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EXHIBIT 2
AGREEMENT OF MERGER
DATED AS OF MAY 10, 1999
AMONG
THQ INC.,
PCPL ACQUISITION COMPANY,
AND
PACIFIC COAST POWER & LIGHT CO.
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EXHIBIT 2
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, dated as of May 10, 1999, among THQ INC.,
a Delaware corporation ("Parent"), PCPL ACQUISITION COMPANY, a California
corporation and a wholly owned subsidiary of Parent ("Mergerco"), and PACIFIC
COAST POWER & LIGHT CO., a California corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company is a California corporation having an
authorized capital that consists of 10,000,000 shares of common stock, no par
value (the "Company Common Stock"), of which, as of the date hereof, 5,383,333
shares are issued and outstanding; and
WHEREAS, Parent is a Delaware corporation having an authorized
capital of (i) 35,000,000 shares of common stock, par value $0.01 per share (the
"THQ Stock"), of which, as of March 24, 1999, 11,374,173 shares were issued and
outstanding, and (ii) 1,000,000 shares of preferred stock, par value $0.01 per
share, none of which, as of the date hereof, is issued and outstanding; and
WHEREAS, Mergerco is a California corporation having an authorized
capital of 1,000 shares of common stock, no par value, all of which are issued
and outstanding and owned of record and beneficially by Parent; and
WHEREAS, the Board of Directors and the shareholders of the Company
have approved the merger of Mergerco with and into the Company pursuant to the
terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is hereby agreed among the parties as
follows:
1. DEFINITIONS.
In this Agreement, the following terms have the meanings specified
or referred to in this Sec tion 1.1 and shall be equally applicable to both the
singular and plural forms. Any agreement referred to below shall mean such
agreement as amended, supplemented and modified from time to time to the extent
permitted by the applicable provisions thereof and by this Agreement.
"ACQUISITION PROPOSAL" has the meaning set forth in Section 7.9.
"ACTION" means any governmental investigation; any suit or action at
law or in equity; any arbitration, audit, assessment, grievance or other
proceeding, whether actual, proposed or threatened; and any other claim.
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by or is under common control
with such Person.
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"AGREED ACCOUNTING PRINCIPLES" means generally accepted accounting
principles consistently applied, provided that, with respect to any matter as to
which there is more than one generally accepted accounting principle, Agreed
Accounting Principles means the generally accepted accounting principles applied
in the preparation of the Balance Sheet; and provided further that, for purposes
of the Agreed Accounting Principles, no known adjustments for items or matters,
regardless of the amount thereof, shall be deemed to be immaterial.
"ASSOCIATE" of any Person means (i) a corporation or organization of
which such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10 percent or more of any class of equity securities, (ii)
any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary
capacity and (iii) any relative or spouse of such Person, or any relative of
such spouse, who has the same home as such Person or who is a director or
officer of the Person or any of its parents or subsidiaries.
"BALANCE SHEET" means the balance sheet of the Company included in
the Financial Statements.
"BALANCE SHEET DATE" means March 31, 1999.
"BRIDGE NOTES" means the promissory notes owing by the Company to
the Bridge Noteholder and identified on Schedule 5.3.
"BRIDGE NOTEHOLDER" means TechFund Capital, L.P.
"BRIDGE NOTE OBLIGATIONS" means the aggregate amount of principal
and interest owing on the Bridge Notes as of the Effective Time, as set forth on
or as determined in accordance with Schedule 5.3.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, as amended from time to time, and the rules and
regulations promulgated thereunder.
"CERTIFICATE OF MERGER" has the meaning set forth in Section 4.1.
"CGCL" means the California General Corporation Law, as amended.
"CLAIM NOTICE" has the meaning set forth in Section 10.3.1.
"CLOSING DATE" has the meaning set forth in Section 4.1.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder.
"COMPANY" means Pacific Coast Power & Light Co., a California
corporation.
"COMPANY AGREEMENTS" has the meaning set forth in Section 5.17.
"COMPANY ANCILLARY AGREEMENTS" means all agreements, instruments and
documents being or to be executed and delivered by the Company under this
Agreement or in connection herewith.
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"COMPANY COMMON STOCK" has the meaning set forth in the recitals to
this Agreement.
"COMPANY GROUP" shall mean any "affiliated group" (as defined in
Section 1504(a) of the Code without regard to the limitations contained in
Section 1504(b) of the Code) that, at any time on or before the Closing Date,
includes or has included the Company (or another such predecessor or successor),
or any other group of corporations that, at any time on or before the Closing
Date, files or has filed Tax Returns on a combined, consolidated or unitary
basis with the Company or any predecessor of or successor to the Company (or
another such predecessor or successor).
"COMPANY INTELLECTUAL PROPERTY" has the meaning set forth in Section
5.18.
"COMPANY MEETING" has the meaning set forth in Section 7.2.1.
"COMPANY PROPERTY" means any real or personal property, plant,
building, facility, structure, underground storage tank, equipment or unit, or
other asset owned, leased or operated by the Company (including any surface
water thereon or adjacent thereto and any soil or ground water thereunder),
whether currently or at any previous time.
"CONSENT OF OPTIONHOLDER" means a Consent of Optionholder, in the
form of Exhibit G.
"CONTEMPLATED TRANSACTIONS" has the meaning set forth in Section
5.2.3.
"CONTINUITY OF INTEREST AGREEMENT" means those certain Continuity of
Interest Agreements to be dated the Effective Date between the Company, Parent
and each of the Effective Time Stockholders, respectively, each substantially in
the form of Exhibit H.
"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"DEVELOPMENT TOOLS" has the meaning set forth in Section 5.20.
"DISCLAIMER OF RELIANCE" means the Disclaimer of Reliance in the
form of Exhibit E.
"EFFECTIVE TIME" has the meaning set forth in Section 4.1.
"EFFECTIVE TIME STOCKHOLDERS" means those Persons who, as of the
Effective Time, are the record holders of shares of Company Common Stock, and
each such Person's successors and assigns with respect to such shares.
"EMPLOYEE PLANS" has the meaning set forth in Section 5.23.
"EMPLOYMENT AGREEMENTS" means those certain Employment Agreements to
be dated the Effective Date between Parent and ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, respectively,
substantially in the form of Exhibit A-1 and A-2.
"ENCUMBRANCE" means any security interest, pledge, mortgage, lien
(including a mechanics' lien), encumbrance, lease, conditional sales agreement,
option, covenant, easement, restriction, charge, claim
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or other defect in title of any nature on any property or asset or property
interest, whether voluntarily incurred or arising by operation of law or
otherwise; and includes any agreement or commitment to grant, make or enter into
any of the foregoing, the filing of any financing statement under the Uniform
Commercial Code or any agreement to file any such financing statement or to
record any lien in the real property records maintained by a Governmental Body.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, including the rules and regulations promulgated
thereunder.
"ERISA AFFILIATE" means (i) any corporation which at any time on or
before the Effective Time is or was a member of the same controlled group of
corporations (within the meaning of Section 414(b) of the Code) as the Company;
(ii) any partnership, trade or business (whether or not incorporated) which at
any time on or before the Effective Time is or was under common control (within
meaning of Section 414(c) of the Code) with the Company; and (iii) any entity
which at any time on or before the Effective Time is or was a member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
either the Company, any corporation described in clause (i) of this definition
or any partnership, trade or business described in clause (ii) of this
definition.
"ESCROW" has the meaning set forth in Section 4.4.
"ESCROW AGENT" means Chase Manhattan Trust Company, in its capacity
as escrow agent; or if such entity is unable or unwilling to so act, another
escrow agent mutually agreed upon by Parent and the Company.
"ESCROW AGREEMENT" has the meaning set forth in Section 7.16.
"ESCROW SHARES" has the meaning set forth in Section 3.2.5.
"EXCHANGE ACT" means the U.S. Securities Exchange Act of 1934, as
amended.
"EXPENSES" means any and all expenses incurred in connection with
investigating, defending or asserting any Action indemnified against hereunder
(including, but not limited to, court filing fees, court costs, arbitration fees
or costs, witness fees and reasonable fees and disbursements of legal counsel,
investigators, expert witnesses, consultants, accountants and other
professionals).
"FINANCIAL STATEMENTS" has the meaning set forth in Section 5.7.
"GENERAL CREDITOR" means each Person who, as of the Merger Filing,
is a creditor of the Company, whether or not the amount owing to such Person has
been billed to the Company as of the Merger Filing.
"GENERAL RELEASE AND COVENANT NOT TO ▇▇▇" means the General Release
and Covenant Not to ▇▇▇ in the form of Exhibit D.
"GOVERNMENTAL BODY" means any foreign, federal, state, local or
other governmental authority or regulatory body.
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"GOVERNMENTAL CONSENTS AND FILINGS" has the meaning set forth in
Section 5.2.3.
"GOVERNMENTAL PERMITS" has the meaning set forth in Section 5.9.
"GROSS STOCKHOLDER MERGER SHARES" has the meaning set forth in
Section 3.2.4.
"▇▇▇▇▇▇" means ▇▇▇▇▇▇ ▇▇▇▇▇▇.
"HAZARDOUS MATERIALS" has the meaning set forth in Section 5.27.
"INDEMNIFIED PERSON" and "INDEMNITOR" each has the meaning set forth
in Section 10.3.1.
"IRS" means the Internal Revenue Service.
"INVENTIONS" has the meaning set forth in Section 5.18.
"KNOWLEDGE" means, with reference to a party hereto, only the actual
knowledge of any of the directors and officers of such party, after reasonable
inquiry of such party's employees, agents and consultants and information set
forth in documents in the possession of such party.
"KNOWLEDGE QUALIFICATION" means a qualification to any
representation or warranty made by a party expressed as "to the knowledge" of
such party, that such party "has not received any notice that" or similar
language intended to limit the scope of such representation and warranty.
"LEASED REAL PROPERTY" has the meaning set forth in Section 5.13.
"LOSS" means any and all losses, costs, obligations, liabilities,
diminution in value, settlement payments, awards, judgments, damage to the
environment, natural resources or public health, fines, penalties, damages,
expenses, deficiencies or other charges, whether foreseeable or unforeseeable
and including interest at the Reference Rate on such Losses.
"MATERIAL ADVERSE EFFECT" means, with respect to any party hereto,
any change or effect (or any development that, insofar as can be reasonably
foreseen, would result in any change or effect) that is materially adverse to
the assets, business, financial condition, results of operations or prospects of
such party.
"MERGER" has the meaning set forth in Section 2.1.
"MERGER FILING" has the meaning set forth in Section 4.2
"MERGERCO" has the meaning specified in the first paragraph of this
Agreement.
"MERGER RATIO" has the meaning set forth in Section 3.2.2
"MERGER SHARES" has the meaning set forth in Section 3.2.1.
"MORAL RIGHTS" has the meaning set forth in Section 5.18.
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"NASDAQ/NMS" has the meaning set forth in Section 7.11.
"NET STOCKHOLDER MERGER SHARES" has the meaning set forth in Section
3.2.6.
"NON-COMPETITION AGREEMENTS" means those certain Non-Competition
Agreements to be dated the Effective Date between Parent and ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇,
respectively, each substantially in the form of Exhibit B.
"OPTIONHOLDER MERGER SHARES" has the meaning set forth in Section
3.2.3.
"OPTIONS" means options granted by the Company under the Stock
Option Plan.
"PARENT" has the meaning specified in the first paragraph of this
Agreement.
"PARENT ANCILLARY AGREEMENTS" means all agreements, instruments and
documents being or to be executed and delivered by Parent under this Agreement
or in connection herewith.
"PARENT GROUP MEMBER" means Parent and its Affiliates and their
respective successors and assigns, including, after the Effective Time, the
Surviving Corporation; and the stockholders, directors, officers, employees and
agents of each of such Persons.
"PARENT SEC DOCUMENTS" has the meaning set forth in Section 6.4.
"PERMITTED ENCUMBRANCES" means (i) liens for taxes and other
governmental charges and assessments which are not yet due and payable, (ii)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable, and (iii) other liens or imperfections on property
which are not material in amount, do not interfere with, and are not violated by
the consummation of the transactions contemplated by, this Agreement and do not
materially detract from the value or marketability of, or materially impair the
existing use of, the property affected by such lien or imperfection.
"PER OPTION SHARE STOCK" has the meaning set forth in Section
7.12.1.
"PER SHARE STOCK" AND "PER SHARE ADDITIONAL STOCK" each has the
meaning set forth in Section 3.2.
"PERSON" means any individual, corporation, partnership, joint
venture, association, company, trust, estate, unincorporated organization or
other entity, or any Governmental Body.
"PRODUCTS" has the meaning set forth in Section 5.19.
"PRODUCTS UNDER DEVELOPMENT" has the meaning set forth in Section
5.19.
"PROXY STATEMENT" has the meaning set forth in Section 7.1.
"PUBLISHED PRODUCTS" has the meaning set forth in Section 5.19.
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"RCRA" means the Resource Conservation and Recovery Act, as amended
from time to time, and the rules and regulations promulgated thereunder.
"REFERENCE RATE" means the "prime" or "base" rate of interest
announced from time to time by Union Bank, plus 2% per annum.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and local
laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued
or promulgated by any Governmental Body (including those pertaining to
electrical, building, zoning, environmental and occupational safety and health
requirements) or common law.
"RSPAS" means the two Restricted Stock Purchase Agreements entered
into in October 1997 between the Company and, respectively, ▇▇▇▇▇▇▇ and
TechFarm.
"SEC" means the U. S. Securities and Exchange Commission.
"SECURITIES ACT" means the U.S. Securities Act of 1933, as amended.
"SEVERANCE AGREEMENTS" means the Severance Agreements to be dated
the Effective Date between Parent and ▇▇▇▇▇▇▇, substantially in the form of
Exhibit F.
"SONY" means 989 Studios, formerly known as Sony Interactive Studios
America, a division of Sony Computer Entertainment America, Inc.
"SONY AGREEMENT" means the Development Agreement dated April 29,
1998, by and between Sony and the Company, as amended by (i) First Amendment,
dated September 24, 1998, to Development Agreement dated April 29, 1998, and
(ii) Second Amendment, dated March 8, 1999, to Development Agreement dated April
29, 1998.
"STOCK CERTIFICATE" has the meaning set forth in Section 3.1.1.
"STOCKHOLDER GROUP MEMBER" means (i) in the event the Merger is not
consummated, the Company, and (ii) from and after the Merger Filing, each of the
Effective Time Stockholders.
"STOCKHOLDERS" means those Persons who from time to time are the
holders of shares of Company Common Stock.
"STOCKHOLDERS' REPRESENTATIVE" means ▇▇▇ ▇▇▇▇▇▇▇ acting from and
after the Effective Time on behalf of the Effective Time Stockholders in
accordance with Section 7.16.
"STOCK OPTION PLAN" means the Company's Employee Stock Option Plan.
"STOCK PRICE" means the average closing price of the THQ Stock on
the NASDAQ Stock Market for the thirty trading days ending on the date of this
Agreement.
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"SUBSIDIARY" shall mean any corporation, partnership, limited
liability company, joint venture or other entity in which the Company (a) owns,
directly or indirectly, 50% or more of the outstanding voting securities or
equity interests or (b) is a general partner.
"SURVIVING CORPORATION" has the meaning set forth in Section 2.1.
"TANGIBLE ASSETS" means the tangible assets and properties of the
Company, whether owned or leased.
"TAX" (and, with correlative meaning, "Taxes") shall mean: (i) any
federal, state, local or foreign net income, gross income, gross receipts,
windfall profit, severance, property, production, sales, use, license, excise,
franchise, employment, payroll, withholding, alternative or add-on minimum, ad
valorem, value-added, transfer, stamp, or environmental tax, or any other tax,
custom, duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax or additional
amount imposed by any governmental authority; and (ii) any liability of the
Company or any Subsidiary for the payment of amounts with respect to payments of
a type described in clause (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group, or as a result of any obligation of the
Company or any Subsidiary under any Tax Sharing Arrangement or Tax indemnity
arrangement.
"TAX RETURN" shall mean any return, report or similar statement
required to be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
"TAX SHARING ARRANGEMENT" shall mean any written or unwritten
agreement or arrangement for the allocation or payment of Tax liabilities or
payment for Tax benefits with respect to a consolidated, combined or unitary Tax
Return which Tax Return includes the Company or any Subsidiary.
"TECHFARM" means TechFarm II, L.P., a California limited
partnership.
"THQ STOCK" has the meaning set forth in the recitals to this
Agreement.
"▇▇▇▇▇▇▇" means ▇▇▇ ▇▇▇▇▇▇▇.
"TREASURY REGULATIONS" has the meaning set forth in Section 5.15.3.
2. THE MERGER.
2.1 THE MERGER; THE SURVIVING CORPORATION. On the terms and subject
to the conditions set forth herein, and in accordance with the provisions of the
CGCL, at the Effective Time Mergerco shall be merged with and into the Company
(the "Merger"). Upon the effectiveness of the Merger, the separate existence of
Mergerco shall cease except to the extent provided by law in the case of a
corporation after its merger into another corporation, and the Company shall be
the surviving corporation (the "Surviving Corporation") and shall continue its
existence under the laws of the State of California.
2.2 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Sections 1107 and 1108 of the CGCL.
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2.3 CERTIFICATE OF INCORPORATION, BYLAWS, DIRECTORS AND OFFICERS.
The Certificate of Incorporation and the Bylaws of the Company as in effect
immediately prior to the Effective Time, shall continue in full force and effect
as the Articles of Incorporation and the Bylaws of the Surviving Corporation.
The directors and officers of Mergerco immediately prior to the Effective Time
shall be the initial directors and officers of the Surviving Corporation until
their respective successors are duly elected and qualified.
3. CONVERSION OF SHARES; DETERMINATION OF PURCHASE PRICE.
3.1 CONVERSION TERMS. As of the Effective Time, by virtue of the
Merger and without any action on the part of any Stockholder or any stockholder
of Mergerco:
3.1.1 Each share of Company Common Stock that is issued and
outstanding immediately prior to the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, be
converted into and become (i) the Per Share Stock, and (ii) the right to
receive the Per Share Additional Stock; and each share of Company Common
Stock that is so converted shall, by virtue of the Merger and without any
action on the part of the holder thereof, cease to be outstanding and
shall be canceled and retired and shall cease to exist; and each holder of
a stock certificate which prior to the Effective Time evidenced any such
share (a "Stock Certificate") shall thereafter cease to have any rights
with respect to such share except, upon the surrender of such Stock
Certificate in accordance with Section 4.3, the right to receive the
amounts of Merger Shares provided for in this Agreement.
3.1.2 Each share of Company Common Stock that, immediately
prior to the Effective Time, is held in the treasury of the Company,
shall, by virtue of the Merger and without any action on the part of the
Company, cease to be outstanding and shall be canceled and retired without
payment of any consideration therefor, and shall cease to exist; and
3.1.3 Each share of common stock of Mergerco that is issued
and outstanding immediately prior to the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, be
converted into and become one share of Company Common Stock.
3.2 DETERMINATION OF MERGER SHARES, MERGER RATIO, OPTIONHOLDER
MERGER SHARES, GROSS STOCKHOLDER MERGER SHARES, NET
STOCKHOLDER MERGER SHARES AND PER SHARE AMOUNTS.
3.2.1 "Merger Shares" means the number of shares of THQ Stock
determined by dividing (i) $15,000,000 less the amount applied or deemed
to be applied to satisfy the liabilities of the Company pursuant to
Sections 4.5.1, 4.5.2 and 4.5.3, by (ii) the Stock Price.
3.2.2 "Merger Ratio" means the number of Merger Shares divided
by the sum of (i) the number of shares of Company Common Stock outstanding
at the Effective Time, plus (ii) the number of shares of Company Common
Stock issuable upon the exercise of Options outstanding as of the
Effective Time.
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3.2.3 "Optionholder Merger Shares" means the product of (i)
the Merger Ratio, times (ii) the number of shares of Company Common Stock
issuable upon the exercise of Options outstanding as of the Effective
Time.
3.2.4 "Gross Stockholder Merger Shares" means (i) the Merger
Shares, less (ii) the Optionholder Merger Shares.
3.2.5 "Escrow Shares" means 20% of the Gross Stockholder
Merger Shares.
3.2.6 "Net Stockholder Merger Shares" means (i) the Gross
Stockholder Merger Shares, less (ii) the Escrow Shares.
3.2.7 "Per Share Stock" means (i) the Net Stockholder Merger
Shares, divided by (ii) the number of shares of Company Common Stock
outstanding at the Effective Time.
3.2.8 The "Per Share Additional Stock" means (i) the number of
Escrow Shares, if any, remaining in the Escrow upon termination of the
Escrow, by (ii) the number of shares of Company Common Stock outstanding
at the Effective Time.
3.3 CLOSING OF COMPANY TRANSFER RECORDS. At the Effective Time, the
stock transfer records of the Company shall be closed and no transfer of shares
of Company Common Stock shall thereafter be made.
4. CONSUMMATION OF THE MERGER.
4.1 CLOSING DATE. On the Closing Date, the Company, Parent and
Mergerco shall cause to be filed with the Secretary of State of the State of
California a properly executed certificate of merger consistent with the terms
of this Agreement and the CGCL and in form and substance reasonably satisfactory
to the parties hereto (the "Certificate of Merger"). The Certificate of Merger
shall state that the effective time of the Merger (the "Effective Time") shall
be upon the filing of the Certificate of Merger with the Secretary of State of
the State of California, and the Merger shall be effective at that time. The
date on which the Certificate of Merger is so filed (the "Closing Date") shall
be a date occurring within five business days after the condition set forth in
Section 8.6 is satisfied or such other date, as may be agreed upon by Parent and
the Company at which the conditions set forth in Sections 8 and 9 are satisfied
or waived. In the event that one or more of the conditions set forth in Sections
8 or 9 has not been satisfied or waived on any date scheduled to be the Closing
Date, this Agreement shall not terminate (unless pursuant to the exercise by one
of the parties of its rights under Section 11) and the Closing Date shall be
rescheduled to such date as may be mutually agreed by Parent and the Company or,
if no such date is mutually agreed upon within two business days after the
previously scheduled Closing Date, the earliest date specified in a written
notice given by Parent or the Company to the other that is at least three
business days after the giving of such notice.
4.2 THE MERGER FILING. The "Merger Filing" shall mean the filing of
the Certificate of Merger with the Secretary of State of the State of
California. To facilitate the Merger Filing, the parties shall execute and
acknowledge the Certificate of Merger in accordance with the laws of the State
of California prior to the Closing Date and the Company shall deliver the
executed Certificate of Merger to counsel for Parent. Such counsel shall file
the Certificate of Merger on the Closing Date immediately upon receipt of
telephonic
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authorization from representatives of Parent and the Company. On the Closing
Date, representatives of the parties shall meet at the offices of Sidley &
Austin at ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, for the purpose of
delivering the documents described in Sections 4.6 through 4.8, and subject to
the satisfaction or waiver of each of the conditions set forth in Sections 8 and
9, causing the Merger Filing to occur.
4.3 PAYMENT OF THE PER SHARE STOCK.
4.3.1 Parent shall establish such appropriate procedures as
may be necessary in order to provide for the payment, at or as soon as
practicable after the Effective Time, to each Effective Time Stockholder
who surrenders to Parent a duly endorsed Stock Certificate together with a
properly completed and duly executed letter of transmittal, Merger Shares
in the amounts specified in Section 3.2.
4.3.2 No certificate or scrip representing fractional shares
of THQ Stock shall be issued upon the surrender for exchange of Stock
Certificates pursuant to this Section 4.3. In lieu of any such fractional
share, each holder of Company Common Stock who would otherwise be entitled
to a fraction of a share of THQ Stock shall be paid an amount in cash
(without interest and rounded to the nearest dollar), determined by
multiplying the Stock Price by the fractional interest to which such
holder would otherwise be entitled. For the purpose of paying such cash in
lieu of fractional shares, all Stock Certificates surrendered for exchange
by a Stockholder shall be aggregated.
4.3.3 No dividends or other distributions that are declared on
or after the Effective Time on THQ Stock, or are payable to the holders of
record thereof on or after the Effective Time, will be paid to any Person
entitled by reason of the Merger to receive a certificate evidencing
Merger Shares until such Person surrenders the related Stock Certificate
as provided in this Section 4.3.
4.3.4 The Merger Shares issued or paid upon the surrender of a
Stock Certificate shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to the shares of Company Common
Stock evidenced by such Stock Certificates.
4.4 THE ESCROW. As a condition to the Merger Filing, Parent shall
deliver certificates evidencing the Escrow Shares to the Escrow Agent, to be
held by the Escrow Agent in an escrow account (the "Escrow") in accordance with
the provisions of the Escrow Agreement. Within five business days after
termination of the Escrow in accordance with the Escrow Agreement, the Escrow
Agent shall deliver the Escrow Shares remaining in the Escrow, after all
deductions have been made therefrom pursuant to Section 10.1, (I) to each
Effective Time Stockholder who surrendered a Stock Certificate and received the
Per Share Stock with respect to the shares evidenced by such Stock Certificate,
an amount equal to (a) the Per Share Additional Stock, multiplied by (b) the
number of shares of Company Common Stock evidenced by such Stock Certificate;
and (II) the balance to Parent. Thereafter the Escrow Agent shall not be liable
to any Persons claiming any amount of such Escrow Shares; and any subsequent
distribution of the balance of such Escrow Shares shall be effected directly
with Parent.
4.5 SATISFACTION OF CERTAIN LIABILITIES. Concurrently with the
Merger Filing:
4.5.1 Parent shall either pay directly to the Bridge
Noteholder the full amount of the Bridge Note Obligations, or shall
provide sufficient funds to the Company to enable the Company
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to pay to the Bridge Noteholder the full amount of the Bridge Note
Obligations, in which case the Company shall apply such funds for such
purpose.
4.5.2 Parent shall either pay directly to each General
Creditor the full amount due and owing as of such date to such General
Creditor, or shall provide sufficient funds to the Company to enable the
Company to pay to each General Creditor the full amount due and owing as
of such date to such General Creditor (or that has accrued in favor of
such General Creditor through the Closing Date), in which case the Company
shall apply such funds for such purpose.
4.5.3 Parent and the Company shall agree in writing on the
amount of the obligations owing as of such date to each General Creditor
that is not yet due as of such date, and such amount shall be deemed
assumed by Parent at the Effective Time and shall be paid by Parent in
cash in the ordinary course of business following the Effective Time.
4.6 PARENT'S DELIVERIES. Subject to fulfillment or waiver of the
conditions set forth in Section 8, concurrently with the Merger Filing Parent
shall deliver, if and to the extent not previously delivered, all of the
following to the Company:
4.6.1 a copy of the Certificate of Incorporation of Parent,
certified as of a recent date by the Secretary of State of the State of
Delaware;
4.6.2 a certificate of good standing of Parent, issued as of a
recent date by the Secretary of State of the State of Delaware;
4.6.3 a certificate of the Secretary or an Assistant Secretary
of Parent, dated the Closing Date, in form and substance reasonably
satisfactory to the Company, to the effect that (i) the Certificate of
Incorporation of Parent has not been amended or modified since the date of
certification of the Delaware Secretary of State referred to in Section
4.6.1; (ii) the Bylaws of Parent, as attached thereto, have not been
amended or modified as of the Closing Date; (iii) the resolutions of the
Board of Directors of Parent authorizing the execution, delivery and
performance of this Agreement and the transactions contemplated herein by
Parent, as attached thereto, are in full force and effect and have not
been superseded, amended or modified as of the Closing Date; and (iv) the
incumbency and signatures of the officers of Parent executing this
Agreement and any Parent Ancillary Agreement are as set forth on the
certificate;
4.6.4 an opinion of counsel to Parent, dated the Closing Date
and in form and substance reasonably satisfactory to the Company;
4.6.5 the certificate contemplated by Section 9.1, duly
executed by the President or any Vice President of Parent; and
4.6.6 the Employment Agreements, the Non-Competition
Agreements and the Severance Agreement duly executed by Parent.
4.7 MERGERCO'S DELIVERIES. Subject to the fulfillment or waiver of
the conditions set forth in Section 8, concurrently with the Merger Filing
Mergerco shall deliver, if and to the extent not previously delivered, all of
the following to the Company:
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4.7.1 a copy of the Certificate of Incorporation of Mergerco,
certified as of a recent date by the Secretary of State of the State of
California;
4.7.2 a certificate of good standing of Mergerco, issued as of
a recent date by the Secretary of State of the State of California;
4.7.3 a certificate of the Secretary or an Assistant Secretary
of Mergerco, dated the Closing Date, in form and substance reasonably
satisfactory to the Company to the effect that (i) the Articles of
Incorporation of Mergerco has not been amended or modified since the date
of certification of the Delaware Secretary of California referred to in
Section 4.7.1; (ii) the Bylaws of Mergerco, as attached thereto, have not
been amended or modified as of the Closing Date; (iii) the resolutions of
the Board of Directors of Mergerco authorizing the execution, delivery and
performance of this Agreement and the transactions contemplated herein by
Mergerco and the written consent of Parent adopting this Agreement in
accordance with the CGCL, as attached thereto, are in full force and
effect and have not been superseded, amended or modified as of the Closing
Date; and (iv) the incumbency and signatures of the officers of Mergerco
executing this Agreement are as set forth on the certificate;
4.7.4 an opinion of counsel to Mergerco, dated the Closing
Date and in form and substance reasonably satisfactory to Parent; and
4.7.5 the certificate contemplated by Section 9.1, duly
executed by the President or any Vice President of Mergerco.
4.8 THE COMPANY'S DELIVERIES. Subject to fulfillment or waiver of
the conditions set forth in Section 9, concurrently with the Merger Filing the
Company shall deliver (or cause to be delivered), if and to the extent not
previously delivered, all of the following to Parent:
4.8.1 a copy of the Articles of Incorporation of the Company,
certified as of a recent date by the Secretary of State of the State of
California;
4.8.2 a certificate of good standing of the Company, issued as
of a recent date by the Secretary of State of the State of California;
4.8.3 a certificate of the Secretary or an Assistant Secretary
of the Company, dated the Closing Date, in form and substance reasonably
satisfactory to Parent, to the effect that (i) the Articles of
Incorporation of the Company has not been amended or modified since the
date of certification of the California Secretary of State referred to in
Section 4.8.1; (ii) the Bylaws, as attached thereto, have not been amended
or modified as of the Closing Date; (iii) the resolutions of the Board of
Directors of the Company authorizing the execution and performance of this
Agreement and the transactions contemplated herein and the resolutions of
the Stockholders adopting this Agreement, as attached thereto, are in full
force and effect and have not been superseded, amended or modified as of
the Closing Date; and (iv) the incumbency and signatures of the officers
of the Company executing this Agreement and any Company Ancillary
Agreement are as set forth on the certificate;
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4.8.4 an opinion of counsel to the Company, dated the Closing
Date and in form and substance reasonably satisfactory to Parent;
4.8.5 all consents, waivers or approvals, if any, obtained by
the Company with respect to the consummation of the Contemplated
Transactions;
4.8.6 the certificates contemplated by Sections 8.1, 8.2, 8.6
and 8.8, duly executed by the President or any Vice President of the
Company;
4.8.7 the Employment Agreements and the Non-Competition
Agreements, duly executed by ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇;
4.8.8 the General Release and Covenant Not to ▇▇▇, dated the
Closing Date and duly executed by each of TechFarm, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇;
4.8.9 the Disclaimer of Reliance, dated the Closing Date and
duly executed by TechFarm, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇;
4.8.10 the Severance Agreement, duly executed by ▇▇▇▇▇▇▇; and
4.8.11 the Continuity of Interest Agreements, dated the
Closing Date and duly executed by the Company and each of the Effective
Time Stockholders.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
As an inducement to Parent and Mergerco to enter into this Agreement
and to consummate the transactions contemplated hereby, the Company represents
and warrants to Parent and Mergerco as follows:
5.1 ORGANIZATION AND GOOD STANDING. The Company is duly and validly
formed and subscribed under the laws of California, is validly existing and in
good standing under the laws of California and any applicable provincial or
local authority, has the power and authority to own, operate and lease its
properties and to carry on its business as now conducted and as presently
proposed to be conducted and is registered or qualified to conduct its business
in each country and subdivision thereof (including each state) where it owns or
rents property, has employees or conducts business. Section 5.1 contains a
correct and complete list of the countries and the subdivisions thereof in which
the Company is qualified or registered to conduct business. True and complete
copies of the Company's Articles of Incorporation and all amendments thereto
through the date hereof, and the Company's Bylaws as amended through the date
hereof, have been delivered to Parent.
5.2 POWER, AUTHORIZATION AND VALIDITY.
5.2.1 The Company has the right, power, legal capacity and
authority to enter into and perform its obligations under this Agreement
and all of the Company Ancillary Agreements.
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5.2.2 The Company has full power and authority to execute,
deliver and perform this Agreement and all of the Company Ancillary
Agreements. The execution, delivery and performance of this Agreement and
the Company Ancillary Agreements by the Company have been duly authorized
and approved by the Company's board of directors and the Stockholders and,
except for the Merger Filing, no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by the Company and is the legal, valid and binding
obligation of the Company enforceable in accordance with its terms, and
each of the Company Ancillary Agreements has been duly authorized by the
Company and upon execution and delivery by the Company will be a legal,
valid and binding obligation of the Company enforceable in accordance with
its terms.
5.2.3 Other than the Merger Filing, no consent, approval,
order or authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state or local governmental
authority on the part of the Company (the "Governmental Consents and
Filings") is required in connection with the consummation of the
transactions contemplated by this Agreement and the Company Ancillary
Agreements (the "Contemplated Transactions").
5.3 CAPITALIZATION.
5.3.1 The authorized capital of the Company consists of
10,000,000 shares of common stock, without par value, of which 5,383,333
have been duly issued and are currently issued and outstanding and none
are held as treasury shares. The number of shares reserved for issuance
and the purpose of such reservation are set forth on Schedule 5.3.
5.3.2 Except for the 1,750,000 shares of Common Stock reserved
for issuance under the Stock Option Plan, under which Options to purchase
1,450,667 shares of Common Stock are outstanding:
5.3.2.1 There are not outstanding any options, warrants,
rights (including conversion or preemptive rights) or agreements for
the purchase or acquisition from the Company of any shares of its
capital stock or any securities convertible into or ultimately
exchangeable or exercisable for any shares of the Company's capital
stock; and
5.3.2.2 Except as set forth on Schedule 5.3.2.2, no
shares of the Company's outstanding capital stock, or capital stock
issuable upon exercise or exchange of any outstanding options,
warrants or rights, or other stock issuable by the Company, are
subject to any rights of first refusal or other rights to purchase
such stock (whether in favor of the Company or any other person),
pursuant to any agreement or commitment of the Company.
5.3.3 Attached to this Agreement as Schedule 5.3 is a complete
list of (i) all Stockholders and the number of shares of Company Common
Stock held by each, and (ii) the Bridge Notes and the amount that will be
payable on the Bridge Notes as of the Merger Filing.
5.3.4 At the Effective Time, Options to purchase not more than
1,450,667 shares of Company Common Stock will be outstanding. Attached to
this Agreement as Schedule 5.3 is a
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complete list of the holders of outstanding Options as of the Effective
Time and the number of shares of Company Common Stock issuable to each
upon the exercise of such optionholder's Options.
5.3.5 All of the issued and outstanding shares of Company
Common Stock are held beneficially and of record by the Persons identified
as the holder of such shares in Schedule 5.3, free and clear of any lien,
charge or encumbrance (except as set forth in Schedule 5.3), and no
voting, dividend or other rights to any of such shares have been granted
to any party other than the indicated beneficial and record owner. All
issued and outstanding securities of the Company have been duly authorized
and validly issued, are fully paid and nonassessable, are not subject to
any right of rescission, and have been offered, issued, sold and delivered
by the Company in full compliance with all registration or qualification
requirements (or applicable exemptions therefrom) and all other applicable
provisions, including, without limitation, anti-fraud provisions of the
securities and corporate laws of the United States, Delaware, California
and all other applicable jurisdictions. There is no liability to any
beneficial or record holder of the Company securities for dividends
accrued or declared but unpaid. There are no voting agreements, rights of
first refusal or other restrictions (other than normal restrictions on
transfer under applicable securities laws) applicable to any of the
Company's outstanding shares. The Company has no liability to any former
Stockholders or partners. The Company has not issued any certificate
evidencing any shares of Company Common Stock in replacement for any
certificate that has been lost, destroyed or stolen, except upon receipt
from the issuee thereof of written indemnification agreements in favor of
the Company. True and complete copies of such indemnification agreements
have been delivered to Parent.
5.3.6 The Company has not granted or agreed to grant to any
person or entity any rights to have any securities of the Company
registered or listed with any governmental authority or stock exchange in
order to facilitate the sale of such securities.
5.4 SUBSIDIARIES. The Company does not have any subsidiaries or any
controlling interest, direct or indirect, in any Person.
5.5 NO VIOLATIONS OR REQUIRED CONSENTS. Except as set forth on
Schedule 5.5, Neither the execution and delivery of this Agreement nor any of
the Company Ancillary Agreements, nor the consummation of any Contemplated
Transaction, (a) will conflict with or (with or without notice or lapse of time,
or both) result in a breach of the terms, conditions or provisions of, or
constitute a default, an event of default or an event creating rights of
acceleration, termination or cancellation or a loss of rights under, or result
in the creation or imposition of any Encumbrance upon, any of the Company's
assets, under (i) the Articles of Incorporation or Bylaws of the Company, (ii)
any Company Agreement, (iii) any other material note, instrument, agreement,
mortgage, lease, license, franchise, permit or other authorization, right,
restriction or obligation to which the Company is a party or by which any of its
assets or business is subject or by which the Company is bound, (iv) any Court
Order to which either the Company or, to the Company's knowledge, any
Stockholder is a party or by which the Company's assets or business is subject
or by which the Company is bound, or (v) any Requirements of Laws affecting the
Company or its respective assets or business; or (b) requires the consent,
approval or notification of any third party (other than the Governmental
Consents and Filings).
5.6 LITIGATION. There is not (i) any Action pending against the
Company, or any officer, director or employee of the Company, (ii) to the
knowledge of the Company any threat of any Action, or (iii) any factual basis
for any Action, which Action, if determined adversely to the Company, has an
amount at
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issue that is greater than $3,000 individually and $10,000 in the aggregate. The
Company is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality and there is no Action initiated by the Company currently
pending or any Action which the Company intends to initiate.
5.7 FINANCIAL STATEMENTS; BOOKS AND RECORDS.
5.7.1 The Company has delivered to Parent the Company's
unaudited balance sheet as of the Balance Sheet Date and statement of
operations for the period commencing on the date of incorporation of the
Company and ending on the Balance Sheet Date, which are attached hereto as
Schedule 5.7 (the "Financial Statements"). The Financial Statements: (i)
were prepared in accordance with the books and records of the Company;
(ii) are true, correct, complete and fairly present the financial
condition of the Company at the respective dates therein indicated and the
results of operations for the respective periods therein specified; (iii)
have been prepared in accordance with Agreed Accounting Principles applied
on a consistent basis; and (iv) are certified by the Chief ▇▇▇▇▇ cial
Officer of the Company as fairly presenting, in all material respects, the
financial position of the Company.
5.7.2 Without limiting the foregoing, the Company has no debt,
liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, that is not
reflected, reserved against or disclosed in the Financial Statements,
except for (i) those that are not required to be reported in accordance
with Agreed Accounting Principles and are disclosed by the Company in
writing to Parent to the extent required pursuant to Sections 5.6 or 5.17
hereof, and (ii) those nonmaterial obligations, individually or in the
aggregate, that may have been incurred after the Balance Sheet Date in the
ordinary course of its business, consistent with past practice.
5.8 AVAILABILITY OF ASSETS AND LEGALITY OF USE. Except as set forth
on Schedule 5.8, the assets owned, leased or licensed by the Company constitute
all the assets used in its business (including all books, records, computers and
computer programs and data processing systems). All Tangible Assets are in good
condition (subject to normal wear and tear and immaterial impairments of value
and damage) and serviceable condition and are generally suitable for the uses
for which intended. The Company does not employ any assets that are owned by any
Person other than the Company or a lessor of such assets to the Company pursuant
to a lease that is either set forth on Schedule 5.17 or is not required to be
set forth thereon.
5.9 GOVERNMENTAL PERMITS.
5.9.1 The Company owns, holds or possesses all licenses,
franchises, permits, privileges, immunities, approvals and other
authorizations from Governmental Bodies which are necessary to entitle it
to own or lease, operate and use its assets and to carry on and conduct
its business as currently conducted (herein collectively called
"Governmental Permits"). Schedule 5.9 sets forth a list and brief
description of each Governmental Permit owned, held or possessed by the
Company. Complete and correct copies of all such Governmental Permits have
been delivered to Parent.
5.9.2 Except as set forth in Schedule 5.9, (i) the Company has
fulfilled and performed its obligations under each of the Governmental
Permits, and no event has occurred or
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condition or state of facts exists which constitutes or, after notice or
lapse of time or both, would constitute a breach or default under any such
Governmental Permit or which permits or, after notice or lapse of time or
both, would permit revocation or termination of any such Governmental
Permit, or which might adversely affect in any material respect the rights
of the Company under any such Governmental Permit; (ii) no notice of
cancellation, of default or of any material dispute concerning any
Governmental Permit, or of any event, condition or state of facts
described in the preceding clause, has been received by, or is known to,
the Company; and (iii) each of the Governmental Permits is valid,
subsisting and in full force and effect and will continue in full force
and effect after the Effective Time, in each case without (x) the
occurrence of any breach, default or forfeiture of rights thereunder, or
(y) the consent, approval, or act of, or the making of any filing with,
any Governmental Body.
5.10 REAL PROPERTY. The Company does not own any Real
Property.
5.11 PERSONAL PROPERTY. The Company's fixed asset register sets
forth a true and complete listing as of March 31, 1999 of all machinery,
equipment, vehicles, furniture and other personal property owned by the Company,
other than such items that have been expended in the fiscal year in which
acquired. A complete and correct copy of such fixed asset register as of such
date has been delivered to Parent in the form of Schedule 5.11 and is dated
March 31, 1999.
5.12 PERSONAL PROPERTY LEASES. The Company has delivered to Parent
true and correct copies of each lease or other agreement under which the Company
is lessee of, or holds or operates, any Tangible Assets.
5.13 TITLE TO PROPERTIES. The Company has good and marketable title
to all assets set forth on the balance sheet included in the Financial
Statements and all of the assets thereafter acquired by it (except for such
assets as have been spent, sold or transferred in the ordinary course of
business since the Balance Sheet Date), free and clear of all Encumbrances,
except Permitted Encumbrances. All leases of real property (the "Leased Real
Property") or personal property to which the Company is a party (i) are in good
standing in all material respects, (ii) afford the Company peaceful and
undisturbed possession of the subject matter of the lease, and (iii) to the
knowledge of the Company provide the Company with valid leasehold interests in
such assets free of any Encumbrances except Permitted Encumbrances. The Company
is not aware of any violation, nor has any such entity or person received any
notice of any violation, of any zoning, building, safety or environmental
ordinance, regulation or requirement or other law, bylaw or regulation
applicable to the operation of owned or leased properties or assets, the
violation of which could have a material adverse effect on the Company's
business. Neither the whole nor any part of any Leased Real Property is subject
to any pending suit for condemnation or other taking by any public authority or
other Person, and, to the knowledge of the Company, no such condemnation or
other taking is threatened or contemplated.
5.14 ACCOUNTS RECEIVABLE. All accounts receivable of the Company
have arisen from bona fide transactions by the Company in the ordinary course of
its business.
5.15 TAXES.
5.15.1 Except as set forth on Schedule 5.15, (i) the Company
has filed on or before the date due all Tax Returns required to be filed
(after giving effect to any extensions); (ii) all such Tax Returns are
complete and accurate and disclose all Taxes required to be paid by the
Company for the periods covered thereby and all [text continues on the
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Taxes shown to be due on such Tax Returns have been timely paid; (iii) all Taxes
(whether or not shown on any Tax Return) owed by the Company and required to be
paid on or before the Closing Date have been (or will be) timely paid; (iv) the
Company has not waived or been requested to waive any statute of limitations in
respect of Taxes; (v) the Tax Returns referred to in clause (i) have not been
examined by the Internal Revenue Service or any state, local or foreign taxing
authority; (vi) there is no Action pending or proposed or threatened with
respect to Taxes of the Company and, to the Company's knowledge, no basis exists
therefor; (vii) the Company is not a party to any Tax Sharing Arrangement or any
Tax indemnity arrangement and the Company will not have any liability under any
Tax Sharing Arrangement or Tax indemnity arrangement on or after the Closing
Date; (viii) the Company has filed returns as a separate entity and has not been
a member of any Company Group; (ix) there are no liens for Taxes upon any of the
Company Property except liens relating to current Taxes not yet due; (x) all
Taxes which the Company is required by law to withhold or to collect for payment
have been duly withheld and collected, and have been paid or accrued, reserved
against and entered on the books of the Company; (xi) no claim has ever been
made by a Taxing authority in a jurisdiction where the Company has never paid
Taxes or filed Tax Returns asserting that the Company is or may be subject to
Taxes assessed by such jurisdiction; (xii) the Company has no knowledge of any
facts that, if known to any taxing authority, would likely result in the
issuance of a notice of proposed deficiency or similar notice of intention to
assess Taxes against the Company; (xiii) there are no Tax rulings, requests for
rulings, or closing agreements relating to the Company which could affect the
Company's liability for Taxes for any period after the Closing Date; (xiv) as a
result of a change in accounting method for a Tax period beginning on or before
the Closing Date, the Company will not be required to include any adjustment
under Section 481(c) of the Code (or any corresponding provision of state or
local Tax law) in taxable income for any Tax period beginning on or after the
Closing Date; (xv) as a result of any "closing agreement" (as described in
Section 7121 of the Code or any corresponding provision of state or local Tax
law), the Company will not be required to include any item of income in, or
exclude any item of deduction from, any taxable period beginning on or after the
Closing Date; (xvi) the Company has not disposed of property in a transaction
being accounted for under the installment method pursuant to Section 453 or 453A
of the Code; and (xviii) the Company has not filed a consent under Section
341(f) of the Code or any comparable provision of state or local Tax law.
5.15.2 No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes,
sales taxes, use taxes, real estate transfer taxes, or other similar taxes
will be imposed on the transactions contemplated by this Agreement.
5.15.3 In connection with the transactions contemplated by this
Agreement, there will be no payment, nor will there be any acceleration of
the vesting of any options, payments or other benefits, in each case that
will be (or under Section 280G of the Code and the Treasury Regulations
thereunder (the "Treasury Regulations") will be presumed to be) a
"parachute payment" to a "disqualified individual" as those terms are
defined in Section 280G of the Code and the Treasury Regulations, without
regard to whether such payment or acceleration is reasonable compensation
for personal services performed or to be performed in the future.
5.16 ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date, the
Company has carried on its business in the ordinary course substantially in
accordance with the procedures and practices in effect on the Balance Sheet
Date, and since the Balance Sheet Date there has not been:
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5.16.1 any change in the financial condition, properties,
assets, liabilities, business or operations of the Company which change by
itself or in conjunction with all other such changes, whether or not
arising in the ordinary course of business, has had or can reasonably be
expected to have a material adverse effect on the Company;
5.16.2 any contingent liability incurred by the Company as
guarantor or surety with respect to the obligations of others;
5.16.3 any mortgage, encumbrance or lien filed against any of
the properties of the Company;
5.16.4 any obligation or liability in excess of$10,000,
individually or in the aggregate, incurred by the Company other than in
the ordinary course of business;
5.16.5 any purchase, sale or other disposition, or any
agreement or other arrangement for the purchase, sale or other
disposition, of any of the properties or assets of the Company other than
in the ordinary course of business or in amounts less than$10,000;
5.16.6 any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the properties, assets or
business of the Company (as presently conducted or presently proposed to
be conducted);
5.16.7 any declaration, setting aside or payment of any
dividend on, or the making of any other distribution in respect of, the
shares of the Company, any split, combination or recapitalization of the
capital stock of the Company or any direct or indirect redemption,
purchase or other acquisition of the capital stock of the Company;
5.16.8 any material change with respect to the management,
supervisory, development or other key personnel of the Company;
5.16.9 any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except such a
satisfaction, discharge or payment made in the ordinary course of business
that is not material to the assets, properties, financial condition,
operating results or business of the Company;
5.16.10 any obligation or liability incurred by the Company to
any of its officers, directors or any loans or advances made to any of its
officers or directors except normal compensation and expense allowances
payable to officers consistent with past practices;
5.16.11 any waiver by the Company of a valuable right or of a
material debt;
5.16.12 any material change or amendment to a material
contract or arrangement by which the Company or any of its assets or
properties is bound or subject, except for changes or amendments which are
expressly provided for or disclosed in this Agreement or the Company
Ancillary Agreements;
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5.16.13 any capital expenditure or commitments therefor by the
Company in excess of $10,000, individually or in the aggregate; or
5.16.14 any Tax Return filed by the Company that is
inconsistent with past practice, or in which the Company has taken any
position, made any election, or adopted any method that is inconsistent
with positions taken, elections made or methods used in preparing or
filing similar Tax Returns in prior periods;
5.16.15 to the knowledge of the Company, any other event or
condition of any character which would materially and adversely affect the
assets, properties, financial condition, operating results or, business of
the Company.
5.17 AGREEMENTS AND COMMITMENTS.
5.17.1 Attached to this Agreement as Schedule 5.17 is a
complete list of every oral or written executory agreement, obligation or
commitment which is material to the Company, its financial condition,
business or prospects (including but not limited to):
5.17.1.1 Any contract, commitment, letter contract,
quotation, purchase order, bid or proposal providing for payments by
or to the Company in an aggregate amount of $5,000 or more;
5.17.1.2 Any license agreement as licensor or licensee
or any agreement to encumber, transfer or sell rights in or with
respect to any of the Company's Intellectual Property (as defined in
Section 5.12 below), except for standard non-exclusive software
licenses for products that are available through general retail or
mail-order channels that are granted to end-user customers in the
ordinary course of business, the form of which has been provided or
made available to Parent's counsel;
5.17.1.3 Any agreement for the purchase, sale or lease
of real or personal Property or intangible assets involving total
payments of more than $10,000;
5.17.1.4 Any agreement for the purchase or sale of any
business unit, business entity or franchise;
5.17.1.5 Any publishing, dealer, distributor, sales
representative, original equipment manufacturer or value added
remarketer agreement and any other agreement accounting for more
than $10,000 of the Company's revenue in any consecutive
twelve-month period;
5.17.1.6 Any purchase or sale agreement relating to any
equity or debt security;
5.17.1.7 Any joint venture contract or arrangement or
any other agreement that involves a sharing of profits with other
persons or entities;
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5.17.1.8 Any instrument evidencing indebtedness for
borrowed money by way of direct loan, sale of debt securities,
purchase money obligation, conditional sale, guarantee or otherwise
(except for trade indebtedness and advances to employees incurred in
the ordinary course of business), and any instrument, contract,
indenture or financing statement evidencing any lien, encumbrance or
security interest in any of the Company's assets;
5.17.1.9 Any contract containing covenants purporting to
limit the Company's freedom to compete in any line of business in
any geographic area;
5.17.1.10 Any lease of real or personal property; and
5.17.1.11 Any other agreement not listed above that is
material to the assets, properties, financial condition, operating
results or business of the Company.
5.17.2 All agreements, obligations and commitments listed or
required to be listed according to Sections 5.17.1, 5.18 and 5.23
(collectively the "Company Agreements") are valid and in full force and
effect in all material respects and a true and complete copy of each has
been delivered to, or made available for inspection by, Parent's counsel.
Neither the Company nor any other party is in breach or default in any
material respect under the terms of any Company Agreement, nor does the
Company have any knowledge of any claim or threat by any other party that
the Company has breached any Company Agreement.
5.17.3 To the extent any Company Agreement with a third party
provides for development or other performance by the Company: (i) such
development or other performance has been timely and properly completed in
accordance with the terms of such Company Agreement and the Company has no
liability arising out of any prior deliverables; (ii) the Company is in
full compliance with all internal schedules and specifications to meet any
milestone or other delivery specified in such Company Agreement the date
of which milestone or delivery has not yet occurred; and (iii) the Company
is not aware of any matter which might cause the Company not to timely and
properly meet any such milestone or other delivery date in full accordance
with the applicable Company Agreement. The Company is in full compliance
with all maintenance and enhancement obligations contained in all Company
Agreements, and the Company has not received any notice from any party to
the contrary. No other party to a Company Agreement has ever exercised a
"right to complete" or similar provision in a Company Agreement that
allowed such party to correct or complete any deliverable item from the
Company. All other parties to any Company Agreement regarding the
publishing or distribution of products have been substantially timely, and
none is currently in arrears, with respect to the payment of any royalty
or similar payments to the Company, the Company has no reason to believe
that any prior royalty or similar payment is incorrect by more than 5% and
the Company has never exercised an audit or other formal remedy under any
Company Agreement with respect to any such payment. In the event any
Company Agreement is terminated by the other party thereto, the Company
will have no liability for a refund or other repayment of any advance,
minimum guarantee or other amounts previously paid to the Company under
such Company Agreement.
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5.18 INTELLECTUAL PROPERTY.
5.18.1 The Company owns or has the right to use all right,
title and interest in all patents, patent applications, trademarks,
service marks, trade names, copyrights, trade secrets, know-how,
technology, Moral Rights (as defined below) and other intellectual
property and proprietary rights reasonably necessary to the conduct of its
business as presently conducted and as presently proposed to be conducted
(the "Company Intellectual Property"). "Moral Rights" means any rights of
paternity or integrity, any right to claim authorship of an invention,
improvement, original work of authorship, formula, process, computer
program, database or trade secret ("Inventions"), to object to any
distortion, mutilation or other modification of, or other derogatory
action in relation to, any Invention, whether or not such would be
prejudicial to any developer's honor or reputation. Set forth on Schedule
5.18 hereto is a true and complete list of all patents, copyright and
trademark registrations and all applications therefor regarding the
Company Intellectual Property that are owned or licensed by the Company,
and no loss, cancellation, termination, expiration or denial of any such
registration or application is foreseeable by the Company except as set
forth in Schedule 5.18. Copies of all forms of non-disclosure or
confidentiality agreements utilized to protect the Company Intellectual
Property have been provided to Parent's counsel.
5.18.2 To the knowledge of the Company, no employee,
Stockholder or other security holder of the Company or any other Person
has any ownership right, title, interest, claim in or lien on any of the
Company Intellectual Property, nor is any Person currently infringing or
using any misappropriated Company Intellectual Property. The Company has
taken and will take all steps reasonably necessary to preserve its legal
rights in, and the secrecy of, the Company Intellectual Property, except
that for which disclosure is required for legitimate business or legal
reasons. Except as set forth in any Company Agreement, the Company has not
granted, and there are not outstanding, any options, licenses or
agreements of any kind relating to any Company Intellectual Property, nor
is the Company bound by or a party to any option, license or agreement of
any kind with respect to any of the Company Intellectual Property. Except
as set forth in any Company Agreement, the Company is not obligated to pay
any royalties or other payments to third parties with respect to the
marketing, sale, distribution, manufacture, license or use of any Company
Intellectual Property.
5.18.3 The business of the Company as presently conducted and
as proposed to be conducted by the Company with respect to product
produced or in production prior to the Closing does not and will not cause
the Company to infringe or violate any of the patents, trademarks, service
marks, trade names, copyrights, trade secrets, proprietary rights or other
intellectual property rights of any other person or entity, and the
Company has not received any claim or notice of infringement or potential
infringement of the intellectual property of any other person. The Company
is not using any confidential information or trade secrets of any former
employer of any of its past or present employees. The Company has no
reason to believe it is or will be necessary to utilize any inventions of
any employees of the Company (or persons the Company currently intends to
hire) made prior to their employment by the Company. At no time during the
conception or reduction to practice of any Invention that is a part of the
Company Intellectual Property was any developer, inventor or other
contributor to such Invention operating under any grants from any
governmental entity or agency or private source, performing research
sponsored by any governmental entity or agency or private source or
subject to any employment agreement or invention assignment or
nondisclosure agreement or other obligation with any third party that
could adversely affect the Company's rights in the Company Intellectual
Property.
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5.19 PRODUCTS AND DISTRIBUTION. Schedule 5.19 contains a complete
list of all of the software products (by SKU) developed, published and/or
distributed by the Company which products have been commercially released (the
"Published Products") and all products (by SKU) currently under development by
the Company, or which the Company is contractually obligated to develop (the
"Products Under Development") and collectively with the Published Products
referred to as the "Products").
5.19.1 Schedule 5.19 sets forth, for each Product, a list of
all contracts and agreements (including without limitation all
development, trademark license, technology license, distribution or other
agreements) relating to the Product.
5.19.2 Schedule 5.19 also sets forth, for each Product Under
Development and as of the date of this Agreement, the following: (a) the
currently scheduled final software delivery date, and (b) an estimate of
percentage of completion.
5.20 DEVELOPMENT TOOLS. Schedule 5.20 contains a complete list of
all software development tools used or intended to be used by the Company in the
development of any of the Products, except for any such tools that are generally
available and are used in their generally available form (such as standard
compilers) (the "Development Tools"). Schedule 5.20 also sets forth, for each
Development Tool: (i) for any Development Tool not entirely developed internally
by the Company employees, the identity of the independent contractors and
consultants involved in such development and a list of the agreements with such
independent contractors and consultants; (ii) a list of any third parties with
any rights to receive royalties or other payments with respect to such
Development Tool, and a schedule of all such royalties payable; (iii) a list of
any restrictions on the Company's unrestricted right to use and distribute such
Development Tool; and (iv) a list of all agreements between the Company and
third parties for the use by such third party of such Development Tool. The
Company has sufficient right, title and interest in and to the Development Tools
for the conduct of its business as currently conducted and as proposed to be
conducted.
5.21 COMPLIANCE WITH LAW AND CHARTER DOCUMENTS. The Company is not
in violation or default of any provisions of its Articles of Incorporation or
Bylaws, both as amended; and to the knowledge of the Company, except for any
violations that individually and in the aggregate would have no material adverse
impact on the Company's business, the Company is in compliance with all
applicable statutes, laws, regulations and executive orders of the United States
and all states, provinces and local authorities and all foreign countries or
other governmental bodies and agencies having jurisdiction over the Company's
business or properties. The Company has not received any notice of any violation
of such statutes, laws, regulations or orders which has not been remedied prior
to the date hereof.
5.22 ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇.
5.22.1 The Company is its own sole "ultimate parent entity"
(as defined in 16 C.F.R. Section 801.1(a)(3) (1998)).
5.22.2 The "person" (as defined in 16 C.F.R. Section
801.1(a)(1) (1998)) in which the Company is included, is the "ultimate
parent entity" (as defined in 16 C.F.R. Section 801.1(a)(3) (1998)), does
not have "annual net sales" (as defined in 16 C.F.R. Section 801.11
(1998)) or "total assets" (as defined in 16 C.F.R. Section 801.11 (1998))
of $10 million or more.
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5.23 EMPLOYEES AND EMPLOYEE RELATIONS.
5.23.1 The Company has no employment contract or material
consulting agreement currently in effect that is not terminable on notice
or whose lawful termination would result in any payment to the terminated
employee greater than the minimum amounts required by California law upon
termination of an employee (other than agreements with the sole purpose of
providing for the confidentiality of proprietary information or assignment
of inventions). All officers, employees and consultants of the Company
have executed and delivered to the Company an agreement regarding the
protection of such proprietary information and the assignment of
inventions to the Company substantially in the forms attached hereto as
Schedule 5.23(a) and 5.23(b). The Company Intellectual Property does not
incorporate or include any "Prior Inventions" of any officer, employee or
consultant (as such term is defined in such forms).
5.23.2 The Company (i) has never been and is not now subject
to a union organizing effort, (ii) is not subject to any collective
bargaining agreement with respect to any of its employees, (iii) is not
subject to any other contract, written or oral, with any trade or labor
union, employees' association or similar organization, and (iv) is not a
party to any current strike or labor dispute. To the knowledge of the
Company, (I) no labor union has requested, sought or attempted to
represent any employees, representatives or agents of the Company, (II)
there is no labor organization activity involving the Company's employees,
(III) the consummation of the Contemplated Transactions will not have a
material adverse effect on the Company's labor relations and (IV) none of
the Company's key employees intend to leave their employ.
5.23.3 Schedule 5.23.3 contains a summary of all pension,
retirement, disability, medical, dental or other health plans, life
insurance or other death benefit plans, profit sharing, deferred
compensation agreements, stock, option, bonus or other incentive plans,
vacation, sick, holiday or other paid leave plans, severance plans or
other similar employee benefit plans maintained by the Company (the
"Employee Plans"). Each of the Employee Plans, and their administration,
is, in all material respects, in compliance with all applicable federal,
state, provincial, municipal, local and other governmental laws and
ordinances, orders, rules and regulations and the Company is in full
compliance with the terms of all of the Employee Plans.
5.23.4 All contributions or other payments due with respect to
any Employee Plan have been made or accrued on the Financial Statements
except those contributions or payments accruing after the Balance Sheet
Date in the ordinary course.
5.23.5 Neither the Company nor any ERISA Affiliate has or has
ever maintained any "employee pension benefit plan" or "employee welfare
benefit plan" (as such terms are defined in ERISA) or has ever been
required to make any payment to any employee pension benefit plan or
employee welfare plan.
5.23.6 To the knowledge of the Company, no employee of the
Company is in violation of (i) any material term of any employment
contract, invention disclosure or assignment agreement or noncompetition
agreement or (ii) any material term of any other contract or agreement, or
any restrictive covenant, relating to the right of any such employee to be
employed by the Company or to use trade secrets or proprietary information
of others. To the knowledge of the Company, the mere fact of employment of
any employee of the Company does not subject the Company to any
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liability to any third party. There are no Actions pending or, to the
knowledge of the Company, threatened (or any basis therefor), relating to
the prior employment of any of the Company's employees or consultants,
their use in connection with the Company's business of any information,
technology or techniques allegedly proprietary to any of their former
employers, clients or other parties, or their obligations under any
agreements with prior employers, clients or other parties.
5.23.7 Other than the Employment Agreement and except as
required by law, the Company is not a party to any (i) agreement with any
executive officer or other key employee of the Company (a) the benefits of
which are contingent, or the terms of which are materially altered, upon
the execution of this Agreement or the Ancillary Agreements (other than
the modification of such benefits or terms of employment by the Employment
Agreement) or the occurrence of any of the Contemplated Transactions, (b)
providing any term of employment or compensation guarantee or (c)
providing severance benefits or other benefits after the termination of
employment of such employee regardless of the reason for such termination
of employment, or (ii) agreement or plan, including, without limitation,
any stock option plan, stock appreciation rights plan or stock purchase
plan, any of the benefits of which will be materially increased, or the
vesting of benefits of which will be materially accelerated, by the
occurrence of any of the Contemplated Transactions or the execution of
this Agreement or the Ancillary Agreements or the value of any of the
benefits of which will be calculated on the basis of any of the
Contemplated Transactions or the provisions of this Agreement or the
Ancillary Agreements.
5.23.8 A list of all ongoing employees, officers and
development consultants of the Company and their current compensation
(salary and bonuses), their last annual review date and their latest
change in compensation (salary or bonus) is set forth in Schedule 5.23.8
attached to this Agreement.
5.23.9 The Company is not aware that any employee or
consultant of the Company is obligated under any agreement (including
licenses, covenants or commitments of any nature) or subject to any
judgment, decree or order of any court or administrative agency, or any
other restriction, that would interfere with the use of his or her best
efforts to carry out his or her duties for the Company or to promote the
interests of the Company or that would conflict with the Company's
business as presently conducted or proposed to be conducted. The carrying
on of the Company's business by the employees and contractors of the
Company and the conduct of the Company's business as presently proposed,
will not, to the Company's knowledge, conflict with or result in a breach
of the terms, conditions or provisions of, or constitute a default under,
any contract, covenant or instrument under which any of such employees or
contractors or the Company is now obligated.
5.24 BUSINESS PLAN. The Company's business plan is attached
hereto as Schedule 5.24.
5.25 CORPORATE DOCUMENTS. The Company has made available to Parent
for examination all documents and information listed in the Exhibits and
Schedules to this Agreement, including, without limitation, the following: (i)
copies of the Company's Articles of Incorporation as currently in effect; (ii)
the Company's corporate minute books containing all records of all proceedings,
consents, actions and meetings of the Stockholders and the Company's Board of
Directors or any committees thereof, (iii) the Company's stock ledgers and
journals reflecting all stock issuances and transfers; and (iv) all permits,
orders and consents now in effect and issued by any regulatory agency expressly
to the Company and all applications for such permits, orders and consents. The
minute books and stock records of the Company provided to Parent contain
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a complete summary of all meetings, consents and actions of the Board of
Directors of the Company and the Stockholders, and all issuances and transfers
of the Company's securities, since the time of its incorporation, accurately
reflecting all transactions referred to in such minutes and records in all
material respects.
5.26 NO BROKERS. The Company is not obligated for the payment of
fees or expenses of any investment banker, broker or finder in connection with
the origin, negotiation or execution of this Agreement or the Company Ancillary
Agreements or in connection with any Contemplated Transaction.
5.27 ENVIRONMENTAL MATTERS.
5.27.1 To the knowledge of the Company, during the period that
the Company has leased or owned its properties or owned or operated any
facilities, there have been no disposals, releases or threatened releases
of Hazardous Materials (as defined below) on, from or under such
properties or facilities. The Company has no knowledge of any presence,
disposals, releases or threatened releases of Hazardous Materials on, from
or under any of such proper-ties or facilities, which may have occurred
prior to the Company having taken possession of any of such properties or
facilities. For purposes of this Agreement, the terms "disposal,"
"release," and "threatened release" shall have the definitions assigned
thereto by CERCLA. For the purposes of this Section "Hazardous Materials"
shall mean any hazardous or toxic substance, material or waste which is or
becomes prior to the Closing regulated under, or defined as a "hazardous
substance," "pollutant," "contaminant," "toxic chemical," "hazardous
material," "toxic substance," or "hazardous chemical" under (1) CERCLA;
(2) the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
Section 11001 et seq.; (5) the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801 et seq.; (4) the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq.; (5) the Occupational Safety and Health Act of
1970, 29 U.S.C. Section 651 et seq.; (6) regulations promulgated under any
of the above statutes; or (7) any applicable state or local statute,
ordinance, rule, or regulation that has a scope or purpose similar to
those statutes identified above;
5.27.2 To the knowledge of the Company, none of the Company's
properties or facilities is in violation of any federal, state, or local
law, ordinance, regulation, or order relating to industrial hygiene or to
the environmental conditions on, under or about such properties or
facilities, including, but not limited to, soil and ground water
condition. During the time that the Company has owned or leased its
properties and facilities, neither the Company nor, to the Company's
knowledge, any third party, has used, generated, manufactured or stored
on, under or about such properties or facilities or transported to or from
such properties or facilities any Hazardous Materials.
5.27.3 During the time that the Company has owned or leased
its properties and facilities, there has been no litigation brought or
threatened against the Company, or any settlement reached by the Company
with, any party or parties alleging the presence, disposal, release or
threatened release of any Hazardous Materials on, from or under any of
such properties or facilities.
5.28 INSURANCE. The Company maintains, and at all times since the
incorporation of the Company has maintained, fire and casualty, general
liability, business interruption, and product liability insurance which is
prudent for similarly sized and similarly situated businesses and which provides
coverage sufficient in amount to allow the Company to replace any of its
properties that might be damaged or destroyed.
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5.29 DISCLOSURE. This Agreement, the Company Ancillary Agreements,
the Exhibits hereto and thereto, the certificates and documents delivered by, or
to be delivered by, the Company to Parent under this Agreement or the Company
Ancillary Agreements, taken together, do not contain any untrue statement of a
material fact and do not omit to state any material fact necessary in order to
make the statements contained herein and therein, in light of the circumstances
under which such statements were made, not misleading.
5.30 POOLING-OF-INTERESTS. To the knowledge of the Company, the
Company has not engaged in any transaction that might preclude the Parent from
accounting for the Merger as a pooling-of-interests.
6. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO.
As an inducement to the Company to enter into this Agreement and to
consummate the transactions contemplated hereby, Parent and Mergerco hereby
jointly and severally represent and warrant to the Company and agree as follows:
6.1 ORGANIZATION AND CAPITAL STRUCTURE.
6.1.1 Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has full
corporate power and authority to own or lease and to operate and use its
properties and assets and to carry on its business as now conducted. The
authorized capital of Parent consists of (i) 35,000,000 shares of THQ
Stock, par value $0.01 per share, of which, as of March 24, 1999,
11,374,173 shares were issued and outstanding, and (ii) 1,000,000 shares
of preferred stock, par value $0.01 per share, none of which is issued and
outstanding or reserved for any purpose. Except for options and warrants
described in the Parent SEC Documents and as contemplated hereby, there
are no options, warrants or other rights to acquire from Parent, or
agreements or commitments by Parent to issue or sell, any shares of
capital stock of Parent, whether on conversion of other securities or
otherwise. All of the Merger Shares, when issued and delivered in
accordance with this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable.
6.1.2 Mergerco is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
authorized capital of Mergerco consists of 1,000 shares of common stock,
par value $1.00 per share, all of which have been issued and are
outstanding and none are held as treasury shares. All of the outstanding
shares of capital stock of Mergerco are validly issued, fully paid and
nonassessable and owned of record and beneficially by Parent, free from
all Encumbrances.
6.2 AUTHORITY.
6.2.1 Parent has full corporate power and authority to
execute, deliver and perform this Agreement and all of the Parent
Ancillary Agreements. The execution, delivery and performance of this
Agreement and the Parent Ancillary Agreements by Parent have been duly
authorized, except for the adoption of this Agreement by Parent as the
sole stockholder of Mergerco in accordance with Section 7.3 and except for
the approval of this Agreement by Parent's board of directors, no other
corporate proceedings on the part of Parent are necessary to authorize
this Agreement, the Parent
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Ancillary Agreements and the transactions contemplated hereby and thereby.
This Agreement has been duly authorized, executed and delivered by Parent
and is the legal, valid and binding obligation of Parent enforceable in
accordance with its terms and each of the Parent Ancillary Agreements has
been duly authorized by Parent and upon execution and delivery by Parent
will be a legal, valid and binding obligation of Parent enforceable in
accordance with its terms.
6.2.2 Mergerco has full corporate power and authority to
execute, deliver and perform this Agreement. The execution, delivery and
performance of this Agreement by Mergerco have been duly authorized and
approved by Mergerco's board of directors and, except for the adoption of
this Agreement by Parent in accordance with Section 7.3 and the Merger
Filing, no other corporate proceedings on the part of Mergerco are
necessary to authorize this Agreement and the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by
Mergerco and is the legal, valid and binding agreement of Mergerco
enforceable in accordance with its terms.
6.2.3 Neither the execution or delivery of this Agreement or
any of the Parent Ancillary Agreements, the consummation of any of the
transactions contemplated hereby or thereby nor compliance with or
fulfillment of the terms, conditions and provisions hereof or thereof
will:
6.2.3.1 conflict with, result in a breach of the terms,
conditions or provisions of, or constitute a default, an event of
default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under, or result in the creation or
imposition of any Encumbrance upon any of Parent's or Mergerco's
assets under, (i) the Certificate of Incorporation or Bylaws of
Parent or the Certificate of Incorporation or Bylaws of Mergerco,
(ii) any material note, instrument, agreement, mortgage, lease,
license, franchise, permit or other authorization, right,
restriction or obligation to which either Parent or Mergerco is a
party or any of their respective assets or business is subject or by
which either Parent or Mergerco is bound, (iii) any Court Order to
which either Parent or Mergerco is a party or by which either Parent
or Mergerco is bound or (iv) any Requirements of Laws affecting
Parent or Mergerco, except for, in the case of clauses (ii) or (iii)
of this Section 6.2.3.1, any such conflicts, breaches, defaults,
rights or Encumbrances that, individually or in the aggregate, would
not have a Material Adverse Effect on Parent or materially impair
the ability of Parent to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated
hereby; or
6.2.3.2 require the approval, consent, authorization or
act of, or the making by either Parent or Mergerco of any
declaration, filing or registration with, any Person, except for the
Merger Filing and such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be
obtained or made would not, individually or in the aggregate, have a
Material Adverse Effect on Parent or materially impair the ability
of Parent to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby.
6.3 NO INVESTMENT BANKER FEES PAYABLE BY STOCKHOLDERS. No
Stockholder will have any liability for any fees or commissions payable by
either Mergerco or Parent (or any Person acting on behalf of Mergerco or Parent)
to any investment banker, broker, finder or intermediary for or on account of
the transactions contemplated by this Agreement.
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6.4 PARENT SEC DOCUMENTS. Parent has previously delivered to the
Company and each of the Stockholders of the Company complete and correct copies
of all reports (including annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K) filed by it with the SEC since January 1,
1999 (the "Parent SEC Documents"). As of their respective dates, the Parent SEC
Documents complied in all material respects with the requirements of the
Exchange Act and none of the Parent SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
7. ACTION PRIOR TO THE MERGER FILING.
The parties hereto covenant and agree to take the following actions
between the date hereof and the Merger Filing:
7.1 [RESERVED].
7.2 THE STOCKHOLDERS' REPRESENTATIVE. The Stockholders'
Representative shall be the representative of the Stockholders after the
Effective Time (and their agent and attorney-in-fact with the power and
authority to take all action on behalf of all Indemnifying Parties with respect
to any action or decisions required to be made under the Escrow Agreement,
Section 10 or otherwise with respect to this Agreement and the Merger); and each
of the Parent Group Members shall be entitled to deal with the Stockholders'
Representative on such basis.
7.3 ACTION BY PARENT. Parent shall take such actions, as the sole
stockholder of Mergerco, as may be necessary to approve the Merger and adopt
this Agreement under the CGCL.
7.4 INVESTIGATION OF THE COMPANY BY PARENT. The Company shall afford
to the officers, employees and authorized representatives of Parent (including
its accountants, attorneys and financial advisors) complete access during normal
business hours to the offices, properties, employees and business and financial
records (including computer files, retrieval programs and similar documentation)
of the Company to the extent Parent shall deem necessary or desirable, and shall
furnish to Parent or its authorized representatives such additional information
concerning the operations, properties and business of the Company as may be
reasonably requested to enable Parent or its representatives to verify the
accuracy of the representations and warranties contained in this Agreement, to
verify that the covenants of the Company contained in this Agreement have been
complied with, to determine whether the conditions set forth in Section 8 have
been satisfied, and to make the determinations provided for in this Agreement.
Parent agrees that such investigation shall be conducted in such a manner as not
to interfere unreasonably with the operations of the Company. No investigation
made by Parent or its representatives hereunder shall affect the efficacy of any
of the representations and warranties of the Company hereunder or the rights of
Parent under Section 10.
7.5 PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the
parties hereto shall refrain from taking any action which would render any
representation or warranty set forth in Sections 5 or 6 of this Agreement
inaccurate as of the Effective Time. Each party shall promptly notify the other
parties of any Action that shall be instituted or threatened against such party
to restrain, prohibit or otherwise challenge the legality of any transaction
contemplated by this Agreement. The Company shall promptly notify
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Parent of any Action that may be instituted or threatened against the Company
which would have been listed in Schedule 5.6 if such Action had arisen prior to
the date hereof.
7.6 CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME. Except as
expressly contemplated by this Agreement, the Company shall carry on its
business in, and not enter into any material transaction other than in
accordance with, the ordinary course consistent with past practice and, to the
extent consistent therewith, use its reasonable best efforts to preserve intact
its current business organization, keep available the services of its current
employees and preserve its relationships with Persons having dealings with it.
In connection therewith, the Company shall not (i) transfer or cause to be
transferred any employee or agent of the Company to any Affiliates of the
Company or any Stockholder, (ii) permit any Affiliate of the Company or of any
Stockholder to offer employment to any such employee or agent, or (iii)
otherwise attempt to persuade any such employee or agent to terminate his or her
relationship with the Company other than for reasons that are in the best
interests of the Company. Without limiting the generality of the foregoing, and
except as expressly contemplated by this Agreement, the Company shall not,
without the prior written consent of Parent:
7.6.1 take any action of the nature described in Section 5.16;
7.6.2 grant any additional options, issue, deliver, sell,
pledge, dispose of or otherwise encumber any shares of its capital stock
or other securities (including any rights, warrants or options to acquire
any shares of its capital stock or other securities); or issue any
certificate evidencing any shares of Company Common Stock in replacement
for any certificate that has been lost, destroyed or stolen, except upon
receipt from the issuee thereof of indemnification of the Company in form
and substance satisfactory to Parent;
7.6.3 amend its Articles of Incorporation or Bylaws;
7.6.4 acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of or equity
in, or by any other manner, any business or any Person or division
thereof;
7.6.5 make or incur any new capital expenditure or
expenditures which, individually, is in excess of $10,000 or, in the
aggregate, are in excess of $50,000;
7.6.6 pay, discharge or satisfy (i) any claim by or liability
or obligation owing to, any present, former or purported holder of any
securities of the Company, (ii) the Bridge Note Obligations, or (ii) any
other claim, liability or obligation other than the payment, discharge or
satisfaction thereof in the ordinary course of business consistent with
past practice; in each case whether such claim, liability or obligation is
absolute, accrued, asserted or unasserted, contingent or otherwise;
7.6.7 alter through merger, liquidation, reorganization,
restructuring or in any other fashion its corporate structure;
7.6.8 enter into or adopt, or amend, any bonus, incentive,
deferred compensation, insurance, medical, hospital, disability or
severance plan, agreement or arrangement or enter into or amend any
employee benefit plan or employment, consulting or management agreement,
other than
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any such amendment to an employee benefit plan that is made to maintain
the qualified status of such plan or its continued compliance with
applicable law; or pay or commit to pay any bonus to any officer or
employee of the Company, or make any other material change in the
compensation of its employees;
7.6.9 modify in any material respect any of the Company
Agreements; or enter into any agreement, understanding, obligation or
commitment; or incur any indebtedness or obligation, of the type that
would have been required to be listed in Schedule 5.17 if in existence on
the date hereof; or enter into any contract that provides for any approval
or consent by any Person to the transactions contemplated by this
Agreement;
7.6.10 enter into any other transaction affecting the business
of the Company, other than in the ordinary course of business consistent
with past practice or as expressly contemplated by this Agreement;
7.6.11 file any Tax Return in respect of its Federal income
Taxes or state income or franchise Taxes; or
7.6.12 with respect to Taxes other than Federal income Taxes
or state income or franchise Taxes, prepare or file any Tax Return
inconsistent with prior practice, or on any such Tax Return, take any
position, make any election, or adopt any method that is inconsistent with
positions taken, elections made or methods used in preparing or filing
similar Tax Returns in prior periods.
7.6.13 take any action that might preclude Parent from
accounting for the Merger as a pooling-of-interests.
7.7 NOTIFICATION BY THE COMPANY OF CERTAIN MATTERS. During the
period prior to the Effective Time, the Company shall promptly advise Parent in
writing of (i) any change or event of which the Company has knowledge that could
have a Material Adverse Effect on the Company, (ii) any notice or other
communication from any third Person alleging that the consent of such third
Person is or may be required in connection with the transactions contemplated by
this Agreement, and (iii) any material default under any Company Agreement or
event which, with notice or lapse of time or both, would become such a default
on or prior to the Effective Time and of which the Company has knowledge.
7.8 MUTUAL COOPERATION; REASONABLE BEST EFFORTS. The parties hereto
shall cooperate with each other, and shall use their respective reasonable best
efforts to cause as promptly as possible the fulfillment of the conditions to
each other party's obligations hereunder and to obtain as promptly as possible
all consents, authorizations, orders or approvals from each and every Person
required in connection with the transactions contemplated by this Agreement.
Each of the parties hereto shall take all such actions as may reasonably be
requested by another party hereto in order to further the consummation of the
transactions contemplated hereby and the acquisition of the control of the
Company by Parent on the terms and subject to the conditions set forth herein
and to permit such party to verify that the covenants of the other parties
contained in this Agreement have been complied with.
7.9 NO SOLICITATION. The Company acknowledges that Parent has
incurred and will incur substantial third party fees and internal costs in
performing its due diligence investigation and performing its other covenants
and agreements hereunder. In consideration of the efforts Parent has undertaken
and proposes
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to undertake and in order to facilitate the transactions contemplated hereby,
the Company agrees that prior to the termination pursuant to Section 11 of the
obligations of the parties to consummate the Merger, it will not, nor shall it
authorize or permit any of its Affiliates or any officer, director, employee,
investment banker, attorney or other adviser or representative of the Company or
any of its Affiliates to, (i) solicit, initiate, or encourage the submission of,
any Acquisition Proposal, (ii) enter into any agreement with respect to any
Acquisition Proposal, or (iii) except to the extent required by law as advised
by counsel in writing, participate in any discussions or negotiations regarding,
or furnish to any person any information for the purpose of facilitating the
making of, or take any other action to facilitate any inquiries or the making
of, any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal. The Company promptly shall advise Parent of any
Acquisition Proposal and any inquiries with respect to any Acquisition Proposal.
"Acquisition Proposal" means any proposal for a merger or other business
combination involving the Company or any of its Affiliates or any proposal or
offer to acquire in any manner, directly or indirectly, an equity interest in
the Company or any of its Affiliates, any voting securities of the Company or
any of its Affiliates or a substantial portion of the assets of the Company.
7.10 REMOVAL OF ASSETS. The Company shall not knowingly permit the
removal from the Company's premises of any of the Assets, books or records by
any of the Stockholders or any of the Company's directors, officers or
employees.
7.11 [RESERVED]
7.12 ASSUMPTION OF STOCK OPTIONS.
7.12.1 At the Effective Time, Parent shall agree to assume the
obligations of the Company with respect to the Options, with the effect
that (i) each of the Options shall remain outstanding in accordance with
the terms of the Plan and the agreements reflecting the terms and
conditions of each of the Options, and (ii) upon each exercise of an
Option after the Effective Time the holder of such option shall receive,
in lieu of shares of Company Common Stock, that number of Optionholder
Merger Shares equal to (i) the number of shares of Company Common Stock
that would have been issuable upon exercise of such Option, multiplied by
(ii) the Merger Ratio. Parent agrees to file with the SEC a registration
statement on Form S-8 covering the THQ Shares that will be issuable upon
the exercise of the Options not later than 60 days after the Closing Date.
7.12.2 The Company shall use its best efforts to cause each
Effective Time Optionholder to execute and deliver a Consent of
Optionholder or before the Effective Time.
7.13 CONSENTS OF THIRD PARTIES AND GOVERNMENTAL APPROVALS.
7.13.1 The Company will act diligently and reasonably to
secure, before the Effective Time, the consent, approval or waiver, in
form and substance reasonably satisfactory to Parent, from any party to
any Company Agreement required to satisfy the condition set forth in
Section 9.5; provided, however, that the Company shall not make any
agreement or understanding affecting the Company or its assets or business
as a condition for obtaining any such consents or waivers except with the
prior written consent of Parent.
7.13.2 During the period prior to the Effective Time, the
parties hereto shall act diligently and reasonably, and shall cooperate
with each other, to secure any consents and approvals
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of any Governmental Body required to be obtained by them in order to
permit the consummation of the transactions contemplated by this Agreement
or to otherwise satisfy the conditions set forth in Section 8.4; provided,
however, that the Company shall not make any agreement or understanding
affecting the Company or its assets or business as a condition for
obtaining any such consents or approvals except with the prior written
consent of Parent.
7.14 FEES AND EXPENSES. Except as may otherwise be expressly
provided in this Agreement, each of the parties shall bear its own costs and
expenses (including the fees and disbursements of their counsel, accountants and
other financial, legal, accounting or other advisors), incurred by it in
connection with the preparation, negotiation, execution, delivery and
performance of this Agreement and each of the other documents and instruments
executed in connection with or contemplated by this Agreement and the
consummation of the transactions contemplated hereby and thereby; provided,
however, that unless this Agreement is terminated without the consummation of
the Merger (i) by Parent pursuant to Section 11.1.3, or (ii) by the Company in
breach of this Agreement, Parent shall pay to the Company all reasonable and
verifiable out-of-pocket legal and accounting costs and expenses (exclusive of
travel costs) incurred by the Company from and after March 1, 1999 (up to a
maximum of $25,000); and provided further, that all fees and disbursements of
counsel, accountants and other financial, legal, accounting and other advisors
retained by the Company or any Stockholder incurred for services rendered after
the Effective Time in connection with the Merger or this Agreements shall be
borne and paid by the Effective Time Stockholders.
7.15 [RESERVED].
7.16 PREPARATION OF ESCROW AGREEMENT. The parties shall prepare and
cause to be executed, prior to or concurrently with the Merger Filing, an escrow
agreement among the Company, Parent, the Stockholders' Representative and the
Escrow Agent (the "Escrow Agreement"). The Escrow Agreement shall, among other
matters, (i) appoint the Escrow Agent as the escrow agent thereunder; (ii)
provide for the deposit by Parent of the Escrow Shares into the Escrow at or
before the Merger Filing; (iii) provide for the release of Escrow Shares to
Parent in accordance with the terms thereof, which terms shall include (a) that
Parent shall have recourse to the Escrow Shares based on Losses and Expenses
suffered by the Company or Parent if Sony asserts any right of offset or
reduction, or otherwise makes any claim under the Sony Agreement, the effect of
which is to reduce the amounts payable by Sony to the Company under the Sony
Agreement, which offset, reduction or claim is based on any actual or asserted
breach or default by the Company under the Sony Agreement occurring prior to the
Effective Time or arising by virtue of the consummation of the Merger, and (b)
that Parent shall have recourse to Escrow Shares constituting 10% of the Gross
Stockholder Merger Shares based on any other Losses or Expenses; (iv) provide
for the procedures by which the Parent Group Members may submit Claims Notices
and by which the Stockholders' Representative may challenge such Claims Notices;
(v) provide for the release of all Escrow Shares then in escrow to the
Stockholders on the date of issuance by Parent's auditor's of the audit report
on Parent's financial statements for its fiscal year ending December 31, 1999
(except to extent any such amounts are required to cover Losses or Expenses for
which a right to indemnification is asserted in Claim Notices); and (vi) include
such other provisions as are customary for such agreements or which the Escrow
Holder requires be included for its benefit.
7.17 REGISTRATION RIGHTS. Parent agrees to provide to each of the
Effective Time Stockholders registration rights with respect to the shares of
THQ Shares issued to them, on the terms and subject to the conditions set forth
in Exhibits C-1 and C-2 hereto.
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7.18 TERMINATION OF AGREEMENTS WITH TECHFARM. At or before the
Effective Time, the Company shall have terminated its Consulting Agreement and
all other agreements, oral or written, with TechFarm.
7.19 TERMINATION OF RSPAS.
7.19.1 The Company shall (i) caused to be terminated,
effective at the Effective Time, (a) each of the RSPAs, (ii) cause to be
terminated, effective at the Effective Time, the corresponding Escrow
Agreements and Assignments (each as defined in such RSPAs), (iii) cause
TechFarm to pay to the Company at the Merger Filing the outstanding
balance, including principal and interest, of the full recourse promissory
note issued by TechFarm to the Company for the purchase price (as set
forth in the RSPA), and (iv) upon consummation of the foregoing, deliver
to TechFarm and ▇▇▇▇▇▇▇ the certificates evidencing the Stock (as defined
in such RSPA).
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGERCO
The obligations of Parent and Mergerco to cause the Merger Filing
shall, except to the extent waived by Parent, be subject to the satisfaction, on
or prior to the Merger Filing, of the following conditions:
8.1 NO MISREPRESENTATION OR BREACH OF COVENANTS AND WARRANTIES.
There shall have been no material breach by the Company in the performance of
its covenants and agreements herein or in any of the Company Ancillary
Agreements. None of the representations and warranties of the Company contained
or referred to herein shall be untrue and incorrect in any respect (in the case
of any representation or warranty containing any materiality qualification) or
in any material respects (in the case of any representation and warranty without
any materiality qualification) either when make or as of the Effective Time (in
each case, without regard to any Knowledge Qualification that may be included in
such representation and warranty), except for changes therein specifically
permitted by this Agreement or resulting from any transaction expressly
consented to in writing by Parent. There shall have been delivered to Parent and
Mergerco a certificate or certificates to such effect, dated the Closing Date
and signed on behalf of the Company by the President or any Vice President of
the Company.
8.2 NO CHANGES TO OR DESTRUCTION OF PROPERTY. Between the date
hereof and the Effective Time, there shall have been (i) no change or event
having a Material Adverse Effect on the Company; and (ii) no material adverse
federal or state legislative or regulatory change affecting the Company's
business; and there shall have been delivered to Parent and Mergerco a
certificate or certificates to such effect, dated the Closing Date and signed on
behalf of the Company by the President or any Vice President of the Company.
8.3 NO RESTRAINT OR LITIGATION. (i) No order shall have been entered
in any Action before any Governmental Body, and no preliminary or permanent
injunction by a court of competent jurisdiction shall have been issued and
remain in effect, that would have the effect of (a) making the purchase of, or
payment for, any shares of Company Common Stock pursuant to this Agreement
illegal, or (b) otherwise making the consummation of the Merger illegal; and
(ii) no Action shall be pending before any Governmental Body or any such court
against the Company, Parent or Mergerco that challenges the legality or validity
of this Agreement, the Merger or any of the transactions contemplated hereby or
seek damages or any other remedy in connection therewith (other than in
connection with the exercise of appraisal rights).
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8.4 NECESSARY GOVERNMENTAL APPROVALS. The parties shall have
received all approvals and actions of or by all Governmental Bodies which are
necessary to consummate the transactions contemplated hereby, which are either
specified in Schedule 5.5 or otherwise required to be obtained prior to the
Effective Time by applicable Requirements of Laws or which are necessary to
prevent a Material Adverse Effect on the Company.
8.5 NECESSARY CONSENTS. The Company shall have received consents, in
form and substance reasonably satisfactory to Mergerco and Parent, to the
transactions contemplated hereby from the other parties to all contracts,
leases, agreements and permits to which the Company is a party or by which the
Company or any of its assets is affected and which are specified in Schedule 8.5
or are otherwise necessary to prevent a Material Adverse Effect on the Company.
8.6 STOCKHOLDER APPROVAL; NO DISSENTING SHARES. This Agreement shall
have been unanimously adopted by all of the Stockholders, no Stockholder shall
have delivered a written demand for appraisal of its Company Common Stock
pursuant to the CGCL and there shall have been delivered to Parent and Mergerco
a certificate or certificates to such effect, dated the Effective Date and
signed on behalf of the Company by the President or any Vice President of the
Company.
8.7 THE STOCK PRICE. The Stock Price shall not be less than $14.00
per share.
8.8 CERTIFICATION OF SHARES AND OPTIONS OUTSTANDING. At the Closing
Meeting, the Company shall deliver a certification of its corporate secretary to
the effect that the number of shares of Company Common Stock and the number of
Options outstanding as of the Closing Date is consistent with the
representations made in Section 5.3.2.
8.9 COMFORT LETTERS. Parent shall have received comfort letters
addressed to Parent from Deloitte & Touche LLP, the independent public
accountants for Parent, and from such investment banking firm as may be selected
by Parent, dated the Effective Date, in form and substance reasonably
satisfactory to Parent, covering such matters as Parent shall reasonably
request.
8.10 POOLING-OF-INTERESTS. No event shall have occurred or facts
discovered that might preclude Parent from accounting for the Merger as a
pooling-of-interests.
8.11 CONSENT OF OPTIONHOLDERS. Each Effective Time Optionholder
shall have executed and delivered to Company a Consent of Optionholder.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.
The obligations of the Company to cause the Merger Filing shall,
except to the extent waived by the Company, be subject to the satisfaction, on
or prior to the Merger Filing, of the following conditions:
9.1 NO MISREPRESENTATION OR BREACH OF COVENANTS AND WARRANTIES.
There shall have been no material breach by Parent or Mergerco in the
performance of any of their respective covenants and agreements herein. None of
the representations and warranties of Parent or Mergerco contained or referred
to herein shall be untrue and incorrect in any respect (in the case of any
representation or warranty containing any materiality qualification) or in any
material respects (in the case of any representation and warranty
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without any materiality qualification), either when made or as of the Effective
Time (in each case, without regard to any Knowledge Qualification that may be
included in such representation and warranty), except for changes therein
specifically permitted by this Agreement or resulting from any transaction
expressly consented to in writing by the Company. There shall have been
delivered to the Company a certificate or certificates to such effect, dated the
Closing Date and signed on behalf of Parent by the President or any Vice
President of Parent and on behalf of Mergerco by the President or any Vice
President of Mergerco.
9.2 NO RESTRAINT OR LITIGATION. (i) No order shall have been entered
in any Action before any Governmental Body, and no preliminary or permanent
injunction by a court of competent jurisdiction shall have been issued and
remain in effect, that would have the effect of (a) making the purchase of, or
payment for, any shares of Company Common Stock pursuant to this Agreement
illegal, or (b) otherwise making the consummation of the Merger illegal; and
(ii) no Action shall be pending before any Governmental Body or any such court
against the Company that challenges the legality or validity of this Agreement,
the Merger or any of the transactions contemplated hereby or seek damages or any
other remedy in connection therewith (other than in connection with the exercise
of dissenters' rights).
9.3 NECESSARY GOVERNMENTAL APPROVALS. The Company shall have
received all approvals and actions of or by all Governmental Bodies necessary to
consummate the transactions contemplated hereby, which are required to be
obtained prior to the Effective Time by applicable Requirements of Laws.
9.4 STOCKHOLDER ACTION. This Agreement shall have been approved and
adopted by the holders of a majority of the outstanding Company Common Stock.
9.5 APPROVAL OF THE PARENT'S BOARD OF DIRECTORS. This Agreement
shall have been ratified and approved by Parent's board of directors.
10. INDEMNIFICATION.
10.1 INDEMNIFICATION OF PARENT GROUP MEMBERS.
10.1.1 To the extent set forth under Section 10.1.2, each
Stockholder Group Member shall jointly and severally indemnify and hold
harmless each Parent Group Member from and against any and all Losses and
Expenses incurred by such Parent Group Member in connection with or
arising from:
10.1.1.1 any breach or failure to perform, or any third
party claim that if successful would constitute a breach or failure
to perform, by the Company of any of its agreements, covenants or
obligations in this Agreement or in any Company Ancillary Agreement
to be performed prior to the Effective Time;
10.1.1.2 any breach, or any third party claim that if
successful would constitute a breach, of any warranty, or the
inaccuracy, or any third party claim that if successful would
constitute an inaccuracy, of any representation or warranty of
Company, contained or referred to in this Agreement (including any
misrepresentation or warranty in, or omission from, any Schedule,
Exhibit, statement, certificate, report or other document furnished
or to be furnished by or on behalf of the Company or any Stockholder
pursuant
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hereto or thereto); provided, however, that for the purpose of this
Section 10, any Knowledge Qualification included in any such
representation shall be disregarded and the Stockholder Group
Members shall be entitled to be indemnified against Losses and
Expenses irrespective of whether Seller had notice or knowledge of
the matters addressed by such representation; or
10.1.1.3 any liability or obligation of the Company in
respect of the assets, operations or business of the Company arising
from events occurring on or prior to the Effective Time, excepting
only (a) such liabilities and obligations as are disclosed in the
Schedules to this Agreement, or (b) are assumed pursuant to Section
4.5.2;
10.1.2 Parent shall have the right to set off or recover any
Losses or Expenses with respect to which Parent is entitled to
indemnification under this Section 10.1 against any payments otherwise
payable to the Effective Time Stockholders from the Escrow in accordance
with the terms of the Escrow Agreement, and, except in the event of fraud,
such right of set-off and recovery shall be Parent's sole recourse against
the Stockholders with respect to the indemnity set forth in this
Section 11.
10.2 INDEMNIFICATION BY PARENT AND THE SURVIVING CORPORATION. Parent
and the Surviving Corporation shall jointly and severally indemnify and hold
harmless each Stockholder Group Member from and against any and all Loss and
Expense incurred by such Stockholder Group Member in connection with or arising
from:
10.2.1 any breach or failure to perform, or any third party
claim that if successful would constitute a breach or failure to perform,
by Parent or the Surviving Corporation of any of their respective
agreements, covenants or obligations in this Agreement or in any Parent
Ancillary Agreement; or
10.2.2 any breach, or any third party claim that if successful
would constitute a breach, of any warranty or the inaccuracy, or any third
party claim that if successful would constitute an inaccuracy, of any
representation or warranty of Parent or Mergerco contained or referred to
in this Agreement (including any misrepresentation or warranty in, or
omission from, any Schedule, Exhibit, statement, certificate, report or
other document furnished or to be furnished by or on behalf of Parent or
Mergerco pursuant hereto).
10.3 NOTICE OF CLAIMS.
10.3.1 If any Parent Group Member (with respect to Section
10.1) or any Stockholder Group Member (with respect to Section 10.2)
believes that it has suffered or incurred any Loss or incurred any
Expense, such Parent Group Member or Stockholder Group Member, as the case
may be (the "Indemnified Person"), shall so notify the parties obligated
to provide indemnification to such Indemnified Person (the "Indemnitor")
(which, in the event such notice is given by a Parent Group Member, shall
be given to the Stockholders' Representative) promptly in writing
describing such Loss or Expense, the amount thereof, if known, and the
method of computation of such Loss or Expense, all with reasonable
particularity and containing a reference to the provisions of this
Agreement, any certificate delivered pursuant hereto or any Parent
Ancillary Agreement or Stockholder Ancillary Agreement in respect of which
such Loss or Expense shall have
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occurred (such written notification being sometimes hereinafter referred
to as the "Claim Notice"); provided, however, that an omission by the
Indemnified Person to give notice as provided herein shall not relieve the
Indemnitor of its indemnification obligation under this Section 10 except
(i) to the extent that such omission results in a failure of actual notice
to the Indemnitor and such Indemnitor is materially damaged as a result of
such failure to give notice, or (ii) if the Indemnified Person fails to
give notice prior to the termination of the indemnity obligation. If any
Action is instituted by or against a third party with respect to which any
Indemnified Person intends to claim any liability or expense as Loss or
Expense under this Section 10, such Indemnified Person shall promptly
notify the Indemnitor of such Action as specified in this Section 10.3.
10.3.2 In calculating any Loss or Expense there shall be
deducted (i) any insurance recovery in respect thereof (and no right of
subrogation shall accrue hereunder to any insurer), and (ii) the amount of
any tax benefit to the Indemnified Person (or any of its Affiliates) with
respect to such Loss or Expense (after giving effect to the tax effect of
receipt of the indemnification payments).
10.3.3 After the giving of any Claim Notice, the amount of
indemnification to which an Indemnified Person shall be entitled under
this Section 10 shall be determined: (i) by a written agreement between
the Indemnified Person and the Indemnitor; (ii) in accordance with the
final determination of a court of competent jurisdiction; or (iii) by any
other means to which the Indemnified Person and the Indemnitor shall
agree.
10.4 EXPIRATION OF INDEMNIFICATION.
10.4.1 In the event the Merger is consummated, the Parent
Group Members' right to indemnification pursuant to Section 10.1 shall
expire on the date that is 18 months after the Closing Date; provided,
however, that if any Claim Notice is given by a Parent Group Member prior
to the expiration of such 18-month period, such Parent Group Member's
right to indemnification in respect of the matters giving rise to such
Claim Notice (i) shall continue until such matters are finally terminated
or otherwise resolved between such Parent Group Member and the
Stockholders' Representative or by a court of competent jurisdiction and
all amounts, if any, payable hereunder in respect of those matters are
finally determined and paid from the Escrow, and (ii) shall extend to all
Losses and Expenses that are the subject of that indemnification
obligation, whether incurred before or after such Claim Notice is given.
10.4.2 In the event the Merger is consummated, the Stockholder
Group Members' right to indemnification pursuant to Section 11.2 shall
expire on the date that is 18 months after the Closing Date; provided,
however, that if any Claim Notice is given by the a Stockholder Group
Member prior to the expiration of such 18-month period, such Stockholder
Group Member's right to indemnification in respect of the matters giving
rise to such Claim Notice (i) shall continue until such matters are
finally terminated or otherwise resolved between such Stockholder Group
Member, Parent and the Surviving Corporation or by a court of competent
jurisdiction and all amounts, if any, payable hereunder in respect of
those matters are finally determined and paid by Parent and/or the
Surviving Corporation, and (ii) shall extend to all Losses and Expenses
that are the subject of that indemnification obligation, whether incurred
before or after such Claim Notice is given.
10.5 EXCLUSIVE REMEDY FOLLOWING THE MERGER. In the event that the
Merger is consummated, any claim against any party hereto for any breach of this
Agreement or the Parent Ancillary
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Agreements or in connection with any of the transactions contemplated hereby or
thereby shall be made solely pursuant to this Section 10.
11. TERMINATION.
11.1 TERMINATION RIGHTS. Notwithstanding anything contained in this
Agreement to the contrary notwithstanding, the obligations of the parties to
consummate the Merger may be terminated at any time prior to the Effective Time:
11.1.1 By the mutual consent of all of the parties hereto;
11.1.2 By Parent or the Company if the Merger Filing shall not
have occurred on or before the later of (i) five business days following
the Company Meeting, or (ii) June 30, 1999 (or such later date as may be
mutually agreed to by Parent and the Company);
11.1.3 By Parent in the event of any material breach by the
Company of any of its agreements, representations or warranties contained
herein and, with respect to any such breach that is curable, the failure
of Company to cure such breach within seven days after receipt of notice
from Parent requesting that such breach be cured; or
11.1.4 By the Company in the event of any material breach by
Parent or Mergerco of any of their respective agreements, representations
or warranties contained herein and, with respect to any breach that is
curable, the failure of Parent to cure such breach, or cause Mergerco to
cure such breach, within seven days after receipt of notice from the
Company requesting that such breach be cured.
11.2 NOTICE OF TERMINATION. Any party desiring to terminate the
obligation of the parties to consummate the Merger this Agreement pursuant to
Section 11.1 (other than Section 11.1.1) shall give notice of such termination
to each of the other parties to this Agreement, identifying in such notice the
provision under which such termination is being effected.
11.3 EFFECT OF TERMINATION. In the event that the obligation of the
parties to consummate the Merger shall be terminated pursuant to this Section
11, all further obligations of the parties under this Agreement shall be
terminated without further liability of any party to the others; provided,
however, that such termination shall not relieve any party from liability for
its breach of this Agreement, or from such party's obligations under Section 10.
12. GENERAL PROVISIONS.
12.1 SURVIVAL OF OBLIGATIONS. All representations, warranties,
covenants and obligations contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement for the periods
set forth herein.
12.2 NO PUBLIC ANNOUNCEMENT. No party hereto shall, without the
approval of all of the other parties, make any press release or other public
announcement (or, in the case of the Company, announce
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to its employees (other than those who have a need to know in order to
consummate the Merger) or to the Stockholders) concerning the transactions
contemplated by this Agreement, except to the extent that the Company shall be
so obligated by law, in which case such party shall so advise Parent of such
determination and the basis therefor and will either prepare a joint statement
with Parent for public release or will permit Parent to review and approve the
content of such announcement not less than 24 hours prior to its release by the
Company; provided, however, that the foregoing shall not preclude communications
or disclosures necessary to implement the provisions of this Agreement.
12.3 NOTICES. All notices, requests, demands, consents, approvals,
designations and other communications called for or contemplated by this
Agreement shall be in writing and shall be deemed given to the party to whom
addressed (i) when delivered to such party by hand or by facsimile transmission,
(ii) one business day after being sent to such party by overnight courier, or
(iii) three business days after being sent to such party by registered or
certified mail (return receipt requested, postage prepaid), in each case at the
following address, or at such other address as such party may designate by
notice in the manner aforesaid:
If to the Company (after the Effective Time), Parent or Mergerco, to:
THQ Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
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Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President and Chief Executive Officer
Telephone: 818/▇▇▇-▇▇▇▇
Telecopier: 818/224-3841
with a copy to:
Sidley & Austin
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Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: 213/▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
If to the Company (prior to the Effective Time) to:
Pacific Coast Power & Light Co.
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Attention: ▇▇▇ ▇▇▇▇▇▇▇,
President and Chief Executive Officer
Telephone: 408/▇▇▇-▇▇▇▇
Telecopier: 408/262-8874
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with a copy to:
General Counsel Associates LLP
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Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone: 650/▇▇▇-▇▇▇▇
Telecopier: 650/428-3901
If to the Stockholders' Representative, to:
▇▇▇ ▇▇▇▇▇▇▇
c/o Pacific Coast Power & Light Co.
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▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: 408/▇▇▇-▇▇▇▇
Telecopier: 408/262-8874
with a copy to:
General Counsel Associates LLP
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▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone: 650/▇▇▇-▇▇▇▇
Telecopier: 650/428-3901
or to such other address as such party may indicate by a notice delivered to the
other parties hereto.
12.4 SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES.
12.4.1 The rights of each party under this Agreement shall not
be assignable by such party prior to the Effective Time without the
written consent of each of the other parties. Following the Effective
Time, any party may assign any of its rights hereunder, but no such
assignment shall relieve it of its obligations hereunder.
12.4.2 This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and permitted assigns.
The successors and permitted assigns hereunder shall include without
limitation, in the case of Parent, any permitted assignee as well as the
successors in interest to such permitted assignee (whether by merger,
liquidation (including successive mergers or liquidations) or otherwise).
Except as provided in Section 10 in the event of the consummation of the
Merger with respect to the rights and remedies of the Stockholders,
nothing in this Agreement, expressed or implied, is intended or shall be
construed to confer upon any Stockholder or other Person other than (i)
the parties hereto and their successors and permitted assigns, and (ii)
the Stockholders' Representative, in his capacity as such, any right,
remedy or claim under or by reason of this Agreement or the transactions
contemplated hereby.
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12.5 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Exhibits
and Schedules referred to herein and the documents delivered pursuant hereto
contain the entire understanding of the parties hereto with regard to the
subject matter contained herein or therein; and such agreements and other
documents supersede all prior agreements and understandings between or among any
of the parties hereto, including without limitation the Letter of Intent dated
as of March 18, 1999 by and among Parent and the Company (which is hereby
terminated). This Agreement shall not be amended, modified or supplemented
except by a written instrument signed by an authorized representative of each of
the parties hereto.
12.6 RULES OF CONSTRUCTION. Whenever in this Agreement the context
so suggests, references to the masculine shall be deemed to include the feminine
and the neuter, references to the singular shall be deemed to include the
plural, and references to "or" shall be deemed to be disjunctive but not
necessarily exclusive. No provision of this Agreement shall be construed in
favor of or against any party hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof, nor shall the
interpretation of this Agreement be affected by reason that this Agreement or
any provision hereof is inconsistent with any prior draft hereof. Except where
expressly provided to the contrary, each reference herein to a "Section" is to a
Section of this Agreement; each reference herein to a Section includes all
Sections subsidiary to the Section referred to. The words "herein," "hereof,"
and "hereunder," and other words of similar import, refer to this Agreement as a
whole and not to any particular Article, Section or subsection, and the word
"including" means "including but not limited to." Titles and headings to
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement. The Schedules and Exhibits referred to herein shall be construed with
and as an integral part of this Agreement to the same extent as if they were set
forth verbatim herein. Except as expressly stated to the contrary herein, all
dollar amounts in this Agreement refer to lawful money of the United States of
America.
12.7 WAIVERS. Any term or provision of this Agreement may be waived,
or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
12.8 EQUITABLE RELIEF. Each of the parties hereto agrees that a
monetary remedy for a breach of this Agreement would be inadequate and would be
impracticable and extremely difficult to prove, and further agrees that such a
breach would cause the other party irrevocable harm, and that either party shall
be entitled to temporary and permanent injunctive relief without the necessity
of proving actual damages and without the necessity of posting a bond or making
any undertaking in connection therewith. Any such requirement of a bond or
undertaking is hereby waived by the parties.
12.9 PARTIAL INVALIDITY. Wherever possible, each provision hereof
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
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12.10 BUSINESS DAY. Whenever this Agreement requires that an action
be taken or a notice be given on a date that would otherwise not be a business
day, the time period for taking such action or giving such notice shall be
extended to the first day thereafter that is a business day.
12.11 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement, and
shall become binding when one or more counterparts have been signed by each of
the parties hereto and delivered to each of the other parties.
12.12 FURTHER ASSURANCES. From time to time after the Effective
Time, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of Mergerco, the
Company or otherwise, such deeds and other instruments and to take or cause to
be taken such further or other action as shall be necessary or desirable in
order to vest or perfect in or to confirm, of record or otherwise, in the
Surviving Corporation title to, and possession of, all of the property, rights,
privileges, powers, immunities and franchises of Mergerco and the Company and
otherwise carry out the purposes of this Agreement.
12.13 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the conflicts of
law provisions) of the State of Delaware.
12.14 ATTORNEYS' FEES. In the event any legal action is instituted
to construe or enforce this Agreement or any provision hereof, the prevailing
party shall be entitled to recover reasonable attorneys' fees.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed the day and year first above written.
PACIFIC COAST POWER & LIGHT CO.
a California corporation
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇ ▇▇▇▇▇▇▇,
President and
Chief Executive Officer
PPL ACQUISITION COMPANY
a California corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President
THQ INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President and
Chief Executive Officer
Signature Page 1 of 1
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EXHIBITS*
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Form of Employment Agreement for ▇▇▇ ▇▇▇▇▇▇▇ A-1
Form of Employment Agreement for ▇▇▇▇▇▇ ▇▇▇▇▇▇ A-2
Form of Non-Competition Agreement B
Form of Registration Obligations of Parent - First Tranche C-1
Form of Registration Obligations of Parent - Second Tranche C-2
Form of General Release and Covenant Not to ▇▇▇ D
Form of Disclaimer of Reliance E
Form of Severance Agreement F
Form of Consent of Optionholder G
Form of Continuity of Interest Agreement H
DESCRIPTION* SCHEDULE
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Capitalization, List of Shareholders, Bridge Noteholder,
Options 5.3d
Optionholders
Rights of first refusal 5.3.2.2
Violations and required consents 5.5
Actions 5.6
Financial Statements 5.7
Excluded assets 5.8
Governmental Permits 5.9
Personal property 5.11
Taxes 5.15
Agreements and commitments 5.17
Intellectual property 5.18
Software products 5.19
Development Tools 5.20
Employee proprietary agreement 5.23(a)
Employee confidentiality agreements 5.23(b)
Employee Plans 5.23.3
Employees and compensation 5.23.8
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Business plan 5.24
Necessary consents 8.5
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* The Schedules and Exhibits are omitted from this filing. The Company
agrees to furnish supplementally a copy of any Schedule or Exhibit to the
Commission upon request.
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