EXECUTION VERSION
SHARE PURCHASE AGREEMENT
BY AND AMONG
COM21, INC.
GADLINE, LTD.,
THE SELLERS
SET FORTH
ON
SCHEDULE A
AND
▇▇▇▇ ▇▇▇▇▇
AS SELLERS' REPRESENTATIVE
Dated as of April 18, 2000
TABLE OF CONTENTS Page
ARTICLE I PURCHASE AND SALE 2
1.1 Purchase and Sale 2
1.2 Additional Consideration 3
1.3 Amendment of Company Option Plan 5
1.4 Adjustments to Consideration 5
1.5 Seller Waivers 5
1.6 Withholding Taxes 6
1.7 Fractional Shares 6
1.8 Lost, Stolen or Destroyed Certificates 6
1.9 Tax Consequences 6
1.10 Accounting Treatment 6
1.11 Legends 6
1.12 Lock-Up Agreement 7
1.13 Definitions 9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
PRINCIPAL SELLERS 10
2.1 Organization of the Company; Subsidiaries 10
2.2 Capitalization; Options and Other Rights 11
2.3 Authority 13
2.4 No Conflict 13
2.5 Consents 14
2.6 Company Financial Statements 14
2.7 No Undisclosed Liabilities 15
2.8 No Changes 15
2.9 Tax Matters 17
2.10 Restrictions on Business Activities 19
2.11 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment 19
2.12 Intellectual Property 19
2.13 Company Contracts 23
2.14 Interested Party Transactions 24
2.15 Governmental Authorization 24
2.16 Litigation 25
2.17 Accounts Receivable 25
2.18 Inventory 25
2.19 Minute Books 26
2.20 Environmental Matters 26
2.21 Brokers' and Finders' Fees; Third Party Expenses 26
2.22 Employee Benefit Plan and Compensation 27
2.23 Employment Matters 27
2.24 Insurance 28
2.25 Compliance with Laws 29
2.26 Export Control Laws 29
2.27 Sales Order Backlog 29
2.28 Grants, Incentives and Subsidies 29
2.29 Bank Accounts, Letters of Credit and Powers of Attorney 30
2.30 Warranties; Indemnities 30
2.31 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance 30
2.32 Complete Copies of Materials 30
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS 31
3.1 Investment Intent 31
3.2 Ownership of Seller's Shares 32
3.3 Authority 32
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER 33
4.1 Organization, Standing and Power 34
4.2 Authority 34
4.3 No Conflict 34
4.4 Consents 34
4.5 SEC Reports; Financial Statements 35
4.6 Litigation 35
4.7 Purchaser Common Stock 36
4.8 Brokers' and Finders' Fees 36
4.9 Capitalization: Options and Other Rights 36
4.10 No Changes 36
4.11 Intellectual Property 36
4.12 Purchaser Employee Benefit Plans 37
ARTICLE V CONDUCT PRIOR TO THE CLOSING 37
5.1 Conduct of Business of the Company 37
5.2 No Solicitation 41
ARTICLE VI ADDITIONAL AGREEMENTS 41
6.1 Access to Information 41
6.2 Confidentiality 42
6.3 Expenses 42
6.4 Public Disclosure 42
6.5 Filings and Consents 42
6.6 Reasonable Efforts 42
6.7 Notification of Certain Matters 43
6.8 Additional Documents and Further Assurances 43
6.9 Granting of Purchaser Options 43
6.10 Employee Benefit Plans 44
6.11 Registration Rights 45
6.12 Sellers' Tax Liability 46
6.13 Treatment as Reorganization 46
6.14 Office of the Chief Scientist 46
6.15 Nasdaq National Market Listing 46
6.16 Transaction Agreements 46
6.17 Invention Assignment Agreements 46
6.18 Offering Circular 46
6.19 Dissenting Shareholders 47
6.20 Alternative Structure 48
6.21 Interim Financing 48
ARTICLE VII CLOSING CONDITIONS 49
7.1 Conditions to Obligations of Each Party to Effect the
Share Purchase 49
7.2 Conditions to the Obligations of Purchaser 49
7.3 Conditions to Obligations of the Company and the Sellers 52
ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW 53
8.1 Survival of Representations, Warranties and Covenants 53
8.2 Indemnification 54
8.3 Escrow Arrangements 54
8.4 Sellers' Representative 58
8.5 Maximum Payments; Remedy 59
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER 59
9.1 Termination 59
9.2 Effect of Termination 60
9.3 Amendment 61
9.4 Extension; Waiver 61
ARTICLE X GENERAL PROVISIONS 61
10.1 Notices 61
10.2 Interpretation 63
10.3 Counterparts 63
10.4 Entire Agreement; Assignment 63
10.5 Severability 63
10.6 Other Remedies 63
10.7 Binding Effect 63
10.8 Governing Law; Arbitration 63
10.9 Rules of Construction 64
INDEX OF SCHEDULES
Schedule Description
Schedule A Allocation of Consideration
Schedule B Company Options
Company Disclosure Schedule
Purchaser Disclosure Schedule
INDEX OF EXHIBITS
Exhibit Description
Exhibit A-1 List of Key Employees
Exhibit A-2 Form of Founder/Executive Employment and Non-Competition
Agreement
Exhibit A-3 Form of Employment and Non-Competition Agreement
Exhibit B Form of Principal Seller Shareholder Agreement
Exhibit C VIVID System Test Acceptance Plan
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Escrow Agreement
Exhibit F-1 Form of Invention Assignment Agreement
Exhibit F-2 Form of Electronic and Telephonic
Communications System Policy Agreement
Exhibit G-1 Form of Legal Opinion of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ &
▇▇▇▇ LLP
Exhibit G-2 Form of Legal Opinion of Fischer, Behar, Chen & Co.
Exhibit H-1 Form of Legal Opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Exhibit H-2 Form of Legal Opinion of Yigal, Arnon & Co.
Exhibit I Notice of Offer
Exhibit J Form of Notice of Amendment and Substitution
THIS SHARE PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of April 18, 2000, by and among COM21, INC., a Delaware
corporation ("Purchaser"), GADLINE, LTD., a company organized under the
laws of Israel (the "Company"), each of the Persons set forth on
Schedule A to this Agreement (each, a "Seller", and collectively, the
"Sellers"), and ▇▇▇▇ ▇▇▇▇▇ as Sellers' Representative (the "Sellers'
Representative").
RECITALS
A. The Company is engaged principally in the development, manufacturing
and marketing of advanced cable broadband solutions.
B. The Sellers signatory to this Agreement as of the date hereof
collectively own not less than seventy-five percent (75%) of the issued
and outstanding Ordinary Shares, NIS 0.5 nominal value per share (the
"Ordinary Shares") of the Company. Each Seller's Ordinary Shares are
referred to in this Agreement as such "Seller's Shares" and collectively
as the "Sellers' Shares."
C. The Boards of Directors of each of Purchaser and the Company believe
it is in the best interests of each company and its respective
stockholders or shareholders, as applicable, that Purchaser acquire the
Company through the share purchase (the "Share Purchase") contemplated by
this Agreement, and in furtherance thereof, have approved this Agreement
and the Share Purchase contemplated hereby, and Purchaser desires to
acquire all of the Sellers' Shares and each of the Sellers desires to
sell such Seller's Shares to Purchaser.
D. The Company, the Sellers and Purchaser desire to make certain
representations and warranties and other agreements in connection with
the transactions contemplated hereby.
E. Purchaser and the Company wish to make certain adjustments to the
rights of Company Option Holders (as defined below) under the Company's
1999 Key Employee and Consultants Share Option Plan (the "Company Option
Plan"), providing that subject to the closing of the transactions
contemplated by this Agreement, the Company Option Holders shall upon the
exercise of each option to purchase one Ordinary Share (each a "Company
Option" and collectively the "Company Options") receive shares of
Purchaser Common Stock (as defined below) in lieu of Ordinary Shares, all
as provided for herein.
F. As an inducement to Purchaser to enter into this Agreement,
(i) ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ (the "Founders/Executives")
have agreed to enter into Founder/Executive Employment and
Non-Competition Agreements with the Company in the form attached as
Exhibit A-2 hereto, (ii) the key employees of the Company listed on
Exhibit A-1 attached hereto (the "Key Employees") have agreed to enter
into Employment and Non-Competition Agreements with the Company in the
form attached as Exhibit A-3 hereto, and (ii) ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
(the "Principal Sellers") have entered into a Principal Seller
Shareholder Agreement in the form attached as Exhibit B hereto.
G. For accounting purposes, it is intended that the transaction
contemplated by this Agreement be treated as a "purchase."
H. The parties intend, for U.S. federal income tax purposes, that the
Share Purchase shall constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and that this Agreement shall be, and is hereby, adopted as a
plan of reorganization for purposes of Section 368 of the Code. The
Sellers intend to apply to the Israel Tax Commission for a tax pre-ruling
which will defer the obligation to pay Israeli capital gains tax until
the earlier of: (a) the sale of Purchaser Common Stock by each Seller or
(b) the second anniversary of the Closing Date (the "Israeli Tax
Ruling").
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
other promises set forth herein, the mutual benefits to be gained by the
performance thereof, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and accepted,
the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale.
Subject to the terms and conditions of this Agreement, on the Closing
Date (as defined below), each Seller shall sell, transfer, assign, convey
and deliver to Purchaser, and Purchaser shall purchase from each Seller,
such Seller's Shares, in each case, free and clear of all liens, pledges,
charges, claims, restrictions on transfer, mortgages, security interests
or other encumbrances of any sort (collectively, "Liens"). The closing
of the purchase and sale of the Sellers' Shares (the "Closing") shall
take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ at 10:00 a.m., as
soon as practicable, but not later than three business days, after all
the conditions set forth in Article VII hereof have been satisfied or
waived, or on such other date, time and place as the parties may mutually
agree (the "Closing Date"). At the Closing, the Sellers shall cause the
Company to deliver to Purchaser one or more instruments representing the
Sellers' Shares, including share transfer deeds executed by each Seller
with respect to the Ordinary Shares being transferred by such Seller, and
Purchaser shall issue and deliver an aggregate of 2,450,000 shares (the
"Initial Consideration") of Common Stock, par value $0.001 per share, of
Purchaser ("Purchaser Common Stock"), less (i) the number of shares of
Purchaser Common Stock reserved for issuance upon exercise of all
outstanding vested Company Options and fifty percent (50%) of all
outstanding unvested Company Options (the "Reserved Option Shares") in
accordance with the column in Schedule B captioned "Initial
Consideration" and (ii) the Escrow Shares (as defined below) applicable
to the Initial Consideration, to the Sellers' Representative for
distribution to the Sellers in accordance with the column in Schedule A
captioned "Initial Consideration." Ten percent (10%) of the shares of
Purchaser Common Stock otherwise issuable to the Sellers' Representative
at the Closing shall be withheld and deposited with the Escrow Agent
(such shares, together with any additional shares of Purchaser Common
Stock deposited with the Escrow Agent pursuant to Section 1.2 and the
Founders' Escrow Shares deposited with the Escrow Agent pursuant to the
next sentence, being referred to herein as the "Escrow Shares"), which
Escrow Shares shall be held in accordance with Article VIII hereof. In
addition, 5,000 of the shares of Purchaser Common Stock otherwise
issuable to each of the Principal Sellers (or to the Sellers'
Representative for distribution to the Principal Sellers) at the Closing
shall be withheld and deposited with the Escrow Agent (the "Founders'
Escrow Shares"), which Escrow Shares shall be held in accordance with
Article VIII hereof. The transfer of shares of Purchaser Common Stock as
set forth herein shall be made by Purchaser to the Sellers'
Representative on the Closing Date. Each Seller shall receive a share
certificate in its name for all of the shares of Purchaser Common Stock
to be issued to such Seller, other than the Escrow Shares. The shares of
Purchaser Common Stock issued as Initial Consideration shall be subject
to the transfer restrictions described in Section 1.12 and to
Article VIII. The number of shares of Purchaser Common Stock to be
issued as Initial Consideration hereunder shall be reduced by the
aggregate number of shares of Purchaser Common Stock to be reserved for
issuance to each holder of Ordinary Shares, Company Debentures and
Company Purchase Rights who did not execute this Agreement as a Seller
hereunder (each, an "Other Shareholder") on or prior to the Closing,
equal to the aggregate number of shares of Purchaser Common Stock set
forth across from each Other Shareholder's name on Schedule A. Each
reference in this Section 1.1 to Schedule A and Schedule B shall refer to
such Schedules as amended as of the Closing Date in accordance with
Section 2.2 hereof.
1.2 Additional Consideration.
The Sellers and the Other Shareholders shall be entitled to receive
from Purchaser additional consideration ("Additional Consideration") as
calculated in accordance with this Section 1.2.
(a) Completion of VIVID System Development. If on or prior to
September 30, 2000 the Company shall have completed the development of
its VIVID System such that the VIVID System meets or exceeds the
performance standards set forth in the test acceptance plan attached
hereto as Exhibit C (the "Test Acceptance Plan"), then Purchaser shall
issue and deliver an aggregate of 210,000 shares (the "First Milestone
Shares") of Purchaser Common Stock, less (i) the Reserved Option Shares
in accordance with the column in Schedule B captioned "Additional
Consideration - First Milestone Shares" and (ii) the Escrow Shares
applicable to the First Milestone Shares determined as set forth in
paragraph (c) below, to the Sellers' Representative for distribution
pursuant to paragraph (c) below not later than ten (10) business days
after the VIVID System shall have satisfied the Test Acceptance Plan as
set forth above. The determination of whether the VIVID System shall
have satisfied the Test Acceptance Plan shall be made by the mutual
agreement of Purchaser and the Sellers' Representative in the good faith
exercise of their reasonable judgement within fourteen days of notice by
the Sellers' Representative that such development has been completed. In
the event that the Purchaser and Sellers' Representative are unable to
reach agreement with respect to the development of the VIVID System after
good faith negotiation, either Purchaser or the Sellers' Representative
may demand arbitration of the matter in accordance with the provisions
set forth in Section 8.3(f) (ii) and (iii) hereof.
(b) Shipment of VIVID System. If (i) on or prior to December 31, 2000 the
Company shall have recognized revenue in accordance with generally accepted
accounting principles consistently applied in the United States ("U.S. GAAP")
in connection with the shipment of a VIVID System to one bona fide customer,
and (ii) on or prior to February 28, 2001 the Company shall have
recognized revenue in accordance with U.S. GAAP in connection with the
shipment of a VIVID System to a second bona fide customer, then Purchaser
shall issue and deliver an aggregate of 140,000 shares (the "Second
Milestone Shares") of Purchaser Common Stock, less (i) the Reserved
Option Shares in accordance with the column in Schedule B captioned
"Additional Consideration - Second Milestone Shares" and (ii) the Escrow
Shares applicable to the Second Milestone Shares determined as set forth
in paragraph (c) below, to the Sellers' Representative for distribution
pursuant to paragraph (c) below not later than ten (10) business days
after such second shipment.
(c) Each payment of Additional Consideration shall be paid by the
Purchaser by (i) issuing the shares of Purchaser Common Stock
constituting such payment of Additional Consideration to the Sellers'
Representative for distribution to the Sellers in accordance with the
column in Schedule A captioned "Additional Consideration - First
Milestone Shares" or "Additional Consideration - Second Milestone
Shares", as applicable, (ii) issuing the shares of Purchaser Common Stock
constituting such payment of Additional Consideration to the Sellers'
Representative for distribution to any holder of shares of Purchaser
Common Stock issued upon exercise of Company Options in accordance with
the column in Schedule B captioned "Additional Consideration - First
Milestone Shares" or "Additional Consideration - Second Milestone
Shares", as applicable, (iii) reserving for issuance upon exercise of
unexercised Company Options the shares of Purchaser Common Stock
constituting such payment of Additional Consideration to be issued upon
exercise of such Company Option in accordance with the column in
Schedule B captioned "Additional Consideration - First Milestone Shares"
or "Additional Consideration - Second Milestone Shares", as applicable,
and (iv) depositing an aggregate of ten percent (10%) of the shares of
Purchaser Common Stock otherwise issuable to the Sellers' Representative
in connection with such payment of Additional Consideration with the
Escrow Agent. The transfer of shares of Purchaser Common Stock as set
forth herein shall be made by Purchaser to the Sellers' Representative on
the applicable date of payment as set forth in paragraph (a) or (b),
above. Each Seller shall receive a share certificate in its name for all
of the shares of Purchaser Common Stock to be issued to such Seller,
other than those shares deposited with the Escrow Agent. The shares of
Purchaser Common Stock issued as Additional Consideration shall be
subject to the transfer restrictions described in Section 1.12 and to
Article VIII. The number of shares of Purchaser Common Stock to be
issued as Additional Consideration hereunder shall be reduced by the
number of shares of Purchaser Common Stock to be reserved for issuance to
Other Shareholders, equal to the aggregate number of shares of Purchaser
Common Stock set forth across from each Other Shareholder's name on
Schedule A. Any Reserved Option Shares that are reserved for issuance to
holders of unvested Company Options upon satisfaction of the milestones
described in Sections 1.2(a) and 1.2(b) above that are not so issued as a
result of the lapse, repurchase or other expiration or termination of
such Company Options shall be distributed to the Sellers' Representative
for distribution to the Sellers pro rata. Each reference in this Section
1.2 to Schedule A and Schedule B shall refer to such Schedules as amended
as of the Closing Date in accordance with Section 2.2 hereof.
(d) After the Closing Date, Purchaser shall not knowingly take any
action that would materially and adversely affect the ability of the
Company to satisfy the conditions precedent to the payment of Additional
Consideration as set forth in paragraphs (a) and (b) above, provided,
however, that Purchaser shall not be required to provide any capital or
financing to the Company in excess of the amounts reflected in the budget
for the development of the VIVID System, a copy of which is attached as
Section 1.2 to the Company Disclosure Schedule.
1.3 Amendment of Company Option Plan.
There are currently outstanding and unexercised vested and unvested
Company Options issued by the Company to employees, directors and
consultants listed in Schedule B attached hereto (the "Company Option
Holders"). The names of all of the Company Option Holders and the number
of Ordinary Shares covered by each Company Option are set forth on
Schedule B. Immediately before the Closing, the Company shall amend the
Company Option Plan to provide, inter alia, that, each Company Option
shall continue to have, and be subject to, the same terms and conditions
of such options immediately prior to the Closing (including, without
limitation, any repurchase rights or vesting provisions), except that
(i) each Company Option will be exercisable (or will become exercisable
in accordance with its terms) for that number of whole shares of
Purchaser Common Stock equal (x) to the product of the number of Ordinary
Shares that were issuable upon exercise of such Company Option
immediately prior to the Closing multiplied by the amount obtained by
dividing 2,450,000 by the sum of (i) the aggregate number of Ordinary
Shares issued and outstanding immediately prior to the Closing, plus
(ii) the Reserved Option Shares (such amount being referred to herein as
the "Exchange Ratio"), rounded down to the nearest whole number of shares
of Purchaser Common Stock, plus (y) if such Company Option shall be
exercised after the date of issuance of the First Milestone Shares or
Second Milestone Shares, as applicable, the number of additional shares
of Purchaser Common Stock in accordance with the column in Schedule B
captioned "Additional Consideration - First Milestone Shares" or
"Additional Consideration - Second Milestone Shares", as applicable and
(ii) the per share exercise price for the shares of Purchaser Common
Stock issuable upon exercise of such assumed Company Option will be equal
to the quotient determined by dividing the exercise price per Ordinary
Share at which such Company Option was exercisable immediately prior to
the Closing by the Exchange Ratio, rounded to the nearest whole cent.
Each reference in this Section 1.3 to Schedule B shall refer to such
Schedule as amended as of the Closing Date in accordance with Section 2.2
hereof.
1.4 Adjustments to Consideration.
The number of shares of Purchaser Common Stock to be issued as part of
the Initial Consideration, Additional Consideration, if any, and upon
exercise of each Company Option shall be adjusted to reflect
appropriately the effect of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities
convertible into Purchaser Common Stock), reorganization,
recapitalization, reclassification or other like change with respect to
Purchaser Common Stock occurring on or after the date hereof and prior to
the Closing.
1.5 Seller Waivers.
Each Seller hereby waives and releases, effective as of the Closing,
any and all rights, claims and causes of action assertable against the
Company in respect of its ownership of any securities of the Company and
any and all agreements related to their interest as a securityholder of
the Company between such Seller and the Company, any and all rights,
claims and causes of action assertable against any other Seller in
respect of any rights of first refusal, preemptive or similar rights
related to any securities of the Company and any and all agreements
related to their interest as a securityholder of the Company between such
Seller and any other Seller, which agreements shall automatically
terminate as of the Closing Date. The shares of Purchaser Common Stock
paid in respect of the surrender for exchange of Ordinary Shares in
accordance with the terms hereof shall be deemed to be full satisfaction
of all rights pertaining to such Ordinary Shares.
1.6 Withholding Taxes.
Any amounts payable to any Seller pursuant to this Article I shall be
subject to, and reduced by an amount equal to, the amount of any state,
federal and foreign withholding taxes incurred (and not previously paid
by or on behalf of such Seller) in connection with the acquisition of
such Seller's Shares, upon the exercise of Company Options, upon the
lapsing of repurchase rights in respect of Ordinary Shares, or upon
payment of a bonus in the form of Ordinary Shares, if any, to such
Seller.
1.7 Fractional Shares.
No fraction of a share of Purchaser Common Stock will be issued, but
in lieu thereof, each Seller who would otherwise be entitled to a
fraction of a share of Purchaser Common Stock (after aggregating all
fractional shares of Purchaser Common Stock to be received by such
Seller) shall be entitled to receive from Purchaser an amount of cash
(rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the Purchaser Stock Price.
1.8 Lost, Stolen or Destroyed Certificates.
In the event any certificates evidencing Ordinary Shares shall have
been lost, stolen, destroyed or not otherwise issued, Purchaser shall
issue in exchange for such lost, stolen or destroyed certificates, upon
the making of an affidavit of that fact by the holder thereof the
consideration required pursuant to Article I hereof; provided, however,
that Purchaser may, in its reasonable discretion and as a condition
precedent to the issuance thereof, require the shareholder to whom a
certificate was not issued or who is the owner of such lost, stolen or
destroyed certificates to enter into a customary indemnification
agreement with Purchaser, pursuant to which such shareholder shall agree
to indemnify Purchaser and its transfer agent against any claim that may
be made against Purchaser or its transfer agent with respect to the
certificates alleged to have been lost, stolen, destroyed, or never
issued.
1.9 Tax Consequences.
It is intended by the parties hereto that the Share Purchase shall
constitute a reorganization within the meaning of Section 368(a) of the
Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a)
of the United States Income Tax Regulations. The Sellers intend to apply
for the Israeli Tax Ruling.
1.10 Accounting Treatment.
For accounting purposes, the transaction contemplated by this
Agreement is intended to be treated as a "purchase."
1.11 Legends.
The shares of Purchaser Common Stock to be issued as Initial
Consideration and Additional Consideration, if any, shall be issued in a
private placement as "restricted securities" as defined under Rule 144 of
the Securities Act and will be subject to the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THESE SECURITIES MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS
(A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
COVERING SUCH SECURITIES, OR (B) A VALID EXEMPTION THEREFROM AND THE
COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH
SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES
ACT.
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF
A SHARE PURCHASE AGREEMENT DATED AS OF APRIL 18, 2000 [AND A
PRINCIPAL SELLER SHAREHOLDER AGREEMENT DATED] AS OF APRIL 18, 2000],
A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY."
The legend set forth in the first paragraph above shall be removed from
the certificate representing shares of Purchaser Common Stock at the
request of the holder thereof at such time as they become eligible for
resale pursuant to Rule 144(k) under the Securities Act, and each such
request shall be accompanied by the favorable opinion of legal counsel,
reasonably satisfactory to Purchaser, concerning compliance with the
conditions of Rule 144(k). Purchaser agrees that it will not
unreasonably require an opinion of counsel for any transfer made pursuant
to Rule 144 under the Securities Act. The legend set forth in the second
paragraph above shall be removed from the certificate representing shares
of Purchaser Common Stock at the request of the holder thereof at such
time as the restrictions set forth in this Agreement or, if applicable,
the Principal Seller Shareholder Agreement, expire. In addition,
Purchaser may place on the certificates representing shares of Purchaser
Common Stock issued as Initial Consideration and Additional
Consideration, if any, other legends required by applicable law.
1.12 Lock-Up Agreement.
(a) Each Seller that is an officer, employee or consultant of the
Company immediately following the Closing (an "Employee Seller") agrees
that it will not directly or indirectly, (i) offer, sell, assign,
transfer, encumber, pledge, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise dispose of, other than
by operation of law, any Purchaser Shares (as defined below) or any
securities convertible into or exercisable or exchangeable for Purchaser
Shares or publicly disclose the intention to make any such offer, sale,
assignment, transfer, pledge, grant or disposal; or (ii) enter into any
swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of the Purchaser Shares,
whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Purchaser Shares, such other securities, in
cash or otherwise, until the earlier to occur of (x) the date that is six
months after the effective date of the Registration Statement (as defined
below) and (y) the eight (8) month anniversary of the Closing Date
(provided that the Registration Statement is then effective) provided
that fifty percent (50%) of the Purchaser Shares received by such
Purchaser shall be released from this restriction on the effective date
of the Registration Statement.
(b) Each Seller that is not an Employee Seller (a "Non-Employee Seller")
agrees that it will not directly or indirectly, (i) offer, sell, assign,
transfer, or otherwise dispose of, other than by operation of law, more
than fifty percent (50%) of the Purchaser Shares, whether any such
transaction is to be settled by delivery of Purchaser Shares, such other
securities, in cash or otherwise, until the earlier to occur of (x) the
date that is six months after the effective date of the Registration
Statement (as defined below) and (y) the eight (8) month anniversary of
the Closing Date.
(c) None of the above provisions shall be deemed to prohibit any Seller
from exercising a Company Option or, in the case of any Non-Employee
Seller, from entering into bona fide hedge or "collar" transactions.
Notwithstanding the foregoing, each Seller shall be permitted to transfer
(i) Purchaser Shares or securities convertible into or exercisable or
exchangeable for Purchaser Shares in a gratuitous transfer (including a
transfer into a registered retirement savings plan) so long as the
recipient of such securities executes a written agreement stating that
such recipient will be bound by the provisions of this Agreement and
(ii) shares of Purchaser Common Stock purchased on or after the date
hereof in the open market or pursuant to Purchaser Options (as defined
below). In addition, if the Seller is a corporation, partnership,
limited liability company or other entity, the Seller shall be permitted
during the period set forth above to transfer such securities to any
Person that controls the Seller, that is controlled by the Seller, or
that is under common control with the Seller, so long as the recipient of
such securities executes a written agreement stating that it will be
bound by the provisions of this Agreement.
1.13 Definitions.
For all purposes of this Agreement, the following terms shall have the
following respective meanings:
"Knowledge" shall mean (i) with respect to the Company, the actual
knowledge of ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇, and with respect to Purchaser, the
actual knowledge of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇ and, as applicable, each
party's directors, provided that such Persons shall have made reasonable
due and diligent inquiry of those employees and contract workers of the
Company or Purchaser, as applicable, whom such officers, directors and
managers reasonably believe would have actual knowledge of the matters
represented and (ii) with respect to any Seller, the actual knowledge of
such Seller.
"Material Adverse Effect" shall mean, with respect to the Company or the
Purchaser, any change, event or effect that is materially adverse
(measured in relation to the value of such party's outstanding equity) to
the business, assets (including intangible assets), financial condition,
results of operations, prospects or capitalization of such entity and its
subsidiaries, taken as a whole; provided, however, that none of the
following shall constitute a "Material Adverse Effect": (a) any effect
primarily resulting from or attributable to (i) the effect of the public
announcement, pendency or consummation of this Agreement and the
transactions contemplated hereby on the current or prospective customers
or suppliers of such party; (ii) changes in general industry or worldwide
economic conditions that affect such Person (or the markets in which such
Person competes) in a manner not disproportionate to the manner in which
such conditions affect other companies in the industries or markets in
which such Person competes; or (iii) changes in U.S. GAAP; and (b) in the
case of Purchaser, a decrease in Purchaser's stock price or the failure
to meet or exceed Wall Street research analysts' or Purchaser's internal
earnings or other estimates or projections.
"NIS" shall mean New Israeli Shekels, the lawful currency of the State of
Israel.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Purchaser Stock Price" shall mean $45.44375.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE PRINCIPAL SELLERS
The Company hereby represents and warrants to Purchaser, and each of the
Principal Sellers hereby severally but not jointly represents and
warrants to Purchaser, subject to such exceptions as are specifically
disclosed in the disclosure letter (referencing the appropriate section
and paragraph numbers) supplied by the Company to Purchaser (the "Company
Disclosure Schedule") and dated as of the date hereof, that on the date
hereof and as of the Closing (other than the representations and
warranties of the Company as of a specified date, which will be true and
correct as of such date) as though made at the Closing as follows:
2.1 Organization of the Company; Subsidiaries.
(a) The Company is a corporation duly organized and validly existing
under the laws of Israel. The Company has the corporate power to own its
properties and to carry on its business as currently conducted and as
currently contemplated to be conducted. The Company is duly qualified or
licensed to do business and is in good standing as a foreign or licensed
corporation in each jurisdiction in which it conducts business, except
where the failure to so qualify or be licensed would not reasonably be
expected to have a Material Adverse Effect on the Company. The Company
has delivered a true and correct copy of its Memorandum of Association
and Articles of Association, each as amended to date and in full force
and effect on the date hereof, to Purchaser. The operations now being
conducted by the Company are not now and have never been conducted by the
Company under any other name.
(b) Other than GADline Europe GmbH (the "Subsidiary"), the Company does
not directly or indirectly own any equity or similar interest in or any
interest convertible, exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, joint venture or other
business, association or entity. Neither the Company nor the Subsidiary
has agreed to make, and is not bound by any Contract (as defined below)
under which it is or may become obligated to make, any future investment
in or capital contribution to any corporation, partnership, joint venture
or other business, association or entity. The Subsidiary is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation, and has the corporate
power to own its properties and to carry on its business as currently
conducted and as currently contemplated to be conducted. The Subsidiary
is duly qualified or licensed to do business and in good standing as a
foreign or licensed corporation in each jurisdiction in which it conducts
business, except where the failure to so qualify would not have a
Material Adverse Effect on the Company. The Company has delivered a true
and correct copy of the organizational documents of the Subsidiary, each
as amended to date and in full force and effect on the date hereof, to
Purchaser. Except for securities the Company owns free and clear of all
Liens, options, right of first refusals or restriction of any nature
(including any restriction on the voting of any security, any restriction
on the transfer of any security or other asset, any restriction on the
possession, exercise or transfer of any other attribute of ownership of
any asset) directly or indirectly through the Subsidiary, there are no
equity securities, partnership interests or similar ownership interests
of any class of equity security of the Subsidiary, or any security
exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Section 2.1 of the Company
Disclosure Schedule sets forth all of the offices of the Company located
outside of the State of Israel.
2.2 Capitalization; Options and Other Rights.
(a) The authorized share capital of the Company is NIS 5,000,000,
consisting of 10,000,000 Ordinary Shares NIS 0.5 nominal value per share,
of which 6,414,949 shares are issued and outstanding as of the date
hereof. Schedule A attached hereto (which may be amended as set forth
below) sets forth (i) for each outstanding Ordinary Share, the name of
the holder of such Ordinary Share, the domicile address of such holder,
and the number of Ordinary Shares held by such holder, (ii) for the
convertible debenture issued to Private Equity Bridge Invest Ltd. on
July 13, 1999 (the "Company Convertible Debenture"), the name of the
holder of such Company Convertible Debenture, the domicile address of
such holder, and the number of Ordinary Shares issuable upon conversion
of the Company Convertible Debenture held by such holder, and (iii) for
the rights to purchase or otherwise acquire Ordinary Shares from the
Company pursuant to those certain Purchase and Sale Agreements, dated as
of April 20, 1999, June 29, 1999 and October 5, 1999, between the buyers
party thereto and the Company (the "Company Purchase Rights"), the name
of the holders of such Company Purchase Rights, the domicile address of
such holders, and the number of Ordinary Shares issuable upon exercise of
the Company Purchase Rights held by such holder, in each case as such
information appears on the Company's records as of the date hereof. The
Company and the Principal Sellers do not have any reason to believe that
such information is not accurate. The Company shall notify Purchaser on
the Closing Date if the information set forth on Schedule A is not
accurate in all respects as of the Closing and shall submit an amended
Schedule A based on the actual number of Ordinary Shares and the holders
thereof on the Closing Date; provided, that any such amended Schedule A
shall not reflect any increase in the number of outstanding Ordinary
Shares other than any Ordinary Shares which may be issued after the date
of this Agreement upon the exercise of any Company Stock Options
disclosed on Schedule B or upon the conversion of the Company Convertible
Debenture or upon exercise of the Company Purchase Rights. No Ordinary
Shares are held in treasury by the Company or the Subsidiary. As of the
date hereof, an indeterminate number of Ordinary Shares are reserved for
issuance upon conversion of the Company Convertible Debenture and 624,733
Ordinary Shares are reserved for issuance upon exercise of the Company
Purchase Rights. Under the Company Option Plan various Company Option
Holders have rights to acquire Ordinary Shares. As of the date hereof,
the total number of Company Options granted under the Company Option Plan
is 746,820 Company Options to acquire 746,820 Ordinary Shares.
Schedule B attached hereto (which may be amended as set forth below) sets
forth for each outstanding Company Option, the name of the holder of such
option, the domicile address of such holder, the number of Ordinary
Shares issuable upon the exercise of such option, the exercise price of
such option, the vesting schedule for such option, including the extent
vested to date and whether the vesting of such option will be accelerated
by the transactions contemplated by this Agreement, and whether such
option is intended to qualify as an eligible option as defined in
Section 102 of the Israeli Income Tax Ordinance (New Version), as
amended. The Company shall notify Purchaser on the Closing Date if the
information set forth on Schedule B is not accurate in all respects as of
the Closing and shall submit an amended Schedule B based on the actual
number of Company Options and the holders thereof on the Closing Date;
provided, that any such amended Schedule B shall not reflect any increase
in the number of outstanding Company Options other than any Company
Options which may be issued after the date of this Agreement in
accordance with Section 5.1 hereof.
(b) All the Ordinary Shares, and all outstanding shares of capital stock
of the Subsidiary, have been duly and validly authorized and issued and
are fully paid and nonassessable and any Ordinary Share when issued in
accordance with the terms of the Company Option Plan, share option or
similar agreement to which the Company is a party or upon conversion of
the Company Convertible Debenture or upon exercise of the Company
Purchase Rights will be duly and validly authorized and issued and fully
paid and nonassessable. None of the Ordinary Shares has been issued, and
none of the Ordinary Shares when issued in accordance with the terms of
the Company Option Plan, share option or similar agreement to which the
Company is a party or upon conversion of the Company Convertible
Debenture or upon exercise of the Company Purchase Rights will be issued,
in violation of the preemptive rights of any shareholder of the Company.
The Ordinary Shares, and the outstanding shares of capital stock of the
Subsidiary, were issued, and the Ordinary Shares to be issued upon
exercise of the Company Options, share option or similar agreement to
which the Company is a party or upon conversion of the Company
Convertible Debenture or upon exercise of the Company Purchase Rights
will be issued, in compliance with all applicable laws and regulations.
Except for the Company Option Plan, the Company has never adopted or
maintained any stock option plan or other plan providing for equity
compensation of any Person. There are no declared or accrued but unpaid
dividends with respect to any Ordinary Shares. The Company has no other
share capital authorized, issued or outstanding.
(c) Except for the Company Options, the Company Convertible Debenture
and the Company Purchase Rights, there are no existing agreements,
subscriptions, options, warrants, calls, commitments, trusts (voting or
otherwise), or rights of any kind whatsoever, written or oral to which
the Company or the Subsidiary is a party or by which it is bound
obligating the Company or the Subsidiary to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of the share capital of the Company or the
Subsidiary or obligating the Company or the Subsidiary to grant, extend,
accelerate the vesting of, change the price of, otherwise amend or enter
into any such option, warrant, call, right, commitment or agreement, nor
are there any outstanding securities of the Company or the Subsidiary or
any other entity which are convertible into or exchangeable for other
securities of the Company or the Subsidiary, nor are there any
agreements, subscriptions, options, warrants, calls, commitments or
rights of any kind granting to any Person any interest in or the right to
purchase or otherwise acquire from the Company or the Subsidiary any
securities so convertible or exchangeable. There are no options
outstanding under the Company's 1997 Share Option Plan. There are no
outstanding or authorized share appreciation, phantom stock, profit
participation, or other similar rights with respect to the Company or the
Subsidiary. There are no voting trusts, proxies, agreements or
understandings with respect to the voting of the Ordinary Shares.
(d) As of the date of this Agreement, not less than seventy-five (75%)
of the issued and outstanding Ordinary Shares are owned by the Sellers.
After giving effect to the consummation of the transactions contemplated
hereby, including the waiver, exercise or expiration of the Company
Purchase Rights and the conversion of the Company Convertible Debenture
into Ordinary Shares, and the amendment to the Company Option Plan
whereby Company Option Holders will receive shares of Purchaser Common
Stock on the exercise of their Company Options, and subject to Section
6.20 hereof, Purchaser will own not less than ninety percent (90%) of the
issued and outstanding Ordinary Shares.
2.3 Authority.
The Company has all requisite power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate or other action on the part of the Company, and no
further action is required on the part of the Company to authorize the
Agreement and the transactions contemplated hereby. This Agreement has
been unanimously approved by the Board of Directors of the Company, which
constitutes all necessary corporate or other action on the part of the
Company, and no further action is required on the part of the Company to
authorize the Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Company and
assuming the due authorization, execution and delivery by the other
parties hereto, constitutes the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except as such enforceability may be subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or
other equitable remedies.
2.4 No Conflict.
The execution and delivery by the Company of this Agreement, and the
consummation of the transactions contemplated hereby, will not conflict
with or result in any violation of or default under (with or without
notice or lapse of time, or both) or give rise to a right of termination,
cancellation, modification or acceleration of any obligation or loss of
any benefit under (any such event, a "Conflict") (i) any provision of the
Memorandum of Association and Articles of Association of the Company or
the organizational documents of the Subsidiary, (ii) any material
mortgage, indenture, lease, contract, covenant or other
agreement, instrument or commitment, permit, concession, franchise or
license (each a "Contract" and collectively the "Contracts") to which the
Company or the Subsidiary or any of their respective properties or assets
(including intangible assets), is subject, or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation which, to the
Company's Knowledge, is applicable to the Company or the Subsidiary or
any of their respective properties (tangible and intangible) or assets
except, in the case of clauses (ii) or (iii), to the extent any such
Conflicts could not, individually or in the aggregate, reasonably be
expected to prevent the consummation of the Share Purchase or otherwise
materially impair the ability of the parties hereto to perform their
obligations under this Agreement.
2.5 Consents.
No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency
or commission or other federal, state, county, local or other foreign
governmental authority, instrumentality, agency or commission (each, a
"Governmental Entity") or any third party, including a party to any
agreement with the Company or the Subsidiary (so as not to trigger any
Conflict), is required by or with respect to the Company or the
Subsidiary in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby,
except for (i) orders, authorizations, registrations, declarations and
filings as may be required under applicable securities laws, (ii) (w) an
exemption from the Israel Securities Authorization from the obligation to
publish a prospectus in the manner required pursuant to the laws of the
State of Israel in connection with the issuance pursuant to this
Agreement of the Purchaser Common Stock to the Sellers and the grant of
the Purchaser Options (the "ISA Exemption"); (x) the approval of the
Investment Center for the purchase of the Ordinary Shares pursuant to the
provisions of the Encouragement of Capital Investment Law and the
approvals issued to the Company pursuant thereto; (y) the approval of the
Office of the Chief Scientist to the transactions contemplated hereby;
and (z) the approval of the Israeli Tax Commission for the amendment to
the Company Option Plan pursuant hereto (collectively, the "Israeli
Regulatory Approvals," which regulatory approvals or exemptions shall be
obtained from one or more Israeli government offices or agencies), (iii)
the filing by the Principal Sellers and Purchaser of a premerger
notification and report form under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and (iv) any
consent, waiver, approval, order or authorization the failure of which to
obtain, and any registration, declaration or filing the failure of which
to make, could not, individually or in the aggregate, reasonably be
expected to prevent the consummation of the Share Purchase or otherwise
materially impair the ability of the parties hereto to perform their
obligations under this Agreement.
2.6 Company Financial Statements.
Section 2.6 of the Company Disclosure Schedule sets forth the audited
consolidated balance sheet of the Company as of December 31, 1999, and
the related audited consolidated statements of income, cash flow and
shareholders' equity for the twelve (12) month periods ended December 31,
1999 (the "Financials"). The Financials are correct and complete in all
material respects and have been prepared in accordance with U.S. GAAP on
a basis consistent throughout the periods indicated and consistent with
each other. The Financials present fairly in all material respects, the
consolidated financial condition, operating results and cash flows of the
Company and the Subsidiary as of the dates and during the periods
indicated therein. The audited consolidated balance sheet of the Company
as of December 31, 1999 is referred to hereinafter as the "Current
Balance Sheet."
2.7 No Undisclosed Liabilities.
The Company and the Subsidiary have no material liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement of any type, whether accrued, absolute, contingent, matured,
unmatured or other required to be reflected in financial statements in
accordance with U.S. GAAP, which individually or in the aggregate (i) has
not been reflected in the Current Balance Sheet, or (ii) except as
expressly permitted by Section 5.1 hereof, has not arisen in the ordinary
course of business consistent with past practices since December 31,
1999.
2.8 No Changes.
Since December 31, 1999, and except as expressly permitted by
Section 5.1 hereof, there has not been, occurred or arisen any:
(a) material transaction by the Company or the Subsidiary except in the
ordinary course of business as conducted on that date and consistent with
past practices;
(b) amendments or changes to the Memorandum of Association and Articles
of Association of the Company;
(c) capital expenditure or commitment by the Company or the Subsidiary
exceeding $50,000 individually or $500,000 in the aggregate;
(d) payment, discharge or satisfaction, in any amount in excess of
$20,000 in any one case, or $50,000 in the aggregate, of any claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than payment, discharge or satisfaction
of liabilities in the ordinary course of business;
(e) destruction of, damage to or loss of any material assets of the
Company or the Subsidiary (whether or not covered by insurance);
(f) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company or the
Subsidiary other than as required by U.S. GAAP;
(g) change in any material election in respect of Taxes (as defined
below), adoption or change in any accounting method in respect of Taxes,
agreement or settlement of any claim or assessment in respect of Taxes,
or extension or waiver of the limitation period applicable to any claim
or assessment in respect of Taxes;
(h) revaluation by the Company or the Subsidiary of any of their
respective assets;
(i) declaration, setting aside or payment of a dividend or other
distribution (whether in cash, stock or property) in respect of any
Ordinary Shares, or any split, combination or reclassification in respect
of any Ordinary Shares, or any issuance or authorization of any issuance
of any other securities in respect of, in lieu of or in substitution for
Ordinary Shares, or any direct or indirect repurchase, redemption, or
other acquisition by the Company or the Subsidiary of any Ordinary Shares
(or options, warrants or other rights convertible into, exercisable or
exchangeable therefor), except for the issuance of Ordinary Shares in
accordance with the agreements evidencing Company Options set forth in
Schedule B or upon conversion of the Company Convertible Debenture or
upon exercise of the Company Purchase Rights;
(j) increase in the salary or other compensation payable or to become
payable by the Company or the Subsidiary to any Person who is one of the
Company's or the Subsidiary's officers, directors, employees, contract
workers, advisors or consultants as of the date hereof, or the
declaration, payment or commitment or obligation of any kind for the
payment by the Company or the Subsidiary of a severance payment,
termination payment, bonus or other additional salary or compensation to
any such Person;
(k) other than in the ordinary course of business, any termination,
extension, amendment or modification of the terms of any material
agreement, contract, covenant, instrument, lease, license or commitment
to which the Company or the Subsidiary is a party or by which either of
them or any of their respective assets are bound;
(l) sale, lease, license (outside of the ordinary course of business) or
other disposition of any of the material assets or material properties of
the Company or the Subsidiary, or the creation of any Lien on any such
material asset or material property, except (i) Liens reflected in the
Current Balance Sheet, (ii) Liens for Taxes not yet due and payable, and
(iii) such imperfections of title and encumbrances, if any, which do not
materially detract from the value or interfere with the present use of
the property subject thereto or affected thereby (collectively,
"Permitted Liens");
(m) loan by the Company or the Subsidiary to any Person, incurring by
the Company or the Subsidiary of any indebtedness for borrowed money,
guaranteeing by the Company or the Subsidiary of any indebtedness for
borrowed money, issuance or sale of any debt securities of the Company or
the Subsidiary or guaranteeing of any debt securities of others, except
for advances to employees or contract workers for travel and business
expenses and customer accounts receivable, in each case in the ordinary
course of business consistent with past practices;
(n) waiver or release of any right or claim of the Company or the
Subsidiary, including any write-off or other compromise of any account
receivable of the Company or the Subsidiary except in the ordinary course
of business;
(o) written or, to the Company's and the Principal Sellers' Knowledge,
oral notice of any claim or potential claim of ownership by any Person
other than the Company or the Subsidiary of the Company Intellectual
Property (as defined below) owned by the Company or the Subsidiary or of
infringement by the Company or the Subsidiary of any other Person's
Intellectual Property (as defined below);
(p) issuance or sale, or contract to issue or sell, by the Company of
any Ordinary Shares or securities convertible into, or exercisable or
exchangeable for, Ordinary Shares, or any securities, warrants, options
or rights to purchase any of the foregoing, except for issuances of
Ordinary Shares upon the exercise thereof;
(q) other than in the ordinary course of business (which shall exclude
exclusive licenses or arrangements), (i) sale or license of any Company
Intellectual Property or entering into of any agreement with respect to
the Company Intellectual Property with any Person or with respect to the
Intellectual Property of any Person, or (ii) purchase or license of any
Intellectual Property or entering into of any agreement with respect to
the Intellectual Property of any Person, (iii) agreement with respect to
the development of any Intellectual Property with a third party, or (iv)
change in pricing or royalties set or charged by the Company or the
Subsidiary to its customers or licensees or in pricing or royalties set
or charged by Persons who have licensed Intellectual Property to the
Company or the Subsidiary;
(r) agreement or modification to agreement pursuant to which any other
party was granted marketing, distribution, development or similar rights
of any type or scope with respect to any products or technology of the
Company or the Subsidiary outside of the ordinary course of business;
(s) application for a grant from the Office of the Chief Scientist of
the Israeli Ministry of Industry and Trade, or any other grant from any
other Government Entity or otherwise;
(t) any event or condition of any character that has had or is
reasonably likely to have a Material Adverse Effect on the Company; or
(u) agreement by the Company or the Subsidiary or any officer, employees
or contract worker on behalf of the Company or the Subsidiary to do any
of the things described in the preceding clauses (a) through (t) of this
Section 2.8 (other than negotiations with Purchaser and its
representatives regarding the transactions contemplated by this
Agreement).
2.9 Tax Matters.
(a) For the purposes of this Agreement, the term "Tax" or "Taxes"
(including, with correlative meaning, "Taxable") shall mean all taxes,
levies, impositions, withholdings, charges, fees or other assessments,
imposed by Israel, the United States or any other state or country
(including, but not limited to, taxes based upon or measured by gross
receipts, net worth or capital stock, income, profits, sales, use or
occupation, value added, ad valorem, transfer, conveyance, franchise,
withholding, payroll, social security, employment or employment related
tax, excise, property, municipal and other taxes), together with all
interest, penalties and additions attributable to or imposed with respect
to such amounts and any obligations under any agreements or arrangements
with any other Person with respect to such amounts, and the term "Tax
Returns" shall mean all Tax returns, reports and forms (including
withholding Tax Returns) for a Taxable period required to be filed by any
applicable U. S., Israeli or other federal, state or local Tax statute,
law, ordinance, rule or regulation ("Tax Law") or Governmental Entity.
(b) The Company or any consolidated, or unitary group of which the
Company or the Subsidiary is or has been a member have timely filed
(after giving effect to any validly granted extensions) all Tax Returns
required to filed by applicable Tax Laws, and all such Tax Returns are
complete and correct in all material respects. The Company and the
Subsidiary have timely paid (after giving effect to any validly granted
extensions) all Taxes due with respect to the Taxable periods covered by
such Tax Returns and all other material Taxes, and the Current Balance
Sheet reflects an adequate reserve for all Taxes payable by the Company
and the Subsidiary for all Taxable periods and portions thereof through
its date.
(c) No written or unwritten notice that any material Tax Return of the
Company or the Subsidiary is currently under audit or examination has
been received by the Company or the Subsidiary, and to the Knowledge of
the Company, no Tax Returns of the Company or the Subsidiary are under
audit or examination by any taxing authority. Each material deficiency
resulting from any audit or examination relating to Taxes by any taxing
authority has been timely paid. No material issues relating to Taxes
were raised by the relevant taxing authority during any presently pending
audit or examination, and no material issues relating to Taxes were
raised by the relevant taxing authority in any completed audit or
examination that can reasonably be expected to recur in a later Taxable
period. To the Knowledge of the Company, no Tax Return of the Company or
the Subsidiary has ever been under audit or examination by the Internal
Revenue Service or other relevant taxing authority. Neither the Company
nor the Subsidiary have received any final assessments from the relevant
Assessment Officer of the Israel Tax Commission.
(d) There is no currently effective agreement or other document
extending, or having the effect of extending, the period of assessment or
collection of any material Taxes and no power of attorney with respect to
any material Taxes has been executed or filed with any taxing authority.
The Company and the Subsidiary have not requested any extension of time
within which to file any material Tax Return, which material Tax Return
has not yet been filed.
(e) No material Tax Liens have been filed and no claims are being
asserted in a writing received by the Company or the Subsidiary with
respect to Taxes.
(f) Neither the Company nor the Subsidiary is a party to or bound by any
Tax sharing agreement, Tax indemnity obligation or similar agreement,
arrangement or practice with respect to Taxes (including any advance
pricing agreement, closing agreement or other agreement relating to Taxes
with any taxing authority).
(g) Neither the Company nor the Subsidiary will be required to include
in a Taxable period ending after the Closing Date items of Taxable income
attributable to income that accrued in a prior Taxable period but was not
recognized in any prior Taxable period as a result of the installment
method of accounting, the completed contract method of accounting, the
long-term contract method of accounting, the cash method of accounting,
or for any other reason.
(h) The Company and the Subsidiary have complied in all material
respects with all applicable statutes, laws, rules and regulations
relating to the payment and withholding of Taxes and has within the time
and manner prescribed by law, withheld from and paid over to the proper
Governmental Entity all amounts required to be so withheld and paid over.
(i) The Company and the Subsidiary have properly and in a timely manner
made estimated material Tax payments or accrued reserves for such
material Tax payments through the Closing Date.
2.10 Restrictions on Business Activities.
There is no agreement (non-compete or otherwise), commitment,
judgment, injunction, order or decree to which the Company or the
Subsidiary is a party or otherwise binding upon the Company or the
Subsidiary which has or may reasonably be expected to have the effect of
prohibiting or impairing any material business practice of the Company or
the Subsidiary or otherwise limiting the freedom of the Company or the
Subsidiary to engage in any line of business or to compete with any
Person. Without limiting the generality of the foregoing, neither the
Company nor the Subsidiary has entered into any agreement under which the
Company or the Subsidiary is restricted from selling, licensing or
otherwise distributing any of its technology or products to or providing
services to, customers or potential customers or any class of customers,
in any geographic area, during any period of time or in any segment of
the market.
2.11 Title of Properties; Absence of Liens and Encumbrances; Condition of
Equipment.
(a) Neither the Company nor the Subsidiary owns any real property, nor
has it ever owned any real property. All current real property leases to
which the Company or the Subsidiary is a party are in full force and
effect, are valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing default
or event of default (or event which with notice or lapse of time, or
both, would constitute a default) except for any such default or event of
default, if any, which does not materially interfere with the Company' or
the Subsidiary's present use of the property subject to such lease.
(b) The Company and the Subsidiary have good and valid title to, or, in
the case of leased properties and assets, valid leasehold interests in,
all of their respective tangible properties and assets, real, personal
and mixed, used or held for use in their respective business, free and
clear of any Liens, except for Permitted Liens.
(c) Each material item of equipment (the "Equipment") owned or leased by
the Company or the Subsidiary is (i) adequate for the conduct of the
business of the Company or the Subsidiary as currently conducted and as
currently contemplated to be conducted, and (ii) in good operating
condition, regularly and properly maintained, subject to normal wear and
tear.
(d) The Company and the Subsidiary have sole and exclusive ownership,
free and clear of any Liens, of all customer lists, customer contact
information, customer correspondence and customer licensing and
purchasing histories relating to their respective current and former
customers (the "Customer Information"). No Person other than the Company
or the Subsidiary possesses any claims or rights with respect to use of
the Customer Information.
2.12 Intellectual Property.
(a) All patents (including, without limitation, all U.S. and foreign
patents, patent applications, patent disclosures, and any and all
divisions, continuations, continuations-in-part, reissues,
re-examinations and extensions thereof), design rights, trademarks, trade
names and service marks (whether or not registered), trade dress, logos,
Internet domain names, copyrights (whether or not registered) and any
renewal rights therefor, sui generis database rights, statistical models,
technology, inventions, supplier lists, trade secrets, know-how, computer
software programs or applications in both source and object code form,
databases, technical documentation of such software programs,
registrations and applications for any of the foregoing and all other
tangible or intangible proprietary information or materials
("Intellectual Property") that are or have been used in (including,
without limitation, in the development of) the Company's or the
Subsidiary's business and/or in any product, technology or process
(i) currently being or formerly manufactured, published or marketed by
the Company or the Subsidiary or (ii) currently under development for
possible future manufacturing, publication, marketing or other use by the
Company or the Subsidiary are hereinafter referred to as the "Company
Intellectual Property."
(b) The Company Disclosure Schedule contains a true and complete list of
the Company's and the Subsidiary's patents and patent applications, mask
works, registered trademarks and trademark applications, trade names,
registered service marks and service ▇▇▇▇ applications, Internet domain
names and Internet domain name applications, and registered copyrights
and copyright applications, and includes details of all due dates for
further filings, maintenance, payments or other actions falling due in
respect of Company Intellectual Property within twelve (12) months
hereof. All of the Company's and the Subsidiary's patents, patent
applications, registered trademarks, and trademark applications, and
registered copyrights are in good standing with all fees and filings due
as of the Closing Date duly made and the due dates specified in the
Company Disclosure Schedule are accurate and complete.
(c) The Company Intellectual Property contains only those items and
rights which are: (i) owned by the Company or the Subsidiary; (ii) in the
public domain; or (iii) rightfully used by the Company or the Subsidiary
pursuant to a valid and enforceable license or other similar agreement
(the "Company Licensed Intellectual Property"). The Company or the
Subsidiary have all rights in currently existing Company Intellectual
Property necessary to carry out their respective current activities and
their respective future activities to the extent such future activities
are already planned in a written business plan (and had all rights
necessary to carry out its former activities at the time such activities
were being conducted), including without limitation, to the extent
required to carry out such activities, rights to make, use, reproduce,
modify, adopt, create derivative works based on, translate, distribute
(directly and indirectly), transmit, display and perform publicly,
license, rent and lease and, other than with respect to Company Licensed
Intellectual Property, assign and sell, Company Intellectual Property.
(d) The reproduction, manufacturing, distribution, licensing,
sublicensing, sale or any other exercise of rights in any Company
Intellectual Property, product, work, technology or process as now used
or offered or proposed in a written business plan for use, licensing or
sale by the Company or the Subsidiary does not infringe on any rights in
any patent, design right, trademark, trade name, service ▇▇▇▇, mask work,
trade dress, Internet domain name, copyright, database, statistical
model, technology, invention, supplier list, trade secret, know-how,
computer software program or application of any Person, anywhere in the
world. No claims (i) challenging the validity, effectiveness or, other
than with respect to Company Licensed Intellectual Property, ownership by
the Company or the Subsidiary of any Company Intellectual Property, or
(ii) to the effect that the use, distribution, licensing, sublicensing,
sale or any other exercise of rights in any product, work, technology or
process as now used or offered or proposed in a written business plan for
use, licensing, sublicensing or sale by the Company or the Subsidiary or
their respective agents or use by its customers infringes or will
infringe on any intellectual property or other proprietary right of any
Person, have been asserted or, to the Knowledge of the Company, are
threatened by any Person. To the Knowledge of the Company all of the
rights within Company Intellectual Property are enforceable and
subsisting. To the Knowledge of the Company, there is no material
unauthorized use, infringement or misappropriation of any Company
Intellectual Property by any third party, employee, former employee or
contract worker.
(e) All personnel, including employees, contract workers, agents,
consultants and contractors, who have contributed to or participated in
the conception and development of Company Intellectual Property on behalf
of the Company or the Subsidiary, have executed nondisclosure agreements
in the form attached to Section 2.12(e) of the Company Disclosure
Schedule and either (i) have been a party to an enforceable
"work-for-hire" or similar agreement with the Company or the Subsidiary
in accordance with applicable national and state law that has accorded
the Company or the Subsidiary full, effective, exclusive and original
ownership of all tangible and intangible property thereby arising, or
(ii) have executed appropriate instruments of assignment in favor of the
Company or the Subsidiary as assignee that have conveyed to the Company
or the Subsidiary effective and exclusive ownership of all tangible and
intangible property thereby arising. None of the Persons referred to on
Section 2.12(e) of the Company Disclosure Schedule as not having executed
any of the foregoing agreements, whether or not expressly named thereon,
have materially contributed to or participated in the conception or
development of Company Intellectual Property.
(f) Neither the Company nor the Subsidiary is, nor as a result of the
execution or delivery of this Agreement, or performance of the Company's
obligations hereunder, will the Company or the Subsidiary be, in
violation of any license, sublicense, agreement or instrument involving
Intellectual Property to which the Company or the Subsidiary is a party
or otherwise bound, nor will execution or delivery of this Agreement, or
performance of the Company's obligations hereunder, cause the diminution,
termination or forfeiture of the Company's or the Subsidiary's rights in
any Company Intellectual Property.
(g) Section 2.12(g) of the Company Disclosure Schedule contains a true
and the complete list of all of the software programs sold by the Company
or the Subsidiary (including all software programs embedded or
incorporated in the Company's or the Subsidiary's products) (the "Company
Software Programs"). The Company or the Subsidiary owns full and
unencumbered right and good, valid and marketable title to such the
Company Software Programs free and clear of all mortgages, pledges,
liens, security interests, conditional sales agreements, encumbrances or
charges of any kind.
(h) The source code and system documentation relating to the Company
Software Programs (i) have at all times been maintained in confidence,
(ii) have been disclosed by the Company or the Subsidiary only to
employees or contract workers who have a "need to know" the contents
thereof in connection with the performance of their duties to the Company
or the Subsidiary and who have executed the nondisclosure agreements
referred to in this Section 2.12, and (iii) have not been disclosed to
any third party.
(i) Except as would not otherwise materially impair the Company's or the
Subsidiary's ability to account for, enforce its rights under, make use
of, understand or memorialize the Company Intellectual Property, the
Company and the Subsidiary have taken all reasonable steps, in accordance
with normal industry practice, to preserve and maintain notes and records
relating to Company Intellectual Property to cause the same to be readily
understood, identified and available.
(j) The Company Software Programs (i) have been designed to ensure Year
2000 compatibility, which consists of data century recognition, and
calculations that accommodate same century and multi-century formulas and
date values; (ii) operate and will operate in accordance with their
specifications prior to, during and after the calendar Year 2000; and
(iii) shall not end abnormally or provide invalid or incorrect results as
a result of date data, specifically including date data which represents
or references different centuries or more than one century.
(k) The Company Intellectual Property is free and clear of any and all
Liens.
(l) Neither the Company nor the Subsidiary owes any royalties or other
payments to third parties in respect of Company Intellectual Property.
All royalties or other payments set forth in the Company Disclosure
Schedule that have accrued prior to the Closing have been paid.
(m) The Company and the Subsidiary employ commercially reasonable
measures to ensure that the Company Software Programs contain no
"viruses." For the purposes of this Agreement, "virus" means any
computer code intentionally designed to disrupt, disable or harm in any
manner the operation of any software or hardware. None of the foregoing
contains any worm, bomb, backdoor, clock, timer, or other disabling
device code, design or routine which causes the software to be erased,
inoperable, or otherwise incapable of being used, either automatically or
upon command by any party.
(n) The Company and the Subsidiary have implemented commercially
reasonable steps for the physical and electronic protection of their
respective information assets from unauthorized disclosure, use or
modification. Section 2.12(n) of the Company Disclosure Schedule sets
forth (i) each breach of security involving its information assets of
which the Company is aware, (ii) its known consequences, and (iii) the
steps the Company or the Subsidiary has taken to remedy such breach.
(o) As of the date hereof and as of the Closing Date, the Company in
good faith intends to and expects that it will (i) use the "Joint
Development" (as defined in the agreement dated as of March 31, 1999,
between the Company and Internet Telecom Ltd.) only for proof of concept
of the VIVID System, (ii) completely replace the "Joint Development"
technology with the Company's internally developed technologies, (iii)
have redesigned the gateway component of the VIVID System prior to
September 30, 2000 to include and incorporate only the Company's
internally developed technology and not any "Joint Development" of other
technology licensed from third parties, and (iv) have redesigned all of
the Company's cable modem products, including the cable modem component
of the VIVID System, prior to September 30, 2000 to not include or
incorporate any "Joint Development."
2.13 Company Contracts.
Set forth on Section 2.13 of the Company Disclosure Schedule is a list
or description of each of the following to which the Company or the
Subsidiary is a party as of the date hereof:
(a) any employment or consulting agreement, contract or commitment with
an employee, contract worker or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a consulting
firm or other similar organization;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation rights plan or stock purchase plan, any
of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of
which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
(c) any fidelity or surety bond or completion bond;
(d) any lease of Personal property having a value in excess of $10,000
individually or $50,000 in the aggregate;
(e) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $15,000
individually or $50,000 in the aggregate;
(f) any agreement, contract or commitment relating to the disposition or
acquisition of a material amount of assets or any interest in any
business enterprise outside the ordinary course of the Company's or the
Subsidiary's business;
(g) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments relating to the
borrowing of money or extension of credit;
(h) any open purchase order or contract for the purchase of materials
involving in excess of $30,000;
(i) any construction contracts;
(j) any dealer, distribution, joint marketing or development agreement;
(k) all arrangements and agreements with the Office of the Chief
Scientist, the Investment Center of the State of Israel, the BIRD
Foundation, or the Marketing Incentive Fund;
(l) except for standard "shrink-wrap" software license agreements, any
license agreement or similar agreement pursuant to which the Company or
the Subsidiary has the right to use any Company Licensed Intellectual
Property;
(m) any sales representative, original equipment manufacturer, value
added, remarketer, reseller or independent software vendor or other
material agreement for use or distribution of the Company's or the
Subsidiary's products, technology or services; or
(n) any other agreement, contract or commitment that involves $10,000
individually or $25,000 in the aggregate or more and is not cancelable
without penalty within thirty (30) days.
Each of the Contracts listed or described on Section 2.13 of the Company
Disclosure Schedule, and each Contract entered into after the date hereof
that would have been required to be disclosed on Section 2.13 of the
Company Disclosure Schedule if such Contract were entered into on or
prior to the date hereof, is referred to as a "Company Contract" and
collectively as the "Company Contracts." Each Company Contract is in
full force and effect. Neither the Company nor the Subsidiary nor to the
Knowledge of the Company and the Principal Sellers, any other party to a
Company Contract, is in breach, violation or default under, and neither
the Company nor the Subsidiary has received notice that it has breached,
violated or defaulted under, any of the material terms or conditions of
any Company Contract in such a manner as would permit any other party to
cancel or terminate any such Company Contract, or would permit any other
party to seek damages, which would be reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the
Company (for any or all of such breaches, violations or defaults, in the
aggregate).
2.14 Interested Party Transactions.
No officer, director or, to the Knowledge of the Company and the
Principal Sellers, Seller (nor any ancestor, sibling, descendant or
spouse of any of such Persons, or any trust, partnership or corporation
in which any of such Persons has or has had an interest), has or has had,
directly or indirectly, (i) an interest in any entity which furnished or
sold, or furnishes or sells, services, products or technology that the
Company or the Subsidiary furnishes or sells, or proposes to furnish or
sell, or (ii) any interest in any entity that purchases from or sells or
furnishes to the Company or the Subsidiary, any goods or services, or
(iii) a beneficial interest in any Contract to which the Company or the
Subsidiary is a party; provided, however, that ownership of no more than
five percent (5%) of the outstanding voting stock of a publicly traded
corporation shall not be deemed to be an "interest in any entity" for
purposes of this Section 2.14.
2.15 Governmental Authorization.
Each consent, license, permit, grant or other authorization
(i) pursuant to which the Company and the Subsidiary currently operates
or holds any interest in any of their respective properties, or
(ii) which is required for the operation of the Company's and the
Subsidiary's business as currently conducted or currently contemplated to
be conducted or the holding of any such interest (collectively, "Company
Authorizations") has been issued or granted to the Company or the
Subsidiary, other than such Company Authorizations the lack of which
would not reasonably be expected to have a Material Adverse Effect on the
Company. The Company Authorizations are in full force and effect and
constitute all Company Authorizations required to permit the Company and
the Subsidiary to operate or conduct their respective business as now
being conducted and as currently proposed by the Company to be conducted
or hold any interest in their respective properties or assets.
2.16 Litigation.
There is no action, suit, claim or proceeding of any nature pending,
or to the Knowledge of the Company and the Principal Sellers threatened,
against the Company or the Subsidiary, their respective properties
(tangible or intangible) or any of their respective officers or
directors, nor to the Knowledge of the Company and the Principal Sellers
is there any reasonable basis therefor. There is no investigation or
other proceeding pending or to the Knowledge of the Company and the
Principal Sellers threatened, against the Company or the Subsidiary, any
of their respective properties (tangible or intangible) or any of their
respective officers or directors by or before any Governmental Entity,
nor to the Knowledge of the Company and the Principal Sellers is there
any reasonable basis therefor. Neither the Company nor the Subsidiary
has received any written or, to the Company's and the Principal Sellers'
Knowledge, oral notice from any Governmental Entity that such
Governmental Entity has at any time challenged or questioned the legal
right of the Company or the Subsidiary to conduct its operations as
presently or previously conducted or as presently contemplated to be
conducted.
2.17 Accounts Receivable.
(a) A list of all accounts receivable of the Company and the Subsidiary
as of March 31, 2000, together with a range of days elapsed since
invoice, is attached to Section 2.17(a) of the Company Disclosure
Schedule.
(b) All of the Company's and the Subsidiary's accounts receivable arose
in the ordinary course of business, are carried at values determined in
accordance with U.S. GAAP consistently applied, and, to the Knowledge of
the Company and the Principal Sellers, are collectible except to the
extent of reserves therefor set forth in the Current Balance Sheet or,
for receivables arising subsequent to March 8, 2000, as reflected on the
books and records of the Company or the Subsidiary (which are prepared in
accordance with U.S. GAAP). No Person has any Lien on any of the
Company's or the Subsidiary's accounts receivable and, as of the date
hereof, no written or, to the Company's and the Principal Sellers'
Knowledge, oral request or agreement for deduction or discount has been
made with respect to any of the Company's or the Subsidiary's accounts
receivable.
2.18 Inventory.
The inventories shown on the Financials or thereafter acquired by the
Company or the Subsidiary consisted of items of a quantity and quality
usable or salable in the ordinary course of business. Since December 31,
1999, the Company and the Subsidiary have continued to replenish
inventories in a normal and customary manner consistent with past
practices. Neither the Company nor the Subsidiary has received written
or oral notice that it will experience in the foreseeable future any
difficulty in obtaining, in the desired quantity and quality and at a
reasonable price and upon reasonable terms and conditions, the raw
materials, supplies or component products required for the manufacture,
assembly or production of its products in the same manner that it has
acquired such items in the past. The values at which inventories are
carried reflect the inventory valuation policy of the Company and the
Subsidiary, which is in accordance with U.S. GAAP. As of the date
hereof, neither the Company nor the Subsidiary has any commitments to
purchase inventory.
2.19 Minute Books.
The minutes of the Company made available to counsel for Purchaser are
the only minutes of the Company and contain materially accurate records
of all consents, approvals or ratifications of the Board of Directors (or
committees thereof) of the Company and its shareholders for all
transactions or actions that require such consent, approval or
ratification.
2.20 Environmental Matters.
Except as could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company, (i) the Company
and the Subsidiary are in compliance with all applicable Environmental
Laws and all Company Permits required by Environmental Laws; (ii) all
past noncompliance of the Company or the Subsidiary with Environmental
Laws or Environmental Permits have been resolved without any pending,
ongoing or future obligation, cost or liability; (iii) neither the
Company nor the Subsidiary has released a Hazardous Material at, or
transported a Hazardous Material to or from, any real property currently
or formerly owned, leased or occupied by the Company or the Subsidiary,
in violation of any Environmental Law; (iv) neither the Company nor the
Subsidiary has received any notice or other communication (in writing or
otherwise), whether from a Governmental Entity, citizens group, employee
or otherwise, that alleges that the Company or the Subsidiary is not in
compliance with any Environmental Law, and, to the Company's Knowledge,
there are no circumstances that may prevent or interfere with the
Company's and the Subsidiary's compliance with any Environmental Law in
the future; and (v) to the Company's Knowledge, no current or prior owner
of any property leased or controlled by the Company or the Subsidiary has
received any notice or other communication (in writing or otherwise),
whether from a Governmental Entity, citizens group, employee or
otherwise, that alleges that such current or prior owner or the Company
or the Subsidiary is not in compliance with any Environmental Law with
respect to such property. For purposes of this Agreement, "Environmental
Law" shall mean any statute, law, ordinance, rule or regulation and any
enforceable judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment,
relating to pollution or protection of the environment or natural
resources, including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Material, as in effect as of the date hereof.
"Environmental Permit" shall mean any permit, approval, identification
number, license or other authorization required under or issued pursuant
to any applicable Environmental Law. "Hazardous Material" shall mean
(i) any petroleum, petroleum products, byproducts or breakdown products,
radioactive materials, asbestos-containing materials or polychlorinated
biphenyls or (ii) any chemical, material or substance defined or
regulated as toxic or hazardous or as a pollutant or contaminant or waste
under any applicable Environmental Law.
2.21 Brokers' and Finders' Fees; Third Party Expenses.
Except for fees payable to ▇▇ ▇▇▇▇▇ Securities Corporation ("Cowen")
pursuant to an engagement letter dated November 2, 1999, a copy of which
has been provided to Purchaser, neither the Company nor the Subsidiary
has incurred, nor will it incur, directly or indirectly, any liability
for brokerage or finders' fees or agents' commissions or any similar
charges in connection with the Agreement or any transaction contemplated
hereby.
2.22 Employee Benefit Plan and Compensation.
(a) Apart from the provision of Managers' Insurance or Mivtachim Pension
Funds to certain of the Company's or the Subsidiary's employees pursuant
to the terms of their employment contracts with the Company which provide
for payment to the employee upon retirement or death and secures a
substantial portion of the severance pay, if any, to which the employee
is legally entitled upon termination of employment under the Severance
Pay Law 5723-1963 and except for the Company Option Plan, the Company
does not maintain any employee pension benefit plans, employee welfare
benefit plans, bonus, deferred compensation plans or arrangements, and
other employee fringe benefit plans (all the foregoing being herein
called "Benefit Plans") for the benefit of any officers or employees of
the Company or the Subsidiary.
(b) The Subsidiary does not maintain any Benefits Plans which provide
benefits which are materially greater than those provided to similarly
situated employees at similar companies in Germany. A list of the
Benefit Plans provided by the Subsidiary will be delivered prior to
Closing.
(c) No employee of the Company or the Subsidiary will be entitled to
severance benefits of any kind as a result of the transactions
contemplated by this Agreement.
2.23 Employment Matters.
(a) Section 2.23(a) of the Company Disclosure Schedule contains a list
of all salaried employees as of the date of this Agreement, and all
consultants who have received more than $20,000 from the Company or the
Subsidiary since January 1, 1999, and correctly reflects, in all material
respects, their salaries, the date of their last salary increase, any
other compensation payable to them (including compensation payable
pursuant to bonus, deferred compensation or commission arrangements),
their dates of employment or retention and their positions. No employee
has a termination notice period of longer than thirty (30) days. All
consultants are terminable at will by the Company or the Subsidiary. The
Company has delivered copies of all personal employment agreements
between the Company or the Subsidiary and any of their respective
officers and employees to Purchaser.
(b) Neither the Company nor the Subsidiary is a party to any collective
bargaining contract or other contract with a labor union involving any of
its employees except for those provisions of general agreements between
the Federation of Labor Unions and the Coordination Bureau of Economic
Organizations which may be applicable to certain classes of employees of
the Company or the Subsidiary by virtue of Extension Orders.
(c) Other than the Personal employment agreements referred to in
Section 2.23(a), there are no employment, severance or similar agreements
between the Company or the Subsidiary and any of their respective
directors, officers, executives or employees which cannot be terminated
by the Company or the Subsidiary upon four (4) weeks notice or less
without giving rise to a claim for damages or compensation (except for
statutory severance pay).
(d) As of the date hereof, there are no pending, or to the Knowledge of
the Company and the Principal Sellers threatened, or reasonably
anticipated, claims or actions outstanding against the Company or the
Subsidiary by any Person who is now or has been an officer or material
claim of any employee of the Company or the Subsidiary, and there have
been no material disputes between the Company or the Subsidiary and any
material number or category of employees.
(e) The Company and the Subsidiary have complied with all applicable
foreign, federal, state and local laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment and
wages and hours, in each case, with respect to employees and their terms
and conditions of employment, including all applicable laws of foreign
jurisdictions where the Company or the Subsidiary has employees, other
than instances of non-compliance which, individually or in the aggregate,
would not reasonably be expected to result in a Material Adverse Effect
on the Company.
(f) The statutory and contractual overtime and severance pay due to
employees of the Company and the Subsidiary as of December 31, 1999 is
either funded or provided for on the Current Balance Sheet. No cause of
action exists giving right to employees to any claim for compensation for
overtime or on termination of employment beyond the statutory severance
pay to which such employee is entitled and to the Knowledge of the
Company and the Principal Sellers, no such claims will be made by any
employee for payment of any compensation as a result of the change of
control of the Company contemplated hereby.
(g) The Company and the Subsidiary have withheld and reported all
amounts required by law or by agreement to be withheld and reported with
respect to wages, salaries and other payments to employees.
(h) Neither the Company nor the Subsidiary is liable for any material
arrears of wages or any material taxes or any penalty for failure to
comply with any of the foregoing.
(i) Neither the Company nor the Subsidiary is liable for any payment to
any trust or other fund governed by or maintained by or on behalf of any
governmental authority, with respect to unemployment compensation
benefits, social security or other benefits or obligations for Employees
(other than routine payments to be made in the normal course of business
and consistent with past practice).
2.24 Insurance.
Section 2.24 of the Company Disclosure Schedule lists all insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, contract workers, officers and
directors of the Company or any affiliate. There is no claim by the
Company or any affiliate pending under any of such policies or bonds as
to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable
under all such policies and bonds have been paid, and the Company and its
affiliates are otherwise in material compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially
similar insurance coverage). The Company and the Principal Sellers have
no Knowledge of threatened termination of, or premium increase with
respect to, any of such policies.
2.25 Compliance with Laws.
The Company and the Subsidiary have complied with and are not in
violation of any foreign, federal, state or local statute, law or
regulation except when the failure to comply would not reasonably be
expected to have a Material Adverse Effect on the Company. Neither the
Company nor the Subsidiary has received any notices of violation with
respect to any such statute, law or regulation.
2.26 Export Control Laws.
The Company and the Subsidiary have conducted their respective export
transactions in accordance with applicable provisions of United States,
German and Israeli export control laws and regulations, including but not
limited to the Export Administration Act and implementing Export
Administration Regulations, Israel's Import Export Ordinance, the
Supervision of Commodities and Services Law and relevant regulations and
orders issued pursuant thereto and the European Union export laws and
regulations, except for such violations which could not reasonably be
expected to have a Material Adverse Effect on the Company. Without
limiting the foregoing, but subject to the exception set forth in the
immediately preceding sentence:
(a) The Company and the Subsidiary have obtained all export licenses and
other approvals required for its export of products, software and
technologies from the United States, Germany and Israel and for any other
place from which the Company or the Subsidiary exports any such products,
software or technologies;
(b) The Company and the Subsidiary are in compliance with the terms of
all applicable export licenses or other approvals;
(c) There are no pending or, to the Knowledge of the Company and the
Principal Sellers, threatened claims against the Company or the
Subsidiary with respect to such export licenses or other approvals; and
(d) No consents or approvals for the transfer of export licenses to
Purchaser are required, or such consents and approvals can be obtained
expeditiously without material cost.
2.27 Sales Order Backlog.
As of March 31, 2000, open sales orders accepted by the Company and
the Subsidiary totaled $6,605,441. Section 2.27 of the Company
Disclosure Schedule lists all sales orders exceeding $2,000 per order,
which have been accepted by the Company or the Subsidiary, and which were
open as of March 31, 2000.
2.28 Grants, Incentives and Subsidies.
Correct copies of all applications submitted by the Company to the
Investment Center for receipt of Approved Enterprise Status in accordance
with the Encouragement of Capital Investments Law--1959 (the "Investment
Law") and all letters of approvals, and supplements thereto, granted by
the Investment Center have been provided to the Purchaser. Correct
copies of all applications submitted by the Company to the Office of the
Chief Scientist for receipt of research and development funding in
accordance with the Law for the Encouragement of Industrial Research and
Development--1984 (the "Research Law") and all letters of approval, and
supplements thereto, granted by the Office of the Chief Scientist have
been provided to the Purchaser. The Company is in compliance, in all
material respects, with the terms and conditions of all of its grants,
incentives and subsidies from the Government of the State of Israel or
any agency thereof (the "Company Grants") and has duly fulfilled all the
undertakings relating thereto, except where any such lack of compliance
would not reasonably be expected to have a Material Adverse Effect on the
Company. The Company is unaware of the occurrence of any event which
might lead to the annulment or material limitation of any of the Company
Grants.
2.29 Bank Accounts, Letters of Credit and Powers of Attorney.
Section 2.29 of the Company Disclosure Schedule lists (a) all bank
accounts, lock boxes and safe deposit boxes relating to the business and
operations of the Company or the Subsidiary (including the name of the
bank or other institution where such account or box is located and the
name of each authorized signatory thereto), (b) all outstanding letters
of credit issued by financial institutions for the account of the Company
or the Subsidiary (selling forth, in each case, the financial institution
issuing such letter of credit, the maximum amount available under such
letter of credit, the terms (including the expiration date) of such
letter of credit and the party or parties in whose favor such letter of
credit was issued), and (c) the name and address of each Person who has a
power of attorney to act on behalf of the Company or the Subsidiary. The
Sellers' Representative has heretofore delivered to Purchaser true,
correct and complete copies of each letter of credit and each power of
attorney described on Section 2.29 of the Company Disclosure Schedule.
2.30 Warranties; Indemnities.
Except for warranties and indemnities implied by law, neither the
Company nor the Subsidiary has given any express written or, to the
Company's and the Principal Sellers' Knowledge, oral warranties or
indemnities relating to products or technology sold or services rendered
by the Company or the Subsidiary.
2.31 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance.
The Company is a "foreign issuer" (as such term is defined in 16
C.F.R. Section 801.1(e)(2)(ii)). The Company and all entities controlled
by the Company do not hold assets located in the United States of America
having an aggregate book value of $15 million or more, and the Company
and all entities controlled by the Company did not make aggregate sales
in or into the United States of $25 million or more in the Company's most
recent fiscal year. The term "controlled" as used in the preceding
sentence shall have the meaning set forth in 16 C.F.R. 80l.l(b).
2.32 Complete Copies of Materials.
The Company has delivered or made available true and complete copies
of each document (or summaries of same) referred to or delivered pursuant
to this Agreement or the Company Disclosure Schedule.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SELLERS
Each Seller hereby represents and warrants, severally and not jointly, to
Purchaser with respect to itself that on the date hereof and as of the
Closing (other than the representations and warranties of each Seller as
of a specified date, which will be true and correct as of such date) as
though made at the Closing as follows:
3.1 Investment Intent.
(a) Such Seller understands that (i) the shares of Purchaser Common
Stock constituting the Initial Consideration and the Additional
Consideration, if any, (collectively, the "Purchaser Shares") have not
been registered under the Securities Act of 1933, as amended (the
"Securities Act"), nor qualified under the securities laws of any other
jurisdiction, (ii) the Purchaser Shares cannot be resold unless they
subsequently are registered under the Securities Act and qualified under
applicable state securities laws or foreign securities laws, unless
exemptions from such registration and qualification requirements are
available, (iii) such Seller has no right to require such registration or
qualification (except as contemplated hereby), and (iv) the certificates
representing the shares of Purchaser Common Stock to be issued as Initial
Consideration and Additional Consideration, if any, shall bear the
legends as set forth in Section 1.11 hereof.
(b) The Purchaser Shares to be received by such Seller pursuant to this
Agreement will be acquired for such Seller's own account and not with a
view to, or intention of, distribution thereof in violation of the
Securities Act, any applicable state securities laws or foreign
securities laws, and the Purchaser Shares will not be disposed of in
contravention of the Securities Act or any applicable state securities
laws or foreign securities laws.
(c) Such Seller is either:
(i) an "accredited investor" as such term is defined in
Rule 501 of Regulation D of the Securities Act;
(ii) not an "accredited investor," but such Seller has
substantial knowledge and experience in financial and
business matters and is capable, without the use of a
financial advisor, of utilizing and analyzing the
information made available in connection with the
acquisition of the Purchaser Shares under this Agreement,
and of evaluating the merits and risks of an investment in
the Purchaser Shares; or
(iii) not an "accredited investor," but such Seller
has, through appropriate representation by a "purchaser
representative" (as such term is used in the Securities
Act and Regulation D thereunder), substantial knowledge
and experience in financial and business matters and is
capable, with the use of a financial advisor, of utilizing
and analyzing the information made available in connection
with the acquisition of the Purchaser Shares under this
Agreement, and of evaluating the merits and risks of an
investment in the Purchaser Shares.
(d) Prior to the Closing, such Seller will provide Purchaser with such
information concerning any prior investment experience, business or
professional experience and other information as Purchaser may reasonably
deem necessary to further evaluate the foregoing representations,
including a customary investor questionnaire with reasonably acceptable
answers thereon, as to such Seller's investor status.
(e) Such Seller has carefully reviewed and understands the risks of, and
other considerations relating to, an investment in the Purchaser Shares.
(f) Such Seller is able to bear the economic risk of his investment in
the Purchaser Shares for an indefinite period of time. The Purchaser
Shares have not been registered under the Securities Act and, therefore,
cannot be sold unless subsequently registered under the Securities Act or
an exemption from such registration is available and are subject to
additional restrictions, including without limitation, rights of
repurchase, rights of first refusal and restrictions on transfer as
provided in this Agreement.
(g) Such Seller has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the offering of the
Purchaser Shares, has had full access to such other information
concerning Purchaser as such Seller has requested. If such Seller is not
an "accredited investor," such Seller has received the Offering Circular
(as defined below) and has read the Offering Circular prior to making a
decision to invest in the Purchaser Shares.
(h) The name, address and shareholdings in the Company of such Seller as
listed on Schedule A are true and correct in all material respects, and
such address constitutes such Seller's principal address for the purpose
of determining the applicability of any state, local or foreign
securities laws.
3.2 Ownership of Seller's Shares.
Such Seller holds of record and owns beneficially Ordinary Shares set
forth next to his name in Schedule A free and clear of any restrictions
on transfer (other than any restrictions under the Securities Act and
state securities laws and any notification requirements under the HSR
Act), Taxes, Liens, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. Such Seller is a not party
to any option, warrant, purchase right, or other contract or commitment
that could require such Seller to sell, transfer, or otherwise dispose of
any capital stock of the Company (other than this Agreement). Such
Seller is not a party to any voting trusts or agreements, proxy, or other
agreement or understanding with respect to the voting of any capital
stock of the Company.
3.3 Authority.
(a) If such Seller is not a natural Person, it warrants and represents
with regard to itself that it is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization.
Such Seller warrants and represents with regard to itself that it has
full power and, if such Seller is an individual, capacity, and if such
Seller is not a natural Person, authority, to execute, deliver and
perform this Agreement and the transactions contemplated hereunder to be
performed by it. If such Seller is not a natural Person, the execution,
delivery and performance of this Agreement by such Seller has been duly
authorized and approved by all necessary corporate or other action and no
corporate or other proceedings on the part of such Seller are necessary
to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly executed and delivered by such Seller and is
the legal, valid and binding obligation of such Seller, enforceable
against such Seller in accordance with its terms, except as such
enforceability may be subject to the laws of general application relating
to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable
remedies.
(b) If such Seller is not a natural Person, the execution, delivery and
performance of this Agreement by such Seller and the consummation by it
of the transactions contemplated hereunder do not, and will not, violate
or conflict with any provision of the charter, by-laws or other
organizational documents of such Seller. There is no liquidation payment
or preference that is, or will be, due and owing to such Seller pursuant
to the Memorandum of Association and Articles of Association of the
Company in connection with the transactions contemplated hereby and the
payment to such Seller of its ratable share of the Initial Consideration
and the Additional Consideration, if any, in consideration for such
Seller's Shares does not, and will not, violate or conflict with any
provision of the Memorandum of Association and Articles of Association of
the Company. The execution, delivery and performance of this Agreement
by such Seller and the consummation by it of the transactions
contemplated hereunder do not, and will not, (i) violate any law, rule,
regulation, order, writ, injunction, judgment or decree of any court,
governmental authority or regulatory agency applicable to such Seller or
(ii) require any consent, approval, authorization or permission of, or
filing with or notification to any Governmental Entity except, in the
case of (i), for violations which, individually or in the aggregate would
not reasonably be expected to have a material adverse effect on such
Seller's ability to consummate the transactions contemplated hereby, and
except, in the case of (ii), any such consent, approval, authorization,
permission, notice or filing which if not obtained or made by such Seller
could not reasonably be expected to have a material adverse effect on
such Seller's ability to consummate the transactions contemplated hereby
and except, in the case of (i) and (ii), for (x) the Israeli Regulatory
Approvals and (y) the filing by the Principal Sellers and Purchaser of a
premerger notification and report form under the HSR Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Purchaser hereby represents and warrants to the Company and the Sellers,
subject to such exceptions as are specifically disclosed in the
disclosure letter (referencing the appropriate section and paragraph
numbers) supplied by the Purchaser to the Company and the Sellers (the
"Purchaser Disclosure Schedule") and dated as of the date hereof, that on
the date hereof and as of the Closing (other than the representations and
warranties of each Seller as of a specified date, which will be true and
correct as of such date) as though made at the Closing as follows:
4.1 Organization, Standing and Power.
Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Purchaser has
the corporate power to own its properties and to carry on its business as
currently conducted and as currently contemplated to be conducted.
Purchaser is duly qualified or licensed to do business and is in good
standing as a foreign or licensed corporation in each jurisdiction in
which it conducts its business, except where the failure to so qualify or
be licensed would not reasonably be expected to have a Material Adverse
Effect on Purchaser.
4.2 Authority.
Purchaser has all requisite power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board
of Directors of Purchaser, which constitutes all necessary corporate or
other action on the part of Purchaser, and no further action is required
on the part of Purchaser to authorize the Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered
by Purchaser and assuming the due authorization, execution and delivery
by the other parties hereto, constitutes the valid and binding obligation
of Purchaser, enforceable against Purchaser in accordance with its terms,
except as such enforceability may be subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or
other equitable remedies.
4.3 No Conflict.
The execution and delivery by Purchaser of this Agreement, and the
consummation of the transactions contemplated hereby, will not Conflict
with (i) any provision of the Amended and Restated Certificate of
Incorporation and bylaws of Purchaser, (ii) any Contract to which
Purchaser or any of its properties or assets (including intangible
assets), is subject, or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation which, to Purchaser's Knowledge, is
applicable to Purchaser or any of its properties (tangible and
intangible) or assets except, in the case of clauses (ii) or (iii) , to
the extent any such Conflicts could not, individually or in the
aggregate, reasonably be expected to prevent the consummation of the
Share Purchase or otherwise materially impair the ability of the parties
hereto to perform their obligations under this Agreement.
4.4 Consents.
No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, or any
third party including a party to any agreement with Purchaser (so as not
to trigger any Conflict) is required by or with respect to Purchaser in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable securities
laws, (ii) the Israeli Regulatory Approvals, (iii) the filing by the
Principal Sellers and Purchaser of a premerger notification and report
form under the HSR Act, and (iv) any consent, waiver, approval, order or
authorization the failure of which to obtain, and any registration,
declaration or filing the failure of which to make, could not,
individually or in the aggregate, reasonably be expected to prevent the
consummation of the Share Purchase or otherwise materially impair the
ability of the parties hereto to perform their obligations under this
Agreement.
4.5 SEC Reports; Financial Statements.
(a) Purchaser has made available to the Company a correct and complete
copy of each form, report, schedule, registration statement and
definitive proxy statement and other document filed by Purchaser with the
Securities and Exchange Commission (the "SEC") on or after January 1,
1999 which are all the forms, reports and documents required to be filed
by Purchaser with the SEC since January 1, 1999. All such required
forms, reports, schedules, registration statements, definitive proxy
statements and other documents (including those that Purchaser may file
after the date hereof until the Closing) are referred to herein as the
"Purchaser SEC Reports." The Purchaser SEC Reports (A) were or will be
filed on a timely basis, (B) were or will be prepared in accordance and
compliance with the requirements of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as the case may
be, and the rules and regulations of the SEC thereunder applicable to
such Purchaser SEC Reports, and (B) did not or will not at the time they
were filed or are filed (or if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(b) Each set of consolidated financial statements (including, in each
case, any related notes thereto) contained in the Purchaser SEC Reports
(i) complied or will comply as to form with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto, (ii) was or will be prepared in accordance with U.S.
GAAP on a basis consistent throughout the periods involved and consistent
with each other (except as may be indicated in the notes thereto or, in
the case of unaudited statements, do not contain footnotes as permitted
by Form 10-Q of the Exchange Act) and (iii) each fairly presents in all
material respects the consolidated financial position of Purchaser and
its subsidiaries at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated,
consistent with the books and records of Purchaser and its subsidiaries,
except that the unaudited interim financial statements were or are
subject to normal adjustments which were not or are not expected to be
material in amount. The audited balance sheet of Purchaser as of
December 31, 1999 is referred to herein as the "Purchaser Balance Sheet."
4.6 Litigation.
There is no action, suit, claim or proceeding of any nature pending,
or to the Knowledge of Purchaser threatened, against Purchaser, its
properties (tangible or intangible) or any of its officers or directors,
nor to the Knowledge of Purchaser is there any reasonable basis therefor.
There is no investigation or other proceeding pending or to the Knowledge
of Purchaser threatened, against Purchaser, any of its properties
(tangible or intangible) or any of its officers or directors by or before
any Governmental Entity, nor to the Knowledge of Purchase is there any
reasonable basis therefor. Purchaser has not received any written or, to
Purchaser's Knowledge, oral notice from any Governmental Entity that such
Governmental Entity has at any time challenged or questioned the legal
right of Purchaser to conduct its operations as presently or previously
conducted or as presently contemplated to be conducted.
4.7 Purchaser Common Stock.
The Purchaser Common Stock which constitutes the Initial Consideration
and the Additional Consideration, if any, has been duly authorized, and
upon consummation of the Share Purchase (in the case of the shares of
Purchaser Common Stock constituting the Initial Consideration), or the
satisfaction of the applicable condition entitling the Sellers to receive
any payment of Additional Consideration (in the case of the shares of
Purchaser Common Stock constituting any payment of Additional
Consideration), will be validly issued, fully paid and nonassessable.
4.8 Brokers' and Finders' Fees.
Purchaser has not incurred, nor will it incur, directly or indirectly,
any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement or any transaction
contemplated hereby.
4.9 Capitalization: Options and Other Rights.
The authorized capital of Purchaser is consists of 40,000,000 shares
of Purchaser Common Stock and 5,000,000 shares of preferred stock, $0.001
par value per share (the "Purchaser Preferred Stock"). As of March 31,
2000, Purchaser had issued and outstanding 21,871,242 shares of Purchaser
Common Stock. No shares of Purchaser Preferred Stock are issued and
outstanding. Purchaser has reserved 5,589,697 shares of Purchaser Common
Stock for issuance pursuant to Purchaser' 1998 Stock Incentive Plan (the
"Purchaser Option Plan"), of which, as of February 29, 2000, 746,630
shares have been issued pursuant to option exercises or direct stock
purchases, 3,795,750 shares are subject to outstanding, unexercised
options, and 1,047,317 shares are available for future grant thereunder.
All the shares of Purchaser Common Stock have been duly and validly
authorized and issued and are fully paid and nonassessable and any share
of Purchaser Common Stock when issued in accordance with the terms of the
Purchaser Option Plan will be duly and validly authorized and issued and
fully paid and nonassessable. Purchaser has no other capital stock
authorized, issued or outstanding.
4.10 No Changes.
Except as disclosed in the Purchaser SEC Reports filed prior to the
date of this Agreement, since the date of the Purchaser Balance Sheet,
there has not been any event, change or development in the business,
properties, financial condition or results of operations of the Purchaser
and its Subsidiaries, taken as a whole, which, individually or in the
aggregate, has had or would reasonably be expected to have a Material
Adverse Effect on Purchaser.
4.11 Intellectual Property.
(a) Other than as disclosed in the Purchaser SEC Reports, Purchaser and
its subsidiaries have such ownership of or such rights by license or
other agreement to use all Intellectual Property as are necessary to
permit Purchaser and its subsidiaries to conduct their business as
currently conducted (collectively, the "Purchaser Intellectual
Property"), except where the failure to have such ownership, license or
right to use would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Purchaser.
(b) To Purchaser's Knowledge and other than as disclosed in the
Purchaser SEC Reports, the conduct of the business of Purchaser and its
subsidiaries as currently conducted does not infringe upon the
proprietary rights of any third party and there are no present or
threatened infringements of the Purchaser Intellectual Property by any
third party, except, in either case, for such infringements which would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Purchaser. Other than as disclosed in the
Purchaser SEC Reports, there are no pending or, to Purchaser's Knowledge,
threatened proceedings or litigation or other adverse claims by any
Person against the use by Purchaser or its subsidiaries of any Purchaser
Intellectual Property that is owned by Purchaser or its subsidiaries or,
to the Purchaser's Knowledge, pending or threatened proceedings or
litigation or other adverse claims by any Person against the use by
Purchaser or its subsidiaries of any Purchaser Intellectual Property that
is licensed to Purchaser or its subsidiaries.
4.12 Purchaser Employee Benefit Plans.
All "employee benefit plans," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
maintained or contributed to by Purchaser or an affiliate are in material
compliance with all applicable provisions of ERISA and the Code, and
Purchaser and its affiliates do not have any liabilities or obligations
with respect to employee benefit plans, arrangement, agreements or
programs, whether or not accrued, contingent or otherwise, except (a) as
previously disclosed in writing to the Company, (b) as disclosed in the
Purchaser SEC Reports, and (c) for instances of noncompliance or
liabilities or obligations that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
Purchaser.
ARTICLE V
CONDUCT PRIOR TO THE CLOSING
5.1 Conduct of Business of the Company.
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Closing, the
Company agrees, except to the extent that Purchaser shall otherwise
consent in writing or by email, to carry on the business of the Company
and the Subsidiary in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, to pay the
material debts and material Taxes of the Company and the Subsidiary when
due, to pay or perform, in the ordinary course of business, other
material obligations when due, and, to the extent consistent with such
business, use its reasonable best efforts consistent with past practice
and policies to preserve intact the Company's and the Subsidiary's
present business organizations, keep available the services of the
Company's and the Subsidiary's present officers and key employees and
preserve the Company's and the Subsidiary's relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it, all with the goal of preserving unimpaired in all
material respects the Company's and the Subsidiary's goodwill and ongoing
businesses at the Closing. Except as required by this Agreement or as
set forth in Section 5.1 of the Company Disclosure Schedule, neither the
Company nor the Subsidiary shall, without the prior written consent
(which may be delivered by email) of Purchaser:
(a) enter into any commitment or transaction involving any expenditure
(other than capital expenditures permitted by clause (b) and payments
permitted by clause (q)) by the Company exceeding $100,000 individually
or $750,000 in the aggregate in any calendar month;
(b) make or commit to make any capital expenditure exceeding $50,000 in
the aggregate in any calendar month.
(c) except in the ordinary course of business consistent with past
practices, (i) sell, license or transfer to any Person any rights to any
Company Intellectual Property or enter into any agreement with respect to
any Company Intellectual Property with any Person or with respect to any
Intellectual Property of any Person (provided, that in no event shall the
Company or the Subsidiary grant an exclusive license to any Company
Intellectual Property), (ii) buy or license any Intellectual Property or
enter into any agreement with respect to the Intellectual Property of any
Person, (iii) enter into any agreement with respect to the development of
any Intellectual Property with a third party, (iv) or change pricing or
royalties charged by the Company or the Subsidiary to its customers or
licensees, or the pricing or royalties set or charged by Persons who have
licensed Intellectual Property to the Company or the Subsidiary;
(d) except for non-exclusive Contracts in the ordinary course of
business consistent with past practices, enter into or amend any Contract
pursuant to which any other party is granted marketing, distribution,
development or similar rights of any type or scope with respect to any
products or technology of the Company or the Subsidiary;
(e) amend or otherwise modify (or agree to do so), or violate the terms
of, any of the Company Contracts set forth or described in the Company
Disclosure Schedule;
(f) commence any litigation other than (i) against any party hereto in
connection with the transactions contemplated by this Agreement, (ii) for
the routine collection of debts, and (iii) where the Company reasonably
and in good faith believes that it would be irreparably harmed if it were
not to commence such litigation, or settle any material litigation;
(g) declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any
Ordinary Shares, or split, combine or reclassify any Ordinary Shares or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for Ordinary Shares, or repurchase, redeem or
otherwise acquire, directly or indirectly, any Ordinary Shares (or
options, warrants or other rights exercisable therefor) except in
accordance with the agreements existing on the date hereof and disclosed
in the Company Disclosure Schedule or evidencing Company Options;
provided, however, that (i) the Company may issue Ordinary Shares in
exchange for and in cancellation of any unexercised Company Purchase
Rights and (ii) in the event any Company Purchase Rights are exercised,
the Company may declare, set aside and pay a dividend on, or otherwise
make a distribution in respect of, or otherwise make a cash payment to
the holders of, Ordinary Shares solely out of the amount by which the
proceeds received by the Company in connection with such exercise of the
Company Purchase Rights exceed the outstanding principal amount of any
interim bridge financing provided to the Company by Purchaser together
with accrued and unpaid interest thereon.
(h) issue, grant, deliver or sell or authorize or propose the issuance,
grant, delivery or sale of, or purchase or propose the purchase of, any
shares of capital stock of the Company or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other
agreements or commitments of any character obligating it to issue or
purchase any such shares or other convertible securities, except for
(i) Ordinary Shares issued upon exercise of Company Options outstanding
on the date hereof, (ii) Ordinary Shares issued pursuant to agreements
existing on the date hereof and disclosed in the Company Disclosure
Schedule, (iii) Ordinary Shares issued in exchange for and in
cancellation of any unexercised Company Purchase Rights, or (iv) or the
issuance of no more than 20,000 Company Options per new non-executive
level employee hire, each with an exercise price per share of not less
than the fair market value of the Ordinary Shares at the time of the
grant, to not more than five new non-executive level employee hires, and
with each option being subject to the Company's or Purchaser's typical
vesting schedule consistent with prior practices;
(i) cause or permit any amendments to its Memorandum of Association and
Articles of Association of the Company;
(j) acquire or agree to acquire by merging or consolidating with, or by
purchasing any assets or equity securities of, or by any other manner,
any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree
to acquire any assets which are material, individually or in the
aggregate, to the Company's business;
(k) except as allowed pursuant to Section 5.1(c) hereof, sell, lease,
license or otherwise dispose of any of its properties or assets, except
for properties or assets which are not Intellectual Property in the
ordinary course of business and consistent with past practices;
(l) incur any indebtedness for borrowed money or guarantee any
indebtedness or otherwise become liable for the debts or obligations of a
third party or issue or sell any debt securities or guarantee any debt
securities of others except for (i) trade payables incurred in the
ordinary course of business consistent with past practices, and (ii) for
short-term borrowings not exceeding $3.0 million in the aggregate
outstanding at any time, which borrowings shall be prepayable at the
option of the Company at any time without the payment of any penalty,
premium or similar payment;
(m) grant any loans to others or purchase debt securities of others or
amend the terms of any existing loan agreement except for (i) customer
accounts receivable extended in the ordinary course of business
consistent with past practices and (ii) amendments to the terms of any
existing loan agreement to provide for any short-term borrowings
permitted under clause (l);
(n) grant any severance or termination pay (i) to any director or
officer, or (ii) to any other employee or contract worker except as
required by law or grants made pursuant to written agreements adopted on
or prior to the date hereof and disclosed in the Company Disclosure
Schedule;
(o) adopt or amend any employee benefit plan, or enter into any
employment contract, pay or agree to pay any special bonus or special
remuneration to any director, employee or contract worker, or increase
the salaries or wage rates of its employees or contract workers, except
(i) as required by law, (ii) for payments made pursuant to written
agreements adopted on or prior to the date hereof and disclosed in the
Company Disclosure Schedule, (iii) agreements with new non-executive
level employee hires entered into in the ordinary course of business
consistent with past practices, (iv) for increases of the base salaries
or base wage rates of not more than twenty percent (20%) of the non-
executive level employees of the Company in an amount not to exceed ten
percent (10%) of the base salary or base wage rate of any such non-
executive level employee, and (v) for cash bonuses not to exceed $5,000
in the aggregate;
(p) revalue any of its assets, including without limitation writing down
the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business;
(q) except as disclosed in Section 5.1(q) of the Company Disclosure
Schedule, pay, discharge or satisfy, in an amount in excess of $25,000 in
any one case, or $50,000 in the aggregate, any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business consistent with past practices;
(r) make or change any election in respect of material Taxes, adopt or
change any accounting method in respect of Taxes (other than as required
by U.S. GAAP), enter into any closing agreement, settle any claim or
assessment in respect of material Taxes, or consent to any extension or
waiver of the limitation period applicable to any claim or assessment in
respect of material Taxes;
(s) enter into any strategic alliance or joint marketing arrangement or
agreement, provided, that the Company may negotiate and pursue those non-
exclusive agreements under negotiation by the Company as of the date of
this Agreement and listed on Section 5.1(s) of the Company Disclosure
Schedule to the extent that such agreements are materially consistent
with the proposed terms thereof as set forth on Section 5.1(s) of the
Company Disclosure Schedule;
(t) take any action to accelerate the vesting schedule of any of the
outstanding Company Options or Ordinary Shares;
(u) apply for a grant from the Office of the Chief Scientist or the
Investment Center of the Israeli Ministry of Industry and Trade, or any
other grant or subsidy from any other Government Entity or otherwise;
(v) hire or terminate any employees or contract workers, or encourage
any employees or contract workers to resign from the Company or the
Subsidiary, except in the ordinary course of business; or
(w) take, or agree in writing or otherwise to take, any of the actions
described in Sections 5.1(a) through 5.1(v) hereof, or any other action
that would reasonably be expected to (x) prevent the Company from
performing or cause the Company not to perform its covenants hereunder or
(y) cause or result in any of its representations and warranties
contained herein being untrue or incorrect.
5.2 No Solicitation.
Until the earlier of (i) the Closing, or (ii) the date of termination
of this Agreement pursuant to the provisions of Section 9.1 hereof, the
Company shall not (and the Company shall use its reasonable best efforts
to prevent, as applicable, any of the Company's officers, directors,
employees, contract workers, stockholders, agents, representatives or
affiliates from), directly or indirectly, take any of the following
actions with any party other than Purchaser and its designees:
(a) solicit, encourage, initiate or participate in any inquiry,
negotiations or discussions, or enter into any agreement, with respect to
any offer or proposal to acquire all or any material part of the
Company's business, properties or technologies, or any material amount of
the Ordinary Shares (whether or not outstanding), whether by merger,
purchase of assets, tender offer, license or otherwise, or effect any
such transaction, (b) disclose any information not customarily disclosed
to any Person concerning the Company's business, technologies or
properties, or afford to any Person access to its properties,
technologies, books or records, not customarily afforded such access,
(c) assist or cooperate with any Person to make any proposal to purchase
all or any material part of the Ordinary Shares or assets of the Company,
other than inventory in the ordinary course of business, or (d) enter
into any agreement with any Person providing for the acquisition of the
Company, whether by merger, purchase of assets, license, tender offer or
otherwise. In the event that the Company or any of the Company's
affiliates shall receive, prior to the Closing or the termination of this
Agreement, any offer, proposal, or request, directly or indirectly, of
the type referenced in clause (a) or (c) above, or any request for
disclosure or access pursuant to clause (b) above, the Company shall
immediately notify Purchaser thereof, including information as to the
identity of the offeror or the party making any such offer or proposal
and the specific terms of such offer or proposal, as the case may be, and
such other information related thereto as Purchaser may reasonably
request . The parties hereto agree that irreparable damage would occur
in the event that the provisions of this Section 5.2 were not performed
in accordance with their specific terms or were otherwise breached. It
is accordingly agreed by the parties hereto that Purchaser shall be
entitled to seek an injunction or injunctions to prevent breaches of the
provisions of this Section 5.2 and to enforce specifically the terms and
provisions hereof in any court of the State of Israel having
jurisdiction, this being in addition to any other remedy to which
Purchaser may be entitled at law or in equity.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Information.
The Company shall afford Purchaser and its accountants, counsel and
other representatives, reasonable access during the period prior to the
Closing to (i) all of the Company's properties, books, contracts,
commitments and records, (ii) all other information concerning the
business, properties and personnel (subject to restrictions imposed by
applicable law) of the Company as Purchaser may reasonably request, and
(iii) all employees and contract workers of the Company as identified by
Purchaser. The Company agrees to provide to Purchaser and its
accountants, counsel and other representatives copies of internal
financial statements (including Tax returns and supporting documentation)
promptly upon request. No information or knowledge obtained in any
investigation pursuant to this Section 6.1 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions
to the obligations of the parties to consummate the Share Purchase in
accordance with the terms and provisions hereof.
6.2 Confidentiality.
Each of the parties hereto hereby agrees that the information obtained
in any investigation pursuant to Section 6.1 hereof, or pursuant to the
negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby, shall be governed by the terms of the
Mutual Confidential Information Non-Disclosure Agreement effective as of
February 11, 2000 (the "Confidential Disclosure Agreement") among the
Company and Purchaser.
6.3 Expenses.
Whether or not the Share Purchase is consummated, all fees and
expenses incurred in connection with the Share Purchase including,
without limitation, all legal, accounting, financial advisory, consulting
and all other fees and expenses of third parties ("Third Party Expenses")
incurred by a party in connection with the negotiation and effectuation
of the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the respective party
incurring such fees and expenses; provided that, in the event the Share
Purchase is consummated, Purchaser agrees to pay, or to cause the Company
to pay, up to $2.0 million of fees payable to ▇▇▇▇▇ and up to $350,000 of
such other documented Third Party Expenses incurred by the Company, and
any Third Party Expenses incurred by the Company in excess of the
foregoing amounts, shall be paid out of the Escrow Amount and shall not
be limited by the Basket Amount. The Company shall provide Purchaser
with a statement of an estimate of Third Party Expenses incurred by the
Company three (3) business days prior to the Closing Date (the "Statement
of Expenses").
6.4 Public Disclosure.
Neither party shall issue any statement or communication to any third
party (other than their respective agents) regarding the subject matter
of this Agreement or the transactions contemplated hereby, including, if
applicable, the termination of this Agreement and the reasons therefor,
without the consent of the other party, which consent shall not be
unreasonably withheld, except that this restriction shall be subject to
Purchaser's obligation to comply with applicable securities laws.
6.5 Filings and Consents.
The Company shall obtain the consents, waivers and approvals listed in
Section 6.5 of the Company Disclosure Schedule so as to preserve all
rights of, and benefits to, the Company thereunder from and after the
Closing. Purchaser shall obtain the ISA Exemption.
6.6 Reasonable Efforts.
Subject to the terms and conditions provided in this Agreement, each
of the parties hereto shall use commercially reasonable efforts to take
promptly, or cause to be taken, all actions, and to do promptly, or cause
to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and
approvals and to effect all necessary registrations and filings and to
remove any injunctions or other impediments or delays, legal or
otherwise, in order to consummate and make effective the transactions
contemplated by this Agreement for the purpose of securing to the parties
hereto the benefits contemplated by this Agreement.
6.7 Notification of Certain Matters.
The Company shall give prompt notice to Purchaser of, and Purchase
shall give prompt notice to the Company of: (i) the occurrence or non-
occurrence of any event, the occurrence or non-occurrence of which would
reasonably be expected to cause any representation or warranty of the
Company or Purchaser as the case may be contained in this Agreement to be
untrue or inaccurate at or prior to the Closing, and (ii) any failure of
the Company or Purchaser as the case may be to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.7 shall not (a) limit or otherwise affect any remedies
available to the party receiving such notice or (b) constitute an
acknowledgment or admission of a breach of this Agreement. No disclosure
by the Company or Purchaser as the case may be pursuant to this
Section 6.7, however, shall be deemed to amend or supplement the Company
Disclosure Schedule or prevent or cure any misrepresentations, breach of
warranty or breach of covenant.
6.8 Additional Documents and Further Assurances.
If, at any time after the Closing Date, Purchaser shall consider or be
advised that any deeds, bills of sale, assignments or assurances or other
documents or instruments or any other acts or things are reasonably
necessary or proper (a) to vest, perfect or confirm, of record or
otherwise, in Purchaser, its right to, and title or interest in, the
Ordinary Shares or (b) otherwise to carry out the purposes of this
Agreement, Purchaser shall so advise the Sellers' Representative in
writing, and the Sellers thereupon shall execute and deliver all such
deeds, bills of sale, assignments and assurances and other documents and
instruments and do all such other acts and things reasonably necessary,
desirable or proper to vest, perfect or confirm its right, title or
interest in, to or under the Ordinary Shares, and otherwise to carry out
the purposes of this Agreement. Purchaser shall, at the request of any
of the other parties hereto, execute and deliver such other instruments
and do and perform such other acts and things as may be necessary or
proper for effecting completely the consummation of the Share Purchase
and the transactions contemplated hereby.
6.9 Granting of Purchaser Options.
(a) At the Closing, Purchaser shall grant options (the "Purchaser
Options") to purchase an aggregate of 200,000 shares of Purchaser Common
Stock under the Purchaser Option Plan to selected key employees of the
Company, including each of the Key Employees and ▇▇▇▇▇ ▇▇▇▇▇, as shall be
agreed by Purchaser and the Company prior to the Closing Date, which
options will be subject to Purchaser's standard terms and conditions,
except that the Purchaser Options shall vest as follows: one fourth (1/4)
shall vest on the first anniversary of the Closing Date, one forty-eighth
(1/48) shall vest on the last day of each of the next twelve months after
such first anniversary date, and one fourth (1/4) shall vest on each of
the eighteen month and two year anniversaries of the Closing Date. The
exercise price for the Purchaser Options shall be the closing price for
the Purchaser Common Stock as quoted on the Nasdaq Stock Market on the
date of grant. The number of Purchaser Options granted hereunder shall
be adjusted to reflect fully the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of
securities convertible into or exchangeable for Purchaser Common Stock),
reorganization, recapitalization or other like change with respect to
Purchaser Common Stock occurring after the date hereof and prior to the
Closing.
(b) Employees of the Company after the Closing will be eligible to
receive additional options to purchase Purchaser Common Stock pursuant to
existing option plans of Purchaser. The number, vesting and timing of
grants of such options shall be based on criteria applied to other
Purchaser employees.
(c) The Purchaser Common Stock to be issued upon the exercise of such
Purchaser Options has been duly and validly reserved for issuance and,
upon issuance in accordance with the terms of the Purchaser Option Plan,
will be duly and validly issued, fully paid, nonassessable, free of any
liens or encumbrances (other than any liens or encumbrances created by
the holder thereof) and free of restrictions on transfer other than
restrictions on transfer under this Agreement and applicable Israeli and
United States state and federal securities laws.
(d) Purchaser agrees to file and use its reasonable best efforts to have
declared effective, no later than the date that is thirty (30) days after
the Closing Date a registration statement on Form S-8 under the
Securities Act covering the shares of Purchaser Common Stock issuable
pursuant to the Purchaser Options.
6.10 Employee Benefit Plans.
(a) With respect to employees of the Company located in Israel ("Israeli
Employees"), following the Closing, Purchaser shall maintain, until at
least December 31, 2000 (the "Initial Period"), or cause to be
maintained, those employee benefits currently maintained by the Company,
including Managers' Insurance Policies, Mivtachim Pension Funds,
Severance Pay Funds and Advanced Education Fund. ("Benefit
Arrangements") provided to the Israeli Employees by the Company, as of
the date hereof, with such changes thereto which do not, in the
aggregate, materially impact and are no less favorable than the overall
benefits conveyed under such Benefit Arrangements; provided that after
the Initial Period the foregoing Benefit Arrangements shall remain in
effect until such time as Purchaser shall implement employee Benefit
Arrangements applicable to all Purchaser employees located in Israel at
which time the Israeli Employees shall be provided such plans, programs
and arrangements.
(b) Following the Closing, the employees of the Company other than
Israeli Employees (the "Non-Israeli Employees") shall be provided with,
until at least December 31, 2000, employee benefit plans or arrangements
that are, in the aggregate, not less favorable than those provided to the
Non-Israeli Employees as of the date hereof.
(c) With respect to each benefit plan, program practice, policy or
arrangement maintained by Purchaser (the "Purchaser Plans") in which Non-
Israeli Employees or Israeli Employees participate, for purposes of
determining eligibility to participate, vesting, and entitlement to
benefits, including for severance benefits and vacation entitlement (but
not for accrual of pension benefits), service with the Company shall be
treated as service with Purchaser; provided however, that such service
shall not be recognized to the extent that such recognition would result
in a duplication of benefits. Such service also shall apply for purposes
of satisfying any waiting periods, evidence of insurability requirements,
or the application of any pre-existing condition limitations. Each
Purchaser Plan shall waive pre-existing condition limitations to the same
extent waived under the applicable plan of the Company. Non-Israeli
Employees and Israeli Employees shall be given credit for amounts paid
under a corresponding benefit plan during the same period for purposes of
applying deductibles, copayments and out-of-pocket maximums as though
such amounts had been paid in accordance with the terms and conditions of
the Purchaser Plan.
6.11 Registration Rights.
(a) Subject to certain limitations set forth in the Registration Rights
Agreement attached hereto as Exhibit D (the "Registration Rights
Agreement"), Purchaser shall, at Purchaser's own expense, file, as soon
as practicable, but in no event (except as provided below) later than ten
(10) days, after the later to occur of the Closing Date or the date upon
which Purchaser's Quarterly Report on Form 10-Q for the most recent
quarter ending prior to Closing Date is required to be filed, a
registration statement on Form S-3 (the "Registration Statement") under
the Securities Act to provide for the resale by the Sellers of the shares
of Purchaser Common Stock constituting the Initial Consideration
(including the Escrow Shares constituting a part of the Initial
Consideration), and shall use its commercially reasonable efforts to
cause such Registration Statement to become effective as promptly as
reasonably practicable thereafter. Within thirty (30) days after the
issuance of the First Milestone Shares and the Second Milestone Shares,
if any, Purchaser shall either amend the Registration Statement or file
an additional registration statement covering such First Milestone Shares
or Second Milestone Shares, as applicable, under the Securities Act to
provide for the resale by the Sellers of such First Milestone Shares or
Second Milestone Shares, as applicable (including the Escrow Shares
constituting a part thereof), and shall use its commercially reasonable
efforts to cause such amended Registration Statement or additional
registration statement to become effective as promptly as reasonably
practicable thereafter. The rights and obligations of the Sellers and
Purchaser in respect of the Registration Statement shall be as set forth
in the Registration Rights Agreement.
(b) In the event that any Seller shall have failed to furnish to
Purchaser such information regarding such Seller, the shares of Purchaser
Common Stock held by such Seller, and the intended method of disposition
of such securities as shall be required pursuant to the Securities Act
and the rules and regulations thereunder to effect the registration of
such shares held by such Seller, on or prior to the Closing Date or the
date of issuance of the First Milestone Shares or Second Milestone
Shares, if any, as applicable (provided, that Purchaser shall have
requested such information from such Seller not later than fourteen (14)
days prior to the Closing Date or such issuance date, as applicable),
Purchaser shall be entitled, in its reasonable discretion, to (i) file
the Registration Statement, amended Registration Statement or additional
registration statement, as applicable, as set forth above without
including any of the shares of Purchaser Common Stock held by such
Seller, or (ii) defer the filing of the Registration Statement, amended
Registration Statement or additional registration statement, as
applicable, until the earlier to occur of the tenth day after such Seller
shall have furnished such information or the thirtieth day after such
Registration Statement is otherwise required to be filed pursuant to
Section 6.11(a) above. Notwithstanding anything herein or in the
Registration Rights Agreement, in the event that all of the shares of
Purchaser Common Stock issued to a Seller can be sold by such Seller in a
single three month period in accordance with Rule 144 under the
Securities Act, Purchaser shall have no obligation to cause the shares of
Purchaser Common Stock held by such Seller to continue to be registered.
(c) Purchaser shall file and use its reasonable best efforts to have
declared effective, a registration statement on Form S-8 for the shares
of Purchaser Common Stock issuable with respect to the assumed Company
Options no later than fifteen (15) days after the Closing Date.
6.12 Sellers' Tax Liability.
Each Seller shall prior to the Closing Date notify the Israeli Tax
Authorities of this Agreement and shall be responsible for all of its own
tax obligations deriving from the transactions contemplated in this
Agreement.
6.13 Treatment as Reorganization.
No party hereto shall knowingly take any action, or knowingly fail to
take any action, that would cause the Share Purchase not to constitute a
reorganization within the meaning of Section 368(a) of the Code, unless
otherwise required pursuant to a "determination" within the meaning of
Section 1313(a) of the Code.
6.14 Office of the Chief Scientist.
Purchaser has been informed that the Company has financed its research
and development in part, by way of funding granted by the Office of the
Chief Scientist in Israel. Purchaser shall sign a standard undertaking
towards the Office of the Chief Scientist to the effect that it shall
cause the Company to comply with the statutory, regulatory and financial
obligations to which the Company is obligated.
6.15 Nasdaq National Market Listing.
Purchaser shall file with the Nasdaq National Market a Notification
Form for Listing of Additional Shares with respect to the Purchaser
Shares issuable in connection with the transactions contemplated hereby.
6.16 Transaction Agreements.
Each of the parties hereto agrees to use its reasonable best efforts
to cause each of the Escrow Agreement and the Registration Rights
Agreement to be executed and delivered and in full force and effect as of
the Closing.
6.17 Invention Assignment Agreements.
The Company shall use commercially reasonable efforts to cooperate
with Purchaser and to encourage each of the employees of the Company to
execute and deliver to Purchaser an Invention Assignment Agreement in the
form attached hereto as Exhibit F-1 and an Electronic and Telephonic
Communications System Policy Agreement in the form attached hereto as
Exhibit F-2.
6.18 Offering Circular.
(a) As promptly as practicable after the execution of this Agreement,
Purchaser shall prepare an offering circular which shall comply as to
form and substance in all material respects with the applicable
provisions of the Securities Act, any applicable Israeli or state
securities laws, and all rules and regulations promulgated thereunder
(the "Offering Circular"). Without limiting the generality of the
foregoing, each of Purchaser and the Company shall, and shall cause its
respective representatives to, fully cooperate with the other party and
its respective representatives in the preparation of the Offering
Circular, and shall, upon request, furnish the other party with all
information concerning it and its affiliates, directors, officers and
shareholders as the other party may reasonably request in connection with
the preparation of the Offering Circular. At the request of Purchaser,
the Company shall mail the Offering Circular to each holder of Ordinary
Shares, Company Debentures and Company Purchase Rights and shall
otherwise cooperate with Purchaser in connection with the preparation of
the Offering Circular. Purchaser shall use reasonable efforts to take
all necessary actions required under any applicable federal, foreign or
state securities laws in connection with the issuance of Purchaser Common
Stock pursuant to the Share Purchase, and the Company shall take all
actions reasonably requested by Purchaser in connection therewith. The
Offering Circular shall be delivered to the Other Shareholders with a
copy of this Agreement and a Notice of Offer, in the form attached hereto
as Exhibit I (the "Offer Notice"), to purchase Ordinary Shares pursuant
to Section 341(a) of the Israeli Companies Law, 1999 (the "Companies
Law"), to each Other Shareholder.
(b) The information supplied by the Company for inclusion in the
Offering Circular shall not (i) at the time the Offering Circular is
mailed to the Other Shareholders (the "Mailing Date")and (ii) at the
Closing, contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they are made,
not misleading. If at any time prior to the Closing any event or
circumstance relating to the Company's or any of it's affiliates or its
or their respective officers and directors should be discovered by the
Company which should be set forth in an amendment or supplement to the
Offering Circular, the Company shall promptly inform Purchaser of such
event or circumstance.
(c) The information supplied by Purchaser for inclusion in the Offering
Circular shall not (i) at the Mailing Date and (iii) at the Closing,
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they are made,
not misleading. If at any time prior to the Closing any event or
circumstance relating to Purchaser's or any of its affiliates or its or
their respective officers and directors should be discovered by Purchaser
which should be set forth in an amendment or supplement to the Offering
Circular, Purchaser shall promptly inform the Company of such event or
circumstance.
6.19 Dissenting Shareholders.
The Company shall use its reasonable best efforts (which shall not
require the payment of any additional consideration) to cause the holders
of one hundred percent (100%) of the issued and outstanding Ordinary
Shares, Company Debentures and Company Purchase Rights who did not
execute this Agreement as a Seller on the date hereof to become
signatories hereto and therefore "Sellers" hereunder. In the event that
on the date that is fourteen (14) days after the Mailing Date the Sellers
hold less than one hundred percent (100%) and more than ninety percent
(90%) of the issued and outstanding Ordinary Shares, then upon the
request of Purchaser the Company shall forward a notice to each Other
Shareholder who did not execute this Agreement as a Seller (a "Dissenting
Holder"), informing such Dissenting Holder of Purchaser's intention to
require such Dissenting Holder to sell its Ordinary Shares to Purchaser,
on the same terms and conditions as contained in this Agreement, pursuant
to Section 341 of the Companies Law (the "Section 341 Notice"). In the
event that within one month of receipt of the Section 341 Notice such
Dissenting Holder has not applied to a court pursuant to Section 341(b)
of the Companies Law (or, if a court, after such application, has found
in favor of Purchaser), then Purchaser shall forward to the Sellers'
Representative the consideration pursuant to this Agreement for the
Dissenting Holder's Ordinary Shares (which consideration shall be subject
to the legends described in Section 1.11, the transfer restrictions
described in Section 1.12, the provision for Escrow Shares and
indemnification described in Sections 1.1, 1.2 and Article VIII, and the
other terms and conditions as are contained in this Agreement) and the
Company shall immediately register Purchaser in the Company's
shareholders register as the holder of those Ordinary Shares held by such
Dissenting Holder. It is hereby agreed that in the event a Dissenting
Holder files an application with a court pursuant to Section 341(b) of
the Companies Law, the Sellers shall severally and not jointly indemnify
Purchaser with respect to all costs and expenses incurred as a result of
such application and shall do all such things as shall be reasonably
necessary in order for Purchaser to successfully defend such application.
The Company shall also use its reasonable best efforts (which shall not
require the payment of any additional consideration) to cause each
Dissenting Holder to deliver to Purchaser a letter containing
representations and warranties in form and substance similar to the
representations and warranties set forth in Article III hereof which, in
the opinion of counsel to Purchaser, would satisfy the requirements of
the Securities Act and any regulations promulgated thereunder in
connection with the issuance of the Purchaser Shares to each Dissenting
Holder.
6.20 Alternative Structure.
If the Sellers hereunder are holders of less than ninety percent (90%)
of the issued and outstanding Ordinary Shares as of the date that is
fourteen (14) days after the Mailing Date, the Company and Purchaser
shall as soon as practicable thereafter restructure the acquisition of
the Company by Purchaser as a merger under Part 8, Chapter 1 of the
Companies Law, and enter into a mutually agreeable Agreement and Plan of
Merger and Reorganization giving effect to the above structure and
reflecting in all other respects the representations, warranties,
covenants, tax treatment and agreements set forth herein, and shall also
amend the Exhibits and Schedules hereto and the other agreements among
the parties hereto entered into in connection herewith to reflect such
restructuring. By signing this Agreement, each Seller irrevocably agrees
to vote all of the Ordinary Shares held by such Seller in favor of such
merger and the transactions contemplated by such Agreement and Plan of
Merger and Reorganization. In the event that, in connection with any
such restructuring, the Company's Board of Directors is required to
recommend that the Company's shareholders approve and adopt such
agreement and the merger contemplated thereby, the provisions of Section
5.2 hereof which are restated in such agreement shall be revised to the
extent required to enable the Company's Board of Directors to comply with
its fiduciary obligations under Israeli law.
6.21 Interim Financing.
At the request of the Company, Purchaser shall provide reasonable
assistance (which shall not require Purchaser to guarantee or otherwise
become contingently liable for the obligations of the Company) to the
Company in obtaining short-term financing in an amount permitted by
Section 5.1 hereof from a bank or other financial institution on
commercially reasonable terms. In the event that the Company is
unsuccessful in obtaining such short-term financing, Purchaser agrees to
provide the Company with interim non-convertible bridge financing in an
amount permitted by Section 5.1 hereof on such arms'-length commercially
reasonably terms as shall be mutually agreeable by Purchaser and the
Company.
ARTICLE VII
CLOSING CONDITIONS
7.1 Conditions to Obligations of Each Party to Effect the Share Purchase.
The respective obligations of the Company and Purchaser to effect the
Share Purchase shall be subject to the satisfaction at or prior to the
Closing of the following conditions:
(a) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary
or permanent) which is in effect and which has the effect of making the
Share Purchase illegal or otherwise prohibiting consummation of the Share
Purchase.
(b) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Share Purchase shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign,
seeking any of the foregoing be pending.
(c) ISA Exemption. Purchaser shall have received the ISA Exemption from
the Israel Securities Authorization.
(d) HSR Act. The waiting period (and any extension thereof) applicable
to the Share Purchase under the HSR Act shall have been terminated or
shall have expired.
7.2 Conditions to the Obligations of Purchaser.
The obligation of Purchaser to effect the Share Purchase shall be
subject to the satisfaction at or prior to the Closing of each of the
following conditions, any of which may be waived, in writing, exclusively
by Purchaser:
(a) Representations, Warranties and Covenants. (i) The representations
and warranties of the Company and the Sellers in this Agreement, other
than (A) the representations and warranties of the Company and the
Sellers as of a specified date, which will be true and correct in all
respects as of such date, and (B) the representations and warranties of
the Company and the Principal Sellers contained in Sections 2.2, 2.3,
2.4, 2.5, 2.6, 2.10, 2.12, and 2.13 and the representations and
warranties of the Sellers contained in Sections 3.1 and 3.2
(collectively, the "Special Representations"), shall be true and correct
in all respects on the date they were made and shall be true and correct
in all respects on and as of the Closing as though such representations
and warranties were made on and as of such time (except (x) for changes
contemplated by this Agreement and (y) where the failures to be true and
correct (without regard to any materiality, Material Adverse Effect or
Knowledge qualifications contained therein), individually or in
aggregate, have not had, and could not reasonably be expected to have (1)
a Material Adverse Effect on the Company or (2) a material adverse effect
on the ability of any Seller to consummate the transactions contemplated
hereby), (ii) the Special Representations (other than the representations
and warranties of the Company and the Sellers as of a specified date,
which will be true and correct in all material respects as of such date)
shall be true and correct in all material respects on the date they were
made and shall be true and correct in all material respects on and as of
the Closing as though such representations and warranties were made on
and as of such time (except for changes contemplated by this Agreement)
(for purposes of this Section 7.2(a)(ii), "material" shall be measured in
relation to the value of the Company's outstanding equity), and (iii) the
Company and each of the Sellers shall have performed and complied in all
material respects with all covenants and obligations under this Agreement
required to be performed and complied with by such parties as of the
Closing and Purchaser shall have received a certificate, validly executed
by the Chairman and the Chief Financial Officer of the Company and each
of the Principal Sellers to such effect.
(b) Governmental Approvals. Approvals from any court, administrative
agency or commission or other federal, state, county, local or other
foreign governmental authority, instrumentality, agency or commission (if
any) listed on Section 7.2(b) of the Company Disclosure Schedule shall
have been timely obtained.
(c) Litigation. There shall be no action, suit, claim or proceeding of
any nature pending, or credibly threatened, against Purchaser or the
Company, their respective properties or any of their respective officers
or directors, arising out of, or in any way connected with, the Share
Purchase or the other transactions contemplated by the terms of this
Agreement.
(d) Third Party Consents. Purchaser shall have received all consents,
waivers, approvals, and assignments listed in Section 6.5 of the Company
Disclosure Schedule.
(e) Injunctions or Restraints on Conduct of Business. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or
regulatory restraint provision limiting or restricting Purchaser's
conduct or operation of the business of the Company following the Closing
shall be in effect, nor shall any proceeding brought by an administrative
agency or commission or other Governmental Entity, domestic or foreign,
seeking the foregoing be pending.
(f) Resignation of Directors and Officers. Purchaser shall have
received a written resignation from each of the directors of the Company
effective as of the Closing. Purchaser shall have received from each of
the officers of the Company, other than ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇,
written resignations in their capacities as officers, but not as
employees, effective as of the Closing.
(g) Legal Opinion. Purchaser shall have received legal opinions from
the Company's special domestic legal counsel, Skadden, Arps, Slate,
▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, and the Company's Israeli legal counsel, Fischer,
Behar, Chen & Co., each in a form reasonably acceptable to Purchaser,
covering the matters set forth in Exhibits G-1 and G-2 attached hereto,
respectively.
(h) No Material Adverse Change. There shall not have occurred any event
or condition of any character that has had or would reasonably be
expected to have a Material Adverse Effect on the Company since the date
of this Agreement.
(i) Escrow Agreement. The Company, the Escrow Agent and the Sellers'
Representative shall have executed and delivered the Escrow Agreement in
the form attached hereto as Exhibit E.
(j) Employment Agreements. (i) each Founder/Executive shall have
entered into a Founder/Executive Employment and Non-Competition Agreement
with the Company in the form attached as Exhibit A-2 hereto, (ii) each
Key Employee shall have entered into an Employment and Non-Competition
Agreement with the Company in the form attached as Exhibit A-3 hereto,
(iii) each Founder/Executive and Key Employee shall be employed by the
Company as of the Closing, and (iv) no Founder/Executive or Key Employee
shall have formally notified the Company of such Founder/Executive's or
Key Employee's intention to terminate his employment with the Company
following the Closing; provided, however, that any Key Employee that is
an employee of the Subsidiary as of the date hereof shall enter into an
Employment and Non-Competition Agreement with the Subsidiary in the form
attached as Exhibit A-3 hereof with such changes and modifications as
shall be required by German law and practice as shall be reasonably
acceptable to Purchaser and the Company.
(k) Approval of the Office of the Chief Scientist. The Office of the
Chief Scientist shall have approved the transactions contemplated hereby
and, in addition, subject to Purchaser delivering the undertaking
required pursuant to Section 6.14, shall not have notified Purchaser or
the Company that (i) the amount of royalties to be paid to the Office of
the Chief Scientist upon such transfer, will be more than five percent
(5%) of revenues directly resulting from sales of those products which
utilize such Intellectual Property; and (ii) the total aggregate payment
which the Company shall be liable to pay the Office of the Chief
Scientist will be more than one hundred percent (100%) of the aggregate
amount of the funding previously provided to the Company by the Office of
the Chief Scientist.
(l) Company Purchase Rights; Company Convertible Debentures
(i) Each of the buyers that are party to those certain Purchase and Sale
Agreements, dated as of April 20, 1999, June 29, 1999 and October 5,
1999, between such buyers and the Company shall have waived or exercised
all their Company Purchase Rights and shall have delivered evidence
reasonably satisfactory to Purchaser of such waivers or exercise, or the
Company shall have certified to Purchaser that such Company Purchase
Rights shall have expired unexercised.
(ii) The Company Convertible Debenture shall have been converted into
Ordinary Shares in accordance with its terms, and the holder of the
Company Convertible Debenture shall have (x) executed and delivered a
signature page to this Agreement and become a Seller hereunder, (y)
consented to the consideration to be received in respect of the Ordinary
Shares issued upon conversion of the Company Convertible Debenture as set
forth across from such Seller's name on Schedule A, and (z) agreed that
such consideration shall be in full satisfaction of any rights that the
holder of the Company Convertible Debenture may have thereunder to
receive any Ordinary Shares from the Company or shares of Purchaser
Common Stock from Purchaser in respect thereof.
(m) Company Option Plans. The Company's Board of Directors shall have
passed resolutions (and taken any further action necessary under
applicable law or as other reasonably requested by Purchaser)
(i) adjusting the rights of the Company Option Holders under the Company
Option Plan and providing the number of shares of Purchaser Common Stock
that will derive to the Company Option Holders for each option to
purchase one Ordinary Share in the manner set forth in Section 1.3 and
(ii) terminating the Company's 1997 Share Option Plan. Each holder of
Company Options shall have been provided with a Notice of Amendment and
Substitution in the form attached hereto as Exhibit J.
(n) Securities Act Compliance. Purchaser shall reasonably be satisfied
that there are no more than 35 Sellers and Other Shareholders who are not
"accredited investors" on the Closing Date and that each Seller and Other
Shareholder who is not an "accredited investor" shall, either alone or
through appropriate representation by a "purchaser representative" (as
such terms are used in the Securities Act and the rules and regulations
promulgated thereunder), have such knowledge and experience in financial
and business matters that such Seller or Other Shareholder is capable of
evaluating the merits and risks of the prospective investment in the
Purchaser Shares.
(o) Additional Sellers. Subject to Section 6.20 hereof, not less than
ninety (90%) of the issued and outstanding Ordinary Shares shall be owned
by the Sellers.
7.3 Conditions to Obligations of the Company and the Sellers.
The obligations of the Company and the Sellers to consummate and
effect this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Closing of each of the
following conditions, any of which may be waived, in writing, exclusively
by the Company and the Sellers:
(a) Representations, Warranties and Covenants. (i) The representations
and warranties of Purchaser in this Agreement (other than the
representations and warranties of Purchaser as of a specified date, which
will be true and correct as of such date) shall be true and correct in
all respects on the date they were made and shall be true and correct in
all respects on and as of the Closing as though such representations and
warranties were made on and as of such time (except (x) for changes
contemplated by this agreement and (y) where the failures to be true and
correct (without regard to any materiality, Material Adverse Effect or
knowledge qualifications contained therein), individually or in
aggregate, have not had, and could not reasonably be expected to have a
Material Adverse Effect on Purchaser), and (ii) Purchaser shall have
complied in all material respects with all covenants and obligations of
this Agreement required to be performed and complied with by it as of the
Closing and the Company and the Sellers shall have received a
certificate, validly executed by the Chief Executive Officer and the
Chief Financial Officer of Purchaser to such effect.
(b) Legal Opinion. The Company and the Sellers shall have received
legal opinions from Purchaser's domestic legal counsel, Wilson, Sonsini,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, and Purchaser's Israeli
legal counsel, Yigal, Arnon & Co., each in a form reasonably acceptable
to Seller, covering the matters set forth in Exhibits H-1 and H-2
attached hereto, respectively.
(c) No Material Adverse Change. There shall not have occurred any event
or condition of any character that has had or could reasonably be
expected to have a Material Adverse Effect on Purchaser since the date of
this Agreement.
(d) Escrow Agreement. Purchaser and the Escrow Agent shall have
executed and delivered the Escrow Agreement in the form attached hereto
as Exhibit E.
(e) Registration Rights Agreement. Purchaser shall have executed and
delivered the Registration Rights Agreement in the form attached hereto
as Exhibit D.
(f) Tax Pre-Ruling. The Sellers shall have received the Israeli Tax
Ruling.
(g) Tax Opinion. The Company shall have received a written opinion from
its tax counsel, Deloitte & Touche LLP, which opinion the Sellers shall
be permitted to rely upon, in form and substance reasonably satisfactory
to the Company, to the effect that the Share Purchase will constitute a
reorganization within the meaning of Section 368(a) of the Code and such
opinion shall not have been withdrawn; provided, however, that if the
counsel to the Company does not render such opinion, this condition shall
nonetheless be deemed to be satisfied with respect to the Company if
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, as counsel to
Purchaser, renders such opinion to the Company, which opinion the Sellers
shall be permitted to rely upon. The parties to this Agreement agree to
make such reasonable representations as requested by such counsel for the
purpose of rendering such opinion.
(h) Nasdaq Listing. The Shares of Purchaser Common Stock issuable in
the Share Purchase shall have been authorized for listing on the Nasdaq
National Market upon official notice of issuance.
ARTICLE VIII
SU RVIVAL OF REPRESENTATIONS
AND WARRANTIES; ESCROW
8.1 Survival of Representations, Warranties and Covenants.
The representations and warranties of the Company and the Principal
Sellers contained in this Agreement, or in any certificate or other
instrument delivered pursuant to this Agreement, shall terminate one year
following the Closing Date; provided, however, that the representations
and warranties of the Company and the Principal Sellers contained in
Section 2.2 and of the Sellers contained in Section 3.2 shall survive
indefinitely, the representations and warranties of the Company and the
Principal Sellers contained in Section 2.9 shall survive until the
expiration of the applicable statute of limitations, and the
representations and warranties of the Company and the Principal Sellers
contained in Section 2.12 shall survive until the second anniversary of
the Closing Date. The representations and warranties of Purchaser
contained in this Agreement, or in any certificate or other instrument
delivered pursuant to this Agreement, shall terminate at the Closing;
provided, however, that the representations and warranties of Purchaser
contained in Section 4.7 shall survive indefinitely. The covenants and
agreements of Purchaser and each Seller in this Agreement, the Escrow
Agreement and the Registration Rights Agreement shall survive the Closing
and shall be fully enforceable for the periods herein and therein
indicated or where not indicated, indefinitely.
8.2 Indemnification.
The Sellers severally and not jointly agree to indemnify and hold
Purchaser and its officers, directors and affiliates, including the
Company after the Closing (the "Indemnified Parties"), harmless against
all claims, losses, liabilities, damages, deficiencies, costs and
expenses, including reasonable attorneys' fees and expenses of
investigation and defense relating to such claim, loss, liability,
damage, deficiency, cost or expense (hereinafter individually a "Loss"
and collectively "Losses") incurred or suffered by the Indemnified
Parties, or any of them (including the Company after the Closing),
directly or indirectly, as a result of and for so long as such
representations or obligations survive under the terms of this Agreement
(i) any breach or inaccuracy of a representation or warranty of the
Company or such Seller contained in this Agreement or any certificate or
instrument delivered pursuant to this Agreement, and (ii) any failure by
the Company or such Seller to perform or comply with any covenant
applicable to them contained in this Agreement. The Principal Sellers
further severally and not jointly agree to indemnify and hold the
Indemnified Parties harmless against all Losses incurred or suffered by
the Indemnified Parties, or any of them (including the Company after the
Closing), directly or indirectly, in connection with the matters set
forth in Section 2.16 of the Company Disclosure Schedule regarding the
dispute involving the Company, Blenda S.A. and Megavision Video
Industries (1994) Ltd. (such Losses being referred to herein as the
"▇▇▇▇▇▇ Losses"). The Sellers shall not have any right of contribution
from the Company with respect to any Loss claimed by an Indemnified Party
hereunder after the Closing. In no event shall any Seller be liable for
more than its proportional share of the Escrow Fund, except to the extent
provided in Section 8.3(a).
8.3 Escrow Arrangements.
(a) Escrow Fund. As soon as reasonably practicable after the Closing
and the date of issuance of the First Milestone Shares and the Second
Milestone Shares, as applicable, the Escrow Shares shall be registered in
the name of, and be deposited with, State Street Bank and Trust Company
of California, N.A., (or another institution selected by Purchaser with
the reasonable consent of the Company and the Sellers' Representative) as
escrow agent (the "Escrow Agent"), such deposit (together with interest
and other income thereon) to constitute the "Escrow Fund" and to be
governed by the terms set forth herein and in the Escrow Agreement
attached hereto as Exhibit E. As security for the indemnity provided for
in Section 8.2 hereof and by virtue of this Agreement, the Sellers will
be deemed to have received and deposited with the Escrow Agent the Escrow
Fund without any act of any Seller. The Escrow Fund shall be available
to compensate the Indemnified Parties, or any of them, for any claims by
such Indemnified Parties for any Losses suffered or incurred by them;
provided, however, that if the Escrow Period (as defined below) has
terminated, and a claim for Losses is made with respect to (i) fraud,
(ii) knowing, intentional or willful breaches by the Company or the
Sellers of their respective representations, warranties or covenants, or
(iii) breaches by the Company or the Sellers of their respective
representations and warranties in Sections 2.2, 2.9, 2.12 and 3.2 hereof,
the claim shall be made directly against the Sellers severally and not
jointly pro rata in proportion to their interest in the Escrow Fund. In
no event shall any Seller be personally liable to Purchaser for any
amounts in excess of the value of the Purchaser Shares received by such
Seller, which shares shall be valued at the Purchaser Stock Price, as
adjusted for Net Taxes (as defined below) and brokerage fees actually
paid by such Seller, except that personal liability for breaches of the
representations and warranties set forth in Section 2.12 shall be limited
to fifty percent (50%) of the value of the Purchaser Shares received by
such Seller, which shares shall be valued at the Purchaser Stock Price,
as adjusted for Net Taxes and brokerage fees actually paid by such
Seller. "Net Taxes" shall consist of the taxes actually paid by such
Seller in connection with the receipt of the Purchaser Shares hereunder,
as adjusted for any tax benefits which are reasonably probable of being
realized by such Seller as a result of such personal liability.
Notwithstanding anything set forth herein to the contrary, the Founders'
Escrow Shares shall be used solely to compensate the Indemnified Parties,
or any of them, for any claims by such Indemnified Parties for any ▇▇▇▇▇▇
Losses suffered or incurred by them, and not for any other Losses, and be
deemed not to constitute a part of the Escrow Fund for any other purpose.
Nothing herein shall limit the liability of the Company for any breach or
inaccuracy of any representation, warranty or covenant contained in this
Agreement if the Share Purchase does not close. Purchaser may not
receive any compensation for any Loss unless and until one or more
Officer's Certificates (as defined below) identifying Losses in excess of
$750,000 in the aggregate (the "Basket Amount") has or have been
delivered to the Escrow Agent as provided in Section 8.3(d) hereof, in
which case Purchaser shall be entitled to recover all Losses so
identified. Notwithstanding the foregoing, Purchaser shall be entitled
to receive payments out of the Escrow Fund for, and the Basket Amount
shall not apply as a threshold to any and all claims or payments made
with respect to breaches of the representations and warranties of the
Company and the Sellers contained in Sections 2.2, 2.21 and 3.2 or with
respect to any ▇▇▇▇▇▇ Losses.
(b) Escrow Period; Distribution upon Termination of Escrow Periods.
Subject to the following requirements, the Escrow Fund shall be in
existence immediately following the Closing and shall terminate at
5:00 p.m., local time at the office of the Escrow Agent, on the first
anniversary of the Closing Date (the "Escrow Period"); provided, however,
that the Escrow Period shall not terminate with respect to any amount
which, in the reasonable judgment of Purchaser, subject to the objection
of the Sellers' Representative and the subsequent arbitration of the
matter in the manner provided in Section 8.3(f) hereof, is necessary to
satisfy any then pending and unsatisfied claims specified in any
Officer's Certificate delivered to the Escrow Agent prior to the
termination of the Escrow Period with respect to facts and circumstances
existing prior to the termination of such Escrow Period. As soon as all
such claims have been resolved, the Escrow Agent shall deliver the
remaining portion of the Escrow Fund, if any, not required to satisfy
such claims (the "Remaining Portion") to the Sellers' Representative for
distribution to the Sellers in accordance with the column in Schedule A
captioned "Percentage Interest in Escrow Fund."
(c) Protection of Escrow Fund; Distribution of Interest from Escrow
Fund.
(i) The Escrow Agent shall hold and safeguard the Escrow Fund during the
Escrow Period, shall treat such fund as a trust fund in accordance with
the terms of the Escrow Agreement and not as the property of Purchaser
and shall hold and dispose of the Escrow Fund only in accordance with the
terms thereof.
(ii) Any shares of Purchaser Common Stock or other equity securities
issued or distributed by Purchaser (including shares issued upon a stock
split) ("New Shares") in respect of Purchaser Common Stock in the Escrow
Fund which have not been released from the Escrow Fund shall be added to
the Escrow Fund and become a part thereof. New Shares issued in respect
of shares of Purchaser Common Stock which have been released from the
Escrow Fund shall not be added to the Escrow Fund but shall be
distributed to the record holders thereof. Cash dividends on Purchaser
Common Stock shall not be added to the Escrow Fund but shall be
distributed to the record holders thereof.
(iii) Each Seller shall have voting rights with respect to the shares of
Purchaser Common Stock contributed to the Escrow Fund by such Seller (and
on any voting securities added to the Escrow Fund in respect of such
shares of Purchaser Common Stock).
(d) Claims for Indemnification.
(i) Upon receipt by the Escrow Agent at any time on or before the last
day of the Escrow Period of an Officer's Certificate (as defined below)
and, subject to the provisions of Section 8.3(e) hereof, the Escrow Agent
shall deliver to Purchaser out of the Escrow Fund, as promptly as
practicable, Purchaser Common Stock held in the Escrow Fund equal to
Losses specified in the Officer's Certificate. For purposes hereof,
"Officer's Certificate" shall mean a certificate signed by any officer of
Purchaser: (a) stating that Purchaser has paid, incurred or properly
accrued or reasonably anticipates that it will have to pay, incur or
accrue Losses, and (b) specifying in reasonable detail (w) the individual
items of Losses included in the amount so stated, (x) the date each such
item was paid, incurred (y) properly accrued, or the basis for any
anticipated liability, and (z) the nature of the misrepresentation,
breach of warranty or covenant to which such item is related.
(ii) For the purposes of determining the number of shares of Purchaser
Common Stock to be delivered to Purchaser out of the Escrow Fund as
indemnity pursuant to Section 8.2 hereof, the shares of Purchaser Common
Stock shall be valued at the Purchaser Stock Price.
(e) Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such certificate
shall be delivered to the Sellers' Representative, and for a period of
thirty (30) days after such delivery, the Escrow Agent shall make no
delivery to Purchaser of any Escrow Amounts pursuant to Section 8.3(d)
hereof unless and until the Escrow Agent shall have received written
authorization from the Sellers' Representative to make such delivery.
After the expiration of such thirty (30) day period, the Escrow Agent
shall make delivery from the Escrow Fund in accordance with
Section 8.3(d) hereof; provided, however, that no such payment or
delivery may be made if the Sellers' Representative shall object in a
written statement to the claim made in the Officer's Certificate, and
such statement shall have been delivered to the Escrow Agent prior to the
expiration of such thirty (30) day period.
(f) Resolution of Conflicts; Arbitration.
(i) In case the Sellers' Representative shall object in writing to any
claim or claims made in any Officer's Certificate to recover Losses from
the Escrow Fund within thirty (30) days after delivery of such Officer's
Certificate, then the Sellers' Representative and Purchaser shall attempt
in good faith to agree upon the rights of the respective parties with
respect to each of such claims. If the Sellers' Representative and
Purchaser should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties and, in the case of a claim
against the Escrow Fund, shall be furnished to the Escrow Agent. The
Escrow Agent shall be entitled to rely on any such memorandum and
distribute amounts from the Escrow Fund in accordance with the terms
thereof.
(ii) If no such agreement referred to in (i) above, or as to the
development of the VIVID System, in the case of any dispute pursuant to
Section 1.2, can be reached after good faith negotiation, either
Purchaser or the Sellers' Representative may demand arbitration of the
matter unless, in the case of any claim for indemnification pursuant to
this Article VIII, the amount of the Loss is at issue in pending
litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to
arbitration, and in either such event the matter shall be settled by
arbitration conducted by one arbitrator mutually agreeable to Purchaser
and the Sellers' Representative. In the event that within forty-five
(45) days after submission of any dispute to arbitration, Purchaser and
the Sellers' Representative cannot mutually agree on one arbitrator,
Purchaser and the Sellers' Representative shall each select one
arbitrator, and the two arbitrators so selected shall select a third
arbitrator. The arbitrator or arbitrators, as the case may be, shall set
a limited time period and establish procedures designed to reduce the
cost and time for discovery while allowing the parties an opportunity,
adequate in the sole judgment of the arbitrator or majority of the three
arbitrators, as the case may be, to discover relevant information from
the opposing parties about the subject matter of the dispute. The
arbitrator or a majority of the three arbitrators, as the case may be,
shall rule upon motions to compel or limit discovery and shall have the
authority to impose sanctions, including attorneys' fees and costs, to
the extent as a competent court of law or equity, should the arbitrators
or a majority of the three arbitrators, as the case may be, determine
that discovery was sought without substantial justification or that
discovery was refused or objected to without substantial justification.
The decision of the arbitrator or a majority of the three arbitrators, as
the case may be, as to the validity and amount of any claim in such
Officer's Certificate, in the case of any claim for indemnification
pursuant to this Article VIII, or as to the development of the VIVID
System, in the case of any dispute pursuant to Section 1.2, shall be
binding and conclusive upon the parties to this Agreement. Such decision
shall be written and shall be supported by written findings of fact and
conclusions which shall set forth the award, judgment, decree or order
awarded by the arbitrator(s).
(iii) Judgment upon any award rendered by the arbitrator(s) may be entered
in any court having jurisdiction. Any such arbitration shall be
conducted in the English language and held in New York, New York, under
the rules then in effect of the American Arbitration Association. The
arbitrator(s) shall determine how all expenses relating to the
arbitration shall be paid, including without limitation, the respective
expenses of each party, the fees of each arbitrator and the
administrative fee of the American Arbitration Association. For purposes
of Israeli Law, the provisions of this Section 8.3(f) shall be deemed a
binding arbitration agreement in accordance with the Arbitration Law,
5728-1968. The arbitration provisions of paragraphs (ii) and (iii) of
this Section 8.3(f) shall also apply to any dispute regarding the
development of the VIVID System pursuant to Section 1.2.
(g) Third-Party Claims.
In the event Purchaser becomes aware of a
third-party claim which Purchaser reasonably believes may result in a
demand against the Escrow Fund, Purchaser shall notify the Sellers'
Representative of such claim, and the Sellers' Representative shall be
entitled on behalf of the Sellers, at its expense, to participate in, but
not to determine or conduct, the defense of such claim. Purchaser shall
have the right in its sole discretion to conduct the defense of and
settle any such claim; provided, however, that except with the consent of
the Sellers' Representative, no settlement of any such claim with
third-party claimants shall be determinative of the amount of Losses
relating to such matter. In the event that the Sellers' Representative
has consented to any such settlement, the Sellers shall have no power or
authority to object under any provision of this Article VIII to the
amount of any claim by Purchaser against the Escrow Fund with respect to
such settlement.
8.4 Sellers' Representative.
(a) Each of the Sellers hereby appoints ▇▇▇▇ ▇▇▇▇▇ its agent and
attorney-in-fact with full power of substitution, as the Sellers'
Representative for and on behalf of the Sellers, to give and receive
notices and communications, to authorize payment to Purchaser of cash
from the Escrow Fund in satisfaction of claims by Purchaser, to object to
such payments, to agree to, negotiate, enter into settlements and
compromises of, and demand arbitration and comply with orders of courts
and awards of arbitrators with respect to such claims, and to take all
other actions that are either (i) necessary or appropriate in the
judgment of the Sellers' Representative for the accomplishment of the
foregoing or (ii) specifically mandated by the terms of this Agreement.
Such agency may be changed by the Sellers from time to time upon not less
than thirty (30) days prior written notice to Purchaser; provided,
however, that the Sellers' Representative may not be removed unless
holders of a two-thirds interest of the Escrow Fund agree to such removal
and to the identity of the substituted agent. Any vacancy in the
position of Sellers' Representative may be filled by the holders of a
majority in interest of the Escrow Fund. No bond shall be required of
the Sellers' Representative, and the Sellers' Representative shall not
receive compensation for its services. Notices or communications to or
from the Sellers' Representative shall constitute notice to or from the
Sellers.
(b) The Sellers' Representative shall not be liable for any act done or
omitted hereunder as the Sellers' Representative while acting in good
faith. The Sellers on whose behalf the Escrow Amount was contributed to
the Escrow Fund shall indemnify the Sellers' Representative and hold the
Sellers' Representative harmless against any loss, liability or expense
incurred without gross negligence or bad faith on the part of the
Sellers' Representative and arising out of or in connection with the
acceptance or administration of the Sellers' Representative's duties
hereunder, including the reasonable fees and expenses of any legal
counsel retained by the Sellers' Representative. Except as set forth in
Section 8.4(d), after all claims for Losses by Purchaser set forth in
Officer's Certificates delivered to the Escrow Agent and the Sellers'
Representative has been satisfied, or reserved against, the Sellers'
Representative, with the consent of the majority in interest in the
Escrow Fund, may recover from the Escrow Fund at the end of the Escrow
Period payments not yet paid for any expenses incurred in connection with
the Sellers' Representative's representation hereby.
(c) A decision, act, consent or instruction of the Sellers'
Representative, including but not limited to an amendment, extension or
waiver of this Agreement pursuant to Section 8.3 and Section 8.4 hereof,
shall constitute a decision of the Sellers and shall be final, binding
and conclusive upon the Sellers; and the Escrow Agent and Purchaser may
rely upon any such decision, act, consent or instruction of the Sellers'
Representative as being the decision, act, consent or instruction of the
Sellers. The Escrow Agent and Purchaser are hereby relieved from any
liability to any Person for any acts done by them in accordance with such
decision, act, consent or instruction of the Sellers' Representative.
(d) Subject to Purchaser's prior claims for indemnification against the
Escrow Fund, the Sellers' Representative shall be entitled to receive
payment for its reasonable and documented expenses therefrom, prior to
any payments to the Sellers; provided, however, that notwithstanding the
foregoing, the Sellers' Representative shall be entitled to receive up to
$50,000 in the aggregate from the Escrow Fund as reimbursement for such
expenses prior to any payments to Purchaser or the Sellers.
8.5 Maximum Payments; Remedy.
Notwithstanding anything to the contrary set forth in this Article
VIII or elsewhere in this Agreement, if the Share Purchase is consummated
the maximum amount the Indemnified Parties may recover from the Sellers
pursuant to the indemnity obligations set forth in Section 8.2 hereof
shall be limited to the amount in the Escrow Fund; provided, however,
that such limitation shall not apply with respect to (i) fraud,
(ii) knowing, intentional or willful breaches by the Company or the
Sellers of their respective representations, warranties or covenants, or
(iii) breaches by the Company or the Sellers of their respective
representations and warranties in Sections 2.2, 2.9, 2,12 and 3.2 hereof,
as provided in Section 8.3(a).
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination.
Except as provided in Section 9.2 hereof, this Agreement may be
terminated and the Share Purchase abandoned at any time prior to the
Closing:
(a) by mutual agreement of the Company and Purchaser;
(b) by Purchaser or the Company if the Closing Date shall not have
occurred by July 17, 2000; provided, however, that the right to terminate
this Agreement under this Section 9.1(b) shall not be available to any
party whose action or failure to act has been a principal cause of or
resulted in the failure of the Share Purchase to occur on or before such
date and such action or failure to act constitutes breach of this
Agreement; and provided, further, that in the event that the acquisition
of the Company shall be restructured pursuant to Section 6.20, the
Agreement and Plan of Merger and Reorganization to be entered into by the
parties in connection therewith shall extend this date by such period as
Purchaser and the Company shall mutually agree shall be reasonably
required to consummate such merger.
(c) by Purchaser or the Company if there shall be a final non-appealable
order of a federal, foreign or state court of competent jurisdiction in
effect preventing consummation of the Share Purchase, which would make
consummation of the Closing illegal (provided that the party seeking to
terminate pursuant to this Section 9.1(c) shall used its reasonable best
efforts to have any such order, decree, ruling or other action vacated,
overturned or lifted);
(d) by Purchaser or the Company if, after the date of this Agreement,
there shall be any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Share Purchase by any
Governmental Entity, which would: (i) prohibit Purchaser's ownership or
operation of any portion of the business of the Company, (ii) make
consummation of the Closing illegal, or (iii) compel Purchaser or the
Company to dispose of or hold separate all or any portion of the business
or assets of the Company or Purchaser as a result of the Share Purchase;
(e) by Purchaser if there has been a breach of any representation,
warranty, covenant or agreement of the Company contained in this
Agreement such that the conditions set forth in Section 7.2(a) would not
be satisfied and such breach has not been cured within thirty (30)
calendar days after written notice thereof to the Company; provided,
however, that no cure period shall be required for a breach which by its
nature cannot be cured; or
(f) by the Company if there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement such that the
conditions set forth in Section 7.3(a) would not be satisfied and such
breach has not been cured within thirty (30) calendar days after written
notice thereof to Purchaser; provided, however, that no cure period shall
be required for a breach which by its nature cannot be cured.
9.2 Effect of Termination.
In the event of termination of this Agreement as provided in
Section 9.1 hereof, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Purchaser or the
Company, or their respective officers, directors or stockholders, if
applicable; provided, however, that each party hereto shall remain liable
for any willful breaches of this Agreement prior to its termination; and
provided further, however, that, the provisions of Sections 6.2, 6.3 and
6.4 hereof, Article X hereof and this Section 9.2 shall remain in full
force and effect and survive any termination of this Agreement pursuant
to the terms of this Article IX.
9.3 Amendment.
This Agreement may be amended by the parties hereto at any time by
execution of an instrument in writing signed on behalf of each of the
parties hereto. For purposes of this Section 9.3, the Sellers agree that
any amendment of this Agreement signed by the Sellers' Representative
shall be binding upon and effective against the Sellers whether or not
they have signed such amendment.
9.4 Extension; Waiver.
At any time prior to the Closing, Purchaser, on the one hand, and the
Company, on the other hand, may, to the extent legally allowed,
(i) extend the time for the performance of any of the obligations of the
other party hereto, (ii) waive any inaccuracies in the representations
and warranties made to such party contained herein or in any document
delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein.
Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. For purposes of this Section 9.4, the
Sellers agree that any extension or waiver signed by the Sellers'
Representative shall be binding upon and effective against all Sellers
whether or not they have signed such extension or waiver.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial messenger
or courier service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice); provided,
however, that notices sent by mail will not be deemed given until
received:
(a) if to Purchaser, to:
Com21, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chief Financial Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies (which shall not constitute notice) to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇ ▇▇▇▇▇ & ▇▇.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Israel
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile No.: 972-2-623-9236
(b) if to the Company, to:
GADline, Ltd.
Beit Rokar
Har Hotzvim
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Israel
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: 972-2-586-7590
with copies (which shall not constitute notice) to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
Fischer, Behar, Chen & Co.
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Israel
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Adv.
Facsimile No.: 972-3-609-1116
(c) If to any Seller, to such Seller's address as set forth on the
signature pages hereof.
(d) If to the Sellers' Representative, to:
▇▇▇▇ ▇▇▇▇▇
▇/▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Israel
10.2 Interpretation.
The words "include," "includes" and "including" when used herein shall
be deemed in each case to be followed by the words "without limitation."
The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The words "foreign" and "domestic"
when used herein shall be deemed a reference to a country outside the
United States and the United States, respectively.
10.3 Counterparts.
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the
parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.4 Entire Agreement; Assignment.
This Agreement, the Exhibits and Schedules hereto, the Confidential
Disclosure Agreement, and the documents and instruments and other
agreements among the parties hereto referenced herein: (i) constitute the
entire agreement among the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings both written
and oral, among the parties with respect to the subject matter hereof and
(ii) shall not be assigned by operation of law or otherwise, except that
Purchaser may assign its rights and delegate its obligations hereunder to
a direct wholly-owned subsidiary as long as (x) Purchaser remains
ultimately liable for all of Purchaser's obligations hereunder and (y)
such assignment and delegation shall not cause the Share Purchase not to
constitute a reorganization within the meaning of Section 368(a) of the
Code.
10.5 Severability.
In the event that any provision of this Agreement or the application
thereof, becomes or is declared by a court of competent jurisdiction to
be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision
to other Persons or circumstances will be interpreted so as reasonably to
effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent
possible, the economic, business and other purposes of such void or
unenforceable provision.
10.6 Other Remedies.
Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy.
10.7 Binding Effect.
This Agreement shall be binding upon Purchaser, the Company, the
Sellers' Representative and each Seller party hereto upon execution of
this Agreement by such party, regardless of whether this Agreement shall
be executed and delivered by any other Seller.
10.8 Governing Law; Arbitration.
This Agreement shall be construed in accordance with, and governed in
all respects by, the internal laws of the State of New York except to the
extent that the domestic laws of the State of Israel require that such
laws be applied to the mechanics and procedures of the transactions
contemplated hereby. Except as otherwise set forth herein, all claims
between the parties hereto regarding the subject matter of this Agreement
shall be finally settled by a board of three (3) arbitrators under the
rules then in effect of the American Arbitration Association. Judgment
upon any award rendered by the arbitrator(s) may be entered in any court
having jurisdiction. Any such arbitration shall be conducted in the
English language and held in New York, New York. Any arbitration award
shall be based on and accompanied by findings of fact and conclusions of
law and shall be conclusive as to the facts so found. Each party shall
be responsible for its respective costs incurred in arbitration, except
that costs and fees of each arbitrator and the administrative fee of the
American Arbitration Association shall be borne equally by the parties.
For purposes of Israeli Law, the provisions of this Section 10.8 shall be
deemed a binding arbitration agreement in accordance with the Arbitration
Law, 5728-1968.
10.9 Rules of Construction.
This Agreement is the mutual product of the parties hereto, and each
provision hereof has been subject to the mutual consultation, negotiation
and agreement of each of the parties, and shall not be construed for or
against any party hereto.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, Purchaser, the Company, the Sellers and the Sellers'
Representative have caused this Agreement to be signed, all as of the
date first written above.
COM21, INC. GADLINE, LTD.
By: ___________________ By: ___________________
Name: _________________ Name: _________________
Title: ________________ Title: ________________
SELLERS' REPRESENTATIVE:
_________________________
▇▇▇▇ ▇▇▇▇▇
[SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT]
SELLERS:
_____ ___________________________________
[Name]
[Address]
By initialing the appropriate line
set forth below, such Seller
represents and warrants that such
Seller is:
_____ an "accredited investor" as such term
is defined in Rule 501 of Regulation
D of the Securities Act.
_____ not an "accredited investor," but
such Seller has substantial knowledge
and experience in financial and
business matters and is capable,
without the use of a financial
advisor, of utilizing and analyzing
the information made available in
connection with the acquisition of
the Purchaser Shares under this
Agreement, and of evaluating the
merits and risks of an investment in
the Purchaser Shares.
_____ not an "accredited investor," but
such Seller has, through appropriate
representation by _________________,
as such Seller's "purchaser
representative" (as such terms used
in the Securities Act and Regulation
D thereunder), substantial knowledge
and experience in financial and
business matters and is capable, with
the use of a financial advisor, of
utilizing and analyzing the
information made available in
connection with the acquisition of
the Purchaser Shares under this
Agreement, and of evaluating the
merits and risks of an investment in
the Purchaser Shares.
[SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT]