\n Section 8.7 Assignment……………………………………………..43
\n Section 8.8 Amendment………………………………………………43
\n Section 8.9 Waiver…………………………………………………43
\n Section 8.10 Specific Performance…………………………………….43
\n Section 8.11 Severability……………………………………………43
\n Section 8.12 Fees and Expenses……………………………………….44
\n<\/c><\/s><\/table>\nEXHIBITS<\/p>\n
EXHIBIT A — REGISTRATION RIGHTS AGREEMENT
\nEXHIBIT B — ACTIVATE DISCLOSURE SCHEDULE
\nEXHIBIT C — LOUDEYE DISCLOSURE SCHEDULE
\nEXHIBIT D — INVESTOR REPRESENTATION STATEMENT<\/p>\n
-4-<\/p>\n
5
\n AGREEMENT AND PLAN OF MERGER<\/p>\n
THIS AGREEMENT AND PLAN OF MERGER (this “AGREEMENT”), dated as of
\nSEPTEMBER 25, 2001 (the “CLOSING DATE”), is entered into by and among Loudeye
\nTechnologies, Inc., a Delaware corporation (“LOUDEYE”), Ignition Acquisition,
\nInc., a Delaware corporation and a wholly-owned subsidiary of Loudeye (“SUB”),
\nand Activate.net Corporation, a Delaware corporation (“ACTIVATE”), and, solely
\nwith respect to Sections 2.1(c), 5.2, 5.3 and 5.5 and Article VII hereof, CMGI,
\nInc., a Delaware corporation (“CMGI”).<\/p>\n
RECITALS<\/p>\n
A. The Boards of Directors of Loudeye, Sub and Activate deem it
\nadvisable and in the best interests of each respective corporation and their
\nrespective stockholders that Loudeye and Activate combine their respective
\nbusinesses upon the terms and conditions set forth herein;<\/p>\n
B. The combination of Loudeye and Activate shall be effected by the
\nterms of this Agreement through a transaction in which Sub will merge with and
\ninto Activate, Activate will become a wholly-owned subsidiary of Loudeye and the
\nstockholders of Activate will receive a combination of (i) cash and (ii) common
\nstock of Loudeye (the “MERGER”);<\/p>\n
C. The parties intend and acknowledge that the Merger will not be
\ntreated as a reorganization within the meaning of Section 368(a) of the Internal
\nRevenue Code of 1986, as amended (the “CODE”) and the regulations promulgated
\nthereunder; and<\/p>\n
NOW, THEREFORE, in consideration of the foregoing and the respective
\nrepresentations, warranties, covenants and agreements set forth below, the
\nparties agree as follows:<\/p>\n
ARTICLE I
\n THE MERGER<\/p>\n
Section 1.1 Effective Time of the Merger.<\/p>\n
(a) Subject to the provisions of this Agreement, a certificate of
\nmerger (the “CERTIFICATE OF MERGER”) in such mutually acceptable form as is
\nrequired by the relevant provisions of the Delaware General Corporation Law
\n(“DELAWARE LAW”) shall be duly executed and delivered by the parties hereto and
\nthereafter delivered to the Secretary of State of the State of Delaware for
\nfiling on the Closing Date.<\/p>\n
(b) The Merger shall become effective upon the filing of the
\nCertificate of Merger with the Secretary of State of the State of Delaware (the
\n“EFFECTIVE TIME”).<\/p>\n
Section 1.2 Closing.<\/p>\n
The closing of the Merger (the “CLOSING”) will take place at 10:00 a.m.,
\nPacific time, on the Closing Date, at the offices of Heller Ehrman White & McAuliffe, LLP, 701 Fifth Avenue, Suite 6100, Seattle, WA 98104.<\/p>\n
-5-<\/p>\n
6
\n Section 1.3 Effects of the Merger.<\/p>\n
(a) At the Effective Time (i) the Sub shall merge with and into
\nActivate, the separate existence of Sub shall cease, and Activate shall continue
\nas the surviving corporation and shall become a wholly-owned subsidiary of
\nLoudeye (Sub and Activate are sometimes referred to herein as the “CONSTITUENT
\nCORPORATIONS” and Activate following consummation of the Merger is sometimes
\nreferred to herein as the “SURVIVING CORPORATION”), (ii) the Certificate of
\nIncorporation of Sub as in effect immediately prior to the Effective Time shall
\nbecome the Certificate of Incorporation of the Surviving Corporation and (iii)
\nthe Bylaws of Sub as in effect immediately prior to the Effective Time shall
\nbecome the Bylaws of the Surviving Corporation.<\/p>\n
(b) At the Effective Time, the effect of the Merger shall be as
\nprovided in the applicable provisions of Delaware Law. Without limiting the
\ngenerality of the foregoing, at and after the Effective Time, the Surviving
\nCorporation shall possess all the rights, privileges, powers and franchises, and
\nbe subject to all the restrictions, disabilities and duties of each of the
\nConstituent Corporations.<\/p>\n
Section 1.4 Directors and Officers.<\/p>\n
The directors of Sub immediately prior to the Effective Time shall
\nbecome the directors of the Surviving Corporation, each to hold office in
\naccordance with the Certificate of Incorporation and Bylaws of the Surviving
\nCorporation, and the officers of Sub immediately prior to the Effective Time
\nshall become the officers of the Surviving Corporation, in each case until their
\nrespective successors are duly elected or appointed and qualified.<\/p>\n
ARTICLE II
\n CONVERSION OF SECURITIES<\/p>\n
Section 2.1 Conversion of Capital Stock.<\/p>\n
At the Effective Time, by virtue of the Merger and without any further
\napproval of the holders of any shares of capital stock of Activate or capital
\nstock of Sub:<\/p>\n
(a) Capital Stock of Sub. Each issued and outstanding share of
\nthe capital stock of Sub shall be converted into and become one fully paid and
\nnonassessable share of Common Stock, $0.001 par value, of the Surviving
\nCorporation.<\/p>\n
(b) Cancellation of Loudeye-Owned and Activate-Owned Stock. Any
\nshares of Preferred Stock, $0.01 par value of Activate (the “ACTIVATE PREFERRED
\nSTOCK”), or shares of Common Stock, $0.01 par value, of Activate (“ACTIVATE
\nCOMMON STOCK”, and together with the Activate Preferred Stock, the “ACTIVATE
\nSTOCK”), that are owned by Loudeye, Sub, Activate or any other direct or
\nindirect wholly-owned Subsidiary (as defined below) of Loudeye or Activate shall
\nbe canceled and retired and shall cease to exist and no stock of Loudeye or
\nother consideration shall be delivered in exchange. As used in this Agreement,
\nthe word “SUBSIDIARY” means, with respect to any other party, any corporation or
\nother organization, whether incorporated or unincorporated, of which (i) such
\nparty or any other Subsidiary of such party is a general partner (excluding
\npartnerships, the general partnership interests of which held by such<\/p>\n
-6-<\/p>\n
7
\nparty or any Subsidiary of such party do not have a majority of the voting
\ninterest in such partnership) or (ii) at least a majority of the securities or
\nother interests having by their terms ordinary voting power to elect a majority
\nof the Board of Directors or others performing similar functions with respect to
\nsuch corporation or other organization or a majority of the profit interests in
\nsuch other organization is directly or indirectly owned or controlled by such
\nparty or by any one or more of its Subsidiaries, or by such party and one or
\nmore of its Subsidiaries.<\/p>\n
(c) Merger Consideration.<\/p>\n
(i) Subject to Section 2.3, the issued and outstanding
\nshares of Activate Preferred Stock (other than shares to be canceled in
\naccordance with Section 2.1(b)) shall, by virtue of the Merger and without any
\naction on the part of the holder thereof, be converted into and represent the
\nright to receive, in the aggregate:<\/p>\n
(A) $1,000,000 in cash; and<\/p>\n
(B) the right to receive the Anniversary
\n Payment (as defined below) on the date that is
\n one year after the Closing Date (the
\n “ANNIVERSARY DATE”).<\/p>\n
The cash payable under Section 2.1(c)(i)(A), and the Anniversary Payment
\n payable under Section 2.1(c)(i)(B) are referred to collectively herein
\n as the “MERGER CONSIDERATION.” The Merger Consideration is subject to
\n adjustment as provided in Section 2.1(c)(iii). All such shares of
\n Activate Preferred Stock, when so converted, shall no longer be
\n outstanding and shall automatically be canceled and retired and shall
\n cease to exist, and the holder of the certificate representing such
\n shares shall cease to have any rights with respect thereto, except the
\n right to receive the Merger Consideration upon the surrender of such
\n certificate in accordance with Section 2.3.<\/p>\n
(ii) For purposes of this Agreement, the following terms
\nshall have the following meanings:<\/p>\n
(A) “ANNIVERSARY PAYMENT” shall mean, at the
\n option of Loudeye subject to Section
\n 2.1(c)(iv), (1) $3,000,000 in cash, or (2) such
\n number of shares of Loudeye Common Stock as is
\n equal to $3,000,000 divided by the Average
\n Price (as defined below) or (3) a combination
\n of cash and shares of Loudeye Common Stock such
\n that the sum of (a) such cash amount and (b)
\n the result obtained by multiplying such number
\n of shares of Loudeye Common Stock by the
\n Average Price equals $3,000,000; provided that
\n from and after the occurrence of a
\n Reorganization Event (as defined below),
\n “ANNIVERSARY PAYMENT” shall mean $3,000,000 in
\n cash. The shares of Loudeye Common Stock, if
\n any, constituting the Anniversary Payment shall
\n be referred to herein as the “DEFERRED SHARES.”
\n For purposes of this Article II, the term
\n “LOUDEYE COMMON STOCK” shall include any other
\n securities into which or<\/p>\n
-7-<\/p>\n
8
\n for which the Common Stock, par value $.001 per
\n share, of Loudeye, may be converted or
\n exchanged pursuant to a merger, consolidation,
\n reorganization, recapitalization, tender offer,
\n exchange offer, share exchange, sale of assets
\n or other similar corporate rearrangement.<\/p>\n
(B) “AVERAGE PRICE” shall mean the average
\n Loudeye Stock Price for the thirty (30)
\n consecutive trading days ending on the trading
\n day that is two (2) trading days prior to the
\n Anniversary Date (as appropriately adjusted for
\n any stock split, stock dividend, reverse stock
\n split or similar event affecting the Loudeye
\n Common Stock during such period).<\/p>\n
(C) “LOUDEYE STOCK PRICE” shall mean the last
\n reported sale price of the Loudeye Common Stock
\n on the Nasdaq National Market (“NASDAQ”) as
\n reported by Bloomberg Financial Markets or an
\n equivalent reliable reporting service mutually
\n acceptable to and hereafter designated by
\n Loudeye and the Former Activate Stockholder (as
\n defined below) (the “REPORTING SERVICE”) or, if
\n the Nasdaq is not the principal trading market
\n for the Loudeye Common Stock, the last reported
\n sale price of Loudeye Common Stock on the
\n principal securities exchange or trading market
\n where such security is listed or traded as
\n reported by the Reporting Service, or if the
\n foregoing do not apply, the last reported sale
\n price for Loudeye Common Stock in the
\n over-the-counter market on the electronic
\n bulletin board for such security as reported by
\n the Reporting Service or, if no last reported
\n sale price is reported for Loudeye Common Stock
\n by the Reporting Service, the average of the
\n bid and ask prices for Loudeye Common Stock
\n that are listed on the “pink sheets” by the
\n National Quotation Bureau, Inc. If the Loudeye
\n Stock Price cannot be calculated in the manner
\n provided above, the Loudeye Stock Price shall
\n be the fair market value as mutually determined
\n by Loudeye and the Former Activate Stockholder
\n outstanding immediately prior to the Effective
\n Time.<\/p>\n
(D) “REORGANIZATION EVENT” shall mean a merger,
\n consolidation, reorganization,
\n recapitalization, tender offer, exchange offer,
\n share exchange, sale of assets or other similar
\n corporate rearrangement, after which the Common
\n Stock, par value $.001 per share, of Loudeye
\n would not be listed on the Nasdaq National
\n Market, New York Stock Exchange or American
\n Stock Exchange.<\/p>\n
(iii) On or before October 15, 2001, Loudeye shall deliver
\nto CMGI an Activate balance sheet as of the Closing Date (the “DRAFT CLOSING
\nBALANCE SHEET”), together with a reasonably detailed calculation of Adjusted
\nWorking Capital (as defined below). The<\/p>\n
-8-<\/p>\n
9
\nDraft Closing Balance Sheet shall be prepared in accordance with United States
\ngenerally accepted accounting principles (“GAAP”) applied on a basis consistent
\nwith prior periods.<\/p>\n
CMGI shall be deemed to accept the Draft Closing Balance
\n Sheet and the contents thereof unless (and the Draft Closing Balance
\n Sheet shall be deemed to be the Final Closing Balance Sheet), within ten
\n (10) business days after its receipt of the Draft Closing Balance Sheet
\n (the “OBJECTION PERIOD”) CMGI delivers to Loudeye a written objection to
\n the contents thereof (the “OBJECTION”), which shall detail the specific
\n basis for CMGI’s Objection. Within ten (10) calendar days after delivery
\n of the Objection, Loudeye and CMGI agree to meet in Chicago, Illinois
\n (or such other location as CMGI and Loudeye shall mutually agree) and to
\n negotiate in good faith to resolve the issues raised in the Objection.
\n If such agreement is reached, then it shall be binding on the parties,
\n and the Draft Closing Balance Sheet, as adjusted pursuant to any such
\n agreement, shall be deemed to be the “FINAL CLOSING BALANCE SHEET”. If
\n such agreement is not reached, then the parties shall refer the matter
\n to binding arbitration in accordance with the procedures set forth in
\n the next paragraph.<\/p>\n
If the parties are unable to reach an agreement on the
\n resolution of an Objection within twenty (20) calendar days following
\n Loudeye’s receipt of such Objection, then the parties agree to submit
\n the dispute to JAMS (the “ARBITRATOR”) for binding arbitration, which
\n arbitration shall take place as soon as practicable (but in any event
\n within the sixty (60) calendar day period following Loudeye’s receipt of
\n an Objection). The Arbitrator’s award with respect to any Objection
\n shall be final and binding upon the parties hereto, and judgment may be
\n entered on the award, and the Draft Closing Balance Sheet, as adjusted
\n pursuant to any such award, shall be deemed to be the “FINAL CLOSING
\n BALANCE SHEET”. Loudeye and CMGI shall each pay fifty percent (50%) of
\n all fees and expenses incurred by the Arbitrator in performing his
\n duties as described herein.<\/p>\n
At the end of the Objection Period (if no Objection is
\n delivered) or upon the agreement of the parties or the final order of
\n the Arbitrator resolving any such Objections (the “ADJUSTMENT
\n DETERMINATION DATE”), if the Adjusted Working Capital on the Final
\n Closing Balance Sheet is less than zero, CMGI shall pay to Loudeye an
\n amount in cash equal to such deficiency by wire transfer of immediately
\n available funds within two (2) business days after the Adjustment
\n Determination Date. If the Adjusted Working Capital on the Final Closing
\n Balance Sheet is greater than zero, Loudeye shall pay to CMGI an amount
\n in cash equal to such excess amount by wire transfer of immediately
\n available funds within two (2) business days after the Adjustment
\n Determination Date. For purposes of this Section 2.1, “ADJUSTED WORKING
\n CAPITAL” shall mean cash and cash equivalents plus accounts receivable
\n less than seventy five (75) days past due plus pre-paid obligations and
\n deposits (if any) plus other current assets minus total liabilities, as
\n reflected on the “Draft Closing Balance Sheet” or the “Final Closing
\n Balance Sheet”, as the case may be.<\/p>\n
(iv) On the Anniversary Date, Loudeye shall deliver the
\nAnniversary Payment to the holder of record of Activate Preferred Stock
\nimmediately prior to the Effective<\/p>\n
-9-<\/p>\n
10
\nTime (the “FORMER ACTIVATE STOCKHOLDER”) by wire transfer of immediately
\navailable funds or delivery or certificates representing Deferred Shares
\npursuant to Section 2.1(c)(ii). In the event that Loudeye determines to pay all
\nor any part of the Anniversary Payment in the form of Deferred Shares, the
\naggregate number of Deferred Shares shall not represent more than fifteen
\npercent (15%) of the fully diluted outstanding shares of Loudeye Common Stock
\n(calculated after the issuance of such Deferred Shares). Any portion of the
\nAnniversary Payment that cannot be issued in the form of Deferred Shares because
\nof such fifteen percent (15%) limitation or otherwise shall be paid in cash by
\nwire transfer of immediately available funds. If the Loudeye Common Stock is not
\nlisted on the Nasdaq National Market, the American Stock Exchange or the New
\nYork Stock Exchange on the Anniversary Date, then the Anniversary Payment shall
\nbe comprised of at least $1,500,000 in cash.<\/p>\n
(v) All Deferred Shares shall be entitled to piggyback
\nregistration rights pursuant to the Registration Rights Agreement in the form
\nattached hereto as EXHIBIT A (the “REGISTRATION RIGHTS AGREEMENT”).<\/p>\n
(d) Activate Common Stock. Each issued and outstanding share of
\nActivate Common Stock shall be canceled and retired and shall cease to exist and
\nno stock of Loudeye or any other consideration shall be delivered in exchange.<\/p>\n
(e) Activate Stock Options. Not later than the Effective Time,
\nall outstanding options, whether vested or unvested (“ACTIVATE OPTIONS”), to
\npurchase Activate Common Stock issued under Activate’s stock option plans that
\nhave not been exercised shall be canceled and terminated by virtue of the Merger
\nwithout any action on the part of the holder thereof and Loudeye shall not
\nassume any Activate Options.<\/p>\n
Section 2.2 Dissenting Shares.<\/p>\n
(a) Notwithstanding any provision of this Agreement to the
\ncontrary, any shares of Activate Stock held by a holder who has exercised such
\nholder’s appraisal rights in accordance with Section 262 of Delaware Law, and
\nwho, as of the Effective Time, has not effectively withdrawn or lost such
\nappraisal rights (“DISSENTING SHARES”), shall not be converted into or represent
\na right to receive any consideration under this Agreement, but the holder of the
\nDissenting Shares shall only be entitled to such rights as are granted by
\nDelaware Law.<\/p>\n
(b) Notwithstanding the provisions of Section 2.2(a), if any
\nholder of shares of Activate Common Stock who demands his appraisal rights with
\nrespect to such shares under Section 2.1 shall effectively withdraw or lose
\n(through failure to perfect or otherwise) his rights to appraisal for such
\nshares under Delaware Law then, as of the later of the Effective Time or the
\noccurrence of such event, such holder’s shares of Activate Common Stock shall be
\ncanceled and retired and shall cease to exist and no stock of Loudeye or any
\nother consideration shall be delivered in exchange.<\/p>\n
(c) Activate shall give Loudeye (i) prompt notice of any written
\ndemands for appraisal of any shares of capital stock of Activate pursuant to
\nSection 262 of Delaware Law, withdrawals of such demands, and any other
\ninstruments that relate to such demands served<\/p>\n
-10-<\/p>\n
11
\npursuant to Delaware Law, and received by the Activate and (ii) the opportunity
\nto participate at its own expense in all negotiations and proceedings with
\nrespect to demands for appraisal rights under Delaware Law. Activate shall not,
\nexcept with the prior written consent of Loudeye, voluntarily make any payment
\nwith respect to any demands for appraisal rights with respect to Activate Stock
\nor offer to settle or compromise any such demands.<\/p>\n
Section 2.3 Exchange of Certificates.<\/p>\n
(a) Activate shall use its best efforts to cause each holder of
\nActivate Preferred Stock to deliver to Loudeye at the Closing such stockholder’s
\ncertificates evidencing Activate Preferred Stock (the “CERTIFICATES”). At the
\nClosing, Loudeye shall deliver to each Activate stockholder who has previously
\ndelivered a Certificate the Merger Consideration issuable in respect of such
\nstockholder’s Certificate(s) by wire transfer of immediately available funds to
\nan account designated by such stockholder.<\/p>\n
(b) If any Activate stockholder does not deliver his, her or its
\nCertificates at or prior to Closing, then from and after the Effective Time,
\neach holder of an outstanding Certificate shall have the right to surrender each
\nCertificate to Loudeye (or at Loudeye’s option, an exchange agent to be
\nappointed by Loudeye), and receive promptly (and in any event within fifteen
\nbusiness days) in exchange for all Certificates held by such holder the Merger
\nConsideration payable in respect of such Certificates. Until surrendered, each
\noutstanding Certificate, which prior to the Effective Time represented shares of
\nActivate Preferred Stock, shall be deemed for all corporate purposes to evidence
\nownership of the Merger Consideration attributable to the surrendered shares of
\nActivate Preferred Stock, but shall, subject to applicable appraisal rights
\nunder Delaware Law and Section 2.2, have no other rights. From and after the
\nEffective Time, there shall be no further registration of transfers on the
\nrecords of Activate of shares of Activate Stock outstanding immediately prior to
\nthe Effective Time.<\/p>\n
(c) If any shares of Loudeye Common Stock issued as part of the
\nAnniversary Payment are to be issued in the name of a person other than the
\nperson in whose name the Certificate(s) surrendered in exchange therefor is
\nregistered, it shall be a condition to the issuance of such shares that (i) the
\nCertificate(s) so surrendered shall be transferable, and shall be properly
\nassigned, endorsed or accompanied by appropriate stock powers, (ii) such
\ntransfer shall otherwise be proper and (iii) the person requesting such transfer
\nshall pay Loudeye, or its exchange agent, any transfer or other taxes payable by
\nreason of the foregoing or establish to the satisfaction of Loudeye that such
\ntaxes have been paid or are not required to be paid. Notwithstanding the
\nforegoing, neither Loudeye nor Activate shall be liable to a holder of shares of
\nActivate Preferred Stock for any Merger Consideration issuable to such holder
\npursuant to the provisions of Article II of this Agreement that are delivered to
\na public official pursuant to applicable abandoned property, escheat or similar
\nlaws.<\/p>\n
(d) In the event any Certificate shall have been lost, stolen or
\ndestroyed, upon the making of an affidavit of that fact by the person claiming
\nsuch Certificate to be lost, stolen or destroyed, Loudeye shall issue in
\nexchange for such lost, stolen or destroyed Certificate, the Merger
\nConsideration issuable in exchange therefor pursuant to the provisions of
\nArticle II of the Agreement. The Board of Directors of Loudeye may in its
\ndiscretion and as a condition<\/p>\n
-11-<\/p>\n
12
\nprecedent to the issuance thereof, require the owner of such lost, stolen or
\ndestroyed Certificate to provide to Loudeye an indemnity agreement or bond
\nagainst any claim that may be made against Loudeye with respect to the
\nCertificate alleged to have been lost, stolen or destroyed.<\/p>\n
Section 2.4 Tax Consequences.<\/p>\n
It is intended by the parties hereto that the Merger shall not
\nconstitute a “reorganization” within the meaning of Section 368 of the Code.<\/p>\n
ARTICLE III
\n REPRESENTATIONS AND WARRANTIES OF ACTIVATE<\/p>\n
Activate represents and warrants to Loudeye and Sub that the statements
\ncontained in this Article III are true and correct, except as expressly set
\nforth in the disclosure schedule delivered by Activate to Loudeye on or before
\nthe date of this Agreement (the “ACTIVATE DISCLOSURE SCHEDULE”) a copy of which
\nis attached hereto as EXHIBIT B. The Activate Disclosure Schedule shall be
\narranged in paragraphs corresponding to the numbered and lettered paragraphs
\ncontained in this Article III.<\/p>\n
Section 3.1 Organization of Activate.<\/p>\n
(a) Activate is a corporation duly organized, validly existing
\nand in good standing under the laws of the State of Delaware, has all requisite
\ncorporate power to own, lease and operate its property and to carry on its
\nbusiness as now being conducted, and is duly qualified or licensed to do
\nbusiness and is in good standing as a foreign corporation in each jurisdiction
\nin which the nature of its business or ownership or leasing of properties makes
\nsuch qualification or licensing necessary and where the failure to be so
\nqualified or licensed could reasonably be expected to result in a material
\nadverse effect on, the business, assets (including intangible assets),
\nliabilities, condition (financial or otherwise), property or results of
\noperations (a “MATERIAL ADVERSE EFFECT”) of Activate and its Subsidiaries, taken
\nas a whole. Schedule 3.1(a) of the Activate Disclosure Schedule contains a true
\nand complete listing of the locations of all sales offices and other offices or
\nfacilities of Activate and a true and complete list of all states in which
\nActivate maintains any employees. Schedule 3.1(a) of the Activate Disclosure
\nSchedule also contains a true and complete list of all states in which Activate
\nis duly qualified or licensed to transact business as a foreign corporation.<\/p>\n
(b) Activate has no Subsidiaries other than Activate.net Canada,
\na corporation organized under the laws of Ontario, Canada (“ACTIVATE.NET
\nCANADA”).<\/p>\n
Section 3.2 Activate Capital Structure.<\/p>\n
(a) The authorized capital stock of Activate consists of
\n700,000,000 shares of Activate Common Stock and 65,000,000 shares of Activate
\nPreferred Stock, all of which are designated as Series A Preferred Stock. As of
\nimmediately prior to the Effective Time, there were: (i) 24,122,104 shares of
\nActivate Common Stock issued and outstanding, all of which are<\/p>\n
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13
\nvalidly issued, fully paid and nonassessable; and (ii) 27,544,183 shares of
\nissued and outstanding shares of Activate Preferred Stock, all of which are
\nvalidly issued, fully paid and nonassessable. As of immediately prior to the
\nEffective Time, the issued and outstanding shares of Activate Common Stock were
\nheld of record by the stockholders of Activate in the amounts and percentages
\nset forth on Schedule 3.2(a) of the Activate Disclosure Schedule, and the issued
\nand outstanding shares of Activate Preferred Stock were held of record by CMGI.
\nAll outstanding shares of Activate Stock were issued in compliance with
\napplicable federal and state securities laws. There are no obligations,
\ncontingent or otherwise, of Activate to repurchase, redeem or otherwise acquire
\nany shares of Activate Stock or make any investment (in the form of a loan,
\ncapital contribution or otherwise) in any other entity.<\/p>\n
(b) Except as set forth in this Section 3.2, there are no equity
\nsecurities of any class or series of Activate, or any security exchangeable into
\nor exercisable for such equity securities, issued, reserved for issuance or
\noutstanding. As of the Effective Time, there are no options, warrants, equity
\nsecurities, calls, rights, commitments, understandings or agreements of any
\ncharacter to which Activate is a party or by which it is bound obligating
\nActivate to issue, deliver or sell, or cause to be issued, delivered or sold,
\nadditional shares of capital stock of Activate or any affiliate or obligating
\nActivate to grant, extend, accelerate the vesting of or enter into any such
\noption, warrant, equity security, call, right, commitment or agreement. To the
\nknowledge of Activate, there are no voting trusts, proxies or other agreements
\nor understandings with respect to the voting of the shares of capital stock of
\nActivate.<\/p>\n
Section 3.3 Authority; No Conflict; Required Filings and Consents.<\/p>\n
(a) Activate has all requisite corporate power and authority to
\nenter into this Agreement and all Transaction Documents to which it is or will
\nbecome a party and to consummate the transactions contemplated by this Agreement
\nand such Transaction Documents. The execution and delivery of this Agreement and
\nsuch Transaction Documents and the consummation of the transactions contemplated
\nby this Agreement and such Transaction Documents have been duly authorized by
\nall necessary corporate action on the part of Activate. This Agreement has been
\nand the Transaction Documents to which Activate is or will become a party have
\nbeen or, to the extent not executed by Activate as of the date hereof, will be
\nduly executed and delivered by Activate. This Agreement and each of the
\nTransaction Documents to which Activate is a party constitutes, and each of the
\nTransaction Documents to which Activate will become a party, when executed and
\ndelivered by Activate, will constitute, assuming the due authorization,
\nexecution and delivery by the other parties hereto and thereto, the valid and
\nbinding obligation of Activate, enforceable against Activate in accordance with
\ntheir respective terms, except to the extent that enforceability may be limited
\nby applicable bankruptcy, reorganization, insolvency, moratorium or other laws
\naffecting the enforcement of creditors’ rights generally and by general
\nprinciples of equity, regardless of whether such enforceability is considered in
\na proceeding at law or in equity or limited by public policy. For purposes of
\nthis Agreement, “TRANSACTION DOCUMENTS” means all documents or agreements
\nrequired to be<\/p>\n
-13-<\/p>\n
14
\ndelivered by any party under this Agreement including the Certificate of Merger
\nand the Registration Rights Agreement.<\/p>\n
(b) The execution and delivery by Activate of this Agreement and
\nthe Transaction Documents to which it is or will become a party does not, and
\nthe consummation of the transactions contemplated by this Agreement and the
\nTransaction Documents to which it is or will become a party will not, (i)
\nconflict with, or result in any violation or breach of any provision of the
\nCertificate of Incorporation or Bylaws of Activate, (ii) result in any violation
\nor breach of, or constitute (with or without notice or lapse of time, or both) a
\ndefault (or give rise to a right of termination, cancellation or acceleration of
\nany obligation or loss of any benefit) under any of the terms, conditions or
\nprovisions of any note, bond, mortgage, indenture, lease, contract or other
\nagreement, instrument or obligation to which Activate is a party or by which it
\nor any of its properties or assets may be bound, or (iii) conflict or violate
\nany permit, concession, franchise, license, judgment, order, decree, statute,
\nlaw, ordinance, rule or regulation applicable to Activate or any of its
\nproperties or assets, except in the case of (ii) and (iii) for any such
\nconflicts, violations, defaults, terminations, cancellations or accelerations
\nwhich would not in the aggregate reasonably be expected to have a Material
\nAdverse Effect on Activate and its Subsidiaries, taken as a whole.<\/p>\n
(c) None of the execution and delivery by Activate of this
\nAgreement or of any other Transaction Documents to which Activate is or will
\nbecome a party or the consummation of the transactions contemplated by this
\nAgreement or such Transaction Documents will require any consent, approval,
\norder or authorization of, or registration, declaration or filing with, any
\nforeign, federal, state or local court, administrative agency or commission or
\nother governmental authority or instrumentality (“GOVERNMENTAL ENTITY”), except
\nfor (i) the filing of the Certificate of Merger with the Delaware Secretary of
\nState, (ii) such consents, approvals, orders, authorizations, registrations,
\ndeclarations and filings as may be required under applicable federal and state
\nsecurities laws, and (iii) such other consents, authorizations, filings,
\napprovals and registrations which are listed on Schedule 3.3(c) of the Activate
\nDisclosure Schedule or which in the aggregate, if not obtained or made, could be
\nexpected to have a Material Adverse Effect on Activate and its Subsidiaries,
\ntaken as a whole.<\/p>\n
Section 3.4 Financial Statements; Absence of Undisclosed Liabilities.<\/p>\n
(a) Activate has delivered to Loudeye copies of Activate’s
\nunaudited consolidated balance sheet as of August 31, 2001 (the “AUGUST BALANCE
\nSHEET”), Activate’s unaudited consolidated balance sheet as of June 30, 2001 and
\nthe related unaudited consolidated statements of operations, stockholders’
\nequity and cash flow for the six month period then ended (together with the
\nAugust Balance Sheet, the “ACTIVATE INTERIM FINANCIALS”), and Activate’s audited
\nconsolidated balance sheet as of December 31, 2000 and December 31, 1999 and the
\nrelated audited consolidated statements of operations, stockholders’ equity and
\ncash flows for the fiscal years ended December 31, 2000, 1999 and 1998 (the
\n“ACTIVATE AUDITED FINANCIALS”, collectively with the Activate Interim
\nFinancials, the “ACTIVATE FINANCIAL STATEMENTS”).<\/p>\n
(b) The Activate Financial Statements are in accordance with the
\nbooks and records of Activate, have been prepared in accordance with GAAP
\napplied on a basis consistent<\/p>\n
-14-<\/p>\n
15
\nwith prior periods and present fairly in all material respects, the financial
\ncondition, results of operations and cash flows of Activate as of their
\nhistorical dates and for the periods indicated, except that the unaudited
\ninterim financial statements were or are subject to normal and recurring
\nyear-end adjustments which were not or are not expected to be material in amount
\nand do not include footnotes.<\/p>\n
(c) As of the Closing Date, Activate has no debt, liability, or
\nobligation of any nature, whether accrued, absolute, contingent, or otherwise,
\nand whether due or to become due, including accrued expenses for payment of
\nroyalties and fees to owners of copyrights or other third parties collecting
\nsuch amounts on behalf of such owners (a “LIABILITY”), that will not be
\nreflected or reserved against in the Final Closing Balance Sheet, except for
\nthose which are not required by GAAP to be reflected on a balance sheet. To
\nActivate’s knowledge, as of the Closing Date, Activate has no material
\nLiabilities that will not be reflected or reserved against on the Final Closing
\nBalance Sheet and that are not set forth in any of the Activate Disclosure
\nSchedules.<\/p>\n
Section 3.5 Tax Matters.<\/p>\n
(a) For purposes of this Agreement, the following definitions
\nshall apply:<\/p>\n
(i) The term “TAXES” shall mean all taxes, however
\ndenominated, including any interest, penalties or other additions to tax that
\nmay become payable in respect thereof, (A) imposed by any federal, territorial,
\nstate, local or foreign government or any agency or political subdivision of any
\nsuch government, which taxes shall include, without limiting the generality of
\nthe foregoing, all income or profits taxes (including but not limited to,
\nfederal income taxes and state income taxes), payroll and employee withholding
\ntaxes, unemployment insurance, social security taxes, sales and use taxes, ad
\nvalorem taxes, excise taxes, franchise taxes, gross receipts taxes, business
\nlicense taxes, occupation taxes, real and personal property taxes, stamp taxes,
\nenvironmental taxes, ozone depleting chemicals taxes, transfer taxes, workers’
\ncompensation, Pension Benefit Guaranty Corporation premiums and other
\ngovernmental charges, and other obligations of the same or of a similar nature
\nto any of the foregoing, which are required to be paid, withheld or collected,
\nor (B) any liability for the payment of amounts referred to in (A) as a result
\nof being a member of any affiliated, consolidated, combined or unitary group.<\/p>\n
(ii) The term “RETURNS” shall mean all reports, estimates,
\ndeclarations of estimated tax, information statements and returns relating to,
\nor required to be filed in connection with, any Taxes, including information
\nreturns or reports with respect to backup withholding and other payments to
\nthird parties.<\/p>\n
(b) All Returns required to be filed prior to the date hereof by
\nor on behalf of Activate, including any consolidated or combined Return required
\nto be filed by the parent of any consolidated or unitary group of which Activate
\nis or was a member, have been duly filed on a timely basis, and such Returns
\nwhen filed were true, complete and correct in all material respects. Copies of
\nsuch Returns or the portions thereof relating to Activate have been provided or
\nmade available to Loudeye. All Taxes shown to be due and payable on such Returns
\nor on subsequent<\/p>\n
-15-<\/p>\n
16
\nassessments with respect thereto, and all payments of estimated Taxes required
\nto be made prior to the date hereof by or on behalf of Activate, or any member
\nof the consolidated group of which Activate is a member, under Section 6655 of
\nthe Code or comparable provisions of state, local or foreign law, have been paid
\nin full on a timely basis. No material Taxes are payable by Activate with
\nrespect to items or periods covered by such Returns (whether or not shown on or
\nreportable on such Returns).<\/p>\n
(c) Activate has withheld and paid over all Taxes required to
\nhave been withheld and paid over prior to the date hereof, and complied with all
\ninformation reporting and backup withholding requirements, including maintenance
\nof required records with respect thereto, in connection with amounts paid or
\nowing to any employee, creditor, independent contractor, or other third party.<\/p>\n
(d) There are no mortgages, liens, pledges, charges or
\nencumbrances of any kind or character (“LIENS”) on any of the assets of Activate
\nwith respect to Taxes, other than Liens for Taxes not yet due and payable or for
\nTaxes that Activate is contesting in good faith through appropriate proceedings
\nand for which appropriate reserves will be established on the Final Closing
\nBalance Sheet.<\/p>\n
(e) Activate has not at any time been (i) a member of an
\naffiliated group of corporations filing consolidated, combined or unitary income
\nor franchise tax returns other than a group the common parent of which is CMGI,
\nor (ii) a member of any partnership or joint venture for a period for which the
\nstatute of limitations for any Tax potentially applicable as a result of such
\nmembership has not expired.<\/p>\n
(f) Activate has no liability for the Taxes of any other person
\n(i) under Treasury Regulation Section 1.1502-6 or any similar provision of
\nstate, local or foreign law, (ii) as a transferee or successor, or (iii) by
\ncontract (including an intercompany account system or other tax sharing
\narrangement).<\/p>\n
(g) The amount of Activate’s liability for unpaid Taxes (whether
\nactual or contingent) for all periods through the Closing Date will not, in the
\naggregate, exceed the amount of the current liability accruals for Taxes to be
\nreflected on the Final Closing Balance Sheet, which balance sheet reflects
\nproper accrual in accordance with GAAP applied on a consistent basis. No
\nliability for Taxes has been incurred since such date other than in the ordinary
\ncourse of business.<\/p>\n
(h) Activate has furnished or made available to Loudeye true and
\ncomplete copies of (i) relevant portions of income tax audit reports, statements
\nof deficiencies, closing or other agreements received by or on behalf of
\nActivate or CMGI relating to Taxes related to the Activate business, and (ii)
\nall federal and state income or franchise tax Returns and state sales and use
\ntax Returns for or including Activate for all periods since the inception of
\nActivate. Activate does not do business in or derive income from any state other
\nthan states for which Returns have been duly filed and furnished or made
\navailable to Loudeye.<\/p>\n
-16-<\/p>\n
17
\n (i) The Returns of or including Activate have never been audited
\nby a government or taxing authority nor is any such audit in process, pending
\nor, to the knowledge of Activate, threatened (either in writing or verbally,
\nformally or informally). No deficiencies exist or have been asserted in writing
\nto Activate, and Activate has not received notice in writing that it has not
\nfiled a Return or paid Taxes required to be filed or paid. Activate is neither a
\nparty to any action or proceeding for assessment or collection of Taxes, nor, to
\nthe knowledge of Activate, has such event been asserted or threatened in writing
\nagainst Activate or any of its assets. No waiver or extension of any statute of
\nlimitations is in effect with respect to Taxes or Returns of Activate. No power
\nof attorney has been given by or with respect to Activate to any person with
\nrespect to Taxes that will be binding upon Activate.<\/p>\n
(j) Activate will not be required to include any material
\nadjustment in taxable income for any period (or portion thereof) pursuant to
\nSection 481 or Section 263A of the Code or any comparable provision under state
\nor foreign Tax laws as a result of transactions, events or accounting methods
\nemployed prior to the Closing.<\/p>\n
(k) Activate is not, nor has it been, a United States real
\nproperty holding corporation within the meaning of Section 897(c)(2) of the Code
\nduring the applicable period specified in Section 897(c)(1)(A)(ii) of the Code,
\nand Loudeye is not required to withhold tax by reason of Section 1445 of the
\nCode. Activate is not a “consenting corporation” under Section 341(f) of the
\nCode. Activate has not entered into any compensatory agreements with respect to
\nthe performance of services which payment thereunder would result in a
\nnondeductible expense to Activate pursuant to Section 280G of the Code or an
\nexcise tax to the recipient of such payment pursuant to Section 4999 of the
\nCode. Activate is not, nor has it been, a “reporting corporation” subject to the
\ninformation reporting and record maintenance requirements of Section 6038A and
\nthe regulations thereunder. Activate is in material compliance with the terms
\nand conditions of any applicable tax exemptions, agreements or orders of any
\nforeign government to which it may be subject or which it may have claimed, and
\nthe transactions contemplated by this Agreement will not have any material
\nadverse effect on such compliance.<\/p>\n
(l) Any tax sharing agreement between Activate and CMGI or any
\nmember of any consolidated or unitary group of which Activate is a member has
\nbeen terminated effective on the Closing Date, such that Activate will have no
\nfurther liability under such agreement.<\/p>\n
(m) Activate is not a party to or otherwise subject to any
\narrangement entered into in anticipation of the Closing, not in accordance with
\npast practice and not required by this Agreement, that could reasonably be
\nexpected to have the effect of (i) the recognition of a deduction or loss before
\nthe Closing Date and a corresponding recognition of taxable income or gain by
\nthe Surviving Corporation after the Closing Date or (ii) the recognition of
\ntaxable income or gain by the Surviving Corporation after the Closing Date
\nwithout the receipt of or entitlement to a corresponding amount of cash.<\/p>\n
Section 3.6 Absence of Certain Changes or Events.<\/p>\n
Since July 31, 2001, other than as set forth on Schedule 3.6 of the
\nActivate Disclosure Schedule, Activate has not:<\/p>\n
-17-<\/p>\n
18
\n (a) suffered any change that has resulted, or could be reasonably
\nexpected to result, in a Material Adverse Effect on Activate and its
\nSubsidiaries, taken as a whole;<\/p>\n
(b) suffered any damage, destruction or loss, whether covered by
\ninsurance or not, that has resulted, or could be reasonably expected to result,
\nin a Material Adverse Effect on Activate and its Subsidiaries, taken as a whole;<\/p>\n
(c) granted or agreed to make any increase of more than $750 per
\nmonth in any individual case and $7,500 per month in the aggregate in the
\ncompensation payable or to become payable by Activate to its officers or
\nemployees;<\/p>\n
(d) made any material change in the accounting methods or
\npractices it follows whether for general financial or tax purposes, or any
\nchange in depreciation or amortization policies or rates adopted therein;<\/p>\n
(e) sold, assigned, transferred, licensed or otherwise disposed
\nof any patent, trademark, trade name, brand name, copyright (or pending
\napplication for any patent, trademark or copyright) invention, work of
\nauthorship, process, know-how, formula or trade secret or interest thereunder or
\nother intangible asset, other than in the ordinary course of business;<\/p>\n
(f) permitted or allowed any of its property or assets to be
\nsubjected to any mortgage, deed of trust, pledge, lien, security interest or
\nother encumbrance of any kind (except those permitted under Section 3.7);<\/p>\n
(g) made any capital expenditure or commitment, including any
\nreasonably expected commitment to pay any licensing or royalty fees, in the
\naggregate, in excess of $10,000;<\/p>\n
(h) sold, transferred or leased any properties or assets to, or
\nentered into any agreement with, any of its affiliates, officers, directors or
\nstockholders or any affiliate of any of the foregoing;<\/p>\n
(i) made any material amendment to or terminated any material
\nagreement which, if not so amended or terminated, would be required to be
\ndisclosed on Schedule 3.6 of the Activate Disclosure Schedule; or<\/p>\n
(j) agreed to take any action described in this Section 3.6 or
\nwhich would constitute a material breach of any of the representations of
\nActivate contained in this Agreement.<\/p>\n
Section 3.7 Title and Related Matters.<\/p>\n
Activate has good and valid title to all its properties, interests in
\nproperties and assets, real and personal, free and clear of all Liens, except
\nLiens for current taxes not yet due and payable and minor imperfections of and
\nencumbrances on title, if any, as do not materially detract from the value of or
\ninterfere with the present use of the property affected thereby. The equipment
\nof Activate used in the operation of its business is, taken as a whole, (i)
\nadequate for the business conducted by Activate and (ii) in good operating
\ncondition and repair, ordinary wear<\/p>\n
-18-<\/p>\n
19
\nand tear excepted. Schedule 3.7.1 of the Activate Disclosure Schedule sets forth
\na list of all real and personal property leases to which Activate is a party
\n(excluding personal property leases providing for lease payments in the
\naggregate of no more than $15,000 per annum). All of Activate’s obligations
\nunder the personal property leases listed in Schedule 3.7.1 of the Activate
\nDisclosure Schedule have been satisfied so that at Closing Activate will hold
\ntitle to all assets subject to leases free and clear of all Liens. Schedule
\n3.7.2 of the Activate Disclosure Schedule contains a description of all items of
\npersonal property owned or leased by Activate with an individual acquired book
\nvalue in excess of $5,000 and real property leased or owned by Activate,
\ndescribing its interest in said property. True and correct copies of the real
\nproperty and personal property leases listed on Schedule 3.7.1 of the Activate
\nDisclosure Schedule have been provided or made available to Loudeye or its
\nrepresentatives.<\/p>\n
Section 3.8 Proprietary Rights.<\/p>\n
(a) Activate owns all right, title and interest in and to, or
\notherwise possesses legally enforceable rights, or is licensed to use, all
\npatents, copyrights, technology, software, software tools, processes, trade
\nsecrets, trademarks, service marks, trade names, Internet domain names and other
\nproprietary rights that are proprietary and required to conduct Activate’s
\nbusiness as conducted to the date of this Agreement, including, without
\nlimitation, all proprietary rights that are required in connection with all
\nversions and implementations of Activate’s Internet sites (including
\nwww.activate.com and the other domain names listed on Schedule 3.8(a) of the
\nActivate Disclosure Schedule) or any service which has been or is being
\ndistributed or sold by Activate or currently is under development by Activate
\nand actively under testing for its intended use (collectively, including such
\nWeb sites, the “Activate Services”), free and clear of all Liens (all of which
\nrights are referred to as “Activate Proprietary Rights”). Schedule 3.8(a) of the
\nActivate Disclosure Schedule contains an accurate and complete (i) list of all
\npatents (with separate listings of issued and pending patents), trademarks (with
\nseparate listings of registered and unregistered trademarks), trade names,
\nInternet domain names and registered copyrights in or related to the Activate
\nServices or otherwise included in the Activate Proprietary Rights and all
\napplications and registration statements therefor, including the jurisdictions
\nin which each such Activate Proprietary Right has been issued or registered or
\nin which any such application of such issuance and registration has been filed,
\n(ii) list of all licenses and other agreements, other than standard form shrink
\nwrap licenses, click through licenses or other similar end-user agreements for
\ngenerally commercially available software (excluding software that is required
\nfor the provision of the Activate Services), with third parties (the “Third
\nParty Licenses”) relating to any patents, copyrights, trade secrets, software,
\ninventions, technology, processes or other proprietary rights under which
\nActivate is licensed or otherwise authorized by such third parties to use,
\nmarket, distribute or incorporate in Activate Services (such patents,
\ncopyrights, trade secrets, software, inventions, technology, know-how, processes
\nor other proprietary rights are collectively referred to as the “Third Party
\nTechnology”), (iii) list of all licenses and other agreements, other than
\nstandard form shrink wrap licenses, click through licenses or other similar
\nend-user agreements for generally commercially available software (excluding
\nsoftware that is required for the provision of the Activate Services), with
\nthird parties relating to any information, compilations, data lists or databases
\nthat Activate is licensed or otherwise authorized by such third parties to use,
\nmarket, disseminate distribute or incorporate in Activate Services and (iv) list
\nof all licenses and agreements with third parties, other than shrink wrap,
\nclick-through and other<\/p>\n
-19-<\/p>\n
20
\nsimilar end-user agreements entered into by Activate in the ordinary course of
\nbusiness, under which such third party is licensed or authorized to make, use,
\nsell, distribute or incorporate any Activate Proprietary Rights or any portion
\nthereof. All of Activate’s patents, copyrights, trademarks, trade names or
\nInternet domain name registrations related to or in the Activate Services are
\nvalid and in full force and effect, and consummation of the transactions
\ncontemplated by this Agreement will not alter or impair any such rights. No
\nclaims have been asserted or threatened against Activate (and Activate has no
\nknowledge of any claims which are likely to be asserted or threatened against
\nActivate or which have been asserted or threatened against others relating to
\nActivate Proprietary Rights or Activate Services) by any person challenging
\nActivate’s use, possession, manufacture, sale or distribution of Activate
\nServices or challenging or questioning the validity or effectiveness of any
\nlicense or agreement relating thereto (including, without limitation, the Third
\nParty Licenses) or alleging a violation of any person’s or entity’s privacy,
\npersonal or confidentiality rights. Activate knows of no valid basis for any
\nclaim of the type specified in the immediately preceding sentence which could in
\nany way relate to or interfere with the continued enhancement and exploitation
\nby Activate of any of the Activate Services. To the knowledge of Activate, none
\nof the Activate Services nor the use or exploitation of any Activate Proprietary
\nRights or Third Party Technology in Activate’s current business infringes on the
\nrights of or constitutes misappropriation of any proprietary information or
\nintangible property right of any third person or entity, including without
\nlimitation any patent, trade secret, copyright, trademark or trade name, and
\nActivate has not been sued, or threatened to be sued, or named as a party in any
\nsuit, action or proceeding which involves a claim of such infringement,
\nmisappropriation or unfair competition.<\/p>\n
(b) Activate has not granted any third party any right to
\nreproduce, distribute, market or exploit any of the Activate Services or any
\nadaptations, translations, or derivative works based on the Activate Services or
\nany portion thereof.<\/p>\n
(c) All designs, drawings, specifications, source code, object
\ncode, scripts, documentation, flow charts, diagrams, data lists, databases,
\ncompilations and information incorporating, embodying or reflecting any of the
\nActivate Services (the “Activate Components”) other than the Third Party
\nTechnology were written, developed and created solely and exclusively by
\nemployees of Activate without the assistance of any third party or entity or
\nwere created by third parties who assigned ownership of their rights to Activate
\nby means of valid and enforceable invention assignment agreements, true and
\ncorrect copies of which have been delivered or made available to Loudeye.
\nActivate has at all times used commercially reasonable efforts customary in its
\nindustry to maintain in confidence the technology (including source code) and
\nother information related to the Activate Services that it desired to treat as
\ntrade secrets and has not disclosed or otherwise dealt with such items in a
\nmanner intended or reasonably likely to cause the loss of such trade secrets by
\nrelease into the public domain.<\/p>\n
(d) No employee, contractor or consultant of Activate is in
\nviolation in any respect of any term of any written employment contract, patent
\ndisclosure agreement or any other written contract or agreement relating to the
\nrelationship of any such employee, consultant or contractor with Activate or any
\nother party because of the nature of the business conducted by Activate or
\ncurrently proposed to be conducted by Activate, except for such violations as
\nwould not in the aggregate reasonably be expected to have a Material Adverse
\nEffect on Activate and its<\/p>\n
-20-<\/p>\n
21
\nSubsidiaries, taken as a whole. Schedule 3.8(d) of the Activate Disclosure
\nSchedule lists all employees, contractors and consultants who have participated
\nin any way in the development of any material portion of the Activate Services
\nor the Activate Proprietary Rights.<\/p>\n
(e) Each person presently or previously employed by Activate
\n(including independent contractors, if any) has executed a confidentiality,
\nnon-disclosure and proprietary inventions assignment agreement pursuant to the
\nform of agreement previously provided or made available to Loudeye or its
\nrepresentatives.<\/p>\n
(f) No product liability or warranty claims have been
\ncommunicated in writing to or, to the knowledge of Activate, threatened against
\nActivate.<\/p>\n
(g) To the knowledge of Activate, there is no unauthorized use,
\ndisclosure, infringement or misappropriation of (i) any Activate Proprietary
\nRights by any third party, including any employee, former employee or
\nindependent contractor of Activate, or (ii) any Third Party Technology to the
\nextent licensed by or through Activate by any employee, former employee or
\nindependent contractor of Activate or any end-user of the Activate Services, in
\nconnection with the use or provision of the Activate Services. Activate has not
\nentered into any agreement to indemnify any other person against any charge of
\ninfringement of any Activate Proprietary Rights or any other rights, other than
\nagreements with licensees of Activate and users of Activate Services.<\/p>\n
(h) All disclosure by Activate or, to the knowledge of Activate,
\nby another party pursuant to rights granted to it by Activate, of confidential
\ninformation owned by Activate to a third party has been pursuant to the terms of
\na written agreement between Activate and such third party. All use, disclosure
\nor appropriation by Activate of confidential information not owned by Activate
\nhas been pursuant to the terms of a written agreement between Activate and the
\nowner of such confidential information, or is otherwise lawful.<\/p>\n
Section 3.9 Employee Benefit Plans.<\/p>\n
(a) Schedule 3.9(a) of the Activate Disclosure Schedule lists,
\nwith respect to Activate and any trade or business (whether or not incorporated)
\nwhich is treated as a single employer with Activate within the meaning of
\nSection 414(b), (c), (m) or (o) of the Code (an “ERISA AFFILIATE”), the
\nfollowing plans, programs and arrangements which cover current or former
\nemployees, consultants or directors of Activate and with respect to which
\nActivate has any potential liability (the “ACTIVATE EMPLOYEE PLANS”): (i) all
\nemployee benefit plans (as defined in Section 3(3) of the Employee Retirement
\nIncome Security Act of 1974, as amended (“ERISA”), (ii) each loan to a
\nnon-officer employee, loans to officers and directors and any stock option,
\nstock purchase, phantom stock, stock appreciation right, supplemental
\nretirement, severance, sabbatical, medical, dental, vision care, disability,
\nemployee relocation, cafeteria benefit (Code Section 125) or dependent care
\n(Code Section 129), life insurance or accident insurance plans, programs or
\narrangements, (iii) all bonus, pension, profit sharing, savings, deferred
\ncompensation or incentive plans, programs or arrangements, (iv) other fringe or
\nemployee benefit plans, programs or arrangements that apply to senior management
\nof Activate and that do not generally apply to all employees, and (v) any
\ncurrent or former employment or<\/p>\n
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22
\nexecutive compensation or severance agreements, written or otherwise, for the
\nbenefit of, or relating to, any present or former employee, consultant or
\ndirector.<\/p>\n
(b) Activate has delivered or made available to Loudeye or its
\nrepresentatives a copy of each of the written Activate Employee Plans and
\nrelated plan documents (including trust documents, insurance policies or
\ncontracts, employee booklets, summary plan descriptions and other authorizing
\ndocuments, and, to the extent still in its possession, any material employee
\ncommunications relating thereto within the last year) and has, with respect to
\neach Activate Employee Plan which is subject to ERISA reporting requirements,
\nprovided or made available copies of any Form 5500 reports filed for the last
\nplan year. Any Activate Employee Plan intended to be qualified under Section
\n401(a) of the Code has either obtained from the Internal Revenue Service a
\nfavorable determination letter as to its qualified status under the Code,
\nincluding all amendments to the Code effected by the Tax Reform Act of 1986 and
\nsubsequent legislation, or has applied to, or has time to apply to, the Internal
\nRevenue Service for such a determination letter prior to the expiration of the
\nrequisite period under applicable Treasury Regulations or Internal Revenue
\nService pronouncements in which to apply for such determination letter and to
\nmake any amendments necessary to obtain a favorable determination. Activate has
\nalso delivered or made available to Loudeye the most recent Internal Revenue
\nService determination letter issued with respect to each such Activate Employee
\nPlan, and nothing has occurred since the issuance of each such letter which
\ncould reasonably be expected to cause the loss of the tax-qualified status of
\nany Activate Employee Plan subject to Code Section 401(a).<\/p>\n
(c) Except as set forth on Schedule 3.9(c) of the Activate
\nDisclosure Schedule, (i) none of the Activate Employee Plans promises or
\nprovides retiree medical or other retiree welfare benefits to any person, except
\nas may be required by law; (ii) there has been no “prohibited transaction,” as
\nsuch term is defined in Section 406 of ERISA and Section 4975 of the Code, with
\nrespect to any Activate Employee Plan; (iii) each Activate Employee Plan has
\nbeen administered in accordance with its terms and in compliance in all material
\nrespects with the requirements prescribed by any and all statutes, rules and
\nregulations (including ERISA and the Code), and Activate and each subsidiary or
\nERISA Affiliate have performed all material obligations required to be performed
\nby them under, are not in any material respect in default, under or violation
\nof, and have no knowledge of any material default or violation by any other
\nparty to, any of the Activate Employee Plans; (iv) neither Activate nor any
\nsubsidiary or ERISA Affiliate is subject to any material liability or penalty
\nunder Sections 4976 through 4980 of the Code or Title I of ERISA with respect to
\nany of the Activate Employee Plans; (v) all contributions required to be made by
\nActivate or any subsidiary or ERISA Affiliate to any Activate Employee Plan have
\nbeen made on or before their due dates and a reasonable amount has been accrued
\nfor required contributions to each Activate Employee Plan for the current plan
\nyears; (vi) with respect to each Activate Employee Plan, no “reportable event”
\nwithin the meaning of Section 4043 of ERISA (excluding any such event for which
\nthe thirty (30) day notice requirement has been waived under the regulations to
\nSection 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 of
\nERISA has occurred; and (vii) no Activate Employee Plan is covered by, and
\nneither Activate nor any subsidiary or ERISA Affiliate has incurred or expects
\nto incur any material liability under Title IV of ERISA or Section 412 of the
\nCode. With respect to each Activate Employee Plan subject to ERISA as either an
\nemployee<\/p>\n
-22-<\/p>\n
23
\npension plan within the meaning of Section 3(2) of ERISA or an employee welfare
\nbenefit plan within the meaning of Section 3(1) of ERISA, Activate has prepared
\nin good faith and timely filed all requisite governmental reports (which were
\ntrue and correct in all material respects as of the date filed) and has properly
\nand timely filed and distributed or posted all material notices and reports to
\nemployees required to be filed, distributed or posted with respect to each such
\nActivate Employee Plan. No suit, administrative proceeding, action or other
\nlitigation has been brought, or to the knowledge of Activate is threatened,
\nagainst or with respect to any such Activate Employee Plan, including any audit
\nor inquiry by the IRS or United States Department of Labor. Neither Activate nor
\nany ERISA Affiliate is a party to, or has made any contribution to or otherwise
\nincurred any obligation under, any “multi-employer plan” as defined in Section
\n3(37) of ERISA.<\/p>\n
(d) With respect to each Activate Employee Plan, Activate has
\ncomplied with (i) the applicable health care continuation and notice provisions
\nof the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and the
\nproposed regulations thereunder, (ii) the applicable requirements of the Family
\nLeave Act of 1993 and the regulations thereunder, and (iii) the applicable
\nrequirements of the Health Insurance Portability and Accountability Act of 1996
\n(“HIPAA”) and the temporary regulations thereunder.<\/p>\n
(e) The consummation of the transactions contemplated by this
\nAgreement will not (i) entitle any current or former employee or other service
\nprovider of Activate or any other ERISA Affiliate to severance benefits or any
\nother payment (including, without limitation, unemployment compensation, golden
\nparachute or bonus), except as expressly provided in this Agreement, or (ii)
\naccelerate the time of payment or vesting of any such benefits, or (iii)
\nincrease or accelerate any benefits or the amount of compensation due any such
\nemployee or service provider.<\/p>\n
(f) There has been no amendment to, written interpretation or
\nannouncement (whether or not written) by Activate or other ERISA Affiliate
\nrelating to, or change in participation or coverage under, any Activate Employee
\nPlan which would materially increase the expense of maintaining such Plan above
\nthe level of expense incurred with respect to that Plan for the most recent
\nfiscal year included in the Activate Financial Statements.<\/p>\n
Section 3.10 Bank Accounts.<\/p>\n
Schedule 3.10 of the Activate Disclosure Schedule sets forth the names
\nand locations of all banks, trust companies, savings and loan associations, and
\nother financial institutions at which Activate maintains accounts of any nature
\nand the names of all persons authorized to draw thereon or make withdrawals
\ntherefrom.<\/p>\n
Section 3.11 Contracts.<\/p>\n
(a) A list of Activate’s material contracts (“MATERIAL
\nCONTRACTS”) is attached as Schedule 3.11(a) to the Activate Disclosure Schedule.
\nExcept as identified on Schedule 3.11(a) of the Activate Disclosure Schedule:<\/p>\n
-23-<\/p>\n
24
\n (i) Activate has no agreements, contracts or commitments
\nthat provide for the sale, use, disclosure, licensing or distribution by
\nActivate or any third party of any Activate Services or Activate Proprietary
\nRights, other than standard form shrink wrap licenses, click through licenses or
\nother similar end-user agreements for generally commercially available software.
\nWithout limiting the foregoing, except as set forth on Schedule 3.11(a)(i) of
\nthe Activate Disclosure Schedule, Activate has not granted to any third party
\nany exclusive rights of any kind, or any rights to reproduce, manufacture or
\ndistribute any of the Activate Services, nor has Activate granted to any third
\nparty any exclusive rights of any kind (including, without limitation,
\nexclusivity with regard to categories of advertisers on Activate’s World Wide
\nWeb site, territorial exclusivity or exclusivity with respect to particular
\nversions, implementations or translations of any of the Activate Services), nor
\nhas Activate granted any third party any right to market any of the Activate
\nServices under any private label or “OEM” arrangement, nor has Activate granted
\nany license of any Activate trademarks or service marks.<\/p>\n
(ii) Activate has no Third Party Licenses other than
\nstandard form shrink wrap licenses for generally commercially available
\nsoftware.<\/p>\n
(iii) Activate has no outstanding agreements, contracts or
\ncommitments that call for fixed and\/or contingent payments or expenditures after
\nthe Closing Date of more than $10,000 by or to Activate (including, without
\nlimitation, any advertising or revenue sharing arrangement).<\/p>\n
(iv) Activate has no outstanding agreements, contracts or
\ncommitments with officers, employees, agents, advisors, salesmen, sales
\nrepresentatives, distributors or dealers, other than its standard form of
\nconfidentiality, assignment of invention and\/or non-disclosure agreements.<\/p>\n
(v) Activate has no employment agreements. Activate also
\nhas no independent contractor or similar agreement, contract or commitment that
\nis not terminable on thirty (30) days’ notice or less without penalty, liability
\nor premium of any type, including, without limitation, severance or termination
\npay.<\/p>\n
(vi) Activate has no currently effective collective
\nbargaining or union agreements, contracts or commitments.<\/p>\n
(vii) Activate is not restricted by agreement from
\ncompeting with any person or entity or from carrying on its business anywhere in
\nthe world.<\/p>\n
(viii) Activate has not guaranteed any obligations of
\nother persons or made any agreements to acquire or guarantee any material
\nobligations of other persons.<\/p>\n
(ix) Activate has no outstanding loan or advance to any
\nperson; nor is it party to any line of credit, standby financing, revolving
\ncredit or other similar financing arrangement of any sort which would permit the
\nborrowing by Activate of any sum.<\/p>\n
-24-<\/p>\n
25
\n (x) Activate has no material agreements pursuant to which
\nActivate has agreed to manufacture for, supply to or distribute to any third
\nparty any Activate Services or Activate Components after the Closing Date.<\/p>\n
(xi) Activate has no agreements providing for “most
\nfavored customer” status or similar adjustments to pricing terms, royalty rates,
\npayment terms and the like based on the terms and conditions of other agreements
\nActivate enters into with third parties (collectively, an “MFN CLAUSE”).
\nActivate has not had to adjust, is not now required to adjust and does not
\npresently anticipate having to adjust its pricing terms, royalty rates, payment
\nterms and the like as a result of any such MFN Clauses.<\/p>\n
True and correct copies of each document or instrument listed on
\nSchedule 3.11(a) of the Activate Disclosure Schedule pursuant to this Section
\n3.11(a) have been provided to Loudeye or its representatives.<\/p>\n
(b) All of the Material Contracts are valid, binding, in full
\nforce and effect, and enforceable by Activate in all material respects in
\naccordance with their respective terms, except to the extent that enforceability
\nmay be limited by applicable bankruptcy, reorganization, insolvency, moratorium
\nor other laws affecting the enforcement of creditors’ rights generally and by
\ngeneral principles of equity, regardless of whether such enforceability is
\nconsidered in a proceeding at law or in equity. To the knowledge of Activate, no
\nparty to any such Material Contract intends to cancel, withdraw, modify or amend
\nsuch contract, agreement or arrangement.<\/p>\n
(c) Activate is not in default under or in breach or violation
\nof, nor to the knowledge of Activate, is there any valid basis for any claim of
\ndefault by Activate under, or breach or violation by Activate of, any material
\nprovision of any Material Contract. To the knowledge of Activate, no other party
\nis in default under or in breach or violation of, nor is there any valid basis
\nfor any claim of default by any other party under or any breach or violation by
\nany other party of, any Material Contract.<\/p>\n
(d) No claims have been made in writing to Activate or to the
\nknowledge of Activate, threatened, under the Material Contracts that could
\nrequire indemnification by Activate, and Activate has not paid any amounts to
\nindemnify any third party as a result of indemnification requirements of any
\nkind since January 1, 2000.<\/p>\n
(e) All accepted advertising arrangements entered into by
\nActivate, and all material agreements, contracts, or commitments for the
\npurchase of supplies by Activate, were made in the ordinary course of business.
\nThere are no outstanding oral contracts or arrangements for the purchase of
\nadvertising in excess of $10,000 or for the sale any other product or service in
\nan aggregate amount in excess of $10,000 by Activate.<\/p>\n
Section 3.12 Compliance With Law.<\/p>\n
Activate and the operation of its business are in compliance in all
\nmaterial respects with all applicable laws and regulations material to the
\noperation of its business. Neither Activate nor, to Activate’s knowledge, any of
\nits employees has directly or indirectly paid or delivered any fee,<\/p>\n
-25-<\/p>\n
26
\ncommission or other sum of money or item of property, however characterized, to
\nany finder, agent, government official or other party in the United States or
\nany other country, that was or is in violation of any federal, state, or local
\nstatute or law or of any statute or law of any other country having
\njurisdiction. Activate has not participated directly or indirectly in any
\nboycotts or other similar practices affecting any of its customers. Activate has
\ncomplied in all material respects at all times with any and all applicable
\nfederal, state and foreign laws, rules, regulations, proclamations and orders
\nrelating to the importation or exportation of its products and data, except for
\nsuch failures to comply as would not in the aggregate reasonably be expected to
\nhave a Material Adverse Effect on Activate and its Subsidiaries, taken as a
\nwhole.<\/p>\n
Section 3.13 Labor Difficulties; No Discrimination.<\/p>\n
(a) Activate is not engaged in any unfair labor practice and is
\nnot in material violation of any applicable laws respecting employment and
\nemployment practices, terms and conditions of employment, and wages and hours.
\nThere is no unfair labor practice complaint against Activate actually pending
\nor, to the knowledge of Activate, threatened before the National Labor Relations
\nBoard. There is no strike, labor dispute, slowdown, or stoppage actually pending
\nor, to the knowledge of Activate, threatened against Activate. To the knowledge
\nof Activate, no union organizing activities are taking place with respect to the
\nbusiness of Activate. No grievance or any arbitration proceeding arising out of
\nor under any collective bargaining agreement is pending and, to the knowledge of
\nActivate, no claims therefor exist. No collective bargaining agreement that is
\nbinding on Activate restricts it from relocating or closing any of its
\noperations. Activate has not experienced any material work stoppage or other
\nmaterial labor difficulty that could have a Material Adverse Effect on Activate
\nand its Subsidiaries, taken as a whole.<\/p>\n
(b) There is and has not been any claim in writing against
\nActivate or its officers or employees, or to Activate’s knowledge, threatened
\nagainst Activate or its officers or employees (in their capacities as such),
\nbased on actual or alleged race, age, sex, disability or other harassment or
\ndiscrimination, or similar tortious conduct, or based on actual or alleged
\nbreach of contract with respect to any person’s employment by Activate, nor to
\nthe knowledge of Activate is there any basis for any such claim that could
\nreasonably be expected to have a Material Adverse Effect on Activate and its
\nSubsidiaries, taken as a whole.<\/p>\n
(c) There are no pending claims against Activate under any
\nworkers compensation plan or policy or for long term disability. Activate has no
\nmaterial obligations under COBRA with respect to any former employees or
\nqualifying beneficiaries thereunder. There are no proceedings pending or, to the
\nknowledge of Activate, threatened, before any Governmental Entity between
\nActivate and any of its employees, which proceedings have or could reasonably be
\nexpected to have a Material Adverse Effect on Activate.<\/p>\n
Section 3.14 Insider Transactions.<\/p>\n
Neither CMGI nor any company controlled by CMGI has any material
\ninterest in any equipment or other property, real or personal, tangible or
\nintangible of Activate, including, without limitation, any Activate Proprietary
\nRights, or any creditor, supplier, or customer of<\/p>\n
-26-<\/p>\n
27
\nActivate or any distributor or reseller of Activate Services.<\/p>\n
Section 3.15 Employees, Independent Contractors and Consultants.<\/p>\n
Schedule 3.15 of the Activate Disclosure Schedule lists all currently
\neffective consulting, independent contractor and\/or employment agreements and
\nother material agreements with individual employees, independent contractors or
\nconsultants to which Activate is a party. True and correct copies of all such
\nwritten agreements have been provided or made available to Loudeye or its
\nrepresentatives. All independent contractors have been properly classified as
\nindependent contractors for the purposes of federal and applicable state tax
\nlaws, laws applicable to employee benefits and other applicable law except to
\nthe extent such failure could not reasonably be expected to result in a Material
\nAdverse Effect. All salaries and wages paid by Activate are in compliance in all
\nmaterial respects with applicable federal, state and local laws. Also shown on
\nSchedule 3.15 of the Activate Disclosure Schedule are the names, positions and
\nsalaries or rates of pay, including bonuses, of all persons presently employed
\nby, or performing contract services for, Activate. No bonus, benefit or other
\npayment with an aggregate value in excess of $5,000 will become due or accrue to
\nActivate employees or contractors as a result of the Merger.<\/p>\n
Section 3.16 Insurance.<\/p>\n
Schedule 3.16 of the Activate Disclosure Schedule contains a list of the
\nprincipal policies of fire, liability and other forms of insurance currently
\nheld by Activate, and all outstanding claims made by Activate under such
\npolicies. To the knowledge of Activate, Activate has not done anything, either
\nby way of action or inaction, that might invalidate such policies in whole or in
\npart. There is no claim pending under any of such policies or bonds as to which
\ncoverage has been questioned, denied or disputed by the underwriters of such
\npolicies or bonds. All premiums due and payable under all such policies and
\nbonds have been timely paid and Activate is otherwise in compliance with the
\nterms of such policies and bonds in all material respects. Activate has no
\nknowledge of any threatened termination of, or material premium increase with
\nrespect to, any of such policies.<\/p>\n
Section 3.17 Accounts Receivable.<\/p>\n
Subject to any reserves to be set forth in the Final Closing Balance
\nSheet, the accounts receivable to be shown on the Final Closing Balance Sheet
\nwill represent bona fide claims against debtors for sales and other charges, and
\nare not subject to discount except for normal cash and immaterial trade
\ndiscounts.<\/p>\n
Section 3.18 Litigation.<\/p>\n
There is no private or governmental action, suit, proceeding, claim,
\narbitration or investigation pending before any agency, court or tribunal,
\nforeign or domestic, or, to the knowledge of Activate, threatened against
\nActivate or any of its properties or any of its officers or directors (in their
\ncapacities as such), if determined adversely to Activate, could have a Material
\nAdverse Effect on Activate and its Subsidiaries, taken as a whole. There is no<\/p>\n
-27-<\/p>\n
28
\noutstanding judgment, decree or order of any agency, court or tribunal, foreign
\nor domestic, against Activate. To Activate’s knowledge, no circumstances exist
\nthat could reasonably be expected to result in a claim against Activate as a
\nresult of the conduct of Activate’s business (including, without limitation, any
\nclaim of infringement of any intellectual property right) which, if determined
\nadversely to Activate, could reasonably be expected to have a Material Adverse
\nEffect on Activate and its Subsidiaries, taken as a whole.<\/p>\n
Section 3.19 Governmental Authorizations and Regulations.<\/p>\n
Activate has obtained each consent, license, permit, grant or other
\nauthorization of a Governmental Entity (i) pursuant to which Activate currently
\noperates or holds any interest in any of its properties or (ii) that is required
\nfor the operation of Activate’s business or the holding of any such interest,
\nand all of such authorizations are in full force and effect, except where the
\nabsence of which or the failure to do so could not reasonably be expected to
\nhave a Material Adverse Effect on Activate and its Subsidiaries, taken as a
\nwhole.<\/p>\n
Section 3.20 No Other Investments.<\/p>\n
Activate does not own or control (directly or indirectly) any capital
\nstock, bonds or other securities of, and does not have any proprietary interest
\nin, any other corporation, limited liability company, general or limited
\npartnership, firm, association or business organization, entity or enterprise,
\nother than Activate.net Canada. Activate does not control (directly or
\nindirectly) the management or policies of any other corporation, limited
\nliability company, partnership, firm, association or business organization,
\nentity or enterprise, other than Activate.net Canada.<\/p>\n
Section 3.21 Compliance with Environmental Requirements.<\/p>\n
Activate has obtained all permits, licenses and other authorizations
\nwhich are required under federal, state and local laws applicable to Activate
\nand relating to pollution or protection of the environment, including laws or
\nprovisions relating to emissions, discharges, releases or threatened releases of
\npollutants, contaminants, or hazardous or toxic materials, substances, or wastes
\ninto air, surface water, groundwater, or land, or otherwise relating to the
\nmanufacture, processing, distribution, use, treatment, storage, disposal,
\ntransport, or handling of pollutants, contaminants or hazardous or toxic
\nmaterials, substances, or wastes or which are intended to assure the safety of
\nemployees, workers or other persons, except where the failure to obtain such
\nauthorizations could not be reasonably expected to have a Material Adverse
\nEffect on Activate and its Subsidiaries, taken as a whole. Activate is in
\ncompliance in all material respects with all terms and conditions of all such
\npermits, licenses and authorizations. There are no conditions, circumstances,
\nactivities, practices, incidents, or actions known to Activate which could
\nreasonably be expected to form the basis of any claim, action, suit, proceeding,
\nhearing, or investigation of, by, against or relating to Activate, based on or
\nrelated to the manufacture, processing, distribution, use, treatment, storage,
\ndisposal, transport, or handling, or the emission, discharge, release or
\nthreatened release into the environment, of any pollutant, contaminant, or
\nhazardous or toxic substance, material or waste, or relating to the safety of
\nemployees, workers or other persons except for such conditions which could not
\nhave a Material Adverse Effect on Activate and its Subsidiaries, taken as a
\nwhole.<\/p>\n
-28-<\/p>\n
29
\n Section 3.22 Corporate Documents.<\/p>\n
Activate has furnished or made available to Loudeye or its
\nrepresentatives copies of: (a) its Certificate of Incorporation and Bylaws, as
\namended to date; (b) its minute book containing consents, actions, and meetings
\nof the stockholders, the board of directors and any committees thereof; (c) all
\nmaterial permits, orders, and consents issued by any regulatory agency with
\nrespect to Activate, or any securities of Activate, and all applications for
\nsuch permits, orders, and consents; and (d) the stock transfer books of Activate
\nsetting forth all transfers of any its capital stock. The corporate minute
\nbooks, stock certificate books, stock registers and other corporate records of
\nActivate are complete and accurate in all material respects, and, to the
\nknowledge of Activate, the signatures appearing on all documents contained
\ntherein are the true or facsimile signatures of the persons purporting to have
\nsigned the same.<\/p>\n
Section 3.23 No Brokers.<\/p>\n
Activate is not obligated for the payment of fees or expenses of any
\nbroker or finder in connection with the origin, negotiation or execution of this
\nAgreement or the other Transaction Documents or in connection with any
\ntransaction contemplated hereby or thereby.<\/p>\n
Section 3.24 Customers and Suppliers.<\/p>\n
As of the Closing Date, no customer which individually accounted for
\nmore than three percent (3%) of Activate’s gross revenues during the 12-month
\nperiod ending July 31, 2001, and no material supplier of Activate, has canceled
\nor otherwise terminated prior to the expiration of the contract term, or, made
\nany written threat to Activate to cancel or otherwise terminate its relationship
\nwith Activate, or has since July 31, 2001 decreased materially its services or
\nsupplies to Activate in the case of any such supplier, or its usage of the
\nServices in the case of such customer.<\/p>\n
ARTICLE IV
\n REPRESENTATIONS AND WARRANTIES OF LOUDEYE AND SUB<\/p>\n
Loudeye and Sub jointly and severally represent and warrant to Activate
\nthat the statements contained in this Article IV are true and correct, except as
\nexpressly set forth in the disclosure schedule delivered by Loudeye to Activate
\non or before the date of this Agreement (the “LOUDEYE DISCLOSURE SCHEDULE”) a
\ncopy of which is attached hereto as EXHIBIT C. The Loudeye Disclosure Schedule
\nshall be arranged in paragraphs corresponding to the numbered and lettered
\nparagraphs contained in this Article IV.<\/p>\n
Section 4.1 Organization of Loudeye and Sub.<\/p>\n
Each of Loudeye and its Subsidiaries, including Sub, is a corporation
\nduly organized, validly existing and in good standing under the laws of its
\nrespective jurisdiction of incorporation and has all requisite corporate power
\nto own, lease and operate its property and to carry on its business as now being
\nconducted and is duly qualified or licensed to do business and is in good
\nstanding in each jurisdiction in which the failure to be so qualified or
\nlicensed would have a Material Adverse Effect on Loudeye or Sub. The authorized
\ncapital stock of Sub consists of<\/p>\n
-29-<\/p>\n
30
\n3,000 shares of Common Stock, all of which are issued and outstanding, duly paid
\nand nonassessable and are owned by Loudeye free and clear of all Liens.<\/p>\n
Section 4.2 Valid Issuance of Loudeye Common Stock.<\/p>\n
The Deferred Shares will be, when issued, duly authorized, validly
\nissued, fully paid, and nonassessable and based in part upon the representations
\nof the Former Activate Stockholder in the Investor Representation Statement (as
\ndefined in Section 6.1) shall be issued in compliance with all applicable
\nfederal and state securities laws.<\/p>\n
Section 4.3 Authority; No Conflict; Required Filings and Consents.<\/p>\n
(a) Each of Loudeye and Sub has all requisite corporate power and
\nauthority to enter into this Agreement and all Transaction Documents to which it
\nis or will become a party and to consummate the transactions contemplated by
\nthis Agreement and such Transaction Documents. The execution and delivery of
\nthis Agreement and such Transaction Documents and the consummation of the
\ntransactions contemplated by this Agreement and such Transaction Documents have
\nbeen duly authorized by all necessary corporate action on the part of Loudeye
\nand Sub. This Agreement has been and the Transaction Documents to which Loudeye
\nor Sub is or will become a party have been or, to the extent not executed as of
\nthe date hereof, will be duly executed and delivered by Loudeye and Sub. This
\nAgreement and each of the Transaction Documents to which Loudeye or Sub is a
\nparty constitutes, and each of the Transaction Documents to which Loudeye or Sub
\nwill become a party when executed and delivered by Loudeye or Sub will
\nconstitute, a valid and binding obligation of Loudeye or Sub, enforceable
\nagainst Loudeye or Sub, as the case may be, in accordance with its respective
\nterms, except to the extent that enforceability may be limited by applicable
\nbankruptcy, reorganization, insolvency, moratorium or other laws affecting the
\nenforcement of creditors’ rights generally and by general principles of equity,
\nregardless of whether such enforceability is considered in a proceeding at law
\nor in equity.<\/p>\n
(b) The execution and delivery by Loudeye or Sub of this
\nAgreement and the Transaction Documents to which it is or will become a party
\ndoes not, and consummation of the transactions contemplated by this Agreement or
\nthe Transaction Documents to which it is or will become a party will not, (i)
\nconflict with, or result in any violation or breach of any provision of the
\nCertificate of Incorporation or Bylaws of Loudeye or Sub, (ii) result in any
\nviolation or breach of, or constitute (with or without notice or lapse of time,
\nor both) a default (or give rise to a right of termination, cancellation or
\nacceleration of any obligation or loss of any material benefit) under any of the
\nterms, conditions or provisions of any note, bond, mortgage, indenture, lease,
\ncontract or other agreement, instrument or obligation to which Loudeye or Sub is
\na party or by which either of them or any of their properties or assets may be
\nbound, or (iii) conflict or violate any permit, concession, franchise, license,
\njudgment, order, decree, statute, law, ordinance, Rule or regulation applicable
\nto Loudeye or Sub or any of their properties or assets, except in the case of
\n(ii) and (iii) for any such conflicts, violations, defaults, terminations,
\ncancellations or accelerations which would not have a Material Adverse Effect on
\nLoudeye and its Subsidiaries, taken as a whole.<\/p>\n
-30-<\/p>\n
31
\n (c) None of the execution and delivery of this Agreement by
\nLoudeye or Sub or of any other Transaction Documents to which Loudeye or Sub is
\nor will become a party or the consummation of the transactions contemplated
\nhereby or thereby will require any consent, approval, order or authorization of,
\nor registration, declaration or filing with, any Governmental Entity, except for
\n(i) the filing of the Certificate of Merger with the Delaware Secretary of
\nState, and (ii) such consents, approvals, orders, authorizations, registrations,
\ndeclarations and filings as may be required under applicable federal and state
\nsecurities laws, which may be obtained or made after the Closing.<\/p>\n
Section 4.4 SEC Filings; Financial Statements.<\/p>\n
(a) Loudeye has filed with the Securities and Exchange Commission
\n(the “SEC”) and made available to Activate or its representatives all forms,
\nreports and documents, including, without limitation, reports required by
\nSection 13 or Section 14 of the Exchange Act, filed by Loudeye with the SEC on
\nor after December 22, 1999 (collectively, the “LOUDEYE SEC REPORTS”). The
\nLoudeye SEC Reports (i) at the time filed, complied in all material respects
\nwith the applicable requirements of the Securities Act of 1933, as amended (the
\n“SECURITIES ACT”), and the Exchange Act, and the rules and regulations
\nthereunder, as the case may be, and (ii) did not at the time they were filed (or
\nif amended or superseded by a filing prior to the date of this Agreement, then
\non the date of such filing) contain any untrue statement of a material fact or
\nomit to state a material fact required to be stated in such Loudeye SEC Reports
\nor necessary in order to make the statements in such Loudeye SEC Reports, in the
\nlight of the circumstances under which they were made, not misleading. The
\nLoudeye SEC Reports constitute all of the documents required to be filed by
\nLoudeye under Section 13 or subsections (a) or (c) of Section 14 of the Exchange
\nAct with the SEC from December 22, 1999 through the date of this Agreement.<\/p>\n
(b) Each of the financial statements (including, in each case,
\nany related notes) contained in the Loudeye SEC Reports (i) complied as to form
\nin all material respects with applicable accounting requirements and the
\napplicable published rules and regulations of the SEC with respect thereto, (ii)
\nwas prepared in accordance with GAAP applied on a consistent basis throughout
\nthe periods involved (except as may be indicated in the notes to such financial
\nstatements or, in the case of quarterly financial statements, as permitted by
\nForm 10-Q under the Exchange Act) and (iii) fairly present the consolidated
\nfinancial position of Loudeye and its Subsidiaries as at the respective dates
\nand the consolidated results of its operations and cash flows for the periods
\nindicated, except that the unaudited interim financial statements were or are
\nsubject to normal and recurring year-end adjustments which were not or are not
\nexpected to be material in amount, and (iv) are consistent with the books and
\nrecords of Loudeye.<\/p>\n
Section 4.5 Interim Operations of Sub.<\/p>\n
Sub was formed by Loudeye solely for the purpose of engaging in the
\ntransactions contemplated by this Agreement, has engaged in no other business
\nactivities and has conducted its operations only as contemplated by this
\nAgreement. Sub has no liabilities and, except for a subscription agreement
\npursuant to which all of its authorized capital stock was issued to Loudeye, is
\nnot a party to any agreement other than this Agreement and agreements with
\nrespect to the appointment of registered agents and similar matters.<\/p>\n
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32
\n Section 4.6 Stockholders Consent.<\/p>\n
No consent or approval of the stockholders of Loudeye is required or
\nnecessary for Loudeye to enter into this Agreement or the Transaction Documents
\nor to consummate the transactions contemplated hereby and thereby.<\/p>\n
Section 4.7 Litigation.<\/p>\n
There is no private or governmental action, suit, proceeding, claim,
\narbitration or investigation pending before any agency, court or tribunal,
\nforeign or domestic, or, to the knowledge of Loudeye, threatened against Loudeye
\nor any of its properties or any of its officers or directors (in their
\ncapacities as such) which in each case could reasonably be expected to have a
\nMaterial Adverse Effect on Loudeye and its Subsidiaries, taken as a whole, or
\nwhich in any manner challenges or seeks to prevent, enjoin, alter or delay the
\ntransactions contemplated by this Agreement or the Transaction Documents. There
\nis no judgment, decree or order against Loudeye, or, to the knowledge of
\nLoudeye, any of its directors or officers (in their capacities as such) which in
\neach case could reasonably be expected to have a Material Adverse Effect on
\nLoudeye and its Subsidiaries, taken as a whole. To Loudeye’s knowledge, no
\ncircumstances exist that could reasonably be expected to result in a claim
\nagainst Loudeye as a result of the conduct of Loudeye’s business (including,
\nwithout limitation, any claim of infringement of any intellectual property
\nright) which, if determined adversely to Activate, could reasonably be expected
\nto have a Material Adverse Effect on Loudeye and its Subsidiaries, taken as a
\nwhole.<\/p>\n
Section 4.8 Compliance With Law.<\/p>\n
Each of Loudeye and its Subsidiaries and the operation of its business
\nare in compliance in all material respects with all applicable laws and
\nregulations material to the operation of its business. Neither Loudeye nor, to
\nLoudeye’s knowledge, any of its employees has directly or indirectly paid or
\ndelivered any fee, commission or other sum of money or item of property, however
\ncharacterized, to any finder, agent, government official or other party in the
\nUnited States or any other country, that was or is in violation of any federal,
\nstate, or local statute or law or of any statute or law of any other country
\nhaving jurisdiction. Loudeye has not participated directly or indirectly in any
\nboycotts or other similar practices affecting any of its customers. Loudeye has
\ncomplied in all material respects at all times with any and all applicable
\nfederal, state and foreign laws, rules, regulations, proclamations and orders
\nrelating to the importation or exportation of its products and data, except for
\nsuch failures to comply as would not in the aggregate reasonably be expected to
\nhave a Material Adverse Effect on Loudeye and its subsidiaries, taken as a
\nwhole.<\/p>\n
Section 4.9 Absence of Material Changes.<\/p>\n
Since June 30, 2001, there has occurred no event or development which
\nhas had, or could reasonably be expected to have in the future, a Material
\nAdverse Effect on Loudeye and its Subsidiaries, taken as a whole.<\/p>\n
Section 4.10 Brokers’ Fees.<\/p>\n
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33
\n Neither Loudeye nor Sub has any liability or obligation to pay any fees
\nor commissions to any broker, finder or agent with respect to the transactions
\ncontemplated by this Agreement.<\/p>\n
ARTICLE V
\n OTHER AGREEMENTS<\/p>\n
Section 5.1 Confidentiality.<\/p>\n
Each party acknowledges that Loudeye and Activate have previously
\nexecuted a Reciprocal Non-Disclosure Agreement dated as of February 28, 1998
\n(the “CONFIDENTIALITY AGREEMENT”), which agreement shall continue in full force
\nand effect in accordance with its terms.<\/p>\n
Section 5.2 No Public Announcement.<\/p>\n
Neither Loudeye, Sub, Activate nor CMGI shall make any public
\nannouncement concerning this Agreement, their discussions or any other
\nmemoranda, letters or agreements between the parties relating to the Merger;
\nprovided, however, that any party may make disclosure if, in the opinion of its
\nlegal counsel, public disclosure is required under applicable law (including,
\nwithout limitation, securities laws), but only after reasonable consultation
\nwith the other parties; and provided further, however, that following execution
\nof this Agreement or consummation of the Merger, Loudeye, CMGI and Activate may
\nmake a public announcement regarding the Merger and the integration of
\nActivate’s business into that of Loudeye solely as mutually agreed upon in a
\njoint press release or separate press releases.<\/p>\n
Section 5.3 Tax Matters; Access to Records.<\/p>\n
(a) CMGI will include the income of Activate (including any
\ndeferred income triggered by Treasury Regulation Section 1.1502-13 or 1.1502-14
\nand excess loss accounts under Section 1.1502-19) for all periods through and
\nincluding the Closing Date in its consolidated federal income tax return and pay
\nany Taxes attributable to such income. The income attributable to such periods
\nwill be determined by closing the books of Activate as of the Closing Date.
\nActivate will provide CMGI with information for inclusion in the consolidated
\nfederal income tax return in accordance with Activate’s past practice. CMGI will
\nallow Loudeye to review and comment on any such tax returns to the extent they
\nrelate to Activate.<\/p>\n
(b) CMGI and Loudeye agree (i) to retain all books and records
\nrelated to Taxes pertinent to Activate relating to any taxable period beginning
\nbefore the Closing Date until the expiration of the statute of limitations of
\nthe respective taxable periods and (ii) to give any other party reasonable
\nwritten notice prior to transferring, destroying or discarding any such books
\nand records and, if the other party so requests, Loudeye and CMGI, as the case
\nmay be, shall allow the other party to take possession of such books and
\nrecords.<\/p>\n
(c) CMGI shall have the right for a period of seven years
\nfollowing the Closing Date to have reasonable access to Activate’s books,
\nrecords and accounts for the period preceding the Closing Date, including
\nfinancial and tax information, correspondence, production records, employment
\nrecords and other records for the limited purposes of concluding its<\/p>\n
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34
\ninvolvement in the business conducted by Activate prior to the Closing Date and
\nfor complying with its obligations under applicable securities, tax,
\nenvironmental, employment or other laws and regulations. Neither Loudeye nor
\nActivate shall destroy any such books, records or accounts without first
\nproviding CMGI with the opportunity to obtain or copy such books, records, or
\naccounts at CMGI’s expense.<\/p>\n
Section 5.4 Further Assurances.<\/p>\n
(a) Following the Closing, each party and CMGI agrees to
\ncooperate fully with the other parties and to execute such further instruments,
\ndocuments and agreements and to give such further written assurances, as may be
\nreasonably requested by any other party to better evidence and reflect the
\ntransactions described herein and contemplated hereby and to carry into effect
\nthe intents and purposes of this Agreement, provided that all such actions shall
\nbe at the cost and expense of the requesting party. Without limiting the
\nforegoing, CMGI agrees that it will cooperate fully with Loudeye and provide, at
\nLoudeye’s cost and expense, any reasonably requested information and documents
\nconcerning Activate to Loudeye in connection with any filings Loudeye is
\nrequired to make under the Exchange Act as a result of the Merger.<\/p>\n
(b) Promptly after the Closing (and in any event within seven
\ndays), Loudeye shall cause the Surviving Corporation to, and the Surviving
\nCorporation shall, uninstall and permanently delete all Centennial Software from
\nall computers and systems owned or leased by Activate, and deliver to CMGI all
\nmanuals and other written materials relating to such software. Not later than
\nseven days after the Closing Date, each of Loudeye and the Surviving Corporation
\nshall deliver to CMGI a certificate of its President or Treasurer to the effect
\nthat all such software has been permanently deleted from all computers and
\nsystems, and all manuals and other written materials relating thereto have been
\ndelivered to CMGI.<\/p>\n
(c) Promptly after the Closing (and in any event within five
\ndays), Loudeye shall cause the Surviving Corporation to, and the Surviving
\nCorporation shall, collect from each of its employees and deliver to CMGI all
\ncomputer network security devices, including the RSA Security token, which were
\npreviously provided for the purpose of accessing CMGI’s computer network. Not
\nlater than five days after the Closing Date, each of Loudeye and the Surviving
\nCorporation shall deliver to CMGI a certificate of its President or Treasurer to
\nthe effect that all such devices have been collected and delivered to CMGI.<\/p>\n
Section 5.5 Seattle Lease Obligation.<\/p>\n
Activate has provided the lessor under the lease for Activate’s Seattle
\nheadquarters (the “SEATTLE LEASE”) with a letter of credit (No. 50103222) (the
\n“LETTER OF CREDIT”) in the amount of $400,000 (which will expire on December 1,
\n2001), which letter of credit secures Activate’s obligation to repay amounts due
\nto the lessor under a promissory note (the “NOTE”) issued in favor of the
\nlessor. If required by such lessor, CMGI shall maintain its guarantee of the
\nLetter of Credit until the expiration or termination of the Letter of Credit
\n(and in any event not later than December 1, 2001). For so long as CMGI
\nmaintains a letter of credit to secure the Seattle Lease, if the lessor notifies
\nCMGI that the lessor intends to draw against such letter of credit due to acts
\nor omissions (including failure to make timely payments under the Note) of
\nLoudeye, Loudeye<\/p>\n
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35
\nwill reimburse CMGI for any amounts drawn against such letter of credit upon
\nreceipt of written notice thereof from CMGI. From and after December 1, 2001,
\nCMGI shall not have any liability under the Seattle Lease, the Note or the
\nLetter of Credit, and all such liabilities shall be assumed by Loudeye.<\/p>\n
Section 5.6 Indemnification.<\/p>\n
Loudeye shall not, for a period of three years after the Effective Time,
\ntake any action to alter or impair any exculpatory or indemnification provisions
\nnow existing in the Certificate of Incorporation or By-laws of Activate for the
\nbenefit of any individual who served as a director or officer of the Company at
\nany time prior to the Effective Time.<\/p>\n
Section 5.7 Employee Benefits.<\/p>\n
The benefits to be provided to employees of Activate as of the Effective
\nTime (“COVERED EMPLOYEES”) shall be the benefits provided to similarly situated
\nemployees of Loudeye, which shall be provided as soon as practicable after the
\nEffective Time, but in no event later than the date the Covered Employees are
\nplaced on the same payroll service as such employees of Loudeye; provided,
\nhowever, that until such time that the Covered Employees are placed on the same
\npayroll service as Loudeye employees, Loudeye shall provide benefits no less
\nfavorable, in the aggregate, than the benefits provided to similarly situated
\nemployees of Loudeye. Loudeye shall from and after the Effective Time (i)
\nprovide Covered Employees credit for the most recent period of uninterrupted
\nservice prior to the Effective Time for purposes of vacation and wellness pay
\nunder employee benefit plans of Loudeye and for enrollment purposes and start
\ndates in the Loudeye 401(k) plan, (ii) to use reasonable efforts to cause any
\nand all pre-existing condition limitations (to the extent such limitations did
\nnot apply to a pre-existing condition under comparable Activate plans) and
\neligibility waiting periods under group health plans of Loudeye to be waived
\nwith respect to Covered Employees and their eligible dependents who become
\nparticipants in such group health plans and (iii) to use reasonable efforts to
\ngive credit for or otherwise take into account the out-of-pocket expenses and
\nannual expense limitations paid by each Covered Employee under the comparable
\nActivate plans for the year in which the Effective Time occurs.<\/p>\n
Section 5.8 Nasdaq.<\/p>\n
On or prior to the Anniversary Date, Loudeye shall cause any Deferred
\nShares issued as part of the Anniversary Payment to be listed on the Nasdaq
\nNational Market.<\/p>\n
Section 5.9 Availability to CMGI of Rule 144.<\/p>\n
In order that CMGI may have the opportunity to sell any Deferred Shares
\npursuant to the provisions of Rule 144 under the Securities Act of 1933, as
\namended, Loudeye shall make and keep adequate current public information
\navailable about Loudeye, as those terms are understood and defined in Rule 144
\nunder the Securities Act of 1933, as amended. Upon the sale of Deferred Shares
\nby CMGI or its assigns under Rule 144 and within five (5) business days of the
\nreceipt of an opinion of counsel to CMGI or its assigns stating that the
\nrequirements of Rule 144<\/p>\n
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36
\nhave been satisfied with respect to the particular sale transaction, Loudeye
\nshall instruct its transfer agent to transfer the Deferred Shares that were sold
\nto the purchaser without any legend restricting transfer.<\/p>\n
ARTICLE VI
\n DELIVERIES AT CLOSING<\/p>\n
Section 6.1 Deliveries by Activate.<\/p>\n
At the Closing, Activate shall deliver or cause to be delivered to
\nLoudeye:<\/p>\n
(a) An executed counterpart of the Registration Rights Agreement;<\/p>\n
(b) A completed and executed Investor Representation Statement,
\nin substantially the form attached hereto as EXHIBIT D (an “INVESTOR
\nREPRESENTATION STATEMENT”) from the holder of Activate Preferred Stock for
\npurposes of confirming the availability of an exemption from registration under
\nthe Securities Act for the issuance by Loudeye of shares of Loudeye Common Stock
\nin the Merger;<\/p>\n
(c) All third party consents or approvals required by Activate’s
\ncontracts, agreements or other obligations in connection with the consummation
\nof the transactions contemplated by this Agreement, except for any consents or
\napprovals the absence of which would not reasonably be expected to result in a
\nMaterial Adverse Effect on Activate and its Subsidiaries, taken as a whole;<\/p>\n
(d) A written letter of resignation from each member of the
\nActivate Board of Directors, in each case effective at the Effective Time;<\/p>\n
(e) UCC-3 termination statements with respect to all Liens
\nrelated to all secured indebtedness, secured obligations, equipment and capital
\nleases set forth on Schedule 3.7.1 of the Activate Disclosure Schedule and
\nevidence reasonably satisfactory to Loudeye that Activate is the owner, free and
\nclear of all Liens, of the personal property set forth on Schedule 3.7.2 of the
\nActivate Disclosure Schedule;<\/p>\n
(f) A certificate from CMGI pursuant to Section 1445 of the Code
\nstating that it is not a foreign person; and<\/p>\n
(g) Such other documents and instruments as shall be reasonably
\nrequested by Loudeye to effect the transactions contemplated by this Agreement.<\/p>\n
Section 6.2 Deliveries by Loudeye.<\/p>\n
At the Closing, Loudeye shall deliver or cause to be delivered to
\nActivate and the stockholders of Activate:<\/p>\n
(a) An executed counterpart of the Registration Rights Agreement;
\nand<\/p>\n
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37
\n (b) Such other documents and instruments as shall be reasonably
\nrequested by Activate to effect the transactions contemplated by this Agreement.<\/p>\n
ARTICLE VII
\n INDEMNIFICATION<\/p>\n
Section 7.1 Indemnification.<\/p>\n
(a) From and after the Effective Time and subject to the
\nlimitations contained in this Article VII, the Former Activate Stockholder will
\nindemnify Loudeye, Loudeye’s current and future affiliates (including the
\nSurviving Corporation), the respective officers, directors, employees, agents,
\nattorneys, accountants, advisors and representatives of such entities and the
\nrespective successors and assigns of such entities (collectively, the “LOUDEYE
\nINDEMNIFIED PARTIES”) and hold the Loudeye Indemnified Parties harmless against
\nany loss, expense, liability or other damage, including reasonable attorneys’
\nfees (collectively “DAMAGES”), to the extent of the amount of such Damages that
\nthe Loudeye Indemnified Parties have incurred by reason of the material breach
\nby Activate of any representation, warranty, covenant or agreement thereof
\ncontained in this Agreement or by reason of a material breach by CMGI of any
\ncovenant or agreement of CMGI contained in this Agreement.<\/p>\n
(b) From and after the Effective Time and subject to the
\nlimitations contained in this Article VII, Loudeye will indemnify the Former
\nActivate Stockholder, the Former Activate Stockholder’s current and future
\naffiliates, the respective officers, directors, employees, agents, attorneys,
\naccountants, advisors and representatives of such entities and the respective
\nsuccessors and assigns of such entities (collectively, the “ACTIVATE INDEMNIFIED
\nPARTIES”) and hold the Activate Indemnified Parties harmless against any
\nDamages, to the extent of the amount of such Damages that the Activate
\nIndemnified Parties have incurred by reason of the material breach by Loudeye or
\nSub of any representation, warranty, covenant or agreement thereof contained in
\nthis Agreement.<\/p>\n
Section 7.2 Sole Remedy.<\/p>\n
Loudeye, Activate, Sub and the Former Activate Stockholder acknowledge
\nand agree that notwithstanding anything to the contrary contained in this
\nAgreement or any other Transaction Document, the rights of the Loudeye
\nIndemnified Parties and the Activate Indemnified Parties under this Article VII
\nshall be the sole and exclusive remedy for any claim of breach by CMGI, Activate
\nor Loudeye of any representation, warranty, covenant or agreement, except in
\nthose cases involving fraud or intentional breach on the part of CMGI, Activate
\nor Loudeye, respectively. The maximum liability of the Former Activate
\nStockholder under this Article VII shall be the aggregate amount of the Merger
\nConsideration actually received by the Former Activate Stockholder, except in
\nthose cases involving fraud or intentional breach on the part of Activate, in
\nwhich case, there shall be no limit on liability. The maximum liability of
\nLoudeye under this Article VII shall be the aggregate amount of the Merger
\nConsideration, except in those cases involving fraud or intentional breach on
\nthe part of Loudeye, in which case, there shall be no limit on liability.<\/p>\n
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38
\n Section 7.3 Damage Limitations.<\/p>\n
(a) Notwithstanding anything contained in this Agreement to the
\ncontrary, the Former Activate Stockholder shall have no liability under this
\nArticle VII, and Loudeye may not deduct any amounts for Damages from the
\nAnniversary Payment, unless and until the aggregate amount of Loudeye’s Damages
\nexceeds $75,000; provided, however, that once the aggregate amount of Loudeye’s
\nDamages exceeds $75,000, Loudeye shall be entitled to deduct the full amount of
\nDamages from the Anniversary Payment. The aggregate liability of the Former
\nActivate Stockholder for breaches of any representations and warranties
\ncontained in Article III (other than the representations and warranties set
\nforth in Sections 3.1, 3.2 and 3.3(a)) shall not exceed the value of the Merger
\nConsideration actually received by the Former Activate Stockholder from Loudeye.<\/p>\n
(b) The sole and exclusive means for the Loudeye Indemnified
\nParties to collect any Damages to which they are entitled to indemnification
\nunder this Article VII shall be recourse to the Merger Consideration. The
\nLoudeye Indemnified Parties shall not attempt to collect any Damages from the
\nFormer Activate Stockholder, unless the aggregate Damages to which they are
\nentitled to indemnification exceed $3,000,000 (in which case, Loudeye shall
\nfirst setoff against the entire Anniversary Payment and then seek to recover the
\nremaining Damages (but not more than an additional $1,000,000) from the Former
\nActivate Stockholder. On the Anniversary Date, in order to collect the aggregate
\nDamages, if any, to which the Loudeye Indemnified Parties are entitled to
\nindemnification, (i) first, Loudeye shall setoff the amount of such Damages
\nagainst the Deferred Shares (the value of such Deferred Shares shall be the
\nAverage Price (as appropriately adjusted for any stock split, stock dividend,
\nreverse stock split or similar event)), and (ii) if the amount of such Damages
\nexceeds the value of the Deferred Shares, Loudeye shall then setoff the
\nremaining amount of such Damages against the cash portion of the Anniversary
\nPayment.<\/p>\n
(c) Notwithstanding any provision of this Agreement to the
\ncontrary, CMGI and Loudeye agree to the following provisions relating to matters
\nas more fully described in item number 6 of Schedule 3.18 in the
\nActiveDisclosure Schedule (the “AboveNet Matter”):<\/p>\n
(i) From and after the Closing Date until ninety (90) days
\nafter the Closing Date, CMGI shall have the exclusive right, in its sole
\ndiscretion, to conduct the defense of any Third Party Claim involving the
\nAboveNet Matter, including without limitation, the exclusive right to direct the
\nsettlement of any Third Party Claim involving the AboveNet Matter.<\/p>\n
(ii) From and after the date that is ninety (90) days
\nafter the Closing Date, Loudeye shall conduct the defense of any Third Party
\nClaim involving the AboveNet Matter; provided that the aggregate liability of
\nthe Former Activate Stockholder for any Third Party Claim involving the AboveNet
\nMatter shall not exceed $120,000, shall not be subject to the $75,000 hurdle set
\nforth in Section 7.3(a), and, in accordance with Section 7.3(b), shall be
\nsatisfied solely by deduction from the Anniversary Payment.<\/p>\n
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39
\n Section 7.4 Indemnification Period.<\/p>\n
The indemnification period shall terminate at 5:00 p.m. Pacific time, on
\nthe Anniversary Date (the “INDEMNIFICATION PERIOD”), except as provided
\notherwise in Section 8.1 with respect to the representations and warranties
\ncontained in Sections 3.1, 3.2, 3.3(a), 3.5, 3.21, 4.1, 4.2 and 4.3(a).<\/p>\n
Section 7.5 Indemnification Claims.<\/p>\n
(a) Promptly after receipt (and in any event within 5 business
\ndays after receipt) by a party entitled, or seeking to assert rights, to
\nindemnification under this Article VII (an “INDEMNIFIED PARTY”), of notice from
\na third party of any matter (a “THIRD PARTY CLAIM”) that may give rise to a
\nclaim for indemnification under Article VII, the Indemnified Party will give
\nnotice to the party from whom indemnification is sought (an “INDEMNIFYING
\nPARTY”) of such claim, which notice shall include a description in reasonable
\ndetail of the facts constituting the basis for such claim and the amount of the
\nclaimed damages; provided that the delay or failure to notify the Indemnifying
\nParty will not relieve the Indemnifying Party of any liability that it may have
\nto an Indemnified Party, except to the extent that the Indemnifying Party
\ndemonstrates that the defense of such action is materially prejudiced by such
\ndelay or failure to give such notice (in which case the Indemnifying Party shall
\nnot have any liability with respect to such Third Party Claim).<\/p>\n
(b) The Indemnifying Party will be entitled to participate in the
\ndefense of such Third Party Claim and, to the extent that it wishes (unless the
\nIndemnifying Party fails to provide reasonable assurance to the Indemnified
\nParty of its financial capacity to defend the claim and provide indemnification
\nwith respect to such claim), to assume and conduct the defense of such Third
\nParty Claim with counsel of its choice reasonably satisfactory to the
\nIndemnified Party and, after notice from the Indemnifying Party to the
\nIndemnified Party of its election to assume the defense of such Third Party
\nClaim, the Indemnifying Party will not, as long as it conducts such defense in a
\nreasonable manner, be liable to the Indemnified Party under this Article VII for
\nany fees of other counsel or any other expenses with respect to the defense of
\nsuch Third Party Claim, in each case subsequently incurred by the Indemnified
\nParty in connection with the defense of such claim. If the Indemnifying Party
\nassumes the defense of a Third Party Claim, (i) no compromise or settlement of
\nsuch Third Party Claim may be effected by the Indemnifying Party without the
\nIndemnified Party’s prior written consent (not to be unreasonably withheld)
\nunless the sole relief provided is monetary damages; and (ii) the Indemnified
\nParty will have no liability with respect to any compromise or settlement of
\nsuch Third Party Claim effected without its prior written consent (not to be
\nunreasonably withheld). In no event will an Indemnified Party consent to the
\nentry of any judgment or enter into any settlement with respect to any Third
\nParty Claim without the prior written consent of the Indemnifying Party (not to
\nbe unreasonably withheld).<\/p>\n
(c) Notwithstanding the foregoing, if the Third Party Claim is
\nbrought by a then current customer, vendor or partner of Loudeye or Activate,
\nand Loudeye determines in good faith that there is a reasonable probability that
\na claim for which it is entitled to indemnification under Article VII would
\nadversely affect it or its affiliates, other than as a result of monetary
\ndamages for which it would be entitled to indemnification under this Agreement,
\nLoudeye shall,<\/p>\n
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40
\nby notice to CMGI within 5 business days following the date Loudeye is first
\nnotified of such Third Party Claim, have the exclusive right to compromise or
\nsettle such claim for a period of 90 days following the date Loudeye is first
\nnotified of the claim, provided that CMGI shall have no liability with respect
\nto any compromise or settlement of such Third Party Claim effected without its
\nprior written consent (which may be withheld in CMGI’s sole and absolute
\ndiscretion).<\/p>\n
(d) If Loudeye has one or more bona fide claim(s) for Damages
\npending at the Anniversary Date, Loudeye shall (1) give written notification to
\nthe Former Activate Stockholder which contains (i) a description and the amount
\nof any Damages incurred or reasonably expected to be incurred by the Loudeye
\nIndemnified Parties, and (ii) a statement that the Loudeye Indemnified Parties
\nare entitled to indemnification under this Article VII for such Damages and an
\nexplanation of the basis therefor, and (2) deposit the Anniversary Payment into
\nan escrow account with State Street Bank and Trust Company, as escrow agent, or
\nother escrow agent mutually agreeable to Loudeye and the Former Activate
\nStockholder pending final resolution of such claim(s). The terms of the escrow
\naccount shall be agreed upon by Loudeye, the Former Activate Stockholder and
\nsuch escrow agent, and shall be evidenced by an escrow agreement in a form
\nsatisfactory to Loudeye and the Former Activate Stockholder. After the
\nAnniversary Date, the escrow account shall be the exclusive means for the
\nLoudeye Indemnified Parties to collect any Damages for which it is entitled to
\nindemnification under this Article VII and shall be used solely to pay such
\nclaimed Damages. Any payments made from such escrow account with respect to such
\nclaimed Damages shall be made first from any Deferred Shares held in such escrow
\naccount (the value of such Deferred Shares shall be the Average Price (as
\nappropriately adjusted for any stock split, stock dividend, reverse stock split
\nor similar event)), and then from any cash held in such escrow account. If
\npermitted by applicable securities laws, the Former Activate Stockholder shall
\nhave the right to direct the escrow agent to sell any Deferred Shares in the
\nescrow account; provided however, that the Former Activate Stockholder shall not
\ndirect the escrow agent to sell any Deferred Shares at a per share price lower
\nthan the Average Price (as appropriately adjusted for any stock split, stock
\ndividend, reverse stock split or similar event). In such event, the proceeds of
\nthe sale of the Deferred Shares shall be deposited into the escrow account.<\/p>\n
Section 7.6 Access and Information.<\/p>\n
The Former Activate Stockholder shall have reasonable access to
\ninformation about the Surviving Corporation and Loudeye and the reasonable
\nassistance of the Surviving Corporation’s and Loudeye’s officers and employees
\nfor purposes of performing its duties and exercising its rights under this
\nArticle VII, provided that the Former Activate Stockholder shall treat
\nconfidentially and not disclose any nonpublic information from or about the
\nSurviving Corporation or Loudeye to anyone (except on a need to know basis to
\nindividuals who agree to treat such information confidentially).<\/p>\n
ARTICLE VIII
\n MISCELLANEOUS<\/p>\n
Section 8.1 Survival of Representations and Covenants.<\/p>\n
-40-<\/p>\n
41
\n All representations and warranties of Activate contained in this
\nAgreement shall survive the Closing and any investigation at any time made by or
\non behalf of Loudeye until the end of the Indemnification Period.
\nNotwithstanding the foregoing, the representatives and warranties contained in
\n(i) Sections 3.1, 3.2 and 3.3(a) shall survive in perpetuity and (ii) Section
\n3.5 and 3.21 shall survive until thirty (30) days after the applicable statute
\nof limitations expires. All representations and warranties of Loudeye and the
\nSub contained in this Agreement shall survive the Closing and any investigation
\nat any time made by or on behalf of Activate until the end of the
\nIndemnification Period. Notwithstanding the foregoing, the representatives and
\nwarranties contained in Sections 4.1, 4.2 and 4.3(a) shall survive in
\nperpetuity.<\/p>\n
Section 8.2 Notices.<\/p>\n
All notices and other communications hereunder shall be in writing and
\nshall be deemed given if delivered personally, telecopied (which is confirmed)
\nor two business days after being mailed by registered or certified mail (return
\nreceipt requested) to the parties at the following addresses (or at such other
\naddress for a party as shall be specified by like notice):<\/p>\n
(a) If to Loudeye or Sub:<\/p>\n
Loudeye Technologies, Inc.
\n 414 Olive Way, Suite 300
\n Seattle, WA 98101
\n Attention: Vice President and General Counsel
\n Fax No: (206) 832-4001
\n Telephone No: (206) 832-4100<\/p>\n
with a copy to:<\/p>\n
Heller Ehrman White & McAuliffe, LLP
\n 701 Fifth Avenue, Suite 6100
\n Seattle, WA 98104
\n Attention: David Wilson
\n Fax No: (206) 447-0849
\n Telephone No: (206) 447-0900<\/p>\n
(b) if to Activate or the Former Activate Stockholder, to:<\/p>\n
CMGI, Inc.
\n 100 Brickstone Square
\n Andover, MA 01810
\n Attention: General Counsel
\n Fax No: (978) 684-3600
\n Telephone No: (978) 684-3601<\/p>\n
with a copy to:<\/p>\n
-41-<\/p>\n
42
\n Hale and Dorr LLP
\n 60 State Street
\n Boston, MA 02109
\n Attention: Mark G. Borden
\n Fax No: (617) 526-5000
\n Telephone No: (617) 526-6000<\/p>\n
Section 8.3 Interpretation.<\/p>\n
When a reference is made in this Agreement to Sections, such reference
\nshall be to a Section of this Agreement unless otherwise indicated. The table of
\ncontents and headings contained in this Agreement are for reference purposes
\nonly and shall not affect in any way the meaning or interpretation of this
\nAgreement. Whenever the words “INCLUDE,” “INCLUDES” or “INCLUDING” are used in
\nthis Agreement they shall be deemed to be followed by the words “WITHOUT
\nLIMITATION.” Whenever the words “TO THE KNOWLEDGE OF ACTIVATE” or “KNOWN TO
\nACTIVATE” or similar phrases are used in this Agreement, they mean the actual
\nknowledge of the executive officers of Activate.<\/p>\n
Section 8.4 Counterparts.<\/p>\n
This Agreement may be executed in two or more counterparts, all of which
\nshall be considered one and the same agreement and shall become effective when
\ntwo or more counterparts have been signed by each of the parties and delivered
\nto the other parties, it being understood that all parties need not sign the
\nsame counterpart.<\/p>\n
Section 8.5 Entire Agreement; No Third Party Beneficiaries.<\/p>\n
This Agreement (including the documents and the instruments referred to
\nherein) (a) constitutes the entire agreement and supersedes all prior agreements
\nand understandings, both written and oral, among the parties with respect to the
\nsubject matter hereof, and (b) is not intended to confer upon any person other
\nthan the parties hereto (including without limitation any Activate employees)
\nany rights or remedies hereunder, provided however, that (i) the provisions in
\nArticle II concerning issuance of the Merger Consideration, including without
\nlimitation, the Anniversary Payment and Article VII concerning indemnification
\nare intended for the benefit of the Former Activate Stockholder and (ii) the
\nprovisions in Sections 5.2, 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 are intended
\nfor the benefit of CMGI and the individuals and entities specified therein and
\ntheir successors and assigns.<\/p>\n
Section 8.6 Governing Law.<\/p>\n
This Agreement shall be governed and construed in accordance with the
\nlaws of the State of Delaware without regard to any applicable conflicts of law.
\nIn any action between the parties arising out of or relating to this Agreement
\nor any of the transactions contemplated by this Agreement: (a) each of the
\nparties irrevocably and unconditionally consents and submits to the exclusive
\njurisdiction and venue of the state and federal courts located in the State of
\nWashington; (b) if any such action is commenced in a state court, then, subject
\nto applicable law,<\/p>\n
-42-<\/p>\n
43
\nno party shall object to the removal of such action to any federal court located
\nin the Western District of Washington; (c) each of the parties irrevocably
\nwaives the right to trial by jury; and (d) each of the parties irrevocably
\nconsents to service of process by first class certified mail, return receipt
\nrequested, postage prepaid, to the address at which such party is to receive
\nnotice in accordance with Section 8.2. Nothing in this Section 8.6, however,
\nshall affect the right of any party to serve legal process in any other manner
\npermitted by law.<\/p>\n
Section 8.7 Assignment.<\/p>\n
Neither this Agreement nor any of the rights, interests or obligations
\nhereunder shall be assigned by any of the parties hereto (whether by operation
\nof law or otherwise) without the prior written consent of the other parties,
\nincluding CMGI. Subject to the preceding sentence, this Agreement will be
\nbinding upon, inure to the benefit of and be enforceable by the parties and
\ntheir respective successors and assigns, including any acquiror of Loudeye’s
\nbusiness and any successor to Loudeye, by merger, operation of law or otherwise,
\nwhether or not such entity shall have expressly assumed the terms of this
\nAgreement..<\/p>\n
Section 8.8 Amendment.<\/p>\n
This Agreement may be amended by the parties hereto, at any time before
\nor after approval of matters presented in connection with the Merger by the
\nstockholders of Activate, but after any such stockholder approval, no amendment
\nshall be made which by law requires the further approval of stockholders without
\nobtaining such further approval. This Agreement may not be amended except by an
\ninstrument in writing signed on behalf of each of the parties hereto, including
\nCMGI.<\/p>\n
Section 8.9 Waiver.<\/p>\n
The failure of any party to enforce at any time the provisions of this
\nAgreement shall not be construed as a waiver of such provisions or the right of
\nsuch party thereafter to enforce such provisions. No waiver shall be valid
\nunless set forth in a written instrument signed on behalf of the waiving party.<\/p>\n
Section 8.10 Specific Performance.<\/p>\n
The parties hereto agree that irreparable damage may occur in the event
\nthat any of the provisions of this Agreement were not performed in accordance
\nwith their specific terms or were otherwise breached. It is accordingly agreed
\nthat the parties shall be entitled to seek injunctive relief to prevent breaches
\nof this Agreement and to enforce specifically the terms and provisions hereof in
\nany court of the United States or any state having jurisdiction, this being in
\naddition to any other remedy to which they are entitled at law or in equity.<\/p>\n
Section 8.11 Severability.<\/p>\n
If any provision of this Agreement is held to be illegal, invalid or
\nunenforceable under any present or future law or regulation, and if the rights
\nor obligations of any party hereto under this Agreement will not be materially
\nand adversely affected thereby, (a) such provision will be<\/p>\n
-43-<\/p>\n
44
\nfully severable, (b) this Agreement will be construed and enforced as if such
\nillegal, invalid or unenforceable provision had never comprised a part hereof,
\n(c) the remaining provisions of this Agreement will remain in full force and
\neffect and will not be affected by the illegal, invalid or unenforceable
\nprovision or by its severance from this Agreement and (d) in lieu of such
\nillegal, invalid or unenforceable provision, there will be added automatically
\nas a part of this Agreement a legal, valid and enforceable provision as similar
\nin terms to such illegal, invalid or unenforceable provision as may be possible.<\/p>\n
Section 8.12 Fees and Expenses.<\/p>\n
All fees and expenses incurred in connection with this Agreement and the
\ntransactions contemplated hereby shall be paid by the party incurring such
\nexpenses, whether or not the Merger is consummated.<\/p>\n
[THE NEXT PAGE IS THE SIGNATURE PAGE]<\/p>\n
-44-<\/p>\n
45
\n IN WITNESS WHEREOF, Loudeye, Sub and Activate have executed this
\nAgreement and Plan of Merger as of the date first written above.<\/p>\n
LOUDEYE TECHNOLOGIES, INC.<\/p>\n
By: \/s\/
\n ————————————-
\n Title:
\n ———————————-<\/p>\n
IGNITION ACQUISITION, INC.<\/p>\n
By: \/s\/
\n ————————————-
\n Title:
\n ———————————-<\/p>\n
ACTIVATE.NET CORPORATION<\/p>\n
By: \/s\/
\n ————————————-
\n Title:
\n ———————————-<\/p>\n
CMGI, Inc. hereby executes this Agreement for the limited purpose of
\nagreeing to and becoming bound by the provisions of Sections 2.1(c), 5.2, 5.3
\nand 5.5 and Article VII.<\/p>\n
CMGI, INC.<\/p>\n
By: \/s\/
\n ————————————-
\n Title:
\n ———————————-<\/p>\n
-45-<\/p>\n
46
\n EXHIBIT A<\/p>\n
REGISTRATION RIGHTS AGREEMENT<\/p>\n
47
\n EXHIBIT B<\/p>\n
ACTIVATE DISCLOSURE SCHEDULE<\/p>\n
48
\n EXHIBIT C<\/p>\n
LOUDEYE DISCLOSURE SCHEDULE<\/p>\n
49
\n EXHIBIT D<\/p>\n
INVESTOR REPRESENTATION STATEMENT<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[8079],"corporate_contracts_industries":[9510],"corporate_contracts_types":[9622,9626],"class_list":["post-43085","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-loudeye-technologies-inc","corporate_contracts_industries-technology__programming","corporate_contracts_types-planning","corporate_contracts_types-planning__merger"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43085","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=43085"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43085"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43085"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43085"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}