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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 19, 1999
Expert Software, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-25646 65-0359860
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(Commission File Number) (I.R.S. Employer Identification No.)
802 Douglas Road, 6th Floor, Coral Gables, Florida 33134
(Address of principal executive offices)
Registrant's telephone number, including area code: (305) 567-9990
Not applicable
(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
On April 19, 1999, Expert Software, Inc. ("Expert"), Activision, Inc.,
a Delaware corporation ("Activision") and Expert Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of Activision ("Acquisition Sub"),
executed an Amended and Restated Agreement and Plan of Merger (the "Amended
Merger Agreement"), pursuant to which, among other things, Acquisition Sub will
be merged with and into Expert, with Expert as the surviving corporation, and
Expert will become a wholly owned subsidiary of Activision (the "Merger"). The
Amended Merger Agreement restated and amended certain terms of the Agreement and
Plan of Merger, dated as of March 3, 1999, by and among Expert, Activision, and
Acquisition Sub so as to, among the other things, (a) extend the date by which
Activision may elect to pay cash consideration to the holders of shares of
Expert common stock from March 25, 1999 to April 20, 1999 and (b) provide that
Acquisition Sub will be merged with and into Expert, with Expert continuing as
the surviving corporation and a wholly owned subsidiary of Activision. The
Amended Merger Agreement is attached hereto as EXHIBIT 2.1.
Pursuant to its rights under the Amended Merger Agreement, on April 19,
1999, Activision gave Expert notice of its election to pay all cash to the
holders of shares of Expert common stock. Accordingly, pursuant to the terms of
the Amended Merger Agreement, holders of shares of Expert common stock will
become entitled to receive cash in an amount equal to $2.65 per each share of
Expert common stock upon closing of the Merger.
As contemplated by the Amended Merger Agreement, on April 19, 1999,
Expert executed a second amendment (the "Amendment No. 2") to that certain
Shareholder Rights Agreement dated as of November 9, 1995 between Expert and
BankBoston N.A. (as successor to The First National Bank of Boston), as amended,
(the "Rights Agreement"), which Amendment No. 2 modified the Rights Agreement to
provide that such Rights Agreement would not be triggered by the execution of
the Amended Merger Agreement. Amendment No. 2 is attached hereto as EXHIBIT 4.1.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
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Exhibit No. Description Page
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2.1 Amended and Restated Agreement and Plan of 5
Merger, dated as of April 19, 1999, by and among
Expert, Activision, Inc., and Expert Acquisition Corp.,
a wholly owned subsidiary of Activision.
4.1 Amendment No. 2 to Shareholders' Rights 65
Agreement, dated as of April 19, 1999, by and between
Expert and BankBoston, N.A. (as successor to The First
National Bank of Boston) (amending the Shareholder
Rights Agreement dated as of November 9, 1995, as
amended).
99.1 Press release, dated as of April 21, 1999, announcing 68
execution of the Amended and Restated Merger
Agreement, dated as of April 19, 1999, by and among
Expert, Activision, Inc., and Expert Acquisition Corp.,
a wholly owned subsidiary of Activision.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report on Form 8-K to be signed on its behalf by
the undersigned thereunto duly authorized.
EXPERT SOFTWARE, INC.
Dated: April 29, 1999 By: /s/ Kenneth P. Currier
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Kenneth P. Currier
Chief Executive Officer
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Exhibit 2.1
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
among
Expert Software, Inc.,
Activision, Inc.
and
Expert Acquisition Corp.
Dated as of April 19, 1999
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TABLE OF CONTENTS
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1. THE MERGER....................................................................1
1.1 The Merger...........................................................1
1.2 The Closing..........................................................2
1.3 Effective Time.......................................................2
1.4 Certificate of Incorporation; By-Laws................................2
1.5 Directors and Officers...............................................2
1.6 Tax Consequences.....................................................2
2. CONVERSION OF SHARES..........................................................3
2.1 Conversion of Merger Subsidiary Shares...............................3
2.2 Conversion of Expert Shares..........................................3
2.3 Election by Activision to Pay Cash Consideration.....................5
2.4 Conversion of Expert Employee Stock Options and Warrants.............5
2.5 Adjustments..........................................................6
2.6 Dissenting Expert Stockholders.......................................6
3. EXCHANGE OF SHARES............................................................7
3.1 Exchange of Certificates.............................................7
4. REPRESENTATIONS AND WARRANTIES OF EXPERT......................................9
4.1 Organization; Good Standing; Authority; Compliance With Law..........9
4.2 Authorization, Validity and Effect of Agreements....................10
4.3 Capitalization......................................................11
4.4 Subsidiaries........................................................11
4.5 Other Interests.....................................................12
4.6 No Violation........................................................12
4.7 SEC Documents.......................................................12
4.8 Financial Statements................................................13
4.9 Litigation..........................................................13
4.10 Absence of Certain Changes..........................................14
4.11 Taxes...............................................................16
4.12 Books and Records...................................................17
4.13 Properties..........................................................17
4.14 Environmental Matters...............................................18
4.15 No Brokers..........................................................18
4.16 Opinion of Financial Advisor........................................19
4.17 Related Party Transactions..........................................19
4.18 Contracts and Commitments...........................................19
4.19 Employee Matters and Benefit Plans..................................20
4.20 Intellectual Property...............................................24
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4.21 Anti-Takeover Plan..................................................27
4.22 Shareholder Vote Required...........................................28
4.23 Undisclosed Liabilities.............................................28
4.24 Insurance...........................................................28
4.25 Tax Treatment.......................................................28
4.26 Relationships with Suppliers, Licensors and Customers...............28
4.27 Bank Accounts.......................................................29
4.28 Year 2000 Problem...................................................29
5. REPRESENTATIONS AND WARRANTIES OF ACTIVISION AND MERGER SUBSIDIARY...........29
5.1 Organization; Good Standing; Authority; Compliance With Law.........29
5.2 Authorization, Validity and Effect of Agreements....................30
5.3 Capitalization......................................................31
5.4 No Violation........................................................32
5.5 Tax Treatment.......................................................32
5.6 SEC Documents.......................................................32
5.7 Financial Statements................................................33
5.8 Litigation..........................................................33
5.9 Absence of Certain Changes..........................................33
5.10 Ownership of Expert Shares..........................................34
5.11 No Brokers..........................................................34
5.12 Intellectual Property...............................................35
5.13 Anti-Takeover Matters...............................................35
5.14 No Shareholder Vote Required........................................35
5.15 Undisclosed Liabilities.............................................35
5.16 Continuity of Business Enterprise...................................36
5.17 Financing...........................................................36
6. COVENANTS AND OTHER AGREEMENTS...............................................36
6.1 Conduct of Businesses...............................................36
6.2 Meeting of Stockholders.............................................38
6.3 Filings; Other Action...............................................39
6.4 Access to Information...............................................40
6.5 Publicity...........................................................41
6.6 Listing of Activision Common Stock..................................41
6.7 Further Action......................................................41
6.8 Tax Treatment.......................................................41
6.9 Other Offers........................................................41
6.10 Notice of Certain Events............................................42
6.11 Affiliate Letters...................................................43
6.12 Termination of Amended and Restated Stockholders' Agreement.........43
6.13 Indemnification and Insurance.......................................44
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(ii)
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6.14 Employee Matters....................................................45
6.15 Employment Agreements; Non-Competition Agreements...................45
7. CONDITIONS...................................................................46
7.1 Conditions to Each Party's Obligation to Effect the Merger..........46
7.2 Conditions to Obligations of Expert to Effect the Merger............46
7.3 Conditions to Obligation of Activision and Merger Subsidiary
to Effect the Merger...............................................47
8. TERMINATION..................................................................49
8.1 Termination.........................................................49
8.2 Effect of Termination...............................................50
8.3 Expenses and Termination Fees.......................................50
8.4 Extension; Waiver...................................................51
9. GENERAL PROVISIONS...........................................................52
9.1 Nonsurvival of Representations, Warranties and Agreements...........52
9.2 Notices.............................................................52
9.3 Assignment; Binding Effect; Benefit.................................53
9.4 Entire Agreement....................................................53
9.5 Confidentiality.....................................................53
9.6 Amendment...........................................................53
9.7 Governing Law.......................................................53
9.8 Counterparts........................................................54
9.9 Headings............................................................54
9.10 Waivers.............................................................54
9.11 Incorporation.......................................................54
9.12 Severability........................................................54
9.13 Interpretation and Certain Definitions..............................54
9.14 Specific Performance................................................55
EXHIBIT A Form of Affiliate Letter
</TABLE>
(iii)
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this
"Agreement") is made and entered into as of April 19, 1999 among Expert
Software, Inc., a Delaware corporation ("Expert"), Activision, Inc., a Delaware
corporation ("Activision"), and Expert Acquisition Corp., a Delaware corporation
and wholly-owned subsidiary of Activision ("Merger Subsidiary").
RECITALS
WHEREAS, the respective Boards of Directors of Expert, Activision and
Merger Subsidiary each have determined that a business combination between
Expert, Activision and Merger Subsidiary is fair to and in the best interests of
their respective companies and stockholders and accordingly have approved this
Agreement and agreed to effect the merger provided for herein upon the terms and
subject to the conditions set forth herein;
WHEREAS, Expert, Activision and Merger Subsidiary entered into that
certain Agreement and Plan of Merger dated as of March 3, 1999 (the "Original
Agreement"); and
WHEREAS, the parties desire to amend the outside date set forth in
Section 2.3 hereof by which Activision may elect to pay cash consideration to
the holders of shares of Expert common stock and certain other provisions.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree that the Original Agreement is amended and restated
in its entirety as follows:
1. THE MERGER
1.1 THE MERGER. On the terms and subject to the conditions
contained in this Agreement, at the Effective Time (as defined in Section 1.3
hereof), Merger Subsidiary shall be merged with and into Expert in accordance
with this Agreement and the separate corporate existence of Merger Subsidiary
shall thereupon cease (the "Merger"). Expert shall be the surviving corporation
in the Merger and shall continue under the corporate name "Expert Software,
Inc." (Expert, after the Effective Time, is sometimes hereinafter referred to as
the "Surviving Corporation"). From and after the Effective Time, all the
properties, rights, privileges, powers and franchises both of a public and of a
private nature of Expert and Merger Subsidiary shall vest in the Surviving
Corporation and all debts, liabilities and duties of Expert and Merger
Subsidiary shall become the debts, liabilities and duties of the Surviving
Corporation. The Merger shall have the effects provided in this Agreement and
the applicable provisions of the Delaware General Corporation Law ("DGCL").
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1.2 THE CLOSING. On the terms and subject to the conditions of
this Agreement, the closing of the Merger (the "Closing") shall take place at
the offices of Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of
the Americas, New York, New York, at 10:00 a.m., local time, on the first
business day immediately following the day on which the last of the conditions
set forth in Article 7 shall be fulfilled or waived in accordance herewith but,
unless the parties otherwise agree, not earlier than May 25, 1999. Unless the
parties shall otherwise agree, the parties shall use their reasonable best
efforts to cause the Closing to occur as soon as possible after the Special
Meeting (as defined in Section 6.2). The date on which the Closing occurs is
hereinafter referred to as the "Closing Date."
1.3 EFFECTIVE TIME. If all the conditions to the Merger set forth
in Article 7 shall have been fulfilled or waived in accordance herewith, and
this Agreement shall not have been terminated as provided in Article 8, the
parties hereto shall cause a Certificate of Merger satisfying the requirements
of the DGCL to be properly executed, verified and delivered for filing in
accordance with the DGCL on the Closing Date. The Merger shall become effective
upon the acceptance for record of the Certificate of Merger by the Secretary of
State of the State of Delaware in accordance with the DGCL (but not earlier than
the Closing Date) or at such later time which the parties hereto shall have
agreed upon and designated in such filing in accordance with applicable law as
the effective time of the Merger (the "Effective Time").
1.4 CERTIFICATE OF INCORPORATION; BY-LAWS.
(a) CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of Merger Subsidiary in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation
(except that the name of the Surviving Corporation shall be "Expert Software,
Inc."), until duly amended in accordance with applicable law.
(b) BY-LAWS. The By-laws of Merger Subsidiary in effect
immediately prior to the Effective Time shall be the By-laws of the Surviving
Corporation (except that the name of the Surviving Corporation shall be "Expert
Software, Inc."), until duly amended in accordance with applicable law.
1.5 DIRECTORS AND OFFICERS.
(a) DIRECTORS. The directors of Merger Subsidiary
immediately prior to the Effective Time, shall automatically become the
directors of the Surviving Corporation as of the Effective Time.
(b) OFFICERS. The officers of Merger Subsidiary
immediately prior to the Effective Time shall automatically become the officers
of the Surviving Corporation as of the Effective Time.
1.6 TAX CONSEQUENCES. If the Section 2.3 Election is not made, it
is intended by the parties hereto that the Merger will constitute a
reorganization within the meaning of Section 368(a)
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of the Internal Revenue Code of 1986, as amended (the "Code"), and the parties
shall report the Merger consistent therewith. The parties hereto hereby adopt
this Agreement as a "plan of reorganization" within the meaning of Section
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
2. CONVERSION OF SHARES
2.1 CONVERSION OF MERGER SUBSIDIARY SHARES. At the Effective Time,
each share of common stock, $1.00 par value per share, of Merger Subsidiary that
is issued and outstanding immediately prior to the Effective Time shall be
converted into one share of common stock, par value $1.00 per share, of the
Surviving Corporation that is issued and outstanding immediately after the
Effective Time, and such shares will be the only shares of capital stock of the
Surviving Corporation that are issued and outstanding immediately after the
Effective Time. Each certificate evidencing ownership of shares of Merger
Subsidiary common stock shall evidence ownership of an equal number of shares of
common stock of the Surviving Corporation.
2.2 CONVERSION OF EXPERT SHARES.
(a) Except as provided in Section 2.3, at the Effective
Time, by virtue of the Merger and without any action on the part of Activision,
Merger Subsidiary, Expert or the holder thereof, each issued and outstanding
share of common stock, par value $.01 per share, of Expert (each an "Expert
Share" and collectively, the "Expert Shares") shall be converted into the right
to receive a number of shares of common stock, par value $.000001 per share, of
Activision (the "Activision Common Stock"), equal to the Exchange Ratio (as
hereinafter defined) and cash, to the extent set forth in Section 2.2(f). The
shares of Activision Common Stock to be issued in connection with the Merger are
sometimes referred to as the "Activision Shares."
(b) The Exchange Ratio shall be equal to (i) $2.65,
divided by (ii) the Activision Per Share Market Value. For purposes of the
foregoing, the "Activision Per Share Market Value" shall be the arithmetic
average of the per share closing sales prices of Activision Common Stock as
reported on the Nasdaq National Market ("NASDAQ") (or such other national
securities exchange or automated quotation system which is then the principal
place of listing or quotation of shares of Activision Common Stock) on the ten
(10) trading days ending on and including the trading day which is two (2)
trading days immediately prior to the date of the Special Meeting (as defined in
Section 6.2) which will be held in accordance with the provisions of Section 6.2
for the purpose of approving this Agreement and the transactions contemplated
hereby.
(c) Notwithstanding anything to the contrary set forth in
Section 2.2(b), (i) in no event shall the number of Activision Shares to be
issued in connection with the Merger exceed 20% of the total number of shares of
Activision Common Stock issued and outstanding at the Effective Time (the
"Maximum Activision Share Issuance"), and (ii) in no event shall the Exchange
Ratio be higher than (x) the Maximum Activision Share Issuance, divided by (y)
the
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total number of Expert Shares issued and outstanding as at the Effective Time
(other than Cancelled Expert Shares, as hereinafter defined).
(d) Each Expert Share held in Expert's treasury, if any,
and each Expert Share owned by Activision or by any direct or indirect
subsidiary of Expert or Activision immediately prior to the Effective Time
(collectively, "Cancelled Expert Shares") shall, at the Effective Time, by
virtue of the Merger and without any action on the part of the holder thereof,
be canceled and retired and cease to exist and no payment shall be made with
respect thereto.
(e) No fractional shares of Activision Common Stock shall
be issued pursuant to this Agreement. In lieu of the issuance of any fractional
shares of Activision Common Stock pursuant to this Agreement, each holder of
Expert Shares shall be paid an amount in cash (without interest), rounded to the
nearest cent, determined by multiplying (i) the Activision Per Share Market
Value by (ii) the fractional amount of a share of Activision Common Stock which
such holder would otherwise be entitled to receive under this Article 2.
(f) Notwithstanding the provisions of Section 2.2(b), in
the event:
(i) the Activision Per Share Market Value is
less than $10.00, Activision shall fix the Exchange Ratio at .2650 and
pay the holders of Expert Shares, in addition to the number of shares
of Activision Common Stock determined based on an Exchange Ratio of
.2650, cash equal to the Shortfall Cash Payment (as defined below) in
lieu of the number of Activision Shares that would have been issued had
the Exchange Ratio been computed in accordance with Section 2.2(b), and
(ii) the provisions of Section 2.2(c) are
applicable and the Exchange Ratio is calculated in accordance with such
section, Activision shall pay to the holders of Expert Shares, in
addition to the number of shares of Activision Common Stock determined
based on the Exchange Ratio determined pursuant to Section 2.2(c), cash
equal to the Shortfall Cash Payment in lieu of the number of Activision
Shares that would have been issued had the Exchange Ratio been computed
in accordance with Section 2.2(b).
In the case of clause (i) or (ii), the cash payment on account of any
Expert Share (the "Shortfall Cash Payment") shall be equal to the Activision Per
Share Market Value multiplied by the fraction of a share of Activision Common
Stock determined by subtracting the Exchange Ratio computed under clause (i) or
(ii), as applicable, from the Exchange Ratio calculated under Section 2.2(b).
Notwithstanding the foregoing provisions of this Section 2.2(f), (a) in the
event Section 2.2(f)(i) is applicable, the total of all Cash Shortfall Payments,
and any cash payable in lieu of fractional shares, with respect to all Expert
Shares shall not exceed 60% of the total Exchange Merger Consideration (as
hereinafter defined), and the Exchange Ratio computed in accordance with Section
2.2(f)(i) shall be adjusted so that Activision Shares are issued in lieu of any
portion of the Cash Shortfall Payment that could not be made due to this clause
(a), and (b) in the event Section 2.2(f)(ii) is applicable, the total of all
Cash Shortfall Payments, and any cash payable in lieu of fractional shares,
shall not exceed 60% of the total Exchange Merger
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Consideration, but the Exchange Ratio shall not be adjusted and no other
payments of cash, Activision Common Stock or any other forms of consideration
shall be payable to holders of Expert Shares.
2.3 ELECTION BY ACTIVISION TO PAY CASH CONSIDERATION. Activision
shall have the right, exercisable at any time on or before April 20, 1999, on
notice to Expert, to elect to pay cash consideration to the holders of Expert
Shares in lieu of issuance of Activision Shares pursuant to Section 2.2 (the
"Section 2.3 Election"). In the event of a Section 2.3 Election, at the
Effective Time, by virtue of the Merger and without any action on the part of
Activision, Merger Subsidiary, Expert or the holder thereof, each issued and
outstanding Expert Share (other than Dissenting Common Stock as defined in
Section 2.6) shall be converted into the right to receive $2.65 per share, in
cash, without interest. The provisions of Section 2.2(d) shall apply in the
event of any such election by Activision. The amount of cash payable with
respect to each Expert Share is hereinafter referred to as the "Per Share Cash
Consideration," and the aggregate Per Share Cash Consideration payable is
referred to as the "Aggregate Cash Consideration."
2.4 CONVERSION OF EXPERT EMPLOYEE STOCK OPTIONS AND WARRANTS.
(a) At the Effective Time, each option or warrant,
whether vested or unvested, to purchase Expert Shares which is then outstanding
and unexercised (an "Expert Option" or an "Expert Warrant," as the case may be)
shall cease to represent a right to acquire shares of Expert Common Stock and
shall be converted automatically into an option or warrant to acquire, under the
same terms and conditions as were applicable to such Expert Option or Expert
Warrant immediately prior to the Effective Time, shares of Activision Common
Stock, and Activision shall assume each Expert Option and Expert Warrant and
each option plan or agreement pursuant to which any such Expert Option and
Expert Warrant were granted; PROVIDED, HOWEVER, that from and after the
Effective time, (i) the number of shares of Activision Common Stock purchasable
upon exercise of such Expert Option or Expert Warrant shall be equal to the
number of shares of Expert Common Stock that were purchasable under such Expert
Option or Expert Warrant immediately prior to the Effective Time multiplied by
the Exchange Ratio, (without adjustment pursuant to Sections 2.2(c) or 2.2(f))
rounding to the nearest whole share, and (ii) the per share exercise price under
each such Expert Option and Expert Warrant shall be adjusted by dividing the per
share exercise price of each such Expert Option and Expert Warrant by the
Exchange Ratio (without adjustment pursuant to Section 2.2(c) or (f)), rounding
to the nearest cent. The terms of each Expert Option and Expert Warrant shall,
in accordance with its terms, be subject to further adjustment as appropriate to
reflect any stock split, stock dividend, recapitalization or other similar
transaction with respect to Activision Common Stock on or subsequent to the
Effective Time. Notwithstanding the foregoing, the number of shares and the per
share exercise price of each Expert Option which is intended to be an "incentive
stock option" (as defined in Section 422 of the Code) shall be adjusted in
accordance with the requirements of Section 424 of the Code. Accordingly, with
respect to any incentive stock options, fractional shares shall be rounded down
to the nearest whole number of shares and where necessary the per share exercise
price shall be rounded up to the nearest cent.
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(b) As soon as practicable after the Effective Time,
Activision shall deliver to each holder of an outstanding Expert Option or
Expert Warrant an appropriate notice setting forth such holder's rights pursuant
thereto, and such Expert Option and Expert Warrant shall continue in effect on
the same terms and conditions (including antidilution provisions).
(c) At or prior to the Effective Time, Activision shall
reserve for issuance the number of shares of Activision Common Stock necessary
to satisfy Activision's obligations under Section 2.4(a). At or prior to the
Effective Time, Activision shall file with the Securities and Exchange
Commission ("SEC") a registration statement on Form S-8 (to the extent such form
is available) under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the shares of Activision Common Stock subject to Expert
Options and Expert Warrants assumed pursuant to Section 2.4(a) hereof, and shall
use its reasonable best efforts to maintain the current status of the prospectus
contained therein, as well as comply with any applicable state securities or
"blue sky" laws, for so long as such options and warrants remain outstanding.
2.5 ADJUSTMENTS. If at any time during the period between the date
of this Agreement and the Effective Time, any change in the Expert Shares or
Activision Common Stock shall occur by reason of any reclassification,
recapitalization, stock dividend, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with the record date
during such period, the Exchange Ratio or the Per Share Cash Consideration, as
applicable, shall be appropriately adjusted.
2.6 DISSENTING EXPERT STOCKHOLDERS. Notwithstanding any provision
of this Agreement to the contrary, if required by the DGCL but only to the
extent required thereby, shares of Expert Common Stock which are issued and
outstanding immediately prior to the Effective Time and which are held by
holders of such shares of Expert Common Stock who have properly exercised
appraisal rights with respect thereto (the "Dissenting Common Stock") in
accordance with Section 262 of the Delaware General Corporation Law ("DGCL")
will not be exchangeable for the right to receive the Cash Merger Consideration,
and holder of such shares of Dissenting Common Stock will be entitled to receive
payment of the appraised value of such shares of Dissenting Common Stock in
accordance with the provisions of such Section 262 unless and until such holders
fail to perfect or effectively withdraw or lose their rights to appraisal and
payment under the DGCL. If, after the Effective Time, any such holder fails to
perfect or effectively withdraws or loses such right, such shares of Dissenting
Common Stock will thereupon be treated as if they had been converted into and
have become exchangeable for, at the Effective Time, the right to receive the
Cash Merger Consideration, without any interest thereon. Notwithstanding
anything to the contrary contained in this Section 2.6, if the Merger is not
consummated, then the right of any stockholder to be paid the fair value of such
stockholder's Dissenting Common Stock pursuant to Section 262 of the DGCL shall
cease. Expert will give Activision prompt notice of any demands and withdrawals
of such demands received by Expert for appraisals of shares of Dissenting Common
Stock. Expert shall not, except with the prior written consent of Activision,
make any payment with respect to any demands for appraisal or offer to settle or
settle any such demands.
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3. EXCHANGE OF SHARES
3.1 EXCHANGE OF CERTIFICATES.
(a) Prior to the Effective Time, Activision shall
designate Continental Stock Transfer & Trust Company, or such other bank or
trust company as shall be reasonably acceptable to Expert, to act as Exchange
Agent in connection with the Merger (the "Exchange Agent"). At, or immediately
prior to, the Effective Time, Activision will take all steps necessary to
deposit with the Exchange Agent for the benefit of the holders of Expert Shares
(i) certificates representing the aggregate number of shares of Activision
Common Stock issuable pursuant to Section 2.2 in exchange for outstanding Expert
Shares, cash in lieu of fractional shares of Activision Common Stock, and any
Cash Shortfall Payment, or (ii) if Activision shall have made the Section 2.3
Election, the Aggregate Cash Consideration (the shares or cash referred to in
clause (i) or (ii), as applicable, being hereinafter referred to as the
"Exchange Fund").
(b) Promptly after the Effective Time, Activision and the
Surviving Corporation shall cause the Exchange Agent to mail to each person who
was a record holder, as of the Effective Time, of an outstanding certificate or
certificates which immediately prior to the Effective Time represented Expert
Shares (the "Certificates"), a form letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange
Agent), instructions for use in effecting the surrender of the Certificates in
exchange for (i) certificates evidencing Activision Shares, cash in lieu of
fractional shares in accordance with Section 2.2(e) and any Cash Shortfall
Payment, or (ii) the Per Share Cash Consideration, if Activision has made the
Section 2.3 Election. Upon surrender to the Exchange Agent of a Certificate,
together with such letter of transmittal duly executed, and any other required
documents, the holder of such Certificate shall be entitled to receive in
exchange therefor (A) (i) a certificate representing the number of whole shares
of Activision Common Stock, if any, to which such holder shall be entitled
pursuant to Section 2.2, (ii) a check representing the amount of cash in respect
of fractional shares, if any, to which such holder shall be entitled in
accordance with Section 2.2(e), (iii) any dividends or other distributions to
which such holder is entitled pursuant to Section 3.1(c), and (iv) a check
representing the amount of any Cash Shortfall Payment to which such holder shall
be entitled pursuant to Section 2.2(f) (the Activision Shares and cash paid
pursuant to Sections 2.2(e), 2.2(f) and 3.1(c) being referred to, collectively
as the "Exchange Merger Consideration"), or (B) if Activision has made the
Section 2.3 Election, a check representing the Per Share Cash Consideration to
which such holder shall be entitled (such cash payment is referred to as the
"Cash Merger Consideration" and the Exchange Merger Consideration and the Cash
Merger Consideration are sometimes referred to as the "Applicable Merger
Consideration"), and such Certificate shall forthwith be canceled. No interest
will be paid or accrued on the Applicable Merger Consideration or payable upon
the surrender of the Certificates. If payment is to be made to a person other
than the person in whose name the Certificate surrendered is registered, it
shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer as determined by the
Exchange Agent, and that the person requesting such payment shall pay any
transfer, or other taxes required by reason of the payment
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to a person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 3.1, each Certificate (other than Certificates
representing Canceled Expert Shares and other than Certificates representing
Dissenting Common Stock) shall represent for all purposes only the right to
receive the Applicable Merger Consideration, without any interest thereon. In
the event of a transfer of ownership of Expert Shares which is not registered in
the stock transfer records of Expert, the amount and type of Applicable Merger
Consideration may be issued to such a transferee if the certificate representing
Expert Shares is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
(c) No dividends or other distributions declared or made
after the Effective Time with respect to shares of Activision Common Stock with
a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Activision Common Stock
they are entitled to receive until the holder of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Activision Common Stock issued in
exchange therefor, without interest, at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Activision Common Stock.
(d) Any portion of the Exchange Fund that remains
unclaimed by the former stockholders of Expert one year after the Effective Time
shall be returned to Activision (provided that Activision shall issue such
shares of Activision Common Stock and/or pay such cash in accordance with this
Article 3 to former stockholders of Expert who thereafter surrender their
Certificates), subject to the provisions and effect of applicable abandoned
property, escheat or similar laws. Any former stockholders of Expert who have
not theretofore complied with this Article 3 shall thereafter look only to
Activision for issuance or payment of the Applicable Merger Consideration,
without any interest thereon. Neither the Surviving Corporation, the Exchange
Agent nor Activision shall be liable to any holder of an Expert Share for any
consideration set forth in Section 2.2 or Section 2.3 hereof delivered in
respect of such Expert Share to a public official pursuant to any abandoned
property, escheat or other similar law.
(e) After the Effective Time there shall be no
registration on the share transfer books of the Surviving Corporation of
transfers of the Expert Shares which were outstanding immediately prior to the
Effective Time, and as of the Effective Time, the share ledger of Expert shall
be closed. All Applicable Merger Consideration paid upon the surrender of
Certificates in accordance with the terms of this Article 3 shall be deemed to
have been paid in full satisfaction of all rights pertaining to the Expert
shares previously evidenced by Certificates. After the Effective Time, the
holders of Expert Shares outstanding at the Effective Time shall cease to have
any rights with respect to such Expert Shares except as provided herein or by
applicable law. If, after the Effective Time, certificates evidencing Expert
Shares are presented to the Surviving
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Corporation, they shall be canceled and exchanged for the Applicable Merger
Consideration as provided in this Article 3.
(f) In the event any Certificates shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof, (i) such shares of Activision Common Stock as may be
required pursuant to Section 2.2, cash for fractional shares, as may be required
by Section 2.2(e) and any dividends or distributions payable pursuant to Section
3.1(c), or (ii) the Cash Merger Consideration, if Activision has made the
Section 2.3 Election, PROVIDED, HOWEVER, that Activision may, in its discretion
and as a condition precedent to the issuance and/or payment thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Activision, the Surviving Corporation or the Exchange Agent with respect
to the Certificates alleged to have been lost, stolen or destroyed.
4. REPRESENTATIONS AND WARRANTIES OF EXPERT
Expert hereby represents and warrants to Activision and Merger
Subsidiary as follows:
4.1 ORGANIZATION; GOOD STANDING; AUTHORITY; COMPLIANCE WITH LAW.
(a) Expert is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as now conducted. Expert is duly licensed or qualified
and is in good standing to transact business as a foreign corporation in each
jurisdiction in which the character of the properties owned or leased by it
therein or in which the nature of its business makes such qualification or
licensing necessary, except where the failure to be so licensed or qualified
would not have, individually or in the aggregate, an Expert Material Adverse
Effect. For purposes of this Agreement, an "Expert Material Adverse Effect"
means a material adverse effect on the business, assets (including intangible
assets), financial condition or results of operations of Expert and the Expert
Subsidiaries (as defined below) taken as a whole; PROVIDED, HOWEVER, that none
of the following shall be deemed by itself or by themselves, either alone or in
combination, to constitute an Expert Material Adverse Effect: (i) conditions
generally affecting the industry in which Expert operates, including, without
limitation, actual or proposed changes in law or regulations or (ii) any effect
that is related to a general drop in stock prices in the United States resulting
from political or economic turmoil.
(b) Each of the Expert Subsidiaries is a corporation or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the corporate or partnership power and authority to own its properties and
to carry on its business as it is now being conducted, and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
ownership of its property or the conduct of its business requires such
qualification, except for jurisdictions in which
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such failure to be so qualified or to be in good standing would not,
individually or in the aggregate, have an Expert Material Adverse Effect.
(c) Except as set forth in Section 4.1(c) of the
disclosure letter delivered at or prior to the execution hereof to Activision,
which shall refer to the relevant sections of this Agreement (the "Expert
Disclosure Letter"), the business of Expert and the Expert Subsidiaries has been
operated in compliance with all laws, ordinances, regulations and orders of all
governmental entities, except for violations which would not have, individually
or in the aggregate, an Expert Material Adverse Effect. Expert and the Expert
Subsidiaries have all permits, certificates, licenses, approvals, consents and
other authorizations (collectively, "Government Approvals") of all governmental
agencies, entities, commissions, boards, bureaus, tribunals, officials or
authorities, whether Federal, state or local (collectively, "Governmental
Agencies"), required by law with respect to the operation of their businesses,
except those the absence of which would not, individually or in the aggregate,
have an Expert Material Adverse Effect or prevent or delay consummation of the
Merger. All such Government Approvals are in full force and effect, and, Expert
and the Expert Subsidiaries are in compliance with all conditions and
requirements of the Government Approvals and with all rules and regulations
relating thereto, other than failures that would not have an Expert Material
Adverse Effect. Expert has not received any notices of violations of any
Federal, state and local laws, regulations and ordinances relating to its
business, operations or assets which, if it were determined that a violation had
occurred, would have an Expert Material Adverse Effect.
(d) The certificate of incorporation or other charter
documents, bylaws, organizational documents and partnership, shareholder, joint
venture or similar agreements (and in each such case, all amendments thereto) of
Expert and each of the Expert Subsidiaries are listed in Section 4.1(d) of the
Expert Disclosure Letter, true and correct copies of which have previously been
delivered or made available to Activision and its counsel.
4.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Expert has
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The Board of
Directors of Expert has approved this Agreement, the Merger, and the
transactions contemplated by this Agreement and has unanimously agreed to
recommend that the holders of Expert Shares adopt and approve this Agreement,
the Merger, and the transactions contemplated by this Agreement at the Special
Meeting (as defined in Section 6.2). Expert has taken all action necessary to
exempt the transactions contemplated by this Agreement from the operation of any
"fair price," "moratorium," "control share acquisition," or other similar
anti-takeover statute or regulation enacted under the state or federal laws of
the United States. As of the date hereof, each director and executive officer of
Expert and each entity that is a stockholder of Expert and that has a
representative on the Board of Directors has indicated that he, she or it
intends to vote all Expert Shares that he, she or it controls to approve this
Agreement, the Merger, and the transactions contemplated by this Agreement at
the Special Meeting. Subject only to the approval of this Agreement and the
transactions contemplated hereby by the holders of a majority of the outstanding
Expert Shares and the filing and acceptance for record of appropriate merger
documents as required by the DGCL, the execution by Expert
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of this Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by all requisite action on the part of
Expert. Assuming this Agreement constitutes a valid and binding obligation of
Activision and Merger Subsidiary, this Agreement constitutes the valid and
legally binding obligation of Expert, enforceable against Expert in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity.
4.3 CAPITALIZATION. The authorized capital stock of Expert
consists of 30,000,000 Expert Shares and 1,000,000 shares of preferred stock,
par value $.01 per share (the "Expert Preferred Shares") of which 25,000 shares
are designated as Series A Junior Participating Cumulative Preferred Stock. As
of the date hereof, there are not more than 7,627,881 Expert Shares issued and
outstanding and no Expert Preferred Shares issued and outstanding. All such
outstanding shares of Expert are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Except as set forth in Section 4.3
of the Expert Disclosure Letter, Expert has no outstanding bonds, debentures,
notes or other obligations the holders of which have or upon the happening of
certain events would have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the stockholders of
Expert on any matter. Except as set forth in Section 4.3 of the Expert
Disclosure Letter, there are no existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements, stock
appreciation rights or similar derivative securities or instruments or
commitments which obligate Expert to issue, transfer or sell any Expert Shares
or make any payments in lieu thereof, and Section 4.3 of the Expert Disclosure
Letter sets forth the exercise prices of all such options, warrants or other
rights or securities, the weighted average exercise price of which is not less
than $1.26 per share. Except as set forth in Section 4.3 of the Expert
Disclosure Letter, there are no agreements or understandings to which Expert or
any Expert Subsidiary is a party with respect to the voting of any Expert Shares
or which restrict the transfer of any such shares, nor does Expert have
knowledge of any such agreements or understandings with respect to the voting of
any such shares or which restrict the transfer of any such shares. There are no
outstanding contractual obligations of Expert or any Expert Subsidiary to
repurchase, redeem or otherwise acquire any Expert Shares or any other
securities of Expert or any Expert Subsidiary. Except as set forth in Section
4.3 of the Expert Disclosure Letter, neither Expert nor any Expert Subsidiary is
under any obligation, contingent or otherwise, by reason of any agreement to
register any of their securities under the Securities Act. Expert has delivered
to Activision complete and correct copies of all Expert option plans and all
forms of options issued pursuant to any Expert option plan, including all
amendments thereto. Section 4.3 of the Expert Disclosure Letter contains a
complete and correct list setting forth as of the date hereof (i) the number of
options and warrants outstanding, (ii) the dates on which such options or
warrants were granted, (iii) the dates on which such options or warrants shall
vest and (iv) the exercise or conversion price of each outstanding option or
warrant, as the case may be.
4.4 SUBSIDIARIES. Section 4.4 of the Expert Disclosure Letter
lists all Subsidiaries of Expert (the "Expert Subsidiaries" and, individually,
an "Expert Subsidiary"). Except as set forth in Section 4.4 of the Expert
Disclosure Letter, Expert owns directly or indirectly all of the outstanding
shares of capital stock or other equity interests of each of the Expert
Subsidiaries. All
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of the outstanding shares of capital stock in each of the Expert Subsidiaries
are duly authorized, validly issued, fully paid and nonassessable. Except as set
forth in Section 4.4 of the Expert Disclosure Letter, all of the outstanding
shares of capital stock of each of the Expert Subsidiaries owned, directly or
indirectly, by Expert are owned free and clear of all liens, pledges, security
interests, claims or other encumbrances. Except as set forth in Section 4.4 of
the Expert Disclosure Letter, there are no options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate Expert or any Expert Subsidiary to issue, transfer or
sell any shares of capital stock of any Expert Subsidiary. The following
information for each Expert Subsidiary is set forth in Section 4.4 of the Expert
Disclosure Letter: (i) its name and jurisdiction of incorporation; (ii) its
authorized capital stock; and (iii) the name of each stockholder and the number
of issued and outstanding shares of capital stock held by it.
4.5 OTHER INTERESTS. Except for interests in the Expert
Subsidiaries, neither Expert nor any Expert Subsidiary owns directly or
indirectly any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust or other entity (other
than investments in short-term investment securities).
4.6 NO VIOLATION. Except as set forth in Section 4.6 of the Expert
Disclosure Letter, neither the execution and delivery by Expert of this
Agreement nor the consummation by Expert of the transactions contemplated by
this Agreement in accordance with its terms will: (i) conflict with or result in
a breach of any provisions of Expert's Certificate of Incorporation or Bylaws;
(ii) violate, result in a breach of any provision of, or constitute a default
under, or require any approval or consent under or result in the termination or
in a right of termination or cancellation of, or accelerate the performance
required by or result in a material adverse change to, or result in the creation
of any lien, security interest, charge or encumbrance upon any of the properties
owned or leased by Expert under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust or any license, franchise,
permit, lease, contract, agreement or other instrument to which Expert or any of
the Expert Subsidiaries is a party, or by which Expert or any of the Expert
Subsidiaries or any of the properties owned or leased by Expert is bound or
affected, except for any of the foregoing matters in this clause which,
individually or in the aggregate, would not have an Expert Material Adverse
Effect; (iii) contravene or conflict with or constitute a violation of any
provision of any law, rule, regulation, judgment, injunction, order or decree
binding upon or applicable to Expert or any Expert Subsidiary; or (iv) other
than the filings provided for in this Agreement, required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Securities
Act or applicable state securities and "Blue Sky" laws (collectively, the
"Regulatory Filings"), require any consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority which has not been obtained or made, except where the failure to
obtain any such consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority would not have an
Expert Material Adverse Effect.
4.7 SEC DOCUMENTS. Since December 31, 1996, Expert has timely
filed with the Securities and Exchange Commission ("SEC") all forms, reports and
documents required to be
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filed by Expert since December 31, 1996 under the Securities Act, the Exchange
Act and the rules and regulations promulgated thereunder (the "Securities
Laws"), including, without limitation, (i) all Annual Reports on form 10-K, (ii)
all Quarterly Reports on form 10-Q, (iii) all proxy statements relating to
meetings of stockholders (whether annual or special), (iv) all Current Reports
on form 8-K and (v) all other reports, schedules, registration statements and
other documents, each as amended (collectively, the "Expert SEC Reports"), all
of which were prepared in compliance in all material respects with the
applicable requirements of the Exchange Act or the Securities Act, as
applicable. Expert has no knowledge that any Expert SEC Reports required to be
filed with the SEC prior to December 31, 1996 have not been filed. As of their
respective dates, except as set forth in Section 4.11 of the Expert Disclosure
Letter, the Expert SEC Reports (i) complied as to form in all material respects
with the applicable requirements of the Securities Laws and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
4.8 FINANCIAL STATEMENTS. Except as set forth in Section 4.11 of
the Expert Disclosure Letter, each of the consolidated balance sheets of Expert
included in or incorporated by reference into the Expert SEC Reports (including
the related notes and schedules) fairly presents the consolidated financial
position of Expert and the Expert Subsidiaries as of its date and each of the
consolidated statements of operations, cash flows and stockholders' equity
included in or incorporated by reference into the Expert SEC Reports (including
any related notes and schedules) fairly presents the results of operations, cash
flows and stockholders' equity, as the case may be, of Expert and the Expert
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein and except, in the case of the unaudited
statements, as permitted by applicable law. Except as set forth in Section 4.11
of the Expert Disclosure Letter, the consolidated balance sheet as of December
31, 1998 of Expert (which is set forth in Section 4.8 of the Expert Disclosure
Letter) delivered to Activision prior to the date hereof (including the related
notes and schedules) (the "Recent Balance Sheet") fairly presents the
consolidated financial position of Expert and the Expert Subsidiaries as of its
date and the consolidated statements of operations, cash flows and stockholders'
equity for the year ended December 31, 1998 of Expert delivered to Activision
prior to the date hereof (including any related notes and schedules) (together
with the Recent Balance Sheet, the "Recent Financial Statements") fairly present
the results of operations, cash flows and shareholders' equity, as the case may
be, of Expert and the Expert Subsidiaries for the periods set forth therein, in
each case in accordance with generally accepted accounting principles
consistently applied during the periods involved.
4.9 LITIGATION. Except as set forth in Section 4.9 of the Expert
Disclosure Letter, there are (i) no continuing orders, injunctions or decrees of
any court, arbitrator or governmental authority to which Expert or any Expert
Subsidiary is a party or by which any of its properties or assets are bound or
likely to be affected and (ii) no actions, suits or proceedings pending against
Expert or any Expert Subsidiary or to which any of their respective properties
or assets are subject
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or, to the knowledge of Expert, threatened against Expert or any Expert
Subsidiary or to which any of their respective properties or assets are subject,
at law or in equity, that in each such case could, individually or in the
aggregate, have an Expert Material Adverse Effect.
4.10 ABSENCE OF CERTAIN CHANGES. Except as set forth in Section
4.10 of the Expert Disclosure Letter, since December 31, 1998, Expert and the
Expert Subsidiaries have conducted their business only in the ordinary course of
such business and consistent with past practices and there has not been any:
(a) material adverse change in the financial condition,
properties, assets (including intangible assets), businesses, operations or
results of operations of Expert or any of the Expert Subsidiaries;
(b) amendment or change in the Certificate of
Incorporation or By-Laws of Expert or in any similar organizational documents of
any Expert Subsidiaries;
(c) incurrence, creation or assumption by Expert or any
of the Expert Subsidiaries of (i) any mortgage, deed of trust, security
interest, pledge, lien, title retention device, collateral assignment, claim,
charge, restriction or other encumbrance of any kind on any of the assets or
properties of Expert or any of the Expert Subsidiaries; or (ii) any obligation
or liability of any indebtedness for borrowed money;
(d) issuance or sale of any debt or equity securities of
Expert or any of the Expert Subsidiaries, or the issuance or grant of any
options, warrants or other rights to acquire from Expert or any of the Expert
Subsidiaries, directly or indirectly, any debt or equity securities of Expert or
any of the Expert Subsidiaries (except upon the exercise of then outstanding
Expert Options and Expert Warrants);
(e) payment or discharge by Expert or any of the Expert
Subsidiaries of any security interest, lien, claim, or encumbrance of any kind
on any asset or property of Expert or any of the Expert Subsidiaries, or the
payment or discharge of any liability that was not either shown or reflected on
the Recent Balance Sheet or incurred in the ordinary course of Expert's business
after the December 31, 1998 in an amount in excess of $50,000 for any single
liability to a particular creditor;
(f) purchase, license, sale, assignment or other
disposition or transfer, or any agreement or other arrangement for the purchase,
license, sale, assignment or other disposition or transfer, of any of the
assets, properties or goodwill of Expert other than a license or sale of any
product or products of Expert or any of the Expert Subsidiaries made in the
ordinary course of Expert's business;
(g) damage, destruction or loss of any property or asset,
whether or not covered by insurance, having (or likely with the passage of time
to have) an Expert Material Adverse Effect;
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(h) declaration, setting aside or payment of any dividend
on, or the making of any other distribution in respect of, the capital stock of
Expert, any split, combination or recapitalization of the capital stock of
Expert or any direct or indirect redemption, purchase or other acquisition of
the capital stock of Expert or any change in any rights, preferences, privileges
or restrictions of any outstanding security of Expert;
(i) increase in the compensation payable or to become
payable to any of the officers, directors, or employees of Expert or any of the
Expert Subsidiaries, or any bonus or pension, insurance or other benefit payment
or arrangement (including without limitation stock awards, stock option grants,
stock appreciation rights or stock option grants) made to or with any of such
officers, employees or agents;
(j) obligation or liability incurred by Expert or any of
its Subsidiaries to any of its officers, directors or stockholders except for
normal and customary compensation and expense allowances payable to officers in
the ordinary course of Expert's business consistent with past practice;
(k) making by Expert or any of the Expert Subsidiaries of
any loan, advance or capital contribution to, or any investment in, any officer,
director or stockholder of Expert or any Expert Subsidiary or any firm or
business enterprise in which any such person had a direct or indirect material
interest at the time of such loan, advance, capital contribution or investment;
(l) entering into, amendment of, relinquishment,
termination or non-renewal by Expert or any Expert Subsidiary of any contract,
lease, transaction, commitment or other right or obligation other than in the
ordinary course of its business or any written or oral indication or assertion
by the other party thereto of any material problems with Expert's or any Expert
Subsidiary's services or performance under such contract, lease, transaction,
commitment or other right or obligation or of such other party's demand to
amend, terminate or not renew any such contract, lease, transaction, commitment
or other right or obligation;
(m) material change in the manner in which Expert or any
Expert Subsidiary extends discounts, credits or warranties to customers or
otherwise deals with its customers;
(n) entering into by Expert or any of the Expert
Subsidiaries of any transaction, contract or agreement that by its terms
requires or contemplates a required minimum current and/or future financial
commitment, expenses (inclusive of overhead expenses) or obligation on the part
of Expert or any of the Expert Subsidiaries involving in excess of $50,000
(provided that the amount of such financial commitments and expenses for all
such transactions, contracts or agreements does not exceed $150,000 in the
aggregate) or that is not entered into in the ordinary course of Expert's
business, or the conduct of any business or operations by Expert or any Expert
Subsidiary that is other than in the ordinary course of Expert's or such Expert
Subsidiary's business; or
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(o) license, transfer or grant of a right under any
Expert Intellectual Property (as defined in Section 4.20 below), other than
those licensed, transferred or granted in the ordinary course of business
consistent with its past practices.
4.11 TAXES. Except as set forth in Section 4.11 of the Expert
Disclosure Letter or where such failure would not have, individually or in the
aggregate, an Expert Material Adverse Effect:
(a) Expert and each of the Expert Subsidiaries has paid
or caused to be paid all federal, state, local, foreign, and other taxes, and
all deficiencies, or other additions to tax, interest, fines and penalties
(collectively, "Taxes"), owed or accrued by it and due and payable through the
date hereof (including any Taxes payable pursuant to Treasury Regulation
ss.1.1502-6 (and any similar state, local or foreign provision)).
(b) Expert and each of the Expert Subsidiaries has timely
filed all federal, state, local and foreign tax returns (collectively "Tax
Returns") required to be filed by any of them through the date hereof, and all
such returns accurately set forth the amount of any Taxes relating to the
applicable period.
(c) Expert and each of the Expert Subsidiaries has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other party.
(d) The Recent Financial Statements reflect adequate
reserves for Taxes payable by Expert and each Expert Subsidiary for all taxable
periods and portions thereof through the date of such financial statements.
(e) Since the date of the Recent Financial Statements,
each of Expert and the Expert Subsidiaries has made sufficient accrual for Taxes
in accordance with generally accepted accounting principles with respect to
periods for which Tax Returns have not been filed.
(f) There are no outstanding agreements, waivers or
arrangements extending the statutory period of limitations applicable to any
claim for, or the period for the collection or assessment of, Taxes due from
Expert or any Expert Subsidiary for any taxable period and there have been no
deficiencies proposed, assessed or asserted for such Taxes.
(g) There are no closing agreements that could affect
Taxes of Expert or any Expert Subsidiary for periods after the Effective Time
pursuant to Section 7121 of the Code or any similar provision under state, local
or foreign tax laws.
(h) No audit or other proceedings by any court,
governmental or regulatory authority or similar authority has occurred, been
asserted or is pending and none of Expert or any Expert Subsidiary has received
notice that any such audit or proceeding may be commenced.
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(i) No election has been made or filed by or with respect
to, and no consent to the application of, Section 341(f)(2) of the Code has been
made by or with respect to, Expert, any Expert Subsidiary or any of their
properties or assets.
(j) None of Expert or any Expert Subsidiary has agreed
to, or filed application for, or is required, to make any changes or adjustment
to its accounting method.
(k) There is no contract, agreement, plan or arrangement
covering any person that, individually or collectively, could give rise to the
payment of any amount that would not be deductible by Expert or any Expert
Subsidiary by reason of Section 280G or Section 162(m) of the Code.
4.12 BOOKS AND RECORDS.
(a) The books of account and other financial records of
Expert and each of the Expert Subsidiaries are true, complete and correct in all
material respects, have been maintained in accordance with good business
practices, and are accurately reflected in all material respects in the
financial statements included in the Expert SEC Reports and the Recent Financial
Statements.
(b) The minute books and other records of Expert and each
of the Expert Subsidiaries that have been, or will be prior to the Closing, made
available to Activision, contain accurate records of all meetings and accurately
reflect all other action of the stockholders and Board of Directors and any
committees of the Board of Directors of Expert and each of the Expert
Subsidiaries.
4.13 PROPERTIES.
(a) None of Expert or any of the Expert Subsidiaries owns
any real property, nor have they ever owned any real property. Section 4.13(a)
of the Expert Disclosure Letter sets forth a list of all real property
currently, or at any time in the past five years, leased by Expert or any of the
Expert Subsidiaries, and, with respect to all real property currently leased by
Expert or any of the Expert Subsidiaries, the name of the lessor, the date of
the lease and each amendment thereto and the aggregate annual rental and/or
other fees payable under any such lease. All such current leases are, to the
knowledge of Expert, in full force and effect, are valid and effective in
accordance with their respective terms, and there is not to the knowledge of
Expert any existing material default or event of default under any such lease
(or event which with notice or lapse of time, or both, would constitute such a
material default).
(b) Expert and each of its Subsidiaries has good and
valid title to, or, in the case of leased properties and assets, valid leasehold
interests in, all of its tangible properties and assets, real, personal and
mixed, used or held for use in its business, free and clear of any liens, except
as reflected in the Recent Financial Statements or in Section 4.13(b) of the
Expert Disclosure Letter and except for liens for taxes not yet due and payable
and such imperfections of title and
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encumbrances, if any, which are not material in character, amount or extent, and
which do not materially detract from the value, or materially interfere with the
present use, of the property subject thereto or affected thereby.
4.14 ENVIRONMENTAL MATTERS. Except as set forth in Section 4.14 of
the Expert Disclosure Letter, neither Expert nor any of its Subsidiaries is in
violation of any laws, regulations, judgments or consent decrees relating to
hazardous substances or hazardous waste (collectively, "Environmental Laws")
which violation could reasonably be expected to result in an Expert Material
Adverse Effect. Except as set forth in Section 4.14 of the Expert Disclosure
Letter, neither Expert, any of the Expert Subsidiaries, nor, to the knowledge of
Expert, any third party, has used, released, discharged, generated,
manufactured, produced, stored, or disposed of in, on, or under or about its
owned or leased property or other assets, or transported thereto or therefrom,
any hazardous substances or hazardous wastes, including asbestos, lead and
petroleum, during the period of Expert's or the Expert Subsidiary's ownership or
lease of such property in a manner that could reasonably be expected to subject
Expert or any Expert Subsidiary to a material liability under the Environmental
Laws. None of Expert or any of the Expert Subsidiaries has received written
notice from any governmental authority that any property owned or leased by
Expert or any of the Expert Subsidiaries is in violation of any Environmental
Laws. There is no pending civil, criminal or administrative suit or other legal
proceeding against Expert or any of the Expert Subsidiaries with respect to any
Environmental Laws. Expert has provided Activision complete copies of all
environmental reports, assessments and studies in Expert's possession and
control with respect to properties owned or leased by Expert or any Expert
Subsidiary. As used in this Agreement, the terms "hazardous substances" and
"hazardous wastes" shall have the meanings set forth in the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, and the
regulations thereunder; the Resource Conservation and Recovery Act, as amended,
and the regulations thereunder; the Federal Clean Water Act, as amended, and the
regulations thereunder; the Clean Air Act, 42 U.S.C. Sections 7401 ET SEQ.; the
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Sections 136 ET
SEQ.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Sections
11001 ET SEQ.; the Occupational Safety and Health Act of 1970; the Hazardous
Materials Transportation Act, as amended by the Hazardous Materials
Transportation Authorization Act of 1994, 49 U.S.C. Sections 5101 ET SEQ.; the
Toxic Substances Control Act, 15 U.S.C. Sections 2601 ET SEQ.; the Oil Pollution
Act of 1990, 33 U.S.C. Sections 2701 ET SEQ.; as each of these may be amended
from time to time; and any and state or local analogues to any of these
statutes.
4.15 NO BROKERS. Neither Expert nor any of the Expert Subsidiaries
has entered into any contract, arrangement or understanding with any person or
firm that may result in the obligation of such entity or Activision or Merger
Subsidiary to pay any finder's fees, brokerage or agent's commissions or other
like payments in connection with the negotiations leading to this Agreement or
the consummation of the transactions contemplated hereby, except that Expert has
retained Piper Jaffray Inc. ("Piper Jaffray") pursuant to an engagement letter
to act as its financial advisor in connection with the transactions contemplated
by this Agreement. Expert is not aware of any claim for payment of any finder's
fees, brokerage or agent's commissions or other like payments in connection with
the negotiations leading to this Agreement or the consummation of the
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transactions contemplated hereby other than fees payable to Piper Jaffray as set
forth in Section 4.15 of the Expert Disclosure Letter, which shall not exceed
$650,000 plus expenses not in excess of $25,000.
4.16 OPINION OF FINANCIAL ADVISOR. The Board of Directors of Expert
has received the opinion of Piper Jaffray, to the effect that, as of the date
hereof, the consideration to be received in the Merger by the Expert
stockholders is fair from a financial point of view to holders of the Expert
Shares.
4.17 RELATED PARTY TRANSACTIONS. Section 4.17 of the Expert
Disclosure Letter sets forth all arrangements, agreements and contracts or
understandings entered into by Expert or any of the Expert Subsidiaries (which
are or will be in effect as of or after the date of this Agreement) with (i) any
consultant (X) involving payments in excess of $60,000 or (Y) which may not be
terminated at will by Expert or the Expert Subsidiary which is a party thereto
without penalty, or (ii) any person who is an officer, director or affiliate of
Expert or any of the Expert Subsidiaries. All such documents are listed in
Section 4.17 of the Expert Disclosure Letter and the copies of such documents,
which have previously been provided or made available to Activision and its
counsel, are true and correct copies. Except as disclosed in Section 4.17 of the
Expert Disclosure Letter, Expert (including all Expert Subsidiaries) has not
made any payments to, received any services from, or is dependent on any
services of, any affiliate of Expert other than services provided by officers
and directors in such capacities and payments to such officers and directors of
Expert in such capacities.
4.18 CONTRACTS AND COMMITMENTS. Except as set forth in Section
4.18(a) of the Expert Disclosure Letter, neither Expert nor any of the Expert
Subsidiaries has, or is party to or is bound by:
(i) any consulting or sales agreement, contract
or commitment under which any firm or other organization provides
services to Expert or any of the Expert Subsidiaries;
(ii) any fidelity or surety bond or completion
bond;
(iii) any agreement of indemnification or
guaranty;
(iv) any agreement, contract, commitment,
transaction or series of transactions for any purpose other than in the
ordinary course of Expert's or any of the Expert Subsidiaries' business
relating to capital expenditures or commitments or long-term
obligations in excess of $50,000;
(v) any agreement, contract or commitment
relating to the disposition or acquisition of assets or any interest in
any business enterprise outside the ordinary course of Expert's or any
of the Expert Subsidiaries' business;
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(vi) any mortgages, indentures, loans or credit
agreements, security agreements or other arrangements or instruments
relating to the borrowing of money or extension of credit, including
guaranties referred to in clause (iii) hereof;
(vii) any purchase order or contract for the
purchase of inventory or other materials involving $50,000 or more;
(viii) any distribution, joint marketing or
development agreement;
(ix) any assignment, license or other agreement
with respect to any form of intangible property; or
(x) any other agreement, contract or commitment
that involves $50,000 or more or is not cancelable without penalty in
excess of $50,000 within thirty (30) days (collectively, any of (i)
through (x) above shall be known as "Contracts").
(a) Except as would not individually or in the aggregate
have an Expert Material Adverse Effect, all such Contracts are valid and binding
on Expert and are in full force and effect and enforceable against Expert in
accordance with their respective terms. Except as disclosed in Section 4.18(b)
of the Expert Disclosure Letter, no approval or consent of, or notice to any
Person the failure of which to obtain would have an Expert Material Adverse
Effect is needed in order that such Contracts shall continue in full force and
effect in accordance with its terms without penalty, acceleration or rights of
early termination following the consummation of the transactions contemplated by
this Agreement. Except to the extent any of the following would not individually
or in the aggregate have an Expert Material Adverse Effect, Expert is not in
violation of, breach of or default under any such Contract nor, to Expert's
knowledge, is any other party to any such Contract. Except as set forth in
Section 4.18 of the Expert Disclosure Letter, Expert is not in violation or
breach of or default under any such Contract (including leases of real property)
relating to non-competition, indebtedness, guarantees of indebtedness of any
other person, employment, or collective bargaining.
4.19 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 4.19(a)(i) below (which definition shall apply
only to this Section 4.19), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other Person
under common control with or otherwise required to be aggregated with
Expert or any Subsidiary as set forth in Section 414(b), (c), (m) or
(o) of the Code and the regulations thereunder;
(ii) "Employee" shall mean any current, former or
retired employee, officer, or director of Expert or any Subsidiary or
any Affiliate:
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(iii) "Employee Agreement" shall refer to any
material management, employment, severance, consulting, relocation,
repatriation, expiration, visas, work permit or similar agreement or
contract between Expert or any Subsidiary or any Affiliate and any
Employee or consultant that is not an Employee Plan;
(iv) "Employee Plan" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement
providing for compensation, severance, termination pay, performance
awards, stock or stock-related awards, fringe benefits or other
employee benefits or remuneration of any kind, whether formal or
informal, funded or unfunded and whether or not legally binding,
including without limitation, each "employee benefit plan" within the
meaning of Section 3(3) of ERISA (as defined below), which is or has
been maintained, contributed to, or required to be contributed to, by
Expert or any of its Subsidiaries or any Affiliate for the benefit of
any "Employee" (as defined below), and pursuant to which Expert or any
Subsidiary or any Affiliate has or may have any material liability
contingent or otherwise;
(v) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
(vi) "IRS" shall mean the Internal Revenue
Service;
(vii) "Multiemployer Plan" shall mean any "Pension
Plan" (as defined below) which is a "multiemployer plan," as defined in
Sections 3(37) and 4001(a)(3) of ERISA; and
(viii) "Pension Plan" shall refer to each Expert
and Subsidiary Employee Plan which is an "employee pension benefit
plan," within the meaning of Section 3(2) of ERISA.
(b) Section 4.19(b) of the Expert Disclosure Letter
contains an accurate and complete list of each Employee Plan (including for each
such plan a description of any of the benefits of which will be increased, or
the vesting of benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement of the value of any of the
benefits of which will be calculated on the basis of any transactions
contemplated by this Agreement) and each Employee Agreement of Expert. Except as
set forth in Section 4.19(b) of the Expert Disclosure Letter, neither Expert nor
any of its Subsidiaries or Affiliates has any announced plan or commitment,
whether legally binding or not, to establish any new Employee Plan or Employee
Agreement, to modify any Employee Plan or Employee Agreement (except to the
extent required by law or to conform any such Employee Plan or Employee
Agreement to the requirements of any applicable law, in each case as previously
disclosed to Expert in writing, or as required by this Agreement), or to enter
into any Employee Plan or Employee Agreement, nor does it have any intention or
commitment to do any of the foregoing.
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(c) DOCUMENTS. Expert has provided to Activision correct
and complete copies of all material documents embodying or relating to each
Employee Plan and each Employee Agreement including: (i) all amendments thereto
and written interpretations thereof; (ii) the most recent annual actuarial
valuations, if any, prepared for each Employee Plan; (iii) the three most recent
annual reports (Series 5500 and all schedules thereto), if any, required under
ERISA or the Code in connection with each Employee Plan or related trust; (iv)
if the Employee Plan is funded, the most recent annual and periodic accounting
of Employee Plan assets; (v) the most recent summary plan description together
with the most recent summary of material modifications, if any, required under
ERISA with respect to each Employee Plan; (vi) all IRS determination letters and
rulings relating to Employee Plans and copies of all applications and
correspondence to or from the IRS or the Department of Labor ("DOL") with
respect to any Employee Plan; (vii) all communications material to any Employee
or Employees relating to any Employee Plan and any proposed Employee Plans, in
each case, relating to any amendments, terminations, establishments, increases
or decreases in benefits, acceleration of payments or vesting schedules or other
events which would result in any material liability to Expert or any Expert
Subsidiary; and (viii) all registration statements and prospectuses prepared in
connection with each Employee Plan.
(d) EMPLOYEE PLAN COMPLIANCE. (i) Except as set forth in
Section 4.19(d) of the Expert Disclosure Letter, Expert and each of the Expert
Subsidiaries and Affiliates has performed in all material respects all
obligations required to be performed by them under each Employee Plan, and each
Employee Plan has been established and maintained in all material respects in
accordance with its terms and in compliance with all applicable laws, statutes,
orders, rules and regulations, including but not limited to ERISA and the Code;
(ii) no "prohibited transaction," within the meaning of Section 4975 of the Code
or Section 406 of ERISA for which no class or statutory exemption is available,
has occurred with respect to any Employee Plan; (iii) there are no material
actions, suits or claims pending or, to the knowledge of Expert, threatened or
anticipated (other than routine claims for benefits) against any Employee Plan
or against the assets of any Employee Plan; (iv) such Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without material liability to Expert or any of the
Expert Subsidiaries or any of its Affiliates (other than ordinary administration
expenses typically incurred in a termination event); (v) there are no audits,
inquiries or proceedings pending or, to the knowledge of Expert, threatened by
the IRS or DOL with respect to any Employee Plan; (vi) neither Expert nor any of
its Subsidiaries is subject to any penalty or tax with respect to any Employee
Plan under Section 402(i) of ERISA or Section 4975 through 4980 of the Code; and
(vii) all contributions, including any top heavy contributions, required to be
made prior to the Closing by Expert or any ERISA Affiliate to any Employee Plan
have been made or shall be made on or before the Closing Date.
(e) PENSION PLANS. Neither Expert nor any of the Expert
Subsidiaries or Affiliates currently maintain, sponsor, participate in or
contribute to, nor have they ever maintained, established, sponsored,
participated in, or contributed to, any Pension Plan which is subject to Part 3
of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code.
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(f) MULTIEMPLOYER PLANS. At no time has Expert or any of
the Expert Subsidiaries or Affiliates contributed to or been requested or
obligated to contribute to any Multiemployer Plan.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth
in Section 4.19(g) of the Expert Disclosure Letter or as required by local,
state or federal law, no Employee Plan or any other employment agreement or
arrangement to which Expert is a party provides, or is required to provide, life
insurance, medical or other employee benefits to any Employee upon his or her
retirement or termination of employment for any reason, and Expert and each of
the Expert Subsidiaries has never represented, promised or contracted (whether
in oral or written form) to any Employee (either individually or to Employees as
a group) that such Employee(s) would be provided with life insurance, medical or
other employee welfare benefits upon their retirement or termination of
employment.
(h) EFFECT OF TRANSACTION. The execution of this
Agreement and the consummation of the transactions contemplated hereby will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Employee Plan, Employee Agreement, trust or loan
that will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee, except as
set forth in Schedule 4.19(h) of the Expert Disclosure Letter.
(i) EMPLOYMENT MATTERS. Expert and each of the Expert
Subsidiaries (i) is in compliance in all respects with all applicable foreign,
federal, state and local laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and hours, in
each case, with respect to Employees except as would not have an Expert Material
Adverse Effect; (ii) has withheld all amounts required by law or by agreement to
be withheld from the wages, salaries, and other payments to Employees; (iii) is
not liable for any arrears of wages of any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice).
(j) LABOR. No work stoppage or labor strike against
Expert or any Expert Subsidiary is pending or, to the knowledge of Expert,
threatened. Neither Expert nor any of the Expert Subsidiaries is involved in or,
to the knowledge of Expert, threatened with, any labor dispute, grievance,
administrative proceeding or litigation relating to labor, safety, employment
practices or discrimination matters involving any Employee, including, without
limitation, charges of unfair labor practices or discrimination complaints,
which, if adversely determined, would, individually or in the aggregate, have an
Expert Material Adverse Effect. Neither Expert nor any of the Expert
Subsidiaries has engaged in any unfair labor practices within the meaning of the
National Labor Relations Act which would, individually or in the aggregate,
directly or indirectly have an Expert Material Adverse Effect. Neither Expert
nor any of the Expert Subsidiaries or
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Affiliates has ever been a party to any agreement with any labor organization or
union, and none of the Employees are represented by any labor organization or
union, nor have any Employees threatened to organize or join a union or filed a
petition for representation with the National Labor Relations Board.
(k) Section 4.19(k) of the Expert Disclosure Letter sets
forth (i) the aggregate amounts of bonus and severance payments that could be
payable to employees of Expert under existing Employee Agreements or Employee
Plans on account of the transactions contemplated by this Agreement (without
regard to termination of employment), and (ii) the aggregate amounts of
severance obligations that could be payable to employees of Expert under
existing Employee Agreements and Employee Plans on account of terminations of
employment following the Effective Time, separately stating the amounts that are
payable by reason of a termination following a change of control of Expert.
4.20 INTELLECTUAL PROPERTY.
(a) For the purposes of this Agreement, the following
terms have the following definitions:
(i) "Intellectual Property" shall mean any or
all of the following and all rights in, arising out of, or associated
therewith: (a) all United States, international and foreign patents and
applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part
thereof; (b) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know
how, technology, technical data, customer lists, proprietary processes
and formulae, all source and object code, algorithms, architectures,
structures, display screens, layouts, inventions, development tools and
all documentation and media constituting, describing or relating to the
above, including, without limitation, manuals, memoranda and records;
(c) all copyrights, copyrights registrations and applications therefor,
and all other rights corresponding thereto throughout the world; (d)
all industrial designs and any registrations and applications therefor
throughout the world; (e) all trade names, logos, common law trademarks
and service marks, trademark and service mark registrations and
applications therefor throughout the world; (f) all proprietary
databases and data collections and all rights therein throughout the
world; and (g) any equivalent rights to any of the foregoing anywhere
in the world.
(ii) "Expert Intellectual Property" shall mean
that Intellectual Property owned by, licensed to, or used by Expert or
any of the Expert Subsidiaries.
(iii) "Expert Registered Intellectual Property"
means those United States, international and foreign: (a) patents and
patent applications (including provisional applications); (b)
registered trademarks and service marks, applications to register
trademarks or service marks, intent-to-use applications, or other
registrations or applications related to trademarks or service marks;
and (c) registered copyrights and
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applications for copyright registration. All of the foregoing are
listed in Section 4.20(a)(iii) of the Expert Disclosure Letter.
(b) Section 4.20(b) of the Expert Disclosure Letter lists
all non-routine proceedings or actions known to Expert before any court,
tribunal (including the United States Patent and Trademark Office ("PTO") or
equivalent authority anywhere in the world) related to any Expert Intellectual
Property. No Expert Intellectual Property is the subject of any non-routine
proceeding or outstanding decree, order, judgment, agreement, or stipulation
restricting in any manner the use, transfer, or licensing thereof by Expert or
any of the Expert Subsidiaries, or which may affect the validity, use or
enforceability of such Expert Intellectual Property.
(c) With respect to each item of Expert Registered
Intellectual Property, necessary registration, maintenance and renewal fees in
connection with such Expert Registered Intellectual Property have been made and
all necessary documents and certificates in connection with such Expert
Registered Intellectual Property have been filed with the relevant patent,
trademark or copyright authorities in the United States or abroad for the
purposes of maintaining such Expert Registered Intellectual Property.
(d) Expert and each Expert Subsidiary has the right to
use, market, distribute, sell or license all Expert Intellectual Property used
in its business as presently conducted and as it is expected to be conducted as
of the Effective Time, including without limitation, all Intellectual Property
used or to be used in the Expert Products (as defined below), and such rights to
use, market, distribute, sell or license are sufficient for such conduct of
their respective businesses.
(e) Neither the manufacture, development, publication,
marketing, license, sale, distribution or use intended by the Expert or any of
the Expert Subsidiaries of any software products currently being licensed,
produced or sold by Expert or any of the Expert Subsidiaries or currently under
development or consideration by Expert or any of the Expert Subsidiaries (the
"Expert Products") violates any license or agreement between Expert or any of
the Expert Subsidiaries and any third party or infringes any Intellectual
Property right, moral right or right of publicity or privacy of any other party,
and there is no pending or, to the knowledge of Expert, threatened claim or
litigation contesting the validity, ownership or right to use, market,
distribute, sell, license or dispose of any Expert Intellectual Property nor, to
the knowledge of Expert, is there any basis for any such claim under applicable
law, nor has Expert or any of the Expert Subsidiaries received any notice
asserting that any Expert Intellectual Property or the proposed use, marketing,
distribution, sale, license or disposition thereof conflicts or will conflict
with the rights of any other party, nor, to the knowledge of Expert, is there
any basis for any such assertion under applicable law. Section 4.20(e) of the
Expert Disclosure Letter sets forth a list of all Expert Products.
(f) Expert and the Expert Subsidiaries have timely and
satisfactorily complied with their respective milestone delivery requirements
under all material agreements pursuant to which Expert or any of the Expert
Subsidiaries, as the case may be, has agreed to program, design or develop on
behalf of a third party, whether for original use or for porting or conversion
(for
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use on a different hardware platform or in a different language), any software
products or any part thereof, except where the failure to so comply could not
reasonably be expected to have an Expert Material Adverse Effect.
(g) Except as set forth in Section 4.20(g) of the Expert
Disclosure Letter, to the extent that any work, invention, or material has been
developed or created by a third party for Expert or any of the Expert
Subsidiaries, Expert and each of the Expert Subsidiaries has a written agreement
with such third party with respect thereto and Expert and each of the Expert
Subsidiaries thereby has obtained ownership of, and is the exclusive owner of,
or has a valid license to use, all Expert Intellectual Property in such work,
material or invention by operation of law or by valid assignment or by
agreement, as the case may be.
(h) Section 4.20(h) of the Expert Disclosure Letter lists
all material contracts, licenses and agreements to which Expert or any of the
Expert Subsidiaries is a party that are currently in effect (i) with respect to
Expert Intellectual Property licensed or offered to any third party; or (ii)
pursuant to which a third party has licensed or transferred any Intellectual
Property to Expert or any of the Expert Subsidiaries. Except as set forth in
Section 4.20(h) of the Expert Disclosure Letter, neither Expert nor any of the
Expert Subsidiaries has transferred ownership of, or granted any exclusive
license with respect to, any Expert Intellectual Property, to any third party.
(i) Except as set forth in Section 4.20(i) of the Expert
Disclosure Letter, the contracts, licenses and agreements listed in Section
4.20(h) are in full force and effect. The consummation of the transactions
contemplated by this Agreement will not violate or result in the breach,
modification, cancellation, termination, or suspension of such contracts,
licenses and agreements listed in Section 4.20(i) and will not cause the
forfeiture or termination or give rise to a right of forfeiture or termination
of any rights of Expert to any Expert Intellectual Property or impair the right
of Expert or any of the Expert Subsidiaries or the Surviving Corporation to use,
market, distribute, sell or license any Expert Intellectual Property or portion
thereof. Expert and each of the Expert Subsidiaries is in material compliance
with, and has not materially breached any term any of such contracts, licenses
and agreements listed in Section 4.20(i) and, to the knowledge of Expert, all
other parties to such contracts, licenses and agreements listed in Section
4.20(i) are in compliance with, and have not breached any term of, such
contracts, licenses and agreements. Except as set forth in Section 4.20(i) of
the Expert Disclosure Letter, following the Effective Time the Surviving
Corporation will be permitted to exercise all of Expert's and each of the Expert
Subsidiaries', if any, rights under the contracts, licenses and agreements
listed in Section 4.20(h) to the same extent Expert and such Expert Subsidiary
would have been able to had the transactions contemplated by this Agreement not
occurred and without the payment of any additional funds other than ongoing
fees, royalties or payments which Expert or such Expert Subsidiary would
otherwise be required to pay.
(j) Section 4.20(j) of the Expert Disclosure Letter lists
all contracts, licenses and agreements between Expert or any of its Subsidiaries
and any third party wherein or whereby Expert or any of its Subsidiaries has
agreed to, or assumed, other than in the ordinary course of
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business, any obligation or duty to warrant, indemnify, hold harmless or
otherwise assume or incur any obligation or liability with respect to the
infringement or misappropriation by Expert or any of the Expert Subsidiaries or
such third party of the Intellectual Property of any third party.
(k) Except as set forth in Section 4.20(k) of the Expert
Disclosure Letter, (a) Expert and each of the Expert Subsidiaries (including
each of their executive officers, directors and, to the knowledge of Expert,
employees) has not received any notice or claim (whether written, oral or
otherwise) challenging Expert's ownership or rights in the Expert Intellectual
Property or claiming that any other person or entity has any legal or beneficial
ownership with respect thereto; (b) all the Expert Intellectual Property rights
owned by Expert and embodied in its products are legally valid and enforceable
without any material qualification, limitation or restriction on their use, and
Expert has not received any notice or claim (whether written or oral)
challenging the validity or enforceability of any of the Expert Intellectual
Property rights; and (c) to Expert's knowledge, no third party is infringing or
misappropriating any part of the Expert Intellectual Property.
(l) Expert and each of the Expert Subsidiaries has taken
reasonable and practicable measures designed to protect their respective rights
in their respective confidential information and trade secrets or any trade
secrets or confidential information of third parties provided to Expert or any
of the Expert Subsidiaries. None of Expert or any of the Expert Subsidiaries, or
any employees or, to Expert's knowledge, consultants of Expert or any of the
Expert Subsidiaries, has permitted any such confidential information or trade
secrets to be used, divulged or appropriated for the benefit of Persons to the
material detriment of Expert or any of the Expert Subsidiaries.
(m) Section 4.20(n) of the Expert Disclosure Letter sets
forth a list of all Internet domain names used by Expert in its business
(collectively, the "Domain Names"). Expert has, and after the Effective Time the
Surviving Corporation will have, a valid registration and all material rights
(free of any material restriction) in and to the Domain Names, including,
without limitation, all rights necessary to continue to conduct Expert's
business as it is currently conducted.
4.21 ANTI-TAKEOVER PLAN. Except for the Shareholders' Rights
Agreement dated November 9, 1995 between Expert and The First National Bank of
Boston (the "Rights Agreement") or as set forth in Section 4.21 of the Expert
Disclosure Letter, neither Expert nor any Expert Subsidiary has in effect any
plan, scheme, device or arrangement, commonly or colloquially known as a "poison
pill" or, an "anti-takeover" plan or any similar plan, scheme, device or
arrangement. Under the Rights Agreement, as a result of the Merger or the
execution of this Agreement, neither Activision nor any stockholder of
Activision or any Affiliate or Associate (as such terms are defined in the
Rights Agreement) of Activision or of any such stockholder of Activision will
become an "Acquiring Person"; no "Stock Acquisition Date" or "Distribution Date"
(as such terms are defined in the Rights Agreement) will occur; and the holders
of any rights issued pursuant to the Rights Agreement will not be entitled to
receive any benefits under the Rights Agreement as a result of the approval,
execution or delivery of this
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Agreement or the consummation of the transactions contemplated hereby. From and
after the date of this Agreement until the Effective Time, Expert shall not take
any action that would cause, as a result of the Merger or the execution of this
Agreement, Activision or any stockholder of Activision or any Affiliate or
Associate of Activision or of any such stockholder to become an "Acquiring
Person" under the Rights Agreements, or that would cause a "Stock Acquisition
Date" or "Distribution Date" to occur or give the holders of any Rights (as such
term is defined in the Rights Agreement) any benefits under the Rights
Agreement, as a result of the Merger or any of the transactions contemplated by
this Agreement.
4.22 SHAREHOLDER VOTE REQUIRED. The only vote of the holders of any
class or shares of capital stock of Expert necessary to approve the Merger and
the transactions contemplated by this Agreement is the affirmative vote of
holders of a majority of the outstanding Expert Shares.
4.23 UNDISCLOSED LIABILITIES. Except as and to the extent
reflected, reserved against or otherwise disclosed in The Recent Financial
Statements (including the notes thereto) or as set forth in Section 4.23 of the
Expert Disclosure Letter, neither Expert nor any Expert Subsidiary had, at
December 31, 1998, any liabilities or obligations of any kind, whether accrued,
absolute, asserted or unasserted, contingent or otherwise, whether or not such
liabilities would have been required to be reflected in a balance sheet prepared
in accordance with generally accepted accounting principles consistently
applied, which would have, individually or in the aggregate, an Expert Material
Adverse Effect.
4.24 INSURANCE. Expert maintains, and has maintained or caused to
be maintained, without interruption, during its existence, policies or binders
of insurance covering such risk, and events, including personal injury, property
damage, errors and omissions and general liability in amounts Expert reasonably
believes adequate for its business and operations, and its current insurance
policies (other than directors' and officers' insurance) will not terminate due
to the consummation of the Merger. Section 4.24 of the Expert Disclosure Letter
sets forth a summary of all current insurance policies (including, without
limitation, limits, deductibles and terms) maintained by Expert and the Expert
Subsidiaries.
4.25 TAX TREATMENT. To Expert's knowledge, neither Expert nor any
of the Expert Subsidiaries has taken any action or engaged in any activities
that would preclude the treatment of the Merger as a reorganization under
Section 368(a) of the Code other than, if applicable, accepting Activision's
Section 2.3 Election. In addition, neither Expert nor any of the Expert
Subsidiaries has any plan or intention to take any action or engage in any
activities that would preclude the treatment of the Merger as a reorganization
under Section 368(a) of the Code.
4.26 RELATIONSHIPS WITH SUPPLIERS, LICENSORS AND CUSTOMERS. No
current distributor, customer of Expert or supplier to Expert or any of the
Expert Subsidiaries has notified Expert or such Expert Subsidiary of an
intention to terminate or substantially alter its existing business relationship
with Expert or such Expert Subsidiary, nor has any licensor under a license
agreement with Expert or any of the Expert Subsidiaries notified Expert or such
Expert Subsidiary of an
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intention to terminate or substantially alter Expert's or such Expert
Subsidiary's rights under such license, which termination or alteration would
have an Expert Material Adverse Effect.
4.27 BANK ACCOUNTS. Section 4.27 of the Expert Disclosure Letter
contains (a) a true and complete list of names and locations of all banks, trust
companies, securities brokers, and other financial institutions at which Expert
and each Expert Subsidiary has an account or safe deposit box or maintains a
banking, custodial, trading, trust, or other similar relationship, (b) a true
and complete list and description of each such account, box and relationship,
(c) a list of all signatories for each such account and box and (d) a list of
all compensating balances required with respect to each such account.
4.28 YEAR 2000 PROBLEM. Except as set forth in Section 4.28 of the
Expert Disclosure Letter, each hardware, software and firmware product used by
Expert or any Expert Subsidiary in its business and all Expert Products
(collectively, the "Software") will accurately process date data (including, but
not limited to, calculating, comparing and sequencing) from, into and between
the twentieth and twenty-first centuries, including, without limitation, leap
year calculations, without a decrease in the functionality of the Software
except for such inaccuracies that do not have an Expert Material Adverse Effect.
Except as set forth in Section 4.28 of the Expert Disclosure Letter, the
Software is designed to be used prior to, during and after the calendar year
2000 A.D. and will operate during each such time period without error relating
to date data, specifically including any error relating to, or the product of,
date data which represents or references different centuries or more than one
century except for such errors as do not have an Expert Material Adverse Effect.
Without limiting the generality of the foregoing, except as set forth in Section
4.28 of the Expert Disclosure Letter, the Software (a) will not abnormally end
or provide invalid or incorrect results as a result of date data, specifically
including date data which represents or references different centuries or more
than one century and (b) has been designed to ensure year 2000 compatibility,
including, but not limited to, date data century recognition, calculations which
accommodate same century and multi-century formulas and date values, and date
data interface values that reflect the century.
5. REPRESENTATIONS AND WARRANTIES OF ACTIVISION AND MERGER SUBSIDIARY
Activision and Merger Subsidiary hereby represent and warrant to Expert
as follows:
5.1 ORGANIZATION; GOOD STANDING; AUTHORITY; COMPLIANCE WITH LAW.
(a) Activision is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and Merger
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of Activision and Merger
Subsidiary has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now conducted. Activision is duly
licensed or qualified and is in good standing to transact business as a foreign
corporation in each jurisdiction in which the character of the properties owned
or leased by it therein or in which the
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nature of its business makes such qualification or licensing necessary, except
where the failure to be so licensed or qualified would not have, individually or
in the aggregate, an Activision Material Adverse Effect. For purposes of this
Agreement, an "Activision Material Adverse Effect," means a material adverse
effect on the business, assets (including intangible assets), financial
condition or results of operations of Activision and its Material Activision
Subsidiaries (as defined below), taken as a whole.
(b) Each of Activision's material Subsidiaries (the
"Material Activision Subsidiaries") is a corporation or partnership duly
incorporated or formed, validly existing and in good standing under the laws of
its jurisdiction of incorporation or formation, has the corporate or partnership
power and authority to own its properties and to carry on its business as it is
now being conducted, and is duly qualified to transact business and is in good
standing in each jurisdiction in which the ownership of its property or the
conduct of its business requires such qualification, except for jurisdictions in
which such failure to be so qualified or to be in good standing would not have,
individually or in the aggregate, an Activision Material Adverse Effect. Each of
the Material Activision Subsidiaries is wholly-owned, directly or indirectly, by
Activision (other than directors' qualifying shares).
(c) Except as described in the Activision SEC Reports (as
defined below), the business of Activision and the Material Activision
Subsidiaries has been operated in compliance with all laws, ordinances,
regulations and orders of all governmental entities, except for violations which
would not have, individually or in the aggregate, an Activision Material Adverse
Effect. Activision and the Material Activision Subsidiaries have all Government
Approvals of all Governmental Agencies, required by law with respect to the
operation of their businesses, except those the absence of which would not,
individually or in the aggregate, have an Activision Material Adverse Effect or
prevent or delay consummation of the Merger. All such Government Approvals are
in full force and effect, and Activision and the Material Activision
Subsidiaries are in compliance with all conditions and requirements of the
Government Approvals and with all rules and regulations relating thereto other
than failures that would not have an Activision Material Adverse Effect.
Activision has not received any notices of violations of any Federal, state and
local laws, regulations and ordinances relating to its business, operations or
assets which, if it were determined that a violation had occurred, would have an
Activision Material Adverse Effect.
(d) The Certificate of Incorporation or other charter
documents and Bylaws (and in each such case, all amendments thereto) of
Activision are described in the Activision SEC Reports, and true and correct
copies have previously been delivered or made available to Expert and its
counsel.
5.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Activision
and Merger Subsidiary each has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. To the extent required by law, the Board of Directors of
each of Activision and Merger Subsidiary have approved this Agreement, the
Merger, and the transactions contemplated by this Agreement. No vote of the
Activision stockholders is required to approve the issuance of the Activision
Common Stock as
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contemplated by this Agreement. The execution by Activision and Merger
Subsidiary of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly authorized by all requisite action
on the part of Activision and Merger Subsidiary. Assuming this Agreement
constitutes a valid and binding obligation of expert, this Agreement constitutes
the valid and legally binding obligation of Activision and Merger Subsidiary,
enforceable against Activision and Merger Subsidiary in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of equity.
5.3 CAPITALIZATION. The authorized capital stock of Activision
consists of 50,000,000 shares of Activision Common Stock and 5,000,000 shares of
preferred stock, $.000001 par value (the "Activision Preferred Shares"). As of
the date hereof, there are not more than 22,509,792 shares of Activision Common
Stock issued and outstanding and no Activision Preferred Shares issued and
outstanding. All such outstanding shares of Activision are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights. The
authorized capital stock of Merger Subsidiary consists of 1,000 shares of common
stock, par value $1.00. As of the date hereof, 100 shares of common stock of
Merger Subsidiary are issued and outstanding, fully paid and non-assessable and
owned by Activision. Except as described in the Activision SEC Reports,
Activision has no outstanding bonds, debentures, notes or other obligations the
holders of which have or upon the happening of certain events would have the
right to vote (or which are convertible into or exercisable for securities
having the right to vote) with the stockholders of Activision on any matter.
Except as described in the Activision SEC Reports, there are no existing
options, warrants, calls, subscriptions, convertible securities, or other
rights, agreements, stock appreciation rights or similar derivative securities
or instruments or commitments which obligate Activision to issue, transfer or
sell any Shares of Activision Common Stock or make any payments in lieu thereof
other than options granted to employees, directors and consultants after the
date of the most recent SEC Report.
(a) The shares of Activision Common Stock to be issued
pursuant to the Merger will be duly authorized, validly issued, fully paid and
unassessable and free of preemptive rights of any nature.
(b) As of the date hereof, Activision has outstanding and
effective three employee or director stock purchase or option plans, each of
which has been approved and adopted by the Board of Directors of Activision and
approved by the stockholders of Activision: (i) the 1991 Stock Option and Stock
Award Plan (the "Option Plan"), (ii) the Employee Stock Purchase Plan (the
"ESPP"), and (iii) the 1998 Incentive Plan (the "Incentive Plan"). The Option
Plan, as amended, authorizes the granting of options and other awards with
respect to an aggregate of 7,566,677 shares of Activision Common Stock. As at
December 31, 1998, no shares were available for grant under the Option Plan. The
Incentive Plan authorizes the granting of options and other awards with respect
to an aggregate of 3,000,000 shares of Activision Common Stock. As at December
31, 1998, there were an aggregate of 1,667,950 remaining shares of Activision
Common Stock reserved and available for grant under the Incentive Plan. The
Option Plan and the ESPP are described in Activision's Annual Report on Form
10-K for the fiscal year ended
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March 31, 1998. The Incentive Plan is described in Activision's definitive proxy
statement for its annual meeting of stockholders held on September 23, 1998.
5.4 NO VIOLATION. Neither the execution and delivery by Activision
and Merger Subsidiary of this Agreement nor the consummation by Activision and
Merger Subsidiary of the transactions contemplated by this Agreement in
accordance with its terms will: (i) conflict with or result in a breach of any
provisions of Activision's or Merger Subsidiary's respective certificate of
incorporation or by-laws; (ii) violate, result in a breach of any provision of,
or constitute a default under, or require any approval or consent under or
result in the termination or in a right of termination or cancellation of, or
accelerate the performance required by or result in a material adverse change
to, or result in the creation of any lien, security interest, charge or
encumbrance upon any of Activision's or Merger Subsidiary's properties under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust or any license, franchise, permit, lease, contract,
agreement or other instrument to which Activision or Merger Subsidiary is a
party, or by which Activision or Merger Subsidiary or any of their properties is
bound or affected, except for any of the foregoing matters in this clause which,
individually or in the aggregate, would not have an Activision Material Adverse
Effect; (iii) contravene or conflict with or constitute a violation of any
provision of any law, rule, regulation, judgment, injunction, order or decree
binding upon or applicable to Activision or Merger Subsidiary; or (iv) other
than the filings provided for in this Agreement and the Regulatory Filings,
require any consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority which has not been
obtained or made, except where the failure to obtain any such consent, approval
or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority would not have an Activision Material
Adverse Effect.
5.5 TAX TREATMENT. Neither Activision nor Merger Subsidiary has
taken any action or engaged in any activities that would preclude the treatment
of the Merger as a reorganization under Section 368(a) of the Code other than,
if applicable, making a Section 2.3 Election. In addition, neither Activision
nor Merger Subsidiary has engaged in or planned to engage in any activities that
would preclude the treatment of the Merger as a reorganization under Section
368(a) of the Code.
5.6 SEC DOCUMENTS. Since March 31, 1997, Activision has timely
filed with the SEC all forms, reports and documents required to be filed by
Activision since March 31, 1997 under the Securities Laws, including, without
limitation, (i) all Annual Reports on form 10-K, (ii) all Quarterly Reports on
form 10-Q, (iii) all proxy statements relating to meetings of stockholders
(whether annual or special), (iv) all Current Reports on form 8-K and (v) all
other reports, schedules, registration statements and other documents, each as
amended (collectively, the "Activision SEC Reports"), all of which were prepared
in compliance in all material respects with the applicable requirements of the
Exchange Act and the Securities Act. Activision has no knowledge that any
Activision SEC Reports required to be filed with the SEC prior to March 31, 1997
have not been filed. As of their respective dates, except as set forth in
Section 5.6 of the disclosure letter delivered at or prior to the execution
hereof to Expert, which shall refer to the relevant sections of this Agreement
(the "Activision Disclosure Letter"), the Activision SEC Reports (i) complied as
to form in all material respects with the applicable requirements of the
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Securities Laws and (ii) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading. Each of the consolidated balance sheets of
Activision included in or incorporated by reference into the Activision SEC
Reports (including the related notes and schedules) fairly presents the
consolidated financial position of Activision and its consolidated subsidiaries
as of its date and each of the consolidated statements of operations, cash flows
and shareholders' equity included in or incorporated by reference into the
Activision SEC Reports (including any related notes and schedules) fairly
presents the results of operations, cash flows and shareholders' equity, as the
case may be, of Activision and its consolidated subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to normal year-end
audit adjustments which would not be material in amount or effect), in each case
in accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein and except, in the
case of the unaudited statements, as permitted by Form 10-Q pursuant to Section
13 or 15(d) of the Exchange Act.
5.7 FINANCIAL STATEMENTS. Except as set forth in Section 5.7 of
the Activision Disclosure Letter, each of the consolidated balance sheets of
Activision included in or incorporated by reference into the Activision SEC
Reports (including the related notes and schedules) fairly presents the
consolidated financial position of Activision and the Material Activision
Subsidiaries as of its date and each of the consolidated statements of
operations, cash flows and stockholders' equity included in or incorporated by
reference into the Activision SEC Reports (including any related notes and
schedules) fairly presents the results of operations, cash flows and
stockholders' equity, as the case may be, of Activision and the Material
Activision Subsidiaries for the periods set forth therein (subject, in the case
of unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein and except, in the case of the unaudited
statements, as permitted by applicable law.
5.8 LITIGATION. Except as set forth in Section 5.8 of the
Activision Disclosure Letter, there are (i) no continuing orders, injunctions or
decrees of any court, arbitrator or governmental authority to which Activision
or any Material Activision Subsidiary is a party or by which any of its
properties or assets are bound or likely to be affected and (ii) no actions,
suits or proceedings pending against Activision or any Material Activision
Subsidiary as to which any of their respective properties or assets are subject
or, to the knowledge of Activision threatened against Activision or any Material
Activision Subsidiary or to which any of their respective properties or assets
are subject, at law or in equity, that in each such case could, individually or
in the aggregate, have an Activision Material Adverse Effect.
5.9 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the
Activision SEC Reports filed with the SEC prior to the date hereof, since
December 31, 1998, Activision and the Material Activision Subsidiaries have
conducted their business only in the ordinary course of such business and
consistent with past practices and there has not been any:
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(a) material adverse change in the financial condition,
properties, assets (including intangible assets), businesses, operations or
results of operations of Activision and the Material Activision Subsidiaries,
taken as a whole, PROVIDED, HOWEVER, that none of the following, in and of
itself, shall constitute a material adverse change within the meaning of this
clause (a): (i) a change in the market price of Activision Common Stock; (ii) a
report of quarterly or fiscal year earnings for any period that are lower than
the comparable previous period or lower than analysts' expectations, provided,
that this clause (ii) shall not be applicable with respect to a fiscal quarter
if Activision reports a net loss for such fiscal quarter in excess of $.05 per
share on a fully diluted basis; and (iii) the consummation by Activision or its
subsidiaries of an acquisition, disposition, financing or similar transaction
approved by Activision's Board of Directors;
(b) amendment or change in the Certificate of
Incorporation or By-Laws of Activision;
(c) except as set forth in Section 5.9(c) of the
Activision Disclosure Letter, issuance or sale of any debt or equity securities
of Activision or any of its Subsidiaries, other than exercises of stock options,
or any options, warrants or other rights to acquire from Activision or any of
its Subsidiaries, directly or indirectly, any debt or equity securities of
Activision or any of its Subsidiaries, other than the granting of stock options
to employees, directors and consultants;
(d) agreement or arrangement made by Activision to take
any action after the date hereof which, if taken prior to the date hereof, would
have made any representation or warranty of Activision set forth in Article 5 of
this Agreement untrue or incorrect as of the date when made; or
(e) declaration, setting aside or payment of any dividend
on, or the making of any other distribution in respect of, the capital stock of
Activision, any split, combination or recapitalization of the capital stock of
Activision or any direct or indirect redemption, purchase or other acquisition
of the capital stock of Activision or any change in any rights, preferences,
privileges or restrictions of any outstanding security of Activision.
5.10 OWNERSHIP OF EXPERT SHARES. As of the date hereof, and during
the three (3) year period immediately preceding the date hereof, neither
Activision nor, to Activision's knowledge, any affiliate or associate (as
defined in Section 203 of the DGCL) thereof, is an "interested stockholder" of
Expert within the meaning of Section 203 of the DGCL.
5.11 NO BROKERS. Neither Activision nor Merger Subsidiary has
entered into any contract, arrangement or understanding with any person or firm
which may result in the obligation of such entity or Expert to pay any finder's
fees, brokerage or agent's commissions or other like payments in connection with
the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby. Neither Activision nor Merger Subsidiary is
aware of any claim for payment directly by Activision or Merger Subsidiary of
any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
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5.12 INTELLECTUAL PROPERTY. Except as set forth in Section 5.12 of
the Activision Disclosure Letter, Activision owns or is licensed or otherwise
possesses legally enforceable rights to use, sufficient patents, trademarks,
trade names, trade secrets, service marks, copyrights, and any applications
therefor, schematics, methodologies, technology, know-how, computer software
programs or applications, and tangible or intangible proprietary information or
material that are required for the conduct of business of Activision as
currently conducted and contemplated (the "Activision Intellectual Property
Rights"), except where the failure to own, license or otherwise possess such
rights is not reasonably likely to have an Activision Material Adverse Affect.
Except as set forth in the Activision Disclosure Letter or as would otherwise
not have an Activision Material Adverse Effect, either individually or in the
aggregate, no claims with respect to Activision Intellectual Property Rights
have been asserted or are, to Activision's knowledge, threatened by any person.
To Activision's knowledge, all U.S. registered copyrights, issued patents and
trademarks held by Activision are valid and subsisting and have been properly
maintained and renewed in accordance with all applicable provisions of law and
administrative regulations of the United States and other jurisdictions, as
applicable, except where the failure to maintain and renew the same has not and
is not reasonably likely to have an Activision Material Adverse Effect. Except
as set forth in Section 5.12 of the Activision Disclosure Letter, to
Activision's knowledge, the present and contemplated business, activities and
products of Activision do not infringe any intellectual property of any other
person. Except as set forth in Section 5.12 of the Activision Disclosure Letter,
no proceeding charging Activision with infringement of the intellectual property
rights of any other person has been filed or, to Activision's knowledge, is
threatened to be filed.
5.13 ANTI-TAKEOVER MATTERS. Activision has taken all action
necessary to exempt the transactions contemplated by this Agreement from the
operation of any "fair price," "moratorium," "control share acquisition," or
other similar anti-takeover statute or regulation enacted under the state or
federal laws of the United States. Neither Activision nor any Material
Activision Subsidiary has in effect any plan, scheme, device or arrangement
commonly or colloquially known as a "poison pill" or an "anti-takeover" plan or
any similar plan, scheme, device or arrangement.
5.14 NO SHAREHOLDER VOTE REQUIRED. No vote of the holders of any
class of capital stock of Activision is required to approve the Merger.
5.15 UNDISCLOSED LIABILITIES. Except as set forth in Section 5.15
of the Activision Disclosure Letter and except as and to the extent reflected,
reserved against or otherwise disclosed in Activision's consolidated balance
sheet dated December 31, 1998 (including the notes thereto), Activision and its
consolidated subsidiaries did not, at December 31, 1998, have any liabilities or
obligations of any kind, whether accrued, absolute, asserted or unasserted,
contingent or otherwise, whether or not such liabilities would have been
required to be reflected in a balance sheet prepared in accordance with
generally accepted accounting principles consistently applied, which would have,
individually or in the aggregate, an Activision Material Adverse Effect.
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5.16 CONTINUITY OF BUSINESS ENTERPRISE. Unless Activision shall
have made the Section 2.3 Election, it is the present intention of Activision to
continue at least one significant historic business line of Expert, or to use at
least a significant portion of Expert's historic assets in a business, in each
case within the meaning of the United States Treasury Regulations Section
1.368-1(d).
5.17 FINANCING. Activision has, and will have at the Effective
Time, bank facilities in place which, either alone or with cash presently on
hand, will provide sufficient funds to consummate the Merger in accordance with
the terms of this Agreement and to consummate the other transactions
contemplated hereby. Activision's bank facilities permit it to borrow money
under such facilities and use such funds to consummate the Merger and other
transactions contemplated hereby.
6. COVENANTS AND OTHER AGREEMENTS
6.1 CONDUCT OF BUSINESSES.
(a) GENERAL. During the period from the date of this
Agreement until the Effective Time, except as specifically permitted by this
Agreement, unless the other party has consented in writing thereto:
(i) Expert and Activision shall use their
reasonable best efforts, and shall cause their respective Subsidiaries
to use their reasonable best efforts, to preserve intact their business
organizations and goodwill;
(ii) Expert and Activision shall confer on a
regular basis with one or more representatives of the other to report
on material operational matters relating to the business of Expert and
the Expert Subsidiaries;
(iii) Activision will cooperate with and, at the
request of Expert, provide reasonable assistance to Expert to seek to
reduce or avoid disruptions to Expert's business that may result from
or arise out of the announcement or pendency of the transactions
contemplated hereby; provided that Expert shall reimburse Activision
for any costs and expenses directly incurred by Activision in
connection with providing any such assistance (such as personnel
expenses for any Activision employees that may be used by Expert in
connection with its business), and Activision shall not be required to
incur any material expenses or liabilities in connection with such
cooperation or assistance;
(iv) Expert and Activision shall promptly notify
the other of any material emergency or other material change in the
condition (financial or otherwise), business, properties, assets,
liabilities or the normal course of its businesses or in the operation
of their properties, any material governmental complaints,
investigations or hearings (or communications indicating that the same
may be contemplated);
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(v) Expert and Activision shall promptly deliver
to the other true and correct copies of any report, statement or
schedule filed with the SEC subsequent to the date of this Agreement;
and
(vi) In the event either party becomes aware that
any of its respective representations or warranties set forth in
Sections 4 and 5 hereof will not be true and correct in all material
respects on the Closing Date as if made at and as of the Closing Date,
such party shall give prompt written notice thereof to the other party,
and shall give access to all appropriate information related thereto
that is in its possession or control.
(b) CONDUCT BY EXPERT. Prior to the Closing Date, without
the prior consent of Activision, Expert:
(i) Shall, and shall cause each Expert
Subsidiary to, conduct its operations according to their usual, regular
and ordinary course in substantially the same manner as heretofore
conducted and keep available the services of its officers and
employees;
(ii) Shall not amend Expert's Certificate of
Incorporation or By-laws, and shall cause each Expert Subsidiary not to
amend its certificates of incorporation, bylaws or equivalent
organizational documents;
(iii) Shall not, and shall cause each Expert
Subsidiary not to, (A) issue or authorize for issue any Expert Shares
(except for shares issued upon the exercise of currently outstanding
share options therefor) or any security convertible into or exercisable
for the foregoing, effect any share split, reverse share split, share
dividend, recapitalization or other similar transaction or issue or
authorize the issuance of any other securities in respect of, in lieu
of or in substitution for Expert Shares or shares of any Expert
Subsidiary, (B) grant, confer or award any option, warrant, conversion
right or other right not existing on the date hereof to acquire, redeem
or repurchase any Expert Shares, except that Expert may grant options
to purchase up to an aggregate of 40,000 Expert Shares under the Expert
1992 Stock Option Plan or the Expert 1997 Stock Option Plan to new or
replacement employees provided such options (x) do not provide for
accelerated vesting upon a change of control, (y) provide for an
exercise price no less than fair market value at the date of grant, and
(z) otherwise contain terms that are consistent with Expert's past
practice, (C) increase any compensation or enter into or amend any
employment agreement with any of its present or future officers,
directors or employees except that Expert may engage in its annual
compensation review process consistent with past practice and make
appropriate increases in compensation not in excess of 5% in the
aggregate and not in excess of 5% in the aggregate for any department
or similar business unit, provided that Expert shall consult with
Activision prior to effecting any such compensation increases, (D)
adopt any new employee benefit plan or (except as contemplated in this
Agreement) amend any existing Employee Plan or severance or termination
pay policies in any material respect, except for changes which are less
favorable to participants in such plans; or
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(E) authorize, declare, set aside or pay any dividends or make any
other distribution or payments with respect to any Expert Shares,
directly or indirectly redeem, purchase or otherwise acquire any Expert
Shares or shares of any of the Expert Subsidiaries, or make any
commitment for any such action;
(iv) Shall not, and shall not permit any of the
Expert Subsidiaries to, pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the Recent Financial
Statements (or the notes thereto) or incurred after the date thereof in
the ordinary course of business consistent with past practice;
(v) Shall not, and shall not permit any of the
Expert Subsidiaries to, enter into or amend, modify or terminate any
contract which may result in total fixed or guaranteed payments or
liability by or to it in excess of $100,000 other than contracts for
expenses of attorneys and accountants incurred in connection with the
Merger;
(vi) Shall not, and shall not permit any of the
Expert Subsidiaries to, enter into any contract with any officer,
trustee, director, consultant or affiliate of Expert or any of the
Expert Subsidiaries;
(vii) Shall, and shall cause each Expert
Subsidiary to, timely prepare, in a manner consistent with past
practice, and file all Tax Returns required to be filed the due date of
which (including reasonable extensions) occurs on or before the
Effective Time and pay all Taxes due with respect to any such Tax
Returns;
(viii) Shall not make or rescind any express or
deemed election relating to Taxes, settle or compromise any claim,
suit, litigation, proceeding, investigation, audit or controversy
relating to Taxes (unless required by law);
(ix) Shall not enter into, terminate or
materially amend or renew any contract other than with third parties in
the ordinary course of operating its business consistent with past
practice; and
(x) Shall not incur any indebtedness or other
obligation for borrowed money other than trade payables and other
accruals made in the ordinary course of business consistent with past
practice; provided, however, that Activision shall not unreasonably
withhold its consent to borrowings by Expert under its existing line of
credit with First National Bank of Boston for working capital purposes.
6.2 MEETING OF STOCKHOLDERS. Expert will take all action necessary
in accordance with applicable law and its Certificate of Incorporation, to
convene a special meeting of its stockholders (the "Special Meeting") as
promptly as practicable to consider and vote upon the approval of this
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Agreement and the transactions contemplated hereby. The Board of Directors of
Expert shall recommend that its stockholders approve this Agreement and the
transactions contemplated hereby and Expert shall use its reasonable best
efforts to obtain such approval; PROVIDED, HOWEVER, that nothing contained in
this Section 6.2 shall prohibit the Directors of Expert from failing to make
such recommendation or using their reasonable best efforts to obtain such
approval if the Directors of Expert have determined in good faith, based upon
the advice of its outside legal counsel, that such action is necessary for such
Directors to comply with their fiduciary duties to Expert's stockholders under
applicable law.
6.3 FILINGS; OTHER ACTION.
(a) Subject to the terms and conditions herein provided,
Expert and Activision shall: (i) to the extent required, promptly, but in no
event later than March 31, 1999, make their respective filings and thereafter
make any other required submissions under the HSR Act with respect to the
Merger; (ii) use all reasonable best efforts to cooperate with one another in
(x) determining which filings are required to be made prior to the Effective
Time with, and which consents, approvals, permits or authorizations are required
to be obtained prior to the Effective Time from, governmental or regulatory
authorities of the United States, the several states and any third parties in
connection with the execution and delivery of this Agreement, the consummation
of the transactions contemplated by this Agreement and (y) timely making all
such filings and timely seeking all such consents, approvals, permits or
authorizations; (iii) use all reasonable best efforts to obtain in writing any
consents required from third parties to effectuate the Merger, such consents to
be in form reasonably satisfactory to Expert and Activision; and (iv) use all
reasonable best efforts to take, or cause to be taken, all other actions and do,
or cause to be done, all other things necessary, proper or appropriate to
consummate and make effective the transactions contemplated by this Agreement.
If, at any time after the Effective Time, any further action is necessary or
desirable to carry out the purpose of this Agreement, the proper officers and
directors Activision and Expert shall take all such necessary action.
(b) As promptly as practicable following the date hereof,
but in no event prior to March 31, 1999 or such earlier date as Activision makes
the Section 2.3 Election or definitively notifies Expert in writing that it will
not make such election, and in any event prior to April 30, 1999, Expert and
Activision shall prepare and file with the SEC (with appropriate requests for
confidential treatment, unless the parties hereto otherwise agree) under the
Exchange Act, a proxy statement/prospectus (or in the event Activision makes the
Section 2.3 Election, a proxy statement) and forms of proxies (such proxy
statement/prospectus or proxy statement and forms of proxy, together with any
amendments or supplements thereto, the "Proxy Statement") relating to the
Special Meeting and the vote of the stockholders of Expert with respect to this
Agreement and the transactions contemplated by this Agreement. Promptly after
clearance by the SEC of the Proxy Statement, unless Activision has made the
Section 2.3 Election, Activision shall prepare and thereafter file with the SEC
under the Securities Act a registration statement on Form S-4 (such registration
statement, together with any amendments or supplements thereto, the "Form S-4"),
in which the Proxy Statement will be included as a prospectus, in connection
with the registration under the Securities Act of the Activision Shares to be
issued to the stockholders of Expert in the
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Merger (such Activision Shares referred to herein as the "Registered
Securities"). Activision and Expert will cause the Proxy Statement and the Form
S-4 to comply as to form in all material respects with the applicable provisions
of the Securities Act and the Exchange Act and the rules and regulations
thereunder. Each of Activision, on the one hand, and Expert, on the other hand,
shall furnish all information about itself and its business and operations and
all necessary financial information to the other as the other may reasonably
request in connection with the preparation of the Proxy Statement and if
applicable the Form S-4. If applicable, Activision shall use its reasonable best
efforts, and Expert will cooperate with it, to have the Form S-4 declared
effective by the SEC as promptly as practicable (including clearing the Proxy
Statement with the SEC). Each of Activision and Expert agrees promptly to
correct any information provided by it for use in the Proxy Statement and if
applicable the Form S-4 if and to the extent that such information shall have
become false or misleading in any material respect, and each of the parties
hereto further agrees to take all steps necessary to amend or supplement the
Proxy Statement and if applicable the Form S-4 and to cause the Proxy Statement
and if applicable the Form S-4, as so amended or supplemented, to be filed with
the SEC and to be disseminated to the Expert stockholders, in each case as and
to the extent required by applicable federal and state securities laws and the
DGCL. Each of Activision and Expert agrees that the information provided by it
for inclusion in the Proxy Statement and if applicable the Form S-4 and each
amendment or supplement thereto at the time of mailing of the Proxy Statement or
effectiveness of the Form S-4 will not include any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Each of Activision and Expert will advise
the other parties, and deliver copies (if any) to them, promptly after receipt
thereof, of (i) any request by or correspondence or communication from the SEC
with respect to the Proxy Statement and if applicable the Form S-4, (ii) any
responses thereto and (iii) notice of the time when the Form S-4 has become
effective or any supplement or amendment has been filed, the issuance of any
stop order, and the suspension of the qualification of the Registered Securities
for offering or sale in any jurisdiction.
Expert shall use its best efforts to timely mail the Proxy Statement to
its stockholders.
6.4 ACCESS TO INFORMATION.
(a) Upon reasonable notice and subject to restrictions
contained in confidentiality agreements by which Expert and Activision are
bound, Expert and Activision shall (and shall cause their respective
subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of the other reasonable access, during normal business
hours during the period prior to the Effective Time, to all their properties,
books, contracts, commitments and records and permit such persons to make such
inspections as they may reasonably require and, during such period, each of
Expert and Activision shall (and shall cause their respective subsidiaries to)
furnish promptly to the other all information concerning its business,
properties and personnel as the other may reasonably request; provided that if a
party is withholding information because it is obligated to do so pursuant to a
confidentiality agreement by which it is bound, the party shall give the other
notice of such withholding.
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(b) All such information shall be Evaluation Material, as
defined in the Non-Disclosure Agreement (as defined in Section 9.5), except as
otherwise provided in such Non-Disclosure Agreement. In the event of termination
of this Agreement for any reason each party shall promptly return all Evaluation
Material obtained from the other, and any copies made of, or reports or analyses
based on, such Evaluation Material, to the other and not use any such Evaluation
Material for any purpose that would be competitive with or cause material harm
to the other.
6.5 PUBLICITY. Activision and Expert shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to this Agreement or any transaction contemplated herein and shall not
issue any such press release or make any such public statement without the prior
consent of the other party, which consent shall not be unreasonably withheld;
PROVIDED, HOWEVER, that a party may, without the prior consent of the other
party, issue such press release or make such public statement as may be required
by law or the rules of the applicable stock exchange if it has used its
reasonable best efforts to consult with the other party and to obtain such
party's consent but has been unable to do so in a timely manner.
6.6 LISTING OF ACTIVISION COMMON STOCK. Unless Activision shall
have made the Section 2.3 Election, Activision shall use its reasonable best
efforts to cause the Activision Shares to be listed, upon official notice of
issuance, on NASDAQ prior to the Effective Time.
6.7 FURTHER ACTION. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may reasonably be required to effect the Merger.
In connection with the Closing, Expert and each Expert Subsidiary shall use its
reasonable best efforts to deliver to Activision such bills of sale,
assignments, certificates, affidavits and indemnities as are required to
effectuate the consummation of the transactions described herein.
6.8 TAX TREATMENT. The parties hereto shall provide any
certificates, representations, or information reasonably requested by counsel
for the parties for the purpose of rendering the tax opinions, if applicable,
described in Sections 7.2(d) and 7.3(d). Unless and until Activision makes a
Section 2.3 Election, no party shall take any action either prior to or after
the Effective Time that could reasonably be expected to cause the Merger to fail
to qualify as a "reorganization" under Section 368(a) of the Code. Expert
covenants that at the time of the Merger, its assets will satisfy the
"substantially all" test within the meaning of Revenue Procedure 77-37, 1977-2
C.B. 568.
6.9 OTHER OFFERS. From the date hereof until the termination of
this Agreement, Expert and the Expert Subsidiaries will not, and will use their
best efforts to cause their officers, directors, employees, controlling
stockholders, agents or representatives (including, without limitation, any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, directly or indirectly, (i) take any action to solicit,
initiate, encourage or facilitate any inquiries or the making or implementation
of any proposal or offer (including, without limitation, any proposal or offer
to its stockholders) with respect to a merger, acquisition, consolidation or
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similar transaction involving, or any purchase of all or any significant portion
of the assets or any equity securities of, Expert or any of the Expert
Subsidiaries (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal") or (ii) engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions with,
any person relating to an Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal. Expert will
promptly cease and cause to be terminated any existing activities, discussions
or negotiations with any parties conducted heretofore with respect to any of the
foregoing and will take the necessary steps to inform the individuals or
entities referred to above of the obligations undertaken in this Section 6.9.
Expert will notify Activision promptly if any such inquiries or proposals are
received by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, it; PROVIDED, HOWEVER,
that nothing contained in this Section 6.9 shall prohibit the Board of Directors
of Expert from (i) furnishing information to or entering into discussions or
negotiations with, any person or entity that makes an unsolicited bona fide
proposal to acquire Expert pursuant to a merger, consolidation, share exchange,
purchase of a substantial portion of the assets or stock, business combination
or other similar transaction, if, and only to the extent that, (A) the Board of
Directors of Expert determines in good faith that such action is required for
the Board of Directors to comply with its fiduciary duties to stockholders under
applicable law as advised by outside legal counsel to Expert, (B) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person or entity, Expert provides written notice to Activision to the
effect that it is furnishing information to, or entering into discussions or
negotiations with, such person or entity, and (C) subject to any confidentiality
agreement with such person or entity (which the Board of Directors of Expert
determined in good faith was required to be executed in order for the Board of
Directors to comply with its fiduciary duties to stockholders imposed by law as
advised by outside legal counsel to Expert), Expert keeps Activision informed of
the status (not the terms) of any such discussions or negotiations; and (ii) to
the extent applicable, complying with Rules 14d-9 and 14e-2 promulgated under
the Exchange Act with regard to an Acquisition Proposal. Notwithstanding
anything to the contrary in this Agreement, the Board of Directors of Expert
shall be permitted from time to time to take the following actions in the
circumstances described below: (i) to withdraw or modify in a material and
negative respect its approval or recommendation of this Agreement or the Merger
in a manner adverse to Activision or (ii) to approve or recommend or enter into
an agreement with respect to an Acquisition Proposal if, in each such case, (x)
an Acquisition Proposal is publicly proposed, publicly disclosed or communicated
to Expert and (y) the Board of Directors of Expert determines in good faith,
based on the advice of its outside legal counsel, that such action is required
in order to comply with its fiduciary duties to the stockholders of Expert. No
action by the Board of Directors of Expert permitted by the preceding sentence
(each, a "Permitted Action") shall constitute a breach of this Agreement by
Expert, provided that such Permitted Action shall give rise to the rights of
Activision set forth in Section 8.3. hereof.
6.10 NOTICE OF CERTAIN EVENTS.
(a) Expert shall as promptly as reasonably practicable
notify Activision of: (i) any notice or other communication from any person
alleging that the consent of such person (or another person) is or may be
required in connection with the transactions contemplated by this
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Agreement; (ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; (iii) any actions, suits, claims, investigations or
proceedings commenced or threatened against, relating to or involving or
otherwise affecting Expert or any Expert Subsidiary that, if pending on the date
of this Agreement, would have been required to have been disclosed pursuant to
Section 4.9 or which relate to the consummation of the transactions contemplated
by this Agreement; and (iv) of any fact or occurrence between the date of this
Agreement and the Effective Time of which it becomes aware which makes any of
its representations and warranties contained in this Agreement untrue in any
material respect (without regard to any materiality qualification contained in
such representation or warranty) or causes any breach of its obligations under
this Agreement in any material respect (without regard to any materiality
qualification contained in such obligation).
(b) Each of Activision and Merger Subsidiary shall as
promptly as reasonably practicable notify Expert of: (i) any notice or other
communication from any person alleging that the consent of such person (or
another person) is or may be required in connection with the transactions
contemplated by this Agreement, (ii) any notice or other communication from any
governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement; (iii) any actions, suits, claims,
investigations or proceedings commenced or threatened against, relating to or
involving or otherwise affecting Activision or Merger Subsidiary that, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 5.8 or which relate to the consummation of the
transactions contemplated by this Agreement; and (iv) of any fact or occurrence
between the date of this Agreement and the Effective Time of which it becomes
aware which makes any of its representations and warranties contained in this
Agreement untrue in any material respect (without regard to any materiality
qualification contained in such representation or warranty) or causes any breach
of its obligations under this Agreement in any material respect (without regard
to any materiality qualification contained in such obligation).
6.11 AFFILIATE LETTERS. Unless Activision makes the Section 2.3
Election, at least 30 days prior to the Closing Date, Expert shall deliver to
Activision a list of names and addresses of the executive officers, directors
and those persons who were, in Expert's reasonable judgment, at the record date
for the Special Meeting, "Affiliates" (each such person, an "Affiliate") of
Expert within the meaning of Rule 145 of the rules and regulations promulgated
under the Securities Act. Expert shall use its reasonable best efforts to
deliver or cause to be delivered to Activision prior to the Closing Date, from
each of the Affiliates of Expert identified in the foregoing list, an Affiliate
Letter in the form attached hereto as EXHIBIT A. Activision shall be entitled to
place legends as specified in such Affiliate Letters on the certificates
evidencing any Activision Shares to be received by such Affiliates pursuant to
the terms of this Agreement and to issue appropriate stock transfer instructions
to the transfer agent for the Activision Common Stock consistent with the terms
of such Affiliate Letter.
6.12 TERMINATION OF AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT.
Expert shall obtain on or before the Closing Date the approval of the
stockholders of Expert parties to that certain Amended and Restated
Stockholders' Agreement dated October 31, 1995 (the
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"Stockholders' Agreement"), holding a majority of the Registrable Securities (as
defined in the Stockholders' Agreement) outstanding to amend the Stockholders'
Agreement to provide that it shall terminate upon the consummation of the
transactions contemplated by this Agreement.
6.13 INDEMNIFICATION AND INSURANCE.
(a) The By-Laws and Certificate of Incorporation of the
Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the By-Laws and Certificate of Incorporation of
Expert, which provisions shall not be amended, repealed or otherwise modified
for a period of six (6) years from the Effective Time in any manner that would
adversely affect the rights thereunder as of the Effective Time of individuals
who at the Effective Time were directors, officers, employees or agents of the
Company, unless such modification is required after the Effective Time by law.
(b) Notwithstanding the foregoing, the Surviving
Corporation shall, to the fullest extent permitted under applicable law or under
the Surviving Corporation's Certificate of Incorporation or By-Laws, indemnify
and hold harmless, each present and former director, officer or employee of
Expert or any of its Subsidiaries (collectively, the "Indemnified Parties")
against any costs or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, (x) arising out of or
pertaining to the transactions contemplated by this Agreement or (y) otherwise
with respect to any acts or omissions occurring at or prior to the Effective
Time, to the same extent as provided in Expert's Certificate of Incorporation or
By-Laws or any applicable contract or agreement as in effect on the date hereof,
in each case for a period of six (6) years after the Effective Time. In the
event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) the Indemnified Parties may
retain as its counsel Goodwin, Procter & Hoar LLP, or other counsel reasonably
satisfactory to the Surviving Corporation, (ii) after the Effective Time, the
Surviving Corporation shall advance to the Indemnified Party the reasonable fees
and expenses of such counsel, and other reasonable costs incurred in the defense
of such matter, and (iii) the Surviving Corporation will cooperate in the
defense of any such matter; provided, however, that the Surviving Corporation
shall not be liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld); and provided, further, that,
in the event that any claim or claims for indemnification are asserted or made
within such six (6) year period, all rights to indemnification in respect of any
such claim or claims shall continue until the disposition of any and all such
claims. The Indemnified Parties as a group may retain only one law firm to
represent them in each applicable jurisdiction with respect to any single action
unless there is, under applicable standards of professional conduct, a conflict
on any significant issue between the positions of any two or more Indemnified
Parties, in which case each Indemnified Person with respect to whom such a
conflict exists (or group of such Indemnified Persons who among them have no
such conflict) may retain one separate law firm in each applicable jurisdiction.
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(c) This Section 6.13 shall survive the consummation of
the Merger at the Effective Time, is intended to benefit Expert, the Surviving
Corporation and the Indemnified Parties, shall be binding on all successors and
assigns of the Surviving Corporation and Activision and shall be enforceable by
the Indemnified Parties.
(d) Activision shall, until the sixth anniversary of the
Effective Time, cause to be maintained in effect, to the extent available, the
policies of directors' and officers' liability insurance maintained by Expert
and the Expert Subsidiaries as of the date hereof (or policies of at least the
same coverage and amounts containing terms that are not less advantageous to the
insured parties) with respect to claims arising from facts that occurred on or
prior to the Effective Time, including without limitation all claims based upon,
arising out of, directly or indirectly resulting from, in consequence of, or in
any way involving the Merger and any and all related events. In lieu of the
purchase of such insurance by Activision, Activision may purchase a six-year
extended reporting period endorsement ("Reporting Tail Coverage") under Expert's
existing directors' and officers' liability insurance coverage, providing that
such Reporting Tail Coverage shall extend the directors' and officers' liability
coverage in force as of the date hereof for a period of at least six (6) years
from the Effective Time for any claim based upon, arising out of, directly or
indirectly resulting from, in consequence of, or any way involving wrongful acts
or omissions occurring or prior to the Effective Time, including without
limitation all claims based upon, arising out of, directly or indirectly
resulting from, in consequence of, or any way involving the Merger or any and
all related events. Expert shall cooperate with Activision in obtaining such
insurance coverage.
6.14 EMPLOYEE MATTERS. As soon as practicable after the Effective
Time, Activision or the Surviving Corporation shall provide the employees of
Expert ("Expert Employees") with the same 401(k) plan, health, dental, stock
option plan, stock purchase plan, life insurance, vacation, disability plan,
dependent care plan, travel accident plan, accidental death and dismemberment
plan, education reimbursement plan and other benefits, if any, as Activision
then provides generally to its employees. With respect to the provision of such
benefits to Expert Employees, all prior service of the Expert Employees with
Expert shall be recognized under such plans for purposes of eligibility and
vesting, and all prior service of the Expert Employees with Expert shall be
recognized for purposes of determining such employees' vacation entitlement
under Activision's vacation plans and policies and for purposes of vesting under
Activision's 401(k) plan. Neither Activision nor the Surviving Corporation shall
treat any Expert Employees as a "new" employee for purposes of any exclusion
under any health, dental or vision plan of Activision or the Surviving
Corporation, as the case may be, for a pre-existing medical condition.
6.15 EMPLOYMENT AGREEMENTS; NON-COMPETITION AGREEMENTS.
Contemporaneously with the execution of this Agreement, each of Kenneth Currier,
Susan Currier and four (4) additional Senior Employees of Expert have executed
employment agreements in forms approved by Activision, and Kenneth Currier and
Susan Currier have executed a non-competition agreement in form approved by
Activision. Expert shall use its reasonable best efforts, subject to the
covenants contained in this Agreement, including Section 6.1(b)(iii), to cause
such agreements to be in full force and effect as of the Closing Date.
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7. CONDITIONS
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligation of each party to effect the Merger and the other
transactions contemplated herein shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions, any or all of which may be
waived, in whole or in part by the parties hereto, to the extent permitted by
applicable law:
(a) SHAREHOLDER APPROVAL. This Agreement and the
transactions contemplated hereby shall have been approved by the requisite vote
of stockholders of Expert.
(b) HSR ACT. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(c) EFFECTIVENESS OF THE REGISTRATION STATEMENT;
CLEARANCE OF THE PROXY STATEMENT. Unless Activision shall have made the Section
2.3 Election, the Registration Statement on Form S-4 shall have been declared
effective by the SEC under the Securities Act. In the event Activision shall
have made the Section 2.3 Election, the Proxy Statement shall have been cleared
by the SEC. No stop order suspending the effectiveness of the Registration
Statement (if applicable) shall have been issued by the SEC, and no proceeding
for that purpose and no similar proceeding in respect of the Proxy Statement
shall have been initiated or, to the knowledge of Activision or Expert,
threatened by the SEC.
(d) GOVERNMENTAL ACTIONS. None of the parties hereto
shall be subject to any order, ruling or injunction of a court of competent
jurisdiction which restrains or prohibits the consummation of the transactions
contemplated by this Agreement (an "Injunction"). In the event any such
Injunction shall have been issued, each party agrees to use its reasonable best
efforts to have any such Injunction lifted, stayed or reversed.
7.2 CONDITIONS TO OBLIGATIONS OF EXPERT TO EFFECT THE MERGER. The
obligation of Expert to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions, unless waived by
Expert:
(a) Each of the representations and warranties of
Activision contained in this Agreement shall be true and correct as of the date
of this Agreement and as of the Closing Date as though made on and as of the
Closing Date, except to the extent that any changes, circumstances or events
making such representations and warranties not true or correct would not,
individually or in the aggregate, constitute an Activision Material Adverse
Effect (without regard to any materiality qualification contained in such
representation or warranty), and Expert shall have received a certificate, dated
the Closing Date, signed on behalf of Activision by the Co-Chairman, President,
Chief Financial Officer or General Counsel of Activision to the foregoing
effect.
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(b) Activision shall have performed or complied in all
material respects (without regard to any materiality qualification contained in
such representation or warranty) with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date, and Expert shall have received a certificate, dated the Closing Date,
signed on behalf of Activision by the Co-Chairman, President, Chief Financial
Officer or General Counsel of Activision to the foregoing effect.
(c) From the date of this Agreement through the Effective
Time and, except as disclosed in the Activision Disclosure Letter and the
Activision SEC Reports filed prior to the date of this Agreement, since December
31, 1998 there shall not have occurred any change, circumstance or event
concerning Activision and its consolidated subsidiaries, taken as a whole, that
has had or could be reasonably likely to have an Activision Material Adverse
Effect, and Expert shall have received a certificate, dated the Closing Date,
signed on behalf of Activision by the Co-Chairman, President, Chief Financial
Officer or General Counsel of Activision to the foregoing effect; PROVIDED,
HOWEVER, that for purposes of this Section 7.2(c), (i) a change in the market
price of the Activision Common Stock; (ii) a report of quarterly or fiscal year
earnings for any period that are lower than the comparable previous period or
lower than analysts' expectations (provided that this clause (ii) shall not be
applicable with respect to a fiscal quarter if Activision reports a net loss for
such fiscal quarter in excess of $.05 per share on a fully diluted basis); or
(iii) the consummation by Activision or its affiliates of an acquisition,
disposition, financing or similar transaction approved by Activision's Board of
Directors, in each case in and of itself, shall not be deemed an Activision
Material Adverse Effect.
(d) Unless Activision shall have made the Section 2.3
Election, Expert shall have received a written opinion from its counsel,
Goodwin, Procter & Hoar LLP, in form and substance reasonably satisfactory to
it, to the effect that the Merger will constitute a tax free reorganization
within the meaning of Section 368(a) of the Code and such opinion shall not have
been withdrawn; PROVIDED, HOWEVER, that if such counsel does not render such
opinion, this condition shall nonetheless be deemed to be satisfied with respect
to Expert if counsel to Activision renders such opinion to Expert. Each party
agrees to make all reasonable representations as requested by such counsel for
the purpose of rendering such opinion.
(e) Unless Activision shall have made the Section 2.3
Election, Activision shall have caused the Activision Shares to be listed,
subject to official notice of issuance, on NASDAQ.
7.3 CONDITIONS TO OBLIGATION OF ACTIVISION AND MERGER SUBSIDIARY
TO EFFECT THE MERGER. The obligations of Activision and Merger Subsidiary to
effect the Merger shall be subject to the fulfillment at or prior to the Closing
Date of the following conditions, unless waived by Activision:
(a) Each of the representations and warranties of Expert
contained in this Agreement shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, except to the extent that any changes, circumstances or events making such
representations and warranties not true or correct would not,
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<PAGE> 52
individually or in the aggregate, constitute an Expert Material Adverse Effect
(without regard to any materiality qualification contained in such
representation or warranty), and Activision shall have received a certificate,
dated the Closing Date, signed on behalf of Expert by the Chief Executive
Officer of the President of Expert to the foregoing effect. Notwithstanding any
provision of this Agreement to the contrary, a breach or violation of the
representations and warranties of Expert set forth in the first five sentences
of Section 4.3 or of the covenants set forth in Section 6.1(b)(iii)(A), (B), (D)
and (E) shall be deemed to have an Expert Material Adverse Effect.
(b) Expert shall have performed or complied in all
material respects (without regard to any materiality qualification contained in
such representation or warranty) with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Activision shall have received a certificate, dated the
Closing Date, signed on behalf of Expert by the Chief Executive Officer or the
President of Expert to the foregoing effect.
(c) From the date of this Agreement through the Effective
Time and, except as disclosed in the Expert Disclosure Letter or in the Expert
SEC Reports filed prior to the date of this Agreement, since December 31, 1998
there shall not have occurred any change, circumstance or event, concerning
Expert, any of the Expert Subsidiaries, that has had or could be reasonably
likely to have an Expert Material Adverse Effect and Activision shall have
received a certificate, dated the Closing Date, signed on behalf of Expert by
the Chief Executive Officer or the President of Expert to the foregoing effect.
(d) Unless Activision has made the Section 2.3 Election,
Activision shall have received a written opinion from its counsel, Robinson
Silverman Pearce Aronsohn & Berman LLP, in form and substance reasonably
satisfactory to it, to the effect that the Merger will constitute a tax free
reorganization within the meaning of Section 368(a) of the Code and such opinion
shall not have been withdrawn; PROVIDED, HOWEVER, that if such counsel does not
render such opinion, this condition shall nonetheless be deemed to be satisfied
with respect to Activision if counsel to Expert renders such opinion to
Activision. Each party agrees to make all reasonable representations as
requested by such counsel for the purpose of rendering such opinion.
(e) As of the Closing Date, neither Kenneth Currier nor
Susan Currier shall have terminated their employment with Expert and the
respective employment agreements and non-competition agreement of Kenneth
Currier and Susan Currier described in Section 6.15 shall be in full force and
effect.
(f) To the extent required under Section 6.11, Activision
shall have received from each of the persons named in the list provided pursuant
to Section 6.12 hereof an executed copy of an Affiliate Letter substantially in
the form of EXHIBIT A attached hereto.
(g) The Stockholders' Agreement shall have been
terminated as set forth in Section 6.13 hereof.
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<PAGE> 53
(h) In the event Activision shall have made the Section
2.3 Election, holders of no more than 5% of the Expert Shares shall have
demanded an appraisal of their shares under Section 262 of the DGCL.
8. TERMINATION
8.1 TERMINATION. This Agreement may be terminated and abandoned at
any time prior to the Effective Time, whether before or after approval and
adoption of this Agreement by the stockholders of Expert:
(a) by mutual written consent of Activision and Expert;
(b) by either Activision or Expert if any United States
federal or state court of competent jurisdiction or other governmental entity
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and
non-appealable, provided that the party seeking to terminate shall have used its
best efforts to appeal such order, decree, ruling or other action;
(c) by Activision upon a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Expert and as a result of such breach the conditions set forth in Section 7.3(a)
or Section 7.3(b), as the case may be, would not then be satisfied; provided,
that if such breach is capable of being cured within ten (10) business days
after written notice to Expert, Activision shall not have the right to terminate
this Agreement under this Section 8.1(c) unless such breach has not been so
cured;
(d) by Expert upon a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Activision or Merger Subsidiary and as a result of such breach the conditions
set forth in Section 7.2(a) or Section 7.2(b), as the case may be, would not
then be satisfied; provided, that if such breach is capable of being cured
within ten (10) business days after written notice to Activision, Expert shall
not have the right to terminate this Agreement under this Section 8.1(d) unless
such breach has not been so cured;
(e) by Activision or Expert, if the Board of Directors of
Expert shall have taken any Permitted Action in accordance with the provisions
of Section 6.9;
(f) by Expert if (i) the Board of Directors of Expert
pursuant to Section 6.9 withdraws or modifies its approval or recommendation of
this Agreement or (ii) Expert enters into a definitive agreement providing for
the implementation of an Acquisition Proposal in accordance with the provisions
of Section 6.9;
(g) by either Activision or Expert, if the Merger shall
not have been consummated on or before August 31, 1999 (other than due to the
failure of the party seeking to
49
<PAGE> 54
terminate this Agreement to perform its obligations under this Agreement
required to be performed by it at or prior to the Effective Time or a breach by
such party of this Agreement);
(h) by Activision if the Board of Directors of Expert
shall have failed to recommend, or shall have withdrawn, modified or amended in
any material and negative respects its approval or recommendations of the Merger
or shall have resolved to do any of the foregoing; PROVIDED, HOWEVER, that such
failure, withdrawal, modification or amendment has not been due to or the result
of Activision's or the Merger Subsidiary's breach of any of their obligations
hereunder;
(i) by Activision or Expert if this Agreement and the
transactions contemplated hereby shall have failed to receive the requisite vote
for approval and adoption by the stockholders of Expert upon the holding of a
duly convened stockholders meeting;
(j) by Activision if Expert suffers an Expert Material
Adverse Effect, or by Expert if Activision suffers an Activision Material
Adverse Effect; or
(k) by either party, if the other party becomes insolvent
or seeks protection under any bankruptcy, receivership, trust deed, creditors
arrangement, composition or comparable proceeding, or if any such proceeding is
instituted against such other party (and not dismissed within sixty (60) days).
The right of any party hereto to terminate this Agreement pursuant to
this Section 8.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective employees, officers,
directors, agents, representatives or advisors, whether prior to or after the
execution of this Agreement.
8.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1 hereof, this Agreement
shall forthwith become void and have no effect, without any liability on the
part of any party hereto or its affiliates, directors, officers or stockholders
and all rights and obligations of any party hereto shall cease except for the
agreements contained in Section 8.3, Section 8.4 and Section 9.5; PROVIDED,
HOWEVER, that nothing contained in this Section 8.2 shall relieve any party from
liability for any breach of this Agreement.
8.3 EXPENSES AND TERMINATION FEES.
(a) Except as set forth in this Section 8.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated; provided, however, that Expert and Activision
shall share equally all SEC filing fees and printing expenses incurred in
connection with the printing and filing of the Proxy Statement and the Form S-4
and any amendments or supplements thereto.
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<PAGE> 55
(b) Expert shall pay Activision a termination fee equal
to $1,100,000 (the "Termination Fee") upon the earliest to occur of the
following events:
(i) an Acquisition Proposal is commenced,
publicly proposed, publicly disclosed or communicated to Expert after
the date of this Agreement, and (A) the Board of Directors of Expert
takes any Permitted Action under Section 6.9, and (B) this Agreement is
terminated by Activision or Expert pursuant to Section 8.1(e) or by
Expert pursuant to Section 8.1(f);
(ii) the termination of this Agreement by
Activision pursuant to Section 8.1(h); or
(iii) the termination of this Agreement by either
Activision or Expert pursuant to Section 8.1(i) and an Acquisition
Proposal by a person other than Activision or Merger Subsidiary exists
at the time of such termination and at the time of such termination the
required approval of the stockholders of Expert had not been obtained,
provided that within 12 months of such termination Expert or its
stockholders accept, publicly announce or enter into a letter of intent
or binding agreement with respect to such Acquisition Proposal.
Expert's payment of the Termination Fee pursuant to this Section 8.3 shall be
the sole and exclusive remedy of Activision against Expert and any of the Expert
Subsidiaries and their respective directors, officers, employees, agents,
advisors or other representatives with respect to the occurrences giving rise to
such payment.
(c) The Termination Fee shall be paid by Expert to
Activision (i) in the event the Termination Fee is payable pursuant to Section
8.3(b)(i) or (ii), within ten (10) days after the date of termination of this
Agreement; or (ii) in the event the Termination Fee is payable pursuant to
Section 8.3(b)(iii), within ten (10) days of acceptance, public announcement, or
the entering into of a letter of intent or binding agreement with respect to
such Acquisition Proposal.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time,
any party hereto, by action taken by its Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
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<PAGE> 56
9. GENERAL PROVISIONS
9.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties, certifications and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement shall terminate as of the
Effective Time and shall not survive the Merger, PROVIDED, HOWEVER, that the
agreements contained in Article 2, Article 3, the last sentence of Section
6.3(a), Sections 6.13, 6.14 and 8.3 and this Article 9 shall survive the Merger.
9.2 NOTICES. Any notice required to be given hereunder shall be in
writing and shall be sent by facsimile transmission (confirmed by any of the
methods that follow), courier service (with proof of service), hand delivery or
certified or registered mail (return receipt requested and first-class postage
prepaid) and addressed as follows:
If to Activision: Activision, Inc.
3100 Ocean Park Boulevard
Santa Monica, CA 90405
Attn: Brian G. Kelly
Tel.: (310) 255-2000
Fax: (310) 255-2155
With a copy to: Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Attn: Kenneth L. Henderson, Esq.
Tel.: (212) 541-2000
Fax: (212) 541-4630
If to Expert: Expert Software, Inc.
800 Douglas Road
North Tower, Suite 600
Coral Gables, FL 33134-3160
Attn: Kenneth Currier
Tel.: (305) 567-9990
Fax: (305) 443-0786
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: John J. Egan III, P.C.
Tel: (617) 570-1000
Fax: (617) 523-1231
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date received.
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<PAGE> 57
9.3 ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties; PROVIDED, HOWEVER, Activision and
Merger Subsidiary may each assign their respective rights, interests or
obligations hereunder to any affiliate provided that Activision remains
obligated hereunder and such assignment does not alter the rights, interests or
obligations of Expert hereunder. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective Surviving Corporations and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Sections 2.2, 2.4 and 6.13, nothing in this Agreement, expressed or implied,
is intended to confer on any person other than the parties hereto or their
respective heirs, surviving corporations, executors, administrators and assigns
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
9.4 ENTIRE AGREEMENT. This Agreement, the Expert Disclosure Letter
and any documents delivered by the parties in connection herewith constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with respect
thereto except that the Non-Disclosure Agreement (as hereinafter defined) shall
remain in effect and shall be binding upon Activision and Expert in accordance
with its terms. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
9.5 CONFIDENTIALITY. Activision and Expert understand and agree
that they are and shall remain bound by and subject to the terms of the
non-disclosure agreement, dated as of February 18, 1999, by and between
Activision and Expert (the "Non-Disclosure Agreement").
9.6 AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken by their respective authorized person, persons or
governing bodies, at any time before or after approval of matters presented in
connection with the Merger by the stockholders of Expert, but after any such
stockholder approval, no amendment shall be made which by law requires the
further approval of stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
9.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
its rules of conflict of laws. Each of Activision and Expert hereby irrevocably
and unconditionally consent to submit to the exclusive jurisdiction of the
courts of the State of Delaware and the United States of America located in the
State of Delaware (the "Delaware Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agree
not to commence any litigation relating thereto except in such courts), consent
to the service of process in such Delaware Courts, waive any objection to the
laying of venue of any such litigation in the Delaware Courts and agree not to
plead or claim in any Delaware Court that such litigation brought therein has
been brought in any inconvenient forum.
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9.8 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which so executed and delivered shall
be an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.
9.9 HEADINGS. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
9.10 WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
9.11 INCORPORATION. The Expert Disclosure Letter and the Activision
Disclosure Letter and all Schedules attached hereto and thereto and referred to
herein and therein are hereby incorporated herein and made a part hereof for all
purposes as if fully set forth herein.
9.12 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
9.13 INTERPRETATION AND CERTAIN DEFINITIONS.
(a) In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders.
(b) As used in this Agreement, the word "Subsidiary" or
"Subsidiaries" when used with respect to any party means any corporation,
partnership, joint venture, business trust or other entity, of which such party
directly or indirectly owns or controls at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the board of directors or others performing similar functions with respect to
such corporation or other organization.
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<PAGE> 59
(c) As used in this Agreement, the word "Person" means an
individual, a corporation, a partnership, an association, a joint-stock company,
a trust, a limited liability company, any unincorporated organization or any
other entity.
(d) As used in this Agreement unless otherwise indicated,
the word "Affiliate" shall have the meaning set forth in Rule 12b-2 of the
Exchange Act.
9.14 SPECIFIC PERFORMANCE. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist, and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, without the posting of any bond whatsoever in addition to any other
remedy at law or equity.
[SIGNATURE PAGE FOLLOWS]
55
<PAGE> 60
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
EXPERT SOFTWARE, INC.
By: /s/ Kenneth Currier
--------------------------------
Name: Kenneth Currier
Title: Chief Executive Officer
ACTIVISION, INC.
By: /s/ Brian G. Kelly
--------------------------------
Name: Brian G. Kelly
Title: Co-Chairman
EXPERT ACQUISITION CORP.
By: /s/ Brian G. Kelly
--------------------------------
Name: Brian G. Kelly
Title: President
<PAGE> 61
CERTIFICATIONS
It is hereby certified that all of the outstanding shares of each class
of capital stock of Expert Acquisition Corp. entitled to vote on this Amended
and Restated Agreement and Plan of Merger have been voted for the adoption of
such Agreement.
-----------------------------------------
By:
Title: Secretary
It is hereby certified that ____________________ of the issued and
outstanding shares of each class of capital stock of Expert Software, Inc. have
voted in favor of the adoption of this Amended and Restated Agreement and Plan
of Merger and such number of shares represents ____% of the issued and
outstanding shares of Expert Software, Inc. entitled to vote for the adoption of
such Agreement.
-----------------------------------------
By:
Title: Secretary
<PAGE> 62
EXHIBIT A
---------
FORM OF AFFILIATE LETTER
Activision, Inc.
3100 Ocean Park Boulevard
Santa Monica, CA 90405
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Expert Software, Inc., a Delaware corporation (the
"Company"), as the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Amended and Restated Agreement and Plan of Merger dated as of April 19, 1999
(the "Agreement"), among the Company, Activision, Inc., a Delaware corporation
(the "Purchaser"), and Expert Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of the Purchaser ("Merger Sub"), the Company will be
merged with and into Merger Sub (the "Merger").
As a result of the Merger, I may receive shares of Common Stock, par
value $.000001 per share, of the Purchaser (the "Purchaser Securities") in
exchange for shares owned by me of Common Stock, par value $.01 per share, of
the Company.
I represent, warrant and covenant to the Purchaser that in the event I
receive any Purchaser Securities as a result of the Merger:
I shall not make any sale, transfer or other disposition of
the Purchaser Securities in violation of the Act or the Rules and Regulations.
I have carefully read this letter and the Agreement and
discussed the requirements of such documents and other applicable limitations
upon my ability to sell, transfer or otherwise dispose of the Purchaser
Securities to the extent I felt necessary with my counsel or counsel for the
Company.
I have been advised that the issuance of Purchaser Securities
to me pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been advised
that, because at the time the Merger was submitted for a vote of the
stockholders of the Company, I may be deemed to have been an affiliate of the
Company and the distribution by me of the Purchaser Securities has not been
registered under the Act, I may not sell, transfer or otherwise dispose of the
Purchaser Securities issued to me in the Merger unless (i) such sale, transfer
or other disposition has been registered under the Act, (ii)
A-1
<PAGE> 63
such sale, transfer or other disposition is made in conformity with Rule 145
promulgated by the Commission under the Act, or (iii) in the opinion of counsel
reasonably acceptable to the Purchaser, or pursuant to a "no action" letter
obtained by the undersigned from the staff of the Commission, such sale,
transfer or other disposition is otherwise exempt from registration under the
Act.
I understand that Activision is under no obligation to
register the sale, transfer or other disposition of the Purchaser Securities by
me or on my behalf under the Act or, except as expressly set forth in the
Agreement, to take any other action necessary in order to make compliance with
an exemption from such registration available.
I also understand that stop transfer instructions will be
given to the Purchaser's transfer agents with respect to Purchaser Securities
and that there will be placed on the certificates representing the Purchaser
Securities issued to me, or any substitutions therefor, a legend stating in
substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT DATED ____________, BETWEEN THE
REGISTERED HOLDER HEREOF AND ACTIVISION, INC., A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF ACTIVISION,
INC.
I also understand that unless the transfer by me of my Purchaser
Securities has been registered under the Act or is a sale made in conformity
with the provisions of Rule 145, the Purchaser reserves the right to put the
following legend on the certificates issued to my transferee:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH
A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN
ACCORDANCE WITH
A-2
<PAGE> 64
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933.
It is understood and agreed that the legends set forth in paragraphs E
and F above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this Affiliate
Letter. It is understood and agreed that such legends and the stop orders
referred to above will be removed if (i) one year shall have elapsed from the
date the undersigned acquired the Purchaser Securities received in the Merger
and the provisions of Rule 145(d)(2) are then available to the undersigned, (ii)
two years shall have elapsed from the date the undersigned acquired the
Purchaser Securities received in the Merger and the provisions of Rule 145(d)(3)
are then available to the undersigned, or (iii) the Purchaser has received
either an opinion of counsel, which opinion of counsel shall be reasonably
satisfactory to the Purchaser or a "no action" letter obtained by the
undersigned from the staff of the Commission, to the effect that the
restrictions imposed by Rule 145 under the Act no longer apply to the
undersigned.
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first paragraph
of this letter or as a waiver of any rights I have to object to any claim that I
am such an affiliate on or after the date of this letter.
Very truly yours,
-----------------------------------
Name:
Accepted this day of
, 1999 by
ACTIVISION, INC.
By:
-----------------------------------
Name:
Title:
A-3
<PAGE> 1
Exhibit 4.1
-----------
AMENDMENT NO. 2 TO
SHAREHOLDER RIGHTS AGREEMENT
Amendment, dated as of April 19, 1999 (the "Amendment"), to the
Shareholder Rights Agreement, dated as of November 9, 1995 and amended by that
certain Amendment No. 1 dated as of March 3, 1999 (the "Rights Agreement"),
between Expert Software, Inc., a Delaware corporation (the "Company"), and The
First National Bank of Boston (as predecessor to BankBoston, N.A.), a national
banking association organized under the laws of the United States (the "Rights
Agent").
W I T N E S S E T H
WHEREAS, in accordance with the terms of the Rights Agreement, the
Company deems it desirable to make certain amendments to the Rights Agreement;
and
WHEREAS, Section 27 of the Rights Agreement provides that prior to the
Distribution Date (as defined therein), the Company and the Rights Agent shall,
if the Company so directs, amend or supplement any provision of the Rights
Agreement as the Company may deem necessary or desirable without the approval of
holders of the Company's common stock, par value $.01 per share (the "Common
Stock"); and
WHEREAS, the Company previously entered into that certain Agreement and
Plan of Merger, dated as of March 3, 1999, with Activision, Inc., a Delaware
corporation ("Parent") and its wholly-owned merger subsidiary of Parent (the
"Original Agreement"), pursuant to which, among other things, the Company will
be merged with and into Acquisition Sub and will become a wholly owned
subsidiary of Parent; and
WHEREAS, the parties to the Original Agreement desire to amend and
restate the Original Agreement to change the outside date set forth in Section
2.3 of the Original Agreement by which Activision, Inc. may elect to pay cash
consideration to the holders of shares of Expert common stock, to provide that
Acquisition Sub will be merged with and into the Company and the Company will
become a wholly owned Subsidiary of Parent, and to change certain other
provisions (such Original Agreement as amended and restated, the "Merger
Agreement"); and
WHEREAS, prior to entering into the Merger Agreement, the Company
desires to amend certain provisions of the Rights Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree that the Rights Agreement
is hereby amended as follows:
<PAGE> 2
1. Section 1(a) of the Rights Agreement is amended by deleting the last
paragraph of Section 1(a) in its entirety and inserting a new paragraph thereto
which provides as follows:
"Notwithstanding anything in this Agreement to the contrary, neither
Activision, Inc., a Delaware corporation ("Parent"), and Expert Acquisition
Corp., a Delaware corporation and wholly-owned subsidiary of Parent
("Acquisition Sub"), nor any of their Affiliates or Associates, shall be deemed
to be an Acquiring Person, and no Stock Acquisition Date or Distribution Date
shall occur, as a result of the negotiation, execution or delivery of that
certain Agreement and Plan of Merger, dated as of March 3, 1999, by and among
the Company, Parent and Acquisition Sub, as such may be amended and or restated
or supplemented from time to time, including without limitation its amendment
and restatement by that certain Amended and Restated Agreement and Plan of
Merger dated as of April 19, 1999 by and among the Company, Parent and
Acquisition Sub."
2. TERMINATION OF AMENDMENT. Immediately upon the termination of the
Merger Agreement in accordance with its terms, this Amendment shall become null
and void and of no further force or effect.
3. TERMINATION OF RIGHTS AGREEMENT. If, but only if, the Effective Time
(as defined in the Merger Agreement) shall occur, then immediately upon the
Effective Time the Rights Agreement shall become null and void and of no further
force or effect.
4. COUNTERPART SIGNATURES. This Amendment may be executed in one or
more counterparts all of which shall be considered one and the same amendment
and each of which shall be deemed to be an original.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2
to Shareholder Rights Agreement to be duly executed as of the day and year first
above written.
EXPERT SOFTWARE, INC.
By: /s/ Kenneth P. Currier
-------------------------------------
Name: Kenneth P. Currier
Title: Chief Executive Officer
BANKBOSTON, N.A., (as successor of
The First National Bank of Boston) as
Rights Agent
By: /s/ Tyler Haynes
-------------------------------------
Name: Tyler Haynes
Title: Administration Manager
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Exhibit 99.1
Contacts: Maryanne Lataif
Activision, Inc,
Vice President, Corporate Communications
(310) 255-2704
[email protected]
Morgen-Walke Associates
Andrea Kaimowitz/Katherine Mittelbusher
(212) 850-5600
Press: Sheryl Seapy/Amanda Christensen
(415) 296-7383
Michelle Dominguez
Expert Software
(305) 569-1310
[email protected]
FOR IMMEDIATE RELEASE
ACTIVISION TO PAY FOR EXPERT SOFTWARE
ACQUISITION WITH CASH
Santa Monica, CA., Coral Gables, FLA. -- April 21, 1999 - Activision, Inc.
(Nasdaq: ATVI) and Expert Software (Nasdaq: XPRT) jointly announced today that
in connection with their previously announced pending merger transaction, the
parties have amended the merger arrangement and Activision will now pay the
merger consideration of $2.65 per Expert share solely in cash.
"By finalizing the merger consideration in cash, Activision will be able to
complete the transaction more efficiently and realize the benefits of the merger
sooner," states Ron Doornink, president of Activision, Inc.
Expert Software, Inc. (Nasdaq: XPRT) is a leading developer and publisher of
high-quality, value-priced software. The Company specializes in sophisticated
yet easy-to-use programs addressing a broad array of everyday consumer
interests, including
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entertainment, education, lifestyle, productivity and small office/home office.
Expert Software can be found on the World Wide Web at
http://www.expertsoftware.com.
Headquartered in Santa Monica, California, Activision, Inc. is a leading
worldwide developer, publisher and distributor of interactive entertainment
software for personal computers and advanced console game systems such as the
PlayStation game console and Nintendo 64. Founded in 1979, Activision posted
revenues of $370 million for the calendar year ended December 31, 1998.
Activision maintains publishing and development operations in the US, Canada,
the United Kingdom, France, Germany, Japan and Australia, and distribution
subsidiaries in the United Kingdom, Germany, The Netherlands and Belgium. More
information about Activision and its products can be found on the company's
World Wide Web site which is located at http://www.activision.com.
###
The statements contained in this release that are not historical facts are
"forward-looking statements." The companies caution readers of this press
release that a number of important factors could cause either Expert's or
Activision'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 Activision and Expert, are described in Activision's Annual
Report on Form 10-K for the fiscal year ended March 31, 1998, and Expert's Form
10K and quarterly reports on Form 10-Q, which have been filed with the US
Security and Exchange Commission. Readers of this press release are referred to
such filings.
