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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
dated as of September 25, 2001
among
LOUDEYE TECHNOLOGIES, INC., and
IGNITION ACQUISITION, INC.
and
XXXXXXXX.XXX CORPORATION
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TABLE OF CONTENTS
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ARTICLE I THE MERGER..................................................................5
Section 1.1 Effective Time of the Merger....................................5
Section 1.2 Closing.........................................................5
Section 1.3 Effects of the Merger...........................................6
Section 1.4 Directors and Officers..........................................6
ARTICLE II CONVERSION OF SECURITIES...................................................6
Section 2.1 Conversion of Capital Stock.....................................6
Section 2.2 Dissenting Shares..............................................10
Section 2.3 Exchange of Certificates.......................................11
Section 2.4 Tax Consequences...............................................12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACTIVATE...............................12
Section 3.1 Organization of Activate.......................................12
Section 3.2 Activate Capital Structure.....................................12
Section 3.3 Authority; No Conflict; Required Filings and Consents..........13
Section 3.4 Financial Statements; Absence of Undisclosed Liabilities.......14
Section 3.5 Tax Matters....................................................15
Section 3.6 Absence of Certain Changes or Events...........................17
Section 3.7 Title and Related Matters......................................18
Section 3.8 Proprietary Rights.............................................19
Section 3.9 Employee Benefit Plans.........................................21
Section 3.10 Bank Accounts..................................................23
Section 3.11 Contracts......................................................23
Section 3.12 Compliance With Law............................................25
Section 3.13 Labor Difficulties; No Discrimination..........................26
Section 3.14 Insider Transactions...........................................26
Section 3.15 Employees, Independent Contractors and Consultants.............27
Section 3.16 Insurance......................................................27
Section 3.17 Accounts Receivable............................................27
Section 3.18 Litigation.....................................................27
Section 3.19 Governmental Authorizations and Regulations....................28
Section 3.20 No Other Investments...........................................28
Section 3.21 Compliance with Environmental Requirements.....................28
Section 3.22 Corporate Documents............................................29
Section 3.23 No Brokers.....................................................29
Section 3.24 Customers and Suppliers........................................29
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF LOUDEYE AND
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SUB .................................................................29
Section 4.1 Organization of Loudeye and Sub................................29
Section 4.2 Valid Issuance of Loudeye Common Stock.........................30
Section 4.3 Authority; No Conflict; Required Filings and Consents..........30
Section 4.4 SEC Filings; Financial Statements..............................31
Section 4.5 Interim Operations of Sub......................................31
Section 4.6 Stockholders Consent...........................................32
Section 4.7 Litigation.....................................................32
Section 4.8 Compliance With Law............................................32
Section 4.9 Absence of Material Changes....................................32
Section 4.10 Brokers' Fees..................................................32
ARTICLE V OTHER AGREEMENTS...........................................................33
Section 5.1 Confidentiality................................................33
Section 5.2 No Public Announcement.........................................33
Section 5.3 Tax Matters; Access to Records.................................33
Section 5.4 Further Assurances.............................................34
Section 5.5 Seattle Lease Obligation.......................................34
Section 5.6 Indemnification................................................35
Section 5.7 Employee Benefits..............................................35
Section 5.8 Nasdaq.........................................................35
Section 5.9 Availability to CMGI of Rule 144...............................35
ARTICLE VI DELIVERIES AT CLOSING.....................................................36
Section 6.1 Deliveries by Activate.........................................36
Section 6.2 Deliveries by Loudeye..........................................36
ARTICLE VII INDEMNIFICATION..........................................................37
Section 7.1 Indemnification................................................37
Section 7.2 Sole Remedy....................................................37
Section 7.3 Damage Limitations.............................................38
Section 7.4 Indemnification Period.........................................39
Section 7.5 Indemnification Claims.........................................39
Section 7.6 Access and Information.........................................40
ARTICLE VIII MISCELLANEOUS...........................................................40
Section 8.1 Survival of Representations and Covenants......................40
Section 8.2 Notices........................................................41
Section 8.3 Interpretation.................................................42
Section 8.4 Counterparts...................................................42
Section 8.5 Entire Agreement; No Third Party Beneficiaries.................42
Section 8.6 Governing Law..................................................42
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Section 8.7 Assignment.....................................................43
Section 8.8 Amendment......................................................43
Section 8.9 Waiver.........................................................43
Section 8.10 Specific Performance...........................................43
Section 8.11 Severability...................................................43
Section 8.12 Fees and Expenses..............................................44
EXHIBITS
EXHIBIT A -- REGISTRATION RIGHTS AGREEMENT
EXHIBIT B -- ACTIVATE DISCLOSURE SCHEDULE
EXHIBIT C -- LOUDEYE DISCLOSURE SCHEDULE
EXHIBIT D -- INVESTOR REPRESENTATION STATEMENT
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of
SEPTEMBER 25, 2001 (the "CLOSING DATE"), is entered into by and among Loudeye
Technologies, Inc., a Delaware corporation ("LOUDEYE"), Ignition Acquisition,
Inc., a Delaware corporation and a wholly-owned subsidiary of Loudeye ("SUB"),
and Xxxxxxxx.xxx Corporation, a Delaware corporation ("ACTIVATE"), and, solely
with respect to Sections 2.1(c), 5.2, 5.3 and 5.5 and Article VII hereof, CMGI,
Inc., a Delaware corporation ("CMGI").
RECITALS
A. The Boards of Directors of Loudeye, Sub and Activate deem it
advisable and in the best interests of each respective corporation and their
respective stockholders that Loudeye and Activate combine their respective
businesses upon the terms and conditions set forth herein;
B. The combination of Loudeye and Activate shall be effected by the
terms of this Agreement through a transaction in which Sub will merge with and
into Activate, Activate will become a wholly-owned subsidiary of Loudeye and the
stockholders of Activate will receive a combination of (i) cash and (ii) common
stock of Loudeye (the "MERGER");
C. The parties intend and acknowledge that the Merger will not be
treated as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "CODE") and the regulations promulgated
thereunder; and
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 Effective Time of the Merger.
(a) Subject to the provisions of this Agreement, a certificate of
merger (the "CERTIFICATE OF MERGER") in such mutually acceptable form as is
required by the relevant provisions of the Delaware General Corporation Law
("DELAWARE LAW") shall be duly executed and delivered by the parties hereto and
thereafter delivered to the Secretary of State of the State of Delaware for
filing on the Closing Date.
(b) The Merger shall become effective upon the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware (the
"EFFECTIVE TIME").
Section 1.2 Closing.
The closing of the Merger (the "CLOSING") will take place at 10:00 a.m.,
Pacific time, on the Closing Date, at the offices of Xxxxxx Xxxxxx White &
XxXxxxxxx, LLP, 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, XX 00000.
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Section 1.3 Effects of the Merger.
(a) At the Effective Time (i) the Sub shall merge with and into
Activate, the separate existence of Sub shall cease, and Activate shall continue
as the surviving corporation and shall become a wholly-owned subsidiary of
Loudeye (Sub and Activate are sometimes referred to herein as the "CONSTITUENT
CORPORATIONS" and Activate following consummation of the Merger is sometimes
referred to herein as the "SURVIVING CORPORATION"), (ii) the Certificate of
Incorporation of Sub as in effect immediately prior to the Effective Time shall
become the Certificate of Incorporation of the Surviving Corporation and (iii)
the Bylaws of Sub as in effect immediately prior to the Effective Time shall
become the Bylaws of the Surviving Corporation.
(b) At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of Delaware Law. Without limiting the
generality of the foregoing, at and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises, and
be subject to all the restrictions, disabilities and duties of each of the
Constituent Corporations.
Section 1.4 Directors and Officers.
The directors of Sub immediately prior to the Effective Time shall
become the directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation, and the officers of Sub immediately prior to the Effective Time
shall become the officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock.
At the Effective Time, by virtue of the Merger and without any further
approval of the holders of any shares of capital stock of Activate or capital
stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
the capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, $0.001 par value, of the Surviving
Corporation.
(b) Cancellation of Loudeye-Owned and Activate-Owned Stock. Any
shares of Preferred Stock, $0.01 par value of Activate (the "ACTIVATE PREFERRED
STOCK"), or shares of Common Stock, $0.01 par value, of Activate ("ACTIVATE
COMMON STOCK", and together with the Activate Preferred Stock, the "ACTIVATE
STOCK"), that are owned by Loudeye, Sub, Activate or any other direct or
indirect wholly-owned Subsidiary (as defined below) of Loudeye or Activate shall
be canceled and retired and shall cease to exist and no stock of Loudeye or
other consideration shall be delivered in exchange. As used in this Agreement,
the word "SUBSIDIARY" means, with respect to any other party, any corporation or
other organization, whether incorporated or unincorporated, of which (i) such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such
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party or any Subsidiary of such party do not have a majority of the voting
interest in such partnership) or (ii) at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the Board of Directors or others performing similar functions with respect to
such corporation or other organization or a majority of the profit interests in
such other organization is directly or indirectly owned or controlled by such
party or by any one or more of its Subsidiaries, or by such party and one or
more of its Subsidiaries.
(c) Merger Consideration.
(i) Subject to Section 2.3, the issued and outstanding
shares of Activate Preferred Stock (other than shares to be canceled in
accordance with Section 2.1(b)) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and represent the
right to receive, in the aggregate:
(A) $1,000,000 in cash; and
(B) the right to receive the Anniversary
Payment (as defined below) on the date that is
one year after the Closing Date (the
"ANNIVERSARY DATE").
The cash payable under Section 2.1(c)(i)(A), and the Anniversary Payment
payable under Section 2.1(c)(i)(B) are referred to collectively herein
as the "MERGER CONSIDERATION." The Merger Consideration is subject to
adjustment as provided in Section 2.1(c)(iii). All such shares of
Activate Preferred Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall
cease to exist, and the holder of the certificate representing such
shares shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration upon the surrender of such
certificate in accordance with Section 2.3.
(ii) For purposes of this Agreement, the following terms
shall have the following meanings:
(A) "ANNIVERSARY PAYMENT" shall mean, at the
option of Loudeye subject to Section
2.1(c)(iv), (1) $3,000,000 in cash, or (2) such
number of shares of Loudeye Common Stock as is
equal to $3,000,000 divided by the Average
Price (as defined below) or (3) a combination
of cash and shares of Loudeye Common Stock such
that the sum of (a) such cash amount and (b)
the result obtained by multiplying such number
of shares of Loudeye Common Stock by the
Average Price equals $3,000,000; provided that
from and after the occurrence of a
Reorganization Event (as defined below),
"ANNIVERSARY PAYMENT" shall mean $3,000,000 in
cash. The shares of Loudeye Common Stock, if
any, constituting the Anniversary Payment shall
be referred to herein as the "DEFERRED SHARES."
For purposes of this Article II, the term
"LOUDEYE COMMON STOCK" shall include any other
securities into which or
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for which the Common Stock, par value $.001 per
share, of Loudeye, may be converted or
exchanged pursuant to a merger, consolidation,
reorganization, recapitalization, tender offer,
exchange offer, share exchange, sale of assets
or other similar corporate rearrangement.
(B) "AVERAGE PRICE" shall mean the average
Loudeye Stock Price for the thirty (30)
consecutive trading days ending on the trading
day that is two (2) trading days prior to the
Anniversary Date (as appropriately adjusted for
any stock split, stock dividend, reverse stock
split or similar event affecting the Loudeye
Common Stock during such period).
(C) "LOUDEYE STOCK PRICE" shall mean the last
reported sale price of the Loudeye Common Stock
on the Nasdaq National Market ("NASDAQ") as
reported by Bloomberg Financial Markets or an
equivalent reliable reporting service mutually
acceptable to and hereafter designated by
Loudeye and the Former Activate Stockholder (as
defined below) (the "REPORTING SERVICE") or, if
the Nasdaq is not the principal trading market
for the Loudeye Common Stock, the last reported
sale price of Loudeye Common Stock on the
principal securities exchange or trading market
where such security is listed or traded as
reported by the Reporting Service, or if the
foregoing do not apply, the last reported sale
price for Loudeye Common Stock in the
over-the-counter market on the electronic
bulletin board for such security as reported by
the Reporting Service or, if no last reported
sale price is reported for Loudeye Common Stock
by the Reporting Service, the average of the
bid and ask prices for Loudeye Common Stock
that are listed on the "pink sheets" by the
National Quotation Bureau, Inc. If the Loudeye
Stock Price cannot be calculated in the manner
provided above, the Loudeye Stock Price shall
be the fair market value as mutually determined
by Loudeye and the Former Activate Stockholder
outstanding immediately prior to the Effective
Time.
(D) "REORGANIZATION EVENT" shall mean a merger,
consolidation, reorganization,
recapitalization, tender offer, exchange offer,
share exchange, sale of assets or other similar
corporate rearrangement, after which the Common
Stock, par value $.001 per share, of Loudeye
would not be listed on the Nasdaq National
Market, New York Stock Exchange or American
Stock Exchange.
(iii) On or before October 15, 2001, Loudeye shall deliver
to CMGI an Activate balance sheet as of the Closing Date (the "DRAFT CLOSING
BALANCE SHEET"), together with a reasonably detailed calculation of Adjusted
Working Capital (as defined below). The
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Draft Closing Balance Sheet shall be prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a basis consistent
with prior periods.
CMGI shall be deemed to accept the Draft Closing Balance
Sheet and the contents thereof unless (and the Draft Closing Balance
Sheet shall be deemed to be the Final Closing Balance Sheet), within ten
(10) business days after its receipt of the Draft Closing Balance Sheet
(the "OBJECTION PERIOD") CMGI delivers to Loudeye a written objection to
the contents thereof (the "OBJECTION"), which shall detail the specific
basis for CMGI's Objection. Within ten (10) calendar days after delivery
of the Objection, Loudeye and CMGI agree to meet in Chicago, Illinois
(or such other location as CMGI and Loudeye shall mutually agree) and to
negotiate in good faith to resolve the issues raised in the Objection.
If such agreement is reached, then it shall be binding on the parties,
and the Draft Closing Balance Sheet, as adjusted pursuant to any such
agreement, shall be deemed to be the "FINAL CLOSING BALANCE SHEET". If
such agreement is not reached, then the parties shall refer the matter
to binding arbitration in accordance with the procedures set forth in
the next paragraph.
If the parties are unable to reach an agreement on the
resolution of an Objection within twenty (20) calendar days following
Loudeye's receipt of such Objection, then the parties agree to submit
the dispute to JAMS (the "ARBITRATOR") for binding arbitration, which
arbitration shall take place as soon as practicable (but in any event
within the sixty (60) calendar day period following Loudeye's receipt of
an Objection). The Arbitrator's award with respect to any Objection
shall be final and binding upon the parties hereto, and judgment may be
entered on the award, and the Draft Closing Balance Sheet, as adjusted
pursuant to any such award, shall be deemed to be the "FINAL CLOSING
BALANCE SHEET". Loudeye and CMGI shall each pay fifty percent (50%) of
all fees and expenses incurred by the Arbitrator in performing his
duties as described herein.
At the end of the Objection Period (if no Objection is
delivered) or upon the agreement of the parties or the final order of
the Arbitrator resolving any such Objections (the "ADJUSTMENT
DETERMINATION DATE"), if the Adjusted Working Capital on the Final
Closing Balance Sheet is less than zero, CMGI shall pay to Loudeye an
amount in cash equal to such deficiency by wire transfer of immediately
available funds within two (2) business days after the Adjustment
Determination Date. If the Adjusted Working Capital on the Final Closing
Balance Sheet is greater than zero, Loudeye shall pay to CMGI an amount
in cash equal to such excess amount by wire transfer of immediately
available funds within two (2) business days after the Adjustment
Determination Date. For purposes of this Section 2.1, "ADJUSTED WORKING
CAPITAL" shall mean cash and cash equivalents plus accounts receivable
less than seventy five (75) days past due plus pre-paid obligations and
deposits (if any) plus other current assets minus total liabilities, as
reflected on the "Draft Closing Balance Sheet" or the "Final Closing
Balance Sheet", as the case may be.
(iv) On the Anniversary Date, Loudeye shall deliver the
Anniversary Payment to the holder of record of Activate Preferred Stock
immediately prior to the Effective
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Time (the "FORMER ACTIVATE STOCKHOLDER") by wire transfer of immediately
available funds or delivery or certificates representing Deferred Shares
pursuant to Section 2.1(c)(ii). In the event that Loudeye determines to pay all
or any part of the Anniversary Payment in the form of Deferred Shares, the
aggregate number of Deferred Shares shall not represent more than fifteen
percent (15%) of the fully diluted outstanding shares of Loudeye Common Stock
(calculated after the issuance of such Deferred Shares). Any portion of the
Anniversary Payment that cannot be issued in the form of Deferred Shares because
of such fifteen percent (15%) limitation or otherwise shall be paid in cash by
wire transfer of immediately available funds. If the Loudeye Common Stock is not
listed on the Nasdaq National Market, the American Stock Exchange or the New
York Stock Exchange on the Anniversary Date, then the Anniversary Payment shall
be comprised of at least $1,500,000 in cash.
(v) All Deferred Shares shall be entitled to piggyback
registration rights pursuant to the Registration Rights Agreement in the form
attached hereto as EXHIBIT A (the "REGISTRATION RIGHTS AGREEMENT").
(d) Activate Common Stock. Each issued and outstanding share of
Activate Common Stock shall be canceled and retired and shall cease to exist and
no stock of Loudeye or any other consideration shall be delivered in exchange.
(e) Activate Stock Options. Not later than the Effective Time,
all outstanding options, whether vested or unvested ("ACTIVATE OPTIONS"), to
purchase Activate Common Stock issued under Activate's stock option plans that
have not been exercised shall be canceled and terminated by virtue of the Merger
without any action on the part of the holder thereof and Loudeye shall not
assume any Activate Options.
Section 2.2 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Activate Stock held by a holder who has exercised such
holder's appraisal rights in accordance with Section 262 of Delaware Law, and
who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal rights ("DISSENTING SHARES"), shall not be converted into or represent
a right to receive any consideration under this Agreement, but the holder of the
Dissenting Shares shall only be entitled to such rights as are granted by
Delaware Law.
(b) Notwithstanding the provisions of Section 2.2(a), if any
holder of shares of Activate Common Stock who demands his appraisal rights with
respect to such shares under Section 2.1 shall effectively withdraw or lose
(through failure to perfect or otherwise) his rights to appraisal for such
shares under Delaware Law then, as of the later of the Effective Time or the
occurrence of such event, such holder's shares of Activate Common Stock shall be
canceled and retired and shall cease to exist and no stock of Loudeye or any
other consideration shall be delivered in exchange.
(c) Activate shall give Loudeye (i) prompt notice of any written
demands for appraisal of any shares of capital stock of Activate pursuant to
Section 262 of Delaware Law, withdrawals of such demands, and any other
instruments that relate to such demands served
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pursuant to Delaware Law, and received by the Activate and (ii) the opportunity
to participate at its own expense in all negotiations and proceedings with
respect to demands for appraisal rights under Delaware Law. Activate shall not,
except with the prior written consent of Loudeye, voluntarily make any payment
with respect to any demands for appraisal rights with respect to Activate Stock
or offer to settle or compromise any such demands.
Section 2.3 Exchange of Certificates.
(a) Activate shall use its best efforts to cause each holder of
Activate Preferred Stock to deliver to Loudeye at the Closing such stockholder's
certificates evidencing Activate Preferred Stock (the "CERTIFICATES"). At the
Closing, Loudeye shall deliver to each Activate stockholder who has previously
delivered a Certificate the Merger Consideration issuable in respect of such
stockholder's Certificate(s) by wire transfer of immediately available funds to
an account designated by such stockholder.
(b) If any Activate stockholder does not deliver his, her or its
Certificates at or prior to Closing, then from and after the Effective Time,
each holder of an outstanding Certificate shall have the right to surrender each
Certificate to Loudeye (or at Loudeye's option, an exchange agent to be
appointed by Loudeye), and receive promptly (and in any event within fifteen
business days) in exchange for all Certificates held by such holder the Merger
Consideration payable in respect of such Certificates. Until surrendered, each
outstanding Certificate, which prior to the Effective Time represented shares of
Activate Preferred Stock, shall be deemed for all corporate purposes to evidence
ownership of the Merger Consideration attributable to the surrendered shares of
Activate Preferred Stock, but shall, subject to applicable appraisal rights
under Delaware Law and Section 2.2, have no other rights. From and after the
Effective Time, there shall be no further registration of transfers on the
records of Activate of shares of Activate Stock outstanding immediately prior to
the Effective Time.
(c) If any shares of Loudeye Common Stock issued as part of the
Anniversary Payment are to be issued in the name of a person other than the
person in whose name the Certificate(s) surrendered in exchange therefor is
registered, it shall be a condition to the issuance of such shares that (i) the
Certificate(s) so surrendered shall be transferable, and shall be properly
assigned, endorsed or accompanied by appropriate stock powers, (ii) such
transfer shall otherwise be proper and (iii) the person requesting such transfer
shall pay Loudeye, or its exchange agent, any transfer or other taxes payable by
reason of the foregoing or establish to the satisfaction of Loudeye that such
taxes have been paid or are not required to be paid. Notwithstanding the
foregoing, neither Loudeye nor Activate shall be liable to a holder of shares of
Activate Preferred Stock for any Merger Consideration issuable to such holder
pursuant to the provisions of Article II of this Agreement that are delivered to
a public official pursuant to applicable abandoned property, escheat or similar
laws.
(d) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, Loudeye shall issue in
exchange for such lost, stolen or destroyed Certificate, the Merger
Consideration issuable in exchange therefor pursuant to the provisions of
Article II of the Agreement. The Board of Directors of Loudeye may in its
discretion and as a condition
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precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificate to provide to Loudeye an indemnity agreement or bond
against any claim that may be made against Loudeye with respect to the
Certificate alleged to have been lost, stolen or destroyed.
Section 2.4 Tax Consequences.
It is intended by the parties hereto that the Merger shall not
constitute a "reorganization" within the meaning of Section 368 of the Code.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACTIVATE
Activate represents and warrants to Loudeye and Sub that the statements
contained in this Article III are true and correct, except as expressly set
forth in the disclosure schedule delivered by Activate to Loudeye on or before
the date of this Agreement (the "ACTIVATE DISCLOSURE SCHEDULE") a copy of which
is attached hereto as EXHIBIT B. The Activate Disclosure Schedule shall be
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article III.
Section 3.1 Organization of Activate.
(a) Activate is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, has all requisite
corporate power to own, lease and operate its property and to carry on its
business as now being conducted, and is duly qualified or licensed to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the nature of its business or ownership or leasing of properties makes
such qualification or licensing necessary and where the failure to be so
qualified or licensed could reasonably be expected to result in a material
adverse effect on, the business, assets (including intangible assets),
liabilities, condition (financial or otherwise), property or results of
operations (a "MATERIAL ADVERSE EFFECT") of Activate and its Subsidiaries, taken
as a whole. Schedule 3.1(a) of the Activate Disclosure Schedule contains a true
and complete listing of the locations of all sales offices and other offices or
facilities of Activate and a true and complete list of all states in which
Activate maintains any employees. Schedule 3.1(a) of the Activate Disclosure
Schedule also contains a true and complete list of all states in which Activate
is duly qualified or licensed to transact business as a foreign corporation.
(b) Activate has no Subsidiaries other than Xxxxxxxx.xxx Canada,
a corporation organized under the laws of Ontario, Canada ("XXXXXXXX.XXX
CANADA").
Section 3.2 Activate Capital Structure.
(a) The authorized capital stock of Activate consists of
700,000,000 shares of Activate Common Stock and 65,000,000 shares of Activate
Preferred Stock, all of which are designated as Series A Preferred Stock. As of
immediately prior to the Effective Time, there were: (i) 24,122,104 shares of
Activate Common Stock issued and outstanding, all of which are
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validly issued, fully paid and nonassessable; and (ii) 27,544,183 shares of
issued and outstanding shares of Activate Preferred Stock, all of which are
validly issued, fully paid and nonassessable. As of immediately prior to the
Effective Time, the issued and outstanding shares of Activate Common Stock were
held of record by the stockholders of Activate in the amounts and percentages
set forth on Schedule 3.2(a) of the Activate Disclosure Schedule, and the issued
and outstanding shares of Activate Preferred Stock were held of record by CMGI.
All outstanding shares of Activate Stock were issued in compliance with
applicable federal and state securities laws. There are no obligations,
contingent or otherwise, of Activate to repurchase, redeem or otherwise acquire
any shares of Activate Stock or make any investment (in the form of a loan,
capital contribution or otherwise) in any other entity.
(b) Except as set forth in this Section 3.2, there are no equity
securities of any class or series of Activate, or any security exchangeable into
or exercisable for such equity securities, issued, reserved for issuance or
outstanding. As of the Effective Time, there are no options, warrants, equity
securities, calls, rights, commitments, understandings or agreements of any
character to which Activate is a party or by which it is bound obligating
Activate to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of Activate or any affiliate or obligating
Activate to grant, extend, accelerate the vesting of or enter into any such
option, warrant, equity security, call, right, commitment or agreement. To the
knowledge of Activate, there are no voting trusts, proxies or other agreements
or understandings with respect to the voting of the shares of capital stock of
Activate.
Section 3.3 Authority; No Conflict; Required Filings and Consents.
(a) Activate has all requisite corporate power and authority to
enter into this Agreement and all Transaction Documents to which it is or will
become a party and to consummate the transactions contemplated by this Agreement
and such Transaction Documents. The execution and delivery of this Agreement and
such Transaction Documents and the consummation of the transactions contemplated
by this Agreement and such Transaction Documents have been duly authorized by
all necessary corporate action on the part of Activate. This Agreement has been
and the Transaction Documents to which Activate is or will become a party have
been or, to the extent not executed by Activate as of the date hereof, will be
duly executed and delivered by Activate. This Agreement and each of the
Transaction Documents to which Activate is a party constitutes, and each of the
Transaction Documents to which Activate will become a party, when executed and
delivered by Activate, will constitute, assuming the due authorization,
execution and delivery by the other parties hereto and thereto, the valid and
binding obligation of Activate, enforceable against Activate in accordance with
their respective terms, except to the extent that enforceability may be limited
by applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability is considered in
a proceeding at law or in equity or limited by public policy. For purposes of
this Agreement, "TRANSACTION DOCUMENTS" means all documents or agreements
required to be
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delivered by any party under this Agreement including the Certificate of Merger
and the Registration Rights Agreement.
(b) The execution and delivery by Activate of this Agreement and
the Transaction Documents to which it is or will become a party does not, and
the consummation of the transactions contemplated by this Agreement and the
Transaction Documents to which it is or will become a party will not, (i)
conflict with, or result in any violation or breach of any provision of the
Certificate of Incorporation or Bylaws of Activate, (ii) result in any violation
or breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which Activate is a party or by which it
or any of its properties or assets may be bound, or (iii) conflict or violate
any permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Activate or any of its
properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, defaults, terminations, cancellations or accelerations
which would not in the aggregate reasonably be expected to have a Material
Adverse Effect on Activate and its Subsidiaries, taken as a whole.
(c) None of the execution and delivery by Activate of this
Agreement or of any other Transaction Documents to which Activate is or will
become a party or the consummation of the transactions contemplated by this
Agreement or such Transaction Documents will require any consent, approval,
order or authorization of, or registration, declaration or filing with, any
foreign, federal, state or local court, administrative agency or commission or
other governmental authority or instrumentality ("GOVERNMENTAL ENTITY"), except
for (i) the filing of the Certificate of Merger with the Delaware Secretary of
State, (ii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, and (iii) such other consents, authorizations, filings,
approvals and registrations which are listed on Schedule 3.3(c) of the Activate
Disclosure Schedule or which in the aggregate, if not obtained or made, could be
expected to have a Material Adverse Effect on Activate and its Subsidiaries,
taken as a whole.
Section 3.4 Financial Statements; Absence of Undisclosed Liabilities.
(a) Activate has delivered to Loudeye copies of Activate's
unaudited consolidated balance sheet as of August 31, 2001 (the "AUGUST BALANCE
SHEET"), Activate's unaudited consolidated balance sheet as of June 30, 2001 and
the related unaudited consolidated statements of operations, stockholders'
equity and cash flow for the six month period then ended (together with the
August Balance Sheet, the "ACTIVATE INTERIM FINANCIALS"), and Activate's audited
consolidated balance sheet as of December 31, 2000 and December 31, 1999 and the
related audited consolidated statements of operations, stockholders' equity and
cash flows for the fiscal years ended December 31, 2000, 1999 and 1998 (the
"ACTIVATE AUDITED FINANCIALS", collectively with the Activate Interim
Financials, the "ACTIVATE FINANCIAL STATEMENTS").
(b) The Activate Financial Statements are in accordance with the
books and records of Activate, have been prepared in accordance with GAAP
applied on a basis consistent
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with prior periods and present fairly in all material respects, the financial
condition, results of operations and cash flows of Activate as of their
historical dates and for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in amount
and do not include footnotes.
(c) As of the Closing Date, Activate has no debt, liability, or
obligation of any nature, whether accrued, absolute, contingent, or otherwise,
and whether due or to become due, including accrued expenses for payment of
royalties and fees to owners of copyrights or other third parties collecting
such amounts on behalf of such owners (a "LIABILITY"), that will not be
reflected or reserved against in the Final Closing Balance Sheet, except for
those which are not required by GAAP to be reflected on a balance sheet. To
Activate's knowledge, as of the Closing Date, Activate has no material
Liabilities that will not be reflected or reserved against on the Final Closing
Balance Sheet and that are not set forth in any of the Activate Disclosure
Schedules.
Section 3.5 Tax Matters.
(a) For purposes of this Agreement, the following definitions
shall apply:
(i) The term "TAXES" shall mean all taxes, however
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, (A) imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality of
the foregoing, all income or profits taxes (including but not limited to,
federal income taxes and state income taxes), payroll and employee withholding
taxes, unemployment insurance, social security taxes, sales and use taxes, ad
valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, ozone depleting chemicals taxes, transfer taxes, workers'
compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar nature
to any of the foregoing, which are required to be paid, withheld or collected,
or (B) any liability for the payment of amounts referred to in (A) as a result
of being a member of any affiliated, consolidated, combined or unitary group.
(ii) The term "RETURNS" shall mean all reports, estimates,
declarations of estimated tax, information statements and returns relating to,
or required to be filed in connection with, any Taxes, including information
returns or reports with respect to backup withholding and other payments to
third parties.
(b) All Returns required to be filed prior to the date hereof by
or on behalf of Activate, including any consolidated or combined Return required
to be filed by the parent of any consolidated or unitary group of which Activate
is or was a member, have been duly filed on a timely basis, and such Returns
when filed were true, complete and correct in all material respects. Copies of
such Returns or the portions thereof relating to Activate have been provided or
made available to Loudeye. All Taxes shown to be due and payable on such Returns
or on subsequent
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assessments with respect thereto, and all payments of estimated Taxes required
to be made prior to the date hereof by or on behalf of Activate, or any member
of the consolidated group of which Activate is a member, under Section 6655 of
the Code or comparable provisions of state, local or foreign law, have been paid
in full on a timely basis. No material Taxes are payable by Activate with
respect to items or periods covered by such Returns (whether or not shown on or
reportable on such Returns).
(c) Activate has withheld and paid over all Taxes required to
have been withheld and paid over prior to the date hereof, and complied with all
information reporting and backup withholding requirements, including maintenance
of required records with respect thereto, in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other third party.
(d) There are no mortgages, liens, pledges, charges or
encumbrances of any kind or character ("LIENS") on any of the assets of Activate
with respect to Taxes, other than Liens for Taxes not yet due and payable or for
Taxes that Activate is contesting in good faith through appropriate proceedings
and for which appropriate reserves will be established on the Final Closing
Balance Sheet.
(e) Activate has not at any time been (i) a member of an
affiliated group of corporations filing consolidated, combined or unitary income
or franchise tax returns other than a group the common parent of which is CMGI,
or (ii) a member of any partnership or joint venture for a period for which the
statute of limitations for any Tax potentially applicable as a result of such
membership has not expired.
(f) Activate has no liability for the Taxes of any other person
(i) under Treasury Regulation Section 1.1502-6 or any similar provision of
state, local or foreign law, (ii) as a transferee or successor, or (iii) by
contract (including an intercompany account system or other tax sharing
arrangement).
(g) The amount of Activate's liability for unpaid Taxes (whether
actual or contingent) for all periods through the Closing Date will not, in the
aggregate, exceed the amount of the current liability accruals for Taxes to be
reflected on the Final Closing Balance Sheet, which balance sheet reflects
proper accrual in accordance with GAAP applied on a consistent basis. No
liability for Taxes has been incurred since such date other than in the ordinary
course of business.
(h) Activate has furnished or made available to Loudeye true and
complete copies of (i) relevant portions of income tax audit reports, statements
of deficiencies, closing or other agreements received by or on behalf of
Activate or CMGI relating to Taxes related to the Activate business, and (ii)
all federal and state income or franchise tax Returns and state sales and use
tax Returns for or including Activate for all periods since the inception of
Activate. Activate does not do business in or derive income from any state other
than states for which Returns have been duly filed and furnished or made
available to Loudeye.
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(i) The Returns of or including Activate have never been audited
by a government or taxing authority nor is any such audit in process, pending
or, to the knowledge of Activate, threatened (either in writing or verbally,
formally or informally). No deficiencies exist or have been asserted in writing
to Activate, and Activate has not received notice in writing that it has not
filed a Return or paid Taxes required to be filed or paid. Activate is neither a
party to any action or proceeding for assessment or collection of Taxes, nor, to
the knowledge of Activate, has such event been asserted or threatened in writing
against Activate or any of its assets. No waiver or extension of any statute of
limitations is in effect with respect to Taxes or Returns of Activate. No power
of attorney has been given by or with respect to Activate to any person with
respect to Taxes that will be binding upon Activate.
(j) Activate will not be required to include any material
adjustment in taxable income for any period (or portion thereof) pursuant to
Section 481 or Section 263A of the Code or any comparable provision under state
or foreign Tax laws as a result of transactions, events or accounting methods
employed prior to the Closing.
(k) Activate is not, nor has it been, a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code,
and Loudeye is not required to withhold tax by reason of Section 1445 of the
Code. Activate is not a "consenting corporation" under Section 341(f) of the
Code. Activate has not entered into any compensatory agreements with respect to
the performance of services which payment thereunder would result in a
nondeductible expense to Activate pursuant to Section 280G of the Code or an
excise tax to the recipient of such payment pursuant to Section 4999 of the
Code. Activate is not, nor has it been, a "reporting corporation" subject to the
information reporting and record maintenance requirements of Section 6038A and
the regulations thereunder. Activate is in material compliance with the terms
and conditions of any applicable tax exemptions, agreements or orders of any
foreign government to which it may be subject or which it may have claimed, and
the transactions contemplated by this Agreement will not have any material
adverse effect on such compliance.
(l) Any tax sharing agreement between Activate and CMGI or any
member of any consolidated or unitary group of which Activate is a member has
been terminated effective on the Closing Date, such that Activate will have no
further liability under such agreement.
(m) Activate is not a party to or otherwise subject to any
arrangement entered into in anticipation of the Closing, not in accordance with
past practice and not required by this Agreement, that could reasonably be
expected to have the effect of (i) the recognition of a deduction or loss before
the Closing Date and a corresponding recognition of taxable income or gain by
the Surviving Corporation after the Closing Date or (ii) the recognition of
taxable income or gain by the Surviving Corporation after the Closing Date
without the receipt of or entitlement to a corresponding amount of cash.
Section 3.6 Absence of Certain Changes or Events.
Since July 31, 2001, other than as set forth on Schedule 3.6 of the
Activate Disclosure Schedule, Activate has not:
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(a) suffered any change that has resulted, or could be reasonably
expected to result, in a Material Adverse Effect on Activate and its
Subsidiaries, taken as a whole;
(b) suffered any damage, destruction or loss, whether covered by
insurance or not, that has resulted, or could be reasonably expected to result,
in a Material Adverse Effect on Activate and its Subsidiaries, taken as a whole;
(c) granted or agreed to make any increase of more than $750 per
month in any individual case and $7,500 per month in the aggregate in the
compensation payable or to become payable by Activate to its officers or
employees;
(d) made any material change in the accounting methods or
practices it follows whether for general financial or tax purposes, or any
change in depreciation or amortization policies or rates adopted therein;
(e) sold, assigned, transferred, licensed or otherwise disposed
of any patent, trademark, trade name, brand name, copyright (or pending
application for any patent, trademark or copyright) invention, work of
authorship, process, know-how, formula or trade secret or interest thereunder or
other intangible asset, other than in the ordinary course of business;
(f) permitted or allowed any of its property or assets to be
subjected to any mortgage, deed of trust, pledge, lien, security interest or
other encumbrance of any kind (except those permitted under Section 3.7);
(g) made any capital expenditure or commitment, including any
reasonably expected commitment to pay any licensing or royalty fees, in the
aggregate, in excess of $10,000;
(h) sold, transferred or leased any properties or assets to, or
entered into any agreement with, any of its affiliates, officers, directors or
stockholders or any affiliate of any of the foregoing;
(i) made any material amendment to or terminated any material
agreement which, if not so amended or terminated, would be required to be
disclosed on Schedule 3.6 of the Activate Disclosure Schedule; or
(j) agreed to take any action described in this Section 3.6 or
which would constitute a material breach of any of the representations of
Activate contained in this Agreement.
Section 3.7 Title and Related Matters.
Activate has good and valid title to all its properties, interests in
properties and assets, real and personal, free and clear of all Liens, except
Liens for current taxes not yet due and payable and minor imperfections of and
encumbrances on title, if any, as do not materially detract from the value of or
interfere with the present use of the property affected thereby. The equipment
of Activate used in the operation of its business is, taken as a whole, (i)
adequate for the business conducted by Activate and (ii) in good operating
condition and repair, ordinary wear
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and tear excepted. Schedule 3.7.1 of the Activate Disclosure Schedule sets forth
a list of all real and personal property leases to which Activate is a party
(excluding personal property leases providing for lease payments in the
aggregate of no more than $15,000 per annum). All of Activate's obligations
under the personal property leases listed in Schedule 3.7.1 of the Activate
Disclosure Schedule have been satisfied so that at Closing Activate will hold
title to all assets subject to leases free and clear of all Liens. Schedule
3.7.2 of the Activate Disclosure Schedule contains a description of all items of
personal property owned or leased by Activate with an individual acquired book
value in excess of $5,000 and real property leased or owned by Activate,
describing its interest in said property. True and correct copies of the real
property and personal property leases listed on Schedule 3.7.1 of the Activate
Disclosure Schedule have been provided or made available to Loudeye or its
representatives.
Section 3.8 Proprietary Rights.
(a) Activate owns all right, title and interest in and to, or
otherwise possesses legally enforceable rights, or is licensed to use, all
patents, copyrights, technology, software, software tools, processes, trade
secrets, trademarks, service marks, trade names, Internet domain names and other
proprietary rights that are proprietary and required to conduct Activate's
business as conducted to the date of this Agreement, including, without
limitation, all proprietary rights that are required in connection with all
versions and implementations of Activate's Internet sites (including
xxx.xxxxxxxx.xxx and the other domain names listed on Schedule 3.8(a) of the
Activate Disclosure Schedule) or any service which has been or is being
distributed or sold by Activate or currently is under development by Activate
and actively under testing for its intended use (collectively, including such
Web sites, the "Activate Services"), free and clear of all Liens (all of which
rights are referred to as "Activate Proprietary Rights"). Schedule 3.8(a) of the
Activate Disclosure Schedule contains an accurate and complete (i) list of all
patents (with separate listings of issued and pending patents), trademarks (with
separate listings of registered and unregistered trademarks), trade names,
Internet domain names and registered copyrights in or related to the Activate
Services or otherwise included in the Activate Proprietary Rights and all
applications and registration statements therefor, including the jurisdictions
in which each such Activate Proprietary Right has been issued or registered or
in which any such application of such issuance and registration has been filed,
(ii) list of all licenses and other agreements, other than standard form shrink
wrap licenses, click through licenses or other similar end-user agreements for
generally commercially available software (excluding software that is required
for the provision of the Activate Services), with third parties (the "Third
Party Licenses") relating to any patents, copyrights, trade secrets, software,
inventions, technology, processes or other proprietary rights under which
Activate is licensed or otherwise authorized by such third parties to use,
market, distribute or incorporate in Activate Services (such patents,
copyrights, trade secrets, software, inventions, technology, know-how, processes
or other proprietary rights are collectively referred to as the "Third Party
Technology"), (iii) list of all licenses and other agreements, other than
standard form shrink wrap licenses, click through licenses or other similar
end-user agreements for generally commercially available software (excluding
software that is required for the provision of the Activate Services), with
third parties relating to any information, compilations, data lists or databases
that Activate is licensed or otherwise authorized by such third parties to use,
market, disseminate distribute or incorporate in Activate Services and (iv) list
of all licenses and agreements with third parties, other than shrink wrap,
click-through and other
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similar end-user agreements entered into by Activate in the ordinary course of
business, under which such third party is licensed or authorized to make, use,
sell, distribute or incorporate any Activate Proprietary Rights or any portion
thereof. All of Activate's patents, copyrights, trademarks, trade names or
Internet domain name registrations related to or in the Activate Services are
valid and in full force and effect, and consummation of the transactions
contemplated by this Agreement will not alter or impair any such rights. No
claims have been asserted or threatened against Activate (and Activate has no
knowledge of any claims which are likely to be asserted or threatened against
Activate or which have been asserted or threatened against others relating to
Activate Proprietary Rights or Activate Services) by any person challenging
Activate's use, possession, manufacture, sale or distribution of Activate
Services or challenging or questioning the validity or effectiveness of any
license or agreement relating thereto (including, without limitation, the Third
Party Licenses) or alleging a violation of any person's or entity's privacy,
personal or confidentiality rights. Activate knows of no valid basis for any
claim of the type specified in the immediately preceding sentence which could in
any way relate to or interfere with the continued enhancement and exploitation
by Activate of any of the Activate Services. To the knowledge of Activate, none
of the Activate Services nor the use or exploitation of any Activate Proprietary
Rights or Third Party Technology in Activate's current business infringes on the
rights of or constitutes misappropriation of any proprietary information or
intangible property right of any third person or entity, including without
limitation any patent, trade secret, copyright, trademark or trade name, and
Activate has not been sued, or threatened to be sued, or named as a party in any
suit, action or proceeding which involves a claim of such infringement,
misappropriation or unfair competition.
(b) Activate has not granted any third party any right to
reproduce, distribute, market or exploit any of the Activate Services or any
adaptations, translations, or derivative works based on the Activate Services or
any portion thereof.
(c) All designs, drawings, specifications, source code, object
code, scripts, documentation, flow charts, diagrams, data lists, databases,
compilations and information incorporating, embodying or reflecting any of the
Activate Services (the "Activate Components") other than the Third Party
Technology were written, developed and created solely and exclusively by
employees of Activate without the assistance of any third party or entity or
were created by third parties who assigned ownership of their rights to Activate
by means of valid and enforceable invention assignment agreements, true and
correct copies of which have been delivered or made available to Loudeye.
Activate has at all times used commercially reasonable efforts customary in its
industry to maintain in confidence the technology (including source code) and
other information related to the Activate Services that it desired to treat as
trade secrets and has not disclosed or otherwise dealt with such items in a
manner intended or reasonably likely to cause the loss of such trade secrets by
release into the public domain.
(d) No employee, contractor or consultant of Activate is in
violation in any respect of any term of any written employment contract, patent
disclosure agreement or any other written contract or agreement relating to the
relationship of any such employee, consultant or contractor with Activate or any
other party because of the nature of the business conducted by Activate or
currently proposed to be conducted by Activate, except for such violations as
would not in the aggregate reasonably be expected to have a Material Adverse
Effect on Activate and its
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Subsidiaries, taken as a whole. Schedule 3.8(d) of the Activate Disclosure
Schedule lists all employees, contractors and consultants who have participated
in any way in the development of any material portion of the Activate Services
or the Activate Proprietary Rights.
(e) Each person presently or previously employed by Activate
(including independent contractors, if any) has executed a confidentiality,
non-disclosure and proprietary inventions assignment agreement pursuant to the
form of agreement previously provided or made available to Loudeye or its
representatives.
(f) No product liability or warranty claims have been
communicated in writing to or, to the knowledge of Activate, threatened against
Activate.
(g) To the knowledge of Activate, there is no unauthorized use,
disclosure, infringement or misappropriation of (i) any Activate Proprietary
Rights by any third party, including any employee, former employee or
independent contractor of Activate, or (ii) any Third Party Technology to the
extent licensed by or through Activate by any employee, former employee or
independent contractor of Activate or any end-user of the Activate Services, in
connection with the use or provision of the Activate Services. Activate has not
entered into any agreement to indemnify any other person against any charge of
infringement of any Activate Proprietary Rights or any other rights, other than
agreements with licensees of Activate and users of Activate Services.
(h) All disclosure by Activate or, to the knowledge of Activate,
by another party pursuant to rights granted to it by Activate, of confidential
information owned by Activate to a third party has been pursuant to the terms of
a written agreement between Activate and such third party. All use, disclosure
or appropriation by Activate of confidential information not owned by Activate
has been pursuant to the terms of a written agreement between Activate and the
owner of such confidential information, or is otherwise lawful.
Section 3.9 Employee Benefit Plans.
(a) Schedule 3.9(a) of the Activate Disclosure Schedule lists,
with respect to Activate and any trade or business (whether or not incorporated)
which is treated as a single employer with Activate within the meaning of
Section 414(b), (c), (m) or (o) of the Code (an "ERISA AFFILIATE"), the
following plans, programs and arrangements which cover current or former
employees, consultants or directors of Activate and with respect to which
Activate has any potential liability (the "ACTIVATE EMPLOYEE PLANS"): (i) all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), (ii) each loan to a
non-officer employee, loans to officers and directors and any stock option,
stock purchase, phantom stock, stock appreciation right, supplemental
retirement, severance, sabbatical, medical, dental, vision care, disability,
employee relocation, cafeteria benefit (Code Section 125) or dependent care
(Code Section 129), life insurance or accident insurance plans, programs or
arrangements, (iii) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (iv) other fringe or
employee benefit plans, programs or arrangements that apply to senior management
of Activate and that do not generally apply to all employees, and (v) any
current or former employment or
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executive compensation or severance agreements, written or otherwise, for the
benefit of, or relating to, any present or former employee, consultant or
director.
(b) Activate has delivered or made available to Loudeye or its
representatives a copy of each of the written Activate Employee Plans and
related plan documents (including trust documents, insurance policies or
contracts, employee booklets, summary plan descriptions and other authorizing
documents, and, to the extent still in its possession, any material employee
communications relating thereto within the last year) and has, with respect to
each Activate Employee Plan which is subject to ERISA reporting requirements,
provided or made available copies of any Form 5500 reports filed for the last
plan year. Any Activate Employee Plan intended to be qualified under Section
401(a) of the Code has either obtained from the Internal Revenue Service a
favorable determination letter as to its qualified status under the Code,
including all amendments to the Code effected by the Tax Reform Act of 1986 and
subsequent legislation, or has applied to, or has time to apply to, the Internal
Revenue Service for such a determination letter prior to the expiration of the
requisite period under applicable Treasury Regulations or Internal Revenue
Service pronouncements in which to apply for such determination letter and to
make any amendments necessary to obtain a favorable determination. Activate has
also delivered or made available to Loudeye the most recent Internal Revenue
Service determination letter issued with respect to each such Activate Employee
Plan, and nothing has occurred since the issuance of each such letter which
could reasonably be expected to cause the loss of the tax-qualified status of
any Activate Employee Plan subject to Code Section 401(a).
(c) Except as set forth on Schedule 3.9(c) of the Activate
Disclosure Schedule, (i) none of the Activate Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person, except
as may be required by law; (ii) there has been no "prohibited transaction," as
such term is defined in Section 406 of ERISA and Section 4975 of the Code, with
respect to any Activate Employee Plan; (iii) each Activate Employee Plan has
been administered in accordance with its terms and in compliance in all material
respects with the requirements prescribed by any and all statutes, rules and
regulations (including ERISA and the Code), and Activate and each subsidiary or
ERISA Affiliate have performed all material obligations required to be performed
by them under, are not in any material respect in default, under or violation
of, and have no knowledge of any material default or violation by any other
party to, any of the Activate Employee Plans; (iv) neither Activate nor any
subsidiary or ERISA Affiliate is subject to any material liability or penalty
under Sections 4976 through 4980 of the Code or Title I of ERISA with respect to
any of the Activate Employee Plans; (v) all contributions required to be made by
Activate or any subsidiary or ERISA Affiliate to any Activate Employee Plan have
been made on or before their due dates and a reasonable amount has been accrued
for required contributions to each Activate Employee Plan for the current plan
years; (vi) with respect to each Activate Employee Plan, no "reportable event"
within the meaning of Section 4043 of ERISA (excluding any such event for which
the thirty (30) day notice requirement has been waived under the regulations to
Section 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 of
ERISA has occurred; and (vii) no Activate Employee Plan is covered by, and
neither Activate nor any subsidiary or ERISA Affiliate has incurred or expects
to incur any material liability under Title IV of ERISA or Section 412 of the
Code. With respect to each Activate Employee Plan subject to ERISA as either an
employee
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pension plan within the meaning of Section 3(2) of ERISA or an employee welfare
benefit plan within the meaning of Section 3(1) of ERISA, Activate has prepared
in good faith and timely filed all requisite governmental reports (which were
true and correct in all material respects as of the date filed) and has properly
and timely filed and distributed or posted all material notices and reports to
employees required to be filed, distributed or posted with respect to each such
Activate Employee Plan. No suit, administrative proceeding, action or other
litigation has been brought, or to the knowledge of Activate is threatened,
against or with respect to any such Activate Employee Plan, including any audit
or inquiry by the IRS or United States Department of Labor. Neither Activate nor
any ERISA Affiliate is a party to, or has made any contribution to or otherwise
incurred any obligation under, any "multi-employer plan" as defined in Section
3(37) of ERISA.
(d) With respect to each Activate Employee Plan, Activate has
complied with (i) the applicable health care continuation and notice provisions
of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
proposed regulations thereunder, (ii) the applicable requirements of the Family
Leave Act of 1993 and the regulations thereunder, and (iii) the applicable
requirements of the Health Insurance Portability and Accountability Act of 1996
("HIPAA") and the temporary regulations thereunder.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of Activate or any other ERISA Affiliate to severance benefits or any
other payment (including, without limitation, unemployment compensation, golden
parachute or bonus), except as expressly provided in this Agreement, or (ii)
accelerate the time of payment or vesting of any such benefits, or (iii)
increase or accelerate any benefits or the amount of compensation due any such
employee or service provider.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by Activate or other ERISA Affiliate
relating to, or change in participation or coverage under, any Activate Employee
Plan which would materially increase the expense of maintaining such Plan above
the level of expense incurred with respect to that Plan for the most recent
fiscal year included in the Activate Financial Statements.
Section 3.10 Bank Accounts.
Schedule 3.10 of the Activate Disclosure Schedule sets forth the names
and locations of all banks, trust companies, savings and loan associations, and
other financial institutions at which Activate maintains accounts of any nature
and the names of all persons authorized to draw thereon or make withdrawals
therefrom.
Section 3.11 Contracts.
(a) A list of Activate's material contracts ("MATERIAL
CONTRACTS") is attached as Schedule 3.11(a) to the Activate Disclosure Schedule.
Except as identified on Schedule 3.11(a) of the Activate Disclosure Schedule:
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(i) Activate has no agreements, contracts or commitments
that provide for the sale, use, disclosure, licensing or distribution by
Activate or any third party of any Activate Services or Activate Proprietary
Rights, other than standard form shrink wrap licenses, click through licenses or
other similar end-user agreements for generally commercially available software.
Without limiting the foregoing, except as set forth on Schedule 3.11(a)(i) of
the Activate Disclosure Schedule, Activate has not granted to any third party
any exclusive rights of any kind, or any rights to reproduce, manufacture or
distribute any of the Activate Services, nor has Activate granted to any third
party any exclusive rights of any kind (including, without limitation,
exclusivity with regard to categories of advertisers on Activate's World Wide
Web site, territorial exclusivity or exclusivity with respect to particular
versions, implementations or translations of any of the Activate Services), nor
has Activate granted any third party any right to market any of the Activate
Services under any private label or "OEM" arrangement, nor has Activate granted
any license of any Activate trademarks or service marks.
(ii) Activate has no Third Party Licenses other than
standard form shrink wrap licenses for generally commercially available
software.
(iii) Activate has no outstanding agreements, contracts or
commitments that call for fixed and/or contingent payments or expenditures after
the Closing Date of more than $10,000 by or to Activate (including, without
limitation, any advertising or revenue sharing arrangement).
(iv) Activate has no outstanding agreements, contracts or
commitments with officers, employees, agents, advisors, salesmen, sales
representatives, distributors or dealers, other than its standard form of
confidentiality, assignment of invention and/or non-disclosure agreements.
(v) Activate has no employment agreements. Activate also
has no independent contractor or similar agreement, contract or commitment that
is not terminable on thirty (30) days' notice or less without penalty, liability
or premium of any type, including, without limitation, severance or termination
pay.
(vi) Activate has no currently effective collective
bargaining or union agreements, contracts or commitments.
(vii) Activate is not restricted by agreement from
competing with any person or entity or from carrying on its business anywhere in
the world.
(viii) Activate has not guaranteed any obligations of
other persons or made any agreements to acquire or guarantee any material
obligations of other persons.
(ix) Activate has no outstanding loan or advance to any
person; nor is it party to any line of credit, standby financing, revolving
credit or other similar financing arrangement of any sort which would permit the
borrowing by Activate of any sum.
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(x) Activate has no material agreements pursuant to which
Activate has agreed to manufacture for, supply to or distribute to any third
party any Activate Services or Activate Components after the Closing Date.
(xi) Activate has no agreements providing for "most
favored customer" status or similar adjustments to pricing terms, royalty rates,
payment terms and the like based on the terms and conditions of other agreements
Activate enters into with third parties (collectively, an "MFN CLAUSE").
Activate has not had to adjust, is not now required to adjust and does not
presently anticipate having to adjust its pricing terms, royalty rates, payment
terms and the like as a result of any such MFN Clauses.
True and correct copies of each document or instrument listed on
Schedule 3.11(a) of the Activate Disclosure Schedule pursuant to this Section
3.11(a) have been provided to Loudeye or its representatives.
(b) All of the Material Contracts are valid, binding, in full
force and effect, and enforceable by Activate in all material respects in
accordance with their respective terms, except to the extent that enforceability
may be limited by applicable bankruptcy, reorganization, insolvency, moratorium
or other laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding at law or in equity. To the knowledge of Activate, no
party to any such Material Contract intends to cancel, withdraw, modify or amend
such contract, agreement or arrangement.
(c) Activate is not in default under or in breach or violation
of, nor to the knowledge of Activate, is there any valid basis for any claim of
default by Activate under, or breach or violation by Activate of, any material
provision of any Material Contract. To the knowledge of Activate, no other party
is in default under or in breach or violation of, nor is there any valid basis
for any claim of default by any other party under or any breach or violation by
any other party of, any Material Contract.
(d) No claims have been made in writing to Activate or to the
knowledge of Activate, threatened, under the Material Contracts that could
require indemnification by Activate, and Activate has not paid any amounts to
indemnify any third party as a result of indemnification requirements of any
kind since January 1, 2000.
(e) All accepted advertising arrangements entered into by
Activate, and all material agreements, contracts, or commitments for the
purchase of supplies by Activate, were made in the ordinary course of business.
There are no outstanding oral contracts or arrangements for the purchase of
advertising in excess of $10,000 or for the sale any other product or service in
an aggregate amount in excess of $10,000 by Activate.
Section 3.12 Compliance With Law.
Activate and the operation of its business are in compliance in all
material respects with all applicable laws and regulations material to the
operation of its business. Neither Activate nor, to Activate's knowledge, any of
its employees has directly or indirectly paid or delivered any fee,
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commission or other sum of money or item of property, however characterized, to
any finder, agent, government official or other party in the United States or
any other country, that was or is in violation of any federal, state, or local
statute or law or of any statute or law of any other country having
jurisdiction. Activate has not participated directly or indirectly in any
boycotts or other similar practices affecting any of its customers. Activate has
complied in all material respects at all times with any and all applicable
federal, state and foreign laws, rules, regulations, proclamations and orders
relating to the importation or exportation of its products and data, except for
such failures to comply as would not in the aggregate reasonably be expected to
have a Material Adverse Effect on Activate and its Subsidiaries, taken as a
whole.
Section 3.13 Labor Difficulties; No Discrimination.
(a) Activate is not engaged in any unfair labor practice and is
not in material violation of any applicable laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours.
There is no unfair labor practice complaint against Activate actually pending
or, to the knowledge of Activate, threatened before the National Labor Relations
Board. There is no strike, labor dispute, slowdown, or stoppage actually pending
or, to the knowledge of Activate, threatened against Activate. To the knowledge
of Activate, no union organizing activities are taking place with respect to the
business of Activate. No grievance or any arbitration proceeding arising out of
or under any collective bargaining agreement is pending and, to the knowledge of
Activate, no claims therefor exist. No collective bargaining agreement that is
binding on Activate restricts it from relocating or closing any of its
operations. Activate has not experienced any material work stoppage or other
material labor difficulty that could have a Material Adverse Effect on Activate
and its Subsidiaries, taken as a whole.
(b) There is and has not been any claim in writing against
Activate or its officers or employees, or to Activate's knowledge, threatened
against Activate or its officers or employees (in their capacities as such),
based on actual or alleged race, age, sex, disability or other harassment or
discrimination, or similar tortious conduct, or based on actual or alleged
breach of contract with respect to any person's employment by Activate, nor to
the knowledge of Activate is there any basis for any such claim that could
reasonably be expected to have a Material Adverse Effect on Activate and its
Subsidiaries, taken as a whole.
(c) There are no pending claims against Activate under any
workers compensation plan or policy or for long term disability. Activate has no
material obligations under COBRA with respect to any former employees or
qualifying beneficiaries thereunder. There are no proceedings pending or, to the
knowledge of Activate, threatened, before any Governmental Entity between
Activate and any of its employees, which proceedings have or could reasonably be
expected to have a Material Adverse Effect on Activate.
Section 3.14 Insider Transactions.
Neither CMGI nor any company controlled by CMGI has any material
interest in any equipment or other property, real or personal, tangible or
intangible of Activate, including, without limitation, any Activate Proprietary
Rights, or any creditor, supplier, or customer of
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Activate or any distributor or reseller of Activate Services.
Section 3.15 Employees, Independent Contractors and Consultants.
Schedule 3.15 of the Activate Disclosure Schedule lists all currently
effective consulting, independent contractor and/or employment agreements and
other material agreements with individual employees, independent contractors or
consultants to which Activate is a party. True and correct copies of all such
written agreements have been provided or made available to Loudeye or its
representatives. All independent contractors have been properly classified as
independent contractors for the purposes of federal and applicable state tax
laws, laws applicable to employee benefits and other applicable law except to
the extent such failure could not reasonably be expected to result in a Material
Adverse Effect. All salaries and wages paid by Activate are in compliance in all
material respects with applicable federal, state and local laws. Also shown on
Schedule 3.15 of the Activate Disclosure Schedule are the names, positions and
salaries or rates of pay, including bonuses, of all persons presently employed
by, or performing contract services for, Activate. No bonus, benefit or other
payment with an aggregate value in excess of $5,000 will become due or accrue to
Activate employees or contractors as a result of the Merger.
Section 3.16 Insurance.
Schedule 3.16 of the Activate Disclosure Schedule contains a list of the
principal policies of fire, liability and other forms of insurance currently
held by Activate, and all outstanding claims made by Activate under such
policies. To the knowledge of Activate, Activate has not done anything, either
by way of action or inaction, that might invalidate such policies in whole or in
part. There is no claim pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums due and payable under all such policies and
bonds have been timely paid and Activate is otherwise in compliance with the
terms of such policies and bonds in all material respects. Activate has no
knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
Section 3.17 Accounts Receivable.
Subject to any reserves to be set forth in the Final Closing Balance
Sheet, the accounts receivable to be shown on the Final Closing Balance Sheet
will represent bona fide claims against debtors for sales and other charges, and
are not subject to discount except for normal cash and immaterial trade
discounts.
Section 3.18 Litigation.
There is no private or governmental action, suit, proceeding, claim,
arbitration or investigation pending before any agency, court or tribunal,
foreign or domestic, or, to the knowledge of Activate, threatened against
Activate or any of its properties or any of its officers or directors (in their
capacities as such), if determined adversely to Activate, could have a Material
Adverse Effect on Activate and its Subsidiaries, taken as a whole. There is no
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outstanding judgment, decree or order of any agency, court or tribunal, foreign
or domestic, against Activate. To Activate's knowledge, no circumstances exist
that could reasonably be expected to result in a claim against Activate as a
result of the conduct of Activate's business (including, without limitation, any
claim of infringement of any intellectual property right) which, if determined
adversely to Activate, could reasonably be expected to have a Material Adverse
Effect on Activate and its Subsidiaries, taken as a whole.
Section 3.19 Governmental Authorizations and Regulations.
Activate has obtained each consent, license, permit, grant or other
authorization of a Governmental Entity (i) pursuant to which Activate currently
operates or holds any interest in any of its properties or (ii) that is required
for the operation of Activate's business or the holding of any such interest,
and all of such authorizations are in full force and effect, except where the
absence of which or the failure to do so could not reasonably be expected to
have a Material Adverse Effect on Activate and its Subsidiaries, taken as a
whole.
Section 3.20 No Other Investments.
Activate does not own or control (directly or indirectly) any capital
stock, bonds or other securities of, and does not have any proprietary interest
in, any other corporation, limited liability company, general or limited
partnership, firm, association or business organization, entity or enterprise,
other than Xxxxxxxx.xxx Canada. Activate does not control (directly or
indirectly) the management or policies of any other corporation, limited
liability company, partnership, firm, association or business organization,
entity or enterprise, other than Xxxxxxxx.xxx Canada.
Section 3.21 Compliance with Environmental Requirements.
Activate has obtained all permits, licenses and other authorizations
which are required under federal, state and local laws applicable to Activate
and relating to pollution or protection of the environment, including laws or
provisions relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials, substances, or wastes
into air, surface water, groundwater, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials, substances, or wastes or which are intended to assure the safety of
employees, workers or other persons, except where the failure to obtain such
authorizations could not be reasonably expected to have a Material Adverse
Effect on Activate and its Subsidiaries, taken as a whole. Activate is in
compliance in all material respects with all terms and conditions of all such
permits, licenses and authorizations. There are no conditions, circumstances,
activities, practices, incidents, or actions known to Activate which could
reasonably be expected to form the basis of any claim, action, suit, proceeding,
hearing, or investigation of, by, against or relating to Activate, based on or
related to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling, or the emission, discharge, release or
threatened release into the environment, of any pollutant, contaminant, or
hazardous or toxic substance, material or waste, or relating to the safety of
employees, workers or other persons except for such conditions which could not
have a Material Adverse Effect on Activate and its Subsidiaries, taken as a
whole.
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Section 3.22 Corporate Documents.
Activate has furnished or made available to Loudeye or its
representatives copies of: (a) its Certificate of Incorporation and Bylaws, as
amended to date; (b) its minute book containing consents, actions, and meetings
of the stockholders, the board of directors and any committees thereof; (c) all
material permits, orders, and consents issued by any regulatory agency with
respect to Activate, or any securities of Activate, and all applications for
such permits, orders, and consents; and (d) the stock transfer books of Activate
setting forth all transfers of any its capital stock. The corporate minute
books, stock certificate books, stock registers and other corporate records of
Activate are complete and accurate in all material respects, and, to the
knowledge of Activate, the signatures appearing on all documents contained
therein are the true or facsimile signatures of the persons purporting to have
signed the same.
Section 3.23 No Brokers.
Activate is not obligated for the payment of fees or expenses of any
broker or finder in connection with the origin, negotiation or execution of this
Agreement or the other Transaction Documents or in connection with any
transaction contemplated hereby or thereby.
Section 3.24 Customers and Suppliers.
As of the Closing Date, no customer which individually accounted for
more than three percent (3%) of Activate's gross revenues during the 12-month
period ending July 31, 2001, and no material supplier of Activate, has canceled
or otherwise terminated prior to the expiration of the contract term, or, made
any written threat to Activate to cancel or otherwise terminate its relationship
with Activate, or has since July 31, 2001 decreased materially its services or
supplies to Activate in the case of any such supplier, or its usage of the
Services in the case of such customer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF LOUDEYE AND SUB
Loudeye and Sub jointly and severally represent and warrant to Activate
that the statements contained in this Article IV are true and correct, except as
expressly set forth in the disclosure schedule delivered by Loudeye to Activate
on or before the date of this Agreement (the "LOUDEYE DISCLOSURE SCHEDULE") a
copy of which is attached hereto as EXHIBIT C. The Loudeye Disclosure Schedule
shall be arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Article IV.
Section 4.1 Organization of Loudeye and Sub.
Each of Loudeye and its Subsidiaries, including Sub, is a corporation
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and has all requisite corporate power
to own, lease and operate its property and to carry on its business as now being
conducted and is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the failure to be so qualified or
licensed would have a Material Adverse Effect on Loudeye or Sub. The authorized
capital stock of Sub consists of
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3,000 shares of Common Stock, all of which are issued and outstanding, duly paid
and nonassessable and are owned by Loudeye free and clear of all Liens.
Section 4.2 Valid Issuance of Loudeye Common Stock.
The Deferred Shares will be, when issued, duly authorized, validly
issued, fully paid, and nonassessable and based in part upon the representations
of the Former Activate Stockholder in the Investor Representation Statement (as
defined in Section 6.1) shall be issued in compliance with all applicable
federal and state securities laws.
Section 4.3 Authority; No Conflict; Required Filings and Consents.
(a) Each of Loudeye and Sub has all requisite corporate power and
authority to enter into this Agreement and all Transaction Documents to which it
is or will become a party and to consummate the transactions contemplated by
this Agreement and such Transaction Documents. The execution and delivery of
this Agreement and such Transaction Documents and the consummation of the
transactions contemplated by this Agreement and such Transaction Documents have
been duly authorized by all necessary corporate action on the part of Loudeye
and Sub. This Agreement has been and the Transaction Documents to which Loudeye
or Sub is or will become a party have been or, to the extent not executed as of
the date hereof, will be duly executed and delivered by Loudeye and Sub. This
Agreement and each of the Transaction Documents to which Loudeye or Sub is a
party constitutes, and each of the Transaction Documents to which Loudeye or Sub
will become a party when executed and delivered by Loudeye or Sub will
constitute, a valid and binding obligation of Loudeye or Sub, enforceable
against Loudeye or Sub, as the case may be, in accordance with its respective
terms, except to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
(b) The execution and delivery by Loudeye or Sub of this
Agreement and the Transaction Documents to which it is or will become a party
does not, and consummation of the transactions contemplated by this Agreement or
the Transaction Documents to which it is or will become a party will not, (i)
conflict with, or result in any violation or breach of any provision of the
Certificate of Incorporation or Bylaws of Loudeye or Sub, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
contract or other agreement, instrument or obligation to which Loudeye or Sub is
a party or by which either of them or any of their properties or assets may be
bound, or (iii) conflict or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, Rule or regulation applicable
to Loudeye or Sub or any of their properties or assets, except in the case of
(ii) and (iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which would not have a Material Adverse Effect on
Loudeye and its Subsidiaries, taken as a whole.
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(c) None of the execution and delivery of this Agreement by
Loudeye or Sub or of any other Transaction Documents to which Loudeye or Sub is
or will become a party or the consummation of the transactions contemplated
hereby or thereby will require any consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity, except for
(i) the filing of the Certificate of Merger with the Delaware Secretary of
State, and (ii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, which may be obtained or made after the Closing.
Section 4.4 SEC Filings; Financial Statements.
(a) Loudeye has filed with the Securities and Exchange Commission
(the "SEC") and made available to Activate or its representatives all forms,
reports and documents, including, without limitation, reports required by
Section 13 or Section 14 of the Exchange Act, filed by Loudeye with the SEC on
or after December 22, 1999 (collectively, the "LOUDEYE SEC REPORTS"). The
Loudeye SEC Reports (i) at the time filed, complied in all material respects
with the applicable requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and the Exchange Act, and the rules and regulations
thereunder, as the case may be, and (ii) did not at the time they were filed (or
if amended or superseded by a filing prior to the date of this Agreement, then
on the date of such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated in such Loudeye SEC Reports
or necessary in order to make the statements in such Loudeye SEC Reports, in the
light of the circumstances under which they were made, not misleading. The
Loudeye SEC Reports constitute all of the documents required to be filed by
Loudeye under Section 13 or subsections (a) or (c) of Section 14 of the Exchange
Act with the SEC from December 22, 1999 through the date of this Agreement.
(b) Each of the financial statements (including, in each case,
any related notes) contained in the Loudeye SEC Reports (i) complied as to form
in all material respects with applicable accounting requirements and the
applicable published rules and regulations of the SEC with respect thereto, (ii)
was prepared in accordance with GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes to such financial
statements or, in the case of quarterly financial statements, as permitted by
Form 10-Q under the Exchange Act) and (iii) fairly present the consolidated
financial position of Loudeye and its Subsidiaries as at the respective dates
and the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount, and (iv) are consistent with the books and
records of Loudeye.
Section 4.5 Interim Operations of Sub.
Sub was formed by Loudeye solely for the purpose of engaging in the
transactions contemplated by this Agreement, has engaged in no other business
activities and has conducted its operations only as contemplated by this
Agreement. Sub has no liabilities and, except for a subscription agreement
pursuant to which all of its authorized capital stock was issued to Loudeye, is
not a party to any agreement other than this Agreement and agreements with
respect to the appointment of registered agents and similar matters.
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Section 4.6 Stockholders Consent.
No consent or approval of the stockholders of Loudeye is required or
necessary for Loudeye to enter into this Agreement or the Transaction Documents
or to consummate the transactions contemplated hereby and thereby.
Section 4.7 Litigation.
There is no private or governmental action, suit, proceeding, claim,
arbitration or investigation pending before any agency, court or tribunal,
foreign or domestic, or, to the knowledge of Loudeye, threatened against Loudeye
or any of its properties or any of its officers or directors (in their
capacities as such) which in each case could reasonably be expected to have a
Material Adverse Effect on Loudeye and its Subsidiaries, taken as a whole, or
which in any manner challenges or seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement or the Transaction Documents. There
is no judgment, decree or order against Loudeye, or, to the knowledge of
Loudeye, any of its directors or officers (in their capacities as such) which in
each case could reasonably be expected to have a Material Adverse Effect on
Loudeye and its Subsidiaries, taken as a whole. To Loudeye's knowledge, no
circumstances exist that could reasonably be expected to result in a claim
against Loudeye as a result of the conduct of Loudeye's business (including,
without limitation, any claim of infringement of any intellectual property
right) which, if determined adversely to Activate, could reasonably be expected
to have a Material Adverse Effect on Loudeye and its Subsidiaries, taken as a
whole.
Section 4.8 Compliance With Law.
Each of Loudeye and its Subsidiaries and the operation of its business
are in compliance in all material respects with all applicable laws and
regulations material to the operation of its business. Neither Loudeye nor, to
Loudeye's knowledge, any of its employees has directly or indirectly paid or
delivered any fee, commission or other sum of money or item of property, however
characterized, to any finder, agent, government official or other party in the
United States or any other country, that was or is in violation of any federal,
state, or local statute or law or of any statute or law of any other country
having jurisdiction. Loudeye has not participated directly or indirectly in any
boycotts or other similar practices affecting any of its customers. Loudeye has
complied in all material respects at all times with any and all applicable
federal, state and foreign laws, rules, regulations, proclamations and orders
relating to the importation or exportation of its products and data, except for
such failures to comply as would not in the aggregate reasonably be expected to
have a Material Adverse Effect on Loudeye and its subsidiaries, taken as a
whole.
Section 4.9 Absence of Material Changes.
Since June 30, 2001, there has occurred no event or development which
has had, or could reasonably be expected to have in the future, a Material
Adverse Effect on Loudeye and its Subsidiaries, taken as a whole.
Section 4.10 Brokers' Fees.
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Neither Loudeye nor Sub has any liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
ARTICLE V
OTHER AGREEMENTS
Section 5.1 Confidentiality.
Each party acknowledges that Loudeye and Activate have previously
executed a Reciprocal Non-Disclosure Agreement dated as of February 28, 1998
(the "CONFIDENTIALITY AGREEMENT"), which agreement shall continue in full force
and effect in accordance with its terms.
Section 5.2 No Public Announcement.
Neither Loudeye, Sub, Activate nor CMGI shall make any public
announcement concerning this Agreement, their discussions or any other
memoranda, letters or agreements between the parties relating to the Merger;
provided, however, that any party may make disclosure if, in the opinion of its
legal counsel, public disclosure is required under applicable law (including,
without limitation, securities laws), but only after reasonable consultation
with the other parties; and provided further, however, that following execution
of this Agreement or consummation of the Merger, Loudeye, CMGI and Activate may
make a public announcement regarding the Merger and the integration of
Activate's business into that of Loudeye solely as mutually agreed upon in a
joint press release or separate press releases.
Section 5.3 Tax Matters; Access to Records.
(a) CMGI will include the income of Activate (including any
deferred income triggered by Treasury Regulation Section 1.1502-13 or 1.1502-14
and excess loss accounts under Section 1.1502-19) for all periods through and
including the Closing Date in its consolidated federal income tax return and pay
any Taxes attributable to such income. The income attributable to such periods
will be determined by closing the books of Activate as of the Closing Date.
Activate will provide CMGI with information for inclusion in the consolidated
federal income tax return in accordance with Activate's past practice. CMGI will
allow Loudeye to review and comment on any such tax returns to the extent they
relate to Activate.
(b) CMGI and Loudeye agree (i) to retain all books and records
related to Taxes pertinent to Activate relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations of
the respective taxable periods and (ii) to give any other party reasonable
written notice prior to transferring, destroying or discarding any such books
and records and, if the other party so requests, Loudeye and CMGI, as the case
may be, shall allow the other party to take possession of such books and
records.
(c) CMGI shall have the right for a period of seven years
following the Closing Date to have reasonable access to Activate's books,
records and accounts for the period preceding the Closing Date, including
financial and tax information, correspondence, production records, employment
records and other records for the limited purposes of concluding its
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involvement in the business conducted by Activate prior to the Closing Date and
for complying with its obligations under applicable securities, tax,
environmental, employment or other laws and regulations. Neither Loudeye nor
Activate shall destroy any such books, records or accounts without first
providing CMGI with the opportunity to obtain or copy such books, records, or
accounts at CMGI's expense.
Section 5.4 Further Assurances.
(a) Following the Closing, each party and CMGI agrees to
cooperate fully with the other parties and to execute such further instruments,
documents and agreements and to give such further written assurances, as may be
reasonably requested by any other party to better evidence and reflect the
transactions described herein and contemplated hereby and to carry into effect
the intents and purposes of this Agreement, provided that all such actions shall
be at the cost and expense of the requesting party. Without limiting the
foregoing, CMGI agrees that it will cooperate fully with Loudeye and provide, at
Loudeye's cost and expense, any reasonably requested information and documents
concerning Activate to Loudeye in connection with any filings Loudeye is
required to make under the Exchange Act as a result of the Merger.
(b) Promptly after the Closing (and in any event within seven
days), Loudeye shall cause the Surviving Corporation to, and the Surviving
Corporation shall, uninstall and permanently delete all Centennial Software from
all computers and systems owned or leased by Activate, and deliver to CMGI all
manuals and other written materials relating to such software. Not later than
seven days after the Closing Date, each of Loudeye and the Surviving Corporation
shall deliver to CMGI a certificate of its President or Treasurer to the effect
that all such software has been permanently deleted from all computers and
systems, and all manuals and other written materials relating thereto have been
delivered to CMGI.
(c) Promptly after the Closing (and in any event within five
days), Loudeye shall cause the Surviving Corporation to, and the Surviving
Corporation shall, collect from each of its employees and deliver to CMGI all
computer network security devices, including the RSA Security token, which were
previously provided for the purpose of accessing CMGI's computer network. Not
later than five days after the Closing Date, each of Loudeye and the Surviving
Corporation shall deliver to CMGI a certificate of its President or Treasurer to
the effect that all such devices have been collected and delivered to CMGI.
Section 5.5 Seattle Lease Obligation.
Activate has provided the lessor under the lease for Activate's Seattle
headquarters (the "SEATTLE LEASE") with a letter of credit (No. 50103222) (the
"LETTER OF CREDIT") in the amount of $400,000 (which will expire on December 1,
2001), which letter of credit secures Activate's obligation to repay amounts due
to the lessor under a promissory note (the "NOTE") issued in favor of the
lessor. If required by such lessor, CMGI shall maintain its guarantee of the
Letter of Credit until the expiration or termination of the Letter of Credit
(and in any event not later than December 1, 2001). For so long as CMGI
maintains a letter of credit to secure the Seattle Lease, if the lessor notifies
CMGI that the lessor intends to draw against such letter of credit due to acts
or omissions (including failure to make timely payments under the Note) of
Loudeye, Loudeye
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will reimburse CMGI for any amounts drawn against such letter of credit upon
receipt of written notice thereof from CMGI. From and after December 1, 2001,
CMGI shall not have any liability under the Seattle Lease, the Note or the
Letter of Credit, and all such liabilities shall be assumed by Loudeye.
Section 5.6 Indemnification.
Loudeye shall not, for a period of three years after the Effective Time,
take any action to alter or impair any exculpatory or indemnification provisions
now existing in the Certificate of Incorporation or By-laws of Activate for the
benefit of any individual who served as a director or officer of the Company at
any time prior to the Effective Time.
Section 5.7 Employee Benefits.
The benefits to be provided to employees of Activate as of the Effective
Time ("COVERED EMPLOYEES") shall be the benefits provided to similarly situated
employees of Loudeye, which shall be provided as soon as practicable after the
Effective Time, but in no event later than the date the Covered Employees are
placed on the same payroll service as such employees of Loudeye; provided,
however, that until such time that the Covered Employees are placed on the same
payroll service as Loudeye employees, Loudeye shall provide benefits no less
favorable, in the aggregate, than the benefits provided to similarly situated
employees of Loudeye. Loudeye shall from and after the Effective Time (i)
provide Covered Employees credit for the most recent period of uninterrupted
service prior to the Effective Time for purposes of vacation and wellness pay
under employee benefit plans of Loudeye and for enrollment purposes and start
dates in the Loudeye 401(k) plan, (ii) to use reasonable efforts to cause any
and all pre-existing condition limitations (to the extent such limitations did
not apply to a pre-existing condition under comparable Activate plans) and
eligibility waiting periods under group health plans of Loudeye to be waived
with respect to Covered Employees and their eligible dependents who become
participants in such group health plans and (iii) to use reasonable efforts to
give credit for or otherwise take into account the out-of-pocket expenses and
annual expense limitations paid by each Covered Employee under the comparable
Activate plans for the year in which the Effective Time occurs.
Section 5.8 Nasdaq.
On or prior to the Anniversary Date, Loudeye shall cause any Deferred
Shares issued as part of the Anniversary Payment to be listed on the Nasdaq
National Market.
Section 5.9 Availability to CMGI of Rule 144.
In order that CMGI may have the opportunity to sell any Deferred Shares
pursuant to the provisions of Rule 144 under the Securities Act of 1933, as
amended, Loudeye shall make and keep adequate current public information
available about Loudeye, as those terms are understood and defined in Rule 144
under the Securities Act of 1933, as amended. Upon the sale of Deferred Shares
by CMGI or its assigns under Rule 144 and within five (5) business days of the
receipt of an opinion of counsel to CMGI or its assigns stating that the
requirements of Rule 144
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have been satisfied with respect to the particular sale transaction, Loudeye
shall instruct its transfer agent to transfer the Deferred Shares that were sold
to the purchaser without any legend restricting transfer.
ARTICLE VI
DELIVERIES AT CLOSING
Section 6.1 Deliveries by Activate.
At the Closing, Activate shall deliver or cause to be delivered to
Loudeye:
(a) An executed counterpart of the Registration Rights Agreement;
(b) A completed and executed Investor Representation Statement,
in substantially the form attached hereto as EXHIBIT D (an "INVESTOR
REPRESENTATION STATEMENT") from the holder of Activate Preferred Stock for
purposes of confirming the availability of an exemption from registration under
the Securities Act for the issuance by Loudeye of shares of Loudeye Common Stock
in the Merger;
(c) All third party consents or approvals required by Activate's
contracts, agreements or other obligations in connection with the consummation
of the transactions contemplated by this Agreement, except for any consents or
approvals the absence of which would not reasonably be expected to result in a
Material Adverse Effect on Activate and its Subsidiaries, taken as a whole;
(d) A written letter of resignation from each member of the
Activate Board of Directors, in each case effective at the Effective Time;
(e) UCC-3 termination statements with respect to all Liens
related to all secured indebtedness, secured obligations, equipment and capital
leases set forth on Schedule 3.7.1 of the Activate Disclosure Schedule and
evidence reasonably satisfactory to Loudeye that Activate is the owner, free and
clear of all Liens, of the personal property set forth on Schedule 3.7.2 of the
Activate Disclosure Schedule;
(f) A certificate from CMGI pursuant to Section 1445 of the Code
stating that it is not a foreign person; and
(g) Such other documents and instruments as shall be reasonably
requested by Loudeye to effect the transactions contemplated by this Agreement.
Section 6.2 Deliveries by Loudeye.
At the Closing, Loudeye shall deliver or cause to be delivered to
Activate and the stockholders of Activate:
(a) An executed counterpart of the Registration Rights Agreement;
and
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(b) Such other documents and instruments as shall be reasonably
requested by Activate to effect the transactions contemplated by this Agreement.
ARTICLE VII
INDEMNIFICATION
Section 7.1 Indemnification.
(a) From and after the Effective Time and subject to the
limitations contained in this Article VII, the Former Activate Stockholder will
indemnify Loudeye, Loudeye's current and future affiliates (including the
Surviving Corporation), the respective officers, directors, employees, agents,
attorneys, accountants, advisors and representatives of such entities and the
respective successors and assigns of such entities (collectively, the "LOUDEYE
INDEMNIFIED PARTIES") and hold the Loudeye Indemnified Parties harmless against
any loss, expense, liability or other damage, including reasonable attorneys'
fees (collectively "DAMAGES"), to the extent of the amount of such Damages that
the Loudeye Indemnified Parties have incurred by reason of the material breach
by Activate of any representation, warranty, covenant or agreement thereof
contained in this Agreement or by reason of a material breach by CMGI of any
covenant or agreement of CMGI contained in this Agreement.
(b) From and after the Effective Time and subject to the
limitations contained in this Article VII, Loudeye will indemnify the Former
Activate Stockholder, the Former Activate Stockholder's current and future
affiliates, the respective officers, directors, employees, agents, attorneys,
accountants, advisors and representatives of such entities and the respective
successors and assigns of such entities (collectively, the "ACTIVATE INDEMNIFIED
PARTIES") and hold the Activate Indemnified Parties harmless against any
Damages, to the extent of the amount of such Damages that the Activate
Indemnified Parties have incurred by reason of the material breach by Loudeye or
Sub of any representation, warranty, covenant or agreement thereof contained in
this Agreement.
Section 7.2 Sole Remedy.
Loudeye, Activate, Sub and the Former Activate Stockholder acknowledge
and agree that notwithstanding anything to the contrary contained in this
Agreement or any other Transaction Document, the rights of the Loudeye
Indemnified Parties and the Activate Indemnified Parties under this Article VII
shall be the sole and exclusive remedy for any claim of breach by CMGI, Activate
or Loudeye of any representation, warranty, covenant or agreement, except in
those cases involving fraud or intentional breach on the part of CMGI, Activate
or Loudeye, respectively. The maximum liability of the Former Activate
Stockholder under this Article VII shall be the aggregate amount of the Merger
Consideration actually received by the Former Activate Stockholder, except in
those cases involving fraud or intentional breach on the part of Activate, in
which case, there shall be no limit on liability. The maximum liability of
Loudeye under this Article VII shall be the aggregate amount of the Merger
Consideration, except in those cases involving fraud or intentional breach on
the part of Loudeye, in which case, there shall be no limit on liability.
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Section 7.3 Damage Limitations.
(a) Notwithstanding anything contained in this Agreement to the
contrary, the Former Activate Stockholder shall have no liability under this
Article VII, and Loudeye may not deduct any amounts for Damages from the
Anniversary Payment, unless and until the aggregate amount of Loudeye's Damages
exceeds $75,000; provided, however, that once the aggregate amount of Loudeye's
Damages exceeds $75,000, Loudeye shall be entitled to deduct the full amount of
Damages from the Anniversary Payment. The aggregate liability of the Former
Activate Stockholder for breaches of any representations and warranties
contained in Article III (other than the representations and warranties set
forth in Sections 3.1, 3.2 and 3.3(a)) shall not exceed the value of the Merger
Consideration actually received by the Former Activate Stockholder from Loudeye.
(b) The sole and exclusive means for the Loudeye Indemnified
Parties to collect any Damages to which they are entitled to indemnification
under this Article VII shall be recourse to the Merger Consideration. The
Loudeye Indemnified Parties shall not attempt to collect any Damages from the
Former Activate Stockholder, unless the aggregate Damages to which they are
entitled to indemnification exceed $3,000,000 (in which case, Loudeye shall
first setoff against the entire Anniversary Payment and then seek to recover the
remaining Damages (but not more than an additional $1,000,000) from the Former
Activate Stockholder. On the Anniversary Date, in order to collect the aggregate
Damages, if any, to which the Loudeye Indemnified Parties are entitled to
indemnification, (i) first, Loudeye shall setoff the amount of such Damages
against the Deferred Shares (the value of such Deferred Shares shall be the
Average Price (as appropriately adjusted for any stock split, stock dividend,
reverse stock split or similar event)), and (ii) if the amount of such Damages
exceeds the value of the Deferred Shares, Loudeye shall then setoff the
remaining amount of such Damages against the cash portion of the Anniversary
Payment.
(c) Notwithstanding any provision of this Agreement to the
contrary, CMGI and Loudeye agree to the following provisions relating to matters
as more fully described in item number 6 of Schedule 3.18 in the
ActiveDisclosure Schedule (the "AboveNet Matter"):
(i) From and after the Closing Date until ninety (90) days
after the Closing Date, CMGI shall have the exclusive right, in its sole
discretion, to conduct the defense of any Third Party Claim involving the
AboveNet Matter, including without limitation, the exclusive right to direct the
settlement of any Third Party Claim involving the AboveNet Matter.
(ii) From and after the date that is ninety (90) days
after the Closing Date, Loudeye shall conduct the defense of any Third Party
Claim involving the AboveNet Matter; provided that the aggregate liability of
the Former Activate Stockholder for any Third Party Claim involving the AboveNet
Matter shall not exceed $120,000, shall not be subject to the $75,000 hurdle set
forth in Section 7.3(a), and, in accordance with Section 7.3(b), shall be
satisfied solely by deduction from the Anniversary Payment.
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Section 7.4 Indemnification Period.
The indemnification period shall terminate at 5:00 p.m. Pacific time, on
the Anniversary Date (the "INDEMNIFICATION PERIOD"), except as provided
otherwise in Section 8.1 with respect to the representations and warranties
contained in Sections 3.1, 3.2, 3.3(a), 3.5, 3.21, 4.1, 4.2 and 4.3(a).
Section 7.5 Indemnification Claims.
(a) Promptly after receipt (and in any event within 5 business
days after receipt) by a party entitled, or seeking to assert rights, to
indemnification under this Article VII (an "INDEMNIFIED PARTY"), of notice from
a third party of any matter (a "THIRD PARTY CLAIM") that may give rise to a
claim for indemnification under Article VII, the Indemnified Party will give
notice to the party from whom indemnification is sought (an "INDEMNIFYING
PARTY") of such claim, which notice shall include a description in reasonable
detail of the facts constituting the basis for such claim and the amount of the
claimed damages; provided that the delay or failure to notify the Indemnifying
Party will not relieve the Indemnifying Party of any liability that it may have
to an Indemnified Party, except to the extent that the Indemnifying Party
demonstrates that the defense of such action is materially prejudiced by such
delay or failure to give such notice (in which case the Indemnifying Party shall
not have any liability with respect to such Third Party Claim).
(b) The Indemnifying Party will be entitled to participate in the
defense of such Third Party Claim and, to the extent that it wishes (unless the
Indemnifying Party fails to provide reasonable assurance to the Indemnified
Party of its financial capacity to defend the claim and provide indemnification
with respect to such claim), to assume and conduct the defense of such Third
Party Claim with counsel of its choice reasonably satisfactory to the
Indemnified Party and, after notice from the Indemnifying Party to the
Indemnified Party of its election to assume the defense of such Third Party
Claim, the Indemnifying Party will not, as long as it conducts such defense in a
reasonable manner, be liable to the Indemnified Party under this Article VII for
any fees of other counsel or any other expenses with respect to the defense of
such Third Party Claim, in each case subsequently incurred by the Indemnified
Party in connection with the defense of such claim. If the Indemnifying Party
assumes the defense of a Third Party Claim, (i) no compromise or settlement of
such Third Party Claim may be effected by the Indemnifying Party without the
Indemnified Party's prior written consent (not to be unreasonably withheld)
unless the sole relief provided is monetary damages; and (ii) the Indemnified
Party will have no liability with respect to any compromise or settlement of
such Third Party Claim effected without its prior written consent (not to be
unreasonably withheld). In no event will an Indemnified Party consent to the
entry of any judgment or enter into any settlement with respect to any Third
Party Claim without the prior written consent of the Indemnifying Party (not to
be unreasonably withheld).
(c) Notwithstanding the foregoing, if the Third Party Claim is
brought by a then current customer, vendor or partner of Loudeye or Activate,
and Loudeye determines in good faith that there is a reasonable probability that
a claim for which it is entitled to indemnification under Article VII would
adversely affect it or its affiliates, other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement,
Loudeye shall,
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by notice to CMGI within 5 business days following the date Loudeye is first
notified of such Third Party Claim, have the exclusive right to compromise or
settle such claim for a period of 90 days following the date Loudeye is first
notified of the claim, provided that CMGI shall have no liability with respect
to any compromise or settlement of such Third Party Claim effected without its
prior written consent (which may be withheld in CMGI's sole and absolute
discretion).
(d) If Loudeye has one or more bona fide claim(s) for Damages
pending at the Anniversary Date, Loudeye shall (1) give written notification to
the Former Activate Stockholder which contains (i) a description and the amount
of any Damages incurred or reasonably expected to be incurred by the Loudeye
Indemnified Parties, and (ii) a statement that the Loudeye Indemnified Parties
are entitled to indemnification under this Article VII for such Damages and an
explanation of the basis therefor, and (2) deposit the Anniversary Payment into
an escrow account with State Street Bank and Trust Company, as escrow agent, or
other escrow agent mutually agreeable to Loudeye and the Former Activate
Stockholder pending final resolution of such claim(s). The terms of the escrow
account shall be agreed upon by Loudeye, the Former Activate Stockholder and
such escrow agent, and shall be evidenced by an escrow agreement in a form
satisfactory to Loudeye and the Former Activate Stockholder. After the
Anniversary Date, the escrow account shall be the exclusive means for the
Loudeye Indemnified Parties to collect any Damages for which it is entitled to
indemnification under this Article VII and shall be used solely to pay such
claimed Damages. Any payments made from such escrow account with respect to such
claimed Damages shall be made first from any Deferred Shares held in such escrow
account (the value of such Deferred Shares shall be the Average Price (as
appropriately adjusted for any stock split, stock dividend, reverse stock split
or similar event)), and then from any cash held in such escrow account. If
permitted by applicable securities laws, the Former Activate Stockholder shall
have the right to direct the escrow agent to sell any Deferred Shares in the
escrow account; provided however, that the Former Activate Stockholder shall not
direct the escrow agent to sell any Deferred Shares at a per share price lower
than the Average Price (as appropriately adjusted for any stock split, stock
dividend, reverse stock split or similar event). In such event, the proceeds of
the sale of the Deferred Shares shall be deposited into the escrow account.
Section 7.6 Access and Information.
The Former Activate Stockholder shall have reasonable access to
information about the Surviving Corporation and Loudeye and the reasonable
assistance of the Surviving Corporation's and Loudeye's officers and employees
for purposes of performing its duties and exercising its rights under this
Article VII, provided that the Former Activate Stockholder shall treat
confidentially and not disclose any nonpublic information from or about the
Surviving Corporation or Loudeye to anyone (except on a need to know basis to
individuals who agree to treat such information confidentially).
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Survival of Representations and Covenants.
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All representations and warranties of Activate contained in this
Agreement shall survive the Closing and any investigation at any time made by or
on behalf of Loudeye until the end of the Indemnification Period.
Notwithstanding the foregoing, the representatives and warranties contained in
(i) Sections 3.1, 3.2 and 3.3(a) shall survive in perpetuity and (ii) Section
3.5 and 3.21 shall survive until thirty (30) days after the applicable statute
of limitations expires. All representations and warranties of Loudeye and the
Sub contained in this Agreement shall survive the Closing and any investigation
at any time made by or on behalf of Activate until the end of the
Indemnification Period. Notwithstanding the foregoing, the representatives and
warranties contained in Sections 4.1, 4.2 and 4.3(a) shall survive in
perpetuity.
Section 8.2 Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, telecopied (which is confirmed)
or two business days after being mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to Loudeye or Sub:
Loudeye Technologies, Inc.
000 Xxxxx Xxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Vice President and General Counsel
Fax No: (000) 000-0000
Telephone No: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx, LLP
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx
Fax No: (000) 000-0000
Telephone No: (000) 000-0000
(b) if to Activate or the Former Activate Stockholder, to:
CMGI, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: General Counsel
Fax No: (000) 000-0000
Telephone No: (000) 000-0000
with a copy to:
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Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Fax No: (000) 000-0000
Telephone No: (000) 000-0000
Section 8.3 Interpretation.
When a reference is made in this Agreement to Sections, such reference
shall be to a Section of this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "INCLUDE," "INCLUDES" or "INCLUDING" are used in
this Agreement they shall be deemed to be followed by the words "WITHOUT
LIMITATION." Whenever the words "TO THE KNOWLEDGE OF ACTIVATE" or "KNOWN TO
ACTIVATE" or similar phrases are used in this Agreement, they mean the actual
knowledge of the executive officers of Activate.
Section 8.4 Counterparts.
This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
two or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
Section 8.5 Entire Agreement; No Third Party Beneficiaries.
This Agreement (including the documents and the instruments referred to
herein) (a) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) is not intended to confer upon any person other
than the parties hereto (including without limitation any Activate employees)
any rights or remedies hereunder, provided however, that (i) the provisions in
Article II concerning issuance of the Merger Consideration, including without
limitation, the Anniversary Payment and Article VII concerning indemnification
are intended for the benefit of the Former Activate Stockholder and (ii) the
provisions in Sections 5.2, 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 are intended
for the benefit of CMGI and the individuals and entities specified therein and
their successors and assigns.
Section 8.6 Governing Law.
This Agreement shall be governed and construed in accordance with the
laws of the State of Delaware without regard to any applicable conflicts of law.
In any action between the parties arising out of or relating to this Agreement
or any of the transactions contemplated by this Agreement: (a) each of the
parties irrevocably and unconditionally consents and submits to the exclusive
jurisdiction and venue of the state and federal courts located in the State of
Washington; (b) if any such action is commenced in a state court, then, subject
to applicable law,
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no party shall object to the removal of such action to any federal court located
in the Western District of Washington; (c) each of the parties irrevocably
waives the right to trial by jury; and (d) each of the parties irrevocably
consents to service of process by first class certified mail, return receipt
requested, postage prepaid, to the address at which such party is to receive
notice in accordance with Section 8.2. Nothing in this Section 8.6, however,
shall affect the right of any party to serve legal process in any other manner
permitted by law.
Section 8.7 Assignment.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties,
including CMGI. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns, including any acquiror of Loudeye's
business and any successor to Loudeye, by merger, operation of law or otherwise,
whether or not such entity shall have expressly assumed the terms of this
Agreement..
Section 8.8 Amendment.
This Agreement may be amended by the parties hereto, at any time before
or after approval of matters presented in connection with the Merger by the
stockholders of Activate, but after any such stockholder approval, no amendment
shall be made which by law requires the further approval of stockholders without
obtaining such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto, including
CMGI.
Section 8.9 Waiver.
The failure of any party to enforce at any time the provisions of this
Agreement shall not be construed as a waiver of such provisions or the right of
such party thereafter to enforce such provisions. No waiver shall be valid
unless set forth in a written instrument signed on behalf of the waiving party.
Section 8.10 Specific Performance.
The parties hereto agree that irreparable damage may occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to seek injunctive relief to prevent breaches
of this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
Section 8.11 Severability.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law or regulation, and if the rights
or obligations of any party hereto under this Agreement will not be materially
and adversely affected thereby, (a) such provision will be
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fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Agreement and (d) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible.
Section 8.12 Fees and Expenses.
All fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, Loudeye, Sub and Activate have executed this
Agreement and Plan of Merger as of the date first written above.
LOUDEYE TECHNOLOGIES, INC.
By: /s/
-------------------------------------
Title:
----------------------------------
IGNITION ACQUISITION, INC.
By: /s/
-------------------------------------
Title:
----------------------------------
XXXXXXXX.XXX CORPORATION
By: /s/
-------------------------------------
Title:
----------------------------------
CMGI, Inc. hereby executes this Agreement for the limited purpose of
agreeing to and becoming bound by the provisions of Sections 2.1(c), 5.2, 5.3
and 5.5 and Article VII.
CMGI, INC.
By: /s/
-------------------------------------
Title:
----------------------------------
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EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
47
EXHIBIT B
ACTIVATE DISCLOSURE SCHEDULE
48
EXHIBIT C
LOUDEYE DISCLOSURE SCHEDULE
49
EXHIBIT D
INVESTOR REPRESENTATION STATEMENT
