, severance, termination, change in control or
indemnification agreements, arrangements or understandings between the Company
or any of its Subsidiaries and any current or former officer or director of the
Company or any of its Subsidiaries which are required to be disclosed in the
Company's SEC Documents have been disclosed therein.
Section 3.10 Employee Benefits; ERISA. (a) Schedule 3.10 of the Company
Disclosure Schedule contains a true and complete list of each material bonus,
deferred compensation, incentive compensation, stock purchase, stock option,
severance or termination pay, health insurance, supplemental unemployment
19
<PAGE> 24
benefits, profit-sharing, pension, or retirement plan, program, agreement or
arrangement, and each other employee benefit plan, program, agreement or
arrangement, other than a non-material fringe benefit plan, sponsored,
maintained or contributed to or required to be contributed to by the Company or
any of its Subsidiaries or by any trade or business, whether or not incorporated
(an "ERISA Affiliate"), that is a member of a "controlled group" within the
meaning of section 4001 of the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder ("ERISA") of
which the Company or a Subsidiary is a member or which is under "common control"
within the meaning of Section 4001 of ERISA, with the Company or a Subsidiary,
for the benefit of any employee or terminated employee of the Company, its
Subsidiaries or any ERISA Affiliate, whether formal or informal (the "Benefit
Plans").
(b) With respect to each Benefit Plan, the Company has made
available a true and complete copy thereof (including all amendments thereto),
as well as true and complete copies of the two most recent annual reports, if
required under ERISA, with respect thereto; the two most recent actuarial
reports, if required under ERISA, with respect thereto; the two most recent
reports prepared with respect thereto in accordance with Statement of Financial
Accounting Standards No. 87, Employer's Accounting for Pensions; the most recent
Summary Plan Description, together with each Summary of Material Modifications,
if required under ERISA with respect thereto; if the Benefit Plan is funded
through a trust or any third party funding vehicle, the trust or other funding
agreement (including all amendments thereto) and the latest financial statements
thereof; and the most recent determination letter received from the Internal
Revenue Service with respect to each Benefit Plan that is intended to be
qualified under section 401 of the Code.
(c) Each Benefit Plan has been operated and administered in all
material respects in accordance with its terms and applicable Law, including but
not limited to ERISA and the Code.
(d) No Benefit Plan is subject to Section 302 of the Code or Title
IV of ERISA nor has the Company or any ERISA Affiliate maintained a plan which
is subject to Section 302 of the Code or Title IV of ERISA.
(e) With respect to any Benefit Plan, neither the Company, nor any
Subsidiary of the Company, nor any trust created thereunder, nor, to the
knowledge of the Company, any trustee or administrator thereof has engaged in a
transaction in connection with which the Company or any Subsidiary of the Com-
20
<PAGE> 25
pany, any such trust, or any trustee or administrator thereof, or any party
dealing with any Benefit Plan or any such trust could be subject to either a
civil penalty assessed pursuant to section 409 or 502(i) of ERISA or a tax
imposed pursuant to section 4975 or 4976 of the Code.
(f) All Benefit Plans that are subject to the laws of any
jurisdiction outside the United States are in material compliance with such
applicable laws, including relevant tax laws, and the requirements of any trust
deed under which they are established.
(g) With respect to each Benefit Plan which is a pension plan
(within the meaning of Section 3(2) of ERISA) the Company (A) has either
obtained a favorable determination letter from the Internal Revenue Service or
intends to request such a determination letter prior to the Effective Time and
(B) has no reason to believe that (i) any such determination letter should be
revoked, or (ii) any application for a favorable determination letter with
respect to a Benefit Plan which has not yet received a determination letter will
be denied.
(h) No Benefit Plan provides health, death or medical benefits
(whether or not insured) with respect to current or former employees of the
Company or its Subsidiaries beyond their retirement or other termination of
service (other than (a) coverage mandated by applicable Law, (b) benefits the
full cost of which is borne by the current or former employee (or his
beneficiary), (c) death or disability benefits under any of the Benefit Plans,
(d) life insurance benefits for any employee of the Company who dies while in
service with the Company) (e) benefits arising in connection with the severance
plans set forth in Schedule 3.10 (a) (3) of the Company Disclosure Schedule or
the employment agreements set forth on Schedule 3.16(b) of the Company
Disclosure Schedule.
(i) Except as set forth on Schedule 3.10(i) of the Company
Disclosure Schedule, the consummation of the Transactions, alone, will not (a)
entitle any current or former employee or officer of the Company or any
Subsidiary to severance pay, unemployment compensation or any other payment, (b)
accelerate the time of payment or vesting for, or increase the amount of
compensation due to any such employee or officer, (c) result in any prohibited
transaction described in section 406 of ERISA or section 4975 of the Code for
which an exemption is not available, or (d) require the Company or any ERISA
Affiliate to fund or make any payments to any trust or other funding vehicle in
respect of any Benefit Plan.
21
<PAGE> 26
(j) Except as set forth on Schedule 3.10(j) of the Company
Disclosure Schedule, there are no pending, anticipated or, to the knowledge of
the Company, threatened claims, by any employee or beneficiary covered under any
such Benefit Plan, or otherwise involving any such Benefit Plan (other than
routine claims for benefits).
Section 3.11 Taxes.
(a) Each of the Company and each of its Subsidiaries has duly and
timely filed (or has had duly and timely filed on its behalf) all Tax Returns
required to be filed by it, and all such Tax Returns are true, complete and
correct in all material respects. Except to the extent adequately reserved for
in accordance with generally accepted accounting principles and reflected on the
Company's March 31, 1998 balance sheet, all Taxes due and payable by the Company
or any of its Subsidiaries have been timely paid in full. The consolidated
financial statements contained in the most recent Company SEC Documents reflect
an adequate accrual or reserve for all Taxes payable by the Company and its
Subsidiaries for all taxable periods and portions thereof through the date of
such financial statements.
(b) Each of the Company and each of its Subsidiaries has complied
in all material respects with all applicable Laws relating to the payment and
withholding of Taxes (including, without limitation, the withholding of Taxes
pursuant to Sections 1441 and 1442 of the Code or similar provisions under any
applicable foreign Laws) and have, within the time and in the manner prescribed
by applicable Laws, withheld from employee wages all amounts required to be so
withheld under all applicable Laws other than those amounts that are not
material, and have, within the time and manner prescribed by applicable Laws,
paid over to the proper Governmental Entity all amounts so withheld.
(c) Except as set forth on Schedule 3.11 of the Company Disclosure
Schedule, (i) no deficiencies for any Taxes have been proposed, asserted or
assessed (either in writing or orally) against the Company or any of its
Subsidiaries, (ii) no Governmental Entity is conducting or proposing to conduct
an audit with respect to Taxes or any Tax Returns of the Company or any of its
Subsidiaries, (iii) no extension or waiver of the statute of limitations with
respect to Taxes or any Tax Return has been granted by the Company or any of its
Subsidiaries, which remains in effect, other than an extension resulting from
the filing of a Tax Return after its original due date in the ordinary course of
business, (iv) neither the Company nor any of its Subsidiaries is a party to any
agreement or arrangement to allocate, share or
22
<PAGE> 27
indemnify another party for Taxes that includes any party other than the Company
or any Subsidiary thereof other than those agreements entered into in the
ordinary course of business, (v) there are no Liens for material Taxes upon the
assets of the Company or any of its Subsidiaries, except for Liens for Taxes
not yet due , (vi) no jurisdiction where either the Company or any of its
Subsidiaries does not file a Tax Return has asserted or other wise made a claim
that the Company or any of its Subsidiaries is required to file a Tax Return for
such jurisdiction, (vii) neither the Company nor any of its Subsidiaries has
agreed to make, or is required to make, any adjustment under Section 481(a) of
the Code (or comparable provision under state, local or foreign Tax laws) by
reason of a change in accounting method or otherwise, (viii) neither the Company
nor any of its Subsidiaries could have any liability for Taxes to another party
(not the Company or any of its Subsidiaries) under Section 1.1502-6 of the
Treasury regulations promulgated under the Code or any comparable state, local
or foreign Tax laws or by contract or otherwise and (ix) no power of attorney
has been granted by or with respect to the Company or any of its Subsidiaries
with respect to any matter relating to Taxes.
(d) As of March 31, 1998, the Company's net operating losses
(without regard to any limitations that may apply) were (i) not less than $95.0
million for federal income tax purposes and (ii) not less than $15.0 million for
state income tax purposes.
(e) Schedule 3.11 of the Company Disclosure Schedule sets forth
the taxable years of the Company or any of its Subsidiaries as to which the
respective statutes of limitations with respect to Taxes have not expired and,
with respect to such taxable years, those years for which examinations have been
completed, those years for which examinations are presently being conducted,
those years for which examinations have not been initiated and those years for
which required Returns have not yet been filed.
Section 3.12 No Excess Nondeductible Payments.
(a) Except as set forth on Schedule 3.12 of the Company Disclosure
Schedule, no amounts payable as a result of the Transactions under the Benefit
Plans or any other plans or arrangements will constitute a "parachute payment"
to a "disqualified individual" as those terms are defined in Section 280G of the
Code, without regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
23
<PAGE> 28
(b) Neither the Company nor any of its Subsidiaries is a party to
any contract, agreement or other arrangement which could result in the payment
of amounts that could be nondeductible by reason of Section 162(m) of the Code.
Section 3.13 Compliance with Applicable Laws.
Except as set forth on Schedule 3.13 of the Company Disclosure
Schedule:
(a) The Company and each of its Subsidiaries have complied and are
presently complying in all material respects with all applicable Laws, and
neither the Company nor any of its Subsidiaries has received notification of any
asserted present or past failure to so comply, except such non-compliance that
(i) has not and will not prevent the Company from carrying on its business
substantially as now conducted, or (ii) would not be reasonably expected to (x)
result in a Material Adverse Effect on the Company or (y) materially impair the
ability of the parties hereto to consummate the Transactions.
(b) Each of the Company and its Subsidiaries has in effect, or has
timely filed applications for, all Permits necessary for it to own, lease or
operate its properties and assets and to carry on its business substantially as
now conducted, except such Permits the failure of which to obtain would not have
a Material Adverse Effect on the Company and its Subsidiaries taken as a whole,
and there are no appeals nor any other actions pending to revoke any such
Permits, and there has occurred no material default or violation under any such
Permits.
(c) Each of the Company and its Subsidiaries is, and has been, and
each of the Company's former Subsidiaries, while a Subsidiary of the Company,
was in compliance in all respects with all applicable Environmental Laws, and
there are no circumstances or conditions that would be reasonably likely to
prevent or interfere with compliance by the Company or its Subsidiaries in the
future with Environmental Laws (or Permits issued thereunder), except where
non-compliance is not reasonably likely to result in a Material Adverse Effect
on the Company and its Subsidiaries taken as a whole.
(d) Neither the Company nor any Subsidiary of the Company has
received any written claim, demand, notice, complaint, court order,
administrative order or request for information from any Governmental Entity or
private party, alleging violation of, or asserting any noncompliance with or
liability under or
24
<PAGE> 29
potential liability under, any Environmental Laws, except for matters which are
no longer threatened or pending or for which the Company or its Subsidiaries are
not subject to further requirements pursuant to an administrative or court
order, judgment or settlement agreement.
(e) During the period of ownership or operation by the Company and
its Subsidiaries of any of their respective current or previously owned or
leased properties, there have been no Releases of Hazardous Material in, on,
under or affecting such properties and none of the Company or its Subsidiaries
have disposed of any Hazardous Material or any other substance either on said
owned or leased properties or at other properties, in a manner that has led, or
could reasonably be anticipated to lead, to a Release. Prior to the period of
ownership or operation by the Company and its Subsidiaries of any of their
respective current or previously owned or leased properties, to the knowledge of
the Company, no Hazardous Material was disposed of at such current or previously
owned or leased properties, and there were no Releases of Hazardous Material in,
on, under or affecting any such property.
(f) Except for leases entered into in the ordinary course of
business, as to which no notice of a claim for indemnity or reimbursement has
been received by the Company, neither the Company nor any of its Subsidiaries
has entered into any agreement that may require it to pay to, reimburse,
guarantee, pledge, defend, indemnify, or hold harmless any Person for or against
any Environmental Liabilities and Costs.
(g) Neither the Company nor any of its Subsidiaries has treated,
stored or disposed of "hazardous waste", as that term is defined in the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., analogous state
Laws, or the regulations promulgated thereunder, such that the Company or any of
its Subsidiaries would be required to obtain a permit under said Laws for such
treatment, storage or disposal.
(h) The Company has provided to Parent true and correct copies of
all environmental studies and reports in its possession or in the possession of
its representative, agents or consultants, prepared within the last five years,
relating to (i) the Company's and its Subsidiaries' compliance with
Environmental Laws; (ii) the environmental condition of the Company's and its
Subsidiaries' currently owned or leased properties, including, but not limited
to, the extent of any on-site contamination at any of such properties, results
of investigations at such properties, remedial action plans for such properties,
and asbestos surveys; and (iii) the environmental
25
<PAGE> 30
condition of any properties formerly owned or operated by the Company or any of
its Subsidiaries, or of any other location at which the Company or any of its
Subsidiaries is subject to an environmental claim, including, but not limited
to, the extent of any on-site contamination at any such properties, results of
investigations at such properties and remedial action plans at such properties.
Section 3.14 Intellectual Property.
(a) (i) Except as set forth on Schedule 3.14(a)(i) of the Company
Disclosure Schedule, the Company is the sole and exclusive owner of, or has the
valid and transferable right to use, the Trademarks, free and clear of all
Liens. Schedule 3.14(a)(i) of the Company Disclosure Schedule sets forth a
complete and accurate list of all U.S., state and foreign (i) Trademark
registrations and applications, and (ii) material unregistered Trademarks, each
as owned by the Company or its Subsidiaries. The Company or one of its
Subsidiaries currently is listed in the records of the appropriate United
States, state or foreign agency as the sole owner of record for each application
and registration listed on Schedule 3.14(a)(i) of the Company Disclosure
Schedule.
(ii) Except as set forth on Schedule 3.14(a)(ii) of the
Company Disclosure Schedule, the Company is the sole and exclusive owner of, or
has the valid and transferable right to use the Other Intellectual Property,
free and clear of all Liens. Schedule 3.14(a)(ii) of the Company Disclosure
Schedule sets forth a complete and accurate list of all U.S. and foreign:
(1) patents and patent applications,
(2) copyright registrations and applications, and
(3) material unregistered copyrights.
The Company currently is listed in the records of the appropriate
United States, state or foreign agency as the sole owner of record for each
application, patent and registration listed on Schedule 3.14(a)(ii) of the
Company Disclosure Schedule that is currently owned by the Company or one of its
Subsidiaries.
(b) The registrations listed on Schedules 3.14(a)(i) and
3.14(a)(ii) of the Company Disclosure Schedule are valid and subsisting, in full
force and effect in all material respects, and have not been cancelled, expired
or abandoned.
26
<PAGE> 31
There is no pending, existing or, to the Company's knowledge, threatened,
opposition, interference, cancellation proceeding or other legal or governmental
proceeding before any court or registration authority in any jurisdiction
against the applications, patents and registrations listed on Schedules
3.14(a)(i) and 3.14(a)(ii) of the Company Disclosure Schedule. To the Company's
knowledge, there is no pending, existing or threatened, opposition,
interference, cancellation proceeding or other legal or govern mental proceeding
before any court or registration authority in any jurisdiction against any of
the Trademarks or any of the Other Intellectual Property owned by the Company
or its Subsidiaries.
(c) Schedule 3.14(c)(i) of the Company Disclosure Schedule sets
forth a complete and accurate list of all agreements granting to third parties
any material right to use or practice any material rights under any of the
Trademarks or any of the Other Intellectual Property owned by the Company;
Schedule 3.14(c)(ii) of the Company Disclosure Schedule sets forth a complete
and accurate list of all material agreements permitting the Company or its
Subsidiaries to use any Trademarks or Other Intellectual Property (such
agreements, together with the agreements referenced on Schedule 3.14(c)(i) of
the Company Disclosure Schedule are collectively referred to herein as the
"Licenses"). The Licenses are valid and binding agreements of the Company or one
or more of its Subsidiaries, as applicable, fully transferable to Parent and
Purchaser, enforceable in accordance with their terms, and the Company and the
Subsidiaries, and to the Company's knowledge, the other parties thereto, as
applicable, are not in material breach or default thereunder.
(d) Each Product is either:
(i) owned by the Company, or one or more of its Subsidiaries, or
otherwise available to the Company or its Subsidiaries
without the license, lease or consent of any third party, or
(ii) used under rights granted to the Company or one or more of
its Subsidiaries pursuant to a written agreement, license or
lease from a third party, which written agreement, license
or lease is set forth on Schedule 3.14(c)(ii) of the Company
Disclosure Schedule.
The Company and each of its Subsidiaries uses the Computer
Programs in connection with the operation of its business as conducted on the
date
27
<PAGE> 32
hereof and, to the Company's knowledge, such use does not violate the rights of
any third party. All Computer Programs which are owned by the Company or its
Subsidiaries were either developed by:
(i) employees of the Company or its Subsidiaries within the
scope of their employment,
(ii) third parties as "works-made-for-hire", as that term is
defined under Section 101 of the United States copy right
laws, pursuant to written agreements, or
(iii) independent contractors who have assigned their rights to
the Company or one or more of its Subsidiaries pursuant to
written agreements, or were assigned to the Company or its
Subsidiaries.
(e) The Company has taken reasonable measures to protect the
confidentiality of its material trade secrets, including requiring employees
having access thereto to execute written non-disclosure agreements. No trade
secret or confidential know-how material to the business of the Company or any
of its Subsidiaries as currently operated has been disclosed or authorized to
be disclosed to any third party, other than pursuant to a non-disclosure
agreement that protects the Company's or such Subsidiary's proprietary interests
in and to such trade secrets and confidential know-how.
(f) To the Company's knowledge, the conduct of the business of
the Company and each of its Subsidiaries does not infringe upon any intellectual
property right owned or controlled by any third party. There are no claims or
suits pending or, to the Company's knowledge, threatened, and neither the
Company nor any of its Subsidiaries has received any written notice of a third
party claim or suit:
(i) alleging that the Company's or such Subsidiary's activities
or the conduct of its business infringes upon or constitutes
the unauthorized use of the proprietary rights of any third
party, or
(ii) challenging the ownership, use, validity or enforceability
of the Trademarks or the Other Intellec-
28
<PAGE> 33
tual Property owned or used by the Company or its
Subsidiaries.
(g) To the Company's knowledge, except as set forth on Schedule
3.14(g) of the Company Disclosure Schedule, no third party is infringing upon
any of the Trademarks or the Other Intellectual Property owned by the Company or
any of its Subsidiaries and, except as set forth on Schedule 3.14(g) of the
Company Disclosure Schedule, no such claims have been made against a third party
by the Company or any of its Subsidiaries.
(h) Except as set forth on Schedule 3.14(h) of the Company
Disclosure Schedule, there are no settlements, consents, judgments or orders
which restrict the Company's or any of its Subsidiaries' rights to use any of
the Trademarks or the Other Intellectual Property, and no concurrent use or
other agreements (aside from license and other like agreements) which restrict
the Company's or any of its Subsidiaries' rights to use any of the Trademarks
or the Other Intellectual Property owned by the Company or any of its
Subsidiaries.
(i) The consummation of the Transactions will not result in the
loss or impairment of the Company's or any of its Subsidiaries' rights to own or
use any of the Trademarks or the Other Intellectual Property owned by or
licensed to the Company or its Subsidiaries nor will it require the consent of
any Governmental Entity or third party in respect of any such Trademarks or the
Other Intellectual Property.
(j) No present or former employee, officer or director of the
Company or any of its Subsidiaries has any right, title or interest, directly or
indirectly, in whole or in part, in any of the Trademarks or Other Intellectual
Property owned by or licensed to the Company or its Subsidiaries.
Section 3.15 Properties. Each of the Company and each of its
Subsidiaries has sufficiently good and valid title to, or an adequate leasehold
interest in, its properties and assets (including the Real Property) in order to
allow it to conduct, and continue to conduct, its business as currently
conducted, except for such properties and assets the loss or forfeiture of which
is not reasonably likely to have a Material Adverse Effect on the Company and
its Subsidiaries, taken as a
29
<PAGE> 34
whole. Except as set forth on Schedule 3.15 of the Company Disclosure Schedule,
and except for such properties and assets the loss or forfeiture of which is not
reasonably likely to have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole, such material tangible properties and assets
(including the Real Property) are sufficiently free of Liens to allow the
Company and each of its Subsidiaries to conduct, and continue to conduct, its
business as currently conducted in all material respects and the consummation of
the Transactions will not alter or impair such ability in any material respect.
Except as set forth on Schedule 3.15 of the Company Disclosure Schedule, the
Company and/or its Subsidiaries have good, valid, marketable and fee simple
title to all the Fee Property, free and clear of all Liens other than Liens the
enforcement of which is not reasonably likely to have a material impact on the
continued use or value of such properties.
Section 3.16 Contracts. (a) Except as set forth in the Company's SEC
Documents or Schedule 3.16 of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is a party to or bound by (i) any "material
contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the
SEC), (ii) any non-competition agreement or any other agreement or obligation
which purports to limit in any material respect the manner in which, or the
localities in which, all or any material portion of the business of the Company
and its Subsidiaries, taken as a whole, may be conducted, (iii) any transaction,
agreement, arrangement or understanding with any Affiliate that would be
required to be disclosed under Item 404 of regulation S-K under the Securities
Act, (iv) any voting or other agreement governing how any Shares shall be voted,
(v) any material agreement with any stockholders of the Company, (vi) any
acquisition, merger, asset purchase or sale agreement or (vii) any contract or
other agreement which would prohibit or materially delay the consummation of the
Merger or any of the Transactions (all contracts of the type described in
clauses (i) - (vii) being referred to herein as "Company Material Contracts").
Each Company Material Contract is valid and binding on the Company (or, to the
extent a Subsidiary of the Company is a party, such Subsidiary) and is in full
force and effect, and the Company and each Subsidiary of the Company have, in
all material respects, performed all obligations required to be performed by
them to date under each Company Material Contract, except where such
noncompliance, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. Neither the Company nor any Subsidiary of the
Company knows of, or has received notice of, any violation or default under
(nor, to the knowledge of the Company, does there exist any condition which with
the passage of time or the giving of notice or both would result in such a
violation or default under) any Company Material Contract, except where such
occurrence or default would not have a Material Adverse Effect on the Company
and its Subsidiaries taken as a whole.
30
<PAGE> 35
(b) Except as disclosed in the Company's SEC Documents or on
Schedule 3.16 of the Company Disclosure Schedule or as provided for in this
Agreement, neither the Company nor any of its Subsidiaries is a party to any
oral or written (i) employment or consulting agreements not terminable on thirty
(30) days' or less notice, (ii) union or collective bargaining agreement, (iii)
agreement with any executive officer or other key employee of the Company or any
of its Subsidiaries the benefits of which are contingent or vest, or the terms
of which are materially altered, upon the occurrence of a transaction involving
the Company or any of its Subsidiaries of the nature contemplated by this
Agreement, (iv) agreement with respect to any executive officer or other key
employee of the Company or any of its Subsidiaries providing any term of
employment or compensation guarantee or (v) agreement or plan, including any
stock option, stock appreciation right, restricted stock or stock purchase plan,
any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the Transactions or
the value of any of the benefits of which will be calculated on the basis of any
of the Transactions.
Section 3.17 Labor Relations. Except to the extent set forth in the
Company's SEC Documents or Schedule 3.17 of the Company Disclosure Schedule, (i)
the Company and each of its Subsidiaries is, and has at all times been, in
material compliance with all applicable Laws respecting employment and
employment practices, terms and conditions of employment, wages, hours of work
and occupational safety and health, and is not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other applicable
Law, except where the failure to comply would not be reasonably likely to cause
a Material Adverse Effect on the Company; (ii) there is no labor strike,
slowdown, stoppage or lockout actually pending, or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries;
and (iii) neither the Company nor any of its Subsidiaries is a party to or bound
by any collective bargaining or similar agreement with any labor organization.
Section 3.18 Products Liability; Recalls. (a) Except as set forth in
Schedule 3.18 of the Company Disclosure Schedule, (i) there is no claim, action,
suit or proceeding pending before any Governmental Entity in which a Product is
alleged to have a Defect; (ii) to the knowledge of the Company and its
Subsidiaries, no such claim, action, suit or proceeding is threatened; (iii) no
valid basis exists for any such claim, action, suit or inquiry, proceeding; and
(iv) no claim, action, suit or proceeding referred to in clause (i) or (ii) of
this Section 3.18 would, if adversely determined, have, individually or in the
aggregate, a Material Adverse Effect on the Company.
31
<PAGE> 36
(b) Except as disclosed in Schedule 3.18 of the Company Disclosure
Schedule, there is no pending, or to the knowledge of the Company, threatened
recall or investigation of any Product, which recall or investigation would
reasonably be expected to have a material Adverse Effect on the Company.
Section 3.19 Applicability of State Takeover Statutes. The Section 203
Approval is valid and in full force and effect. Section 203 of the DGCL will not
apply to the Company Option Agreement, the Offer, the acquisition of Shares
pursuant to the Offer or the Merger. No other state takeover statute or similar
statute or regulation applies or purports to apply to the Offer, the Merger or
the other Transactions.
Section 3.20 Voting Requirements. The affirmative vote of the holders
of a majority of all the Shares entitled to vote approving this Agreement is the
only vote of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the Transactions.
Section 3.21 Brokers. No broker, investment banker, financial advisor
or other Person, other than Piper Jaffray, the fees and expenses of which will
be paid by the Company, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the Transactions
based upon arrangements made by or on behalf of the Company. The Company has
provided Parent true and correct copies of all agreements between the Company
and Piper Jaffray, including, without limitations, any fee arrangements.
Section 3.22 Opinion of Financial Advisor. The Company has received the
opinion of Piper Jaffray, to the effect that, as of the date of this Agreement,
the consideration to be received in the Offer and the Merger by the holders of
Shares is fair to such holders from a financial point of view, as of the date of
such opinion, and a complete and correct signed copy of such opinion has been,
or promptly upon receipt thereof will be, delivered to Parent. The Company has
been authorized by Piper Jaffray to permit the inclusion of such opinion in its
entirety in the Offer Documents and the Schedule 14D-9 and the Proxy Statement,
so long as such inclusion is in form and substance reasonably satisfactory to
Piper Jaffray and its counsel.
32
<PAGE> 37
Section 3.23 Year 2000.
Except as set forth on Schedule 3.23 of the Company Disclosure
Schedule:
(a) all of the Computer Programs, computer firmware, computer
hardware (whether general or special purpose) and other similar or related items
of automated, computerized and/or software system(s) that are used or relied on
by the Company or by any of its Subsidiaries in the conduct of their respective
businesses will not malfunction, will not cease to function, will not generate
incorrect data, and will not provide incorrect results when processing,
providing, and/or receiving (i) date-related data into and between the twentieth
and twenty-first centuries and (ii) date-related data in connection with any
valid date in the twentieth and twenty- first centuries; and
(b) all of the products and services sold, licensed, rendered or
otherwise provided by the Company or by any of its Subsidiaries in the conduct
of their respective businesses will not malfunction, will not cease to function,
will not generate incorrect data and will not produce incorrect results when
processing, providing and/or receiving (i) date-related data into and between
the twentieth and twenty-first centuries and (ii) date-related data in
connection with any valid date in the twentieth and twenty-first centuries; and
neither the Company nor any of its Subsidiaries is or shall be subject to
claims or liabilities arising from their failure to do so; and
(c) neither the Company nor any of its Subsidiaries has made other
representations or warranties regarding the ability of any product or service
sold, licensed, rendered or otherwise provided by the Company or by any of its
Subsidiaries in the conduct of their respective businesses to operate without
malfunction, to operate without ceasing to function, to generate correct data
and to produce correct results when processing, providing and/or receiving (i)
date-related data into and between the twentieth and twenty-first centuries and
(ii) date-related data in connection with any valid date in the twentieth and
twenty-first centuries.
Section 3.24 Company Rights Agreement. The Company and its Board of
Directors have taken all action which may be necessary under the Company Rights
Agreement so that the Offer is deemed to be a "Permitted Offer" (as defined in
the Company Rights Agreement) and the execution and delivery of this Agreement
33
<PAGE> 38
and the Company Option Agreement (and any amendments thereto by the parties
hereto), and the consummation of the Merger and the Transactions, will not cause
(i) Parent or Purchaser to constitute an "Acquiring Person" (as defined in the
Company Rights Agreement), (ii) a "Distribution Date," "Section 13 Event,"
"Triggering Event," or "Share Acquisition Date" (each as defined in the Company
Rights Agreement) to occur or (iii) the Rights (as defined in the Company Rights
Agreement) to become exercisable pursuant to Section 11(a)(ii) thereof or
otherwise. The Company shall cause the Company Rights Agreement to be amended
such that the "Final Expiration Date" (as such term is defined in the Company
Rights Agreement) and the expiration of the Rights shall occur upon the
acceptance for payment of Shares pursuant to the Offer.
Section 3.25 Absence of Questionable Payments. Neither the Company nor
any of its Subsidiaries nor any director, officer, agent, employee or other
person acting on behalf of the Company or any of its Subsidiaries, has used any
corporate or other funds for unlawful contributions, payments, gifts, or
entertainment, or made any unlawful expenditures relating to political activity
to government officials or others or established or maintained any unlawful or
unrecorded funds in violation of Section 30A of the Exchange Act. Neither the
Company nor any of its Subsidiaries nor any current director, officer, agent,
employee or other person acting on behalf of the Company or any of its
Subsidiaries, has accepted or received any unlawful contributions, payments,
gifts, or expenditures. The Company and each of its Subsidiaries which is
required to file reports pursuant to Section 12 or 15(d) of the Exchange Act is
in compliance with the provisions of Section 13(b) of the Exchange Act.
Section 3.26 Full Disclosure. The Company has not failed to disclose to
Parent any fact material to the business, results of operations, assets,
liabilities or condition (financial or otherwise) of the Company necessary to
make the information which the Company has disclosed to Parent or Purchaser not
misleading. No representation or warranty by the Company in this Agreement and
no statement contained in any exhibit, disclosure schedule, or certificate
contemplated by this Agreement contains or will contain any untrue statement of
material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was made, in order to make the
statements herein or therein not misleading.
34
<PAGE> 39
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the Company as follows:
Section 4.1 Organization, Standing and Corporate Power. Each of Parent
and Purchaser is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction in which each is incorporated and
has the requisite corporate power and authority to carry on its business as now
being con ducted. Each of Parent and Purchaser is duly qualified or licensed to
do business and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed (individually or in the aggregate) would
not have a Material Adverse Effect on Parent.
Section 4.2 Authority; Noncontravention. Parent and Purchaser have the
requisite corporate power and authority to enter into this Agreement and to
consummate the Transactions. The execution and delivery of this Agreement by
Parent and Purchaser and the consummation by Parent and Purchaser of the
Transactions have been duly authorized by all necessary corporate action on the
part of Parent and Purchaser, as applicable. This Agreement has been duly
executed and delivered by Parent and Purchaser and, assuming this Agreement
constitutes the valid and binding obligation of the Company, constitutes a valid
and binding obligation of each such party, enforceable against each such party
in accordance with its terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar Laws now or
hereafter in effect relating to creditors' rights generally and (ii) the remedy
of specific performance and injunctive relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The execution and delivery of this Agreement do not, and the
consummation of the Transactions will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any lien upon any of the properties or assets of Parent under, (i) the
certificate of incorporation or by-laws of Parent or Purchaser, (ii) any Law
applicable to Parent or Purchaser or their respective properties or assets,
other than, in the case of clause (ii), any such conflicts, viola-
35
<PAGE> 40
tions, defaults, rights or Liens that individually or in the aggregate would not
(x) impair in any material respect the ability of Parent and Purchaser to
perform their respective obligations under this Agreement or (y) prevent or
impede the consummation of any of the Transactions. No consent, approval, order
or authorization of, or registration, declaration or filing with, any
Governmental Entity or any other Person is required by Parent or Purchaser in
connection with the execution and delivery of this Agreement or the consummation
by Parent or Purchaser, as the case may be, of any of the Transactions, except
for (i) the filings, permits, authorizations, consents and approvals set forth
in Schedule 4.2 of the disclosure schedule delivered by Parent to the Company
at or prior to the execution of this Agreement (the "Parent Disclosure
Schedule"), or as may be required under, and other applicable requirements of,
the Securities Act, the Exchange Act, the HSR Act, any applicable state
securities or "blue sky" Laws and the DGCL, and (ii) such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, prevent the consummation of or materially impair the ability of
Parent or Purchaser to consummate the Transactions.
Section 4.3 Proxy Statement; Offer Documents. The Offer Documents and
any other documents to be filed by Parent with the SEC or any other Government
Entity in connection with the Merger and the other Transactions will (in the
case of the Offer Documents and any such other documents filed with the SEC
under the Securities Act or the Exchange Act) comply as to form in all material
respects with the requirements of the Exchange Act and the Securities Act,
respectively, and will not, on the date of filing with the SEC or, in the case
of the Proxy Statement, on the date the Proxy Statement is first mailed to
stockholders of the Company, contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they are made, not misleading or shall, at the time of the Special
Meeting (as defined in Section 5.3) or at the Effective Time, omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Special Meeting which shall
have become false or misleading in any material respect. Notwithstanding the
foregoing, neither Parent nor Purchaser makes any representation or warranty
with respect to the statements made in any of the foregoing documents based on
and in conformity with information supplied by or on behalf of the Company
specifically for inclusion therein.
36
<PAGE> 41
Section 4.4 Operations of Purchaser. Purchaser was formed solely for
the purpose of engaging in the Transactions and has not engaged in any business
activities or conducted any operations other than in connection with the
Transactions.
Section 4.5 Brokers. No broker, investment banker, financial advisor or
other Person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of Parent or Purchaser.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. After the date hereof
and prior to the time the designees of Parent have been elected or appointed to,
and shall constitute a majority of, the Board of Directors of the Company
pursuant to Section 1.4 or the date, if any, on which this Agreement is earlier
terminated pursuant to Section 7.1, and except (i) as expressly contemplated by
this Agreement, (ii) as set forth on Schedule 5.1 of the Company Disclosure
Schedule or (iii) as agreed in writing by Parent:
(a) the Company shall and shall cause its Subsidiaries to carry on
their respective businesses in the ordinary course;
(b) the Company shall and shall cause its Subsidiaries to use all
commercially reasonable efforts consistent with good business judgment to
preserve intact their current business organizations, keep available the
services of their current officers and key employees and preserve their
relationships consistent with past practice with desirable customers, suppliers,
licensors, licensees, distributors and others having business dealings with them
to the end that their goodwill and ongoing businesses shall be unimpaired in all
material respects at the Effective Time;
(c) neither the Company nor any of its Subsidiaries shall,
directly or indirectly, amend its certificate of incorporation or by-laws or
similar organizational documents;
(d) Officers of the Company and its Subsidiaries shall confer at
such times as Parent may reasonably request with one or more Representatives of
37
<PAGE> 42
Parent to report material operational matters and the general status of ongoing
operations;
(e) neither the Company nor any of its Subsidiaries shall: (i)(A)
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to the Company's capital stock or that of its
Subsidiaries, except that a wholly-owned Subsidiary of the Company may declare
and pay a dividend or make advances to its parent or the Company or (B) redeem,
purchase or otherwise acquire directly or indirectly any of the Company's
capital stock or that of its Subsidiaries; (ii) issue, sell, pledge, dispose of
or encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire, any shares of capital stock of any class of the Company or its
Subsidiaries, other than Shares issued upon the exercise of Options outstanding
on the date hereof in accordance with the Option Plans as in effect on the date
hereof; or (iii) split, combine or reclassify the outstanding capital stock of
the Company or of any of the Subsidiaries of the Company;
(f) except as permitted by this Agreement, neither the Company nor
any of its Subsidiaries shall acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof
(including entities which are Subsidiaries of the Company or any of the
Company's Subsidiaries) or (B) any assets, including real estate, except
purchases in the ordinary course of business consistent with past practice;
(g) neither the Company nor any of its Subsidiaries shall make any
new capital expenditure or expenditures which individually exceed $50,000 and in
the aggregate exceed $150,000;
(h) neither the Company nor any of its Subsidiaries shall, except
in the ordinary course of business and except as otherwise permitted by this
Agreement, amend or terminate any Company Material Contract where such
amendment or termination would have a Material Adverse Affect on the Company, or
waive, release or assign any material rights or claims;
(i) neither the Company nor any of its Subsidiaries shall
transfer, lease, license, sell, mortgage, pledge, dispose of or encumber any
property or assets other than in the ordinary course of business and consistent
with past practice;
38
<PAGE> 43
(j) neither the Company nor any of its Subsidiaries shall: (i)
enter into any employment or severance agreement with or grant any severance or
termination pay to any officer, director or key employee of the Company or any
its Subsidiaries; or (ii) hire or agree to hire any new or additional key
employees or officers;
(k) neither the Company nor any of its Subsidiaries shall, except
as required to comply with applicable Law or expressly provided in this
Agreement, (A) adopt, enter into, terminate, amend or increase the amount or
accelerate the payment or vesting of any benefit or award or amount payable
under any Benefit Plan or other arrangement for the current or future benefit or
welfare of any director, officer or current or former employee, except to the
extent necessary to coordinate any such Benefit Plans with the terms of this
Agreement, (B) increase in any manner the compensation or fringe benefits of, or
pay any bonus to, any director, officer or employee, (C) pay any benefit not
provided for under any Benefit Plan, (D) grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or Benefit Plan
(including the grant of stock options, stock appreciation rights, stock based or
stock related awards, performance units or restricted stock, or the removal of
existing restrictions in any Benefit Plans or agreements or awards made
thereunder) or (E) take any action to fund or in any other way secure the
payment of compensation or benefits under any employee plan, agreement, contract
or arrangement or Benefit Plan;
(l) neither the Company nor any of its Subsidiaries shall: (i)
incur or assume any long-term debt, or except in the ordinary course of
business, incur or assume any short-term indebtedness in amounts not consistent
with past practice; (ii) incur or modify any material indebtedness or other
liability except as set forth on Schedule 5.1 of the Company Disclosure
Schedule; (iii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other Person, except in the ordinary course of business and consistent with
past practice; (iv) make any loans, advances or capital contributions to, or
investments in, any other Person (other than to wholly owned Subsidiaries of the
Company or customary loans or advances to employees in the ordinary course of
business and consistent with past practice); (v) settle any claims other than in
the ordinary course of business, in accordance with past practice and without
admission of liability; or (vi) enter into any material commitment or
transaction;
39
<PAGE> 44
(m) neither the Company nor any of its Subsidiaries shall change
any of the accounting methods used by it unless required by GAAP;
(n) neither the Company nor any of its Subsidiaries shall make any
Tax election, amend any Tax Return, make a claim for any Tax Refund or settle or
compromise any Tax liability (whether with respect to amount or timing);
(o) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or obligations, in the
ordinary course of business and consistent with past practice, of claims,
liabilities or obligations reflected or reserved against in, or contemplated by,
the consolidated financial statements (or the notes thereto) of the Company and
its consolidated Subsidiaries; or, except in the ordinary course of business
consistent with past practice, waive the benefits of, or agree to modify in any
manner, any confidentiality, standstill or similar agreement to which the
Company or any of its Subsidiaries is a party;
(p) neither the Company nor any of its Subsidiaries shall (by
action or inaction) amend, renew, terminate or cause to be extended any lease,
agreement or arrangement relating to any of the Leased Properties or enter into
any lease, agreement or arrangement with respect to any real property.
(q) neither the Company nor any of its Subsidiaries will enter
into an agreement, contract, commitment or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention to do
any of the foregoing; and
(r) neither the Company nor any of its Subsidiaries shall take any
action that the Company knows at the time of taking such action would result in
any of the conditions to the Offer set forth in Annex A not being satisfied
(subject to the Company's right to take action specifically permitted by Section
5.5).
Section 5.2 Access; Confidentiality. The Company shall (and shall cause
each of its Subsidiaries to) afford to the Representatives of Parent reasonable
access on reasonable prior notice during normal business hours, throughout the
period prior to the earlier of the Effective Time or the termination of this
Agreement, to all of its properties, offices, executive employees, contracts,
commitments, books and
40
<PAGE> 45
records (including but not limited to Tax Returns) and any report, schedule or
other document filed or received by it pursuant to the requirements of federal
or state securities laws and shall (and shall cause each of its Subsidiaries to)
furnish promptly to Parent such additional financial and operating data and
other information as to its and its Subsidiaries' respective businesses and
properties as Parent may from time to time reasonably request. Parent and
Purchaser will make all reasonable efforts to minimize any disruption to the
businesses of the Company and its Subsidiaries which may result from the
requests for data and information hereunder and pursuant to Section 5.1(d)
hereof. Except as otherwise agreed to by the Company, unless and until Parent
and Purchaser shall have purchased Shares pursuant to the Offer, Parent will be
bound by the terms of a confidentiality agreement (the "Confidentiality
Agreement"), dated as of June 16, 1998 and amended as of July 27, 1998, by and
between Parent and the Company.
Section 5.3 Special Meeting, Proxy Statement.
(a) If required by applicable Law in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable Law, its Certificate of Incorporation and By-laws:
(i) as promptly as practicable following the acceptance for
payment and purchase of Shares by Purchaser pursuant to the Offer duly
call, give notice of, convene and hold a special meeting of its
stockholders (the "Special Meeting") for the purposes of considering and
taking action upon the approval of the Merger and the approval and adoption
of this Agreement;
(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and (x)
obtain and furnish the information required to be included by the SEC in
the Proxy Statement (as hereinafter defined) and, after consultation with
Parent, respond promptly to any comments made by the SEC with respect to
the preliminary proxy or information statement and cause a definitive proxy
or information statement, including any amendment or supplement thereto
(the "Proxy Statement") to be mailed to its stockholders at the earliest
practicable date; provided that no amendment or supplement to the Proxy
Statement will be made by the Company without consultation with Parent and
its counsel and (y) use its reasonable best efforts to obtain the necessary
approvals of the Merger and this Agreement by its stockholders; and
41
<PAGE> 46
(iii) unless this Agreement has been terminated in accordance
with Article VII, subject to its rights pursuant to Section 5.5, include in
the Proxy Statement the recommendation of its Board of Directors that
stockholders of the Company vote in favor of the approval of the Merger and
the approval and adoption of this Agreement.
(b) Parent shall vote, or cause to be voted, all of the Shares
then owned by it, Purchaser or any of its other Subsidiaries in favor of
approval of the Merger and the approval and adoption of this Agreement.
(c) Notwithstanding anything else herein or in this Section 5.3,
in the event that Parent, Purchaser and any other Subsidiaries of Parent shall
acquire in the aggregate a number of the outstanding shares of each class of
capital stock of the Company, pursuant to the Offer or otherwise, sufficient to
enable Purchaser or the Company to cause the Merger to become effective under
applicable Law without a meeting of stockholders of the Company, the parties
hereto shall, at the request of Parent and subject to Article VI, take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the consummation of such acquisition, without a meeting of
stockholders of the Company, in accordance with Section 253 of the DGCL.
Section 5.4 Reasonable Efforts; Notification. (a) Upon the terms and
subject to the conditions set forth in this Agreement, including without
limitation Section 5.5 hereto, each of the parties agrees to use all reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Offer and the Merger, and the other
Transactions, including (i) the preparation and filing with the SEC of the Offer
Documents, the Schedule 14D-9, the preliminary Proxy Statement and the Proxy
Statement and all necessary amendments or supplements thereto; (ii) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from any Governmental Entity and the making of all necessary
registrations and filings (including filings with any Governmental Entity, if
any) and the taking of all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (iii) the obtaining of all necessary consents, approvals
or waivers from third parties, (iv) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of any of the Transactions, including seeking to have any stay
or temporary restraining order entered by any court
42
<PAGE> 47
or other Governmental Entity vacated or reversed, and (v) the execution and
delivery of any additional instruments necessary to consummate the Transactions
and to fully carry out the purposes of this Agreement.
(b) Each of the Company, Parent and Purchaser shall give prompt
notice to the other of (i) any of their representations or warranties contained
in this Agreement becoming untrue or inaccurate in any material respect
(including in the case of representations or warranties receiving knowledge of
any fact, event or circumstance which is reasonably likely to cause any
representation qualified as to the knowledge to be or become untrue or
inaccurate in any material respect) or (ii) the failure by them to comply with
or satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by them under this Agreement; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
Section 5.5 No Solicitation. (a) The Company shall not, nor shall it
permit any of its Subsidiaries to, nor shall it authorize (and shall use its
best efforts not to permit) any officer, director or employee of, or any
investment banker, attorney or other advisor or representative of, the Company
or any of its Subsidiaries to, (i) solicit or initiate, or encourage, directly
or indirectly, any inquiries or the submission of, any Takeover Proposal, (ii)
participate in any discussions or negotiations regarding, or furnish to any
Person any information or data with respect to or access to the proper ties of,
or take any other action to knowingly facilitate the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal or
(iii) enter into any agreement with respect to any Takeover Proposal or approve
or resolve to approve any Takeover Proposal; provided, that nothing contained in
this Section 5.5 or any other provision hereof shall prohibit the Company or the
Company's Board of Directors from (A) taking and disclosing to the Company's
stockholders a position with respect to a tender or exchange offer by a third
party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act, or
(B) making such disclosure to the Company's stockholders as, in the good faith
judgment of the Company's Board of Directors, after receiving written advice
from outside counsel, is required under applicable Law, provided that the
Company may not, except as permitted by Section 5.5(b), withdraw or modify, or
propose to withdraw or modify, its position with respect to the Offer or the
Merger or approve or recommend, or propose to approve or recommend any Takeover
Proposal, or enter into any agreement with respect to any Takeover Proposal.
Upon execution of this Agreement, the Company will immediately cease any
existing activities, discussions or negotia-
43
<PAGE> 48
tions with any parties conducted heretofore with respect to any of the
foregoing. Notwithstanding the foregoing, prior to the time of acceptance of
Shares for payment pursuant to the Offer, the Company may furnish information
concerning its business, properties or assets to any Person or group and may
negotiate and participate in discussions and negotiations with such Person or
group concerning a Takeover Proposal if:
(x) such Person or group has submitted a Superior Proposal; and
(y) in the opinion of the Company's Board of Directors such action
is required to discharge the Board's fiduciary duties to the Company's
stockholders under applicable Law, determined only after receipt of a
written opinion from independent legal counsel to the Company that the
failure to provide such information or access or to engage in such
discussions or negotiations would cause the Company's Board of Directors
to violate its fiduciary duties to the Company's stockholders under
applicable Law.
The Company will promptly (but in no case later than 24 hours) notify Parent of
the existence of any proposal, discussion, negotiation or inquiry received by
the Company regarding any Takeover Proposal, and the Company will promptly
communicate to Parent the terms of any proposal, discussion, negotiation or
inquiry which it may receive regarding any Takeover Proposal (and will promptly
provide to Parent copies of any written materials received by the Company in
connection with such proposal, discussion, negotiation or inquiry) and the
identity of the party making such proposal or inquiry or engaging in such
discussion or negotiation. The Company will promptly provide to Parent any
non-public information concerning the Company provided to any other Person in
connection with any Takeover Proposal which was not previously provided to
Parent. The Company will keep Parent informed of the status and details of any
such Takeover Proposal and of any amendments or proposed amendments to any
Takeover Proposal and will promptly (but in no case later than 24 hours) notify
Parent of any determination by the Company's Board of Directors that a Superior
Proposal has been made.
(b) Except as set forth in this Section 5.5(b), neither the Board
of Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent or
Purchaser, the approval or recommendation by the Board of Directors of the
Company or any such committee of the Offer, this Agreement or the Merger, (ii)
approve or recommend, or
44
<PAGE> 49
propose to approve or recommend, any Takeover Proposal or (iii) enter into any
agreement with respect to any Takeover Proposal. Notwithstanding the foregoing,
subject to compliance with the provisions of this Section 5.5, prior to the time
of acceptance for payment of Shares pursuant to the Offer, the Company's Board
of Directors may withdraw or modify its approval or recommendation of the Offer,
this Agreement or the Merger, approve or recommend a Superior Proposal, or enter
into an agreement with respect to a Superior Proposal, in each case at any time
after the third business day following Parent's receipt of written notice
(including by facsimile) from the Company advising Parent that the Board of
Directors of the Company has received a Superior Proposal which it intends to
accept, specifying the material terms and conditions of such Superior Proposal
and identifying the Person making such Superior Proposal, but only if the
Company shall have caused its financial and legal advisors to negotiate with
Parent promptly following delivery of such notice and through such three
business day period to make such adjustments to the terms and conditions of this
Agreement as would enable the Company to proceed with the Transactions on such
adjusted terms.
Section 5.6 Publicity. Except as required by Law or as permitted by
Section 5.5, so long as this Agreement is in effect, neither the Company, Parent
nor any of their respective affiliates shall issue or cause the publication of
any press release or other announcement with respect to the Merger, this
Agreement or the other Transactions without the prior consultation of the other
party.
Section 5.7 Transfer Taxes. All liability for transfer or other similar
Taxes arising out of or related to the Offer and the Merger or the consummation
of any other Transaction, and due to the property owned by the Company or any of
its Subsidiaries or affiliates ("Transfer Taxes") shall be borne by the Company,
and the Company shall file or cause to be filed all Tax Returns relating to such
Transfer Taxes which are due.
Section 5.8 State Takeover Laws. Notwithstanding any other provision
in this Agreement, in no event shall the Section 203 Approval be withdrawn,
revoked or modified by the Board of Directors of the Company. If any state
takeover statute other than Section 203 of the DGCL becomes or is deemed to
become applicable to the Company Stockholder Agreement, the Offer, the
acquisition of Shares pursuant to the Offer or the Merger, the Company shall
take all action necessary to render such statute inapplicable to all of the
foregoing.
45
<PAGE> 50
Section 5.9 Indemnification and Insurance.
(a) The Company shall, to the fullest extent permitted under
applicable Delaware Law, the terms of the Company's Certificate of Incorporation
or By-Laws and regardless of whether the Merger becomes effective, indemnify and
hold harmless, and, after the Effective Time, the Surviving Corporation shall,
to the fullest extent permitted under applicable Delaware Law, indemnify and
hold harmless, each present and former director, officer or employee of the
Company or any of its Subsidiaries (collectively, the "Indemnified Parties")
against any costs or expenses (including reasonable attorneys' fees), judgments,
losses, claims, damages and liabilities incurred in connection with, and amounts
paid in settlement of, any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative and wherever asserted,
brought or filed, (x) arising out of or pertaining to the Transactions or (y)
otherwise with respect to any acts or omissions or alleged acts or omissions
occurring at or prior to the Effective Time, in each case for a period of six
years after the date hereof. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) any counsel retained by the Indemnified Parties for any period after
the Effective Time must be reasonably satisfactory to the Surviving Corporation,
(ii) after the Effective Time, the Surviving Corporation shall pay the
reasonable fees and expenses of such counsel, promptly after statements therefor
are received, 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 or delayed); and provided, further, that, in
the event that any claim or claims for indemnification are asserted or made
within such six 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 shall be reimbursed for the costs of
only one law firm to represent them 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.
The indemnity agreements of the Surviving Corporation in this Section 5.9(b)
shall extend, on the same terms to, and shall inure to the benefit of and shall
be enforceable by, each Person or entity who controls, or in the past
controlled, any present or former director, officer or employee of the Company
or any of its Subsidiaries.
(b) For a period of three years after the Effective Time, Parent
shall cause the Surviving Corporation to maintain in effect, if available,
directors' and
46
<PAGE> 51
officers' liability insurance covering those Persons who are currently covered
by the Company's directors' and officers' liability insurance policy (a copy of
which has been made available to Parent) on terms (including the amounts of
coverage and the amounts of deductibles, if any) that are no less favorable to
the terms now applicable to them under the Company's current policies; provided,
however, that in no event shall Parent or the Surviving Corporation be required
to expend in excess of 150% of the annual premium currently paid by the Company
for such coverage; and provided further, that, if the premium for such coverage
exceeds such amount, Parent or the Surviving Corporation shall purchase a policy
with the greatest coverage available for such 150% of the annual premium.
(c) This Section 5.9 shall survive the consummation of the Merger
at the Effective Time, is intended to benefit the Company, the Surviving
Corporation and the Indemnified Parties, shall be binding on all successors and
assigns of the Surviving Corporation and shall be enforceable by the Indemnified
Parties.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject to
the satisfaction on or prior to the Effective Time of each of the following
conditions, any and all of which may be waived in whole or in part by the
Company, Parent or Purchaser, as the case may be, to the extent permitted by
applicable Law:
(a) this Agreement shall have been approved and adopted by the
requisite vote of the holders of Shares, if required by applicable Law and the
Certificate of Incorporation, in order to consummate the Merger;
(b) any waiting period applicable to the Merger under the HSR Act
shall have expired or been terminated;
(c) no statute, rule, regulation, order, decree or injunction
shall have been enacted, promulgated or issued by any Governmental Entity
precluding, restraining, enjoining or prohibiting consummation of the Merger;
and
47
<PAGE> 52
(d) Parent, Purchaser or their affiliates shall have purchased all
Shares duly tendered and not withdrawn pursuant to the Offer; provided, however,
that the obligation of Parent and Purchaser to effect the Merger shall not be
conditioned on the fulfillment of the condition set forth in this subsection
(d) if the failure of Purchaser to purchase the Shares pursuant to the Offer
shall have constituted a breach of this Agreement.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the
Merger contemplated herein may be abandoned at any time prior to the Effective
Time, whether before or after approval of matters presented in connection with
the Merger by the stockholders of the Company (provided, however, that if Shares
are purchased pursuant to the Offer, neither Parent nor Purchaser may in any
event terminate this Agreement):
(a) By the mutual written consent of Parent and the Company;
provided, however, that if Parent shall have a majority of the directors
pursuant to Section 1.4, such consent of the Company may only be given if
approved by the Continuing Directors.
(b) By either of Parent or the Company if (i) a statute, rule or
executive order shall have been enacted, entered or promulgated prohibiting the
Transactions on the terms contemplated by this Agreement or (ii) any
Governmental Entity shall have issued an order, decree or ruling or taken any
other action (which order, decree, ruling or other action the parties hereto
shall use their reasonable efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the Transactions and such order,
decree, ruling or other action shall have become final and non-appealable.
(c) By either of Parent or the Company if at least that number of
Shares required by the Minimum Condition to be tendered shall not have been
purchased in the Offer on or before November 30, 1998; provided, that the party
seeking to terminate this Agreement pursuant to this Section 7.1(c) shall not
have breached in any material respect its obligations under this Agreement in
any manner that shall have proximately contributed to the failure to consummate
the Offer on or before such date;
48
<PAGE> 53
(d) By the Company:
(i) if the Company has entered into an agreement with respect
to a Superior Proposal or has approved or recommended a Superior Proposal
in accordance with Section 5.5(b), provided the Company has complied with
all provisions thereof, including the notice provisions therein, and that
it simultaneously terminates this Agreement and makes simultaneous payment
to the Parent of the Expenses and the Termination Fee; or
(ii) if Parent or Purchaser shall have terminated the Offer
or the Offer expires without Parent or Purchaser, as the case may be,
purchasing any Shares pursuant thereto; provided that the Company may not
terminate this Agreement pursuant to this Section 7.1(d)(ii) if the Company
is in material breach of this Agreement or the Company Option Agreement;
(iii) if Parent, Purchaser or any of their affiliates shall
have failed to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer;
provided, that the Company may not terminate this Agreement pursuant to
this Section 7.1(d)(iii) if the Company is in material breach of this
Agreement or the Company Option Agreement; or
(iv) if there shall be a breach by Parent or Purchaser of any
of their representations, warranties, covenants or agreements contained in
this Agreement which breach is incapable of being cured or is not cured
within 10 days of notice from the Company to Parent, except, in each case,
where such breach does not have a material adverse effect on the ability of
Parent or Purchaser to consummate the Offer or the Merger.
(e) By Parent or Purchaser:
(i) (A) if prior to the purchase of the Shares pursuant to
the Offer, the Board of Directors of the Company shall have withdrawn, or
modified or changed in a manner adverse to Parent or Purchaser its approval
or recommendation of the Offer, this Agreement or the Merger or shall have
recommended or approved a Takeover Proposal (provided that the Company
merely providing notice to Parent pursuant to the last sentence of Section
5.5(b) shall not in itself constitute a recommendation or approval of a
Takeover Proposal); or
49
<PAGE> 54
(B) there shall have been a material breach of any
provision of Section 5.5; or
(ii) if Parent or Purchaser shall have terminated the
Offer without Parent or Purchaser purchasing any Shares thereunder,
provided that Parent or Purchaser may not terminate this Agreement
pursuant to this Section 7.1(e)(ii) if Parent or Purchaser is in
material breach of this Agreement; or
(iii) if, due to an occurrence that if occurring
after the commencement of the Offer would result in a failure to
satisfy any of the conditions set forth in Annex A hereto, Parent,
Purchaser or any of their affiliates shall have failed to commence the
Offer on or prior to five business days following the date of the
initial public announcement of the Offer; or
(iv) if the Company receives a Takeover Proposal from
any Person (other than Parent or Purchaser), and the Company's Board of
Directors takes a neutral position or makes no recommendation with
respect to such Takeover Proposal after a reasonable amount of time
(and in no event more than ten business days following such receipt)
has elapsed for the Company's Board of Directors to review and make a
recommendation with respect to such Takeover Proposal; or
(v) if there shall be a breach by the Company of any
of its representations, warranties, covenants or agreements contained
in this Agreement or the Company Option Agreement which breach is
incapable of being cured or is not cured within 10 days of notice from
Parent to the Company, except, in each case, where such breach
(without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein) does not have a Material
Adverse Effect on the Company or a materially adverse effect on the
ability of the Company to consummate the Offer or the Merger.
Section 7.2 Effect of Termination. In the event of termination
of this Agreement by either the Company or Parent or Purchaser as provided in
Section 7.1, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Parent, Purchaser or the
Company, other than the provisions of Section 3.21, 4.6, 5.2, this Section 7.2
and Article VIII and except to the extent that such termination results from the
wilful and material breach by a party of
50
<PAGE> 55
any of its representations, warranties, covenants or agreements set forth in
this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. (a) Except as provided below,
all fees and expenses incurred in connection with the Offer, the Merger, this
Agreement and the Transactions shall be paid by the party incurring such fees or
expenses, whether or not the Offer or the Merger is consummated.
(b) If (x) Parent or Purchaser terminates this
Agreement pursuant to Section 7.1(e)(i) or 7.1(e)(iv) or (y) the Company
terminates this Agreement pursuant to Section 7.1(d)(i), then in each case, the
Company shall pay, or cause to be paid to Parent, at the time of termination, an
amount equal to $2,500,000 (the "Termination Fee") and an amount equal to
Parent's and Purchaser's actual and documented reasonable out-of-pocket expenses
incurred by Parent or Purchaser in connection with the Offer, the Merger, this
Agreement and the consummation of the Transactions, including, without
limitation, the reasonable fees and expenses payable to all attorneys,
accountants, banks, investment banking firms, and other financial institutions
and Persons and their respective agents and counsel incurred in connection with
the Transactions or arranging or committing to provide or providing any financ-
ing for, the Transactions (the "Expenses"). In addition, if this Agreement is
'[]terminated by either Parent or the Company pursuant to Section 7.1(c), by
Parent pursuant to Section 7.1(e)(ii) (other than if such termination is a
result of the failure to satisfy the conditions set forth in paragraphs (a)(i),
(a)(ii), (a)(v), (a)(vii), (a)(viii), (b) or (c) of Annex A hereto) or 7.1(e)(v)
(other than by reason of a breach of Section 5.5) or by the Company pursuant to
Section 7.1(d)(ii) (other than if such termination is a result of the failure to
satisfy the conditions set forth in paragraphs (a)(i), (a)(ii), (a)(v),
(a)(vii), (a)(viii), (b) or (c) of Annex A hereto) and at the time of such
termination, Parent is not in material breach of this Agreement, then the
Company shall pay to Parent, at the time of termination, the Expenses, and, if
the Company shall thereafter, within 12 months after such termination, enter
into an agreement with respect to a Takeover Proposal, then the Company shall
pay the Termination Fee concurrently with entering into any such agreement. Any
payments required to be made pursuant to this Section 8.1 shall be made by wire
transfer of same day funds to an account designated by Parent. The Termination
Fee payable hereunder if (x) Parent or
51
<PAGE> 56
Purchaser terminates this Agreement pursuant to Section 7.1(e)(i) or 7.1(e)(iv)
or (y) the Company terminates this Agreement pursuant to Section 7.1(d)(i) (the
"Immediately Payable Termination Fee"), shall be secured by the Company's
assets pursuant to the Security Agreement, dated as of the date hereof by and
among Parent, Hasbro Interactive Inc., a Delaware corporation and a wholly owned
subsidiary of Parent and the Company.
Section 8.2 Amendment and Modification. Subject to applicable
Law, this Agreement may be amended, modified and supplemented in any and all
respects, whether before or after any vote of the stockholders of the Company
contemplated hereby, by written agreement of the parties hereto (which in the
case of the Company shall include approvals as contemplated in Section 1.4(c)),
at any time prior to the Closing Date with respect to any of the terms contained
herein; provided, however, that after the approval of this Agreement by the
stockholders of the Company, no such amendment, modification or supplement shall
reduce the amount or change the form of the Merger Consideration or otherwise
adversely affect the rights of stockholders.
Section 8.3 Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time or in the case of the Company shall survive the acceptance
for payment of and payment for Shares purchased pursuant to the Offer. This
Section 8.3 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
Section 8.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given upon receipt, and shall
be given to the parties at the following addresses or telecopy numbers (or at
such other address or telecopy number for a party as shall be specified by like
notice):
(a) if to Parent or Purchaser, to:
Hasbro, Inc.
1027 Newport Avenue
Pawtucket, Rhode Island 02861
Attention: Harold P. Gordon, Vice Chairman
Telecopy: (401) 727-5121
with a copy to:
52
<PAGE> 57
Hasbro, Inc.
32 W. 23rd Street
New York, New York 10010
Attention: Phillip H. Waldoks
Senior Vice President-Corporate
Legal Affairs and Secretary
Telecopy: (212) 741-0663
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Howard L. Ellin, Esq.
Telecopy: 212-735-2000
(b) if to the Company, to:
MicroProse, Inc.
2490 Mariner Loop
Suite 100
Alameda, California 94501
Attention: Stephen M. Race
Chief Executive Officer
Telecopy: (510) 864-4607
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: David Drummond, Esq.
Telecopy: (650) 493-6811
Section 8.5 Interpretation. (a) The words "hereof," "herein"
and "herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement, and article, section, paragraph, exhibit and
schedule references are to the articles, sections, paragraphs, exhibits and
schedules of this Agreement unless
53
<PAGE> 58
other wise specified. Whenever the words "include," "includes" or "including"
are used in this Agreement they shall be deemed to be followed by the words
"without limitation." All terms defined in this Agreement shall have the defined
meanings contained herein when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements and instruments) by waiver
or consent and (in the case of statutes) by succession of comparable successor
statutes and all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns.
(b) The phrases "the date of this Agreement," "the
date hereof" and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to August 11, 1998. The phrase "to the knowledge of"
the Company and/or any Subsidiary thereof or any similar phrase shall mean such
facts and other information which as of the date of this Agreement are known to
any vice president, chief financial officer, controller, and any officer
superior to any of the foregoing, of the referenced party after the conduct of a
reasonable investigation by such officers.
(c) The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
Section 8.6 Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties.
Section 8.7 Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership. This Agreement, the Confidentiality Agreement and the
Company Option Agreement (including the documents and the instruments referred
to herein and therein): (a) constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the
54
<PAGE> 59
subject matter hereof, and (b) except as provided in Sections 5.9 and 1.4(c)
(which is for the benefit of the Company's stockholders other than Parent and
Purchaser) are not intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
Section 8.8 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated unless the economic or legal substance of the
Transactions is affected in an adverse way to any party.
Section 8.9 Governing Law. This Agreement shall be governed by
and construed in accordance with the Laws of the State of Delaware without
giving effect to the principles of conflicts or choice of law thereof or of any
other jurisdiction.
Section 8.10 Assignment. 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, except that Purchaser may assign, in its
sole discretion, any or all of its rights, interests and obligations hereunder
to Parent or to any direct or indirect wholly owned Subsidiary of Parent.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
Section 8.11 Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of Delaware or in Delaware state court, this
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto (a) consents to submit itself to
the personal jurisdiction of any Federal court located in the State of Delaware
or any Delaware state court in the event any dispute arises out of this
Agreement or any of the Transactions, (b) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for leave
from
55
<PAGE> 60
any such court and (c) agrees that it will not bring any action relating to this
Agreement or any of the Transactions in any court other than a Federal or state
court sitting in the State of Delaware.
Section 8.12 Extension; Waiver. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 8.2, waive compliance by the
other parties with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of those
rights.
Section 8.13 Procedure for Termination, Amendment, Extension
or Waiver. A termination of this Agreement pursuant to Section 7.1, an amendment
of this Agreement pursuant to Section 8.2 or an extension or waiver pursuant to
Section 8.12 shall, in order to be effective, require in the case of Parent,
Purchaser or the Company, action by its Board of Directors or the duly
authorized designee of its Board of Directors; provided, however, that in the
event that Parent's designees are appointed or elected to the Board of Directors
of the Company as provided in Section 1.4, after the acceptance for payment of
Shares pursuant to the Offer and prior to the Effective Time, except as
otherwise contemplated by this Agreement the affirmative vote of a majority of
the Continuing Directors of the Company shall be required by the Company to
amend this Agreement by the Company.
Section 8.14 Certain Undertakings of Parent. Parent shall
perform, or cause to be performed and shall be liable for any obligation of
Purchaser under this Agreement which shall have been breached by Purchaser.
Section 8.15 Definitions. For purposes of this Agreement:
"Affiliate" has the meaning set forth in Rule 12b-2 of the Exchange
Act.
"Benefit Plans" has the meaning assigned thereto in Section 3.10.
56
<PAGE> 61
"By-laws" means the by-laws of the Company as in effect on the date of
this Agreement.
"Certificate of Incorporation" means the certificate of incorporation
of the Company as in effect on the date of this Agreement.
"Certificate of Merger" has the meaning assigned thereto in Section
1.6.
"Certificates" has the meaning assigned thereto in Section 2.2.
"Closing" has the meaning assigned thereto in Section 1.7.
"Closing Date" has the meaning assigned thereto in Section 1.7.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means MicroProse, Inc., a Delaware corporation.
"Company Disclosure Schedule" has the meaning assigned thereto in
Section 3.2.
"Company Material Contract" has the meaning assigned thereto in Section
3.16.
"Company Option Agreement" has the meaning assigned thereto in the
recitals.
"Company's SEC Documents" has the meaning assigned thereto in Section
3.5.
"Computer Programs" means:
(i) any and all computer software programs, including all
source and object code,
(ii) databases and compilations, including any and all
data and collections of data, whether machine
readable or otherwise,
(iii) billing, reporting, and other management information
systems,
57
<PAGE> 62
(iv) all descriptions, flow-charts and other work product
used to design, plan, organize and develop any of the
foregoing,
(v) all content contained on any Internet site(s), and
(vi) all documentation, including user manuals and
training materials, relating to any of the
foregoing.
"Company Rights Agreement" means the Preferred Shares Rights Agreement,
dated as of February 6, 1996, by and between the Company and Chemical Mellon
Shareholder Services, L.L.C.
"Confidentiality Agreement" has the meaning assigned thereto in Section
5.2.
"Continuing Director" means (i) any member of the Board of Directors of
the Company as of the date hereof, or (ii) any successor of a Continuing
Director who is (A) unaffiliated with, and not a designee or nominee, of Parent
or Purchaser, and (B) recommended to succeed a Continuing Director by a majority
of the Continuing Directors then on the Board of Directors of the Company, and
in each case under clauses (i) and (ii), who is not an employee of the Company.
"Convertible Notes" has the meaning assigned thereto in Section 3.3.
"Defect" means a defect or impurity of any kind, whether in design,
manufacture, processing, or otherwise, including, without limitation, any
dangerous propensity associated with any reasonably foreseeable use of a
Product, or the failure to warn of the existence of any defect, impurity, or
dangerous propensity.
"DGCL" means the Delaware General Corporation Law, as amended.
"Dissenting Shares" has the meaning assigned thereto in Section 2.5.
"Dissenting Stockholders" has the meaning assigned thereto in Section
2.5.
"Effective Time" has the meaning assigned thereto in Section 1.6.
"Environmental Laws" means all foreign, Federal, state and local Laws
relating to pollution or protection of human health, safety or the environment,
including, without limitation, Laws relating to Releases or threatened Releases
of
58
<PAGE> 63
Hazardous Materials into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport or handling of
Hazardous Materials, and all Laws and regulations with regard to record keeping,
notification, disclosure and reporting requirements respecting Hazardous
Materials, and all Laws relating to endangered or threatened species of fish,
wildlife and plants and the management or use of natural resources.
"Environmental Liabilities and Costs" means all liabilities,
obligations, responsibilities, obligations to conduct cleanup, losses, damages,
deficiencies, punitive dam ages, consequential damages, treble damages, costs
and expenses (including, without limitation, all reasonable fees, disbursements
and expenses of counsel, expert and consulting fees and costs of investigations
and feasibility studies and responding to government requests for information or
documents), fines, penalties, restitution and monetary sanctions, interest,
direct or indirect, known or unknown, absolute or contingent, past, present or
future, resulting from any claim or demand, by any Person or entity, whether
based in contract, tort, implied or express warranty, strict liability, joint
and several liability, criminal or civil statute, including any Environmental
Law, or arising from environmental, health or safety conditions, or the Release
or threatened Release of Hazardous Materials into the environment.
"ERISA" has the meaning assigned thereto in Section 3.10.
"ERISA Affiliate" has the meaning assigned thereto in Section 3.10.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expenses" has the meaning assigned thereto in Section 8.1.
"Fee Properties"means all real property and interests in real property
owned in fee by the Company or one of its Subsidiaries.
"GAAP" has the meaning assigned thereto in Section 3.5.
"Governmental Entity" means any (i) nation, state county, city, town,
village, district, or other jurisdiction of any nature; (ii) federal, state,
local, municipal, foreign or other government; (iii) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official, or entity and any
59
<PAGE> 64
court or other tribunal); or (iv) body exercising, or entitled to exercise any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"Hazardous Materials" means all substances defined as hazardous
substances in the National Oil and Hazardous Substances Pollution Contingency
Plan, 40 C.F.R. Section 300.5, or substances defined as hazardous substances,
hazardous materials, toxic substances, hazardous wastes, pollutants or
contaminants, under any Environmental Law, or substances regulated under any
Environmental Law, including, but not limited to, petroleum (including crude oil
or any fraction thereof), asbestos, and polychlorinated biphenyls.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnified Parties" has the meaning assigned thereto in Section 5.9.
"Laws" means any administrative order, constitution, law, ordinance,
principle of common law, rule, regulation, statute, treaty, judgment, decree,
license or permit enacted, promulgated, issued, enforced or entered by any
Governmental Entity.
"Leased Properties" means all real property and interests in real
property leased by the Company or one of its Subsidiaries.
"Licenses" has the meaning assigned thereto in Section 3.14(c) hereof.
"Lien" means any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, lien, mortgage, pledge,
reservation, restriction, security interest, title retention or other security
arrangement, or any \adverse right or interest, charge or claim of any nature
whatsoever of, on, or with respect to any asset, property or property interest.
"Material Adverse Change" or "Material Adverse Effect" means, when used
in connection with the Company or Parent, any change or effect (or any
development that, insofar as can reasonably be foreseen, is likely to result in
any change or effect) that is materially adverse to the business, assets,
financial condition or results of operations of such party and its Subsidiaries
taken as a whole (except for any such change or effect that (i) is caused by
conditions affecting the United States or world
60
<PAGE> 65
economy as a whole, (ii) affects the industry in which the Company competes as a
whole or (iii) arises as a result of the announcement or pendency of the Offer).
"Merger" has the meaning assigned thereto in Section 1.5.
"Merger Consideration" has the meaning assigned thereto in Section 2.1.
"Minimum Condition" has the meaning assigned thereto in Annex A.
"Offer" has the meaning assigned thereto in Section 1.1.
"Offer Documents" has the meaning assigned thereto in Section 1.3.
"Offer Price" has the meaning assigned thereto in Section 1.1.
"Offer to Purchase" has the meaning assigned thereto in Section 1.1.
"Option Plans" has the meaning assigned thereto in Section 2.4.
"Option" has the meaning assigned thereto in Section 2.4.
"Other Intellectual Property" shall mean all intellectual property
rights used in the business of the Company or any of its Subsidiaries as
currently conducted, including but not limited to all patents and patent
applications; copyrights, copyright registrations and applications (including
copyrights in Computer Programs); Computer Programs; technology, trade secrets,
know-how, confidential information, proprietary processes and formulae;
"semiconductor chip product" and "mask works" (as such terms are defined in 17
U.S.C. 901); and rights of publicity and privacy relating to the use of the
names, signatures, likenesses, voices and biographical information of real
persons; together with any and all rights of renewal thereof and the right to
sue for past, present or future infringements or misappropriations thereof.
"Paying Agent" has the meaning assigned thereto in Section 2.2.
"Parent" means Hasbro, Inc.
"PBGC" means the Pension Benefit Guaranty Corporation.
61
<PAGE> 66
"Permit" means any Federal, state, local and foreign governmental
approval, authorization, certificate, filing, franchise, license, notice, permit
or right.
"Person" means an individual, corporation, partnership, joint venture,
association, joint stock company, limited liability company, labor union,
estate, trust, unincorporated organization or other entity, including any
Governmental Entity.
"Piper Jaffray" has the meaning assigned thereto in Section 1.2.
"Preferred Shares" has the meaning assigned thereto in Section 3.3.
"Preferred Stock Purchase Rights" shall mean the preferred stock
purchase rights issued pursuant to the Company Rights Agreement.
"Product" means any product designed, manufactured, shipped, sold, mar-
keted, distributed and/or otherwise introduced into the stream of commerce by or
on behalf of the Company or any of its Subsidiaries.
"Proxy Statement" has the meaning assigned thereto in Section 5.3.
"Purchaser" means New HIAC Corp.
"Real Property" means the Leased Properties and the Fee Properties.
"Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment (including, without limitation,
ambient air, surface water, groundwater, and surface or subsurface strata) or
into or out of any property of any Hazardous Material, including the movement of
Hazardous Materials through or in the air, soil, surface water, groundwater or
property.
"Representative" means, with respect to any Person, such Person's
officers, directors, employees, agents and representatives (including any
investment banker, financial advisor, accountant, legal counsel, agent,
representative or expert retained by or acting on behalf of such Person or its
Subsidiaries).
"Schedule 14D-1" has the meaning assigned thereto in Section 1.3.
"Schedule 14D-9" has the meaning assigned thereto in Section 1.3.
62
<PAGE> 67
"SEC" means the United States Securities and Exchange Commission or any
successor agency.
"SEC Documents" means reports, proxy statements, forms, and other docu-
ments required filed with the SEC under the Securities Act and the Exchange Act.
"Secretary of State" has the meaning assigned thereto in Section 1.6.
"Section 203 Approval" has the meaning assigned thereto in Section 1.2.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Shares" has the meaning assigned thereto in Section
3.3.
"Series B Preferred Shares" has the meaning assigned thereto in Section
3.3.
"Series B-1 Preferred Shares" has the meaning assigned thereto in
Section 3.3.
"Series B Participating Preferred Shares" has the meaning assigned
thereto in Section 3.3.
"Shares" has the meaning assigned thereto in the recitals.
"Significant Subsidiaries" has the meaning assigned thereto in Rule
1-02 of Regulation S-X of the SEC.
"Special Meeting" has the meaning assigned thereto in Section 5.3.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, joint venture or other entity, whether incorporated or
unincorporated, of which such Person or any other Subsidiary of such Person (i)
owns, directly or indirectly, 50% or more of the outstanding voting securities
or equity interests, (ii) is entitled to elect at least a majority of the Board
of Directors or similar governing body, or (iii) is a general partner (excluding
such partnerships where such Person or any Subsidiary of such Person do not have
a majority of the voting interests in such partnership).
"Superior Proposal" means an unsolicited bona fide proposal by a Third
Party to acquire, directly or indirectly, for consideration consisting of cash
and/or securities, more than a majority of the Shares then outstanding or all or
substantially all of the
63
<PAGE> 68
assets of the Company or to acquire, directly or indirectly, the Company by
merger or consolidation, and otherwise on terms which the Board of Directors of
the Company determines in good faith to be more favorable to the Company's
stockholders than the Offer and the Merger (based on advice of the Company's
independent financial advisor that the value of the consideration provided for
in such proposal is superior to the value of the consideration provided for in
the Offer and the Merger), for which financing, to the extent required, is then
committed or which, in the good faith reasonable judgment of the Board of
Directors of the Company, based on advice from the Company's independent
financial advisor, is reasonably capable of being financed by such Third Party.
"Surviving Corporation" has the meaning assigned thereto in Section
1.5.
"Takeover Proposal" means any bona fide proposal or offer, whether in
writing or otherwise, from any Person other than Parent, Purchaser or any
affiliates thereof (a "Third Party") to acquire beneficial ownership (as defined
under Rule 13(d) of the Exchange Act) of all or a material portion of the assets
of the Company and its Subsidiaries taken as a whole or 50% or more of any class
of equity securities of the Company pursuant to a merger, consolidation or other
business combination, sale of shares of capital stock, sale of assets, tender
offer, exchange offer or similar transaction with respect to either the Company
or any of its Subsidiaries, including any single or multi-step transaction or
series of related transactions, which is structured to permit such Third Party
to acquire beneficial ownership of any material portion of the assets of the
Company and its Subsidiaries taken as a whole or 50% or more of such equity
interest in the Company.
"Taxes" mean any federal, state, local or foreign net income, gross
income, receipts, windfall profit, severance, property, production, sales, use,
license, excise, franchise, employment, payroll, withholding, alternative or
add-on minimum, ad valorem, transfer, stamp or environmental tax, or any other
tax, custom, duty, govern mental fee or other like assessment or charge of any
kind whatsoever, together with any interest or penalty, addition to tax or
additional amount imposed by any govern mental authority.
"Tax Returns" mean all returns, reports, or statements required to be
filed with any Governmental Entity with respect to any Tax (including any
attachments thereto), including, without limitation, any consolidated, unitary
or similar return, information return, claim for refund, amended return or
declaration of estimated Tax.
64
<PAGE> 69
"Termination Fee" has the meaning assigned thereto in Section 8.1(b).
"Third Party" has the meaning assigned thereto in this Section 8.15
under "Takeover Proposal."
"Trademarks" shall mean all United States and foreign trademarks
(including service marks and trade names, whether registered or at common law),
registrations and applications therefor, owned or licensed by the Company or its
Subsidiaries, and the goodwill of the Company's and each of its Subsidiaries'
respective businesses associated therewith, together with any and all (i) rights
of renewal thereof and (ii) rights to sue for past, present and future
infringements or misappropriation thereof.
"Transactions" has the meaning assigned thereto in Section 1.2(a).
"Transfer Taxes" has the meaning assigned thereto in Section 5.7.
"Warrants" has the meaning assigned thereto in Section 3.3.
65
<PAGE> 70
IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
HASBRO, INC.
By: /s/ Harold P. Gordon
-----------------------------------
Name: Harold P. Gordon
Title: Vice Chairman
NEW HIAC CORP.
By: /s/ Harold P. Gordon
-----------------------------------
Name: Harold P. Gordon
Title: President
MICROPROSE, INC.
By: /s/ Stephen M. Race
-----------------------------------
Name: Stephen M. Race
Title: Chief Executive Officer
<PAGE> 71
ANNEX A
CONDITIONS TO THE OFFER
Capitalized terms used but not defined herein shall have the meanings
set forth in the Agreement and Plan of Merger of which this Annex A is a part.
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may extend or amend the
Offer consistent with the terms of the Merger Agreement if (i) there shall not
have been validly tendered and not withdrawn prior to the expiration of the
Offer such number of Shares which, when added to the Shares, if any,
beneficially owned by Parent or Purchaser, would constitute at least 50.1% of
the Shares outstanding on a fully diluted basis (the "Minimum Condition"), (ii)
any applicable waiting period under the HSR Act has not expired or been
terminated, or (iii) at any time on or after the date of the Merger Agreement
and prior to the Expiration Date, any of the following events shall occur and
shall not result from the material breach by Parent or Purchaser of any of their
obligations under the Merger Agreement:
(a) there shall be threatened in writing or pending
any suit, action or proceeding (i) seeking to prohibit or impose any material
limitations on Parent's or Purchaser's ownership or operation (or that of any of
their respective Subsidiaries or Affiliates) of all or a material portion of
their or the Company's businesses or assets, (ii) seeking to compel Parent or
Purchaser or their respective Subsidiaries and Affiliates to dispose of or hold
separate any material portion of the business or assets of the Company or Parent
and their respective Subsidiaries, in each case taken as a whole, (iii)
challenging the acquisition by Parent or Purchaser of any Shares pursuant to the
Offer or the Company Option Agreement, (iv) seeking to restrain or prohibit the
making or consummation of the Offer or the Merger or the performance of any of
the other Transactions, (v) seeking to obtain from the Company any damages that
would be reasonably likely to have a Material Adverse Effect on the Company,
(vi) seeking to impose material limitations on the ability of Purchaser, or
rendering Purchaser unable, to accept for payment, pay for or purchase some or
all of the Shares pursuant to the Offer and the Merger, (vii) seeking to impose
material limitations on the ability of Purchaser or Parent effectively to
exercise full rights of ownership of the Shares, including, without limitation,
the right to vote the Shares
A-1
<PAGE> 72
purchased by it on all matters properly presented to the Company's stockholders,
or (viii) which otherwise is reasonably likely to have a Material Adverse Effect
on the Company or, as a result of the Transactions, Parent and its Subsidiaries,
which, in the case of any of the foregoing, is reasonably likely to succeed on
the merits; or
(b) there shall be any statute, rule, regulation,
judgment, order or injunction enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger, or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger of
applicable waiting periods under the HSR Act, that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (viii) of paragraph (a) above; or
(c) there shall have occurred (1) any general
suspension of trading in, or limitation on prices for, securities on the New
York Stock Exchange, the American Stock Exchange or in the Nasdaq National
Market System, for a period in excess of three hours (excluding suspensions or
limitations resulting solely from physical damage or interference with such
exchanges not related to market conditions), (2) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (3) any limitation or proposed limitation
(whether or not mandatory) by any United States governmental authority or agency
that has a material adverse effect generally on the extension of credit by banks
or other financial institutions, (4) any change in general financial bank or
capital market conditions which has a material adverse effect the ability of
financial institutions in the United States to extend credit or syndicate
loans, (5) any decline in either the Dow Jones Industrial Average or the
Standard & Poor's Index of 500 Industrial Companies by an amount in excess of
15% measured from the close of business on the date of this Agreement or (6) in
the case of any of the situations in clauses (1) through (5) inclusive, existing
at the time of the commencement of the Offer, a material acceleration or
worsening thereof; or
(d) the representations and warranties of the Company
set forth in the Merger Agreement shall not be true and accurate as of the date
of consummation of the Offer as though made on or as of such date (except for
those representations and warranties that address matters only as of a
particular date or only with respect to a specific period of time which need
only be true and accurate as of such date or with respect to such period) or the
Company shall have breached or failed to perform or comply with any obligation,
agreement or covenant required by the Merger Agreement to be performed or
complied with by it except, in each case where the failure of such
representations and warranties to be true and accurate (without
A-2
<PAGE> 73
giving effect to any limitation as to "materiality" or "material adverse effect"
set forth therein), or the failure to perform or comply with such obligations,
agreements or covenants, do not, individually or in the aggregate, have a
Material Adverse Effect on the Company or a materially adverse effect on the
ability to consummate the Offer or the Merger; or
(e) there shall have occurred a Material Adverse
Effect on the Company; or
(f) the Company's Board of Directors (i) shall have
withdrawn, or modified or changed in a manner adverse to Parent or Purchaser
(including by amendment of the Schedule 14D-9) its recommendation of the Offer,
the Merger Agreement, or the Merger, (ii) shall have recommended a Takeover
Proposal, (iii) shall have adopted any resolution to effect any of the
foregoing, or (iv) shall have taken a neutral position or made no recommendation
with respect to a Takeover Proposal received from any Person (other than Parent
or Purchaser) after a reasonable amount of time (and in no event more than ten
business days following such receipt) has elapsed for the Company's Board of
Directors to review and make a recommendation with respect to such Takeover
Proposal; or
(g) any party to the Company Option Agreement other
than Purchaser and Parent shall have breached or failed to perform any of its
agreements under such agreement or breached any of its representations and
warranties in such agreements or any such agreement shall not be valid, binding
and enforceable, except for such breaches or failures or failures to be valid,
binding and enforceable that do not materially and adversely affect the benefits
expected to be received by Parent and Purchaser under the Merger Agreement or
the Company Option Agreement;
(h) the Merger Agreement shall have been terminated
in accordance with its terms; or
(i) the Company pursuant to or within the meaning of
Title 11, U.S. Code or any similar Federal or state law for the relief of
debtors ("Bankruptcy Law"): (1) commences a voluntary case, (2) consents to the
entry of an order for relief against it in an involuntary case, (3) consents to
the appointment of a receiver, trustee, assignee, liquidator or similar official
under any Bankruptcy Law ( a "Custodian") of it or for all or substantially all
of its property, (4) makes a general assignment for the benefit of its
creditors, or (5) generally is not paying its debts as they become due; or (6) a
court of competent jurisdiction enters an order or decree under
A-3
<PAGE> 74
any Bankruptcy Law that: (x) is for relief against the Company in an involuntary
case, (y) appoints a Custodian of the Company or for all or substantially all of
the property of the Company, or (z) orders the liquidation of the Company, and
the order or decree remains unstayed and in effect for 60 days;
which in the reasonable good faith judgment of Parent or Purchaser, in any such
case, and regardless of the circumstances (including any action or inaction by
Parent or Purchaser) giving rise to such condition makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment of or payments
for Shares.
The foregoing conditions are for the sole benefit of Parent
and Purchaser and may be waived by Parent or Purchaser, in whole or in part, at
any time and from time to time, in the sole discretion of Parent or Purchaser
(except for the Minimum Condition). The failure by Parent or Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
A-4
<PAGE> 1
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 11, 1998 (the "Agreement"),
between MICROPROSE, INC., a Delaware corporation ("Issuer"), and HASBRO, INC., a
Rhode Island corporation ("Grantee").
RECITALS
A. Issuer and Grantee have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), providing for,
among other things, upon the terms and subject to the conditions thereof, the
merger of Purchaser with and into Issuer (the "Merger"); and
B. As a condition and inducement to Grantee's willingness to enter into
the Merger Agreement, Grantee has requested that Issuer agree, and Issuer has
agreed, to grant Grantee the Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Issuer
and Grantee agree as follows:
Capitalized terms used but not defined herein have the meanings set
forth in the Merger Agreement.
1. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase up to 19.9% of the number of shares (the "Option
Shares") of common stock, par value $0.001 per share ("Issuer Common Stock"), of
Issuer issued and outstanding immediately prior to the grant of the Option
(provided that the Option Shares shall not, upon timely issuance, constitute
more than 19.9% of the then issued and outstanding shares of Issuer) at a
purchase price of $6.00 (as adjusted as set forth herein) per Option Share (the
"Purchase Price"). The Cash-Out Right (as defined herein) when payable in
connection with the Immediately Payable Termination Fee (the "Immediately
Payable Cash-Out Right"), shall be secured by the Issuer's assets pursuant to
the Security Agreement, dated as of the date hereof, by and among Grantee,
Hasbro Interactive Inc., a Delaware corporation and a wholly owned subsidiary of
Grantee, and the Issuer.
<PAGE> 2
2. Exercise of Option. (a) Grantee may exercise the Option, with
respect to any or all of the Option Shares at any time and from time to time,
subject to the provisions of Section 2(c), after the Merger Agreement becomes
terminable under circumstances which could entitle Grantee to the Termination
Fee under Section 8.1 of the Merger Agreement (a "Triggering Event") except that
(i) subject to the last sentence of this Section 2(a), the Option will terminate
and be of no further force and effect upon the earliest to occur of (A) the
consummation of the Offer, (B) six months after the date on which a Triggering
Event occurs, and (C) termination of the Merger Agreement in accordance with its
terms prior to the occurrence of a Triggering Event, unless, in the case of
clauses (B) and (C), the Grantee could be entitled to receive termination fees
following such time or termination upon the occurrence of certain events, in
which case the Option will not terminate until the later of (x) six months
following the time such termination fees become payable and (y) the expiration
of the period in which the Grantee has such right to receive termination fees,
and (ii) any purchase of Option Shares upon exercise of the Option will be
subject to compliance with the HSR Act and the obtaining or making of any
consents, approvals, orders, notifications or authorizations, the failure of
which to have obtained or made would have the effect of making the issuance of
Option Shares illegal (the "Regulatory Approvals") and no preliminary or
permanent injunction or other order by any court of competent jurisdiction
prohibiting or otherwise restraining such issuance shall be in effect.
Notwithstanding the termination of the Option, Grantee will be entitled to
purchase the Option Shares if it has exercised the Option in accordance with the
terms hereof prior to the termination of the Option, and the termination of the
Option will not affect any rights hereunder which by their terms do not
terminate or expire prior to or as of such termination.
(b) In the event that Grantee wishes to exercise the Option, it will
send to Issuer a written notice (an "Exercise Notice"; the date of which being
herein referred to as the "Notice Date") to that effect which Exercise Notice
also specifies the number of Option Shares, if any, Grantee wishes to purchase
pursuant to this Section 2(b), the number of Option Shares, if any, with respect
to which Grantee wishes to exercise its Cash-Out Right (as defined herein)
pursuant to Section 7(c), the denominations of the certificate or certificates
evidencing the Option Shares which Grantee wishes to purchase pursuant to this
Section 2(b) and a date not earlier than 20 business days nor later than 30
business days from the Notice Date for the closing (an "Option Closing") of such
purchase (an "Option Closing Date"). Any Option Closing will be at an agreed
location and time in New York, New York on the applicable Option Closing Date or
at such later date as may be necessary so as to comply with clause (ii) of
Section 2(a).
2
<PAGE> 3
(c) Notwithstanding anything to the contrary contained herein, any
exercise of the Option and purchase of Option Shares shall be subject to
compliance with applicable laws and regulations, which may prohibit the purchase
of all the Option Shares specified in the Exercise Notice without first
obtaining or making certain Regulatory Approvals. In such event, if the Option
is otherwise exercisable and Grantee wishes to exercise the Option, the Option
may be exercised in accordance with Section 2(b) and Grantee shall acquire the
maximum number of Option Shares specified in the Exercise Notice that Grantee is
then permitted to acquire under the applicable laws and regulations, and if
Grantee thereafter obtains the Regulatory Approvals to acquire the remaining
balance of the Option Shares specified in the Exercise Notice, then Grantee
shall be entitled to acquire such remaining balance. Issuer agrees to use its
reasonable best efforts to assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a Regulatory
Approval required for the purchase of any Option Shares will not be issued or
granted or (ii) such Regulatory Approval has not been issued or granted within
six months of the date of the Exercise Notice, Grantee shall have the right to
exercise its Cash-Out Right (as defined herein) pursuant to Section 7(c) with
respect to the Option Shares for which such Regulatory Approval will not be
issued or granted or has not been issued or granted.
(d) if Grantee receives in aggregate (i) the Termination Fee pursuant
to Section 8.1(b) of the Merger Agreement, (ii) amounts from the sale or other
disposition of the Option Shares, and (iii) pursuant to Section 7(c) hereof in
excess of the sum of (A) $3,500,000 plus (B) the amounts paid by Grantee to
purchase any Option Shares, then all such excess amounts shall be remitted by
Grantee to Issuer. If any payment by Issuer pursuant to Section 7(c) hereof or
payment of the Termination Fee pursuant to Section 8.1(b) of the Merger
Agreement would cause Grantee to become obligated to remit amounts pursuant to
this Section, then Issuer shall have the right to reduce such payments such that
no such obligation would arise.
3. Payment and Delivery of Certificates. (a) At any Option Closing,
Grantee will pay to Issuer in same day funds by wire transfer to a bank account
designated in writing by Issuer an amount equal to the Purchase Price multiplied
by the number of Option Shares to be purchased at such Option Closing.
(b) At any Option Closing, simultaneously with the delivery of same day
funds as provided in Section 3(a), Issuer will deliver to Grantee a certificate
or certificates representing the Option Shares to be purchased at such Option
Closing, which Option Shares will be free and clear of all liens, claims,
charges and encumbrances of any kind
3
<PAGE> 4
whatsoever. If at the time of issuance of Option Shares pursuant to an exercise
of the Option hereunder, Issuer shall have issued any securities similar to
rights under a shareholder rights plan, then each Option Share issued pursuant
to such exercise will also represent such a corresponding right with terms
substantially the same as and at least as favorable to Grantee as are provided
under any Issuer shareholder rights agreement or any similar agreement then in
effect.
(c) Certificates for the Option Shares delivered at an Option Closing
will have typed or printed thereon a restrictive legend which will read
substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1993, AND MAY BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IF SO REGISTERED OR IF ANY
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE
ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE
STOCK OPTION AGREEMENT, DATED AS OF AUGUST 11, 1998, A COPY OF WHICH
MAY BE OBTAINED FROM THE SECRETARY OF MICROPROSE, INC. AT ITS PRINCIPAL
EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising under
the Securities Act in the above legend will be removed by delivery of substitute
certificate(s) without such reference if such Option Shares have been sold in
compliance with the registration and prospectus delivery requirements of the
Securities Act, such Option Shares have been sold in reliance on and in
accordance with Rule 144 under the Securities Act or Grantee has delivered to
Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel in
form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act and
(ii) the reference to restrictions pursuant to this Agreement in the above
legend will be removed by delivery of substitute certificate(s) without such
reference if the Option Shares evidenced by certificate(s) containing such
reference have been sold or transferred in compliance with the provisions of
this Agreement under circumstances that do not require the retention of such
reference.
4. Incorporation of Representations and Warranties of Issuer. The
representations and warranties of Issuer contained in Article III of the Merger
Agreement are hereby incorporated by reference herein with the same force and
effect as though made pursuant to this Agreement.
4
<PAGE> 5
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee as follows:
(a) Corporate Authorization. Issuer has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer, and no other
corporate proceedings on the part of Issuer are necessary to authorize
this Agreement and the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Issuer,
and assuming this Agreement constitutes a valid and binding agreement
of Grantee, this Agreement constitutes a valid and binding agreement of
Issuer, enforceable against Issuer in accordance with its terms (except
insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, or by principles governing the
availability of equitable remedies).
(b) Authorized Stock. Issuer has taken all necessary corporate
and other action to authorize and reserve and, subject to the
expiration or termination of any required waiting period under the HSR
Act, to permit it to issue, and, at all times from the date hereof
until the obligation to deliver Option Shares upon the exercise of the
Option terminates, shall have reserved for issuance, upon exercise of
the Option, shares of Issuer Common Stock necessary for Grantee to
exercise the Option, and Issuer will take all necessary corporate
action to authorize and reserve (and shall at all times maintain, free
from pre-emptive rights, sufficient authorized and reserved shares) for
issuance all additional shares of Issuer Common Stock or other
securities which may be issued pursuant to Section 7 upon exercise of
the Option. The shares of Issuer Common Stock to be issued upon due
exercise of the Option, including all additional shares of Issuer
Common Stock or other securities which may be issuable upon exercise of
the Option or any other securities which may be issued pursuant to
Section 7, upon issuance pursuant hereto, will be duly and validly
issued, fully paid and nonassessable, and will be delivered free and
clear of all liens, claims, charges and encumbrances of any kind or
nature whatsoever, including without limitation any preemptive rights
of any stockholder of Issuer.
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that:
5
<PAGE> 6
(a) Corporate Authorization. Grantee has the corporate power
and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
and validly authorized by the Board of Directors of Grantee, and no
other corporate proceedings on the part of Grantee are necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Grantee,
and assuming this Agreement constitutes a valid and binding agreement
of Issuer, this Agreement constitutes a valid and binding agreement of
Grantee, enforceable against Grantee in accordance with its terms
(except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies).
(b) Purchase Not For Distribution. Any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
and the Option is not being, acquired by Grantee with a view to the
public distribution thereof. Neither the Option nor any of the Option
Shares will be offered, sold, pledged or otherwise transferred except
in compliance with, or pursuant to an exemption from, the registration
requirements of the Securities Act.
7. Adjustment upon Changes in Capitalization, Etc. (a) In the event of
any changes in Issuer Common Stock by reason of a stock dividend, reverse stock
split, merger, recapitalization, combination, exchange of shares, or similar
transaction, the type and number of shares or securities subject to the Option,
and the Purchase Price therefor, will be adjusted appropriately, and proper
provision will be made in the agreements governing such transaction, so that
Grantee will receive upon exercise of the Option the number and class of shares
or other securities or property that Grantee would have received with respect to
Issuer Common Stock if the Option had been exercised immediately prior to such
event or the record date therefor, as applicable.
(b) Without limiting the parties' relative rights and obligations under
the Merger Agreement, in the event that the Issuer enters into an agreement (i)
to consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and Issuer will not be the continuing or surviving corporation in
such consolidation or merger, (ii) to permit any person, other than Grantee or
one of its subsidiaries, to merge into Issuer and Issuer will be the continuing
or surviving corporation, but in connection with such merger, the shares of
Issuer Common Stock outstanding immediately prior to the consummation of such
merger will be changed into or exchanged for stock or other
6
<PAGE> 7
securities of Issuer or any other person or cash or any other property, or the
shares of Issuer Common Stock outstanding immediately prior to the consummation
of such merger will, after such merger represent less than 50% of the
outstanding voting securities of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction will make proper provision so that the
Option will, upon the consummation of any such transaction and upon the terms
and condition set forth herein, be converted into, or exchanged for, an option
with identical terms appropriately adjusted to acquire the number and class of
shares or other securities or property that Grantee would have received in
respect of Issuer Common Stock if the Option had been exercised immediately
prior to such consolidation, merger, sale, or transfer, or the record date
therefor, as applicable and make any other necessary adjustments.
(c) If, at any time during the period commencing on the occurrence of a
Triggering Event and ending on the termination of the Option in accordance with
Section 2, Grantee sends to Issuer an Exercise Notice indicating Grantee's
election to exercise its right (the "Cash-Out-Right") pursuant to this Section
7(c), then Issuer shall pay to Grantee, on the Option Closing Date, in exchange
for the cancellation of the Option with respect to such number of Option Shares
as Grantee specifies in the Exercise Notice, an amount in cash equal to such
number of Option Shares multiplied by the difference between (i) the average
closing price for the 5 trading days commencing on the 12th Nasdaq trading day
immediately preceding the Notice Date, per share of Issuer Common Stock as
reported on the Nasdaq National Market (or, if not listed on the Nasdaq, as
reported on any other national securities exchange or national securities
quotation system on which the Issuer Common Stock is listed or quoted, as
reported in The Wall Street Journal (Northeast edition), or, if not reported
thereby, any other authoritative source) (the "Closing Price") and (ii) the
Purchase Price. Notwithstanding the termination of the Option, Grantee will be
entitled to exercise its rights under this Section 7(c) if it has exercised such
rights in accordance with the terms hereof prior to the termination of the
Option.
8. Registration Rights.
(a) At any time and from time to time within three years of the
date hereof, Grantee may by written notice (a "Registration Notice") to Issuer
request Issuer to register under the Securities Act all or part of any Issuer
Common Stock beneficially owned by Grantee (collectively, the "Registrable
Securities") in order to permit the sale or other disposition of such securities
pursuant to, at the option of Grantee (i) a shelf
7
<PAGE> 8
registration or (ii) a bona fide, firm commitment underwritten public offering
in which Grantee shall have the right, including with respect to any takedown
off the shelf, to select the managing underwriter, which shall be reasonably
acceptable to the Issuer, and shall effect as wide a distribution of such
Registrable Securities as is reasonably practicable and shall use reasonable
efforts to prevent any person or group from purchasing through such offering
shares representing more than 3% of the shares of Issuer Common Stock then
outstanding on a fully-diluted basis; provided, however, that any such
Registration Notice must relate to a number of shares equal to at least 2% of
the shares of Issuer Common Stock then outstanding on a fully-diluted basis.
(b) Issuer shall use reasonable best efforts to effect, as
promptly as practicable, the registration under the Securities Act of the
Registrable Securities requested to be registered in the Registration Notice;
provided, however, that (i) Grantee shall not be entitled to more than an
aggregate of three effective registration statements hereunder and (ii) Issuer
will not be required to file any such registration statement during any period
of time (not to exceed 40 days after a Registration Notice in the case of clause
(A) below or 90 days after a Registration Notice in the case of clauses (B) and
(C) below) when (A) Issuer is in possession of material non-public information
which it reasonably believes would be detrimental to be disclosed at such time
and, based upon the advice of outside securities counsel to Issuer, such
information would have to be disclosed if a registration statement were filed at
that time; (B) Issuer would be required under the Securities Act to include
audited financial statements for any period in such registration statement and
such financial statements are not yet available for inclusion in such
registration statement; or (C) Issuer determines, in its reasonable judgment,
that such registration would interfere with any financing, acquisition or other
material transaction involving Issuer. If the consummation of the sale of any
Registrable Securities pursuant to a registration hereunder does not occur
within 90 days after the filing with the SEC of the initial registration
statement therefor, the provisions of this Section shall again be applicable to
any proposed registration, it being understood that Grantee shall not be
entitled to more than an aggregate of three effective registration statements
hereunder. Issuer will use reasonable best efforts to cause each such
registration statement to become effective, to obtain all consents or waivers of
other parties which are required therefor, and to keep such registration
statement effective for such period not in excess of 180 calendar days from the
day such registration statement first becomes effective as may be reasonably
necessary to effect such sale or other disposition. Issuer shall use reasonable
best efforts to cause any Registrable Securities registered pursuant to this
Section to be qualified for sale under the securities or blue sky laws of such
jurisdictions as Grantee may reasonably request and shall continue such
registration or qualification in effect in such jurisdictions; provided,
however, that Issuer
8
<PAGE> 9
shall not be required to qualify to do business in, or consent to general
service of process in, any jurisdiction.
(c) If Issuer effects a registration under the Securities Act of
Issuer Common Stock for its own account or for any other stockholders of Issuer
(other than on Form S-4 or Form S-8, or any successor form), it will allow
Grantee the right to participate in such registration, and such participation
will not affect the obligation of Issuer to effect demand registration
statements for Grantee under this Section 8, except that, if the managing
underwriters of such offering advise Issuer in writing that in their opinion the
number of shares of Issuer Common Stock requested to be included in such
registration exceeds the number which can be sold in such offering, Issuer will
include that portion of the shares requested to be included therein equal to the
product obtained by multiplying (i) the number of shares which the underwriter
has informed the Issuer can be included in the offering and (ii) the percentage
obtained by dividing (x) the total number of shares of Issuer Common Stock held
by Grantee and (y) the total number of shares of Issuer outstanding.
(d) The registration rights set forth in this Section are subject
to the condition that Grantee shall provide Issuer with such information with
respect to Grantee Registrable Securities, the plan for distribution thereof,
and such other information with respect to Grantee as, in the reasonable
judgment of counsel for Issuer, is necessary to enable Issuer to include in a
registration statement all material facts required to be disclosed with respect
to a registration hereunder.
(e) A registration effected under this Section shall be effected
at Issuer's expense, except for underwriting discounts and commissions and the
fees and expenses of Grantee's counsel, and Issuer shall provide to the
underwriters such documentation (including certificates, opinions of counsel and
"comfort" letters from auditors) as are customary in connection with
underwritten public offerings and as such underwriters may reasonably require.
In connection with any registration, Grantee and Issuer agree to enter into an
underwriting agreement reasonably acceptable to each such party, in form and
substance customary for transactions of this type.
9. Listing. If Issuer Common Stock or any other securities to be
acquired upon exercise of the Option are then listed on the Nasdaq (or any other
national securities exchange or national securities quotation system), Issuer,
upon the request of Grantee, will promptly file an application to list the
shares of Issuer Common Stock or other securities to be acquired upon exercise
of the Option on the Nasdaq (and any such other
9
<PAGE> 10
national securities exchange or national securities quotation system) and will
use reasonable efforts to obtain approval of such listing as promptly as
practicable.
10. Miscellaneous. (a) Expenses. Except as otherwise provided in the
Merger Agreement, each of the parties hereto will pay all costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) Amendment. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) Extension; Waiver. Any agreement on the part of a party to waive
any provision of this Agreement, or to extend the time for performance, will be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise will not constitute a waiver of such rights.
(d) Entire Agreement; No Third-Party Beneficiaries. This Agreement and
the Merger Agreement (including the documents and instruments attached thereto
as exhibits or schedules or delivered in connection therewith) (i) constitute
the entire agreement, and supersede all prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter of
this Agreement, and (ii) are not intended to confer upon any person other than
the parties any rights or remedies.
(e) Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws thereof.
(f) Notices. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and will be deemed given
if delivered personally, telecopied (which is confirmed), or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
10
<PAGE> 11
If to Issuer to:
MicroProse, Inc.
2490 Mariner Loop
Suite 100
Alameda, California 94501
Attention: Stephen M. Race, Chief Executive Officer
Telecopy: (510) 864-4607
with a copy to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: David Drummond
Telecopy: (650) 493-6811
If to Grantee to:
Hasbro, Inc.
1027 Newport Avenue
Pawtucket, Rhode Island 02861
Attention: Harold P. Gordon, Vice Chairman
Telecopy: (401) 727-5121
with a copy to:
Hasbro, Inc.
32 West 23rd Street
New York, New York 10010
Attention: Phillip H. Waldoks, Senior Vice President -
Corporate Legal Affairs and Secretary
Telecopy: (212) 741-0663
11
<PAGE> 12
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Howard L. Ellin, Esq.
Telecopy: (212) 735-2000
(g) Assignment. Neither this Agreement, the Option nor any of the
rights, interests, or obligations under this Agreement may be assigned,
transferred or delegated, in whole or in part, by operation of law or otherwise,
by Issuer or Grantee without the prior written consent of the other. Any
assignment, transfer or delegation in violation of the preceding sentence will
be void. Subject to the first and second sentences of this Section 11(g), this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
(h) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee will execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(i) Enforcement. The parties agree that irreparable damage would occur
and that the parties would not have any adequate remedy at law in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties will be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of Delaware or in Delaware
state court, the foregoing being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (iii) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
Federal court sitting in the State of Delaware or a Delaware state court.
12
<PAGE> 13
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first written above.
MICROPROSE, INC.
By: /s/ Stephen M. Race
-----------------------------------
Name: Stephen M. Race
Title: Chief Executive Officer
HASBRO, INC.
By: /s/ Harold P. Gordon
-----------------------------------
Name: Harold P. Gordon
Title: Vice Chairman
<PAGE> 1
SOFTWARE DISTRIBUTION AND LOAN AGREEMENT
SOFTWARE DISTRIBUTION AND LOAN AGREEMENT, dated as of August 11, 1998, by
and between HASBRO INTERACTIVE, INC., a Delaware corporation ("Distributor"),
and MICROPROSE, INC., a Delaware corporation ("Publisher").
WHEREAS, Publisher designs, develops, manufactures and markets computer
software products in various formats and for various platforms;
WHEREAS, Distributor has various distribution and marketing channels which
Publisher desires to be used in the sale and distribution of its computer
software products;
WHEREAS, the parties hereto desire that Distributor be the exclusive
distributor of Publisher's computer software products in the United States and
Canada, and that Publisher provide manufacturing and marketing services and
promotion for such computer software products, subject to the terms and
conditions set forth in this Agreement; and
WHEREAS, as a financial accommodation to Publisher, Distributor has agreed
to make available certain loans to Publisher, subject to the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, terms, covenants and conditions set forth herein, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
For purposes of this Agreement:
"Bankruptcy Code" shall mean Title 11 of the United States Code entitled
"Bankruptcy", as amended from time to time, and any successor statute or
statutes.
"Bundling" means combining the Products with any hardware equipment,
including, without limitation, any computer system or any multimedia upgrade
kit.
<PAGE> 2
"Business Day" shall mean any day excluding Saturday, Sunday and any day
which shall be in New York a legal holiday or a day on which banking
institutions in New York are authorized or required by law or other government
actions to close.
"Change of Control" means (i) any sale, transfer or other conveyance,
whether direct or indirect, of a more than 35% of the fair market value of the
assets of Publisher, on a consolidated basis, in one transaction or a series of
related transactions, (ii) any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable) is or becomes the "beneficial owner" (as such term is used in Rule
13d-3 promulgated pursuant to the Exchange Act), directly or indirectly, of more
than 35% of the equity of Publisher then outstanding normally entitled to vote
in elections of directors, or (iii) Publisher enters into, or Publisher's Board
of Directors approves, any agreement, arrangement or letter of intent with
respect to the foregoing, other than as provided by written notice from
Publisher to Distributor prior to the execution hereof on the date hereof.
"Collateral Account" shall have the meaning set forth in Article I of the
Security Agreement.
"Dealer-Reseller" shall mean any dealer, reseller or other third party
intermediary which purchases Software Copies from Distributor for resale solely
to End-Users and retailers hereunder, and not for further resale.
"Default" shall mean any event, act or condition which would become an
Event of Default with the giving of notice, the lapse of time, or both.
"Documentation" shall mean any instruction manuals or documentation
provided by Publisher with the Products.
"End-User" shall mean an end-user customer located within the Licensed
Territory who is licensed to use a Software Copy for its internal purposes, and
not for resale, redistribution, or any other purpose.
"End-User License Agreement" shall mean an End-User license agreement
pursuant to which the Distributor licenses End-Users to use a Software Copy,
which shall be in a form approved by Publisher that is at least as protective of
the Software Copy under applicable local law as Publisher's then-current
standard End-User license agreement.
2
<PAGE> 3
"Event of Default" shall have the meaning set forth in Section 6.7 hereof.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than trade payables incurred in the
ordinary course of business of such Person), (ii) all indebtedness of such
Person evidenced by a note, bond, debenture or similar instrument, (iii) the
face amount of all letters of credit issued for the account of such Person and,
without duplication, all unreimbursed amounts drawn thereunder and (iv) all
indebtedness of any other Person secured by any Lien on any property owned by
such Person, whether or not such indebtedness has been assumed.
"Intellectual Property Security Agreement" shall have the meaning set
forth in Section 6.5(a)(ii) of this Agreement.
"Lien" shall mean, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
"Loan Documents" shall mean this Agreement, the Note, the Security
Agreement, the Intellectual Property Security Agreement, and any other
agreement, instrument or document executed and delivered by Publisher or any of
its subsidiaries in connection herewith, including, without limitation, those
executed and delivered after the Effective Date under Article VI.
"Notice of Borrowing" shall have the meaning set forth in Section 6.5(f).
"OEM" means original equipment manufacturer.
"Obligations" shall mean all obligations, liabilities and indebtedness of
every nature of Publisher from time to time owing to Distributor under or in
connection with this Agreement.
"Permitted Lien" shall have the meaning set forth in Section 6.6(c) of
this Agreement.
"Person" shall mean and include any individual, partnership, joint
venture, firm, corporation, limited liability company or partnership,
association, trust or other enterprise or any government or political
subdivision or agency, department or instrumentality thereof.
3
<PAGE> 4
"Products" shall have the meaning set forth in Section 2.2 hereof.
"Publisher Trademarks" means trademarks, trade names, service marks,
service names, logos and other similar proprietary rights owned, controlled or
licensed by Publisher from time to time with respect to the Products.
"Sale" or "selling" of the Products or Software Copies shall mean the sale
of a license to use such Products or Software Copies. All references in this
Agreement to the purchase, sale or distribution of Software or Software Copies
shall mean the purchase, sale or distribution of a license to use such Software
or Software Copy.
"Software Copy" or "Software Copies" shall mean an object code
(machine-readable) copy or copies of the Products, together with a copy or
copies of any accompanying Documentation redistributing thereto that is
designated by Publisher for distribution to End-Users. All such copies shall be
fixed on CD-ROM, diskette or other tangible media.
"Territory" means the United States, Canada and any and all United States
possessions, territories and military bases.
ARTICLE II
APPOINTMENT OF DISTRIBUTOR
Section 2.1. Appointment and Authority of Distributor.
(a) Appointment of Distributor. Subject to the terms and
conditions set forth herein, Publisher hereby appoints Distributor to advertise,
promote, resell and distribute ("Distribute") Software Copies of the Products in
the Territory, and Distributor hereby accepts such appointment. Such appointment
shall be on an exclusive basis during the Term. Distributor's sole remuneration
for the Distribution of the Products shall be the fee set forth in Section 5.1
hereof. As a Distributor, Distributor shall have the right to obtain Software
Copies from Publisher and to market and resell such Software Copies to End-Users
both directly and indirectly.
(b) Territorial and Other Resale Restrictions. All Dealer-
Resellers shall have a ship-to address within the Territory and the End-User
License Agreement shall limit use of the Products to within the Licensed
Territory. The Distributor's marketing rights are expressly limited to the
marketing of the Products
4
<PAGE> 5
under approved Publisher Trademarks pursuant to Article 7 below. The foregoing
license is further limited to distribution of Software Copies in tangible
packaged goods media, in the format provided by Publisher, which may include
CD-ROM or diskette, and no right or license is granted to distribute copies via
the Internet or any wide area network (WAN) or otherwise in electronic media. In
addition, the Distributor may not distribute the Products on an OEM, Bundled or
value-added basis, or through original equipment manufacturers, and may not
bundle the Products with the software of a third party, without the prior
written consent of Publisher. The Distributor shall use all commercially
reasonable efforts to realize the maximum sales potential for the Software
Copies in the Territory. The Distributor shall not advertise, market,
distribute, sell, or ship the Software Copies outside the Territory, or sell to
any party reasonably expected to engage in any of the foregoing acts outside the
Territory. The Distributor shall not sell or distribute, or permit the sale or
distribution by any party, of the Products in any scheme being a lottery, as
premiums, give-aways, discounts, as Bundled merchandise, or in conjunction with
any co-branded or other marketing arrangement not approved by Publisher, or for
any other purposes not expressly contemplated and permitted by this Agreement.
(c) Additional Restrictions on the Products. The Software
Copies may not be reproduced, duplicated, copied, modified, translated or
otherwise altered by the Distributor. The Distributor agrees that it will not
itself, or through any Subsidiary, affiliate or other third party: (i) lease,
timeshare, or encumber the Products; (ii) attempt to decompile, disassemble or
reverse engineer the Products in whole or in part, or otherwise attempt to
derive the source code of the Publisher Product, or take any other action in
derogation of Publisher's or its suppliers' intellectual property rights; or
(iii) market, distribute, sell, develop or cause to be developed any derivative
software or any other software program based upon Publisher trade secrets or
Confidential Information of Publisher.
(d) Reservation of Rights. All rights not expressly granted
hereunder are reserved by Publisher. This Agreement does not authorize or imply
any rights other than as expressly set forth herein. Without limiting the
foregoing, Publisher reserves the right under all of its intellectual property
rights to make, have made, develop, market, license, sell and distribute within
the Territory any software products other than the Products licensed for resale
hereunder, to distribute the Products in the Territory on a Bundled or original
equipment manufacturer basis, and to distribute the Products in the Territory
via the Internet or any wide area network (WAN) or otherwise in electronic
media.
5
<PAGE> 6
(e) Ownership. Publisher retains ownership of the Products and
all right, title and interest therein, provided, however, that nothing contained
herein shall be construed to limit, restrict or abrogate any grant of a security
interest under the Security Agreement or the Intellectual Property Security
Agreement of the Publisher. The Distributor acknowledges and agrees that it is
acquiring a limited right to resell certain Software Copies of the Products and
a license to use the Publisher Trademarks as specified hereunder. All patents,
copyrights, trade secrets and other intellectual property rights in and to the
Products shall remain the exclusive property of Publisher or its suppliers.
Distributor agrees that, as between Distributor and Publisher, Publisher owns
all right, title, and interest in the Products and in all of Publisher's
patents, trademarks, trade names, inventions, copyrights, know-how, and trade
secrets relating to the design, manufacture, operation or service of the
Products. The use by Distributor of any of these property rights is authorized
only for the purposes herein set forth or in the Other Loan Documents, and,
except as otherwise provided herein or in the Other Loan Documents, upon
termination of this Agreement for any reason such authorization shall cease. The
Software Copies are offered for sale and are sold by Publisher subject in every
case to the condition that such sale does not convey any license, expressly or
by implication, to manufacture, duplicate or otherwise copy or reproduce any of
the Software Copies, except as expressly set forth herein.
(f) Notification of Unauthorized Use. The Distributor shall
promptly notify Publisher in writing upon its discovery of any unauthorized use
or infringement of the Products or Publisher's patent, copyright, trademark or
other intellectual property rights with respect thereto. Publisher shall have
the sole and exclusive right in its sole discretion to bring an infringement
action or proceeding for its own account against a third party, and, in the
event that Publisher brings such an action or proceeding, the Distributor shall
cooperate and provide reasonable information and assistance to Publisher and its
counsel in connection with any such action or proceeding.
Section 2.2. Products. For purposes of this Agreement, "Products" includes
all computer software and hardware and related products manufactured or marketed
by Publisher prior to and during the term of this Agreement. The term "Products"
does not include, however, those computer software and hardware and related
products for which Publisher does not have the right, pursuant to agreements
that are in force on the date hereof and listed on Exhibit A hereto ("Excluded
Products"), to grant to Distributor the rights described herein, except that,
with respect to such Excluded Products, Distributor shall have the rights
described herein
6
<PAGE> 7
to the extent permissible under such existing agreements. In addition, Publisher
shall use commercially reasonable efforts to (i) obtain for Distributor the full
rights hereunder to the Excluded Products and (ii) make available to Distributor
any comparable distribution rights which become available during the term of
this Agreement in the Territory, as such rights become available. Upon such
termination, such computer software and hardware and related products shall be
deemed "Products" for purposes of this Agreement.
Section 2.3. Consents. Publisher has secured or will use all commercially
reasonable efforts to secure for the Products and the Publisher Trademarks all
necessary licenses and consents required pursuant to all applicable copyright
and other intellectual property laws and waivers of any and all moral rights
free of royalty and fees to the relevant parties for Distributor to exercise its
rights under this Agreement with respect to the Publisher Trademarks and the
Products. Any and all expenses incurred by Publisher to obtain such licenses and
consents from third parties shall be borne by Publisher.
Section 2.4. Right of First Offer. If Publisher desires to grant a third
party license to develop, manufacture or market conversions of any Products in
formats or on platforms other than as manufactured or marketed by Publisher,
Publisher and Distributor shall enter into good faith negotiations to reach an
agreement with respect to such other formats or platforms. In the event that
Publisher and Distributor are unable to reach an agreement within 60 days after
commencing such negotiations, and at such time or thereafter Publisher is
considering entering into an agreement or arrangement with a third party,
Publisher shall first give written notice of its intention to enter into such
agreement or arrangement to Distributor, specifying the material terms thereof,
and Distributor shall have 20 days from the receipt of such notice to enter into
such agreement or arrangement with Publisher on the same terms as specified in
such notice. If Distributor does not exercise such right by the end of such 20
day term, Publisher may enter into such agreement or arrangement with such third
party on terms identical to those specified in its notice to Distributor.
Notwithstanding the foregoing, nothing herein shall be deemed to restrict
Publisher's right to manufacture or market any Products in formats or on
platforms other than those existing on the date hereof if such manufacturing or
marketing activities are carried out by Publisher, and not by a third party.
7
<PAGE> 8
ARTICLE III
TERM
Section 3.1. Initial Term. This Agreement is effective as of the date
hereof (the "Effective Date") and, subject to extension or earlier termination
as provided for herein, shall terminate on March 31, 2001 (the "Initial Term").
Distributor's right to Distribute the Products is effective as soon as is
reasonably practicable after the date hereof, in Distributor's sole discretion.
Section 3.2. Renewal. Distributor and Publisher, in their sole discretion,
may mutually agree to renew this Agreement at the end of the Initial Term or any
subsequent renewal thereof for a period of one (1) year from such date (a
"Renewal Term"). Prior to the end of the Initial Term or any Renewal Term the
parties shall conduct good faith discussions regarding the renewal of such term,
provided, however, that neither party shall be obligated to renew such term.
Unless otherwise provided, the Initial Term and all Renewal Terms shall be
referred to as the "Term."
ARTICLE IV
DISTRIBUTION, MARKETING AND SUPPORT OF THE PRODUCTS
Section 4.1. Creation and Delivery of Products. Publisher shall be
responsible for, and shall bear the costs associated with, creating the
Products, including, without limitation, research and development and preparing,
producing, manufacturing, developing and packaging the Products and the
associated documentation and inserts. Publisher shall manufacture the Products
to be final Products, containing, at a minimum, final software and instruction
manuals consistent with Publisher's existing practices. Publisher shall use
commercially reasonable efforts to meet the reasonable delivery dates and
reasonable quantities set forth on Distributor's orders. At the request of
either party, the parties shall consult in good faith with respect to inventory
held by Publisher and/or Distributor and forecasts of future orders. Products
ordered by Distributor hereunder shall be shipped to such location as designated
by Distributor, freight prepaid by Publisher, on a consignment basis, for sale
and shipment by Distributor to its customers. Distributor may request from time
to time for Publisher to ship products directly to Distributor's customers, and
such shipments shall be treated under this Agreement as a sale and shipment by
Distributor, as if such Products had been shipped to Distributor by Publisher
and then sold and shipped by Distributor to Distributor's customers. Any
shipments by
8
<PAGE> 9
Distributor to its customers, or by Publisher to Distributor's customers at
Distributor's request, shall be at Distributor's sole expense.
Section 4.2. Quality and Support. Publisher agrees that the Products shall
conform to the standards of quality consistent with Publisher's prior products
in the same price classification. Publisher shall maintain reasonable and
adequate quality assurance for the Products as is customary in the industry.
Publisher shall be also responsible for, and provide, consumer technical support
for the Products consistent with its current practice, and in no event less than
a level of support that is customary in the industry.
Section 4.3. Risk of Loss. Distributor shall bear the risk of loss for all
Products after such Products are received by Distributor in accordance with
orders placed by Distributor pursuant to Section 4.1 above. Risk of loss shall
pass to Publisher upon receipt by Publisher of any Products returned by
Distributor pursuant to Section 4.6.
Section 4.4. Sales Literature. Publisher agrees to provide at Publisher's
cost to Distributor such quantities of specification sheets, catalogs and other
printed sales materials relating to the Products that Publisher prepares for the
marketing and promotion of the Products as may be reasonably requested by
Distributor in sufficient time before the release of the Products and continuing
for the life of the Products.
Section 4.5. Marketing Support. Publisher agrees to use commercially
reasonable efforts to provide at its expense advertising and public relations
support in order to facilitate the marketing of the Products by Distributor in
the Territory. Prior to and throughout the Term of this Agreement, Publisher
agrees to consult with Distributor on the nature and extent of its market
support activities. Publisher agrees to provide Distributor with a reasonable
number of free trade and press samples of the Products as requested from time to
time by Distributor. A representative of Publisher reasonably satisfactory to
Distributor shall, at Publisher's or Distributor's reasonable request, accompany
Distributor on sales calls and at meetings with Distributor's customers, at
Publisher's expense. Distributor shall manage co-op marketing and advertising
with respect to Products Distributed by Distributor and Publisher shall bear the
expense thereof up to an amount equal to 5.5% of Distributor's gross sales in
each fiscal year of Distributor or a greater amount that is mutually agreed upon
by the parties. Credits or refunds for co-op marketing granted by Distributor
may be deducted by Distributor from payments due Publisher hereunder.
9
<PAGE> 10
Section 4.6. Consignment and Return. All Products ordered by Distributor
and delivered by Publisher shall be held for the benefit of Publisher until
shipped to Distributor's customers and at no time shall title of Products
ordered by or delivered to Distributor pass to Distributor. Products shall be
shipped by Distributor to its customers F.O.B. point of shipment. Costs of
freight shall be the responsibility of such customer or Distributor, as agreed
upon by Distributor and its customers in accordance with current trade
practices. Distributor's return policy shall provide that customers may return
Products as defective or for stock balancing with approval of Distributor and an
authorized return merchandise authorization number ("RMA"). Distributor shall
have the right to return to Publisher any and all Products (i) not manufactured
to the quality standards of products customarily distributed by Distributor;
(ii) not delivered in accordance with the order placed by Distributor or the
terms and conditions of this Agreement; (iii) that are defective in operation or
packaging; (iv) returned by Distributor's customers or end-users; or (v) which
Distributor does not Distribute. Distributor shall request from Publisher a RMA
for returns by a Distributor customer in excess of one thousand (1,000) units,
and Publisher shall issue such RMA number to Distributor unless such customer
does not return such units. Distributor and Publisher shall consult with respect
to the actions to be taken with respect to requests by Distributor customers to
return units of the Products in excess of one thousand (1,000) units.
Distributor shall be responsible for costs of freight and insurance for all
Products returned to Publisher, except for returns pursuant to items (i), (ii)
or (iii) of this Section or in the event that Distributor terminates this
Agreement pursuant to Sections 11.2(a) or 11.2(b). Following the termination of
this Agreement, Publisher shall be responsible for all requests for returns of
Products from Distributor's customers, including credits or refunds with respect
thereto, and Distributor shall have no responsibility or liability of any kind
with respect thereto, except as set forth in this paragraph below. For each unit
of a Product returned to Publisher following the termination of this Agreement,
by a customer who acquired such Product from Distributor, in excess of the
aggregate units of such Product Distributed to such customer following such
termination, Distributor shall pay to Publisher the lesser of fifteen percent
(15%) of the amount Publisher actually refunds or credits such customer for such
returned unit or the amount received by Distributor pursuant to Section 5.1 for
the Distribution of such returned unit. Distributor shall pay such amount to
Publisher within sixty (60) days of receipt of an invoice detailing the customer
returning the Products, the number of units of the Products returned, the number
of units of the Products Distributed to such customer following termination of
this Agreement and the amount of the refund or credit with respect to such
returns actually granted by Publisher. Notwithstanding
10
<PAGE> 11
the foregoing, except for returns pursuant to items (i), (ii), and (iii) of this
Section, Distributor may not return more than 18% of all Products Distributed
during any year or 25% of a single identified Product.
Section 4.7. General. Subject to Section 4.8 below and the other terms of
this Agreement, all aspects of Distributor's exercise of any and/or all of the
rights herein granted by Publisher with respect to the Distribution of the
Products during the Term shall be undertaken in Distributor's sole discretion,
including without limitation, returns policies, terms and conditions of sale,
compilation of customer names and use of warranty and end-user registration
information. Distributor agrees that it shall disclose to Publisher and
Publisher agrees that it shall disclose to Distributor, following the other
party's written request, any warranty or end-user registration information with
respect to the Products previously Distributed by Distributor. Publisher shall
be solely liable and responsible for any uses it makes of such information.
Section 4.8. Pricing. Publisher shall, after consultation with
Distributor, develop a price list with respect to the Products, which may
include different prices for Products Distributed in Canada. Such price list
shall set forth the price Distributor shall charge its customers for the
Products, prior to any customary trade discounts, rebates, promotional
allowances or fees, and commission splits Distributor may offer customers for
the Products. Such price list may also set forth the guidelines for co-op
advertising, price protection, allowances for defective Products, shipping
charges and promotional incentives as such policies are set forth in this
Agreement. Distributor may Distribute Products without consulting Publisher as
long as prices are consistent with the price list. Distributor shall consult
with Publisher regarding any price protections or price reductions.
Section 4.9. Warranty Obligation. Publisher shall be fully responsible for
providing a warranty to End-Users, to the extent determined by Publisher, for
the Products. Distributor shall pass on to End-Users Publisher's standard
limited warranty and other terms contained in the End-User License Agreement
included with each Software Copy but Distributor shall have no warranty
obligation to End-Users.
Section 4.10. Consumer Adviser Rating Compliance. Publisher agrees that,
if so required by Distributor and/or any governmental entity, it shall submit
each Product or materials associated with such Product to such third party as is
designated by Distributor and/or the governmental entity for the purpose of
obtaining consumer
11
<PAGE> 12
advisory rating code(s) for each Product. Any and all costs and expenses
incurred in connection with the procurement of such consumer advisory rating
code(s) shall be borne solely by Publisher.
ARTICLE V
TERMS OF PAYMENT WITH RESPECT TO DISTRIBUTION
Section 5.1. Service Fees. Distributor shall be entitled to receive
payment of, and to deduct and retain a monthly service fee (the "Service Fee")
equal to, 17.5% of Net Receipts for each fiscal month of Distributor or, in the
case of the first month, the number of days in which this Agreement is in
effect, in consideration of Distributor's Distribution of the Products. Payment
of the Service Fee shall have priority over all payments to Publisher and other
deductions by Distributor under this Agreement. For the purposes of this
Agreement, "Net Receipts" shall mean, for any period, monies received by
Distributor from customers in respect of sales of the Products less customary
trade discounts, price protection and monies credited to customers' accounts for
sales returns, in each case during such period.
Section 5.2. Uncollectible Accounts. Distributor shall manage the
invoicing and collection of amounts due Distributor for its Distribution of
Products. Distributor shall take such steps as it deems reasonable and
appropriate to collect any such amount which is overdue. Distributor shall
determine in its sole discretion exercised in good faith (but in any event no
later than six (6) months after such amount was due) when an amount may be
deemed uncollectible. In the event that all or any portion of an amount deemed
uncollectible is later collected, Distributor shall remit such amount in
conjunction with the statements and payments to be made pursuant to Paragraph
5.3(a) below.
Section 5.3. Statements and Payment Terms.
(a) Within ten (10) days following the end of each fiscal
month of Distributor (each, a "Payment Date") during the Term, Distributor shall
provide Publisher with a written statement specifying for each Product: (i) the
total number of Products Distributed during such month; (ii) the Net Receipts
collected during such month for the Distribution of the Products; (iii) the
deductions pursuant to Sections 4.5, 5.1, 6.3 and 6.4 for such month; (iv) any
required tax deductions; (v) any other deductions for money owed Distributor
hereunder, including, without limitation, pursuant to Article VI hereof; and
(vi) the balance of the Net Receipts due Publisher in respect of such month.
With such statement and subject to the
12
<PAGE> 13
provisions of this Agreement, including the foregoing deductions, Distributor
shall pay Publisher the consideration due Publisher in respect of that month.
Until the Loans (as defined in Section 6.1 hereof) shall be paid in full, the
set-offs permitted by Sections 6.3(b) and 6.4(b) shall remain in effect.
Distributor's payment terms with its customers shall not exceed 60 days from the
date of shipment by Distributor without the prior written consent of Publisher.
Section 5.4. Books and Records. Distributor shall maintain, at its
offices, books of account and records concerning the calculation of Net
Receipts. An independent certified public accountant or representative of
Publisher (who shall have signed a confidentiality agreement with Distributor in
customary form) appointed by Publisher may examine Distributor's books and
records solely for the purpose of verifying the accuracy thereof and of the
invoice payment statements and royalties provided hereunder, only during
Distributor's normal business hours and upon not less than fourteen (14) days
prior written notice and not more than once in any calender year; provided
however, that Distributor's books and records shall be deemed conclusive and no
examination shall be permitted with respect to such books and records that
Publisher has not examined pursuant to this Section 5.4 within two years after
the date of such books and records. Any such audit shall be at Publisher's sole
expense unless such inspection uncovers a shortfall of at least 10% of the
amounts due to Publisher for such period, in which case Distributor shall
reimburse Publisher for the reasonable cost of such audit. The rights
hereinabove granted to Publisher party constitute Publisher's sole and exclusive
rights to examine the Distributor's books and records.
Section 5.5. Minimum Biannual Payment Obligations. (a) Distributor and
Publisher shall jointly determine and agree upon the expected minimum amounts
payable pursuant to the terms of this Agreement (after giving effect to
deductions for the Service Fee, satisfaction of principal on and interest on the
Loans and other appropriate set-offs or deductions) during each six-month period
commencing April 1, 1999 (the "Minimum Obligations") as determined in meetings
to be held between Publisher and Distributor prior to the beginning of each
Six-Month Period at which Publisher and Distributor shall use reasonable good
faith efforts to determine such Minimum Obligations. As used herein, "Six-Month
Period" means the six (6) month period following April 1, 1999, and each
subsequent six-month period thereafter and continuing until the expiration of
the Term. In the event that Distributor fails to pay the Publisher the Minimum
Obligation for any Six-Month Period, Publisher, by providing written notice
(setting forth payments received and any claimed shortfall) to Distributor
within thirty (30) days of the last Payment Date of such Six-Month
13
<PAGE> 14
Period, may terminate this Agreement upon the expiration of next Six-Month
Period, which termination shall be Publisher's sole and exclusive remedy for
Distributor's failure to meet the Minimum Obligation. If Publisher provides
Distributor with such notice, Distributor shall have thirty (30) days in which
to cure such breach by payment of the amount by which Distributor's payments to
Publisher for such Six-Month Period fell below 75% of the Minimum Obligation for
such period.
(b) In the event that Publisher and Distributor are unable to
agree on the Minimum Obligations by the commencement of any Six-Month Period
pursuant to the first sentence of Section 5.5(a), after using reasonable good
faith efforts to do so, such disagreement shall be finally settled by
arbitration conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (the "AAA") in effect as of the date of the
arbitration, except as they may be modified herein or by mutual agreement of
Parent and Publisher. The parties shall use reasonable best efforts to complete
the arbitration within 90 days after such disagreement is submitted to
arbitration. The arbitration shall be conducted by three arbitrators, each
having substantial experience in, or knowledge of, the interactive computer
software industry, selected within thirty days following the submission of a
dispute to arbitration as follows: (i) one arbitrator shall be selected by
Distributor; (ii) one arbitrator shall be selected by Publisher; and (iii) one
arbitrator shall be selected from a list of five names submitted by the AAA as
follows: starting with Distributor, Distributor and Publisher shall alternately
have four days beginning with the transmittal date of the list in which to
strike one name from the list until only one name, that of the third arbitrator,
remains. If either Distributor or Publisher does not strike a name from the list
within the four day period, the other shall have the right to select the third
arbitrator from the names remaining on the list. Any arbitration conducted
pursuant to this Section 5.5(b) shall be decided by the vote of at least two of
the three arbitrators, and the final decision shall be in the form of a
reasoned, written statement of the amount of the Minimum Obligation for the
Six-Month Period for which the parties are unable to agree. Each of Distributor
and Publisher stipulates that the provisions hereof, and the decision of the
arbitrators with respect to disagreement with respect to the amount of the
Minimum Obligation, shall be final and binding upon the parties and shall be the
sole and exclusive remedy for such disagreement. Each Distributor and Publisher
hereby acknowledges that since arbitration is the exclusive remedy, neither
Distributor nor Publisher has the right to resort to any federal, state or local
court or administrative agency concerning any dispute, controversy or claim
with respect to the parties inability to agree on the amount of the Minimum
Obligation and that the decision of the arbitrators shall be a complete defense
to any suit, action or proceed-
14
<PAGE> 15
ing instituted in any federal, state or local court or before any administrative
agency with respect to the parties inability to agree on the amount of the
Minimum Obligation; provided that the decision of the arbitrators is subject to
vacation by a court of competent jurisdiction pursuant to the terms of the
Federal Arbitration Act. It is the intention of the parties that the arbitration
decision will be final and binding. The arbitration shall be held in the City,
County and State of New York.
ARTICLE VI
LOANS BY DISTRIBUTOR
Section 6.1. Loans. (a) Subject to and upon the terms and conditions
hereof, Distributor agrees at any time and from time to time after the date
hereof and prior to October 15, 1998 (the "Borrowing Expiration Date") to make
loans (collectively, the "Loans") to Publisher, in an amount not to exceed
$5,500,000 in the aggregate (the "Maximum Loan Commitment") and, in any event,
not to exceed, in the aggregate, the lesser of $1,500,000 or the Maximum Loan
Commitment as reduced pursuant to clause (b) of this Section 6.1, as of August
21, 1998; the lesser of $3,500,000 or the Maximum Loan Commitment as reduced
pursuant to clause (b) of this Section 6.1, as of September 4, 1998; the lesser
of 5,000,000 or the Maximum Loan Commitment as reduced pursuant to clause (b) of
this Section 6.1, as of September 18, 1998; and the lesser of $5,500,000 or the
Maximum Loan Commitment as reduced pursuant to clause (b) of this Section 6.1,
as of October 14, 1998; and at all times thereafter. Publisher agrees,
covenants, represents and warrants that such Loans shall be used only for
operating working capital needs of the Publisher consistent with past practice.
(b) Once prepaid or repaid, the Loans may not be reborrowed.
Each prepayment of the Loans shall, to the extent of the principal amount so
prepaid, permanently reduce the Maximum Loan Commitment by such amount. The
Loans shall, to the extent not prepaid in full, mature and be due and payable on
the six-month anniversary of the Effective Date (the "Maturity Date"), without
further action on the part of Distributor.
Section 6.2. Notes; Recordation. (a) Publisher's obligation to pay the
principal of and interest on the Loans shall be evidenced by a promissory note
duly executed and delivered by Publisher, substantially in the form of Exhibit B
hereto (the "Note"). Publisher shall be obligated from time to time to pay, on
the terms set forth herein and in the Note, the lesser of the face amount of the
Note and the actual aggregate principal amount outstanding.
15
<PAGE> 16
(b) Distributor is hereby authorized to record the date and
amount of each Loan and each principal and interest payment in respect thereof
in its books and records or on the Note. Such books and records or Note shall
constitute prima facie evidence of the accuracy of the information contained
therein.
Section 6.3. Interest. (a) Publisher agrees to pay interest in respect of
the unpaid principal amount of the Loans from the Drawdown Date (as defined in
the relevant Notice of Borrowing) until the Loans shall be paid in full at a per
annum rate of 12%, or such lesser amount as will not violate applicable law.
Such interest shall be computed on the basis of a 365-day year, and paid for the
number of days elapsed.
(b) Interest on the Loans shall accrue from and including the
relevant Drawdown Date to but excluding the date of any repayment thereof and
shall be payable in arrears on each Payment Date, the date of any principal
repayment or prepayment (whether mandatory or voluntary), at maturity (whether
by acceleration or on the Maturity Date) and, after such maturity, on demand.
Each payment of interest required to be made in connection with a mandatory
prepayment on each Payment Date shall be deducted, pursuant to Section 5.3(a)(v)
hereof, from the amount otherwise payable to the Publisher pursuant to Section
5.3 and may, in the Distributor's sole discretion, be set off against amounts
otherwise payable to Publisher under Section 5.3(a). Each such deduction and
application shall be made second in order of priority, following deduction of
the Service Fee then payable, provided, however, that nothing contained herein
shall limit, extinguish or reduce the Publisher's unconditional, general
obligation to repay all amounts owing from time to time hereunder or under the
other Loan Documents, and provided further, that in the event that Net Receipts
for the months of August and September, 1998 are insufficient to pay all
interest then accrued and owing on the Loans, any such shortfall shall not be
payable until the first Payment Date occurring after October 15, 1998.
(c) In the event that, and for so long as, an Event of Default
under Section 6.7 shall have occurred and be continuing, the outstanding
principal amount of the Loans and, to the extent permitted by law, overdue
interest in respect of the Loans, shall bear interest at a rate per annum equal
to 2% per annum in excess of the highest legal amount applicable under clause
(a) above, such interest to be computed on the basis of a 365-day year, and paid
for the number of days elapsed.
16
<PAGE> 17
Section 6.4. Prepayments, Payments. (a) Publisher shall have the right
voluntarily to prepay the Loans in whole or in part from time to time without
premium or penalty, but together with all interest owing on the amount being
prepaid, in principal amounts not less than $250,000, provided that Publisher
shall give Distributor written notice (or telephonic notice promptly confirmed
in writing), of its intent to prepay all or part of the Loans, at least one
Business Day prior to such prepayment, which notice shall specify the amount of
such prepayment.
(b) On each Payment Date, Publisher shall be required to make
a principal prepayment on the Loans in an amount equal to 32.5% of Net Receipts
for the previous fiscal month of Distributor. Each mandatory prepayment of
principal required to be made on each Payment Date shall be deducted, pursuant
to Section 5.3(a)(v) hereof, from the amount otherwise payable to the Publisher
pursuant to Section 5.3, and may, in the Distributor's sole discretion, be set
off against amounts otherwise payable to Publisher under Section 5.3(a). Each
such deduction and application shall be made third in order of priority,
following deduction of the Service Fee and accrued interest then payable;
provided, however, that nothing contained herein shall limit, extinguish or
reduce the Publisher's unconditional, general obligation to repay all amounts
owing from time to time hereunder or under the other Loan Documents.
(c) All payments to be made to Distributor by Publisher under
this Agreement (including, without limitation, under this Article VI), shall be
made by Publisher without set-off, counterclaim or any other deduction by
Publisher. Notwithstanding any other provision of this Agreement, all amounts
payable by customers or any other Person in connection with Distribution of the
Products shall be payable directly to Distributor for deposit to the Collateral
Account (as defined in the Security Agreement of Publisher), for distribution in
accordance with the terms hereof and thereof, and to the extent of any
inconsistency between any Security Agreement and this Agreement, the terms of
the relevant Security Agreement shall govern and control. All payments shall be
made in lawful money of the United States of America in immediately available
funds to such account as may be specified from time to time in writing to
Publisher.
Section 6.5. Conditions Precedent to Loans. The obligation of Distributor
to make each Loan is subject to the satisfaction of the following conditions
precedent:
(a) Loan Documents.
17
<PAGE> 18
(i) Note. Publisher shall have executed and delivered to
Distributor the Note in the amount and as otherwise provided herein.
(ii) Collateral Security Agreements. Each of Publisher
and each of its subsidiaries (other than non-U.S. subsidiaries) shall
have executed and delivered to Distributor a security agreement
substantially in the form set forth as Exhibit C-1 hereto (collectively,
as amended, modified or supplemented from time to time, the "Security
Agreement") and intellectual property security agreements substantially in
the forms set forth as Exhibits C-2-A and C-2-B hereto (collectively, as
amended, modified or supplemented from time to time, the "Intellectual
Property Security Agreement").
(b) UCC-1 Financing Statements. Distributor shall have
received UCC-1 financing statements signed by Publisher and each of its active
subsidiaries (other than non-U.S. subsidiaries) as debtor, naming Distributor as
secured party with respect to all assets and properties of Publisher and its
subsidiaries (other than non-U.S. subsidiaries) and that are otherwise in
appropriate form for filing in the filing offices set forth in Schedule I of the
Security Agreement and Distributor shall have filed such UCC-1 financing
statements in the applicable jurisdictions, which Distributor shall do promptly
after receipt thereof.
(c) Trademark and Copyright Assignments. Each of Publisher and
its subsidiaries requested by Distributor to do so shall file such trademark and
copyright assignment agreements and such other documents as are reasonably
requested by Distributor.
(d) Additional Matters. Distributor shall have received such
other certificates, opinions, documents and instruments relating to the
transactions contemplated hereby as may have been reasonably requested by
Distributor, and all corporate and other proceedings and all other documents
(including, without limitation, all documents referred to herein and not
appearing as exhibits hereto) and all legal matters in connection with such
transactions shall be satisfactory in form and substance to Distributor.
18
<PAGE> 19
(e) Use of Proceeds. The proceeds of such Loans shall be used
to fund Publisher's operating working capital needs consistent with past
practice.
(f) Notice of Borrowing. Distributor shall have received a
duly executed and completed a notice of borrowing in respect of such Loan, in
substantially the form of Exhibit D (a "Notice of Borrowing"), at least three
Business Days prior to the desired date for the making of such Loan.
(g) Representations and Warranties. The representations and
warranties contained herein and in the other Loan Documents shall be true and
correct in all material respects on such date.
(h) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing on such date.
(i) No Injunction. No law or regulation shall have been
adopted, no order, judgment or decree of any governmental authority shall have
been issued, and no litigation shall be pending or threatened, which in the
judgment of Distributor would enjoin, prohibit or restrain, or impose or result
in the imposition of any material adverse condition upon, the making or
repayment of such Loan.
Section 6.6. Covenants. The Publisher covenants that from the date of this
Agreement and thereafter so long as the Note is outstanding:
(a) Accounting; Financial Statements and Other Information.
The Publisher will maintain a system of accounting established and administered
in accordance with GAAP. The Publisher will deliver to Distributor: (i) within
45 days after the end of each of the first three quarterly fiscal periods in
each fiscal year of the Publisher, consolidated and consolidating balance sheets
of the Publisher and its subsidiaries as at the end of such period and the
related consolidated and consolidating statements of income, stockholders'
equity and changes in financial position of the Publisher and its subsidiaries
for such period, certified by the principal financial officer of the Publisher
as presenting fairly the information contained therein, subject to normal
year-end audit adjustments; (ii) within 90 days after the end of each fiscal
year of the Publisher, consolidated and consolidating balance sheets of the
Publisher and its subsidiaries as at the end of such year and the related
consolidated and consolidating statements of income, stockholders' equity and
changes in financial position of the Publisher and its subsidiaries for such
fiscal year,
19
<PAGE> 20
setting forth in each case in comparative form the consolidated and
consolidating figures for the previous fiscal year, certified by independent
public accountants of recognized national standing selected by the Publisher,
which shall state that such consolidated financial statements present fairly the
financial position of the Publisher and its subsidiaries as at the dates
indicated and the results of their operations and changes in their financial
position for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years and that the audit by such accountants in connection
with such consolidated financial statements has been made in accordance with
GAAP; (3) together with each delivery of financial statements pursuant to clause
(1) or (2) hereof, an officer's certificate as to no Event of Default or
Default; and (4) immediately upon any officer of the Publisher obtaining
knowledge of any condition or event which constitutes an Event of Default, an
officer's certificate describing the same and the period of existence thereof
and what action the Publisher has taken, is taking and proposes to take with
respect thereto;
(b) Inspection. The Publisher will permit any authorized
representatives of Distributor to visit and inspect any of the properties of the
Publisher or any of its subsidiaries, including its and their books of account,
and to make copies and take extracts therefrom, and to discuss its and their
affairs, finances and accounts with its and their officers and independent
public accountants (and by this provision the Publisher authorizes such
accountants to discuss with such representatives the affairs, finances and
accounts of the Publisher and its subsidiaries, provided, that the Publisher is
present), all at such reasonable times and as often as may be reasonably
requested, at Publisher's expense.
(c) Liens, etc. The Publisher will not, and will not permit
any subsidiary of the Publisher to, directly or indirectly create, incur, assume
or permit to exist any Lien on or with respect to any property or asset of the
Publisher or any subsidiary of the Publisher, whether now owned or held or
hereafter acquired, or any income or profits therefrom (whether or not provision
is made for the equal and ratable securing of the Notes in accordance with the
last sentence of this Section), except for the following (collectively,
"Permitted Liens"):
(i) Liens for taxes, assessments or other governmental charges the
payment of which is not at the time required;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary course of
business for sums not yet due or the payment of which is not at the time
required;
20
<PAGE> 21
(iii) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, or to secure (or to obtain letters of credit or surety, appeal
or performance bonds which secure) the performance of bids, tenders,
statutory obligations, leases, purchase, construction or sales contracts
and other similar obligations, in each case not incurred in connection
with the borrowing of money, the obtaining of advances or the payment of
the deferred purchase price of property;
(iv) leases or subleases granted to others, easements,
rights-of-way, restrictions and other similar charges or encumbrances, in
each case incidental to, and not interfering with, the ordinary conduct of
the business of the Publisher or any of its subsidiaries;
(v) Liens granted in connection with that certain facility
agreement, dated as of July 28, 1998, between Barclays Bank PLC, as
secured party and MicroProse Limited, as debtor;
(vi) a Lien in favor of Sony Signatures, as agent for Tristar
Pictures, on the "Starship Troopers" trademark, copyrights and related
assets;
(vii) Liens granted under that certain mortgage on certain German
real property of the Company, dated March 19, 1994 in favor of WestLB
Bank, as secured party;
(viii) Liens granted in connection with that certain factoring
agreement, dated as of July 13, 1998, between Aerofund Financial Inc., as
secured party and MicroProse, Inc., as debtor (the "Aerofund Agreement");
(ix) Liens in favor of Oracle Credit Corporation under an Agreement
dated May 30, 1997, on certain accounting software equipment;
(x) equipment Liens on office equipment, arising in the ordinary
course and consistent with past practices; and
(xi) those Liens existing on the Effective Date, as to which the
representation and warranty set forth in Section 9.1(h) is true
(collectively, the "Scheduled Liens"), provided that the Publisher
covenants and agrees
21
<PAGE> 22
within 45 days following the Effective Date, to use reasonable best
efforts to obtain releases and UCC termination statements of all Scheduled
Liens from the relevant secured parties, and to use reasonable best
efforts to obtain releases and UCC termination statements in connection
with Aerofund Agreement, and to deliver same to Distributor for filing or
recordation wherever appropriate.
(d) Investments, Borrowings, Guaranties, etc. The Publisher
will not, and will not permit any of its subsidiaries to, directly or indirectly
(i) make or own any investment other than those existing on the date hereof, or
(ii) to make any borrowings under the Aerofund Agreement, and will use its
reasonable best efforts to terminate such factoring arrangement, or (iii) create
or become or be liable with respect to any guaranty.
(e) Restricted Payments. The Publisher will not directly or
indirectly declare, order, pay, make or set apart any sum for any payment of
dividends.
(f) Transactions with Affiliates. The Publisher will not, and
will not permit any of its subsidiaries to, directly or indirectly, engage in
any transaction, including, without limitation, the purchase, sale or exchange
of assets or the rendering of any service, with any affiliate of the Publisher,
except in the ordinary course of and pursuant to the reasonable requirements of
the Publisher's or such Subsidiary's business and upon fair and reasonable
terms.
(g) Consolidation, Merger, Sale of Assets, etc. The Publisher
will not, and will not permit any of its subsidiaries to, directly or
indirectly, consolidate with or merge into any other Person or permit any other
Person to consolidate with or merge into it, or sell, lease, abandon or
otherwise dispose of all or substantially all or any substantial part its
assets in one or a series of transactions.
(h) Corporate Existence, etc. The Publisher will at all times
preserve and keep in full force and effect its corporate existence, and rights
and franchises deemed material to its business, and those of each of its
subsidiaries.
(i) Payment of Taxes and Claims. The Publisher will, and will
cause each of its subsidiaries to, pay all taxes, assessments and other
governmental charges imposed upon it or any of its properties or assets or in
respect of any of its franchises, business, income or profits before any penalty
or interest accrues
22
<PAGE> 23
thereon, and all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums which have become due and payable and
which by law have or might become a Lien upon any of its properties or assets.
(j) Insurance, etc. The Publisher will maintain or cause to be
maintained in good repair, working order and condition all properties used or
useful in the business of the Publisher and its subsidiaries and from time to
time will make or cause to be made all appropriate repairs, renewals and
replacements thereof. The Publisher will maintain or cause to be maintained,
with financially sound and reputable insurers, insurance with respect to its and
its subsidiaries' properties and businesses against loss or damage of the kinds
customarily insured against by corporations of established reputation engaged in
the same or similar business and similarly situated, of such types and in such
amounts as are customarily carried under similar circumstances by such other
corporations.
(k) Conditions Subsequent to Initial Loan. Publisher covenants
and agrees, forthwith upon demand by Distributor, (i) to cause each of its
non-U.S. subsidiaries, to execute, deliver and perform a Security Agreement, and
in the case of each such subsidiary owning or having any rights in or to any
intellectual property, each relevant Intellectual Property Security Agreement
(to the extent, in the case of non-U.S. subsidiaries, permitted by applicable
foreign law), (ii) to execute and deliver stock pledge agreements covering the
capital stock of each of its subsidiaries (to the extent, in the case of
non-U.S. subsidiaries, permitted by applicable foreign law), and in connection
therewith to deliver all certificates evidencing any capital stock of its
subsidiaries, (iii) to remove the Scheduled Liens in accordance with Section
6.6(c)(xi) hereof, and (iv) to take all other reasonable actions requested by
Distributor in connection with the foregoing to create, preserve and protect the
security interest intended to be granted to Distributor hereunder.
Without prejudice to any other provision of any Loan Document,
Publisher covenants and agrees that it will not permit any subsidiary to create
or suffer to exist any Lien upon any of such Subsidiary's properties or assets,
other than Permitted Liens and the Liens in favor of the Secured Parties under
the Loan Documents.
Section 6.7. Events of Default. Each of the following events, acts,
occurrences or conditions shall constitute an "Event of Default" under this
Agreement, regardless of whether such event, act, occurrence or condition is
voluntary or involuntary or results from the operation of law or pursuant to or
as a result of
23
<PAGE> 24
compliance by any Person with any judgment, decree, order, rule or regulation of
any court or administrative or governmental body:
(a) Failure to Make Payments. Publisher shall default for 10
days in the payment when due of any principal of or interest on any Loan or any
other Obligations.
(b) Breach of Representation or Warranty. Any representation
or warranty made by Publisher herein or in any other Loan Document or any
certificate or statement delivered pursuant hereto or thereto shall prove to be
false or misleading in any material respect on the date as of which made or
deemed made.
(c) Breach of Covenants. Publisher shall fail to perform or
observe any agreement, covenant or obligation under this Agreement or any other
Loan Document not otherwise specifically covered by this Section 6.7 and such
failure shall continue unremedied for 30 or more days after Publisher has
received notice thereof.
(d) Termination of Agreement. This Agreement shall have been
terminated.
(e) Change of Control. There shall have occurred a Change in
Control.
(f) Bankruptcy, etc. (i) Publisher or any subsidiary shall
commence a voluntary case concerning itself under the Bankruptcy Code; or (ii)
an involuntary case is commenced against Publisher or any subsidiary and the
petition is not dismissed within sixty (60) days after commencement of the case;
or (iii) a custodian (as defined in the Bankruptcy Code) is appointed for, or
takes charge of, all or substantially all of the property of Publisher or any
subsidiary or Publisher or any subsidiary commences any other proceedings under
any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to Publisher or any subsidiary or
there is commenced against Publisher or any subsidiary any such proceeding which
remains undismissed for a period of sixty (60) days; or (iv) any order of relief
or other order approving any such case or proceeding is entered; or (v)
Publisher or any subsidiary is adjudicated insolvent or bankrupt; or (vi)
Publisher or any subsidiary allows any appointment of any custodian or the like
for it or any substantial part of its property to continue undischarged or
unstayed for
24
<PAGE> 25
a period of sixty (60) days; or (vii) Publisher or any subsidiary makes a
general assignment for the benefit of creditors; or (viii) Publisher or any
subsidiary shall fail to pay, or shall state that it is unable to pay, its debts
generally as they become due; or (ix) Publisher or any subsidiary shall call a
meeting of its creditors with a view to arranging a composition or adjustment of
its debts; or (x) Publisher or any subsidiary shall by any act or failure to act
consent to, approve of or acquiesce in any of the foregoing; or (xi) any action
is taken by Publisher or any subsidiary for the purpose of effecting any of the
foregoing.
(g) Default Under Other Agreements. Publisher shall default in
the payment when due (whether by scheduled maturity, required prepayment,
acceleration, or otherwise) of any amount owing in respect of any Indebtedness
(other than the Obligations) in excess of $50,000 in the aggregate; or Publisher
shall default in the performance or observance of any obligation or condition
with respect to any such Indebtedness or any other event shall occur or
condition shall exist, if the effect of such default, event or condition is to
accelerate the maturity of any such Indebtedness or to permit the holder or
holders thereof, or any trustee or agent for such holders, to accelerate the
maturity of any such Indebtedness, or any such Indebtedness shall become or be
declared to be due and payable prior to its stated maturity other than as a
result of a regularly scheduled payment.
Section 6.8. Rights and Remedies. Upon the occurrence of any Event of
Default described in Section 6.7(f) hereof, the then unpaid principal amount of,
and any and all accrued interest on, the Loans shall automatically become
immediately due and payable, with all additional interest from time to time
accrued thereon and without presentation, demand, or protest or other
requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and notice of acceleration), all of which are hereby expressly waived by
Publisher; and upon the occurrence and during the continuance of any other Event
of Default, Distributor may in its sole discretion declare the unpaid principal
amount of, and any and all accrued and unpaid interest on, the Loans to be, and
the same shall thereupon be, immediately due and payable with all additional
interest from time to time accrued thereon and without presentation, demand, or
protest or other requirements of any kind (including, without limitation,
valuation and appraisement, diligence, presentment, notice of intent to demand
or accelerate and notice of acceleration), all of which are hereby expressly
waived by Publisher.
25
<PAGE> 26
Section 6.9. Set-off, etc. Distributor shall have the right, without prior
notice to Publisher, any such notice being expressly waived by Publisher to the
fullest extent permitted by applicable law, to set-off or recoup and apply
against any Obligation hereunder any and all credits, obligations or claims,
whether direct or indirect, absolute or contingent, matured or unmatured, at any
time held or owing by Distributor to or for the credit or the account of
Publisher, howsoever arising, in addition to all other rights and remedies of
Distributor at law, in equity or under any Loan Document.
ARTICLE VII
TRADEMARKS
Section 7.1. Right to Use. During the term of this Agreement, the
Distributor shall have the right and shall be required to indicate to the public
within the Licensed Territory that it is an authorized Distributor of the
Products and shall be required to market and advertise the Products under the
Publisher Trademarks. Notwithstanding the foregoing, any use of Publisher's
Trademarks on Web sites or other postings on the Internet or in other electronic
transmissions via computer networks shall be subject to the prior written
approval of Publisher (which shall not be unreasonably withheld). The
Distributor shall not use Publisher's Trademarks, or any other copyright,
trademark, logo or other right of Publisher in any manner contrary to public
morals, in any manner which is deceptive or misleading, which is derogatory to
Publisher's Trademarks, or which compromises or reflects unfavorably upon the
goodwill, good name, reputation or image of Publisher or Publisher's Trademarks,
or which might jeopardize or limit Publisher's proprietary interest in
Publisher's Trademarks. Nothing herein shall grant to the Distributor any right,
title or interest in Publisher's Trademarks. All uses of Publisher's Trademarks
hereunder by the Distributor shall inure solely to the benefit of Publisher. At
no time during or after the term of this Agreement shall the Distributor
challenge or assist other to challenge Publisher's Trademarks or the
registration thereof or attempt to register any trademarks, marks or trade names
confusingly similar to those of Publisher.
Section 7.2. Approval of Representations. All representations of
Publisher's Trademarks that the Distributor intends to use shall first be
submitted to Publisher for approval in writing (which shall not be unreasonably
withheld). The Distributor shall not use any of Publisher's Trademarks in
conjunction with another trademark on or in relation to any other software
without Publisher's prior written approval. All uses shall be subject to
approval by Publisher to ensure that the Publisher's Trademarks are not used by
the Distributor in a manner that is unautho-
26
<PAGE> 27
rized by Publisher. In the event Publisher does not approve a use by
Distributor, it shall promptly provide Distributor with a written report
detailing the reasons for rejection of such use. In the event Publisher shall
fail to object to a use provided for its review within fourteen (14) business
days after delivery, Publisher shall be deemed to have approved such use.
ARTICLE VIII
CONFIDENTIALITY
Section 8.1. Proprietary Information. Each party acknowledges and agrees
that certain information which it may receive from the other party will be
Proprietary Information to the disclosing party. Proprietary Information shall
mean: (i) the fact that the disclosing party intends to develop or have
developed any particular software or other product; (ii) any confidential
information concerning or related to the Products; (iii) any non-public
information concerning the terms and conditions of this Agreement, except that
Distributor may disclose such terms and conditions as it reasonably deems
appropriate for the Distribution of the Products; (iv) nonpublic information
concerning the business or finances of the disclosing party, including, but not
limited to, trade secrets of the disclosing party; and (v) any other information
which if disclosed to a third party could adversely affect a competitive
advantage of the disclosing party.
Section 8.2. Protection. Each party agrees, both during and after the Term
of this Agreement, to use the Proprietary Information of the other party only in
connection with its rights and obligations under this Agreement, and not to,
directly or indirectly, reproduce such Proprietary Information or distribute or
disclose such Proprietary Information, except to employees who have a need to
know such Proprietary Information in connection with the performance of the
obligations and the exercise of the rights under this Agreement, and to hold in
confidence all Proprietary Information of the other party and to use its best
efforts to prevent the unauthorized copying, use and/or disclosure of the other
party's Proprietary Information.
Section 8.3. No Nondisclosure Obligation. Each party's respective
obligation to hold the other party's Proprietary Information in strict
confidence shall not apply to any information that: (i) becomes known to the
general public without a breach of the nondisclosure obligations of this
Agreement; (ii) is disclosed by the owner of the Proprietary Information to
others without restriction on disclosure; (iii) is obtained from a third party
without breach of a non-disclosure obligation; (iv) was
27
<PAGE> 28
in the possession of the nondisclosing party prior to disclosure by the
disclosing party; or (v) was independently developed by the nondisclosing party
without use of or reference to the other party's Proprietary Information. A
party may disclose Proprietary Information if so required in connection with
any suit, action or required to be disclosed by law, provided that such party
provide the disclosing party with advance notice to allow the disclosing party
to seek a protective order, and provided further that such party takes any
available, reasonable steps to protect the Proprietary Information.
Section 8.4. Irreparable Harm. Each party agrees that the unauthorized use
or disclosure of the disclosing party's Proprietary Information may cause
irreparable injury to the disclosing party. Accordingly, both parties agree that
the remedy at law for any breach of this Section may be inadequate and, in
recognition thereof, agree that the party suffering from the unauthorized use or
disclosure shall be entitled to seek injunctive relief to prevent any such
breach or the threat of such a breach.
ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 9.1. Publisher Representations, Warranties and Covenants.
Publisher represents, warrants and covenants that:
(a) Publisher has the requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Publisher and the
consummation by Publisher of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Publisher. This
Agreement has been duly executed and delivered by Publisher and, assuming this
Agreement constitutes the valid and binding obligation of the Distributor,
constitutes a valid and binding obligation of each such party, enforceable
against each such party in accordance with its terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) the remedy of specific performance and injunctive relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(b) Exhibit A hereto sets forth a true, complete and accurate
list of any and all agreements or arrangements that in any way would limit or
restrict the ability of Distributor to exclusively Distribute the Products in
the Territory.
28
<PAGE> 29
(c) Publisher has and shall have all requisite ownership,
licenses and consents to grant to Distributor all the rights with respect to the
Products and Publisher Trademarks. The Publisher Trademarks and the grant of the
right to Distribute the Products do not violate or infringe any rights
(including without limitation intellectual property or other proprietary rights)
of any third party.
(d) There are no restrictions which would or could prevent
Distributor from Distributing the Products by any media or by means for which
rights are granted to Distributor hereunder and there are not and will not be
any payments (out of any part of any revenues from the Distribution or
exploitation of the Products or otherwise) which must be made by Distributor to
any actors, musicians, directors, writers or to other persons who participated
in the Products, or to any union, guild or other labor organization, for any
right to Distribute the Products or as compensation for any other use of the
Products as contemplated hereunder.
(e) The Products manufactured by Publisher are and shall be of
high quality customary in the industry, and the media upon which the Product is
recorded shall be free from defects in materials and workmanship for a period of
one hundred eighty (180) days from the date of sale to the End-User.
(f) Neither the execution, delivery or performance by
Publisher of this Agreement, nor compliance by it with the terms and provisions
hereof, nor the consummation of the transactions contemplated hereby, (i) will
contravene any applicable provision of any law, statute, rule, regulation, order
or injunction of any court or governmental instrumentality, or (ii) will
conflict or be inconsistent with or result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute a default under, or result
in the creation or imposition of (or the obligation to create or impose) any
Lien upon any of the property or assets of Publisher pursuant to the terms of
any indenture, mortgage, deed of trust, agreement or other instrument to which
Publisher is a party or by which it or any of its property or assets is bound or
to which it may be subject.
(g) Publisher shall use the proceeds of the Loans in
accordance with Section 6.1(a). Neither the making of the Loan nor the use of
the proceeds thereof will violate or be inconsistent with the provisions of
Regulations T, U or X of the Federal Reserve Board.
29
<PAGE> 30
(h) There are no obligations outstanding to any Person in
whose favor a Scheduled Lien exists, and there are no commitments to lend money
or otherwise incur any obligation in favor of any such Person.
Section 9.2. Distributor Representations, Warranties and Covenants.
Distributor represents, warrants and covenants that:
(a) Distributor has the requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Distributor
and the consummation by Distributor of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Distributor. This Agreement has been duly executed and delivered by Distributor
and, assuming this Agreement constitutes the valid and binding obligation of
Publisher, constitutes a valid and binding obligation of each such party,
enforceable against each such party in accordance with its terms, except that
(i) such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) the remedy of specific performance and
injunctive relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
(b) Standard of Business Practices. Distributor shall comply
in all material respects with all laws and regulations relating or pertaining to
the distribution, sale, advertising or use of the Products in the Licensed
Territory, and shall comply in all material respects with the regulations and
directives of any regulatory agencies which shall have jurisdiction over the
Products.
Section 9.3. No Representation Regarding Revenues. Distributor neither
makes nor has made any express or implied representation or warranty as to the
amount of receipts which shall be derived from the Distribution of the Products,
or that there will be any receipts or other sums payable to Publisher.
Section 9.4. Limitation of Liability. EXCEPT AS OTHERWISE PROVIDED
HEREIN, THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES AND
CONDITIONS BY EITHER PARTY. ANY IMPLIED WARRANTIES BY EITHER PARTY, INCLUDING
WARRANTIES OR CONDITIONS OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, ARE EXPRESSLY EXCLUDED. EXCEPT WITH RESPECT TO THE INDEMNIFICATION
OBLIGATIONS SET FORTH IN ARTICLE X OF
30
<PAGE> 31
THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR
ANY OTHER ENTITY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, INDIRECT OR
RELIANCE DAMAGES, HOW EVER CAUSED, WHETHER FOR BREACH OF CONTRACT, NEGLIGENCE OR
UNDER ANY OTHER LEGAL THEORY, WHETHER FORESEEABLE OR NOT AND WHETHER OR NOT
PUBLISHER OR DISTRIBUTOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES,
AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
Section 9.5. Survival. The representations, warranties, limitations on
liability and indemnification rights set forth in Articles IX and X of this
Agreement shall survive the termination of this Agreement.
ARTICLE X
INDEMNIFICATION
Section 10.1. Indemnification of Distributor. Publisher agrees to
indemnify and hold Distributor, its parent, affiliates, officers, directors,
representatives, employees, contractors, agents, subcontractors, customers,
licensees and assigns harmless against any and all actions, claims, losses,
liabilities, costs, damages and expenses (including any legal costs or expenses
incurred, expert witness' fees and any compensation, costs or disbursements
paid to compromise or settle any action or claim) (collectively, "Claims")
suffered or incurred by Distributor or such other persons or entities and
arising from a breach of any representation, warranty, term or provision of this
Agreement by Publisher and its consequences, including, without limitation, any
claim that the exercise of any of Distributor's rights under this Agreement
infringes the copyright, trademark or any other intellectual property or other
rights of any third party, any negligence by Publisher or its agents or
representatives, any claim of defect or error in the manufactured units of the
Products, and any gross negligence or willful misconduct resulting in a virus,
worm, time bomb, booby trap or other programming designed to interfere with the
normal functioning of the Products or the End-User's equipment, programs or data
(collectively, a "Virus").
Section 10.2. Indemnification by the Distributor. Except for Publisher's
indemnification obligations set forth above, the Distributor will indemnify,
defend and hold harmless Publisher, its parents, subsidiaries, affiliates, and
each of their respective successors and permitted assigns, directors, officers,
employees, represen-
31
<PAGE> 32
tatives, agents, consultants, and contractors in respect of any and all losses,
claims, suits, proceedings, liabilities, causes of action, damages, costs,
expenses (including reason able attorneys' fees and expenses) arising out of or
relating to the breach or inaccuracy of, or failure to comply with, any of the
representations, warranties, covenants, agreements, terms or conditions made by
the Distributor hereunder, the actions or omissions, including negligence, of
the Distributor's employees or officers.
Section 10.3. Procedure. Any party entitled to indemnification hereunder
(the "Indemnified Party") shall give prompt written notice of the assertion of
any such Claim to the indemnifying party (the "Indemnifying Party") and the
Indemnified Party shall have the right to select counsel (as reasonably approved
by the Indemnifying Party) and control the defense and settlement thereof,
subject to the right of the Indemnifying Party to participate in any such action
or to proceed at its own expense with counsel of its own choosing. The
Indemnified Party shall have the right to withhold payment of sums due to the
Indemnifying Party pursuant to this Agreement if, and to the extent that, and
for the period during which the Indemnified Party reasonably believes that such
withholding is necessary to maintain a reasonable reserve against any Claims
actually asserted, and also the right to offset against payments due to the
Indemnifying Party for indemnification obligations due the Indemnified Party by
the Indemnifying Party hereunder. If the Indemnifying Party shall fail to
promptly act, the Indemnified Party shall have the right and is hereby
authorized and empowered by the Indemnifying Party to appear by its attorneys in
any such action, to adjust, settle, compromise, litigate, contest, satisfy
judgments and take any other action necessary or desirable for the disposition
of such claim, demand or action; in any such case the Indemnifying Party within
fifteen (15) days after demand therefor by the Indemnified Party, shall fully
reimburse the Indemnified Party for all such payments and expenses, including
attorneys' fees; if the Indemnifying Party shall fail so to reimburse the
Indemnified Party then, without waiving its right otherwise to enforce such
reimbursement, the Indemnified Party shall have the right to deduct the said
amount of such payments and expenses, or any part thereof, from any sums
accruing, to or for the account of the Indemnifying Party under this or any
agreement.
ARTICLE XI
TERMINATION AND REMEDIES
32
<PAGE> 33
Section 11.1. Term and Termination. Unless sooner terminated in accordance
with the procedures specified in this Article XI, this Agreement shall terminate
according to the procedures set out in Article III of this Agreement.
Section 11.2. Termination Upon Event of Default. Distributor shall have
the right, at its option, to terminate this Agreement by giving written notice
to Publisher in the manner provided in Section 13.4 below, effective immediately
upon the receipt of such notice, upon the occurrence of any Event of Default.
Publisher shall have the right, at its option, to terminate this Agreement by
giving written notice to Distributor in the manner provided in Section 12.4
below, effective immediately upon the receipt of such notice, upon the
occurrence of any of the following events:
(a) In the event that Distributor shall be adjudicated
bankrupt or shall petition for or consent to any relief under any bankruptcy,
reorganization, receivership, liquidation, compromise, or any moratorium
statute, whether now or hereafter in effect, or shall make an assignment for the
benefit of its creditors, or shall petition for the appointment of a receiver,
liquidator, trustee, or custodian of all or a substantial part of its assets, or
if a receiver, liquidator, trustee or custodian is appointed for all or a
substantial part of its assets and is not discharged within thirty (30) days
after the date of such appointment.
(b) Upon any default in the performance of or breach of any
material agreement, covenant, obligation or undertaking of Distributor made
hereunder, if such default or breach shall not be remedied within thirty (30)
days of delivery of notice of such default or breach. Any such notice shall
state the grounds upon which such claim of default or breach is based, and the
steps required to remedy such default or breach. Notwithstanding anything in
this Agreement to the contrary, neither party shall be deemed to be in breach of
this Agreement if a failure to comply with its terms is directly caused by Force
Majeure or the action or inaction of the other party.
ARTICLE XII
EFFECT OF TERMINATION
Section 12.1. Outstanding Orders. Upon termination of this Agreement,
Publisher shall remain obligated to deliver Products to Distributor or to
Distributor's customers, to fill all outstanding orders placed by Distributor
with Publisher and accepted by Publisher, unless expressly canceled by both
parties, and both parties
33
<PAGE> 34
shall remain obligated to perform any other acts which are necessary or
appropriate to the orderly winding up of the dealings between the parties
hereunder.
Section 12.2. No Sell-Off. (a) Upon termination of this Agreement,
Distributor shall timely return to Publisher, pursuant to Section 4.6 above, all
finished units of the Products in Distributor's possession or control which have
not been Distributed.
(b) All trademarks, trade names, patents, copyrights, designs,
drawings, or other data, photographs, samples, and literature relating to the
Products shall be and remain the property of Publisher. Within thirty (30) days
after the expiration or termination of this Agreement, Distributor shall prepare
all such items in its possession for shipment, as Publisher may direct, at
Publisher's expense. Distributor shall not make or retain any copies of any
confidential items or information which may have been entrusted to it. Effective
upon the termination of this Agreement, Distributor shall cease to use all
trademarks, marks, and trade names of Publisher. Notwithstanding the foregoing,
Distributor shall continue to have such rights in all trademarks, trade names,
patents, copyrights, designs, drawings or other data, photographs, samples and
literature relating to the Products as are necessary to fulfill its outstanding
orders as of the date of the expiration or termination of this Agreement.
Section 12.3. Remaining Payments. Upon termination of this Agreement,
Distributor shall, subject to the provisions of this Agreement, be liable to
Publisher for any consideration due and unpaid, if any, up to the date of such
termination and for any further consideration that may become due and payable to
Publisher pursuant to Section 12.1.
Section 12.4. Remedies. Notwithstanding anything herein to the contrary,
in addition to and not in lieu of its rights to terminate this Agreement upon a
material breach by a party, the non-breaching party shall have the right to
pursue any remedies available to it at law or in equity, including without
limitation the repayment of such sums as have been previously provided by one
party to the other.
Section 12.5. Survival. Any termination of this Agreement (however
occasioned) shall not affect 4.6 and Articles V, VI, VII, VIII, IX, X, XI, XII
and XIII, which shall continue in full force and effect.
34
<PAGE> 35
Section 12.6. Limitation on Termination Liability. Neither party shall
incur any liability whatsoever for any damage, loss or expenses of any kind
suffered or incurred by the other, arising from or incident to any termination
of this Agreement by such party which complies with the terms of this Agreement,
whether or not the terminating party is aware of any such damage, loss or
expense, provided, however, that Publisher shall be and remain liable for all
principal of and interest on the Loans.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Entire Agreement. This Agreement, including the Exhibits
hereto, (i) sets forth the entire agreement between the parties with respect to
the subject matter hereof and supersedes all prior negotiations, understandings
and agreements between the parties hereto concerning the subject matter hereof,
whether express or implied, written or oral and no addition to or modification
of any provision of this Agreement shall be binding upon the parties unless made
by written instrument signed by a duly authorized representative of each of
Publisher and Distributor and (ii) is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
Section 13.2. No Assignment. No assignment or transfer of this Agreement
or any right or privilege granted hereunder, including any assignment by
operation of law pursuant to a merger, liquidation, foreclosure, or involuntary
sale in bankruptcy, shall be permitted by either party without the other party's
prior written consent; provided, however, that either party may transfer, assign
or sublicense all or any part of this Agreement without the other party's
consent provided such parties are contractually obligated to comply with this
Agreement if the transferring, assigning or sublicensing party remains primarily
liable and such transfer, assignment or sublicense is (i) to a direct or
indirect parent or subsidiary of such party or a direct or indirect parent or
subsidiary of such parent or subsidiary, or (ii) to a purchaser of all or
substantially all of such party's assets or outstanding capital stock, whether
by merger, consolidation or otherwise. Any attempted assignment or transfer
contrary to the terms of this Section 13.2 shall be null and void. The
appointment by Distributor of any nonexclusive sub-representative, agent,
sub-distributor, reseller or dealer shall not constitute an assignment or
transfer of any part of, or any right or privilege under, this Agreement.
Subject to the foregoing limitations, this Agreement shall inure to the benefit
of and be binding upon the parties hereto, their successors, and assigns.
35
<PAGE> 36
Section 13.3. Execution of Documents. Each party shall cooperate with the
other party to execute all such documents and do all such acts as may be
reasonably required to enable each party to effectively exercise the rights
granted to it under this Agreement.
Section 13.4. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon receipt, and shall be given
to the parties at the following addresses or telecopy numbers (or at such other
address or telecopy number for a party as shall be specified by like notice):
(a) if to Distributor, to:
Hasbro Interactive, Inc.
50 Dunham Road
Beverly, MA 01915
Attention: Thomas Dusenberry, President
Telecopy: (978) 921-3710
with a copy to:
Hasbro, Inc.
32 W. 23rd Street
New York, New York 10010
Attention: Phillip H. Waldoks
Senior Vice President-Corporate
Legal Affairs and Secretary
Telecopy: (212) 741-0663
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Howard L. Ellin, Esq.
Telecopy: 212-735-2000
36
<PAGE> 37
(b) if to Publisher, to:
MicroProse, Inc.
2490 Mariner Loop
Suite 100
Alameda, California 94501
Attention: Stephen M. Race
Chief Executive Officer
Telecopy: (510) 864-4607
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: David Drummond, Esq.
Telecopy: (650) 493-6811
Section 13.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York. Any action or
proceeding brought to enforce the terms of this Agreement shall be brought in
the State of New York and each agrees to waive any objections to personal
jurisdiction, service of process and venue in any court of the United States
located in the State of New York or in New York state court.
Section 13.6. Independent Contractors. The relationship of Publisher and
the Distributor established by this Agreement is that of independent
contractors, and nothing contained in this Agreement shall be construed to (i)
give either party the power to direct and control the day-to-day activities of
the other, (ii) constitute the parties as partners, co-owners or otherwise as
participants in a joint or common undertaking, or (iii) allow the Distributor to
create or assume any obligation on behalf of Publisher for any purpose
whatsoever. All financial obligations associated with the Distributor's business
are the sole responsibility of the Distributor. Distributor shall have no
responsibility or liability of any kind to any subcontractors or third parties
providing services to or for the benefit of Publisher. Distributor shall be free
to manage and control its business as it sees fit, without the management,
control or assistance of Publisher, except as otherwise prescribed herein.
37
<PAGE> 38
Section 13.7. Severability; Headings. Should any provision of this
Agreement be held to be void, invalid, or inoperative, the remaining provisions
shall not be affected and shall continue in effect as though such unenforceable
provision had been deleted herefrom. The name of this Agreement and the headings
of the Articles and Sections of this Agreement are inserted merely for
convenience of reference and shall not be used or relied upon in connection with
the construction or interpretation of this Agreement.
Section 13.8. No Waiver. No failure or delay by either party in exercising
any right, power, or remedy hereunder shall operate as a waiver of any
subsequent exercise of such right, power, or remedy. It is agreed that any
remedies provided in this Agreement shall be cumulative and shall not be
exclusive of any other remedies available hereunder, or at law or in equity. No
amendment, waiver or modification of any provision of this Agreement shall be
effective unless in writing and signed by the party against whom such amendment,
waiver or modification is sought to been forced.
Section 13.9. Force Majeure. If the performance of this Agreement or any
obligations hereunder is prevented, restricted or interfered with by reason of
fire or other casualty or accident, strike or labor dispute, war or other
violence, any law, order, proclamation, regulation, ordinance, demand or
requirement of any government agency, or any other act or condition beyond the
reasonable control of the parties hereto ("Force Majeure"), the party so
affected upon giving prompt notice to the other parties will be excused from
such performance during such prevention, restriction or interference.
Section 13.10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one and the same instrument, but this Agreement
shall not be binding upon the parties until it has been signed by both parties.
38
<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
HASBRO INTERACTIVE, INC. MICROPROSE, INC.
/s/ Thomas R. Dusenberry /s/ Stephen M. Race
- ----------------------------- ------------------------------
Authorized signature Authorized signature
Thomas R. Dusenberry Stephen M. Race
- ----------------------------- ------------------------------
Printed name Printed name
President Chief Executive Officer
- ----------------------------- ------------------------------
Title Title
<PAGE> 40
Exhibit A
EXCLUDED PRODUCTS
<PAGE> 41
EXHIBIT A
EXISTING PRODUCT RESTRICTIONS
1. Restrictions under Agreement with Activision for North American
distribution of Sony PSX version of CIVILIZATION II.
2. Restrictions under Agreement with GT Interactive for budget deal on
back-catalog products.
3. Restrictions under Agreement with GT Interactive (WizardWorks) for
publishing of Macintosh versions of products.
4. Restrictions under Agreements with Imagineer for worldwide distribution of
Sega Saturn versions of TRANSPORT TYCOON and CIVILIZATION II.
5. Restrictions under Agreement with Majesco for budget deal on back-catalog
products to Kaybee Toys channel only.
6. Restrictions under License-In Agreements (see list previously provided)
relating to terms of licenses governing individual products or
intellectual properties licensed from third parties. Distributor will be
required to familiarize itself with such requirements and abide by
approval procedures, etc.
7. The parties should consult regarding expeditious transfer of existing
distribution account to Distributor, in light of Publisher's current
accounts receivable and field inventory.
A-1
<PAGE> 42
Exhibit B
NOTE
$5,500,000 New York, New York
August 11, 1998
FOR VALUE RECEIVED, the undersigned, MICROPROSE, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay on the Maturity Date (as
defined in the hereinafter described Software Distribution and Loan Agreement)
to the order of Hasbro Interactive, Inc., a Delaware corporation (the "Lender"),
in lawful money of the United States of America in immediately available funds,
to such account as may be specified from time to time in writing to the Borrower
by the Lender, the principal amount of FIVE MILLION FIVE HUNDRED THOUSAND UNITED
STATES DOLLARS ($5,500,000) or, if less, the then aggregate unpaid principal
amount of Loans (as defined in the hereinafter described Software Distribution
and Loan Agreement) made by the Lender under such Software Distribution and Loan
Agreement.
The Borrower also promises to pay interest on the unpaid principal
amount of each Loan in like money to said account from the date of the making of
such Loan until the principal amount thereof is paid in full, at the rates and
times, and computed in the manner, provided in the Agreement.
This Note (as amended, supplemented or otherwise modified from time
to time, this "Note") is the Note referred to in the Software Distribution and
Loan Agreement dated as of August 11, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Agreement") between the Borrower and
the Lender, and is entitled to the benefits thereof and shall be subject to the
provisions thereof. This Note is secured pursuant to various agreements (as
described in the Agreement).
As provided in the Agreement, this Note is subject to mandatory and
voluntary prepayments, in whole or in part.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the then unpaid principal amount of, and accrued
interest on, this
B-1
<PAGE> 43
Note shall become, or may be declared to be, as applicable, immediately due and
payable in the manner and with the effect provided in the Agreement.
The Borrower hereby waives to the extent permitted by applicable law
presentment, demand, protest or notice of any kind in connection with this Note.
No failure or delay on the part of the Lender in exercising any right, power or
privilege hereunder or under the other Loan Documents (as defined in the
Agreement) and no course of dealing between the Borrower and the Lender shall
operate as a waiver of any such right, power or privilege; nor shall any single
or partial exercise of any such right, power or privilege preclude any other or
further exercise thereof or the exercise of any other such right, power or
privilege. The rights and remedies provided herein and in the other Loan
Documents are cumulative and not exclusive of any rights or remedies which the
Lender would otherwise have.
This Note may not be assigned or otherwise transferred by the Lender
without the prior written consent of the Borrower. The Borrower may not assign
or otherwise transfer any of its rights or obligations under this Note without
the prior written consent of the Lender.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND THE
LENDER HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK.
MICROPROSE, INC.
By:_____________________
Name:
Title:
B-2
<PAGE> 44
Exhibit C-1
SECURITY AGREEMENT
<PAGE> 45
Exhibit C-1
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of August 11, 1998 (as the same may
from time to time be amended, supplemented or otherwise modified, this "Security
Agreement"), among Hasbro, Inc., a Rhode Island corporation ("Parent"), Hasbro
Interactive, Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Distributor" and, together with Parent, the "Secured Parties" and as
agent under certain provisions of this Agreement for the ratable benefit of
itself and Parent, the "Agent"), a Delaware corporation, and [Company], a
__________ corporation (the "Debtor").
W I T N E S S E T H:
WHEREAS, the Borrower and Distributor have entered into the Software
Distribution and Loan Agreement dated as of the date hereof (as amended,
supplemented or otherwise modified from time to time, the "Loan Agreement")
pursuant to which Distributor has agreed (i) to distribute software products of
Borrower and (ii) to make certain loans to the Borrower, in each case subject to
and upon the terms and conditions set forth therein;
WHEREAS, the Borrower, Parent and New HIAC Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent, have entered into an
Agreement and Plan of Merger (the "Merger Agreement") and the Borrower and
Parent have entered into a Stock Option Agreement (the "Option Agreement," and
together with the Merger Agreement, the "Merger Documents"), each dated as of
the date hereof; and
WHEREAS, it is required by the Merger Documents and it is a
condition precedent to the obligation of the Secured Party to make the loans
contemplated by the Loan Agreement, that the Debtor enter into this Security
Agreement and grant the Secured Parties the security interests set forth herein;
C-1-1
<PAGE> 46
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. As used herein, the following terms shall
have the meanings set forth below:
"Account Debtor" shall mean the person who is obligated on a
Receivable.
"Accounts" shall mean "accounts" as such term is defined in Section
9-106 of the UCC.
"Bankruptcy Code" shall mean Title 11 of the United States Code
entitled "Bankruptcy", as amended from time to time, and any successor statute
or statutes.
"Borrower" means MicroProse, Inc., a Delaware corporation.
"Business Day" shall mean any day excluding Saturday, Sunday and any
day which shall be in New York City a legal holiday or a day on which banking
institutions are authorized or required by law or other government actions to
close.
"Chattel Paper" shall mean "chattel paper" as such term is defined
in Section 9-105(b) of the UCC.
"Collateral" shall have the meaning assigned to it in Section 2
hereof.
"Collateral Account" shall mean the account (which may be a
securities account) maintained pursuant to this Security Agreement by the
Secured Parties, entitled "MicroProse, Inc. Collateral Account, Hasbro
Interactive, Inc. and Hasbro, Inc., secured parties", and all funds and
instruments or other items from time to time credited to such account and all
interest thereon.
"Collateral Records" shall mean books, records, computer software,
computer printouts, customer lists, blueprints, technical specifications,
manuals, and similar items which relate to any Collateral.
C-1-2
<PAGE> 47
"Contracts" shall mean all contracts, agreements, licenses, and
other writings to which the Debtor is a party as any of the same may from time
to time be amended, supplemented or otherwise modified.
"Default" shall mean any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Deposit Accounts" shall mean the Collateral Account and any deposit
account, including without limitation, "deposit accounts" as such term is
defined in Section 9-105(e) of the UCC and any other deposit or securities
account (general or special), together with any funds, instruments or other
items credited to any such account from time to time, and all interest thereon.
"Documents" shall mean "documents" as such term is defined in
Section 9-105(f) of the UCC.
"Equipment" shall mean "equipment" as such term is defined in
Section 9-109(2) of the UCC, including, without limitation, machinery,
manufacturing equipment, data processing equipment, computers, office equipment,
furniture, appliances and tools.
"Event of Acceleration" shall mean an Event of Default or any
failure by the Borrower to pay any amount then due and owing under the Merger
Documents.
"Event of Default" shall have the meaning set forth in the Loan
Agreement.
"Fixtures" shall mean "fixtures" as such term is defined in Section
9-313 of the UCC.
"General Intangibles" shall mean "general intangibles" as such term
is defined in Section 9-106 of the UCC, including, without limitation, rights to
the payment of money (other than Receivables), trademarks, copyrights, patents,
and contracts, licenses and franchises, limited and general partnership
interests and joint venture interests, federal income tax refunds, trade names,
to the extent classified as a "general intangible" under the UCC under any
applicable law, distributions on certificated securities (as defined in ss.
8-102(1)(a) of the UCC and uncertificated securities (as defined in ss.
8-102(1)(b) of the UCC, computer programs and other
C-1-3
<PAGE> 48
computer software, inventions, designs, trade secrets, goodwill, proprietary
rights, customer lists, supplier contracts, sale orders, correspondence,
advertising materials, payments due in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of any property, reversionary
interests in pension and profit-sharing plans and reversionary, beneficial and
residual interests in trusts, credits with and other claims against any Person,
together with any collateral for any of the foregoing and the rights under any
security agreement granting a security interest in such collateral.
"Hedging Agreements" shall mean interest rate or currency protection
or hedging arrangements, including without limitation, caps, collars, floors,
forwards and any other similar or dissimilar interest rate or currency exchange
agreements or other interest rate or currency hedging arrangements.
"Instruments" shall mean "instruments" as such term is defined in
Section 9-105(1)(i) of the UCC.
"Insurance Policies" shall mean all insurance policies as in effect
from time to time covering the Debtor or any Collateral.
"Inventory" shall mean "inventory" as such term is defined in ss.
9-109(4) of the UCC, including without limitation, all goods (whether such goods
are in the possession of the Debtor or of a bailee or other Person for sale,
lease, storage, transit, processing, use or otherwise and whether consisting of
whole goods, spare parts, components, supplies, materials or consigned or
returned or repossessed goods), including without limitation, all such goods
which are held for sale or lease or are to be furnished (or which have been
furnished) under any contract of service or which are raw materials or work in
progress or materials used or consumed in the Debtor's business.
"Lien" shall mean with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset.
"Loan Agreement" shall mean that certain Software Distribution and
Loan Agreement, dated as of the date hereof, between Interactive and the
Borrower, as amended or modified from time to time in accordance with its terms.
Money" shall mean "money" as such term is defined in Section
1-201(24) of the UCC.
C-1-4
<PAGE> 49
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and
other like property, if title thereto is governed by a certificate of title
ownership.
"Permitted Liens" shall have the meaning set forth in the Loan Agree
ment.
"Person" shall mean and include any individual, partnership, joint
venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or agency, department or instrumentality
thereof.
"Proceeds" shall mean "proceeds" as such term is defined in Section
9-306(1) of the UCC.
"Receivables" shall mean all rights to payment for goods sold or
leased or services rendered, whether or not earned by performance and all rights
in respect of an Account Debtor, including without limitation, all such rights
in which the Debtor has any right, title or interest by reason of the purchase
thereof by the Debtor, and including without limitation all such rights
constituting or evidenced by any Account, Chattel Paper, Instrument, General
Intangible, note, contract, invoice, purchase order, draft, acceptance,
intercompany account, security agreement, or other evidence of indebtedness or
security, together with (a) any collateral assigned, hypothecated or held to
secure any of the foregoing and the rights under any security agreement granting
a security interest in such collateral, (b) all goods, the sale of which gave
rise to any of the foregoing, including, without limitation, all rights in any
returned or repossessed goods and unpaid seller's rights, (c) all guarantees,
endorsements and indemnifications on, or of, any of the foregoing, and (d) all
powers of attorney for the execution of any evidence of indebtedness or security
or other writing in connection therewith.
"Receivables Records" shall mean (a) all original copies of all
documents, instruments or other writings evidencing the Receivables, (b) all
books, correspondence, credit or other files, records, ledger sheets or cards,
invoices, and other papers relating to Receivables, including without limitation
all tapes, cards, computer tapes, computer discs, computer runs, record keeping
systems and other papers and documents relating to the Receivables, whether in
the possession or under the control of the Debtor or any computer bureau or
agent from time to time acting for the Debtor or otherwise, (c) all evidences of
the filing of financing statements and the registration of other instruments in
connection therewith and amendments, supplements or other modifications
thereto, notices to other creditors or secured
C-1-5
<PAGE> 50
parties, and certificates, acknowledgments, or other writings, including without
limitation lien search reports, from filing or other registration officers, (d)
all credit information, reports and memoranda relating thereto, and (e) all
other written or non-written forms of information related in any way to the
foregoing or any Receivable.
"Security Agreement" shall mean this Security Agreement, as the same
may from time to time be amended, supplemented or otherwise modified.
"Secured Obligations" shall mean all "Obligations" as such term is
defined in Article I of the Loan Agreement, together with all other obligations
from time to time owing by the Borrower, the Debtor or any affiliate of either
of them under or in connection with the Loan Documents and the Immediately
Payable Termination Fee and the Immediately Payable Cash-Out Right (each as
defined in the applicable Merger Document) payable under the Merger Documents.
"UCC" shall mean the Uniform Commercial Code as in effect from time
to time in the State of New York or in any other applicable jurisdiction.
ARTICLE II
GRANT OF SECURITY INTERESTS
As security for the prompt and complete payment and performance in
full of all of the Secured Obligations, the Debtor hereby assigns, pledges and
transfers to the Secured Parties and grants to the Secured Parties a security
interest in and continuing Lien on all of the Debtor's right, title and interest
in, to and under the following, in each case, whether now owned or existing or
hereafter acquired or arising, and wherever located (all of which being
hereinafter collectively called the "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) the Collateral Account;
C-1-6
<PAGE> 51
(v) all Collateral Records;
(vi) all Deposit Accounts;
(vii) all Documents;
(viii) all Equipment;
(ix) all Fixtures;
(x) all General Intangibles;
(xi) all Hedging Agreements;
(xii) all Instruments;
(xiii) all Insurance Policies;
(xiv) all Inventory;
(xv) all Money;
(xvi) all Motor Vehicles;
(xvii) all Receivables;
(xviii) all Receivables Records;
(xix) all other tangible and intangible personal
property;
(xx) all accessions and additions to any or all of the
foregoing, all substitutions and replacements for any or all of the
foregoing and all Proceeds or products of any or all of the foregoing;
provided, however, that there is expressly excluded from the grant of a
security interest contained in this Article II each and every property or asset
which,
C-1-7
<PAGE> 52
by its terms may not be assigned or encumbered, or as to which disclosure
of same is not permitted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Debtor hereby represents and warrants to the Secured Parties,
which representations and warranties shall survive execution and delivery of
this Security Agreement, as follows:
3.1 Validity, Perfection and Priority. (a) The security interests in
the Collateral granted to the Secured Parties hereunder constitute valid and
continuing security interests in the Collateral; and
(b) (i) upon filing of financing statements naming the Debtor
as "debtor" and each Secured Party as "secured party" in the filing offices set
forth on Schedule I hereto, the security interests in the Collateral (other than
Instruments and Chattel Paper) granted to the Secured Parties hereunder will
constitute perfected security interests therein superior and prior to all Liens,
rights or claims of all other Persons (other than Permitted Liens); and (ii)
upon the delivery to the Agent of such items of the Collateral that constitute
Instruments or Chattel Paper, the security interests in such items of collateral
granted to the Secured Parties hereunder will constitute perfected security
interests therein superior and prior to all Liens, rights or claims of all other
Persons (other than Permitted Liens).
3.2 No Liens; Other Financing Statements. (a) Except for the Lien
granted to the Secured Parties hereunder, the Debtor owns and, as to all
Collateral whether now existing or hereafter acquired, will continue to own,
each item of the Collateral free and clear of any and all Liens, rights or
claims of all other Persons other than Permitted Liens, and the Debtor shall
defend the Collateral against all claims and demands of all Persons at any time
claiming the same or any interest therein adverse to the Secured Parties.
(b) No financing statement or other evidence of any Lien
covering or purporting to cover any of the Collateral is on file in any public
office other than (i) financing statements filed or to be filed in connection
with the security interests granted to the Secured Parties hereunder, and (ii)
financing statements filed in connection with Permitted Liens.
C-1-8
<PAGE> 53
3.3 Chief Executive Office. The chief executive office of the Debtor
is located at ________________________________________.
3.4 Location of Inventory and Equipment. All inventory and equipment
now or from time to time included in the Collateral will be located at the
respective addresses set forth in Schedule II hereto.
ARTICLE IV
COVENANTS
The Debtor covenants and agrees with the Secured Parties that from
and after the date of this Security Agreement:
4.1 Further Assurances.
(a) The Debtor will from time to time at the expense of the
Debtor, promptly execute, deliver, file and record all further instruments,
indorsements and other documents, and take such further action as either Secured
Party may deem reasonably necessary or desirable in obtaining the full benefits
of this Security Agreement and of the rights, remedies and powers herein
granted, including, without limitation, the following:
(i) the filing of any financing statements, in form
acceptable to the Secured Parties under the UCC in effect in any
jurisdiction with respect to the liens and security interests granted
hereby;
(ii) the delivery to the Agent of all items of
Collateral constituting Instruments (including, without limitation,
certificated securities) or Chattel Paper, together with undated
instruments of transfer executed by the Debtor in blank that are in form
and substance acceptable to the Agent and such certificates and other
documents as the Agent may reasonably request with respect thereto; and
(iii) furnish to the Secured Parties from time to time
statements and schedules further identifying and describing
C-1-9
<PAGE> 54
the Collateral and such other reports in connection with the Collateral as
either Secured Party may reasonably request, all in reasonable detail and
in form satisfactory to such Secured Party.
(b) The Debtor hereby authorizes each Secured Party to file
any financing statement without the signature of the Debtor to the extent
permitted by applicable law. A photocopy or other reproduction of this Security
Agreement shall be sufficient as a financing statement and may be filed in lieu
of the original to the extent permitted by applicable law. The Debtor will pay
or reimburse the Secured Parties for all filing fees and related expenses
incurred by either Secured Party in connection therewith.
4.2 Change of Name; Identity; Corporate Structure; or Chief
Executive Office Location of Inventory and Equipment. The Debtor will not change
its name, identity, corporate structure or the location of its chief executive
office or locations of its inventory or equipment specified in Schedule II
without (i) giving the Secured Parties at least ten (10) days' prior written
notice clearly describing such new name, identity, corporate structure or new
location and providing such other information in connection therewith as the
Secured Parties may reasonably request, and (ii) taking all action satisfactory
to the Secured Parties as either Secured Party may reasonably request to
maintain the security interest of the Secured Parties in the Collateral intended
to be granted hereby at all times fully perfected with the same or better
priority and in full force and effect.
4.3 Maintain Records. The Debtor will keep and maintain at its own
cost and expense satisfactory and complete records of the Collateral.
4.4 Right of Inspection. Upon reasonable prior notice, the Secured
Parties shall at all times have full and free access during normal business
hours to all the books, correspondence and records of the Debtor, and the
Secured Parties and their representatives may examine the same, take extracts
therefrom and make photo copies thereof, and the Debtor agrees to render the
Secured Parties at the Debtor's cost and expense, such clerical and other
assistance as may be reasonable requested with regard thereto. Upon reasonable
prior notice, the Secured Parties and their representatives shall at all times
also have the right to enter into and upon any premises where any of the
inventory or equipment is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests therein.
C-1-10
<PAGE> 55
4.5 Insurance. The Debtor will maintain, with financially sound and
reputable insurers acceptable to the Secured Parties and licensed to do business
in each state in which any of the Collateral covered by any policy is located,
insurance with respect to the Collateral and its use, against loss or damage of
the kinds customarily insured against by reputable companies in the same or
similar businesses, similarly situated, such insurance to be of such types and
in such amounts (with such deductible amounts) as is customary for such
companies under the same or similar circumstances, similarly situated.
4.6 Payment of Obligations. The Debtor will pay promptly when due
all taxes, assessments and governmental charges or levies imposed upon the
Collateral, as well as all claims of any kind (including, without limitation,
claims for labor, materials, supplies and services) against or with respect to
the Collateral.
4.7 Negative Pledge. The Debtor will not create, incur or permit to
exist, will defend the Collateral against, and will take such other action as is
necessary to remove, any Lien or claim on or to the Collateral, other than the
Liens created hereby and Permitted Liens.
4.8 Limitations on Dispositions of Collateral. The Debtor will not
sell, transfer, lease or otherwise dispose of any of the Collateral, or attempt,
offer or contract to do so except in the ordinary course of its business.
4.9 Performance by the Secured Parties of the Debtor's Obligations;
Reimbursement. If the Debtor fails to perform or comply with any of its
agreements contained herein, either Secured Party may, without notice to or
consent by the Debtor, perform or comply or cause performance or compliance
therewith and the expenses of such Secured Party incurred in connection with
such performance or compliance, together with interest thereon at the rate of
interest then applicable to the Loans, shall be payable by the Debtor to such
Secured Party on demand and such reimbursement obligation shall be secured
hereby.
4.10 Maintaining the Collateral Account. So long as any of the
Secured Obligations shall remain unpaid: it shall be a term and condition of the
Collateral Account that the Secured Parties, and each of them acting alone,
shall have the sole right to withdraw funds or hold any funds in the Collateral
Account, and the Debtor hereby agrees and acknowledges that the Secured Parties
and each of them shall have exclusive dominion and control of the Collateral
Account, and that the Secured Parties, or either of them shall be the sole
Person entitled to give
C-1-11
<PAGE> 56
instructions to release, withdraw or transfer funds in the Collateral Account.
Neither Secured Party shall have any obligation to invest any funds from time to
time in the Collateral Account in any interest-bearing investment.
ARTICLE V
POWER OF ATTORNEY
The Debtor hereby irrevocably constitutes and appoints each Secured
Party and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of the Debtor and in the name of the Debtor or in its own
name, from time to time in each Secured Party's discretion, for the purpose of
carrying out the terms of this Security Agreement, to, at any time that an
Event of Acceleration has occurred and is continuing, take any and all
appropriate action and execute any and all documents and instruments which in
any such case may be necessary or desirable in the reasonable judgment of either
Secured Party to accomplish the purposes of this Security Agreement.
The Debtor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
ARTICLE VI
REMEDIES; RIGHTS UPON DEFAULT
6.1 Rights and Remedies Generally. If an Event of Acceleration shall
occur and be continuing, then and in every such case, the Secured Parties shall
have all the rights of a secured party under the UCC, shall have all rights now
or hereafter existing under all other applicable laws, and, subject to any
mandatory requirements of applicable law then in effect, shall have all the
rights set forth in this Security Agreement and all the rights set forth with
respect to the Collateral or this Security Agreement in any other security
agreement between the parties.
6.2 Assembly of Collateral. If an Event of Acceleration shall occur
and be continuing, upon five days notice to the Debtor, the Debtor shall, at its
own expense, assemble the Collateral (or from time to time any portion thereof)
and
C-1-12
<PAGE> 57
make it available to the Secured Parties at any place or places designated by
the Secured Parties which is reasonably convenient to the parties.
6.3 Disposition of Collateral. The Secured Parties will give the
Debtor reasonable notice of the time and place of any public sale of the
Collateral or any part thereof or of the time after which any private sale or
any other intended disposition thereof is to be made. The Debtor agrees that the
requirements of reasonable notice to it shall be met if such notice is mailed,
postage prepaid to its address specified in Section 3.3 of this Security
Agreement (or such other address that the Debtor may provide to the Secured
Parties in writing) at least five (5) days before the time of any public sale or
after which any private sale may be made.
6.4 Recourse. The Debtor shall remain liable for any deficiency if
the proceeds of any sale or other disposition of the Collateral are insufficient
to satisfy the Secured Obligations. The Debtor shall also be liable for all
expenses of the Secured Parties incurred in connection with collecting such
deficiency, including, without limitation, the reasonable fees and disbursements
of any attorneys employed by the Secured Parties to collect such deficiency.
6.5 Expenses; Attorneys Fees. The Debtor shall reimburse the Secured
Parties for all of their expenses in connection with the exercise of their
rights hereunder, including, without limitation, all reasonable attorneys' fees
and legal expenses incurred by either Secured Party. Expenses of retaking,
holding, preparing for sale, selling or the like shall include the reasonable
attorneys' fees and legal expenses of the Secured Parties. All such expenses
shall be secured hereby.
6.6 Limitation on Duties Regarding Preservation of Collateral. Each
Secured Party's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the UCC
or otherwise, shall be to deal with it in the same manner as such Secured Party
deals with similar property for its own account.
(a) The Secured Parties shall have no obligation to take any
steps to preserve rights against prior parties to any Collateral.
(b) Neither the Secured Parties nor any of their directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon all or any part of the Collateral or for any delay in doing so or
shall be under
C-1-13
<PAGE> 58
any obligation to sell or otherwise dispose of any Collateral upon the request
of the Debtor or otherwise.
6.7 Application of Proceeds. The Secured Parties hereby agree that
all proceeds received on account of any sale or other disposition of any
Collateral, and all Collateral applied directly in satisfaction of any Secured
Obligations, shall be applied as follows: first, to the payment of all expenses
incurred under section 6.5 hereof, second, to the payment of all interest
accrued and owing on the Loans under the Loan Agreement until paid in full,
third, to the payment of all principal due and owing on the Loans under the Loan
Agreement, until paid in full, fourth, to the payment of any expenses relating
to or other amounts arising under the Loan Agreement not covered by clause the
"first" hereof, and fifth, to the payment of Secured Obligations due and owing
under the Merger Documents until paid in full.
ARTICLE VII
MISCELLANEOUS
7.1 Indemnity. The Debtor agrees to indemnify, reimburse and hold
the Secured Parties and their officers, directors, employees, representatives
and agents ("Indemnitees") harmless from any and all liabilities, obligations,
losses, damages, penalties, claims, actions, judgments, suits, costs or expenses
or disbursements (including reasonable attorneys' fees and expenses) for
whatsoever kind or nature which may be imposed on, asserted against or incurred
by any of the Indemnitees in any way relating to or arising out of this Security
Agreement or the transactions contemplated hereby. The obligations of the Debtor
under this Section shall be secured hereby and shall survive payment and
performance or discharge of the Obligations and the termination of this Security
Agreement.
7.2 Governing Law. THIS SECURITY AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
7.3 Notices. Except as otherwise expressly provided herein, all
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by telecopy, telex, or cable
communication), and shall be deemed to have been duly given or made when
delivered by hand, or five days after being deposited in the United States mail,
postage prepaid, or, in the case of
C-1-14
<PAGE> 59
telex notice, when sent, answer-back received, or in the case of telecopy
notice, when sent, or in the case of a nationally recognized overnight courier
service, one Business Day after delivery to such courier service, addressed, in
the case of each party hereto, at its address specified on the signature pages
hereof or to such other address as may be designated by any party in a written
notice to the other party hereto.
7.4 Successors and Assigns. This Security Agreement shall be binding
upon and inure to the benefit of the Debtor, the Secured Parties, all future
holders of the Secured Obligations and their respective successors and assigns,
except that neither party may assign or transfer any of its rights or
obligations under this Security Agreement without the prior written consent of
the other party.
7.5 Waivers and Amendments. None of the terms or provisions of this
Security Agreement may be waived, amended, supplemented or otherwise modified
except by a written instrument executed by the party against whom enforcement is
sought. In the case of any waiver, the Debtor and the Secured Parties shall be
restored to their former position and rights hereunder and under the outstanding
Secured Obligations, and any Event of Acceleration waived shall be deemed to be
cured and not continuing, but no such waiver shall extend to any subsequent or
other Event of Acceleration, or impair any right consequent thereon.
7.6 No Waiver; Remedies Cumulative. No failure or delay on the part
of either Secured Party in exercising any right, power or privilege hereunder
and no course of dealing between the Debtor and the Secured Parties shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by a
Secured Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which such Secured Party would
otherwise have on any future occasion. The rights and remedies expressly
provided herein and in the other Loan Documents and Merger Documents are
cumulative and may be exercised singly or concurrently and as often and in such
order as the Secured Parties deem expedient and are not exclusive of any rights
or remedies which the Secured Parties would otherwise have whether by security
agreement or now or hereafter existing under applicable law. No notice to or
demand on the Debtor in any case shall entitle the Debtor to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Secured Parties to any other or future action in any
circumstances without notice or demand.
C-1-15
<PAGE> 60
7.7 Termination; Release. When the Secured Obligations have been
paid in full this Security Agreement shall terminate, and the Secured Parties,
at the request and sole expense of the Debtor, will execute and deliver to the
Debtor the proper instruments (including UCC termination statements)
acknowledging the termination of this Security Agreement, and will duly assign,
transfer and deliver to the Debtor, without recourse, representation or warranty
of any kind whatsoever, such of the Collateral as may be in possession of the
Secured Parties and has not theretofore been disposed of, applied or released.
7.8 Headings Descriptive. The headings of the several Sections and
subsections of this Security Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Security Agreement.
7.9 Severability. In case any provision in or obligation under this
Security Agreement or the Secured Obligations shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
C-1-16
<PAGE> 61
IN WITNESS WHEREOF, the Debtor and the Secured Parties have caused
this Security Agreement to be duly executed and delivered as of the date first
above written.
HASBRO, INC.
By:
------------------------------
Name:
Title:
HASBRO INTERACTIVE, INC.
By:
------------------------------
Name:
Title:
[DEBTOR]
By:
------------------------------
Name:
Title:
C-1-17
<PAGE> 62
Schedule I
Filing Offices
C-1-18
<PAGE> 63
Schedule II
Location of Inventory and Equipment
C-1-18
<PAGE> 64
Exhibit C-2-A
INTELLECTUAL PROPERTY SECURITY AGREEMENT
<PAGE> 65
TRADEMARK SECURITY AGREEMENT
TRADEMARK SECURITY AGREEMENT (the "Trademark Agreement") dated as of
August __, 1998, between ____________, a ___________ corporation (the "Debtor"),
Hasbro, Inc., a Rhode Island corporation ("Hasbro"), and Hasbro Interactive,
Inc., a Delaware corporation (together with Hasbro, the "Secured Parties")
WHEREAS, the Debtor and Hasbro are parties to a Loan and Distribution
Agreement, dated as of August __, 1998, (as amended and in effect from time to
time, the "Agreement"), between the Debtor and Hasbro,
WHEREAS, the Debtor has executed and delivered to the Secured Parties a
Security Agreement, dated August __, 1998 (the "Security Agreement"), pursuant
to which the Debtor has granted to the Secured Parties a security interest in
certain of the Debtor's property, including without limitation all trademarks,
service marks, trademark and service mark registrations, and trademark and
service mark registration applications listed on Schedule A attached hereto, all
to secure the payment and performance of the Secured Obligations (as defined in
the Security Agreement);
WHEREAS, this Trademark Agreement is supplemental to the provisions
contained in the Security Agreement;
NOW, THEREFORE, in consideration of the premises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ss.1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings provided therefor in the Security
Agreement.
ss.2. Grant of Security Interest.
(1) As security for the prompt and complete payment and performance in
full of all of the Secured Obligations, the Debtor hereby assigns, pledges and
transfers to the Secured Parties and grants to the Secured Parties a security
interest in and continuing lien on all of the Debtor's right, title and interest
in, to and under the following, in each case, whether now owned or existing or
hereafter acquired or arising, and wherever located: (a) any and all trademarks,
trade names, corporate names, business names, trade styles, service marks,
logos, other source or business identifiers, designs and general intangibles of
like nature, and all registrations, applications, and recordings thereof,
including, without limitation, registrations, recordings, and applications in
the United States Patent and Trademark Office (the "PTO") or any similar office
or agency of the United States, any State thereof or any other country or any
political subdivision thereof including, but not limited to those U.S. and
foreign registered trademarks and applications on Schedule A hereto (the
"Trademarks") and (b) any reissues, extensions or renewals thereof and (c) all
goodwill of the Debtor and its business, products and services appurtenant to,
associated with or symbolized by the Trademarks and (d) the proceeds thereof
including (i) any and all accounts, chattel paper, instruments, other forms of
money or currency or other proceeds payable to Debtor from time to time in
C-2-A-1
<PAGE> 66
respect of the Trademarks, (ii) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Debtor from time to time with respect
to any of the Trademarks, (iii) any and all payments (in any form whatsoever)
made or due and payable to Debtor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Trademarks any governmental authority (or any person or entity
acting under color of governmental authority), (iv) any claim of Debtor against
third parties for past, present, or future infringement or dilution of any
Trademark or any injury to the goodwill associated with any Trademark, and (v)
any and all other amounts from time to time paid or payable under or in
connection with any of the Trademarks
(2) The Debtor has executed in blank and delivered to the Secured Parties
an assignment of registered trademarks in substantially the form of Exhibit 1
hereto (the "Assignment of Marks"). The Debtor hereby authorizes each Secured
Party to complete as Secured Party and record with the PTO the Assignment of
Marks attached hereto as Exhibit 1 solely upon the occurrence and during the
continuance of an Event of Default and the exercise of the Secured Parties'
remedies under this Trademark Agreement and the Security Agreement.
(3) Pursuant to the Security Agreement, the Debtor has granted to the
Secured Parties a security interest in the Collateral (including the
Trademarks). The Security Agreement, and all rights and interests of the Secured
Parties in and to the Collateral (including the Trademarks) thereunder are
hereby ratified and confirmed in all respects. In no event shall this Trademark
Agreement, the grant, assignment, conveyance, mortgage, pledge, hypothecation,
and transfer of a security interest in the Trademarks hereunder, or the
recordation of this Trademark Agreement (or any document hereunder) with the PTO
or any state or foreign trademark registry adversely affect or impair the
Security Agreement, the security interest of the Secured Parties in the
Collateral (including the Trademarks) pursuant to the Security Agreement, the
attachment and perfection of such security interest in the Collateral (including
the security interest in the Trademarks), under the Uniform Commercial Code, or
any present or future rights and interests of the Secured Parties in and to the
Collateral under or in connection with the Security Agreement, this Trademark
Agreement, or the Uniform Commercial Code. Any and all rights and interests of
the Secured Parties in and to the Trademarks (and any and all obligations of the
Debtor with respect to the Trademarks) provided herein, or arising hereunder or
in connection herewith, shall only supplement and be cumulative and in addition
to the rights and interests of the Secured Parties (and the obligations of the
Debtor) in, to or with respect to the Collateral (including the Trademarks)
provided in or arising under or in connection with the Security Agreement and
shall not be in derogation thereof. In the event of any irreconcilable conflict
between the provisions of this Trademark Agreement and the Agreement, or between
this Trademark Agreement and the Security Agreement, the provisions of the
Agreement or the Security Agreement, as the case may be, shall control.
ss.3. Representations, Warranties and Covenants. The Debtor represents,
warrants and covenants that, except as previously or concurrently disclosed in
writing by Debtor to Secured Parties:
(a) Schedule A hereto sets forth a true and complete list of all
registered Trademarks and Trademark applications owned by Debtor;
C-2-A-2
<PAGE> 67
(b) The Trademarks are subsisting and have not been adjudged invalid or
unenforceable, in whole or in part, and there is no litigation or proceeding
pending concerning the validity or enforceability of the Trademarks;
(c) To the best of the Debtor's knowledge, each of the Trademarks is valid
and enforceable;
(d) To the best of the Debtor's knowledge, there is no infringement by
others of the Trademarks;
(e) No claim has been made that the use of any of the Trademarks violates
the rights of any third person and, to the best of the Debtor's knowledge, there
is no infringement by the Debtor of the trademark rights of others;
(f) The Debtor is the sole and exclusive owner of the entire and
unencumbered right, title, and interest in and to each of the Trademarks, free
and clear of any liens, charges, encumbrances, and adverse claims, and other
than the security interest and assignment created by the Security Agreement and
this Trademark Agreement, and free and clear of all licenses and registered user
agreements and covenants by Debtor not to sue third persons, except as
previously disclosed to the Secured Parties in writing by the Debtor;
(g) The Debtor has the unqualified right to enter into this Trademark
Agreement and to perform its terms and has entered and will enter into written
agreements with each of its present and future employees, agents, consultants,
licensors and licensees that will enable them to comply with the covenants
herein contained;
(h) The Debtor has used, and will continue to use, proper statutory and
other appropriate proprietary notices in connection with its use of the
Trademarks;
(i) The Debtor has used, and will continue to use, consistent standards of
quality in its manufacture and provision of products and services sold or
provided under the Trademarks;
(j) This Trademark Agreement, together with the Security Agreement, will
create in favor of the Secured Parties perfected security interests in the
Trademarks protected under the laws of the United States or any State thereof
superior and prior to all liens, rights or claims of all other persons, (other
than Permitted Liens, as described in the Security Agreement), upon making the
filings and recordations referred to in clause (k) of this ss.3; and
(k) Except for the filing of financing statements with the Secretary of
State of the State of California under the Uniform Commercial Code and the
recording of this Trademark Agreement with the PTO, no authorization, approval
or other action by, and no notice to or filing with, any governmental or
regulatory authority, agency or office is required either (i) for the grant by
the Debtor or the effectiveness of the security interest and assignment granted
hereby or for the execution, delivery and performance of this Trademark
Agreement by the Debtor, or (ii) for the perfection of or the exercise by the
Secured Parties of any of their rights and remedies hereunder.
ss.4. Inspection Rights. The Debtor hereby grants to the Secured Parties
and their employees and agents the right to visit the Debtor's plants and
facilities that manufacture, inspect, or store
C-2-A-3
<PAGE> 68
products sold under any of the Trademarks, and to inspect the products and
quality control records relating thereto at reasonable times during regular
business hours and upon reasonable notice.
ss.5. No Transfer or Inconsistent Agreements. Without the Secured Parties'
prior written consent and except for licenses of the Trademarks in the ordinary
course of the Debtor's business consistent with its past practices, the Debtor
will not (a) transfer, license, or otherwise dispose or alienate any of its
rights in the Trademarks, or (b) enter into any agreement that is inconsistent
with the Debtor's obligations under this Trademark Agreement or the Security
Agreement.
ss.6. After-acquired Trademarks.
(a) If, before the Secured Obligations shall have been finally paid and
satisfied in full, the Debtor shall obtain any right, title or interest in or to
any other or new Trademarks, then the provisions of this Trademark Agreement
shall automatically apply thereto and, upon the acquisition of any rights in any
Trademark registration or application not identified on Schedule A hereto,
Debtor shall promptly (and in no event longer than 30 days following the
acquisition of rights in such Trademark registration or application) provide to
the Secured Parties notice thereof in writing and execute and deliver to the
Secured Parties such documents or instruments as the Secured Parties may
reasonably request further to implement, preserve or evidence the Secured
Parties' interest therein.
(b) The Debtor authorizes the Secured Parties to modify this Trademark
Agreement and the Assignment of Marks, without the necessity of the Debtor's
further approval or signature, by amending Schedule A hereto and the Annex to
the Assignment of Marks to include any other or new Trademarks.
ss.7. Trademark Prosecution.
(a) The Debtor shall assume full and complete responsibility for the
prosecution, defense, enforcement or any other necessary or desirable actions in
connection with the Trademarks and shall hold the Secured Parties harmless from
any and all costs, damages, liabilities and expenses that may be incurred by the
Secured Parties in connection with the Secured Parties' interest in the
Trademarks or any action or failure to act by Debtor in connection with this
Trademark Agreement or the transactions contemplated hereby.
(b) With respect to all Trademarks which are material to the Debtor's
business, the Debtor shall have the right and the duty, through trademark
counsel acceptable to the Secured Parties, to (i) prosecute diligently any
applications to register such Trademarks pending as of the date of this
Trademark Agreement or thereafter, (ii) to preserve and maintain all rights in
such Trademarks including the filing of appropriate renewal applications and
other instruments to maintain in effect such Trademarks and (iii) pay when due
all registration renewal fees and other fees, taxes and other expenses that
shall be incurred or that shall accrue. Any expenses incurred in connection with
such actions shall be borne by the Debtor. Further, the Debtor shall not abandon
any Trademark (or registration or application therefore) which is material to
the Debtor's business, without the consent of the Secured Parties.
C-2-A-4
<PAGE> 69
(c) The Debtor shall have the right and the duty to bring suit or other
action in the Debtor's own name to maintain and enforce the Trademarks which are
material to its business. The Debtor may require the Secured Parties to join in
such suit or action as necessary to assure the Debtor's ability to bring and
maintain any such suit or action in any proper forum if (but only if) the Debtor
is completely satisfied that such joinder will not subject the Secured Parties
to any risk of liability. The Debtor shall promptly, upon demand, reimburse and
indemnify the Secured Parties for all damages, costs and expenses, including
legal fees, incurred by the Secured Parties pursuant to this ss.7(c).
(d) In general, the Debtor shall take any and all such actions (including
institution and maintenance of suits, proceedings, or actions) as may be
necessary or appropriate to properly maintain, protect, preserve, and enforce
the Trademarks which are material to Debtor's business. The Debtor shall not
take or fail to take any action, nor permit any action to be taken or not taken
by others under its control, that would adversely affect the validity, grant or
enforcement of such Trademarks.
(e) Promptly upon obtaining knowledge thereof, the Debtor will notify the
Secured Parties in writing of the institution of, or any final adverse
determination in, any proceeding in the PTO or any similar office or agency of
the United States or any foreign country, or any court, regarding the validity
of any of the Trademarks or the Debtor's rights, title, or interests in and to
the Trademarks, and of any event that does or reasonably could materially
adversely affect the value of any of the Trademarks, the ability of the Debtor
or the Secured Parties to dispose of any of the Trademarks, or the rights and
remedies of the Secured Parties in relation thereto.
ss.8. Remedies.
(a) Upon the occurrence and during the continuance of an Event of Default,
the Secured Parties shall have, in addition to all other rights and remedies
given it by this Trademark Agreement, the Security Agreement, those allowed by
law and the rights and remedies of a secured party under the UCC, the right to,
immediately, without demand of performance and without other notice (except as
set forth next below) or demand whatsoever to the Debtor, all of which are
hereby expressly waived, sell or license at public or private sale or otherwise
realize upon the whole or from time to time any part of the Trademarks, or any
interest that the Debtor may have therein, and, after deducting from the
proceeds of sale or other disposition of the Trademarks all expenses incurred by
the Secured Parties in attempting to enforce this Trademark Agreement (including
all reasonable expenses for broker's fees and legal services), shall apply the
residue of such proceeds toward the payment of the Secured Obligations as set
forth in or by reference in the Security Agreement. Notice of any sale, license,
or other disposition of the Trademarks shall be given to the Debtor at least
five (5) days before the time that any intended public sale or other public
disposition of the Trademarks is to be made or after which any private sale or
other private disposition of the Trademarks may be made, which the Debtor hereby
agrees shall be reasonable notice of such public or private sale or other
disposition. At any such sale or other disposition, the Secured Parties may, to
the extent permitted under applicable law, purchase or license the whole or any
part of the Trademarks or interests therein sold, licensed or otherwise disposed
of.
(b) The Debtor hereby grants to the Secured Parties, effective upon the
occurrence and during the continuance of an Event of Default, in order to
exercise its rights and remedies as
C-2-A-5
<PAGE> 70
contemplated in Section 8(a) herein with respect to the Trademarks or any other
Collateral, a non-exclusive right and license to use the Trademarks, provided
that: (i) the goods sold or services offered under the Trademarks shall be of a
quality substantially consistent with those heretofore offered under such
Trademarks by the Debtor; (ii) the Debtor shall have the right to inspect, at
reasonable intervals and upon reasonable notice, representative samples of goods
sold under the Trademarks and the premises where such goods are manufactured;
and (iii) the Trademark shall be used only in conjunction with goods and
services of the nature previously offered by the Debtor under such Trademarks.
ss.9. Collateral Protection. If the Debtor shall fail to do any act that
it has covenanted to do hereunder, or if any representation or warranty of the
Debtor shall be breached, the Secured Parties, in their own names or that of the
Debtor (in the sole discretion of the Secured Parties), may (but shall not be
obligated to) do such act or remedy such breach (or cause such act to be done or
such breach to be remedied), and the Debtor agrees promptly to reimburse the
Secured Parties for any reasonable cost or expense incurred by the Secured
Parties in so doing.
ss.10. Power of Attorney. If any Event of Default shall have occurred and
be continuing, the Debtor does hereby make, constitute and appoint the Secured
Parties (and any officer or agent of the Secured Parties as the Secured Parties
may select in their exclusive discretion) as the Debtor's true and lawful
attorney-in-fact, with full power of substitution and with the power to endorse
the Debtor's name on all applications, documents, papers, and instruments
necessary for the Secured Parties to use the Trademarks, or to grant or issue
any exclusive or nonexclusive license of any of the Trademarks to any third
person, or to take any and all actions necessary for the Secured Parties to
assign, pledge, convey or otherwise transfer title in or dispose of the
Trademarks or any interest of the Debtor therein to any third person, and, in
general, to execute and deliver any instruments or documents and do all other
acts that the Debtor is obligated to execute and do hereunder. The Debtor hereby
ratifies all that such attorney shall lawfully do or cause to be done by virtue
hereof, and releases the Secured Parties from any claims, liabilities, causes of
action or demands arising out of or in connection with any action taken or
omitted to be taken by the Secured Parties under this power of attorney (except
for the Secured Parties' gross negligence or willful misconduct). This power of
attorney is coupled with an interest and shall be irrevocable for the duration
of this Trademark Agreement.
ss.11. Further Assurances. The Debtor shall, at any time and from time to
time, and at its expense, make, execute, acknowledge and deliver, and file and
record as necessary or appropriate with governmental or regulatory authorities,
agencies or offices, such agreements, assignments, documents and instruments,
and do such other and further acts and things (including, without limitation,
obtaining consents of third parties), as the Secured Parties may request or as
may be necessary or appropriate in order to implement and effect fully the
intentions, purposes and provisions of this Trademark Agreement, or to assure
and confirm to the Secured Parties the grant, perfection, and priority of the
Secured Parties' security interest in any of the Trademarks.
ss.12. Termination. At such time as all of the Secured Obligations have
been indefeasibly paid and satisfied in full, this Trademark Agreement shall
terminate and the Secured Parties shall, upon the written request and at the
expense of the Debtor, execute and deliver to the Debtor all deeds, assignments
and other instruments as may be necessary or proper to reassign, reconvey, and
re-vest in and to the Debtor the entire right, title and interest to the
Trademarks previously granted,
C-2-A-6
<PAGE> 71
assigned, transferred and conveyed to the Secured Parties by the Debtor pursuant
to this Trademark Agreement, as fully as if this Trademark Agreement had not
been made, subject to any disposition of all or any part thereof that may have
been made by the Secured Parties pursuant hereto or the Security Agreement.
ss.13. Course of Dealing. No course of dealing between the Debtor and the
Secured Parties, nor any failure to exercise, nor any delay in exercising, on
the part of the Secured Parties, any right, power or privilege hereunder or
under the Security Agreement or any other agreement shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
ss.14. Expenses. Any and all fees, costs and expenses, of whatever kind or
nature, including the reasonable attorneys' fees and legal expenses incurred by
the Secured Parties in connection with the preparation of this Trademark
Agreement and all other documents relating hereto, the consummation of the
transactions contemplated hereby or the enforcement hereof, the filing or
recording of any documents (including all taxes in connection therewith) in
public offices, the payment or discharge of any taxes, counsel fees, maintenance
or renewal fees, encumbrances or otherwise protecting, maintaining or preserving
the Trademarks, or in defending or prosecuting any actions or proceedings
arising out of or related to the Trademarks, shall be borne and paid by the
Debtor.
ss.15. No Assumption of Liability; Indemnification. NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE SECURED PARTIES ASSUME NO
LIABILITIES OF THE DEBTOR WITH RESPECT TO ANY CLAIM OR CLAIMS REGARDING THE
DEBTOR'S OWNERSHIP OR PURPORTED OWNERSHIP OF, OR RIGHTS OR PURPORTED RIGHTS
ARISING FROM, ANY OF THE TRADEMARKS OR ANY USE, LICENSE, OR SUBLICENSE THEREOF,
WHETHER ARISING OUT OF ANY PAST, CURRENT OR FUTURE EVENT, CIRCUMSTANCE, ACT OR
OMISSION OR OTHERWISE. ALL OF SUCH LIABILITIES SHALL BE EXCLUSIVELY THE
RESPONSIBILITY OF THE DEBTOR, AND THE DEBTOR SHALL INDEMNIFY THE SECURED PARTIES
FOR ANY AND ALL COSTS, EXPENSES, DAMAGES AND CLAIMS, INCLUDING LEGAL FEES,
INCURRED BY THE SECURED PARTIES WITH RESPECT TO SUCH LIABILITIES.
ss.16. Notices. All notices and other communications made or required to
be given pursuant to this Trademark Agreement shall be in writing and shall be
delivered in hand, mailed by United States registered or certified first-class
mail, postage prepaid, or sent by telecopy and confirmed by delivery via courier
or postal service, to the addresses provided in the Agreement.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand to a responsible officer
of the party to which it is directed, at the time of the receipt thereof by such
officer, (ii) if sent by registered or certified first-class mail, postage
prepaid, three (3) business days after the posting thereof, and (iii) if sent by
telecopy or telex, at the time of the dispatch thereof, if in normal business
hours in the country of receipt, or otherwise at the opening of business on the
following business day.
C-2-A-7
<PAGE> 72
ss.17. Amendment and Waiver. This Trademark Agreement is subject to
modification only by a writing signed by the Secured Parties and the Debtor,
except as provided in Section 6(b). The Secured Parties shall not be deemed to
have waived any right hereunder unless such waiver shall be in writing and
signed by the Secured Parties. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right on any future occasion.
ss.18. Governing Law; Consent to Jurisdiction. THIS TRADEMARK AGREEMENT IS
INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE. The Debtor
agrees that any suit for the enforcement of this Trademark Agreement may be
brought in the courts of the State of Delaware or any federal court sitting
therein and consents to the exclusive jurisdiction of such court and to service
of process in any such suit being made upon the Debtor by mail at the address
specified in Section 16. The Debtor hereby waives any objection that it may now
or hereafter have to the venue of any such suit or any such court or that such
suit is brought in an inconvenient court.
ss.19. Waiver of Jury Trial. THE DEBTOR WAIVES ITS RIGHT TO A JURY TRIAL
WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS TRADEMARK AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF ANY SUCH RIGHTS OR SECURED OBLIGATIONS. Except as prohibited by
law, the Debtor waives any right which it may have to claim or recover in any
litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. The Debtor (a) certifies that neither the Secured Parties nor
any representatives, agents or attorneys of the Secured Parties have
represented, expressly or otherwise, that the Secured Parties would not, in the
event of litigation, seek to enforce the foregoing waivers, and (b) acknowledges
that, in entering into the Agreement, the Secured Parties are relying upon,
among other things, the waivers and certifications contained in this Section 19.
ss.20. Miscellaneous.
(a) The headings of each section of this Trademark Agreement are for
convenience only and shall not define or limit the provisions thereof.
(b) This Trademark Agreement and all rights and obligations hereunder
shall be binding upon the Debtor and its respective successors and assigns, and
shall inure to the benefit of the Secured Parties and its successors and
assigns.
(c) If any term of this Trademark Agreement shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby, and this Trademark Agreement shall be construed and be
enforceable as if such invalid, illegal or unenforceable term had not been
included herein.
C-2-A-8
<PAGE> 73
IN WITNESS WHEREOF, this Trademark Agreement has been executed as of the
day and year first above written.
[DEBTOR]
By:
-----------------------
Name:
Title:
Agreed and Acknowledged:
HASBRO INTERACTIVE, INC.
By:
-----------------------
Name:
Title:
HASBRO, INC.
By:
-----------------------
Name:
Title:
C-2-A-9
<PAGE> 74
COMMONWEALTH OR STATE OF _______________)
) ss.
COUNTY OF ______________________________)
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this ___ day of _____, 19__, personally appeared __________ to me
known personally, and who, being by me duly sworn, deposes and says that he is
the _____ of __________, and that said instrument was signed and sealed on
behalf of said corporation by authority of its Board of Directors, and said
__________ acknowledged said instrument to be the free act and deed of said
corporation.
---------------------------
Notary Public
My commission expires:
C-2-A-10
<PAGE> 75
Schedule A
Trademarks
C-2-A-11
<PAGE> 76
Exhibit 1
ASSIGNMENT OF TRADEMARKS
WHEREAS, _____________, a _____________ corporation (the "Debtor"), has
adopted and used and is using the trademarks and service marks (the "Marks")
identified on the Annex hereto, and is the owner of the registrations of and
pending registration applications for such Marks in the Patent and Trademark
Office identified on such Annex; and
WHEREAS, ______________, a corporation organized and existing under the
laws of the State of ________ (the "Secured Party"), is desirous of acquiring
the Marks and the registrations and applications therefor;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, the Debtor does hereby assign, sell and transfer unto the
Secured Party all right, title and interest in and to the Marks, together with
(a) the registrations applications for the Marks, including, but not limited to
those registrations and applications on the Annex hereto and all reissues,
extensions, and renewals thereof, (b) the goodwill of the business, products,
and services appurtenant to, associated with, and symbolized by the Marks and
(c) the proceeds thereof including (i) any and all accounts, chattel paper,
instruments, other forms of money or currency or other proceeds payable to
Debtor from time to time in respect of the Marks, (ii) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to Debtor from time to
time with respect to any of the Marks, (iii) any and all payments (in any form
whatsoever) made or due and payable to Debtor from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Marks any governmental authority (or any Person acting under
color of governmental authority), (iv) any claim of Debtor against third parties
for past, present, or future infringement or dilution of any Mark or any injury
to the goodwill associated with any Mark, and (v) any and all other amounts from
time to time paid or payable under or in connection with any of the Marks.
This Assignment of Trademarks is intended to and shall take effect at such
time as the Secured Party shall complete this instrument by inserting its name
in the second paragraph above and signing its acceptance of this Assignment of
Trademarks below.
C-2-A-12
<PAGE> 77
IN WITNESS WHEREOF, the Debtor, by its duly authorized officer, has
executed this assignment, as an instrument under seal, on this _____ day of
_________, 199_.
[DEBTOR]
By:
-------------
Title:
-------------
The foregoing Assignment of Trademarks by the Debtor to the Secured
Parties is hereby accepted as of the _____ day of __________, __.
By:
-------------
Title:
-------------
C-2-A-13
<PAGE> 78
COMMONWEALTH OR STATE OF _______________)
) ss.
COUNTY OF ______________________________)
On this the ___ day of _____, 199_, before me appeared __________, the
person who signed this instrument, who acknowledged that (s)he is the _____ of
__________ and that being duly authorized (s)he signed such instrument as a free
act on behalf of __________.
-------------------------
Notary Public
My commission expires:
COMMONWEALTH OR STATE OF _______________)
) ss.
COUNTY OF ______________________________)
On this the ___ day of _____, 199_, before me appeared __________, the
person who signed this instrument, who acknowledged that (s)he is the _____ of
__________ and that being duly authorized (s)he signed such instrument as a free
act on behalf of __________.
-------------------------
Notary Public
My commission expires:
C-2-A-14
<PAGE> 79
Annex
Schedule of Trademarks
C-2-A-15
<PAGE> 80
Exhibit C-2-B
INTELLECTUAL PROPERTY SECURITY AGREEMENT
<PAGE> 81
COPYRIGHT SECURITY AGREEMENT
COPYRIGHT SECURITY AGREEMENT (the" Copyright Agreement") dated as of
August __, 1998, between ______________, a __________ corporation (the
"Debtor"), Hasbro, Inc., a Rhode Island corporation ("Hasbro"), and Hasbro
Interactive, Inc., a Delaware corporation (together with Hasbro, the "Secured
Parties")
WHEREAS, the Debtor and Hasbro are parties to a Loan and Distribution
Agreement, dated as of August __, 1998, (as amended and in effect from time to
time, the "Agreement"), between the Debtor and Hasbro,
WHEREAS, the Debtor has executed and delivered to the Secured Parties a
Security Agreement, dated August __, 1998 (the "Security Agreement"), pursuant
to which the Debtor has granted to the Secured Parties a security interest in
certain of the Debtor's property, including without limitation all copyrights,
copyright registrations, and copyright applications listed on Schedules A and B
attached hereto, all to secure the payment and performance of the Secured
Obligations (as defined in the Security Agreement);
WHEREAS, this Copyright Agreement is supplemental to the provisions
contained in the Security Agreement;
NOW, THEREFORE, in consideration of the premises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ss.1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings provided therefor in the Security
Agreement.
ss.2. Grant of Security Interest.
(a) As security for the prompt and complete payment and performance in
full of all of the Secured Obligations, the Debtor hereby assigns, pledges and
transfers to the Secured Parties and grants to the Secured Parties a security
interest in and continuing lien on all of the Debtor's right, title and interest
in, to and under the following, in each case, whether now owned or existing or
hereafter acquired or arising, and wherever located: (a) any and all copyrights
and all registrations, applications, and recordings, thereof, including, without
limitation, registrations, recordings, and applications in the United States
Copyright Office (the "Copyright Office") or any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof including, but not limited to those U.S. and foreign
registered Copyrights and applications on Schedules A and B hereto and (b)
derivative works thereof (together with subsection (a), the "Copyrights") and
(c) any reissues, extensions or renewals thereof and (d) the proceeds thereof
including (i) any and all accounts, chattel paper, instruments, other forms of
money or currency or other proceeds payable to Debtor from time to time in
respect of the Copyrights, (ii) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Debtor from time to time with respect
to any of the Copyrights, (iii) any and all payments (in any form whatsoever)
made or due and payable to Debtor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Copyrights any governmental authority (or any person or entity
acting under color of governmental authority), (iv) any claim of Debtor against
third parties for past, present, or future infringement of any Copyright, and
(v) any and all other amounts from time to time paid or payable under or in
connection with any of the Copyrights
C-2-B-1
<PAGE> 82
(b) The Debtor has executed in blank and delivered to the Secured Parties
an assignment of registered Copyrights in substantially the form of Exhibit 1
hereto (the "Assignment of Copyrights"). The Debtor hereby authorizes each
Secured Party to complete as Secured Party and record with the Copyright Office
the Assignment of Copyrights attached hereto as Exhibit 1 solely upon the
occurrence and during the continuance of an Event of Default and the exercise of
the Secured Parties' remedies under this Copyright Agreement and the Security
Agreement.
(c) Pursuant to the Security Agreement, the Debtor has granted to the
Secured Parties a security interest in the Collateral (including the
Copyrights). The Security Agreement, and all rights and interests of the Secured
Parties in and to the Collateral (including the Copyrights) thereunder are
hereby ratified and confirmed in all respects. In no event shall this Copyright
Agreement, the grant, assignment, conveyance, mortgage, pledge, hypothecation,
and transfer of a security interest in the Copyrights hereunder, or the
recordation of this Copyright Agreement (or any document hereunder) with the
Copyright Office or any state or foreign copyright registry adversely affect or
impair the Security Agreement, the security interest of the Secured Parties in
the Collateral (including the Copyrights) pursuant to the Security Agreement,
the attachment and perfection of such security interest in the Collateral
(including the security interest in the Copyrights), under the Uniform
Commercial Code, or any present or future rights and interests of the Secured
Parties in and to the Collateral under or in connection with the Security
Agreement, this Copyright Agreement, or the Uniform Commercial Code. Any and all
rights and interests of the Secured Parties in and to the Copyrights (and any
and all obligations of the Debtor with respect to the Copyrights) provided
herein, or arising hereunder or in connection herewith, shall only supplement
and be cumulative and in addition to the rights and interests of the Secured
Parties (and the obligations of the Debtor) in, to or with respect to the
Collateral (including the Copyrights) provided in or arising under or in
connection with the Security Agreement and shall not be in derogation thereof.
In the event of any irreconcilable conflict between the provisions of this
Copyright Agreement and the Agreement, or between this Copyright Agreement and
the Security Agreement, the provisions of the Agreement or the Security
Agreement, as the case may be, shall control.
ss.3. Representations, Warranties and Covenants. The Debtor represents,
warrants and covenants that, except as previously or concurrently disclosed in
writing by Debtor to the Secured Parties:
(a) Schedules A and B hereto set forth a true and complete list of all
registered Copyrights and Copyright applications owned by Debtor;
(b) With respect to the copyright registrations and applications set forth
in Schedule A:
(i) The Copyrights are subsisting and have not been adjudged
invalid or unenforceable, in whole or in part, and there is no litigation or
proceeding pending concerning the validity or enforceability of the Copyrights;
(ii) To the best of the Debtor's knowledge, each of the
Copyrights is valid and enforceable;
(iii) To the best of the Debtor's knowledge, there is no
infringement by others of the Copyrights;
(iv) No claim has been made that the use of any of the
Copyrights violates the rights of any third person and, to the best of the
Debtor's knowledge, there is no infringement by the Debtor of the Copyright
rights of others;
C-2-B-2
<PAGE> 83
(v) The Debtor is the sole and exclusive owner of the entire
and unencumbered right, title, and interest in and to each of the Copyrights,
free and clear of any liens, charges, encumbrances, and adverse claims, and
other than the security interest and assignment created by the Security
Agreement and this Copyright Agreement, and free and clear of all licenses and
registered user agreements and covenants by Debtor not to sue third persons,
except as previously disclosed to the Secured Parties in writing by the Debtor;
(vi) The Debtor has the unqualified right to enter into this
Copyright Agreement and to perform its terms and has entered and will enter into
written agreements with each of its present and future employees, agents,
consultants, licensors and licensees that will enable them to comply with the
covenants herein contained;
(vii) The Debtor has used, and will continue to use, proper
statutory and other appropriate proprietary notices in connection with its use
of the Copyrights;
(viii) This Copyright Agreement, together with the Security
Agreement, will create in favor of the Secured Parties perfected security
interests in the Copyrights protected under the laws of the United States or any
State thereof superior and prior to all liens, rights or claims of all other
persons, (other than Permitted Liens, as described in the Security Agreement),
upon making the filings and recordations referred to in Section 3(b)(ix); and
(ix) Except for the filing of financing statements with the
Secretary of State of the State of California under the Uniform Commercial Code
and the recording of this Copyright Agreement with the Copyright Office, no
authorization, approval or other action by, and no notice to or filing with, any
governmental or regulatory authority, agency or office is required either (i)
for the grant by the Debtor or the effectiveness of the security interest and
assignment granted hereby or for the execution, delivery and performance of this
Copyright Agreement by the Debtor, or (ii) for the perfection of or the exercise
by the Secured Parties of any of their rights and remedies hereunder.
(c) With respect to the copyright registrations and applications set forth
in Schedule B:
(i) The Copyrights have not been adjudged invalid or
unenforceable, in whole or in part, and there is no litigation or proceeding
pending concerning the validity or enforceability of the Copyrights; and
(ii) The Copyrights have not been cancelled.
ss.4. No Transfer or Inconsistent Agreements. Without the Secured Parties'
prior written consent and except for licenses of the Copyrights in the ordinary
course of the Debtor's business consistent with its past practices, the Debtor
will not (a) transfer, license, or otherwise dispose or alienate any of its
rights in the Copyrights, or (b) enter into any agreement that is inconsistent
with the Debtor's obligations under this Copyright Agreement or the Security
Agreement.
ss.5. After-acquired Copyrights.
(a) If, before the Secured Obligations shall have been finally paid and
satisfied in full, the Debtor shall obtain any right, title or interest in or to
any other or new copyrights, then the provisions of this Copyright Agreement
shall automatically apply thereto and, upon the acquisition of any rights in any
Copyright registration or application not identified on Schedules A or B hereto,
Debtor shall promptly (and in no event longer than 30 days following the
acquisition of rights in such copyright registration or application) provide to
the Secured
C-2-B-3
<PAGE> 84
Parties notice thereof in writing and execute and deliver to the Secured Parties
such documents or instruments as the Secured Parties may reasonably request
further to implement, preserve or evidence the Secured Parties' interest
therein.
(b) The Debtor authorizes the Secured Parties to modify this Copyright
Agreement and the Assignment of Copyrights, without the necessity of the
Debtor's further approval or signature, by amending Exhibit A hereto and the
Annex to the Assignment of Copyrights to include any other or new Copyrights.
ss.6. Copyright Prosecution.
(a) The Debtor shall assume full and complete responsibility for the
prosecution, defense, enforcement or any other necessary or desirable actions
in connection with the Copyrights and shall hold the Secured Parties harmless
from any and all costs, damages, liabilities and expenses that may be incurred
by the Secured Parties in connection with the Secured Parties' interest in the
Copyrights or any action or failure to act by Debtor in connection with this
Copyright Agreement or the transactions contemplated hereby.
(b) With respect to all Copyrights which are material to the Debtor's
business, the Debtor shall have the right and the duty, through copyright
counsel acceptable to the Secured Parties, to (i) prosecute diligently any
applications to register such Copyrights pending as of the date of this
Copyright Agreement or thereafter, (ii) to preserve and maintain all rights in
such Copyrights including the filing of appropriate renewal applications and
other instruments to maintain in effect such Copyrights and (iii) pay when due
all registration renewal fees and other fees, taxes and other expenses that
shall be incurred or that shall accrue. Any expenses incurred in connection with
such actions shall be borne by the Debtor. Further, the Debtor shall not abandon
any Copyright (or registration or application therefore) which is material to
the Debtor's business, without the consent of the Secured Parties.
(c) The Debtor shall have the right and the duty to bring suit or other
action in the Debtor's own name to maintain and enforce the Copyrights which are
material to its business. The Debtor may require the Secured Parties to join in
such suit or action as necessary to assure the Debtor's ability to bring and
maintain any such suit or action in any proper forum if (but only if) the Debtor
is completely satisfied that such joinder will not subject the Secured Parties
to any risk of liability. The Debtor shall promptly, upon demand, reimburse and
indemnify the Secured Parties for all damages, costs and expenses, including
legal fees, incurred by the Secured Parties pursuant to this Section 6(c).
(d) In general, the Debtor shall take any and all such actions (including
institution and maintenance of suits, proceedings, or actions) as may be
necessary or appropriate to properly maintain, protect, preserve, and enforce
the Copyrights which are material to Debtor's business. The Debtor shall not
take or fail to take any action, nor permit any action to be taken or not taken
by others under its control, that would adversely affect the validity, grant or
enforcement of such Copyrights.
(e) Promptly upon obtaining knowledge thereof, the Debtor will notify the
Secured Parties in writing of the institution of, or any final adverse
determination in, any proceeding in the Copyright Office or any similar office
or agency of the United States or any foreign country, or any court, regarding
the validity of any of the Copyrights or the Debtor's rights, title, or
interests in and to the Copyrights, and of any event that does or reasonably
could materially adversely affect the value of any of the Copyrights, the
ability of the Debtor or the Secured Parties to dispose of any of the
Copyrights, or the rights and remedies of the Secured Parties in relation
thereto.
C-2-B-4
<PAGE> 85
ss.7. Remedies.
(a) Upon the occurrence and during the continuance of an Event of Default,
the Secured Parties shall have, in addition to all other rights and remedies
given it by this Copyright Agreement, the Security Agreement, those allowed by
law and the rights and remedies of a secured party under the UCC, the right to,
immediately, without demand of performance and without other notice (except as
set forth next below) or demand whatsoever to the Debtor, all of which are
hereby expressly waived, sell or license at public or private sale or otherwise
realize upon the whole or from time to time any part of the Copyrights, or any
interest that the Debtor may have therein, and, after deducting from the
proceeds of sale or other disposition of the Copyrights all expenses incurred by
the Secured Parties in attempting to enforce this Copyright Agreement (including
all reasonable expenses for broker's fees and legal services), shall apply the
residue of such proceeds toward the payment of the Secured Obligations as set
forth in or by reference in the Security Agreement. Notice of any sale, license,
or other disposition of the Copyrights shall be given to the Debtor at least
five (5) days before the time that any intended public sale or other public
disposition of the Copyrights is to be made or after which any private sale or
other private disposition of the Copyrights may be made, which the Debtor hereby
agrees shall be reasonable notice of such public or private sale or other
disposition. At any such sale or other disposition, the Secured Parties may, to
the extent permitted under applicable law, purchase or license the whole or any
part of the Copyrights or interests therein sold, licensed or otherwise disposed
of.
(b) The Debtor hereby grants to the Secured Parties, effective upon the
occurrence and during the continuance of an Event of Default, in order to
exercise its rights and remedies as contemplated in Section 7(a) herein with
respect to the Copyrights or any other Collateral, a non-exclusive right and
license to use the Copyrights.
ss.8. Collateral Protection. If the Debtor shall fail to do any act that
it has covenanted to do hereunder, or if any representation or warranty of the
Debtor shall be breached, the Secured Parties, in their own names or that of the
Debtor (in the sole discretion of the Secured Parties), may (but shall not be
obligated to) do such act or remedy such breach (or cause such act to be done or
such breach to be remedied), and the Debtor agrees promptly to reimburse the
Secured Parties for any reasonable cost or expense incurred by the Secured
Parties in so doing.
ss.9. Power of Attorney. If any Event of Default shall have occurred and
be continuing, the Debtor does hereby make, constitute and appoint the Secured
Parties (and any officer or agent of the Secured Parties as the Secured Parties
may select in their exclusive discretion) as the Debtor's true and lawful
attorney-in-fact, with full power of substitution and with the power to endorse
the Debtor's name on all applications, documents, papers, and instruments
necessary for the Secured Parties to use the Copyrights, or to grant or issue
any exclusive or nonexclusive license of any of the Copyrights to any third
person, or to take any and all actions necessary for the Secured Parties to
assign, pledge, convey or otherwise transfer title in or dispose of the
Copyrights or any interest of the Debtor therein to any third person, and, in
general, to execute and deliver any instruments or documents and do all other
acts that the Debtor is obligated to execute and do hereunder. The Debtor hereby
ratifies all that such attorney shall lawfully do or cause to be done by virtue
hereof, and releases the Secured Parties from any claims, liabilities, causes of
action or demands arising out of or in connection with any action taken or
omitted to be taken by the Secured Parties under this power of attorney (except
for the Secured Parties' gross negligence or willful misconduct). This power of
attorney is coupled with an interest and shall be irrevocable for the duration
of this Copyright Agreement.
ss.10. Further Assurances. The Debtor shall, at any time and from time to
time, and at its expense, make, execute, acknowledge and deliver, and file and
record as necessary or appropriate with governmental or regulatory authorities,
agencies or offices, such agreements, assignments, documents and instruments,
and do
C-2-B-5
<PAGE> 86
such other and further acts and things (including, without limitation, obtaining
consents of third parties), as the Secured Parties may request or as may be
necessary or appropriate in order to implement and effect fully the intentions,
purposes and provisions of this Copyright Agreement, or to assure and confirm to
the Secured Parties the grant, perfection, and priority of the Secured Parties'
security interest in any of the Copyrights.
ss.11. Termination. At such time as all of the Secured Obligations have
been indefeasibly paid and satisfied in full, this Copyright Agreement shall
terminate and the Secured Parties shall, upon the written request and at the
expense of the Debtor, execute and deliver to the Debtor all deeds, assignments
and other instruments as may be necessary or proper to reassign, reconvey, and
re-vest in and to the Debtor the entire right, title and interest to the
Copyrights previously granted, assigned, transferred and conveyed to the Secured
Parties by the Debtor pursuant to this Copyright Agreement, as fully as if this
Copyright Agreement had not been made, subject to any disposition of all or any
part thereof that may have been made by the Secured Parties pursuant hereto or
the Security Agreement.
ss.12. Course of Dealing. No course of dealing between the Debtor and the
Secured Parties, nor any failure to exercise, nor any delay in exercising, on
the part of the Secured Parties, any right, power or privilege hereunder or
under the Security Agreement or any other agreement shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
ss.13. Expenses. Any and all fees, costs and expenses, of whatever kind or
nature, including the reasonable attorneys' fees and legal expenses incurred by
the Secured Parties in connection with the preparation of this Copyright
Agreement and all other documents relating hereto, the consummation of the
transactions contemplated hereby or the enforcement hereof, the filing or
recording of any documents (including all taxes in connection therewith) in
public offices, the payment or discharge of any taxes, counsel fees, maintenance
or renewal fees, encumbrances or otherwise protecting, maintaining or preserving
the Copyrights, or in defending or prosecuting any actions or proceedings
arising out of or related to the Copyrights, shall be borne and paid by the
Debtor.
ss.14. No Assumption of Liability; Indemnification. NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE SECURED PARTIES ASSUME NO
LIABILITIES OF THE DEBTOR WITH RESPECT TO ANY CLAIM OR CLAIMS REGARDING THE
DEBTOR'S OWNERSHIP OR PURPORTED OWNERSHIP OF, OR RIGHTS OR PURPORTED RIGHTS
ARISING FROM, ANY OF THE COPYRIGHTS OR ANY USE, LICENSE, OR SUBLICENSE THEREOF,
WHETHER ARISING OUT OF ANY PAST, CURRENT OR FUTURE EVENT, CIRCUMSTANCE, ACT OR
OMISSION OR OTHERWISE. ALL OF SUCH LIABILITIES SHALL BE EXCLUSIVELY THE
RESPONSIBILITY OF THE DEBTOR, AND THE DEBTOR SHALL INDEMNIFY THE SECURED PARTIES
FOR ANY AND ALL COSTS, EXPENSES, DAMAGES AND CLAIMS, INCLUDING LEGAL FEES,
INCURRED BY THE SECURED PARTIES WITH RESPECT TO SUCH LIABILITIES.
ss.15. Notices. All notices and other communications made or required to
be given pursuant to this Copyright Agreement shall be in writing and shall be
delivered in hand, mailed by United States registered or certified first-class
mail, postage prepaid, or sent by telecopy and confirmed by delivery via courier
or postal service, to the addresses provided in the Agreement.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand to a responsible officer
of the party to which it is directed, at the time of the receipt thereof by such
officer, (ii) if sent by registered or certified first-class mail, postage
prepaid, three (3)
C-2-B-6
<PAGE> 87
business days after the posting thereof, and (iii) if sent by telecopy or telex,
at the time of the dispatch thereof, if in normal business hours in the country
of receipt, or otherwise at the opening of business on the following business
day.
ss.16. Amendment and Waiver. This Copyright Agreement is subject to
modification only by a writing signed by the Secured Parties and the Debtor,
except as provided in Section 5(b). The Secured Parties shall not be deemed to
have waived any right hereunder unless such waiver shall be in writing and
signed by the Secured Parties. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right on any future occasion.
ss.17. Governing Law; Consent to Jurisdiction. THIS COPYRIGHT AGREEMENT IS
INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE. The Debtor
agrees that any suit for the enforcement of this Copyright Agreement may be
brought in the courts of the State of Delaware or any federal court sitting
therein and consents to the exclusive jurisdiction of such court and to service
of process in any such suit being made upon the Debtor by mail at the address
specified in Section 15. The Debtor hereby waives any objection that it may now
or hereafter have to the venue of any such suit or any such court or that such
suit is brought in an inconvenient court.
ss.18. Waiver of Jury Trial. THE DEBTOR WAIVES ITS RIGHT TO A JURY TRIAL
WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS COPYRIGHT AGREEMENT, ANY RIGHTS OR SECURED OBLIGATIONS HEREUNDER OR
THE PERFORMANCE OF ANY SUCH RIGHTS OR SECURED OBLIGATIONS. Except as prohibited
by law, the Debtor waives any right which it may have to claim or recover in any
litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. The Debtor (a) certifies that neither the Secured Parties nor
any representatives, agents or attorneys of the Secured Parties have
represented, expressly or otherwise, that the Secured Parties would not, in the
event of litigation, seek to enforce the foregoing waivers, and (b) acknowledges
that, in entering into the Agreement, the Secured Parties are relying upon,
among other things, the waivers and certifications contained in this Section 18.
ss.19. Miscellaneous.
(a) The headings of each section of this Copyright Agreement are for
convenience only and shall not define or limit the provisions thereof.
(b) This Copyright Agreement and all rights and obligations hereunder
shall be binding upon the Debtor and its respective successors and assigns, and
shall inure to the benefit of the Secured Parties and its successors and
assigns.
(c) If any term of this Copyright Agreement shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby, and this Copyright Agreement shall be construed and be
enforceable as if such invalid, illegal or unenforceable term had not been
included herein.
C-2-B-7
<PAGE> 88
IN WITNESS WHEREOF, this Copyright Agreement has been executed as of the
day and year first above written.
[DEBTOR]
By:
-------------------
Name:
Title:
Agreed and Acknowledged:
HASBRO INTERACTIVE, INC.
By:
-------------------
Name:
Title:
HASBRO, INC.
By:
-------------------
Name:
Title:
C-2-B-8
<PAGE> 89
COMMONWEALTH OR STATE OF _____________)
) ss.
COUNTY OF ____________________________)
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this ___ day of _____, 19__, personally appeared to me known
personally, and who, being by me duly sworn, deposes and says that he is the
_____ of __________, and that said instrument was signed and sealed on behalf of
said corporation by authority of its Board of Directors, and said __________
acknowledged said instrument to be the free act and deed of said corporation.
-------------------------
Notary Public
My commission expires:
C-2-B-9
<PAGE> 90
Copyrights
Schedule A
C-2-B-10
<PAGE> 91
Schedule B
C-2-B-11
<PAGE> 92
Exhibit 1
ASSIGNMENT OF COPYRIGHTS
WHEREAS, ____________, a ______________ corporation (the "Debtor"), is the
owner of the copyrights (the "Copyrights") identified on the Annex hereto, and
is the owner of the registrations of and pending registration applications for
such Copyrights in the United States Copyright Office identified on such Annex;
and
WHEREAS, _______________, a corporation organized and existing under the
laws of the State of _________ (the "Secured Party"), is desirous of acquiring
the Copyrights and the registrations and applications therefor;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, the Debtor does hereby assign, sell and transfer unto the
Secured Party all right, title and interest in and to the Copyrights, together
with (a) the registrations applications for the Copyrights, including, but not
limited to those registrations and applications on the Annex hereto and all
reissues, extensions, and renewals thereof, (b) any derivative works thereof (c)
the proceeds thereof including (i) any and all accounts, chattel paper,
instruments, other forms of money or currency or other proceeds payable to
Debtor from time to time in respect of the Copyrights, (ii) any and all proceeds
of any insurance, indemnity, warranty or guaranty payable to Debtor from time to
time with respect to any of the Copyrights, (iii) any and all payments (in any
form whatsoever) made or due and payable to Debtor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Copyrights any governmental authority (or
any Person acting under color of governmental authority), (iv) any claim of
Debtor against third parties for past, present, or future infringement of any
Copyright or any injury to the goodwill associated with any Copyright, and (v)
any and all other amounts from time to time paid or payable under or in
connection with any of the Copyrights.
C-2-B-12
<PAGE> 93
This Assignment of Copyrights is intended to and shall take effect at such
time as the Secured Party shall complete this instrument by inserting its name
in the second paragraph above and signing its acceptance of this Assignment of
Copyrights below.
IN WITNESS WHEREOF, the Debtor, by its duly authorized officer, has
executed this assignment, as an instrument under seal, on this ___ day of
______, 199_.
[DEBTOR]
By:
-----------------
Title:
--------------
The foregoing Assignment of Copyrights by the Debtor to the Secured
Parties is hereby accepted as of the _____ day of _______, __.
By:
-----------------
Title:
--------------
C-2-B-13
<PAGE> 94
COMMONWEALTH OR STATE OF _______________)
) ss.
COUNTY OF ______________________________)
On this the ___ day of _____, 199_, before me appeared __________, the
person who signed this instrument, who acknowledged that (s)he is the _____ of
__________ and that being duly authorized (s)he signed such instrument as a free
act on behalf of __________.
-----------------------
Notary Public
My commission expires:
COMMONWEALTH OR STATE OF _______________)
) ss.
COUNTY OF ______________________________)
On this the ___ day of _____, 199_, before me appeared __________, the
person who signed this instrument, who acknowledged that (s)he is the _____ of
__________ and that being duly authorized (s)he signed such instrument as a free
act on behalf of __________.
-----------------------
Notary Public
My commission expires:
C-2-B-14
<PAGE> 95
Annex
Schedule of Copyrights
C-2-B-15
<PAGE> 96
Exhibit D
NOTICE OF BORROWING
[__________], 1998
Hasbro Interactive, Inc.
50 Dunham Road
Beverly, MA 01915
Attention: Thomas Dusenberry, President
Gentlemen:
Reference is made to the Software Distribution and Loan Agreement
dated as of August 11, 1998 (as amended, supplemented or otherwise modified,
(the "Agreement") between MICROPROSE, INC., a Delaware corporation (the
"Borrower"), and Hasbro Interactive, Inc., a Delaware corporation (the
"Lender"). Capitalized terms used herein and not otherwise defined herein have
the meanings given such terms in the Agreement.
The Borrower hereby gives you notice, irrevocably, pursuant to
Section 6.5(f) of the Agreement that the Borrower is requesting that a Loan in
an original principal amount of $[ ] be made under the Agreement on [ ],
1998 (the "Drawdown Date"), which day is a Business Day. After giving effect to
the making of such Loan, the aggregate original principal amount of Loans made
under the Agreement will be $[ ].
The Borrower hereby represents and warrants for the benefit of the
Lender on and as of each of the date hereof and the Drawdown Date that:
(a) this Notice of Borrowing has been duly authorized by all
necessary action on the part of the Borrower and its members, has been duly
executed and delivered by the Borrower and constitutes the legal, valid and
binding obligation of the Borrower;
(b) the representations and warranties of the Borrower set
forth in the Agreement and the other Loan Documents are true and correct in all
material respects as though made on and as of the date hereof and the Drawdown
Date, except to the extent such representations and warranties specifically
relate to a different date;
D-1
<PAGE> 97
(c) no event or circumstance has occurred and is continuing,
or would result from the making of the Loans requested hereby or the use of the
proceeds thereof, which constitutes a Default or an Event of Default; and
(d) the proceeds of the Loan will be used to fund Publisher's
operating working capital needs for the period [ ], 1998 to [ ], 1998 and
such uses are itemized on Schedule I hereto consistent with past practice.
Very truly yours,
MICROPROSE, INC.
By:
----------------------
Name:
Title:
D-2
<PAGE> 1
[MICROPROSE LETTERHEAD]
June 16, 1998
Hasbro
50 Dunham Road
Beverly, MA 01915
Attention: Mr. Ron Parkinson
Ladies and Gentlemen:
In connection with your consideration of a possible business transaction (a
"Transaction") with MicroProse, Inc. (the "Company"), the Company and you expect
to make available to one another certain nonpublic information concerning their
respective business, financial condition, operations, assets and liabilities. As
a condition to such information being furnished to each party and its directors,
officers, employees, agents or advisors (including, without limitation,
attorneys, accountants, consultants, bankers and financial advisors)
(collectively, "Representatives"), each party agrees to treat any nonpublic
information concerning the other party (whether prepared by the disclosing
party, its advisors or otherwise and irrespective of the form of communication)
which is furnished hereunder to a party or to its Representatives now or in the
future by or on behalf of the disclosing party (herein collectively referred to
as the "Evaluation Material") in accordance with the provisions of this letter
agreement, and to take or abstain from taking certain other actions hereinafter
set forth.
(1) EVALUATION MATERIAL. The term "Evaluation Material" also shall be
deemed to include all notes, analyses, compilations, studies, interpretations or
other documents prepared by each party or its Representatives which contain,
reflect or are based upon, in whole or in part, the information furnished to
such party or its Representatives pursuant hereto which is not available to the
general public. The term "Evaluation Material" does not include information
which (i) is or becomes generally available to the public other than as a result
of a breach of this Agreement by the receiving party or its Representatives,
(ii) was within the receiving party's possession prior to its being furnished to
the receiving party by or on behalf of the disclosing party, provided that the
source of such information was not known by the receiving party to be bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the disclosing party, (iii) is or becomes
available to the receiving party on a non-confidential basis from a source other
than the disclosing party or any of its Representatives, provided that such
source was not known by the receiving party to be bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the disclosing party or any other party with respect to such
information, (iv) is disclosed by the disclosing party to a third party without
a duty of confidentiality, (v) is independently developed by the recipient
without use of Evaluation Material, (vi) is disclosed under operation of law, or
(vii) is disclosed by the recipient or its Representatives with the discloser's
prior written approval.
(2) PURPOSE OF DISCLOSURE OF EVALUATION MATERIAL. It is understood and
agreed to by each party that any exchange of information under this agreement
shall be solely for the purpose of evaluating a Transaction between the parties
and not to affect, in any way, each party's relative competitive position to
each party or to other entities. It is further agreed, that the information to
be disclosed to each other shall only be that information which is reasonably
necessary to a Transaction and that information which is not reasonably
necessary for such purposes shall not be disclosed or
<PAGE> 2
exchanged. For purposes of determining when information is reasonably necessary
for such purpose, legal counsel to each party shall agree, in advance, to
review information requests so as to comply with such standard. In addition,
competitively sensitive information such as information concerning product
development or marketing plans, product prices or pricing plans, cost data,
customers or similar information which has been determined to be reasonably
necessary to a Transaction, shall be limited only to those senior executives
and Representatives who are involved in evaluating or negotiating a Transaction
or approving the value of a Transaction.
(3) USE OF EVALUATION MATERIAL. Each party hereby agrees that it and its
Representatives shall use the other's Evaluation Material solely for the
purpose of evaluating a possible Transaction between the parties, and that the
disclosing party's Evaluation Material will be kept confidential and each party
and its Representatives will not disclose or use for purposes other than the
evaluation of a Transaction any of the other's Evaluation Material in any
manner whatsoever, provided, however, that (i) the receiving party may make any
disclosure of such information to which the disclosing party gives its prior
written consent and (ii) any of such information may be disclosed to the
receiving party's Representatives who need to know such information for the
sole purpose of evaluating a possible Transaction between the parties, who are
provided with a copy of this letter agreement, and who are directed by the
receiving party to treat such information confidentially.
(4) NON-DISCLOSURE. In addition, each party agrees that, without the
prior written consent of the other party, its Representatives will not disclose
to any other person the fact that any Evaluation Material has been made
available hereunder, that discussions or negotiations are taking place
concerning a Transaction involving the parties or any of the terms, conditions
or other facts with respect thereto (including the status thereof) PROVIDED,
that a party may make such disclosure if in the written opinion of a party's
outside counsel, such disclosure is necessary to avoid committing a violation
of law. In such event, the disclosing party shall use its best efforts to give
advance notice to the other party.
(5) REQUIRED DISCLOSURE. In the event that a party or its
Representatives are requested or required (by oral questions, interrogatories,
requests for information or documents in legal proceedings, subpoena, civil
investigative demand or similar process) to disclose any of the other party's
Evaluation Material, the party requested or required to make the disclosure
shall provide the other party with prompt notice of any such request or
requirement so that the other party may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this letter
agreement. If, in the absence of a protective order or other remedy or the
receipt of a waiver by such other party, the party requested or required to
make the disclosure or any of its Representatives are nonetheless, in the
opinion of counsel, legally compelled to disclose the other party's Evaluation
Material to any tribunal, the party requested or required to make the
disclosure or its Representative may, without liability hereunder, disclose to
such tribunal only that portion of the other party's Evaluation Material which
such counsel advises is legally required to be disclosed, provided that the
party requested or required to make the disclosure exercises its reasonable
efforts to preserve the confidentiality of the other party's Evaluation
Material, including, without limitation, by cooperating with the other party to
obtain an appropriate protective order or other reliable assurance that
confidential treatment will be accorded the other party's Evaluation Material
by such tribunal.
-2-
<PAGE> 3
(6) TERMINATION OF DISCUSSIONS. If either party decides that it does not
wish to proceed with a Transaction with the other party, the party so deciding
will promptly inform the other party of that decision by giving a written notice
of termination. In that case, or at any time upon the request of either
disclosing party for any reason, each receiving party will promptly deliver to
the disclosing party or destroy all written Evaluation Material (and all copies
thereof and extracts therefrom) furnished to the receiving party or its
Representatives by or on behalf of the disclosing party pursuant hereto. In the
event of such a decision or request, all other Evaluation Material prepared by
the requesting party shall be destroyed and no copy thereof shall be retained,
and in no event shall either party be obligated to disclose or provide the
Evaluation Material prepared by it or its Representatives to the other party.
Notwithstanding the return or destruction of the Evaluation Material, each party
and its Representatives will continue to be bound by its obligations of
confidentiality and other obligations hereunder.
(7) NO REPRESENTATION OF ACCURACY. Each party understands and
acknowledges that neither party nor any of its Representatives makes any
representation or warranty, express or implied, as to the accuracy or
completeness of the Evaluation Material made available by it or to it. Each
party agrees that neither party nor any of its Representatives shall have any
liability to the other party or to any of its Representatives relating to or
resulting from the use of or reliance upon such other party's Evaluation
Material or any errors therein or omissions therefrom. Only those
representations or warranties which are made in a final definitive agreement
regarding the Transaction, when, as and if executed, and subject to such
limitations and restrictions as may be specified therein, will have any legal
effect.
(8) DEFINITIVE AGREEMENTS. Each party understands and agrees that no
contract or agreement providing for any Transaction involving the parties shall
be deemed to exist between the parties unless and until a final definitive
agreement has been executed and delivered. Each party also agrees that unless
and until a final definitive agreement regarding a Transaction between the
parties has been executed and delivered, neither party will be under any legal
obligation of any kind whatsoever with respect to such a Transaction by virtue
of this letter agreement except for the matters specifically agreed to herein.
For purposes of this paragraph, the term "definitive agreement" does not
include an executed letter of intent or any other preliminary written
agreement. Both parties further acknowledge and agree that each party reserves
the right, in its sole discretion, to provide or not provide Evaluation
Material to the receiving party under this Agreement, to reject any and all
proposals made by the other party or any of its Representatives with regard to
a Transaction between the parties, and to terminate discussions and
negotiations at any time.
(9) WAIVER. It is understood and agreed that no failure or delay by
either party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege hereunder.
(10) MISCELLANEOUS. Each party agrees to be responsible for any breach of
this agreement by any of its Representatives. No failure or delay by the
Company or any of its Representatives in exercising any right, power or
privileges under this agreement shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
of any right, power or privilege hereunder. In case any provision of this
agreement shall be invalid, illegal or
-3-
<PAGE> 4
unenforceable, the validity, legality and enforceability of the remaining
provisions of the agreement shall not in any way be affected or impaired
thereby.
(11) INJUNCTIVE RELIEF. It is further understood and agreed that money
damages would not be a sufficient remedy for any breach of this letter agreement
by either party or any of its Representatives and that the non-breaching party
shall be entitled to equitable relief, including injunction and specific
performance, as a remedy for any such breach. Such remedies shall not be deemed
to be the exclusive remedies for a breach of this letter agreement but shall be
in addition to all other remedies available at law or equity. In the event of
litigation relating to this letter agreement, if a court of competent
jurisdiction determines that either party or any of its Representatives have
breached this letter agreement, then the breaching party shall be liable and pay
to the non-breaching party the reasonable legal fees incurred in connection with
such litigation, including an appeal therefrom.
(12) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to agreements
made and to be performed within such State.
(13) SUBSEQUENT CONFIDENTIALITY AGREEMENTS. If the Company enters into a
confidentiality agreement similar to this agreement after the date hereof with
any entity and such agreement contains provisions on the whole less restrictive
than those set forth in this agreement, then the less restrictive provisions
shall apply to you in lieu of such other provisions.
(14) Terms for this agreement are to stay in effect for a maximum of 1
year.
-4-
<PAGE> 5
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned, whereupon this letter agreement
shall become a binding agreement between you and the Company.
Very truly yours,
MICROPROSE, INC.
By: /s/ M. Kip Welch
---------------------------
M. Kip Welch
Vice President & General Counsel
Accepted and Agreed as of
the date first written above:
HASBRO
By: /s/ Ron Parkinson
----------------------
Name: Ron Parkinson
Title: V.P. Finance
Subject to term limitation to one year.
-5-
