SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): March 14, 2000
TAKE-TWO INTERACTIVE SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-29230 51-0350842
(State or other jurisdiction (Commission (I.R.C. Employer
of incorporation) File Number) Identification No.)
575 Broadway, New York, New York 10012
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 334-6633
Not Applicable
Former name or former address, if changed since last report
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Item 2. Acquisition of Assets.
On March 14, 2000, Take-Two Interactive Software, Inc., through its
wholly-owned subsidiary Broadband Studios, Inc., acquired all of the outstanding
capital stock of Toga Holdings B.V., a Netherlands corporation, the parent
company of Pixel Broadband Studios, Ltd., an Israeli corporation, from Broadband
Solutions, Inc. Under a stock purchase agreement, our subsidiary acquired all of
the outstanding capital stock of Toga for $4.45 million and 2,561,245 shares of
common stock. Pixel is a leading provider of multiplayer gaming technology.
Effective as of the closing, our subsidiary entered into a four-year
employment agreement with Ramy Weitz. Mr. Weitz became President of the
subsidiary. We also granted options to purchase 190,000 shares of our common
stock to certain employees of Pixel.
We entered into a registration rights agreement with Broadband Solutions,
Inc. providing for certain registration rights in connection with the shares
issued in the transaction, including the registration of approximately 410,000
shares of common stock as promptly as possible after the closing and with a
demand registration right to register an additional approximately 385,000 shares
six months after the closing.
Effective as of the closing, our subsidiary granted a two-year warrant to
an entity controlled by Mr. Weitz to purchase 5,000,000 shares of our subsidiary
(representing 10% of the issued and outstanding capital stock of the subsidiary
based upon an agreed upon valuation). In addition, our company, our subsidiary
and an entity controlled by Mr. Weitz entered into an agreement which provides
such entity with certain board representation rights, preemptive rights in
connection with certain issuances of capital stock by our subsidiary and certain
purchase and sale rights in connection with a sale of the our subsidiary's stock
by us. The provisions of this agreement terminate upon an initial public
offering by our subsidiary.
The source of the consideration paid in connection with the acquisition was
authorized but unissued of shares of common stock, and cash raised from private
sale of shares of our common stock. The amount of consideration paid by us in
connection with the acquisition was determined by arm's length negotiations.
Descriptions of the stock purchase agreement and the other agreements
discussed above are qualified in their entirety by reference to such agreements,
which are attached as exhibits and are incorporated herein by reference.
<PAGE>
Item 7. Exhibits.
Exhibit 1 - Stock Purchase Agreement
Exhibit 2 - Registration Rights Agreement
Exhibit 3 - Employment Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on behalf of the undersigned duly
authorized.
Dated: March 20, 2000
Take-Two Interactive Software, Inc.
By: /s/ Ryan A. Brant
--------------------------------
Ryan A. Brant
Chairman of the Board
Chief Executive Officer
STOCK PURCHASE AGREEMENT
dated March 8, 2000
FOR THE ACQUISITION OF
PIXEL BROADBAND STUDIOS, LTD.
BY
BBS ACQUISITION CORP.
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2
STOCK PURCHASE AGREEMENT
PARTIES: PREMIER BUSINESS SOLUTIONS, INC.,
a Corporation formed under the laws of the British Virgin Islands
("Seller")
c/o Ernst & Young Trust Corporation (BVI) Ltd.
P. O. Box 3340
Road Town, Tortola
British Virgin Islands
TOGA HOLDINGS B.V.,
a Corporation formed under the laws of the Netherlands
("Shareholder") c/o Executive Management Trust B.V.
Drentestraat 20
1083 HK Amsterdam
The Netherlands
PIXEL BROADBAND STUDIOS LTD.,
an Israeli Corporation ("Company")
4 Harakhev Street
Tel Aviv, 67771 Israel
BBS ACQUISITION CORP.,
a Delaware Corporation ("Buyer")
575 Broadway, 3rd Floor
New York, NY 10012
TAKE-TWO INTERACTIVE SOFTWARE, INC.,
a Delaware Corporation ("Parent")
575 Broadway, 3rd Floor
New York, NY 10012
DATE: March 8, 2000
BACKGROUND: Company is primarily in the business of developing, producing and
publishing multimedia interactive entertainment products and developing
on-demand multiplayer online technology that can be used over all forms of
digital networks hereafter developed ("Company Business"). Shareholder owns 100%
of the issued and outstanding shares of capital stock of Company ("Company
Stock"). Effective as of March 9, 2000, Seller will own 100% of the issued and
outstanding shares of capital stock of Shareholder ("Shareholder Stock"). Buyer
is a wholly-owned subsidiary of Parent. The parties desire that Seller sell and
Buyer buy all of the Shareholder Stock, all on the terms and subject to the
conditions set forth in this Stock Purchase Agreement (the "Agreement").
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3
INTENDING TO BE LEGALLY BOUND, in consideration of the mutual agreements
contained herein and subject to the satisfaction of the terms and conditions set
forth herein, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS
Certain defined terms used in this Agreement and not specifically defined in
context are defined in this Section 1 as follows:
1.1 "Accounts Receivable" means (a) any right to payment for goods sold,
leased or licensed or for services rendered, whether or not it has been earned
by performance, whether billed or unbilled, and whether or not it is evidenced
by any Contract (as defined in Section 1.5); (b) any note receivable; or (c) any
other receivable or right to payment of any nature.
1.2 "Asset" means any real, personal, mixed, tangible or intangible
property of any nature, including Cash Assets (as defined in Section 1.3),
prepayments, deposits, escrows, Accounts Receivable, Tangible Property (as
defined in Section 1.31), Real Property (as defined in Section 1.29), Software
(as defined in Section 1.30), Contract Rights (as defined in Section 1.6),
Intangibles (as defined in Section 1.17) and goodwill, and claims, causes of
action and other legal rights and remedies.
1.3 "Cash Asset" means any cash on hand, cash in bank or other accounts,
readily marketable securities, and other cash-equivalent liquid assets of any of
the Company.
1.4 "Consent" means any consent, approval, order or authorization of, or
any declaration, filing or registration with, or any application, notice or
report to, or any waiver by, or any other action (whether similar or dissimilar
to any of the foregoing) of, by or with, any Person (as defined in Section
1.24), which is necessary in order to take a specified action or actions in a
specified manner and/or to achieve a specified result.
1.5 "Contract" means any written or oral contract, agreement, instrument,
order, arrangement, commitment or understanding of any nature, including sales
orders, purchase orders, leases, subleases, data processing agreements,
maintenance agreements, license agreements, sublicense agreements, loan
agreements, promissory notes, security agreements, pledge agreements, deeds,
mortgages, guaranties, indemnities, warranties, employment agreements,
consulting agreements, sales representative agreements, joint venture
agreements, buy-sell agreements, options or warrants.
1.6 "Contract Right" means any right, power or remedy of any nature under
any Contract, including rights to receive property or services or otherwise
derive benefits from the payment, satisfaction or performance of another party's
Obligations (as defined in Section 1.22), rights to demand that another party
accept property or services or take any other actions, and rights to pursue or
exercise remedies or options.
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1.7 "Employee Benefit Plan" means any employee benefit plan and any other
plan, program, policy or arrangement for or regarding bonuses, commissions,
incentive compensation, severance, vacation, deferred compensation, pensions,
profit sharing, retirement, payroll savings, stock options, stock purchases,
stock awards, stock ownership, phantom stock, stock appreciation rights,
medical/dental expense payment or reimbursement, disability income or
protection, sick pay, group insurance, self insurance, death benefits, employee
welfare or fringe benefits of any nature, including manager's insurance policies
and severance pay funds; but not including employment Contracts with individual
employees.
1.8 "Encumbrance" means any lien, superlien, security interest, pledge,
right of first refusal, mortgage, easement, covenant, restriction, reservation,
conditional sale, prior assignment, or other encumbrance, claim, burden or
charge of any nature.
1.9 "Entity" means any corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any company limited by shares,
limited liability company or joint stock company), firm, society or other
enterprise, association, organization or entity.
1.10 "Environmental Laws" means all applicable Laws (including consent
decrees and administrative orders) relating to the public health and safety and
protection of the environment, including those governing the use, generation,
handling, storage and disposal or cleanup of Hazardous Substances, all as
amended.
1.11 "GAAP" means (i) as to each of the Pixel Companies, generally accepted
accounting principles under current Israeli accounting rules and regulations,
consistently applied and (ii) as to the Shareholder, generally accepted
accounting principles under the accounting rules and regulations of the
Netherlands, consistently applied.
1.12 "Governmental Body" means any: (a) nation, principality, republic,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal, foreign
or other government; (c) governmental or quasi-governmental authority of any
nature (including any governmental division, subdivision, department, agency,
bureau, branch, office, commission, council, board, instrumentality, officer,
official, representative, organization, unit, body or Entity and any court or
other tribunal); (d) multi-national organization or body; or (e) individual,
Entity or body exercising, or entitled to exercise, any executive, legislative,
judicial, administrative, regulatory, police, military or taxing authority or
power of any nature.
1.13 "Hazardous Substances" means any substance, waste, contaminant,
pollutant or material that has been determined by any Governmental Body to be
capable of posing a risk of injury or damage to health, safety, property or the
environment, including (a) all substances, wastes, contaminants, pollutants and
materials defined, designated or regulated as hazardous, dangerous or toxic
pursuant to any Law, and (b) asbestos, polychlorinated biphenyls ("PCB's"),
petroleum, petroleum products and urea formaldehyde.
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5
1.14 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the regulations promulgated thereunder.
1.15 "including" means including but not limited to.
1.16 INTENTIONALLY OMITTED.
1.17 "Intangible" means any name, corporate name, fictitious name,
trademark, trademark application, service mark, service mark application, trade
name, brand name, product name, slogan, trade secret, know-how, patent, patent
application, copyright, copyright application, design, logo, formula, invention,
product right, technology, process, program, platform or other intangible asset
of any nature, whether in use, under development or design, or inactive.
1.18 "Judgment" means any order, writ, injunction, citation, award, decree
or other judgment of any nature of any Governmental Body.
1.19 "to the knowledge of Company, the Shareholder and the Seller", "to the
knowledge of the Company, the Shareholder or the Seller" and similar phrases
mean that none of Ramy Weitz, any of the other senior executive officers of the
Pixel Companies or the Shareholder, or any of the shareholders of Seller has any
actual knowledge, implied knowledge or belief that the statement made is
incorrect. For this purpose, "implied knowledge" means (i) all information that
a senior executive officer exercising reasonable diligence should have known in
the course of operating and managing the business and affairs of any of the
Pixel Companies or the Shareholder, and (ii) all information that a shareholder
exercising reasonable diligence in the course of owning the shares of the
Shareholder should have known.
1.20 "Law" means any provision of any foreign, federal, state or local law,
statute, ordinance, charter, constitution, treaty, code, rule, regulation or
guideline. For purposes of this Agreement, "foreign" means any country, state,
territory, possession or other jurisdiction of any kind other than the United
States of America or any state, territory or possession of the United States of
America.
1.21 "Material Adverse Effect" means any adverse effect on (a) the
financial condition or financial performance of any of the Pixel Companies or
the Shareholder, or (b) any of the Assets or Obligations of any of the Pixel
Companies or the Shareholder, which adverse effect is or will be material to the
Pixel Companies taken as a whole or the Shareholder.
1.22 "Obligation" means any debt, liability or obligation of any nature,
whether secured, unsecured, recourse, nonrecourse, liquidated, unliquidated,
accrued, absolute, fixed, contingent, ascertained, unascertained, known, unknown
or otherwise.
1.23 "Permit" means any license, permit, approval, waiver, order,
authorization, right or privilege of any nature, granted, issued, approved or
allowed by any Governmental Body.
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1.24 "Person" means any individual, Entity or Governmental Body.
1.25 "Pixel Companies" means the Company, and each Person listed on
Schedule 3.1 hereto for which the Company directly or indirectly owns
beneficially or of record an amount of voting securities or other interests in
such Person that (a) is sufficient to enable the Company to elect at least a
majority of the members of such Person's board of directors or other governing
body or (b) constitutes at least a majority of the economic interest in such
Person.
1.26 "Pixel Intangible" means all Software and other Intangibles owned,
marketed, licensed, supported, maintained, used or under development by any of
the Pixel Companies.
1.27 INTENTIONALLY OMITTED.
1.28 "Proceeding" means any demand, claim, suit, action, litigation,
investigation, arbitration, administrative hearing or other proceeding of any
nature.
1.29 "Real Property" means any real estate, land, building, condominium,
town house, structure or other real property of any nature, all shares of stock
or other ownership interests in cooperative or condominium associations or other
forms of ownership interest through which interests in real estate may be held,
and all appurtenant and ancillary rights thereto, including easements,
covenants, water rights, sewer rights and utility rights.
1.30 "Software" means any computer program, operating system, applications
system, firmware or software of any nature, whether operational, under
development or inactive, including all object code, source code, technical
manuals, user manuals, test scripts and other documentation therefor, whether in
machine-readable form, programming language or any other language or symbols,
and whether stored, encoded, recorded or written on disk, tape, film, memory
device, paper or other media of any nature, and any data bases necessary in the
use of the computer program, operating system, application, firmware or
software.
1.31 "Tangible Property" means any furniture, fixtures, leasehold
improvements, vehicles, office equipment, computer equipment, other equipment,
machinery, tools, forms, supplies or other tangible personal property of any
nature.
1.32 "Tax" means (a) any foreign, federal, state or local income, earnings,
profits, gross receipts, franchise, capital stock, net worth, sales, use, value
added, occupancy, general property, real property, personal property, intangible
property, transfer, fuel, excise, payroll, withholding, unemployment
compensation, social security, retirement or other tax of any nature; (b) any
foreign, federal, state or local organization fee, qualification fee, annual
report fee, filing fee, occupation fee, assessment, sewer rent or other fee or
charge of any nature; or (c) any deficiency, interest or penalty imposed with
respect to any of the foregoing.
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7
SECTION 2. THE TRANSACTION
2.1 Sale and Purchase of Shareholder Stock. On the Closing Date (defined in
Section 5.1), subject to the other terms and conditions of this Agreement, the
Seller shall sell, transfer, assign and convey to Buyer, and Buyer shall
purchase, all right, title and interest in and to the Shareholder Stock, free
and clear of any Encumbrances.
2.2 Purchase Price.
2.2.1 Purchase Price and Allocation. The total purchase price
("Purchase Price") for the Shareholder Stock, shall consist of (a) a cash
payment ("Cash Consideration") in the amount of $4,462,248.44 and (b)
2,563,849 shares of common stock, $.01 par value per share, of Parent
("Parent Common Stock") (hereafter referred to as the "Share
Consideration"). The Cash Consideration and Share Consideration is herein
collectively referred to as the "Consideration". The amount of cash and
number of shares of Parent Common Stock comprising the Consideration is
subject to change as provided in Schedule 6.4.
2.3 Indemnification Matters Adjustment. The Purchase Price shall be reduced
by the full aggregate amount (the "Indemnification Matters Adjustment") owed to
Buyer and/or Parent as a result of any Indemnification Matters (as defined in
Section 10.3) arising during the period commencing on the Closing Date and
ending eighteen (18) months following the Closing Date ("Holdback Period"). For
the purposes of the Indemnification Matters Adjustment, a portion of the Share
Consideration shall be placed in escrow at Closing and thereafter held or
distributed pursuant to the terms of the Indemnification Escrow Agreement dated
as of the Closing Date ("Indemnification Escrow Agreement") by and among the
Seller, Parent, Buyer and Blank Rome Comisky & McCauley LLP ("Escrow Agent"), a
copy of which is attached hereto as Exhibit 2.3.
2.4 Currency and Method of Payment. All dollar amounts stated in this
Agreement are stated in United States currency, and all payments required under
this Agreement shall be paid in United States currency. All payments required
under this Agreement shall be made by wire transfer of immediately available
United States federal funds.
SECTION 3. REPRESENTATIONS OF SELLER,
SHAREHOLDER AND COMPANY
Knowing that Buyer and Parent are relying thereon, the Seller, the
Shareholder and the Company represent and warrant to Buyer and Parent, as set
forth below in this Section 3; provided that with respect to Shareholder, such
representations and warranties are only made as they relate to Shareholder and
each of the Pixel Companies.
3.1 Organization. Each of the Pixel Companies, the Shareholder and the
Seller is a corporation, duly organized, validly existing and in good standing
under the Laws of the jurisdiction of its formation. Seller possesses the full
corporate power and authority to enter into and perform its obligations under
this Agreement. Each of the
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Shareholder and the Pixel Companies possesses the full corporate power and
authority: (i) to own and use its Assets in the manner in which such Assets are
currently owned and used, and (ii) to conduct its business as such business is
currently being conducted. Each of the Shareholder and the Pixel Companies is
duly qualified or registered to do business in each jurisdiction where such
qualification or registration is required by applicable Law, except where the
failure to so qualify would not have a Material Adverse Effect. Each of the
Shareholder and the Pixel Companies is in good standing in its jurisdiction of
formation and in each of the jurisdictions where it has qualified or registered
to do business.
3.1.1 Except as set forth on Schedule 3.1, none of Ramy Weitz (as his
interests relate directly or indirectly to the Seller, Shareholder or any
of the Pixel Companies), the Seller, the Shareholder or any of the Pixel
Companies owns any securities or any other interest in any Person.
3.1.2 Schedule 3.1 sets forth a true and complete list of each of the
Pixel Companies, the Shareholder and the Seller, and includes for each
thereof: (i) its exact legal name; (ii) its corporate business form and
jurisdiction and date of formation; (iii) its federal employer
identification number or Israeli company registration number, if
applicable; (iv) its headquarters address, telephone number and facsimile
number; (v) its directors and officers, indicating all current title(s) of
each individual; (vi) its registered agent and/or office in its
jurisdiction of formation (if applicable); (vii) all foreign jurisdictions
in which it is qualified or registered to do business, the date it so
qualified or registered, and its registered agent and/or office in each
such jurisdiction (if applicable); (viii) all fictitious, assumed or other
names of any type that are registered or used by it or under which it has
done business at any time since such company's date of incorporation; and
(ix) any name changes, recapitalizations, mergers, reorganizations or
similar events since its date of formation.
3.1.3 Accurate and complete copies of the memorandum or articles of
association, articles or certificates of incorporation, bylaws, operating
agreements and other organizational and related documents, each as amended
to date, and all material Contracts relating to the acquisition or
formation of the Shareholder and each of the Pixel Companies (and their
affiliates or predecessors), have been delivered to Buyer. Accurate and
complete copies of the memorandum or articles of association, articles or
certificates of incorporation, bylaws, operating agreements and other
organizational and related documents, each as amended to date, of the
Seller (and its predecessors), have been delivered to Buyer.
3.2 Authority; Non-Contravention.
3.2.1 Each of Seller, Shareholder and the Company have all necessary
right, power and authority to enter into and to perform its obligations
under this Agreement, and the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby by
Seller, Shareholder and the Company have been duly authorized by all
necessary actions by their respective boards of directors and shareholders.
Each of the Seller, Shareholder and the Company has all necessary right,
power and authority and capacity to enter into, execute, deliver and
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9
perform all of its obligations under this Agreement and under each other
agreement, document or instrument referred to in or contemplated by this
Agreement to which it is or is to become a party. This Agreement (i) has
been duly and validly executed by Seller, Shareholder and the Company, and
(ii) constitutes the legal, valid and binding obligation of each of them,
enforceable against each of them in accordance with its terms.
3.2.2 Except as set forth on Schedule 3.2, neither the execution,
delivery and performance of this Agreement nor the consummation or
performance of any of the transactions contemplated hereby by Company,
Shareholder and/or Seller, will directly or indirectly (with or without
notice or lapse of time):
3.2.2.1 contravene, conflict with or result in a violation of any
of the provisions of the memorandum or articles of association,
articles or certificates of incorporation or organization, bylaws or
other organizational documents of any of the Pixel Companies, the
Shareholder or the Seller;
3.2.2.2 contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge any
of the transactions contemplated hereby or to exercise any remedy or
obtain any relief under, any Law or any Judgment to which any of the
Pixel Companies, the Seller or the Shareholder, or any of the Assets
owned or used by any of the Pixel Companies, is subject;
3.2.2.3 contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate or modify, any
Permit that is held by any of the Pixel Companies, the Shareholder or
the Seller or that otherwise relates to any of the businesses of any
of the Pixel Companies or the Shareholder or to any of the Assets
owned or used by any of the Pixel Companies or the Shareholder;
3.2.2.4 contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of, or any
Specified Contract (as defined in Section 3.16) or Contract to which
Company, Shareholder or Seller is a party or by which any of them is
bound including, without limitation, the BIRD-F financing (and the
Company's obligations related to such financing will not be adversely
affected by virtue of this Agreement or the consummation of the
transactions contemplated herein); or
3.2.2.5 result, in the imposition or creation of any Encumbrance
upon or with respect to any Asset owned or used by any of the Pixel
Companies or the Shareholder.
3.2.3 Except as set forth on Schedule 3.2, none of the Pixel
Companies, the Shareholder or the Seller was, is or will be required to
make any filing with or give any notice to, or to obtain any Consent from,
any Person in connection with the execution and delivery of this Agreement
or the consummation or performance of any of the transactions contemplated
hereby.
3.3 Capital Stock and Ownership.
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3.3.1 Schedule 3.3 sets forth the authorized capital stock of the
Shareholder and each of the Pixel Companies, including the type of shares
authorized, the par value per share and the number of each type and class
of shares that are issued and outstanding. With respect to the Shareholder
and each of the Pixel Companies, Schedule 3.3 contains an accurate and
complete list of: (i) the full legal names of all shareholders of the
Shareholder and each of the Pixel Companies and the Pixel Company of which
such Persons are shareholders; (ii) the addresses of such shareholders'
respective current principal residences; (iii) the Israeli Identification
numbers or social security numbers or federal tax identification numbers of
such shareholders, if applicable; and (iv) the numbers of shares, type and
class of shares and tax basis in the shares owned of record by such
shareholders and the certificate numbers of the stock certificates
representing such shares. With respect to each shareholder of the
Shareholder and of the Pixel Companies: (i) he, she or it is the holder and
sole record and beneficial owner of the shares of Shareholder Stock,
Company Stock or other Pixel Company stock set forth on Schedule 3.3 next
to his, her or its name (the "Shares") and has good and valid title to the
Shares, free and clear of any Encumbrances; (ii) the Shares are the only
shares of the capital stock of the Shareholder, the Company or the other
Pixel Companies held by him, her or it; (iii) he, she or it has the ability
to vote all of the Shares at any meeting of the shareholders of the
Shareholder or the Company (or such other Pixel Companies, as applicable)
or by written consent in lieu of any such meeting; and (iv) he, she or it
has not appointed or granted any proxy or entered into any agreement,
contract, commitment or understanding with respect to any of the Shares.
Except as set forth on Schedule 3.3, neither the Shareholder nor any of the
Pixel Companies has ever authorized, offered, sold or issued any securities
other than the Shares. Except for the Seller, the Shareholder and any other
shareholders listed on Schedule 3.3, there are no other record or
beneficial owners of any shares of the Shareholder Stock or the Pixel
Companies' stock or any other securities of the Shareholder or the Pixel
Companies. Except for the shares listed on Schedule 3.3 with respect to the
Shareholder and each of the Pixel Companies, there were and currently are
no other issued or outstanding shares of capital stock. All of the issued
and outstanding shares of capital stock of each of the Shareholder and the
Pixel Companies have been duly authorized and validly issued, and are fully
paid and nonassessable. Except as set forth on Schedule 3.3, there exists
no right of first refusal or other preemptive right with respect to any
shares of or other securities or Assets of the Shareholder or any of the
Pixel Companies.
3.3.2 All offerings, sales and issuances by the Shareholder and each
of the Pixel Companies of any shares or options to purchase shares of
capital stock were conducted in compliance with all applicable Israel and
United States federal and state securities Laws and all other applicable
Laws.
3.3.3 Except as set forth on Schedule 3.3, there is no:
3.3.3.1 outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Shareholder or any of the
Pixel Companies;
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3.3.3.2 outstanding security, instrument or obligation that is or
may become convertible into or exchangeable for any shares of the
capital stock or other securities of the Shareholder or any of the
Pixel Companies;
3.3.3.3 Contract under which the Shareholder or any of the Pixel
Companies is or may become obligated to sell or otherwise issue any
shares of its capital stock or any other securities; or
3.3.3.4 pending or previously asserted or, to the knowledge of
the Company or the Seller, threatened claim by any Person to the
effect that such Person is or was entitled to acquire or receive any
shares of capital stock or any other securities of the Shareholder or
any of the Pixel Companies.
3.4 Financial and Corporate Records.
3.4.1 The books and records of each of the Shareholder and the Pixel
Companies are and have been properly prepared and maintained in form and
substance adequate for preparing audited financial statements in accordance
with GAAP, and such books and records fairly and accurately reflect (i) all
of the Assets and Obligations of the Shareholder and each of the Pixel
Companies and (ii) all of the Contracts and other transactions to which the
Shareholder and each of the Pixel Companies is or was a party or by which
the Shareholder and each of the Pixel Companies or the business or Assets
of the Shareholder and each of the Pixel Companies is or was affected.
3.4.2 Accurate and complete copies of the contents of the minute books
and stock books or Registers of Members, as applicable, of the Shareholder
and each of the Pixel Companies have been delivered to Buyer. Such minute
books and stock books or Registers of Members, as applicable, include
minutes of all meetings of the shareholders, board of directors and any
committees of the board of directors at which any material action was
taken, which minutes accurately record all material actions taken at such
meetings, (ii) accurate and complete written statements of all actions
taken by the shareholders, board of directors and any committees of the
board of directors without a meeting, and (iii) accurate and complete
records of the subscription, issuance, transfer and cancellation of all
shares of capital stock and all other securities since the date of
incorporation or formation. None of the shareholders, board of directors or
any committee of the board of directors has taken any material action other
than those actions reflected in the records referenced in clauses (i) and
(ii) of the preceding sentence.
3.4.3 Schedule 3.4 contains an accurate and complete list of all bank
accounts, other accounts, certificates of deposit, marketable securities,
other investments, safe deposit boxes, lock boxes and safes of the
Shareholder and each of the Pixel Companies, and the names of all officers,
employees or other individuals who have access thereto or are authorized to
make withdrawals therefrom or dispositions thereof.
3.5 Compliance with Laws; Permits
3.5.1 Except as set forth on Schedule 3.5, (i) the Shareholder and
each of the Pixel Companies is in compliance with each Judgment and with
each Law that is
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12
applicable to it or to the conduct of any of its businesses or the
ownership or use of any of its Assets, except where the failure to so
comply would not have a Material Adverse Effect; (ii) the Shareholder and
each of the Pixel Companies has at all times been in full compliance with
each Judgment or Law that is or was applicable to it or to the conduct of
any of its businesses or the ownership or use of any of its Assets, except
where the failure to so comply would not have a Material Adverse Effect;
(iii) no event has occurred, and no condition or circumstance exists, that
might (with or without notice or lapse of time) constitute or result in a
violation by the Shareholder or any of the Pixel Companies of, or a failure
on the part of the Shareholder or any of the Pixel Companies to comply
with, any Judgment or Law, except where the failure to so comply would not
have a Material Adverse Effect; and (iv) neither the Shareholder nor any of
the Pixel Companies has received, at any time, any written notice or other
written communication from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible or potential violation of, or
failure to comply with, any Judgment or Law, or (B) any actual, alleged,
possible or potential obligation on the part of the Shareholder or any of
the Pixel Companies to undertake, or to bear all or any portion of the cost
of, any cleanup or any remedial, corrective or response action of any
nature.
3.5.2 Except as set forth on Schedule 3.5 and except as would not have
a Material Adverse Effect, the Shareholder and each of the Pixel Companies
has obtained and holds all Permits required for the lawful operation of its
business as and where such business is presently conducted. All Permits
held by the Shareholder and the Pixel Companies are listed on Schedule 3.5,
and accurate and complete copies of such Permits have been delivered to
Buyer.
3.6 Financial Statements
3.6.1 Schedule 3.6 sets forth the fiscal year end for each of the
Pixel Companies and the Shareholder.
3.6.2 Seller has delivered to Buyer the following financial statements
and related notes (the "Financial Statements"): (i) the consolidating
balance sheet of the Pixel Companies as of December 31, 1999 and December
31, 1998, and the statements of earnings, shareholders' equity and changes
in financial position of the Pixel Companies for the fiscal years ended
December 31, 1999 and December 31, 1998, all of which have been audited by
Kost Forer & Gabbay, a member of Ernst & Young International ("KFG"); (ii)
the unaudited consolidating balance sheet of the Pixel Companies (the
"Latest Balance Sheet") as of January 31, 2000 (the "Latest Balance Sheet
Date"); and (iii) the unaudited consolidating statements of earnings,
shareholders' equity and changes in financial position of the Pixel
Companies for the period ended January 31, 2000.
3.6.3 The Financial Statements present fairly the consolidating
financial position of the Pixel Companies as of the respective dates
thereof and the consolidated results of operations, changes in
shareholders' equity and cash flows of the Pixel Companies for the periods
covered thereby. Except as disclosed on Schedule 3.6, the Financial
Statements have been prepared in accordance with GAAP.
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13
3.7 Assets.
3.7.1 Schedule 3.7 sets forth the list of Assets as of February 29,
2000 of (i) each of the Pixel Companies routinely maintained by the Pixel
Companies, including, without limitation, the internally generated Accounts
Receivable reports for each of the Pixel Companies which contains an
accurate and complete list of Accounts Receivable (including an aging
thereof); and (ii) the Shareholder routinely maintained by the Shareholder.
3.7.2 Schedule 3.7 accurately identifies which Assets listed therein
are being leased or licensed to the Shareholder or any of the Pixel
Companies.
3.7.3 The Shareholder and each of the Pixel Companies owns and has
good, valid and marketable title to, all of its respective Assets that are
purported to be owned by it and has the right to transfer all rights, title
and interest in such Assets, free and clear of any Encumbrance.
3.7.4 Except for the Assets listed on Schedule 3.7 or elsewhere on
Schedules to this Agreement, no other Assets are material to the operation
of the business of the Shareholder or any of the Pixel Companies.
3.8 Obligations.
3.8.1 Schedule 3.8 sets forth the list of Obligations as of February
29, 2000 of (i) each of the Pixel Companies routinely maintained by the
Pixel Companies including (a) accounts payable, (b) accrued expenses and
reserves, (c) deferred revenues, and (d) other current and long-term
liabilities; and (ii) the Shareholder routinely maintained by Shareholder.
3.8.2 There are no Obligations of any Pixel Company except for (i)
Obligations adequately reflected or reserved against on the Financial
Statements; and (ii) Obligations incurred since the Latest Balance Sheet
Date in the ordinary course of business, consistent with past practice.
Except as set forth on Schedule 3.8, there are no Obligations of the
Shareholder.
3.9 Operations Since December 31, 1999. Except as set forth on Schedule
3.9, since December 31, 1999:
3.9.1 except in the ordinary course of its business consistent with
its past practices, neither the Shareholder nor any of the Pixel Companies
has: (i) pledged or hypothecated any of its Assets or otherwise permitted
any of its Assets to become subject to any Encumbrance; (ii) incurred any
Obligation; (iii) made any loan or advance to any Person; (iv) assumed,
guaranteed or otherwise become liable for any Obligation of any Person; (v)
committed for any capital expenditure; (vi) purchased, leased, sold,
abandoned or otherwise acquired or disposed of any business or Assets;
(vii) waived or released any right or canceled or forgiven any debt or
claim; (viii) discharged any Encumbrance or discharged or paid any
indebtedness or other Obligation; (ix) assumed or entered into any Contract
other than this Agreement; (x) amended or terminated any Specified
Contract; (xi) increased, or authorized an increase in, the compensation or
<PAGE>
14
benefits paid or provided to any of their directors, officers, employees,
salesmen, agents or representatives; (xii) established, adopted or amended
(including any amendment with a future Closing Date) any Employee Benefit
Plan; (xiii) declared, accrued, set aside, or paid any dividend or made any
other distribution in respect of any shares of capital stock, other
securities, Cash Assets or other Assets; (xiv) repurchased, redeemed or
otherwise reacquired any shares of capital stock or other securities; (xv)
sold or otherwise issued any shares of capital stock or any other
securities; (xvi) amended its articles or certificate of incorporation,
memorandum or articles of association, bylaws or other organizational
documents; (xvii) been a party to any merger, consolidation,
recapitalization, reclassification of shares, stock split, reverse stock
split or similar transaction; (xviii) accrued any deferred bonuses or
compensation due to any shareholder, employee or agent of the Shareholder
or any of the Pixel Companies, or paid any such deferred bonuses or
compensation except to the extent such deferred bonuses or compensation was
accrued on the Latest Balance Sheet; (xix) changed any of its methods of
accounting or accounting practices in any respect; or (xx) entered into any
transactions with any related parties.
3.9.2 even in the ordinary course of its businesses consistent with
its past practices, neither the Shareholder nor any of the Pixel Companies
has incurred any Obligation, made any loan to any Person, acquired or
disposed of any business or Assets, entered into any Contract (other than
customer contracts) or other transaction, or done any of the other things
described in Section 3.9.1 except as set forth on Schedule 3.9; and
3.9.3 there has been no material adverse change or material casualty
loss affecting the Shareholder or any of the Pixel Companies or the
business, Assets or financial condition of the Shareholder or any of the
Pixel Companies; and there has been no adverse change in the financial
performance of the Shareholder or any of the Pixel Companies; and there has
been no material loss, damage or destruction to, or any interruption in the
use of, any of the Software or other Assets (whether or not covered by
insurance) of the Shareholder or any of the Pixel Companies.
3.10 Accounts Receivable. All Accounts Receivable of the Shareholder and
the Pixel Companies arose in the ordinary course of business and are proper and
valid Accounts Receivable, and can be collected by the Shareholder and the Pixel
Companies, as applicable, in full (without any counterclaim or setoff). There
are no refunds, discounts, rights of setoff or assignments affecting any such
Accounts Receivable. Proper amounts of deferred revenues appear on the books and
records of each of the Pixel Companies, in accordance with GAAP, with respect to
the Shareholder's and all of the Pixel Companies' (a) billed but unearned
Accounts Receivable; (b) previously billed and collected Accounts Receivable
still unearned; and (c) unearned customer deposits.
3.11 Tangible Property. Each of the Pixel Companies and the Shareholder has
good and marketable title to all of its Tangible Property, free and clear of any
Encumbrances, except as set forth in the December 31, 1999 Financial Statements
or on Schedule 3.11. Except as set forth on Schedule 3.11, all of the Tangible
Property of each of the Pixel Companies and the Shareholder is located at the
offices or facilities of the Pixel Companies and the Shareholder, and each of
the Pixel Companies and the Shareholder has the full and unqualified right to
require the immediate return of any of its
<PAGE>
15
Tangible Property which is not located at its offices or facilities. All
Tangible Property of each of the Pixel Companies and the Shareholder, wherever
located, (a) is in good condition, ordinary wear and tear excepted, (b) is
structurally sound and free of any material defect and deficiency, (c) complies
in all respects with, and is being operated and otherwise used in compliance
with, all applicable Laws, except where the failure to comply would not have a
Material Adverse Effect and (d) is sufficient for the operations and business of
each of the Pixel Companies and the Shareholder as presently conducted.
3.12 Real Property. Neither the Shareholder nor any of the Pixel Companies
owns any Real Property. Schedule 3.12 contains an accurate and complete list of
all Real Property leased by the Shareholder and each of the Pixel Companies,
showing location, rental cost and landlord. All Real Property under lease to or
otherwise used by the Shareholder or any of the Pixel Companies is in good
condition, ordinary wear and tear excepted, and is sufficient for the current
operations of the Shareholder and the Pixel Companies, as applicable. No such
Real Property, nor the occupancy, maintenance or use thereof, is in violation
of, or breach or default under, any Contract or Law, except where such
violation, breach or default has not and will not have a Material Adverse
Effect, and no notice or threat from any lessor, Governmental Body or other
Person has been received by the Shareholder or any of the Pixel Companies or
served upon any such Real Property claiming any violation of, or breach, default
or liability under, any Contract or Law, or requiring the Shareholder and or
calling attention to the need for any work, repairs, construction, alteration,
installations or environmental remediation. To the knowledge of Company, the
Shareholder and the Seller, no Proceedings are pending which would affect the
zoning or use of any of the Pixel Companies' Real Property. All utilities,
including water, gas, telephone, electricity, sanitary and storm sewers, are
currently available to the Shareholder's and all of the Pixel Companies' Real
Property at normal and customary rates, and are adequate to serve the
Shareholder's and the Pixel Companies' Real Property for their respective
current uses thereof. The Shareholder and each of the Pixel Companies is in
compliance with all applicable Environmental Laws, which compliance includes the
possession by each of the Pixel Companies of all permits and other Governmental
Authorizations required under applicable Environmental Laws (other than failures
to comply which, or permits and authorizations the failure of which to possess,
would not have or cause a Material Adverse Effect), and compliance with the
terms and conditions thereof. Neither the Shareholder nor any of the Pixel
Companies has placed or caused to be placed, and none of the Pixel Companies has
any knowledge that there were or are, any Hazardous Substances in, on, under or
migrating from any of the Pixel Companies' Real Property.
3.13 Software and Other Intangibles
3.13.1 Schedule 3.13 contains an accurate and complete list and
description of all Software, names, corporate names, fictitious names,
trade names, trademarks, trademark applications, service marks, service
mark applications, brand names, product names, and slogans, patents, patent
applications, copyrights, copyright applications, designs and logos owned,
marketed, licensed, supported, maintained, used or under development by the
Shareholder or any of the Pixel Companies, and, in the case of Software, a
product description, the language in which it is written and the type of
hardware platform(s) on which it runs. Except as set forth on Schedule
3.13, no other
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16
Software or Intangibles (other than trade secrets and know-how) are used to
operate the business of the Shareholder or any of the Pixel Companies.
3.13.2 Except as set forth on Schedule 3.13, (i) each of the Pixel
Companies has good and marketable title to, and has the full right to use,
all of the Pixel Intangibles, free and clear of any Encumbrance, and (ii)
the Shareholder has good and marketable title to, and has the full right to
use, all of the Software and other Intangibles owned, marketed, licensed,
supported, maintained, used or under development by the Shareholder
(collectively, the "Shareholder Intangibles") free and clear of any
Encumbrance. No rights of any third party are necessary to market, license,
sell, modify, update, and/or create derivative works for the Pixel
Intangibles which are owned by the Pixel Companies or the Shareholder
Intangibles which are owned by the Shareholder.
3.13.3 Except as set forth on Schedule 3.13, all of the Pixel
Intangibles (other than the Pixel Intangibles licensed to the Pixel
Companies) and all of the Shareholder Intangibles (other than the
Shareholder Intangibles licensed to the Shareholder) were created as a work
for hire (as defined under U.S. copyright law) by regular full time
employees only of the Pixel Companies or the Shareholder, as applicable,
and the Pixel Companies and the Shareholder, respectively, made reasonable
efforts to ensure that such Pixel Intangibles and Shareholder Intangibles
do not include any (i) inventions, works of authorship, derivatives or
contributions of such employees made prior to the time such employees
became employees of the Pixel Companies or the Shareholder or (ii)
intellectual property of any previous employer of such employee. To the
extent that any author or developer of any such Pixel Intangibles or
Shareholder Intangibles was not a regular full-time employee of the Pixel
Companies or the Shareholder, respectively, at the time such person
contributed to such Pixel Intangibles or Shareholder Intangibles, such
author or developer has irrevocably assigned to the Pixel Companies or the
Shareholder, as applicable, in writing all copyrights and other proprietary
rights in such person's work with respect to such Pixel Intangibles or
Shareholder Intangibles.
3.13.4 With respect to the Software listed on Schedule 3.13, (i) the
Pixel Companies or the Shareholder, as applicable, maintain in accordance
with customary industry practices machine-readable master-reproducible
copies, source code listings, technical documentation and user manuals for
the most current releases or versions thereof and for all earlier releases
or versions thereof currently being supported by them; (ii) in each case,
the machine-readable copy substantially conforms to the corresponding
source code listing; (iii) it is written in the language set forth on
Schedule 3.13, for use on the hardware set forth on Schedule 3.13 with
standard operating systems; (iv) it can be maintained and modified by the
current programmers of the Company and reasonably competent programmers
trained by the Company; and (v) in each case, it operates in accordance
with the user manual therefor without material operating defects.
3.13.5 Neither the Shareholder Intangibles nor the Pixel Intangibles,
or their respective past or current uses, including the preparation,
distribution, marketing or licensing thereof, has violated or infringed
upon, or is violating or infringing upon, any Software, technology, patent,
copyright, trade secret or other Intangible of any Person, except where
such violation would not have a Material Adverse Effect. Neither the
<PAGE>
17
Shareholder Intangibles nor the Pixel Intangibles is subject to any
Judgment. No Proceeding is pending or, to the knowledge of the Company, the
Shareholder or the Seller, threatened, nor has any written claim or demand
been made, which challenges or challenged the legality, validity,
enforceability, use or exclusive ownership by any of the Pixel Companies of
any of the Pixel Intangibles or by the Shareholder of the Shareholder
Intangibles. To the knowledge of Company, the Shareholder and the Seller,
no Person is violating or infringing upon, or has violated or infringed
upon at any time, any of the Pixel Intangibles or the Shareholder
Intangibles, except where such violation would not have a Material Adverse
Effect.
3.13.6 The Pixel Companies have maintained in accordance with
reasonable business practices all trade secrets and copyrights with respect
to the Pixel Intangibles, and the Shareholder has adequately maintained in
accordance with reasonable business practices all trade secrets and the
copyrights with respect to the Shareholder Intangibles. Except as set forth
on Schedule 3.13, none of the Pixel Companies has disclosed or delivered to
any escrow agent or to any other Person, or permitted the disclosure to any
escrow agent or to any other Person of, the source code (or any aspect or
portion thereof) for or relating to any past or present product of any of
the Pixel Companies.
3.13.7 Each license, sublicense or other Contract covering or relating
to any Pixel Intangible is legal, valid, binding, enforceable and in full
force and effect, and upon consummation of the transactions contemplated
hereby, will continue to be legal, valid, binding, enforceable and in full
force and effect on terms identical to those in effect immediately prior to
the consummation of the transactions contemplated hereby except as would
not have a Material Adverse Effect. Neither the Shareholder nor any of the
Pixel Companies is in breach of or default under any license, sublicense or
other Contract covering or relating to any Pixel Intangible or Shareholder
Intangible or has performed any act or omitted to perform any act which,
with notice or lapse of time or both, will become or result in a violation,
breach or default thereunder, except where such violation, breach or
default has not and will not have a Material Adverse Effect. No Proceeding
is pending or, to the knowledge of the Company, the Shareholder or the
Seller, is being or has been threatened, nor has any claim or demand been
made, which challenges the legality, validity, enforceability or ownership
of any license, sublicense or other Contract covering or relating to any
Pixel Intangible or Shareholder Intangible.
3.13.8 None of the Software or other Intangibles listed or required to
be listed on Schedule 3.13 is owned by or registered in the name of any
current or former owner, shareholder, partner, director, executive,
officer, employee, salesman, agent, customer, representative or contractor
or the Seller nor does any such Person have any interest therein or right
thereto, including the right to royalty payments.
3.13.9 Except with respect to demonstration or trial copies, no
portion of any Pixel Intangibles contains any "back door," "time bomb,"
"Trojan horse," "worm," "drop dead device," "virus" or other software
routines or hardware components designed to permit unauthorized access or
to disable or erase software, hardware, or data without the consent of the
user.
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18
3.13.9.1 Set forth in Schedule 3.13 are all Internet domain names
related to the Company Business and the business of each of the other
Pixel Companies ("Domain Names") and the Pixel Company that maintains
the registration of such Domain Name. All registrations of Domain
Names are in good standing. No legal action has been taken or is
pending to challenge rights to, suspend, cancel or disable any Domain
Name, registration therefor or the right of any of the Pixel Companies
to use a Domain Name. Each of the identified Pixel Companies has all
right, title and interest in and to, and rights to use on the Internet
and otherwise as a trade-mark and trade name, the Domain Names
registered to it. The Shareholder has no Internet domain names.
3.13.9.2 There is no governmental prohibition or restriction on
the use of any of the Software or any other Intangible in any
jurisdiction or on the export or import of any of the Software or any
other Intangible from or to any jurisdiction. The Pixel Companies and
the Shareholder do not "engage" in any "means of encryption" as such
terms are defined in the Control of Products and Services Declaration
(Engagement in Encryption), 1974, as amended, promulgated under the
Law for Control of Products and Services of 1957.
3.13.9.3 Except as disclosed in Schedule 3.13, the Shareholder
and each of the Pixel Companies, as applicable, identified as an owner
of a database relating to its business or the business of any other
Person is the sole owner of, and has good and marketable title to, and
all right, title and interest in and to such databases. Except as
specified in Schedule 3.13, no Person other than one of the Pixel
Companies has any right or interest of any kind or nature in or to
such databases. To the knowledge of the Company, the Shareholder or
the Seller, no person (i) is violating or infringing upon, or has
violated or infringed upon at any time, any right of the Pixel
Companies or the Shareholder in or to such databases; or (ii) is
breaching or has breached at any time any duty or obligation owed to
the Pixel Companies or the Shareholder in respect of such databases.
All licenses referred to in Schedule 3.13 are in full force and effect
and neither the Pixel Company nor, to the knowledge of the Company,
the Shareholder or the Seller, the other party thereto is in default
of its obligations thereunder. Neither the past nor current use of any
such database or the information contained therein in the Company
Business or the business of any of the other Pixel Companies or the
Shareholder (i) has violated or infringed upon, or is violating or
infringing upon, the rights of any Person; or (ii) breaches any duty
or obligation owed to any Person; or (iii) violates the privacy or any
Law relating to the privacy of any Person, except, in each instance,
where the violation has not and will not have a Material Adverse
Effect. All such databases maintained by the Pixel Companies or the
Shareholder that are subject to the registration requirements of the
Israeli Protection of Privacy Law, 1981, and the regulations
promulgated thereunder, have been duly registered with the Israeli
Registrar of Databases.
3.14 Holding Company. Shareholder: (i) is a holding company, the sole
function of which has been to hold and administer certain capital stock of the
Company and to enter into certain transactions relating thereto; and (ii) has
not since its inception conducted any business or operations except as described
in the immediately preceding clause.
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19
3.15 INTENTIONALLY OMITTED.
3.16 Contracts.
3.16.1 Schedule 3.16 contains an accurate and complete list of all of
the following types of Contracts to which any of the Pixel Companies or the
Shareholder is a party or by which any of the Pixel Companies or the
Shareholder is bound (collectively, the "Specified Contracts"), grouped
into the following categories: (i) Software license and Software
maintenance Contracts under which any of the Pixel Companies or the
Shareholder is the licensor or provider of services; (ii) Contracts for the
purchase or lease of Real Property or otherwise concerning Real Property
owned or used by any of the Pixel Companies or the Shareholder; (iii) loan
agreements, mortgages, notes, guarantees and other financing Contracts;
(iv) Contracts for the purchase, lease and/or maintenance of computer
equipment and other equipment, Contracts for the purchase, license, lease
and/or maintenance of Software under which any of the Pixel Companies or
the Shareholder is the purchaser, licensee, lessee or user; and other
supplier Contracts; (v) employment, consulting and sales representative
Contracts (excluding Contracts which constitute Employee Benefit Plans
listed on Schedule 3.18, and excluding oral Contracts with employees for
"at will" employment); (vi) Contracts under which any rights in and/or
ownership of any Software product, technology or other Intangible of any of
the Pixel Companies or the Shareholder, or any prior version thereof, or
any part of the customer base, business or Assets of any of the Pixel
Companies or the Shareholder, or any shares or other ownership interests in
any of the Pixel Companies or the Shareholder (or any of their
predecessors) was acquired; (vii) Contracts containing clauses that
prohibit or restrict any of the Pixel Companies or the Shareholder from
soliciting any employee or customer of any other Person or otherwise
prohibiting or restricting any of the Pixel Companies or the Shareholder
from engaging in any business and (viii) other Contracts material to the
business of the Pixel Companies or the Shareholder (excluding Contracts
which constitute Insurance Policies listed on Schedule 3.22). A description
of each oral Specified Contract is included on Schedule 3.16, and true and
correct copies of each written Specified Contract have been delivered to
Buyer.
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20
3.16.2 Each Specified Contract is valid and in full force and effect,
and is enforceable by the Pixel Companies or the Shareholder, as
applicable, in accordance with its terms, except as would not have a
Material Adverse Effect.
3.16.3 Except as set forth on Schedule 3.16, to the knowledge of the
Company, the Shareholder and the Seller: (i) no Person has violated,
breached, or declared or committed any default under, any Specified
Contract; (ii) no event has occurred, and no circumstance or condition
exists (including, without limitation, the change of control by virtue of
the sale of the Shareholder Stock pursuant to this Agreement), that would
(with or without notice or lapse of time) (A) result in a violation or
breach of any of the provisions of any Specified Contract, (B) give any
Person the right to declare a default or exercise any remedy under any
Specified Contract, (C) give any Person the right to accelerate the
maturity or performance of any Specified Contract, or (D) give any Person
the right to cancel, terminate or modify any Specified Contract; (iii)
neither the Shareholder nor any of the Pixel Companies has received any
notice or other communication (in writing or otherwise) regarding any
actual, alleged, possible or potential violation or breach of, or default
under, any Specified Contract; and (iv) neither the Shareholder nor any of
the Pixel Companies has waived any of its rights under any Specified
Contract.
3.16.4 The performance of the Specified Contracts in accordance with
their respective terms will not result in any violation of or failure to
comply with any Judgment or, to the knowledge of the Company, the
Shareholder or the Seller, Law applicable to any of the Pixel Companies or
the Shareholder on or prior to the Closing Date.
3.16.5 The Specified Contracts are all the Contracts necessary and
sufficient to operate the business of the Shareholder and each of the Pixel
Companies, except for such Contracts which, if not possessed by the
Shareholder or the Pixel Companies, would not have a Material Adverse
Effect.
3.17 Employees and Independent Contractor
3.17.1 Schedule 3.17 contains an accurate and complete list of all of
the employees of the Pixel Companies and the Shareholder, respectively,
(including any employee of any of the Pixel Companies or the Shareholder
who is on a leave of absence or on layoff status) and (i) their titles or
responsibilities; (ii) their Israeli Identification numbers or social
security numbers, if applicable; (iii) their dates of hire; (iv) their
current salaries or wages and all bonuses, commissions and incentives paid
at any time during the past twelve months; (v) their last compensation
changes and the dates on which such changes were made; (vi) any specific
bonus, commission or incentive plans or agreements for or with them; (vii)
each Employee Benefit Plan in which they participate; (viii) any Permit
that is held by them and that relates to or is useful in connection with
any of the businesses of any of the Pixel Companies or the Shareholder;
(ix) any outstanding loans or advances made to them; and (x) the notice
period provided for in such employee's employment agreement.
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3.17.2 Schedule 3.17 also contains an accurate and complete list of
all sales representatives and independent contractors engaged by the Pixel
Companies or the Shareholder and (i) their tax identification numbers, if
applicable, and state or country of residence; (ii) their payment
arrangements (if not set forth in a Specified Contract listed or described
on Schedule 3.16); and (iii) a brief description of their jobs or projects
currently in progress.
3.17.3 Except as limited by the specific and express terms of any
employment Contracts listed on Schedule 3.16 and except for any limitations
of general application which may be imposed under applicable Laws, each of
the Pixel Companies and the Shareholder, as applicable, has the right to
terminate the employment of each of its employees at will upon no more than
thirty (30) days' notice and to terminate the engagement of any of its
independent contractors without payment to such employee or independent
contractor other than for services rendered through termination and without
incurring any penalty or liability other than liability for severance pay
in accordance with such company's disclosed severance pay policy and
applicable Israeli laws.
3.17.4 Each of the Pixel Companies and the Shareholder is in
compliance with all Laws relating to employment practices, except where the
failure to comply would not have a Material Adverse Effect. The Pixel
Companies and the Shareholder have delivered to Buyer accurate and complete
copies of all employee manuals and handbooks, disclosure materials, policy
statements and other materials relating to the employment of the current
and former employees of each of the Pixel Companies and the Shareholder, as
applicable.
3.17.5 Neither the Shareholder nor any of the Pixel Companies has ever
been a party to or bound by any union or collective bargaining Contract,
nor is any such Contract currently in effect or being negotiated by or on
behalf of the Shareholder or any of the Pixel Companies.
3.17.6 Since the respective incorporation or formation dates of the
Shareholder and each of the Pixel Companies, neither the Shareholder nor
any of the Pixel Companies has experienced any labor problem that was or is
material to it. The Shareholder's and each of the Pixel Companies'
relations with its employees are currently on a good and normal basis.
3.17.7 To the knowledge of the Company, the Shareholder and the
Seller, no employee of the Shareholder or any of the Pixel Companies is a
party to or is bound by any confidentiality agreement, noncompetition
agreement or other Contract (with any Person) that would have (A) a
Material Adverse Effect, or (B) a material adverse effect on the
performance by such employee of any of his duties or responsibilities as an
employee of the Shareholder or such Pixel Company.
3.17.8 Except as set forth on Schedule 3.17, each of the Pixel
Companies' and the Shareholder's current and past employees, consultants
and contractors has signed agreements with the Pixel Companies and the
Shareholder containing restrictions that protect in accordance with
reasonable business practices the proprietary and confidential information
of the Pixel Companies and the Shareholder and
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22
vest in the Pixel Companies and the Shareholder the full ownership of items
developed by such employee, consultant or contractor.
3.17.9 Except as set forth on Schedule 3.17, since December 31, 1999,
no employee of any of the Pixel Companies or the Shareholder having an
annual salary of $50,000 or more has stated an intention to terminate or
has terminated his or her employment with such company. To the knowledge of
Company, the Shareholder and the Seller, the transactions contemplated by
this Agreement will not adversely affect relations with any employees of
the Pixel Companies or the Shareholder.
3.17.10 All employees of the Pixel Companies or the Shareholder who
are not citizens of the country in which their employment, or any material
portion thereof, is performed but who are assigned to the operations of any
of the Pixel Companies or the Shareholder or otherwise engage in business
in such country on behalf of any of the Pixel Companies or the Shareholder
possess all applicable passports, visas and other authorizations required
by the laws of such country and have otherwise complied with all applicable
immigration and similar laws of such country, except for any failure to
obtain such authorization or to comply as would not have a Material Adverse
Effect.
3.18 Employee Benefit Plans
3.18.1 Schedule 3.18 contains an accurate and complete list of all of
Pixel Companies' Employee Benefit Plans (collectively referred to as the
"Pixel Employee Benefit Plans"). Accurate and complete copies and
descriptions of all of the Pixel Employee Benefit Plans, all employees
affected or covered by the Pixel Employee Benefit Plans, and all
Obligations thereunder are attached to Schedule 3.18. The Shareholder does
not presently maintain, nor has it ever established, maintained or
contributed to, any Employee Benefit Plan.
3.18.2 Except as set forth on Schedule 3.18, none of the Pixel
Companies has (i) established, maintained or contributed to (or had the
obligation to contribute to) any Employee Benefit Plans, (ii) proposed any
Employee Benefit Plans which it plans to establish or maintain or to which
it plans to contribute, or (iii) proposed any changes to any Employee
Benefit Plans now in effect.
3.18.3 If permitted and/or required by applicable Law, the Pixel
Companies have properly submitted all of the Pixel Employee Benefit Plans
in good faith to meet the applicable requirements of Law, including, to the
extent applicable, the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and/or the Internal Revenue Code of 1986, as amended (the
"Code"), to the Internal Revenue Service (the "IRS") or such other
applicable Government Body for its approval within the time prescribed
therefor under applicable federal regulations. Favorable letters of
determination, if any, of such tax-qualified status from the IRS or such
other applicable Government Body are attached to Schedule 3.18.
3.18.4 With respect to the Pixel Employee Benefit Plans, the Pixel
Companies will have made, on or before the Closing Date, all payments
required to be
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23
made by them on or before the Closing Date and will have accrued (in
accordance with GAAP) as of the Closing Date all payments due but not yet
payable as of the Closing Date. The Pixel Employee Benefit Plans are
sufficient to fund the payment in full of all legal severance pay that
would be due and owing to any employee of the Pixel Companies who was
terminated on or before the Closing Date.
3.18.5 Company has delivered to Buyer an accurate and complete copy of
the most current Form 5500, to the extent applicable, and any other form or
filing required to be submitted to any Governmental Body with regard to any
of the Pixel Employee Benefit Plans and the most current actuarial report
with regard to any of the Pixel Employee Benefit Plans.
3.18.6 All of the Pixel Employee Benefit Plans are, and have been,
operated in compliance with their provisions and with all applicable Laws,
including ERISA and the Code and the regulations and rulings thereunder,
except for any failures to comply as would not have a Material Adverse
Effect. The Pixel Companies and all fiduciaries of the Pixel Employee
Benefit Plans have complied with the provisions of the Pixel Employee
Benefit Plans and with all applicable Laws including ERISA and the Code and
the regulations and rulings thereunder, except for any failures to comply
as would not have a Material Adverse Effect. There have been no Reportable
Events (as defined in ERISA), no events described in Sections 4062, 4063 or
4064 of ERISA, and no termination or partial termination (including any
termination or partial termination attributable to this sale) of any of the
Pixel Employee Benefit Plans. There would be no Obligation of any of the
Pixel Companies under Title IV of ERISA if any of the Pixel Employee
Benefit Plans were terminated as of the Closing Date. None of the Pixel
Companies has incurred, nor will incur with the giving of notice or passage
of time any withdrawal liability, nor do any of the Pixel Companies have
any contingent withdrawal liability, under ERISA to any Multiemployer Plan
(as defined in ERISA or the Code), or (ii) other applicable Law with
respect to multiemployer plans in jurisdictions not subject to ERISA. None
of the Pixel Companies has incurred, or will incur with the giving of
notice or passage of time, any Obligation to the Pension Benefit Guaranty
Corporation (or any successor thereto) or to any comparable Government Body
in any other jurisdiction.
3.18.7 Neither the execution and delivery of this Agreement nor the
consummation of the Transactions will (i) result in any payment (including
any severance, unemployment compensation or golden parachute payment)
becoming due from any of the Pixel Companies under any of the Pixel
Employee Benefit Plans, (ii) increase any benefits otherwise payable under
any of the Pixel Employee Benefit Plans, or (iii) result in the
acceleration of the time of payment or vesting of any such benefits to any
extent.
3.18.8 There are no pending Proceedings against any of the Pixel
Employee Benefit Plans, the Assets of any of the trusts under such plans,
the plan sponsor, the plan administrator or any fiduciary of any such plan
(other than routine benefit claims), and, to the knowledge of Company and
the Seller, there are no facts which could form the basis for any such
Proceeding. There are no investigations or audits of any of the Pixel
Employee Benefit Plans, any trusts under such plans, the plan
<PAGE>
24
sponsor, the plan administrator or any fiduciary of any such plan that have
been instituted or, to the knowledge of Company and the Seller, threatened,
and, to the knowledge of Company and the Seller, there are no facts which
could form the basis for any such investigation or audit.
3.18.9 Except as set forth on Schedule 3.18, no event has occurred nor
will occur which will result in any of the Pixel Companies having an
Obligation in connection with any Employee Benefit Plan established,
maintained, contributed to or to which there has been an obligation to
contribute (currently or previously) by it or by any other entity which,
together with any of the Pixel Companies, constitute elements of either (i)
a controlled group of corporations (within the meaning of Section 414(b) of
the Code), (ii) a group of trades or businesses under common control
(within the meaning of Sections 414(c) of the Code or 4001 of ERISA), (iii)
an affiliated service group (within the meaning of Section 414(m) of the
Code), or (iv) another arrangement covered by Section 414(o) of the Code.
3.18.10 The Pixel Employee Benefit Plans comply, and the Pixel
Companies have administered and operated the Pixel Employee Benefit Plan in
material compliance with, their terms and all applicable Law, except for
any failures to comply as would not have a Material Adverse Effect.
3.19 Customers, Prospects and Suppliers. Each customer of the Pixel
Companies and the Shareholder is listed in the list of customers included as
part of Schedule 3.19. Schedule 3.19 contains an accurate and complete list of
all current suppliers of each of the Pixel Companies and the Shareholder. Except
as set forth on Schedule 3.19, since January 1, 1998, none of the customers or
suppliers of any of the Pixel Companies or the Shareholder has given notice to
such company that (i) it will or intends to terminate or not renew its Contract
with such company before the scheduled expiration date, (ii) it will otherwise
terminate its relationship with such company, or (iii) it may otherwise reduce
the volume of business transacted with such company below historical levels. The
relationship of each of the Pixel Companies and the Shareholder with their
respective customers is currently on a good and normal basis, and neither the
Shareholder nor any of the Pixel Companies has experienced any problems with
material customers or suppliers since January 1, 1998. To the knowledge of
Company, the Shareholder and the Seller, the transactions contemplated hereby
will not adversely affect the Pixel Companies' or the Shareholders' relations
with any of the customers or suppliers of any thereof.
<PAGE>
25
3.20 Taxes.
3.20.1 Schedule 3.20 contains an accurate and complete list of all Tax
Returns with respect to the Shareholder's and the Pixel Companies'
respective last five fiscal years. "Tax Returns" means all federal, state,
local, foreign and other Tax returns and reports, information returns,
statements, declarations, estimates, schedules, notices, notifications,
forms, elections, certificates or other documents any of the Pixel
Companies is required to file or submit to any Governmental Body with
respect to the determination, assessment, collection or payment of any Tax
or in connection with the administration, implementation or enforcement of
or compliance with any Law relating to any Tax. Accurate and complete
copies of all federal, state, local and foreign income, sales and use Tax
Returns filed by each of the Pixel Companies and the Shareholder with
respect to its respective last five fiscal years are attached to Schedule
3.20, and accurate and complete copies of all other Tax Returns listed
thereon have been delivered to Buyer.
3.20.2 Except as set forth on Schedule 3.20: (i) each of the Pixel
Companies and the Shareholder has properly and timely filed all Tax Returns
required to be filed by it, all of which were accurately prepared and
completed in full compliance with all Laws; (ii) each of the Pixel
Companies and the Shareholder has properly withheld from payments to its
employees, agents, representatives, contractors and suppliers all amounts
required by Law to be withheld for Taxes; (iii) each of the Pixel Companies
and the Shareholder has paid all Taxes required to be paid by it; (iv) no
audit of the Shareholder or any of the Pixel Companies by any governmental
taxing authority has ever been conducted, is currently pending or, to the
knowledge of Company, the Shareholder and the Seller, is threatened; (v) no
notice of any proposed Tax audit, or of any Tax deficiency or adjustment,
has been received by the Shareholder or any of the Pixel Companies, and
there is no reasonable basis for any Tax deficiency or adjustment to be
assessed against the Shareholder or any of the Pixel Companies; (vi) there
are no agreements or waivers currently in effect that provide for an
extension of time for the assessment of any Tax against the Shareholder or
any of the Pixel Companies; (vii) the Financial Statements fully accrue all
actual and contingent liabilities for Taxes with respect to all periods
through the dates thereof in accordance with GAAP; (viii) since the Latest
Balance Sheet Date, neither the Shareholder nor any of the Pixel Companies
has incurred any liabilities for Taxes except in the ordinary course of
business consistent with past practices; and (ix) no Proceeding is pending
or to the knowledge of the Company or the Shareholder has been threatened
against or with respect to any of the Pixel Companies or the Shareholder in
respect of any Tax.
3.20.3 Neither the Shareholder nor any of the Pixel Companies has, in
the past ten years, acquired Assets from another corporation in a
transaction in which such company's Tax basis for the acquired Assets was
determined, in whole or in part, by reference to the Tax basis of the
acquired Assets (or any other property) in the hands of the transferor.
3.20.4 Shareholder is not a "controlled foreign corporation" as
defined in Section 957 of the Internal Revenue Code of 1986, as amended.
3.21 Proceedings and Judgments
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26
3.21.1 Except as set forth on Schedule 3.21: (i) no Proceeding is
currently pending or, to the knowledge of Company, the Shareholder and the
Seller, threatened, nor has any Proceeding occurred at any time since
January 1, 1996, to which any of the Pixel Companies or the Shareholder is
or was a party; (ii) no Judgment is currently outstanding, nor has any
Judgment been outstanding at any time since January 1, 1996, against any of
the Pixel Companies or the Shareholder, or by which any of the Pixel
Companies, the Shareholder or any Assets or business of any thereof is or
was bound; and (iii) no breach of contract, breach of warranty, tort,
negligence, infringement, product liability, discrimination, wrongful
discharge or other claim of any nature has been asserted or brought to the
knowledge of Company, the Shareholder and the Seller, threatened by or
against any of the Pixel Companies or the Shareholder at any time since
January 1, 1996, and, to the knowledge of the Company or the Shareholder,
there is no basis for any such claim.
3.21.2 As to each matter described on Schedule 3.21, accurate and
complete copies of all pertinent pleadings, judgments, orders,
correspondence and other legal documents have been delivered to Buyer.
3.21.3 To the knowledge of the Company, the Shareholder and the
Seller, no officer or employee of any of the Pixel Companies or the
Shareholder is subject to any Judgment that prohibits such officer or
employee from engaging in or continuing any conduct, activity or practice
relating to any of the businesses of any of the Pixel Companies or the
Shareholder.
3.22 Insurance. Schedule 3.22 contains an accurate and complete list and
summary description of all contracts and policies of insurance relating to any
of the Assets, the Business, the Pixel Companies or the Shareholder. Each such
policy and contract is in full force and effect; all premiums due and payable
with respect thereto have been paid; and no notice of cancellation or
termination has been received by Seller, Shareholder or any Pixel Company with
respect to any such policy or contract.
3.23 Questionable Payments. To the knowledge of the Company, the
Shareholder or the Seller, none of the current or former partners, owners,
shareholders, directors, executives, officers, representatives, agents or
employees of any of the Pixel Companies or the Shareholder (when acting in such
capacity or otherwise on behalf of any of the Pixel Companies or the Shareholder
or any of their predecessors): (a) has used or is using any corporate funds for
any illegal contributions, gifts, entertainment or other unlawful expenses
relating to political activity; (b) has used or is using any corporate funds for
any direct or indirect unlawful payments to any foreign or domestic government
officials or employees; (c) has violated or is violating any provision of the
Foreign Corrupt Practices Act of 1977 or other comparable applicable Law; (d)
has established or maintained, or is maintaining, any unlawful or unrecorded
fund of corporate monies or other properties; (e) has made at any time since
January 1, 1996, any false or fictitious entries on the books and records of any
of the Pixel Companies or the Shareholder; (f) has made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment of any nature
using corporate funds or otherwise on behalf of any of the Pixel Companies or
the Shareholder; or (g) has made any material favor or gift that is not
<PAGE>
27
deductible for federal income tax purposes using corporate funds or otherwise on
behalf of any of the Pixel Companies or the Shareholder.
3.24 Related Party Transactions.
3.24.1 Except as set forth on Schedule 3.24 and except for any
employment Contracts listed on Schedule 3.16, there are no real estate
leases, personal property leases, loans, guarantees, Contracts,
transactions, understandings or other arrangements of any nature between or
among any of the Pixel Companies or the Shareholder and any current or
former partner, owner, shareholder, director, officer or controlling Person
of any of the Pixel Companies or the Shareholder (or any of their
respective predecessors) or any other Person affiliated with any of the
Pixel Companies or the Shareholder (or any of their respective
predecessors).
3.24.2 All transactions entered into between the Company and any
"officeholder" of the Company or any transaction entered into between the
Company and a third party in which an "officeholder" has a "personal
interest" (all such terms within the meaning of Section 96 of the Israeli
Companies Ordinance, [New Version], 1983 (the "Companies Ordinance")),
prior to February 2, 2000, were duly approved by the Board of Directors
and/or the shareholders of the Company in accordance with Section 96 of the
Companies Ordinance.
3.24.3 All transactions entered into between the Company and any
"officeholder" of the Company or any transaction entered into between the
Company and a third party in which an "officeholder" has a "personal
interest" (all such terms within the meaning of Section 96 of the Israeli
Company Law, 1999 (the "Company Law")), on or after February 2, 2000, were
duly approved by the Board of Directors and/or the shareholders of the
Company in accordance with Chapter 5 of Part 6 of the Company Law.
3.25 Brokerage Fees. No Person acting on behalf of any of the Pixel
Companies, the Shareholder or any of their respective shareholders (including,
without limitation, the Seller) is or shall be entitled to any brokerage or
finder's fee in connection with the Transactions.
3.26 Antitrust Legislation.
3.26.1 HSR Act. Neither the Company nor any Person controlled by the
Company (i) holds assets located in the United States of America (other
than investment assets, voting or nonvoting securities of another person,
and assets included pursuant to ss.801.40(c)(2) of the HSR Act) having an
aggregate book value of $15,000,000 or more, as determined pursuant to the
HSR Act, or (ii) made aggregate sales in or into the United States of
America of $25,000,000 or more in its most recent fiscal year, as
determined pursuant to the HSR Act. Except as set forth on Schedule 3.26,
upon consummation of the transactions provided for herein, no shareholder
of Company will hold an aggregate total amount of Parent's or Buyer's
voting securities and assets in excess of $15,000,000 or Parent's or
Buyer's voting security constituting fifteen percent (15%) or more of the
issued and outstanding voting securities of Parent or Buyer.
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28
Neither Company nor the Seller, nor, to the knowledge of Company and the
Seller, any other Person is required to file a Premerger Notification and
Report Form pursuant to the HSR Act in connection with the Transactions.
3.26.2 Israeli Restrictive Trade Practices Law. Neither the
Shareholder nor the Company has annual revenues in excess of ten million
dollars ($10,000,000), nor has either been declared a monopoly by the
Director General of the Israel Anti-Trust Authority (the "Director
General"). Neither the Shareholder nor the Company has ever filed a Merger
Notice with the Director General. None of Shareholder, Company, Seller or
Buyer, or, to the knowledge of Company, Shareholder and Seller, any other
Person is required to file a Merger Notice with the Director General in
connection with the Transactions.
3.27 Restricted Stock. All Parent Common Stock to be issued to the Seller
hereunder is being acquired for such Seller's own account and not on behalf of
any other person, and all such Parent Common Stock is being acquired by such
Seller for investment purposes only and not with a view to, or for sale in
connection with, any resale or distribution of such Parent Common Stock. The
Seller has had the opportunity to review the SEC Reports (herein defined)
(copies of which were provided previously) and to ask questions and receive
answers from Parent concerning Buyer and Parent. The Seller believes that it has
sufficient knowledge and experience in business and financial matters, that it
is capable of evaluating the merits and risks of an investment in the Parent
Common Stock, and that it has the capacity to protect its own interests in
connection with the transactions contemplated hereby. The Seller is an
"accredited investor," as such term is defined in Rule 501 under the Securities
Act of 1933, as amended (the "1933 Act"), and understands that the Parent Common
Stock has not been registered under the 1933 Act, nor qualified under any state
securities laws, and as a consequence thereof, is subject to substantial
restrictions on transfer. The Seller understands that no federal or state agency
has approved or disapproved the Parent Common Stock, passed upon or endorsed the
merits of the offering thereof, or made any finding or determination as to the
fairness of the Parent Common Stock for investment. The Seller understands that
the certificates for the Parent Common Stock to be issued pursuant to Section 2
shall bear appropriate restrictive legends and Buyer shall have the right to
place a stop order against such shares. Seller agrees that it shall not effect
any sale, transfer or other disposition of any Parent Common Stock unless: (i)
such sale, transfer or other disposition is effected pursuant to an effective
registration statement under all Israeli and United States federal and state
securities Laws; (ii) counsel reasonably satisfactory to Parent and Buyer (it
being understood that Levin & Srinivasan LLP is acceptable) shall have advised
Parent and Buyer in a written opinion letter (satisfactory in form and content
to Parent and Buyer), upon which Parent and Buyer may rely, that such sale,
transfer or other disposition will be exempt from registration under all Israeli
and United States federal and state securities Laws; or (iii) an authorized
representative of the SEC shall have rendered written advice to Seller to the
effect that the SEC would take no action, or that the staff of the SEC would not
recommend that the SEC take action, with respect to such sale, transfer or other
disposition, and a copy of such written advice and all other related
communications with the SEC shall have been forwarded by Seller to Parent and
Buyer. Seller understands that (i) except as may otherwise be required pursuant
to the terms and provisions of its Registration Rights Agreement, Parent has no
obligation or intention to
<PAGE>
29
register the Parent Common Stock for resale under any federal, state or foreign
securities laws or to take any action (including the filing of reports or the
publication of information required by Rule 144 under the 1933 Act), which would
make available any exemption from the registration requirements of such laws,
and (ii) it may be precluded from selling or otherwise transferring or disposing
of any Parent Common Stock or any portion thereof and may therefore have to bear
the economic risk of investment in the Parent Common Stock for an indefinite
period of time.
3.28 Full Disclosure. The copies of documents attached as Schedules or
Exhibits to this Agreement or otherwise delivered to Buyer in connection with
the transactions contemplated hereby, are accurate and complete in all material
respects, and are not missing any amendments or modifications. To the knowledge
of Company, the Shareholder and the Seller, there is no fact that has not been
disclosed to Buyer in the Schedules to this Agreement or otherwise in writing,
that had or has or, so far as either Company, the Shareholder or the Seller can
reasonably foresee, will have a Material Adverse Effect or will materially and
adversely affect the ability of either the Company, the Shareholder or the
Seller to perform its obligations under this Agreement.
SECTION 4. REPRESENTATIONS OF BUYER AND PARENT
Knowing that Company, the Shareholder and the Seller rely thereon, Buyer
and Parent represent and warrant to the Seller, the Shareholder and the Company
as of the date of this Agreement, and covenant with the Seller, the Shareholder
and the Company as follows:
4.1 Organization. Buyer and Parent are corporations that are duly
organized, validly existing and in good standing under the Laws of their
respective jurisdictions of incorporation. Buyer and Parent each possess the
full corporate power and authority to own its Assets, conduct its business as
and where such business is presently conducted, and enter into this Agreement.
4.2 Agreement. Each of Buyer's and Parent's execution, delivery and
performance of this Agreement, and its consummation of the transactions
contemplated by this Agreement, (a) have been duly authorized by all necessary
corporate actions by its board of directors; (b) do not constitute a violation
of or default under its charter or bylaws; (c) do not constitute a default or
breach (immediately or after the giving of notice, passage of time or both)
under any Contract to which Buyer or Parent, respectively, is a party or by
which Buyer or Parent, respectively, is bound; (d) do not constitute a violation
of any Law or Judgment that is applicable to it or to its businesses or Assets,
or to the transactions contemplated by this Agreement; and (e) do not require
the Consent of any Person. This Agreement constitutes the valid and legally
binding agreement of each of Buyer and Parent, enforceable against it in
accordance with its terms.
4.3 Securities Reports. Since October 31, 1998 (a) Parent has filed all
forms, reports, statements and other documents required to be filed with (i) the
Securities and Exchange Commission (the "SEC") including, without limitation,
(A) all Annual Reports
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30
on Form 10-K, (B) all Quarterly Reports on Form 10-Q, (C) all proxy statements
relating to meetings of shareholders (whether annual or special), (D) all
reports on Form 8-K, (E) all other reports or registration statements, and (F)
all amendments and supplements to all such reports and registration statements
(collectively, the "SEC Reports") and (ii) any applicable, federal, state or
foreign securities authorities; and (b) Parent has complied with the filing
requirements in all material respects regarding all forms, reports, statements
and other documents required to be filed with any other applicable federal,
state or foreign regulatory authorities including, without limitation, state
insurance and health regulatory authorities. The SEC Reports did not, as of the
date they were filed, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
4.4 Stock. The Share Consideration, when issued, will be duly authorized
and validly issued, fully paid and non-assessable, will be delivered hereunder
free and clear of any liens, adverse claims, security interests, pledges,
mortgages, charges and encumbrances of any nature whatsoever (except that the
shares of parent Common Stock constituting the Share Consideration are not
registered and will be subject to restrictions on transfers under the Securities
Act, and a portion of the Share Consideration will be held in escrow pursuant to
the Indemnification Escrow Agreement), and assuming that the representations and
warranties of Seller, Shareholder, Company and Electronic Arts contained herein
and in the investment representation letters contemplated by Section 5.2.18 are
true and correct, will be issued in compliance with all applicable federal and
state securities laws.
4.5 Absence of Certain Changes or Events. Except as disclosed in the SEC
Reports filed prior the date of this Agreement, in press releases disseminated
prior to the date of this Agreement, or in this Agreement, there has not been
any material adverse change in the Parent's business or in its financial
condition.
4.6 Litigation. No claim, action, proceeding or investigation is pending
which seeks to delay or prevent the consummation of the transactions
contemplated by this Agreement, or which would be reasonably likely to adversely
affect or restrict the Parent's or Buyer's ability to consummate the
transactions contemplated by this Agreement.
4.7 Brokerage Fees. No Person acting on behalf of Buyer or Parent is or
shall be entitled to any brokerage or finder's fee in connection with the
Transactions.
SECTION 5. CLOSING
5.1 Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") shall be held on a date that is mutually acceptable to the
parties (the "Closing Date"), and at a location that is mutually acceptable to
the parties.
5.2 Seller's Obligations at the Closing. At the Closing, the Seller shall
deliver or cause to be delivered the following to Buyer:
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31
5.2.1 stock certificates representing all of the issued and
outstanding shares of Shareholder Stock, together with Share transfer deeds
or such other evidence of transfer as is necessary or appropriate under
applicable law, dated the Closing Date and duly executed by the Seller, and
stamps or other proper evidence of the payment of any stock transfer or
similar Taxes due as a result of the transfer of Shareholder Stock;
5.2.2 a General Release substantially in the form of Exhibit 5.2(b),
dated the Closing Date and duly executed by the Seller, Packet Science
Ltd., Guy Poran Holdings Ltd., Toga Holdings BV and each of the directors
and officers of the Shareholder, the Seller and each of the Pixel
Companies;
5.2.3 the original signed copies of all Consents listed on Schedule
3.2;
5.2.4 all instruments or documents necessary to change the names of
the individuals who have access to or are authorized to make withdrawals
from or dispositions of all bank accounts, other accounts, certificates of
deposits, marketable securities, other investments, safe deposit boxes,
lock boxes and safes of each of the Pixel Companies and the Shareholder
described on Schedule 3.4, and all keys and combinations to all safe
deposit boxes, lock boxes and safes of the Pixel Companies and the
Shareholder and other depositories described on Schedule 3.4;
5.2.5 all of the original minute books and stock books of the
Shareholder and each of the Pixel Companies (including those of any
applicable predecessors);
5.2.6 duly executed resignations, dated the Closing Date, of all
directors and officers of the Shareholder and each of the Pixel Companies
other than as specified by Buyer;
5.2.7 copies of the applicable resolutions, filings and other
documents establishing, in form and substance acceptable to Buyer, that the
transactions contemplated by this Agreement were fully completed and
authorized by all appropriate corporate action on the part of the Seller,
the Shareholder and the Pixel Companies;
5.2.8 good standing certificates or the equivalent thereof for the
Shareholder and each of the Pixel Companies, dated no earlier than fifteen
(15) days before the Closing Date, from the applicable jurisdiction of
formation and from each other jurisdiction in which each of the Pixel
Companies is qualified or registered to do business as a foreign
corporation;
5.2.9 a certificate of the Secretary of each of the Seller, the
Shareholder and the Company as to the incumbency and signatures of the
officers of each entity executing this Agreement;
5.2.10 copies of the resolutions duly adopted by the board of
directors and shareholders of Seller authorizing Seller to execute, deliver
and perform this Agreement and to consummate the transaction contemplated
by this Agreement, certified by an
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32
officer of Seller as in full force and effect, without modification or
rescission, on and as of the Closing Date;
5.2.11 copies of the resolutions duly adopted by the board of
directors and shareholders of the Shareholder and the Company authorizing
each of them to execute, deliver and perform this Agreement and to
consummate the transactions contemplated by this agreement, certified by
officers of the Shareholder and the Company, respectively, as in full force
and effect, without modification or rescission, on and as of the Closing
Date;
5.2.12 employment agreement, in the form attached hereto as Exhibit
5.2.12, between Buyer and Ramy Weitz dated the date hereof and duly
executed by Ramy Weitz ("Weitz Employment Agreement").
5.2.13 a legal opinion of the following counsel of Seller, Shareholder
and the Company: Levin & Srinivasan LLP, New York counsel, Daniel
Blackleder Law Office, Israeli counsel, DeBrauw Blackstone Westbroek,
Netherlands counsel, and Harney, Westwood & Riegels, British Virgin Islands
counsel, addressed to Buyer, each dated the Closing Date, and substantially
in the form attached as Exhibit 5.2.13, but with such changes as are
acceptable to Buyer;
5.2.14 payoff letter(s) and proper documentary evidence of the
termination of indebtedness set forth on Schedule 3.8;
5.2.15 the Indemnification Escrow Agreement duly executed by the
Seller, the Parent, the Buyer and the Escrow Agent;
5.2.16 noncompetition agreement in the form attached hereto as Exhibit
5.2.16 duly executed by Guy Poran;
5.2.17 a lock-up letter in the form attached hereto as Exhibit 5.2.17
duly executed by Seller;
5.2.18 investment representation letter in the form attached hereto as
Exhibit 5.2.18 duly executed by Electronic Arts, Inc.;
5.2.19 registration rights agreements in favor of Seller and
Electronic Arts, respectively, in the forms attached hereto as Exhibit
5.2.19 and duly executed by the parties thereto (each, a "Registration
Rights Agreement" and collectively, the "Registration Rights Agreements");
5.2.20 a certificate of an authorized officer of each of the Seller,
the Shareholder and the Company certifying that: (i) all representations
and warranties of such entity were true and correct when made on and as of
the date of this Agreement and remain true and correct on and as of the
Closing Date, and (ii) all covenants and agreements to have been performed
or satisfied by such entity on or prior to the Closing Date have been
performed and satisfied;
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5.2.21 a letter agreement in favor of Buyer and Parent executed by
Seller in a form mutually acceptable to Seller and Buyer;
5.2.22 the Financial Statements and all Schedules that were incomplete
as of the date hereof, which items will be substantially in form attached,
it being understood that any material changes will be reasonably acceptable
to Buyer and Parent; and
5.2.23 all other agreements, certificates, instruments, financial
statement certifications and documents reasonably requested by Buyer in
order to fully consummate the transactions contemplated by this Agreement
and carry out the purposes and intent of this Agreement.
5.3 Buyer's Obligations at the Closing. At the Closing, Buyer shall
deliver, or cause to be delivered, the following to the Seller:
5.3.1 one or more wire transfers of immediately available United
States federal funds in the aggregate amount of the Cash Consideration (as
defined in Section 2.2), in accordance with Seller's proper instructions
and as contemplated by Schedule 6.4;
5.3.2 the portion of the Share Consideration not being delivered into
escrow pursuant to the Indemnification Escrow Agreement or paid to third
parties as contemplated by Schedule 6.4;
5.3.3 good standing certificate for Parent, dated no earlier than
fifteen (15) days before the Closing Date, from the State of Delaware ;
5.3.4 copies of the resolutions duly adopted by the board of directors
of Buyer and Parent, authorizing Buyer and Parent to execute, deliver and
perform this Agreement and to consummate the transactions contemplated
hereby, certified by officers of Buyer and Parent, respectively, as in full
force and effect, without modification or rescission, on and as of the
Closing Date;
5.3.5 Certificates of the Secretary of Buyer as to the incumbency and
signatures of the officers of Buyer executing this Agreement;
5.3.6 A certificate of the Secretary of Parent as to the incumbency
and signatures of the officers of Parent executing this Agreement;
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5.3.7 the Registration Rights Agreements;
5.3.8 the Weitz Employment Agreement;
5.3.9 the Contribution Agreements;
5.3.10 the warrant agreement between Buyer and Ramy Weitz LLC in the
form attached hereto as Exhibit 5.3.10;
5.3.11 the warrant holder agreement among Parent, Buyer, and Ramy
Weitz LLC in the form attached hereto as Exhibit 5.3.11;
5.3.12 a certificate of an authorized officer of each of the Buyer and
the Parent certifying that: (i) all representations and warranties of such
entity were true and correct when made on and as of the date of this
Agreement and remain true and correct on and as of the Closing Date, and
(ii) all covenants and agreements to have been performed or satisfied by
such entity on or prior to the Closing Date have been performed and
satisfied;
5.3.13 all other agreements, certificates, instruments and documents
reasonably requested by the Seller in order to fully consummate the
transactions contemplated by this Agreement and carry out the purposes and
intent of this Agreement.
SECTION 6. OBLIGATIONS BETWEEN SIGNING AND CLOSING;
CERTAIN OBLIGATIONS AFTER CLOSING
6.1 Covenants Prior to Closing. From and after the date of this Agreement
through the Closing Date: except in the ordinary course of its business
consistent with its past practices, neither the Shareholder nor any of the Pixel
Companies shall: (i) pledge or hypothecate any of its Assets or otherwise permit
any of its Assets to become subject to any Encumbrance; (ii) incur any
Obligation; (iii) make any loan or advance to any Person; (iv) assume, guarantee
or otherwise become liable for any Obligation of any Person; (v) commit any
capital expenditure; (vi) purchase, lease, sell, abandon or otherwise acquire or
dispose of any business or Assets; (vii) waive or release any right or cancel or
forgive any debt or claim; (viii) discharge any Encumbrance or discharge or pay
any indebtedness or other Obligation; (ix) assume or enter into any Contract
other than this Agreement; (x) amend or terminate any Specified Contract; (xi)
increase, or authorize an increase in, the compensation or benefits paid or
provided to any of their directors, officers, employees, salesmen, agents or
representatives; (xii) establish, adopt or amend (including any amendment with a
future Closing Date) any Employee Benefit Plan; (xiii) declare, accrue, set
aside, or pay any dividend or make any other distribution in respect of any
shares of capital stock, other securities, Cash Assets or other Assets; (xiv)
repurchase, redeem or otherwise reacquire any shares of capital stock or other
securities; (xv) sell or otherwise issue any shares of capital stock or any
other securities; (xvi) amend its articles or certificate of incorporation,
memorandum or articles of association, bylaws or other organizational documents;
(xvii) be a party to any merger, consolidation, recapitalization,
reclassification of shares, stock split, reverse stock split or
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similar transaction; (xviii) accrue any deferred bonuses or compensation due to
any shareholder, employee or agent of the Shareholder or any of the Pixel
Companies, or pay any such deferred bonuses or compensation except to the extent
such deferred bonuses or compensation was accrued on the Latest Balance Sheet;
(xix) change any of its methods of accounting or accounting practices in any
respect; or (xx) enter into any transactions with any related parties.
6.2 Post-Closing Cooperation. At and after the Closing Date, the Seller
shall promptly deliver to Buyer and Parent all correspondence, papers, documents
and other items and materials received by it or found to be in its possession
which pertain to the business or the Assets of the Shareholder and the Pixel
Companies. At any time and from time to time after the Closing Date, at any
party's request and without further consideration, the party whose assistance is
requested shall promptly execute and deliver all such further agreements,
certificates, instruments and documents and perform such further actions as the
requesting party may reasonably request, in order to fully consummate the
transactions contemplated by this Agreement and fully carry out the purposes and
intent of this Agreement. Without limiting the foregoing, it is expressly
understood and agreed that Seller and its shareholder will cooperate with Buyer
and Parent in preparing any financial statements relating to the Buyer Group
(herein defined) following the Closing.
6.3 Transfer of Assets. Promptly after the Closing, Parent shall transfer
to Rockstar Broadband Studios, Inc., a Delaware corporation ("Rockstar")
pursuant to the form of Asset Contribution Agreement attached hereto as Exhibit
6.3.1 ("Asset Contribution Agreement") the assets listed in the Asset
Contribution Agreement. Contemporaneously with the execution of the Contribution
Agreement, Parent shall transfer to Buyer all of its issued and outstanding
shares of Rockstar, DMA Design Holdings Limited and DMA Design Limited to Buyer
(collectively, the "DMA Entities") pursuant to a share contribution agreement in
the form attached hereto as Exhibit 6.3.2 together with the Asset Contribution
Agreement, the "Contribution Agreements"). It is the parties' intention to
proceed with a public offering of Buyer's common stock on the London Stock
Exchange as promptly as practicable.
6.4 Payment of Obligations of Company and Shareholder. Buyer hereby assumes
and agrees to pay or cause to be paid in cash and by delivery of shares of
Parent Common Stock promptly following the Closing, the outstanding indebtedness
of Shareholder and Company to Electronic Arts, Inc., in the amounts and in the
manner more fully described on Schedule 6.4.
SECTION 7. TRANSFER TAXES
Notwithstanding any other provisions of this Agreement to the contrary, the
Seller shall pay all sales, use, stock transfer, stamp, recording, real property
transfer and similar taxes, if any, required to be paid in connection with the
sale of Company Stock contemplated by this Agreement.
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SECTION 8. CERTAIN OBLIGATIONS
8.1 Employment Matters. All employees of Company on the Closing Date shall
continue to be employed by Company after the Closing Date on an "at-will" basis
and for salaries or wages consistent with the levels in effect as of the Closing
Date.
8.2 Employee Benefit Plans. As soon as is practicable after the Closing
Date, Buyer and the executives of Company shall review the Pixel Employee
Benefits Plans to determine which (if any) plans should remain in effect as
employee benefit plans of Company and which should be replaced with Buyer's
Employee Benefit Plans, with a view toward replacing all of the Pixel Employee
Benefit Plans with Buyer's Employee Benefit Plans except where cost factors or
unusual circumstances dictate otherwise.
8.3 Employee Stock Options. Promptly following the Closing, the Company's
employees designated by Seller at or prior to Closing will be provided stock
options for 100,000 shares of Parent Common Stock on the terms set forth on
Schedule 8.3. Such grants shall be subject to the receipt by Parent from the
Israel Securities Authority of an exemption form the requirement to file a
prospectus under the Israeli Securities Law, 1968, in connection with such grant
which Parent shall use reasonable efforts to obtain promptly following the
Closing.
SECTION 9. RESTRICTIVE COVENANTS OF THE SELLER
AND RAMY WEITZ
9.1 Certain Acknowledgements. The Seller and Ramy Weitz expressly
acknowledge that:
9.1.1 "Restricted Business" means on the date hereof the business
conducted by, or actively being contemplated to be conducted by, each
member of the Buyer Group, including, without limitation, (i) developing,
producing and publishing multimedia interactive entertainment products and
developing on-demand multiplayer online technology that can be used over
all forms of digital networks; and (ii) acting as a digital mediator and
providing interactive entertainment programming over digital and other
networks.
9.1.2 "Buyer Group" means (i) the Shareholder and the Pixel Companies;
and (ii) Buyer and all existing and future direct or indirect subsidiaries
of Buyer including, without limitation, Rockstar and the DMA Entities;
9.1.3 the Restricted Business is highly competitive, is marketed
throughout the United States and in many other locations worldwide, and
requires long sales "lead times" sometimes exceeding one year;
9.1.4 the Buyer Group expends substantial time and money, on an
ongoing basis, to train its employees, maintain and expand its customer
base, and improve and develop its Software, technology, databases, products
and services;
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9.1.5 in connection with the transactions contemplated by this
Agreement, (a) during its tenure as a shareholder of the Shareholder before
the Closing, and its tenure as a shareholder of the Parent after the
Closing, and (b) during his tenure as a Shareholder of Seller before the
Closing, and his tenure as an officer and director of Buyer after the
Closing, each of Seller and Ramy Weitz has had and will continue to have
access to, receive and/or learn proprietary and confidential knowledge and
information of the Buyer Group; such knowledge and information must be kept
in strict confidence to protect the Restricted Business for the benefit of
the Buyer Group's competitive position in the marketplace; and such
confidential information could be useful to competitors of the Buyer Group
for indefinite periods of time; and
9.1.6 the covenants of this Section 9 (the "Covenants") are a material
part of the agreement among the parties hereto and are an integral part of
the obligations of the Seller and Ramy Weitz hereunder; the Covenants are
supported by good and adequate consideration; and the Covenants are
reasonable and necessary to protect the legitimate business interests of
the Buyer Group.
9.2 Nondisclosure Covenants. At all times after the Closing Date, except
with Parent's prior written consent, or except in connection with the proper
performance of services for and as an employee of the Buyer Group, neither Ramy
Weitz nor the Seller, its directors, officers and employees, shall, directly or
indirectly, in any capacity:
9.2.1 communicate, publish or otherwise disclose to any Person, or use
for the benefit of any Person, any confidential or proprietary property,
knowledge or information of the Buyer Group or concerning any of its
business, Software, Assets or financial condition, no matter when or how
such knowledge or information was acquired, including (i) the identity of
customers and prospects, their specific requirements, and the names,
addresses and telephone numbers of individual contacts at customers and
prospects; (ii) prices, renewal dates and other detailed terms of customer
and supplier contracts and proposals; (iii) pricing policies, marketing and
sales strategies, methods of delivering products and services, and product
and service development projects and strategies; (iv) source code, object
code, formats, user manuals, technical manuals and other documentation for
Software products; (v) screen designs, report designs and other designs,
concepts and visual expressions for Software products; (vi) designs,
concepts, know-how, user manuals, technical manuals and other documentation
for trading systems, communications networks and related technologies;
(vii) employment and payroll records; (viii) forecasts, budgets and other
nonpublic financial information; and (ix) expansion plans, management
policies, methods of operation, and other business strategies and policies;
including acquisition strategies and acquisition targets, or
9.2.2 disclose, use or refer to any proprietary Software, technology,
products or services or other confidential or proprietary knowledge or
information of the Buyer Group, no matter when or how acquired, for any
purpose not in furtherance of the businesses and interests of the Buyer
Group, including the purposes of designing, developing, marketing and/or
selling any Software, technology, products or services that are similar to
(visually or functionally) or competitive with any proprietary Software,
technology, products or services of the Buyer Group, or in making
acquisitions.
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9.3 Noncompetition Covenants. During the period beginning on the Closing
Date and ending on the date that is thirty-six (36) months after the Closing
Date, except with Buyer's prior written consent, neither Ramy Weitz nor the
Seller shall, directly or indirectly, in any capacity, at any location
worldwide:
9.3.1 communicate with or solicit any Person who is or during such
period becomes a customer, supplier, employee, salesman, agent or
representative of, or a consultant to, the Buyer Group, in any manner that
interferes or is reasonably likely to interfere with such Person's
relationship with the Buyer Group, or in an effort to obtain any such
Person as a customer, employee, supplier, salesman, agent or representative
of, or a consultant to, any other Person that conducts a business
competitive with or similar to all or any part of the Restricted Business.
9.3.2 market or sell, in any manner other than in furtherance of the
business and interests of the Buyer Group, any Software, technology,
products or services that is competitive with any proprietary Software,
technology, products or services of the Buyer Group; or
9.3.3 establish, own, manage , operate, finance or control, or
participate in the establishment, ownership, management, operation,
financing or control of, or be a director, officer, employee, salesman,
agent or representative of, or be a consultant to, any Person that conducts
a business competitive with or similar to all or any part of the Restricted
Business.
9.4 Certain Exclusions. For purposes of this Section 9, confidential and
proprietary knowledge and information of the Buyer Group shall not include any
knowledge and information that is now known by or readily available to the
general public, or that becomes known by or readily available to the general
public other than as a result of any breach of this Section 9. The ownership by
the Seller or Ramy Weitz of not more than two percent (2%) of the outstanding
securities of any public company shall not, by itself, constitute a breach of
the Covenants contained in Section 9, even if such public company competes with
the Buyer Group.
9.5 Enforcement of Covenants. Each of Ramy Weitz and the Seller expressly
acknowledges that it would be extremely difficult to measure the damages that
might result from any breach of any of the Covenants, and that any breach of any
of the Covenants will result in irreparable injury to the Buyer Group for which
money damages could not adequately compensate. If a breach of the Covenants
occurs, Parent and/or Buyer shall be entitled, in addition to all other rights
and remedies that Parent and/or Buyer may have at law or in equity, to have an
injunction issued by any competent court enjoining and restraining the Seller,
Ramy Weitz and all other Persons involved therein from continuing such breach.
The existence of any claim or cause of action that the Seller or Ramy Weitz or
any such other Person may have against any member of the Buyer Group shall not
constitute a defense or bar to the enforcement of any of the Covenants. If
Parent or Buyer must resort to litigation to enforce any of the Covenants that
has a fixed term, then such term shall be extended for a period of time equal to
the period during which a breach of such Covenant was occurring, beginning on
the date of a
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final court order (without further right of appeal) holding that such a breach
occurred or, if later, the last day of the original fixed term of such Covenant.
9.6 Scope of Covenants. If any Covenant, or any part thereof, or the
application thereof, is construed to be invalid, illegal or unenforceable, then
the other Covenants, or the other portions of such Covenant, or the application
thereof, shall not be affected thereby and shall be enforceable without regard
thereto. If any of the Covenants is determined to be unenforceable because of
its scope, duration, geographical area or other factor, then the court making
such determination shall have the power to reduce or limit such scope, duration,
area or other factor, and such Covenant shall then be enforceable in its reduced
or limited form.
SECTION 10. INDEMNIFICATION
10.1 The Seller's Indemnification. From and after the Closing Date, the
Seller (and, as to Section 10.1.3 below only, the Seller, Ramy Weitz and Guy
Poran, jointly and severally) shall indemnify and hold harmless Parent and the
members of the Buyer Group, and their respective successors and assigns, and
their respective directors, officers, employees, agents and representatives,
from and against any and all actions, suits, claims, demands, debts,
liabilities, obligations, losses, damages, costs and expenses, including
reasonable attorney's fees and court costs, arising out of or caused by,
directly or indirectly, any of the following:
10.1.1 Any breach or failure of any warranty or representation made by
the Seller, the Shareholder and/or Company in or pursuant to this
Agreement.
10.1.2 Any failure or refusal by the Seller, the Shareholder or the
Company to perform any covenant or term of this Agreement required to be
performed by either or both of them.
10.1.3 Any act or omission or any matter or thing by or relating to or
otherwise affecting Shareholder and occurring, accruing, arising or
otherwise relating to the period prior to and through the Closing Date.
10.2 The Buyer's Indemnification. From and after the Closing Date, Buyer
and Parent, jointly and severally, shall indemnify and hold harmless the Seller,
and its successors and assigns, and its directors, officers, employees, agents
and representatives, from and against any and all actions, suits, claims,
demands, debts, liabilities, obligations, losses, damages, costs and expenses,
including reasonable attorney's fees and court costs, arising out of or caused
by, directly or indirectly, any of the following:
10.2.1 Any breach or failure of any warranty or representation made by
Buyer and/or Parent in or pursuant to this Agreement.
10.2.2 Any failure or refusal by Buyer and/or Parent to perform any
covenant or term of this Agreement required to be performed by either or
both of them.
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10.3 Indemnification Procedures. With respect to each event, occurrence or
matter (an "Indemnification Matter") as to which a Person ("Indemnitee") is
entitled to indemnification from the indemnifying Persons under Sections 10.1 or
10.2 (each, an "Indemnitor"):
10.3.1 Within ten (10) days after the Indemnitee receives written
documents underlying the Indemnification Matter or, if the Indemnification
Matter does not involve a third party action, suit, claim or demand,
promptly after the Indemnitee first has actual knowledge of the
Indemnification Matter, the Indemnitee shall give notice to the Indemnitor
of the nature of the Indemnification Matter and the amount demanded or
claimed in connection therewith ("Indemnification Notice"), together with
copies of any such written documents.
10.3.2 If a third party action, suit, claim or demand is involved,
then, upon receipt of the Indemnification Notice, the Indemnitor shall, at
its expense and through counsel of its choice, promptly assume and have
sole control over the litigation, defense or settlement (the "Defense") of
the Indemnification Matter, except that (i) the Indemnitee may, at its
option and expense and through counsel of its choice, participate in (but
not control) the Defense; (ii) the Indemnitor shall not consent to any
Judgment, or agree to any settlement, without the Indemnitee's prior
written consent; and (iii) if the Indemnitor does not promptly assume
control over the Defense or, after doing so, does not continue to prosecute
the Defense in good faith, the Indemnitee may, at its option and through
counsel of its choice, but at the Indemnitor's expense, assume control over
the Defense. In any event, the Indemnitor and the Indemnitee shall fully
cooperate with each other in connection with the Defense, including by
furnishing all available documentary or other evidence as is reasonably
requested by the other.
10.3.3 All amounts owed by the Indemnitor to the Indemnitee (if any)
shall be paid in full within five (5) business days after a final judgment
(without further right of appeal) determining the amount owed is rendered,
or after a final settlement or agreement as to the amount owed is executed.
10.4 No Contribution. Seller waives, and acknowledges and agrees that it
shall not have and shall not exercise or assert (or attempt to exercise or
assert), any right of contribution, right of indemnity or other similar right or
remedy against Company or any of the other Pixel Companies or the Shareholder in
connection with any actual or alleged inaccuracy in or breach of any
representation, warranty, covenant or obligation set forth in this Agreement.
10.5 Limits on Indemnification. The Indemnitor's liability under this
Section 10 shall be limited as follows (except as provided in Section 10.6).
10.5.1 Threshold. No amount shall be payable by the Indemnitor under
this Section 10 unless and until the aggregate amount otherwise payable by
the Indemnitor under this Section 10 exceeds $150,000, and then only to the
extent any such amounts exceed $150,000.
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10.5.2 Ceiling. No Indemnitor's total liability under this Section 10
shall exceed an amount equal to two-thirds of the "Market Value" of the
aggregate Share Consideration (without giving effect to any reduction in
the Share Consideration pursuant to Section 2.3). For purposes of this
Section 10.5.2, "Market Value" of the Share Consideration shall mean the
average closing price of the Parent Common Stock on the NASDAQ National
Market for the five (5) business days immediately preceding the date of
this Agreement multiplied by the number of shares of Parent Common Stock
included in the Share Consideration.
10.5.3 Time Periods. With respect to any Indemnification Matter under
Section 10.1, the Indemnitor shall have no liability unless the Indemnitee
gives an Indemnification Notice with respect thereto within twelve (12)
months after the Closing Date.
10.6 Exceptions to Limitations; Available Remedies. Except as expressly
provided in this Section 10.6, none of the limitations set forth in Section 10.5
shall apply in the case of any Indemnification Matter involving (a) intentional
misrepresentation, fraud or a criminal matter, (b) title to or infringement
caused by any Software, technology, service or product which, at any time before
Closing, was marketed, licensed, maintained, supported, owned, or claimed to
have been owned by any of the Pixel Companies or the Shareholder; (c) record or
beneficial ownership of any shares of capital stock in any of the Pixel
Companies or the Shareholder, (d) Taxes, (e) environmental matters, (f)
covenants or other obligations to be performed at and after Closing, (g) the
authority of the parties to enter into this Agreement and consummate the
Transactions, and the valid, binding and enforceable nature of this Agreement
and the agreements contemplated hereby against the parties, or (h) the
circumstances described in Section 10.1.3. The Indemnification Matters described
in Sections 10.6(a), (c), (f) and (g) shall survive the Closing without
limitation and shall not be subject to the "Limits on Indemnification" described
in Section 10.5. The Indemnification Matters described in Sections 10.6(d), (e)
and (h) shall survive the Closing until all applicable statutes of limitation
for claims regarding such matters shall have expired, and such matters shall be
subject to the "Threshold" described in Section 10.5.1 and the "Ceiling"
described in Section 10.5.2. The Indemnification Matter described in Section
10.6(b) shall survive the Closing for a period of three (3) years and shall be
subject to the "Threshold" described in Section 10.5.1 and the "Ceiling"
described in Section 10.5.2.
10.7 Exclusive Remedy. Each party hereto hereby acknowledges and agrees
that its sole and exclusive remedy with respect to any and all claims (including
claims against each other) relating to the subject matter of this Agreement
shall be pursuant to the indemnification provisions set forth in this Section.
SECTION 11. OTHER PROVISIONS
11.1 Publicity. No party hereto shall issue any press release or otherwise
make any public statement with respect to the existence of this Agreement or the
transactions contemplated hereby without the prior approval of the other parties
hereto, except as may
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be required by applicable Law or the applicable rules or regulations of any
stock exchange (upon reasonable prior written notice to the other party).
11.2 Fees and Expenses. Buyer shall pay all of the fees and expenses
incurred by it or Parent, and Company and Seller shall each pay fifty percent
(50%) of all fees and expenses incurred by the Seller, the Shareholder and the
Pixel Companies, in negotiating and preparing this Agreement and in consummating
the transactions contemplated hereby. Seller shall pay all expenses associated
with tax planning of the Seller and its shareholders. The Company shall pay all
of the fees and expenses incurred by it in connection with its negotiation with
Electronic Arts, Inc. relating to the payoff of outstanding Obligations to
Electronic Arts.
11.3 Termination. This Agreement may be terminated by written notice of
termination at any time prior to the Closing:
(a) by Buyer if: (i) an event or condition occurs that results in a
Material Adverse Effect; (ii) any representation or warranty of Seller,
Shareholder, or the Company contained in this Agreement was not true and
complete in all material respects when made; (iii) Seller, Shareholder, or
the Company has not complied in all material respects with any covenant or
agreement contained in this Agreement to be complied with by it; or (iv)
Seller, Shareholder, or the Company makes a general assignment for the
benefit of creditors, or any proceeding shall be instituted by or against
Seller, Shareholder, or the Company seeking to adjudicate any of them a
bankrupt or insolvent, or seeking liquidation, winding up or
reorganization, arrangement, adjustment, protection, relief or composition
of its debts under any Law relating to bankruptcy, insolvency or
reorganization;
(b) by Seller if: (i) any representation or warranty of Parent or
Buyer contained in this Agreement was not true and complete in all material
respects when made; (ii) Parent or Buyer has not complied in all material
respects with any covenant or agreement contained in this Agreement to be
complied with by it; or (iii) Parent or Buyer makes a general assignment
for the benefit of creditors, or any proceeding shall be instituted by or
against Parent or Buyer seeking to adjudicate any of them a bankrupt or
insolvent, or seeking liquidation, winding up or reorganization,
arrangement, adjustment, protection, relief or composition of its debts
under any Law relating to bankruptcy, insolvency or reorganization;
(c) by Buyer or Seller if the Closing has not occurred by April 1,
2000; provided, however, that the right to terminate this Agreement
pursuant to this clause shall not be available to any party whose failure
to fulfill any obligation under this Agreement shall have been the cause
of, or shall have resulted in, the failure of the Closing to occur on or
prior to such date;
(d) by Buyer or Seller if any governmental authority has issued an
order, decree, or ruling or taken any other action restraining, enjoining,
or otherwise prohibiting the transactions contemplated by this Agreement
and such order, decree, ruling or other action shall have become final and
nonappealable; or
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(e) by the mutual written consent of Buyer and Seller.
11.4 Notices. All notices, consents or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or one business day
after being sent by a nationally recognized overnight delivery service, postage
or delivery charges prepaid or five business days after being sent by registered
or certified mail, return receipt requested, postage charges prepaid. Notices
also may be given by facsimile and shall be effective on the date transmitted if
confirmed within forty-eight (48) hours thereafter by a signed original sent in
one of the manners provided in the preceding sentence. Notices to Company or
Buyer shall be sent to Parent (in the manner provided below), and notices to the
Seller shall be sent to the Seller's address set forth on page 1 of this
agreement with a copy to Levin & Srinivasan LLP, 1776 Broadway, Suite 1900, New
York, New York 10019 Attention: Michael P. Martin, Esquire. Notices to Parent
shall be sent to Parent address stated on page one of this Agreement to the
attention of its General Counsel, with a copy sent simultaneously to the same
address to the attention of its President. Any party may change its address for
notice and the address to which copies must be sent by giving notice of the new
addresses to the other parties in accordance with this Section 11.4, provided
that any such change of address notice shall not be effective unless and until
received.
11.5 Survival. All representations and warranties made in this Agreement or
pursuant hereto shall survive the date of this Agreement, the Closing Date and
the consummation of the Transactions for a period of twelve (12) months, subject
to the provisions of Sections 10.5 and 10.6. Except as set forth in this
Agreement, there are no representations or warranties, express or implied, made
by any party hereto to any other party that relate exclusively to the purchase
of the Shareholder Stock contemplated by this Agreement.
11.6 Interpretation of Representations. Each representation and warranty
made in this Agreement or pursuant hereto is independent of all other
representations and warranties made by the same parties, whether or not covering
related or similar matters, and must be independently and separately satisfied.
Exceptions or qualifications to any such representation or warranty shall not be
construed as exceptions or qualifications to any other representation or
warranty.
11.7 Reliance by Buyer. Notwithstanding the right of Buyer to investigate
the business, Assets and financial condition of the Shareholder and the Pixel
Companies, and notwithstanding any knowledge obtained or obtainable by Buyer or
Parent as a result of such investigation, Buyer and Parent have the unqualified
right to rely upon, and have relied upon, each of the representations and
warranties made by the Seller, Shareholder or the Company in this Agreement.
<PAGE>
44
11.8 Entire Understanding. This Agreement, together with the Exhibits and
Schedules hereto, state the entire understanding among the parties with respect
to the subject matter hereof, and supersede all prior oral and written
communications and agreements, and all contemporaneous oral communications and
agreements, with respect to the subject matter hereof, including all
confidentiality letter agreements and letters of intent previously entered into
among some or all of the parties hereto. No amendment or modification of this
Agreement shall be effective unless in writing and signed by the party against
whom enforcement is sought. Nothing contained in Section 9 or elsewhere in this
Agreement shall be deemed to limit (or adversely affect) in any manner any right
or remedy of any Indemnitee under any of the agreements contemplated by this
Agreement.
11.9 Assignment. This Agreement shall bind, benefit, and be enforceable by
and against Seller, Shareholder, Company, Buyer and Parent and their respective
successors and assigns. No party shall in any manner assign any of its, his or
her rights or obligations under this Agreement without the express prior written
consent of the other parties.
11.10 Waivers. Except as otherwise expressly provided herein, no waiver
with respect to this Agreement shall be enforceable unless in writing and signed
by the party against whom enforcement is sought. Except as otherwise expressly
provided herein, no failure to exercise, delay in exercising, or single or
partial exercise of any right, power or remedy by any party, and no course of
dealing between or among any of the parties, shall constitute a waiver of, or
shall preclude any other or further exercise of, any right, power or remedy.
11.11 Severability. If any provision of this Agreement is construed to be
invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.
11.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart hereof.
11.13 Section Headings. Section and subsection headings in this Agreement
are for convenience of reference only, do not constitute a part of this
Agreement, and shall not affect its interpretation.
11.14 References. All words used in this Agreement shall be construed to be
of such number and gender as the context requires or permits.
11.15 Controlling Law. THIS AGREEMENT IS MADE UNDER, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN.
<PAGE>
45
11.16 Jurisdiction and Process. In any action between or among any of the
parties, whether arising out of this Agreement, any of the agreements
contemplated hereby or otherwise, (a) each of the parties irrevocably consents
to the exclusive jurisdiction and venue of the federal and state courts located
in the State of New York, (b) if any such action is commenced in a state court,
then, subject to applicable law, no party shall object to the removal of such
action to any federal court located in the State of New York, (c) each of the
parties irrevocably waives the right to trial by jury, (d) each of the parties
irrevocably consents to service of process by first class certified mail, return
receipt requested, postage prepaid, to the address at which such party is to
receive notice in accordance with Section 11.4, and (e) the prevailing parties
shall be entitled to recover their reasonable attorneys' fees, costs and
disbursements from the other parties (in addition to any other relief to which
the prevailing parties may be entitled).
11.17 No Third-Party Beneficiaries. No provision of this Agreement is
intended to or shall be construed to grant or confer any right to enforce this
Agreement, or any remedy for breach of this Agreement, to or upon any Person
other than the parties hereto, including any customer, prospect, supplier,
employee, contractor, salesman, agent or representative of Shareholder or any of
the Pixel Companies.
11.18 Neutral Construction. In view of the fact that each of the parties
hereto have been represented by their own counsel and this Agreement has been
fully negotiated by all parties, the legal principle that ambiguities in a
document are construed against the draftsperson of that document shall not apply
to this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
46
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first stated above.
BBS ACQUISITION CORP.
By:
----------------------------------
Barry S. Rutcofsky
Vice President
TAKE-TWO INTERACTIVE SOFTWARE,
INC.
By:
----------------------------------
Barry S. Rutcofsky
President
PIXEL BROADBAND STUDIOS LTD.
By:
----------------------------------
Ramy Weitz
Chief Executive Officer
TOGA HOLDINGS B.V.
By:
----------------------------------
Name: ___________________________
Title: ___________________________
PREMIER BUSINESS SOLUTIONS, INC.
By:
----------------------------------
Name: ___________________________
Title: ___________________________
<PAGE>
47
JOINDER
Each of the undersigned hereby joins in the foregoing Stock Purchase
Agreement solely for the purposes set forth in Section 6.2 and Section 10
(subject to the limitations described in Section 10), and Ramy Weitz also joins
in this Agreement for the purpose set forth in Section 5.2.21 and Section 9.
IN WITNESS WHEREOF, the undersigned have executed this Joinder the ____ day
of March, 2000.
------------------------
Ramy Weitz
------------------------
Guy Poran
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement dated as of March __, 2000, by and between
Take-Two Interactive Software, Inc., a Delaware corporation (the "Company"), and
Broadband Solutions, Inc. (f/k/a Premier Business Solutions, Inc.), a
corporation formed under the laws of the British Virgin Islands (the "Holder").
WHEREAS, the Company is simultaneously issuing to the Holder pursuant to a
Stock Purchase Agreement dated as of the date hereof, by and among the Company,
the Holder, Toga Holdings BV, a corporation formed under the laws of the
Netherlands, Pixel Broadband Studios, Ltd., an Israeli corporation, and BBS
Acquisition Corp., a Delaware corporation (the "Purchase Agreement"), 2,561,245
shares (the "Shares") of the Company's common stock, par value $.01 per share;
WHEREAS, the Company's common stock is listed on Nasdaq's National Market
System under the symbol "TTWO"; and
WHEREAS, pursuant to the Purchase Agreement, the Company has agreed to
grant to the Holder registration rights set forth herein with respect to the
Shares any securities issued in exchange for or in replacement of the Shares,
and any securities issued by way of any stock split, reverse stock split,
recapitalization, or other similar transaction affecting the Shares or any such
other securities (collectively, the "Registrable Securities").
NOW, THEREFORE, the parties do hereby agree as follows:
1. Piggyback Registration.
(a) If, at any time after the date hereof, the Company proposes to
prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement covering equity or debt securities
of the Company or any such securities of the Company held by its
shareholders, other than in connection with a merger, acquisition or
pursuant to a registration statement on Form S-4 or Form S-8 or any
successor form, the Company will give written notice of its intention to do
so to the Holder at least thirty (30) days prior to the filing of each such
Registration Statement. Upon the written request of the Holder, made within
fifteen (15) days after receipt of the notice, that the Company include any
of the Registrable Securities in the proposed registration statement, the
Company shall, as to the Holder, use reasonable best efforts to effect the
registration under the Securities Act of 1933, as amended (the "Act") of
such Registrable Securities which it has been so requested to register (the
"Piggyback Registration");
(b) Notwithstanding the provisions of paragraph (a) above, if the
Piggyback Registration is in connection with an underwritten public
offering and in the written opinion of the Company's underwriter or
managing underwriter of the underwriting group, if any, for such offering,
the inclusion of all or a portion of the
<PAGE>
2
Registrable Securities requested to be registered, when added to the
securities being registered by the Company or the selling shareholder(s),
if any, will exceed the maximum amount of the Company's securities which
can be marketed (i) at a price reasonably related to their then current
market value, or (ii) without otherwise having a material adverse effect on
the offering, then the Company may exclude from such offering all or a
portion of the Registrable Securities which it has been requested to
register. Notwithstanding the provisions of paragraph (a) above, the right
to Piggyback Registration shall not apply, unless Company otherwise agrees
in writing, to any registration statement: (i) to be filed on a
registration form which is unavailable for the registration of the
Registrable Securities; (ii) relating solely to Registrable Securities to
be offered pursuant to (x) an employee benefit plan, or (y) a dividend or
interest reinvestment plan (including such a plan that has an open
enrollment or cash investment feature); (iii) relating to Company
securities to be issued for a consideration other than solely cash; (iv)
relating to Company securities to be offered solely to existing security
holders of Company, through a "rights offering" or otherwise; (v) relating
solely to Company securities to be issued on the exercise of options,
warrants and similar rights, or on the conversion or exchange of other
securities, issued by Company or any other person; (vi) relating solely to
debt securities of Company, including debt securities that are convertible
or exchangeable for equity securities of Company; or (vii) that may become
effective automatically upon filing with the Commission pursuant to Rule
462 under the Act or otherwise.
(c) If securities are proposed to be offered for sale pursuant to a
registration statement by other security holders of the Company and the
total number of securities to be offered by the Holder and such other
selling security holders is required to be reduced pursuant to a request
from the underwriter or managing underwriter as set forth in paragraph (b)
above, the aggregate number of Registrable Securities to be offered by the
Holder pursuant to such registration statement shall equal the number which
bears the same ratio to the maximum number of securities that the
underwriter or managing underwriter believes may be included for all the
selling security holders (including the Holder) as the original number of
Registrable Securities proposed to be sold by the Holder bears to the total
original number of securities proposed to be offered by the Holder and the
other selling security holders.
(d) Notwithstanding the preceding provisions of this Section, the
Company shall have the right to elect not to file any proposed registration
statement or to withdraw the same after the filing but prior to the
effective date thereof.
2. Demand Registration.
(a) As soon as practicable after the date hereof, the Company shall
prepare and file with the Commission, at the sole expense of the Company
(except as hereinafter provided), in respect of sixteen percent (16%) of
the Registrable Securities issued to Holder at the Closing under the
Purchase Agreement a registration statement so as to permit a public
offering and sale of such Registrable Securities for a period of ninety
(90) days.
<PAGE>
3
(b) As soon as practicable after the six-month anniversary of the date
hereof, the Company shall prepare and file with the Commission, at the sole
expense of the Company (except as hereinafter provided), in respect of
fifteen percent (15%) of the Registrable Securities issued to Holder at the
Closing under the Purchase Agreement a registration statement so as to
permit a public offering and sale of such Registrable Securities for a
period of ninety (90) days.
(c) At any time after the first anniversary of the date of this
Agreement, the Holder may on one occasion only submit to the Company a
Demand Registration Request, to have the Company prepare and file with the
Commission, at the sole expense of the Company (except as hereinafter
provided), in respect of up to the aggregate number of Registrable
Securities not previously registered pursuant to Section 1 or Section 2(a)
a registration statement so as to permit a public offering and sale of such
Registrable Securities for a period of ninety (90) days; and the Company
shall thereafter use its reasonable best efforts to cause to be registered
under the Act as soon as practicable thereafter all of the Registrable
Securities that Holder has so requested to be registered.
(d) Notwithstanding any provision of Section 2(b) to the contrary, if,
at the time a Demand Registration Request is given to the Company under
Section 2 hereof (i) the Company is engaged in negotiations with respect to
an acquisition, merger, financing or other material event which would
require the Company to file a Form 8-K in the event that such acquisition,
merger, financing or other material event is consummated or has otherwise
occurred or (ii) in the event the Company shall furnish to the Holder a
certificate signed by the chief executive officer of the Company stating
that in the good faith judgment of the Company and its investment banker
that it would be detrimental to the Company and its shareholders for the
Company to immediately proceed with a registration statement and it is
therefore essential to defer the filing of such registration statement,
then, in each such case, the Company will have the right to defer such
filing for a period not to exceed one hundred eighty (180) days; provided
that the Company shall actively employ in good faith reasonable efforts to
cause such registration statement filed pursuant to this Section to become
effective as soon as practicable, and provided further that the Company may
not delay any registration requested pursuant to this Section more than
once during any twelve-month period. For the avoidance of doubt, this
paragraph (c) of this Section shall not apply to the registration required
pursuant to paragraph (a) of this Section.
(e) Nothing herein contained shall require the Company to undergo an
audit, other than in the ordinary course of business, or as required in
connection with the delivery of a "comfort letter" for purposes of
effecting a registration statement as set forth in this Section 2.
(f) If the Holder intends to sell any Registrable Securities
registered pursuant to this section it shall give the Company written
notice thereof not fewer than five days prior to the date on which Holder
intends to execute such sale. The
<PAGE>
4
Company shall have the right, exercisable by delivery of written notice to
the Holder during such five-day period, to direct the sale of such
Registrable Securities to any NASD Member Firm which is reasonably
acceptable to the Holder in order to provide for an orderly sale of such
Registrable Securities and, in the Company's sole discretion, it may direct
such NASD Member Firm to offer and sell such Registrable Securities in,
among other things, a block trade in which the NASD Member Firm so engaged
will attempt to sell such Registrable Securities as agent but may position
and resell a portion of the block as principal to facilitate the
transaction or otherwise, as described in any registration statement filed
pursuant to this section, provided that (i) such Registrable Securities are
sold at not less than the then Market Price, (ii) the entire proceeds of
such sale, less only reasonable and customary brokerage commissions
actually paid to the executing NASD Member Firm are promptly remitted to
the Holder, and (iii) if such sale is consummated as a "block trade", the
Holder receives written confirmation from counsel (including the Company's
in-house counsel) that such trade was effected in accordance with
applicable federal securities laws.
3. Termination of Registration Rights. Notwithstanding the foregoing
provisions, Company's obligation to register the Registrable Securities under
this Agreement shall terminate as to any particular Registrable Securities (a)
on the second anniversary of the date hereof, (b) when such Registrable
Securities have been sold in an offering registered under the Act or in a sale
exempt from registration under the Act, (c) when such Registrable Securities
shall have been effectively registered under the Act for a period of at least
ninety (90) days, or (d) when a written opinion, to the effect that such
Registrable Securities may be sold without registration under the Act or
applicable state law and without restriction as to the quantity and manner of
such sales, shall have been received from counsel for Company.
4. Covenants of the Company. The Company hereby covenants and agrees as
follows:
(a) In accordance with the Act and the rules and regulations
promulgated thereunder, and subject to the terms and provisions of this
Agreement, the Company shall prepare and file with the Commission a
registration statement as expeditiously as reasonably possible, but in no
event later than seventy-five (75) days following the receipt of a Demand
Registration Request. The Company shall use its reasonable best efforts to
cause such registration statement to become and remain continuously
effective for a period of ninety (90) days; provided that if for any
portion of such ninety-day period such registration statement is not
effective, the ninety-day requirement for maintaining the effectiveness of
such registration statement shall be extended by the length of such
interruption(s); and the Company shall prepare and file with the Commission
such amendments to such registration statement and supplements to the
prospectus contained therein as may be necessary to keep such registration
statement effective and such registration statement and prospectus accurate
and complete in all material respects during such period.
(b) Following the effective date of any registration statement
<PAGE>
5
filed under Section 1 or 2, the Company shall, upon the request of the
Holder, forthwith supply such reasonable number of copies of the
registration statement and prospectus meeting the requirements of the Act
and such other documents (i.e., documents incorporated in the registration
statement by reference) as shall be reasonably requested by the Holder to
permit the Holder to make a public distribution of the Registrable
Securities. The obligations of the Company hereunder with respect to the
Registrable Securities are expressly conditioned on the Holder's furnishing
to the Company such appropriate information concerning the Holder, the
Registrable Securities and the terms of the Holder's offering of such
Registrable Securities as the Company may reasonably request.
(c) The Company will pay all costs, fees and expenses in connection
with any registration statement filed pursuant to Sections 1 and 2 hereof,
including, without limitation, all registration and filing fees, the
Company's legal and accounting fees, printing expenses and blue sky fees
and expenses; provided, however, that the Holder shall be solely
responsible for the fees of any counsel retained by the Holder in
connection with such registration and any transfer taxes or underwriting
discounts, selling commissions or selling fees applicable to the
Registrable Securities sold by the Holder pursuant thereto.
(d) The Company will use reasonable best efforts to qualify or
register the Registrable Securities included in a registration statement
for offering and sale under the securities or blue sky laws of such states
as are reasonably requested by the Holder, provided that the Company shall
not be obligated to execute or file any general consent to service of
process (unless the Company is already then subject to service in such
jurisdiction) or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction, except as may be required by the Act and
its rules and regulations.
(e) Subject to such other reasonable requirements as may be imposed by
the underwriter as a condition of inclusion of the Registrable Securities
in a Piggyback Registration, the Holder agrees, if so required by the
managing underwriter, not to sell, take any short sale of, loan, grant any
option for the purchase of, effect any public sale or distribution of or
otherwise dispose of, any equity securities of the Company, during such
reasonable period of time requested by the underwriter; provided, however,
such period shall not exceed a period commencing one hundred eighty (180)
days following the completion of such underwritten offering and, provided
further, that a majority of the executive officers and directors of the
Company, including, the Chief Executive Officer, have also agreed not to
sell, take any short sale of, loan, grant any option for the purchase of,
effect any public sale or distribution of, or otherwise dispose of, any
equity securities of the Company, under the circumstances and pursuant to
the terms set forth in this Section.
(f) The Company shall promptly notify Holder with respect to
Registrable Securities covered by any such registration statement, at any
time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration
<PAGE>
6
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made, and at the request of Holder
promptly prepare and furnish to Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an 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 not misleading in light of the circumstances under
which they were made.
(g) The Company shall enter into customary agreements (including if
the method of distribution is by means of an underwriting, an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of the
Registrable Securities to be so included in the registration statement.
(h) The Company shall use its reasonable best efforts to list the
Registrable Securities covered by such registration statement with any
securities exchange on which the common stock of the Company is then
listed.
5. Covenant of the Holder. The Holder, upon receipt of notice from the
Company that an event has occurred which requires a post-effective amendment to
a registration statement or a supplement to the prospectus included therein,
shall promptly discontinue the sale of Registrable Securities until the Holder
receives a copy of a supplemented or amended prospectus from the Company, which
the Company shall provide as soon as practicable after such notice. The Company
shall use reasonable best efforts to file and have declared effective any such
post-effective amendment as soon as possible.
6. Indemnification.
(a) The Company shall indemnify, defend and hold harmless the Holder,
each of its directors, officers, employees, and any person who controls
Holder within the meaning of Section 15 of the Act from and against any and
all losses, claims, damages and liabilities (including, without limitation,
any legal fees or other fees or expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action) caused by or arising out of any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement or prospectus or any amendment or supplement thereto included
therein or caused by or arising out of any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein in light of the circumstances in which they are
made not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or alleged untrue
statement or omission or alleged omission based upon information furnished
or required to be furnished in writing to the Company by the Holder
expressly for use therein; provided, however, that the indemnification in
this Section shall not inure to the benefit
<PAGE>
7
of the Holder on account of any such loss, claim, damage or liability
arising from the sale of Registrable Securities by the Holder, if a copy of
a subsequent prospectus correcting the untrue statement or omission in such
earlier prospectus was provided to the Holder by the Company prior to the
sale and the subsequent prospectus was not delivered or sent by the Holder
to the purchaser prior to such sale. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of
Holder, its directors, officers, participating person, or controlling
person, and shall survive the transfer of such Registrable Securities by
Holder. The Holder shall at the same time indemnify the Company, its
directors, each officer signing a registration statement and each person
who controls the Company within the meaning of the Act from and against any
and all losses, claims, damages and liabilities caused by or arising out of
any untrue statement or alleged untrue statement of a material fact
contained in a registration statement or prospectus included therein, or
caused by or arising out of any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case, only insofar as such
losses, claims, damages or liabilities are caused by any untrue statement
or alleged untrue statement or omissions or alleged omission based upon
information furnished in writing to the Company by the Holder expressly for
use therein.
(b) If for any reason the foregoing indemnity is unavailable, or is
insufficient to hold harmless any indemnitee, then the indemnitor shall
contribute to the amount paid or payable by the indemnitee as a result of
such losses, claims, damages, liabilities, or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by
the indemnitor on the one hand and the indemnitee on the other from the
registration, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, or provides a lesser sum to the indemnitee
than the amount hereinafter calculated, in such proportion as is
appropriate to reflect not only the relative benefits received by the
indemnitor on the one hand and the indemnitee on the other but also the
relative fault of the indemnitor and the indemnitee as well as any other
relevant equitable considerations. The relative fault of the Company and
the Holder shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information
supplied by the Company or by the Holder and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent
such statement or omission. Notwithstanding the provisions of this Section
6(b), in no event shall the Company be required to contribute any amount of
any damages that the Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
7. Governing Law.
(a) This Agreement shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal substantive
laws of the State of New York.
<PAGE>
8
(b) Each of the Company and the Holder hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of New York and of the United States of America located
in the County of New York, State of New York (the "New York Courts") for
any litigation arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any litigation
relating thereto except in such courts), waives any objection to the laying
of venue of any such litigation in the New York Courts and agrees not to
plead or claim that such litigation brought in any New York Courts has been
brought in an inconvenient forum.
8. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed duly given when delivered by
hand or mailed by express, registered or certified mail, postage prepaid, return
receipt requested, as follows:
If to the Company, at:
Take-Two Interactive Software, Inc.
575 Broadway, 3rd Floor
New York, New York 10012
Attn: Barry S. Rutcofsky, President
with a copy of the same to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, Pennsylvania 19103
Attn: Kimon Hatza, Esq.
If to the Holder, at that address set forth under its name on the signature
page.
with a copy of the same to:
Levin & Srinivasan LLP
1776 Broadway, Suite 1900
New York, New York 10019
Attention: Gregg Srinivasan, Esq.
Or such other address as has been indicated by either party in accordance
with a notice duly given in accordance with the provisions of this Section.
9. Amendment. This Agreement may only be amended by a written instrument
executed by the Company and the Holder.
<PAGE>
9
10. Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
11. Assignment; Benefits. The Holder may not assign the Holder's rights
hereunder without the prior written consent of the Company, which consent may be
given or withheld for any reason or no reason at all, and any attempted
assignment without such consent shall be void and of no force and effect.
12. Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
13. Severability. Any provision of this Agreement which is held by a court
of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
14. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
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<PAGE>
10
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto on the date first above written.
Company: TAKE-TWO INTERACTIVE SOFTWARE, INC.
By: __________________________________
Barry S. Rutcofsky
President
Holder: PREMIER BUSINESS SOLUTIONS, INC.
By: __________________________________
Name:
Title:
Address:
Attention:
Number of Registrable Securities: 2,561,245
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
EXECUTED IN CONNECTION WITH THE
STOCK PURCHASE AGREEMENT AMONG
TAKE TWO INTERACTIVE SOFTWARE, INC.,
BBS ACQUISITION CORP.,
PIXEL BROADBAND STUDIOS, LTD.
TOGA HOLDINGS BV, AND
PREMIER BUSINESS SOLUTIONS, INC.
EMPLOYMENT AGREEMENT
AGREEMENT (the "Agreement") dated as of March __, 2000 between BBS
Acquisition Corp., a Delaware corporation (the "Employer" or the "Company"), and
Ramy Weitz (the "Employee").
W I T N E S S E T H :
WHEREAS, the Employer desires to employ the Employee as its President and
to be assured of his services as such on the terms and conditions hereinafter
set forth; and
WHEREAS, the Employee is willing to accept such employment on such terms
and conditions;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and intending to be legally bound hereby, the Employer
and the Employee hereby agree as follows:
1. Term. Employer hereby agrees to employ Employee, and Employee hereby
agrees to accept employment with Employer for a four-year period commencing
effective as of the date hereof (the "Effective Date") (such period or such
shorter period if this Agreement is terminated as hereinafter provided, being
herein referred to as the "Term," and any year commencing on the Effective Date
or any anniversary of the Effective Date being hereinafter referred to as an
"Employment Year") unless this agreement is terminated as hereinafter provided.
2. Employee Duties.
(a) During the Term, the Employee shall serve as President of the
Company and shall have the duties, responsibilities and authority
customarily associated with the office and position of President of the
Employer, reporting directly to the Board of Directors of the Employer (the
"Board"). It is understood that such duties, responsibilities and authority
shall be reasonably related to the Employee's position. During the Term,
the Employer shall use its best efforts, including, without limitation, by
nominating Employee on the management slate, to have the Employee elected
and continued as a member of the Board.
(b) At all times prior to the termination or expiration of the Term,
except during any periods of vacation, Disability (within the meaning of
Section 6(b)), or other duly authorized leave of absence, the Employee
shall devote substantially all of his business time, attention, knowledge
and skills faithfully, diligently and to the best of his ability, in
furtherance of the business and activities of the Company; provided that,
notwithstanding the above, the Employer acknowledges that the Employee
<PAGE>
2
shall be permitted to (i) continue to provide services as an officer,
director, consultant or advisor to any person, entity, partnership or
corporation listed on Appendix A hereto to which the Employee provides
services on the Effective Date, (ii) serve as an officer or director of a
cooperative apartment, or civic or charitable organization or committee or
serve as a director of any business corporation with the consent of the
Board, (iii) perform speaking engagements, and (iv) pursue his personal
financial and legal affairs, including without limitation managing his
personal and family investments, so long as such activities do not conflict
or materially interfere with the performance by the Employee of his duties
hereunder. The principal place of performance by the Employee of his duties
hereunder shall be the Company's executive office in Tel Aviv, Israel and
its executive offices in London, England, although the Company may from
time to time reasonably require the Employee to travel outside of these
areas in connection with the business of the Company.
3. Compensation.
(a) During the term of this Agreement, the Employer shall pay the
Employee a salary (the "Salary") at a rate of $255,000 per annum, with a 5%
increase in each succeeding Employment Year, payable in equal installments
bi-weekly, or at such other times as may mutually be agreed upon between
the Employer and the Employee. The Employee's Salary may be increased from
time to time at the discretion of the Board. Any such increase shall not
reduce or limit any other obligation of the Employer hereunder.
(b) For each calendar quarter ending during the term of this
Agreement, if the Company attains 100% of the performance objectives (the
"Bonus Targets") established by the Board and reasonably acceptable to the
Employee for such calendar quarter, the Employee shall receive a quarterly
bonus (the "Bonus") equal to 8.25% of his yearly Salary. Any Bonus payable
under this Section 2(b) shall be paid to the Employee at the same time as
bonuses are paid to other senior executive officers of the Company, but in
no event later than 90 days after the close of the calendar year for which
the Bonus is payable.
(c) The Employee shall be entitled to a car allowance of $1,250 per
month.
(d) In addition to the foregoing, the Employee shall be entitled to
such other cash bonuses and such other compensation in the form of stock,
stock options or other property or rights as may from time to time be
awarded to him by the Board during or in respect of his employment
hereunder.
4. Benefits.
(a) During the term of this Agreement, the Employee and the Employee's
family shall be entitled to participate and receive all benefits under (i)
each welfare benefit plan sponsored or maintained by the Company or any of
its affiliates, as
<PAGE>
3
applicable, including without limitation, each group life, hospitalization,
medical, dental, health, accident or disability insurance or similar plan
or program of the Company of any of its affiliates, as applicable, and (ii)
each pension, profit sharing, retirement, deferred compensation or savings
plan sponsored or maintained by the Company or any of its affiliates, as
applicable, in each case, whether now existing or established hereafter, to
the extent that the Employee is eligible to participate in any such plan
under the generally applicable provisions thereof, and such other
perquisites of office as the Company or any of its affiliates, as
applicable, may, from time to time, make generally available to its senior
management (collectively, the "Benefits"). Nothing paid to the Employee
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the salary or any other obligation
payable to the Employee pursuant to this Agreement.
(b) During the term of this Agreement, the Employee will be entitled
to the number of paid holidays, personal days off, vacation days and sick
leave days in each calendar year as are determined by the Company from time
to time (not less than four weeks paid vacation annually). Such vacation
may be taken at the Employee's discretion, and at such time or times as are
not inconsistent with the reasonable business needs of the Company.
5. Travel and Other Business Expenses. All travel and other expenses
incident to the rendering of services reasonably incurred on behalf of the
Company by the Employee during the term of this Agreement shall be paid by the
Employer. If any such expenses are paid in the first instance by the Employee,
the Employer shall reimburse him therefor on presentation of appropriate
receipts for any such expenses in accordance with generally applicable policies
and procedures of the Company.
6. Termination. Notwithstanding the provisions of Section 1 hereof, the
Employee's employment with the Employer may be earlier terminated as follows:
(a) By action taken by the Board, the Employee may be discharged by
the Employer for Cause (as hereinafter defined), effective as of such time
as the Board shall determine but subject to prior written notice and the
expiration of any cure period, if applicable, set forth in Section 6(d) and
Employee may terminate his employment for Good Reason, subject to prior
written notice and the expiration of any cure period set forth in Section
6(e). Upon discharge of the Employee pursuant to this Section 6(a), the
Employer shall have no further obligation or duties to the Employee, except
for payment (within 15 days of the date of termination) to the Employer of
his reimbursable expenses and any accrued and unpaid Salary through the
effective date of termination as well as any vested Benefits which shall be
payable to the Employee in accordance with the plan, policy, practice,
program or agreement under which such Benefits have accrued, and the
Employee shall have no further obligations or duties to the Employer,
except as provided in Section 7.
(b) In the event of (i) the death of the Employee or (ii) the
inability of the Employee, in the Board's reasonable judgment, for a period
exceeding
<PAGE>
4
one hundred and eighty consecutive days or 180 days in any 12 month period,
by virtue of any illness or physical or mental incapacity or
disability)(from any cause or causes of any kind, nature, or description
whatsoever)(collectively, the "Disability"), to substantially perform the
Employee's duties hereunder, thereafter and for so long as such Disability
continues (during which 180-day period the Employee's Salary, Bonus and any
other Benefits shall not be suspended or diminished), the Company may
terminate this Agreement by delivery of 30 days' written notice thereof to
Employee. Upon any termination of the Employee's employment under this
Section 6(b), the Employer shall have no further obligations or duties to
the Employee except for payment to the executors or administrators of the
Employee's estate, or the Employee, as the case may be, of (i) within 15
days of the date of termination, the Employee's reimbursable expenses and
any accrued but unpaid Salary through the date of termination, (ii) at the
same time that bonuses are otherwise payable to other senior management of
the Company, in accordance with the provisions of Section 2(b), the pro
rated amount equal to the product of the Bonus the Employee would have been
entitled to receive under Section 2(b) for the calendar quarter in which
his employment terminated pursuant to this Section 6(b) had he remained
employed for the entire quarter and assuming that all Bonus Targets for
such quarter had been met, multiplied by a fraction, the numerator of which
is equal to the number of days in the calendar quarter of the Employee's
termination of employment which have elapsed as of the date of such
termination and the denominator of which is 91 and (iii) any vested
Benefits which shall be payable to the Employee's estate, or the Employee,
as the case may be, in accordance with the plan, policy, practice, program
or agreement under which such benefits have accrued; provided that, upon
the date of such termination, all of the Employee's options, if any, shall
immediately vest and become fully exercisable.
(c) In the event that Employee's employment with the Employer is
terminated by the Employer action taken by the Board without Cause which
termination shall be on at least 30 days' prior written notice, or by the
Employee due to termination for Good Reason, but subject to the prior
written notice following the expiration of any cure period, then the
Employer shall have no further obligation or duties to Employee, except for
payment of the amounts described below, and Employee shall have no further
obligations or duties to the Employer, except as provided in Section 7. In
the event of such termination, and provided Employee is not in breach of
his obligations under Section 7 hereof (i) the Employer shall pay to the
Employee, (A) as a lump sum payment without discount, payable immediately
upon such termination, the Employee's reimbursable expenses and any accrued
but unpaid Salary through the date of termination and, in accordance with
the provisions of Section 2(b), the pro-rated amount equal to the product
of the Bonus the Employee would have been entitled to receive under Section
2(b) for the calendar quarter in which his employment terminated pursuant
to this Section had he remained employed for the entire quarter and
assuming that all Bonus Targets for such quarter had been met, multiplied
by a fraction, the numerator of which is equal to the number of days in the
calendar quarter of the Employee's termination of employment which have
elapsed as of the date of such termination and the denominator of which is
91, and (B) in accordance with the Company's normal payroll practices, the
Employee's Salary, Bonus (deemed to be earned), and any vested Benefits
<PAGE>
5
payable to the Employee, in accordance with the plan, policy, practice,
program or agreement under which such Benefits have accrued, in each case,
in an amount equal to what the Employee would have been entitled to receive
had he remained employed for 24 months following the date of termination of
Employee's employment hereunder, but in no event longer than the fourth
anniversary of the date hereof, (ii) the Employee shall be entitled to
participate in the Benefits of the Company or any of its affiliates, as
applicable, pursuant to Section 4(a) to the same extent he has been
participating on the date of the termination of this Agreement until 24
months following the date of termination of Employee's employment
hereunder, but in no event longer than the fourth anniversary of the date
hereof, to the extent that the Company is able to provide such Benefits,
and (iii) upon the date of such termination, all of the Employee's options,
if any, shall immediately vest and become fully exercisable.
(d) For purposes of this Agreement, the Company shall have "Cause" to
terminate the Employee's employment under this Agreement upon (i) the
failure by the Employee to substantially perform his material duties under
this Agreement, (ii) the engaging by the Employee in criminal misconduct
(including embezzlement and criminal fraud) which is materially injurious
to the Company, monetarily or otherwise, or (iii) the conviction of the
Employee of a felony, or any crime involving fraud, embezzlement or moral
turpitude. The Company shall give written notice to the Employee, which
notice shall specify the grounds for the proposed termination and the
Employee shall be given thirty (30) days to cure if the grounds arise under
clause (i) above.
(e) For purposes of this Agreement, the Employee may terminate his
employment under this Agreement for "Good Reason" upon the occurrence of
one or more of the following events without the Employee's consent: (i)
assignment to the employee by the Board of any duties materially and
adversely inconsistent with the Employee's position as a senior employee of
the Company; (ii) the Board's material reduction of the nature and scope of
the Employee's rights, authority, responsibilities or duties which are
materially and adversely inconsistent with the Employee's prior
responsibility with the Company and position as a senior employee of the
Company; or (iii) the failure of the Company to comply with the material
provisions of this Agreement in any material respect to be taken by
Employee; provided that, with respect to clauses (i) through (iii), no act
or omission by the Company or the Board shall constitute Good Reason
hereunder unless (x) the Employee gives the Company written notice thereof
within thirty (30) days after he first knew of such act or omission, (y)
the Company fails to remedy such act or omission within thirty days after
receiving such notice, and (z) Employee provides written notice to the
Company terminating this Agreement within ten days after the company's
failure to remedy such act or omission during such thirty-day period.
7. Confidentiality; Noncompetition.
(a) The Employer and the Employee acknowledge that the services to be
performed by the Employee under this Agreement are unique and
<PAGE>
6
extraordinary and, as a result of such employment, the Employee will be in
possession of confidential information relating to the business practices
of the Company. The term "confidential information" shall mean any and all
information (verbal and written) relating to the Company or any of its
affiliates, or any of their respective activities other than such
information which (i) is generally known (other than through unlawful
disclosure) in the industry in which the Company is or may become engaged
or (ii) is in the public domain (such information not being deemed to be in
the public domain merely because it is embraced by more general information
which is in the public domain) other than as the result of breach of the
provisions of this Section 7(a), including, but not limited to, information
relating to: trade secrets, personnel lists, financial information,
research projects, services used, pricing, customers, customer lists and
prospects, product sourcing, marketing and selling and servicing. The
Employee agrees that he will not, during or for a period of two years after
the termination of employment, directly or indirectly, use, communicate,
disclose or disseminate to any person, firm or corporation any confidential
information regarding the clients, customers or business practices of the
Company acquired by the Employee during his employment by Employer, without
the prior written consent of Employer or except as required by the
Employee's duties or applicable law; provided, however, that the Employee
understands that Employee will be prohibited from misappropriating any
trade secret at any time during or after the termination of employment.
(b) (i) The Employee hereby agrees that he shall not, during the
period of his employment, directly or indirectly, within any county (or
adjacent county) in any State within the United States or country outside
the United States in which the Company is actively engaged in business or
actively pursuing engaging in business during the period of the Employee's
employment or on the date of termination of the Employee's employment
including Israel, the United Kingdom, any other country within the European
Union, engage, have an interest in (other than as a holder of not in excess
of 2% of the outstanding voting shares of any publicly traded company) or
render any services to any business (whether as owner, manager, operator,
licensor, licensee, lender, partner, stockholder, joint venturer, employee,
consultant or otherwise) substantially similar to the Business (as
hereinafter defined), provided that nothing in this Section 7(b)(i) shall
be construed to prevent the Employee from (x) continuing to provide
services as a director, consultant or advisor to any person, entity,
partnership or corporation listed on Appendix A hereto to which the
Employee provides services on the Effective Date (an "Approved Entity"), or
(y) pursuing his personal financial and legal affairs, including without
limitation managing his personal and family investments, so long as such
activities, do not conflict or materially interfere with the performance by
the Employee of his duties hereunder.
(ii) The Employee hereby agrees that he shall not, (A) in the case of
the termination of his employment hereunder by the Employer for Cause or by
the Employee without Good Reason, for the longer of 18 months following the
date of the termination of his employment hereunder and 36 months following
the closing under the Stock Purchase Agreement, and (B) in the case of the
termination of his employment hereunder by the Employer without Cause or by
the Employee for Good Reason, for the
<PAGE>
7
longer of 24 months following the date of the termination of the Employee's
employment hereunder (so long as all payments required pursuant to Section
6(c) are timely made) and 36 months following the closing under the Stock
Purchase Agreement, directly or indirectly, within any county (or adjacent
county) in any State within the United States or country outside the United
States in which the Company is actively engaged in business on the date of
termination of the Employee's employment, engage, have an interest in
(other than as a holder of not in excess of 2% of the outstanding voting
shares of any publicly traded company) or render any services to any
business (whether as owner, manager, operator, licensor, licensee, lender,
partner, stockholder, joint venturer, employee, consultant or otherwise)
substantially similar to the Business; provided that nothing in this
Section 7(b)(ii) shall be construed to prevent the Employee from (x)
rendering any services (whether as owner, manager, operator, licensor,
licensee, lender, partner, (stockholder, joint venturer, investor,
employee, officer, director, consultant, advisor or otherwise) to any
Approved Entity, or (y) pursuing his personal financial and legal affairs,
including without limitation managing his personal and family investments,
so long as such activities do not conflict or materially interfere with the
performance by the Employee of his duties hereunder.
(iii) For purposes of this Section 7(b), "Business" shall mean, the
business conducted by, or actively being contemplated at any time during
the Term by, each of Toga Holdings B.V. ("Toga"), Pixel Broadband Studios
Ltd. ("Pixel"), Pixel Technologies Ltd., A.V.P. Audio Visual Products Ltd.,
the Company and all existing and future direct and indirect subsidiaries of
the Company, including, without limitation, the business of developing,
producing and publishing multimedia interactive entertainment products and
developing on-demand mutiplayer online technology that can be used over all
forms of digital networks and acting as a digital mediator and providing
interactive entertainment programming over digital and other networks.
(iv) The provisions of this Section 7(b) shall cease to apply to the
Employee at any time during which the Employee's employment hereunder has
been terminated without Cause or for Good Reason, unless the Employee
continues to receive the payment of all the amounts he is entitled to under
Section 6(c), in which case the Employee shall be bound by the provisions
of this Section 7(b); provided, however, if Employee is terminated as
aforesaid in this subparagraph (iv) at or after the expiration of
thirty-six (36) months of the Term, then, notwithstanding anything herein
to the contrary, Employee shall be subject to the provisions of this
noncompetition covenant for a period of twelve (12) months from the date of
termination, if (but only if) the Employer continues to make the payments
contemplated by 6(c) to the date that this Agreement would have expired if
not earlier terminated.
(c) The Employee hereby agrees that he shall not, during the period of
his employment and for the longer of (A) in the case of the termination of
his employment hereunder by the Employer for Cause or by the Employee
without Good Reason, for the longer of 18 months following the date of the
termination of his employment hereunder and 36 months following the closing
under the Stock Purchase Agreement, and (B) in the case of the termination
of his employment hereunder by the
<PAGE>
8
Employer without Cause or by the Employee for Good Reason, for the longer
of 24 months following the date of the termination of the Employee's
employment hereunder (so long as all payments required pursuant to Section
6(c) are timely made) and 36 months following the closing under the Stock
Purchase Agreement, without the Employer's prior written consent, directly
or indirectly, take any action which constitutes an interference with or a
disruption of any of the Company's business activities including, without
limitation, the solicitations of the Company's customers, or persons listed
on the personnel lists of the Company; provided, however, that nothing
herein will prevent any affiliate of the Employee from hiring any employee
of the Company or any of its affiliates, (i) who, without solicitation,
encouragement or inducement by the Employee, independently applies for
employment with such affiliate or (ii) pursuant to a general solicitation
by such affiliate, provided that the Employee has no knowledge thereof. At
no time during the term of this Agreement, or thereafter shall the Employee
directly or indirectly, disparage the commercial, business or financial
reputation of the Company.
(d) For purposes of clarification, but not of limitation, the Employee
hereby acknowledges and agrees that the provisions of subparagraphs 7(b)
and (c) above shall serve as a prohibition against him, during the period
referred to therein, directly or indirectly, hiring, offering to hire,
enticing, soliciting or in any other manner persuading or attempting to
persuade any officer, significant employee, agent, lessor, lessee,
licensor, licensee, supplier or customer who has been previously contacted
by either a representative of the Company, including the Employee, to
discontinue or alter his, her or its relationship with the Company unless
such person shall have ceased to be employed by the Company for a period of
at least 12 months.
(e) Upon the termination of the Employee's employment for any reason
whatsoever, all documents, records, notebooks, equipment, price lists,
specifications, programs, customer and prospective customer lists and other
materials which refer or relate to any aspect of the business of the
Company which are in the possession of the Employee including all copies
thereof, shall be promptly returned to the Company.
(f) (i) The Employee agrees that all processes, technologies and
inventions, including new contributions, improvements, ideas and
discoveries, whether patentable or not, conceived, developed, invented or
made by him during his employment by Employer (collectively, "Inventions")
shall belong to the Company, provided that such Inventions grew out of and
are related to the Employee's work with the Company and are conceived or
made on the Company's time or with the use of the Company's facilities or
materials. The Employee shall at the sole cost and expense control of the
Company further: (a) promptly disclose such Inventions to the Company; (b)
assign to the Company, without additional compensation, all patent and
other rights to such Inventions for the United States and foreign
countries; (c) sign all papers necessary to carry out the foregoing; and
(d) give testimony in support of his inventorship;
(ii) If any Invention is described in a patent application or
<PAGE>
9
is disclosed to third parties, directly or indirectly, by the Employee
within one year after the termination of his employment by the Company, it
is to be presumed that the Invention was conceived or made during the
period of the Employee's employment by the Company; and
(iii) The Employee agrees that he will not assert any rights to any
Invention as having been made or acquired by him prior to the date of this
Agreement, except for Inventions, if any, disclosed to the Company in
writing prior to the date hereof.
(g) The Company shall be the sole owner of all products and proceeds
of the Employee's services hereunder, including, but not limited to all
Inventions, free and clear of any claims by the Employee (or anyone
claiming under the Employee) of any kind or character whatsoever (other
than the Employee's right to receive payments hereunder). The Employee
shall, at the request of the Company and at the Company's sole cost and
expense, execute such assignments, certificates or other instruments as the
Company may from time to time deem necessary or desirable to evidence,
establish, maintain, perfect, protect, enforce or defend its right, or
title and interest in or to any such properties.
(h) The parties hereto hereby acknowledge and agree that (i) the
Company may be irreparably injured in the event of a breach by the Employee
of any of his obligations under this Section 7, (ii) monetary damages may
not be an adequate remedy for any such breach, and (iii) the Company shall
be entitled to seek injunctive relief, in addition to any other remedy
which it may have, in the event of any such breach.
(i) Each of the rights and remedies enumerated in Section 7(g) and
7(h) shall be independent of the other, and shall be severally enforceable,
and all of such rights and remedies shall be in addition to, and not in
lieu of, any other rights and remedies available to the Company under law
or in equity.
(j) If any provision contained in this Section 7 is hereafter
construed by any court of competent jurisdiction to be invalid or
unenforceable and such determination becomes final and nonappealable, the
same shall not affect the remainder of the covenant or covenants, which
shall be given full effect to the fullest extent permitted by law, without
regard to the invalid portions.
(k) Without limiting the foregoing clause (j), if any provision
contained in this Section 7 is found to be unenforceable by reason of the
extent, duration or scope thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration, scope
or other provision and in its reduced form any such restriction shall
thereafter be enforceable as contemplated hereby.
(l) Employee acknowledges that this Agreement is being entered into,
as part of the transactions contemplated by that certain stock purchase
agreement (the "Stock Purchase Agreement") among Broadband Europe, Toga,
Pixel Broadband Studios, Ltd., the Company and Take-Two, of even date
herewith and that the covenants
<PAGE>
10
contained in this Section 7 have been agreed to as part of the
consideration for the Company and Take-Two entering into the Stock Purchase
Agreement.
(m) It is the intent of the parties hereto that the covenants
contained in this Section 7 shall be enforced to the fullest extent
permissible under the laws and public policies of each jurisdiction in
which enforcement is sought (the Employee hereby acknowledging that said
restrictions are reasonably necessary for the protection of the Company).
Accordingly, it is hereby agreed that if any of the provisions of this
Section 7 shall be adjudicated to be invalid or unenforceable for any
reason whatsoever, said provision shall be (only with respect to the
operation thereof in the particular jurisdiction in which such adjudication
is made) construed by limiting and reducing it so as to be enforceable to
the extent permissible, without invalidating the remaining provisions of
this Agreement or affecting the validity or enforceability of said
provision in any other jurisdiction.
8. General. This Agreement is further governed by the following provisions:
(a) Notices. All notices relating to this Agreement shall be in
writing and shall be either personally delivered, sent by telecopy (receipt
confirmed) or mailed by certified mail, return receipt requested, to be
delivered at such address as is indicated below, or at such other address
or to the attention of such other person as the recipient has specified by
prior written notice to the sending party. Notice shall be effective when
so personally delivered, one business day after being sent by telecopy or
five days after being mailed.
To the Employer:
BBS Acquisition Corp.
575 Broadway, 3rd Floor
New York, NY 10012
To the Employee:
Ramy Weitz
24 Karem Haseitim
Savion, _____
Israel
<PAGE>
11
With, in either case, a copy in the same manner to:
Levin & Srinivasan LLP
1776 Broadway
New York, New York 10019
Attention: Notices (103/006)
(b) Parties in Interest. Employee may not delegate his duties or
assign his rights hereunder. This Agreement shall inure to the benefit of,
and be binding upon, the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns.
(c) Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with
respect to the employment of the Employee by the Employer and contains all
of the covenants and agreements between the parties with respect to such
employment in any manner whatsoever. Any modification or termination of
this Agreement will be effective only if it is in writing signed by the
party to be charged.
(d) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York. Employee agrees to
and hereby does submit to jurisdiction before any state or federal court of
record in New York County or in the state and county in which such
violation may occur, at Employer's election.
(e) Warranty. Employee hereby warrants and represents that the
execution of this Agreement and the discharge of Employee's obligations
hereunder will not breach or conflict with any other contract, agreement,
or understanding between Employee and any other party or parties.
<PAGE>
12
(f) Indemnification. The Employer, and each indemnifying entity of the
Employer, joint and severally, agrees to indemnify the Employee and hold
harmless the Employee to the fullest extent permitted by law from and
against, and to pay or reimburse, any and all costs, expenses, damages and
claims and personal liability (including judgments, fines, amounts paid in
settlement and out-of-pocket expenses, including reasonable attorneys'
fees) that may be incurred by the Employee by reason of or relating to his
having been an employee, officer or director of the Company or any
affiliates thereof, whether or not he continues to be such an employee,
officer or director at the time of incurring such cost, expense, damages,
claim or personal liability. The Employer shall use its reasonable best
efforts at all times during the employment period to maintain, to the
extent available on commercially reasonable terms, directors' and officers'
liability insurance adequate to support the Employer's obligation to
indemnify the Employee. The Employee shall reasonably cooperate during the
employment period with the Company in maintaining the Company's "key man"
life insurance. The foregoing indemnification obligation is independent of
any similar obligation provided in the Employer's Certificate of
Incorporation or Bylaws, and shall apply with respect to any matters
attributable to periods prior to the Effective Date, and to matters
attributable to his employment hereunder, without regard to when asserted.
(g) Severability. In the event that any term or condition in this
Agreement shall for any reason be held by a court of competent jurisdiction
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other term or condition
of this Agreement, but this Agreement shall be construed as if such invalid
or illegal or unenforceable term or condition had never been contained
herein.
(h) Execution in Counterparts. This Agreement may be executed by the
parties in one or more counterparts, each of which shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts has
been signed by each of the parties hereto and delivered to each of the
other parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
BBS ACQUISITION CORP.
By:
----------------------------------
Name:
Title:
----------------------------------
Ramy Weitz
<PAGE>
APPENDIX A
APPROVED ENTITIES
Packet Science Ltd.
Linkids, Inc. (Come2Gether Inc.)
Simigon Ltd.
World Imaging, Inc.
Cellular Magic Ltd./Inc.
ING Inc.
Ramy Weitz LLC
Pixel Ltd.
