EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 5, 2002
BY AND AMONG
▇▇▇▇▇ GROUP, LTD.
▇▇▇▇▇ ACQUISITION SUB, INC.
AND
O2WIRELESS SOLUTIONS, INC.
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TABLE OF CONTENTS
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ARTICLE I THE MERGER....................................................................1
Section 1.1 The Merger...............................................................1
Section 1.2 Effective Time...........................................................1
Section 1.3 Closing of the Merger....................................................1
Section 1.4 Effects of the Merger....................................................2
Section 1.5 Certificate of Incorporation and Bylaws..................................2
Section 1.6 Directors................................................................2
Section 1.7 Officers.................................................................2
ARTICLE II CONVERSION OF SHARES..........................................................2
Section 2.1 Conversion of Shares.....................................................2
Section 2.2 Stock Options............................................................3
Section 2.3 Exchange Fund............................................................4
Section 2.4 Exchange Procedures......................................................4
Section 2.5 Distributions with Respect to Unsurrendered Certificates.................5
Section 2.6 No Further Ownership Rights in Company Common Stock......................5
Section 2.7 No Fractional Shares of Parent Stock.....................................5
Section 2.8 Dissenting Shares........................................................6
Section 2.9 Termination of Exchange Fund.............................................6
Section 2.10 No Liability.............................................................6
Section 2.11 Investment of the Exchange Fund..........................................6
Section 2.12 Lost Certificates........................................................6
Section 2.13 Withholding Rights.......................................................7
Section 2.14 Stock Transfer Books.....................................................7
Section 2.15 Further Assurance........................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................7
Section 3.1 Organization and Qualification; Subsidiaries.............................7
Section 3.2 Capitalization of the Company and Its Subsidiaries.......................8
Section 3.3 Authority Relative to This Agreement.....................................9
Section 3.4 SEC Reports; Financial Statements........................................9
Section 3.5 No Undisclosed Liabilities..............................................10
Section 3.6 Absence of Changes......................................................10
Section 3.7 Information Supplied....................................................12
Section 3.8 Consents and Approvals; No Violations...................................12
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TABLE OF CONTENTS
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Section 3.9 No Default..............................................................12
Section 3.10 Litigation..............................................................13
Section 3.11 Compliance with Applicable Law..........................................13
Section 3.12 Employee Plans..........................................................14
Section 3.13 Labor Matters...........................................................15
Section 3.14 Environmental Matters...................................................16
Section 3.15 Taxes...................................................................18
Section 3.16 Material Contracts......................................................19
Section 3.17 Insurance...............................................................20
Section 3.18 Real Property...........................................................21
Section 3.19 Intellectual Property...................................................21
Section 3.20 Books and Records.......................................................22
Section 3.21 Opinion of Financial Advisor............................................22
Section 3.22 Brokers.................................................................22
Section 3.23 Tax Treatment...........................................................22
Section 3.24 Takeover Statute; Dissenters' Rights....................................22
Section 3.25 Bank Accounts, Brokerage Accounts and Powers of Attorney................22
Section 3.26 Transactions with Management............................................23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB......................23
Section 4.1 Organization and Qualification; Subsidiaries............................23
Section 4.2 Capitalization of Parent and Its Subsidiaries...........................23
Section 4.3 Authority Relative to This Agreement....................................24
Section 4.4 TASE Reports............................................................25
Section 4.5 Financial Statements....................................................25
Section 4.6 No Undisclosed Liabilities..............................................25
Section 4.7 Absence of Changes......................................................25
Section 4.8 Information Supplied....................................................27
Section 4.9 Consents and Approvals; No Violations...................................27
Section 4.10 No Default..............................................................27
Section 4.11 Litigation..............................................................28
Section 4.12 Tax Treatment...........................................................29
Section 4.13 No Prior Activities.....................................................29
ARTICLE V COVENANTS RELATED TO CONDUCT OF BUSINESS.....................................29
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TABLE OF CONTENTS
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Section 5.1 Conduct of Business of the Company......................................29
Section 5.2 Access to Information...................................................31
ARTICLE VI ADDITIONAL AGREEMENTS........................................................32
Section 6.1 Preparation of Disclosure Documents.....................................32
Section 6.2 Public Announcements and Confidentiality................................33
Section 6.3 Affiliate Letters.......................................................33
Section 6.4 Stock Exchange Listing..................................................34
Section 6.5 Reasonable Best Efforts.................................................34
Section 6.6 Acquisition Proposals...................................................35
Section 6.7 Indemnification; Directors' and Officers' Insurance.....................36
Section 6.8 Notification of Certain Matters.........................................38
Section 6.9 Tax-Free Reorganization Treatment.......................................38
Section 6.10 Employee Matters........................................................38
Section 6.11 Fees and Expenses.......................................................39
Section 6.12 Obligations of Merger Sub...............................................39
Section 6.13 Antitakeover Statutes...................................................39
Section 6.14 Consent and Proxy of Certain Company Stockholders.......................39
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER.....................................40
Section 7.1 Conditions to Each Party's Obligations to Effect the Merger.............40
Section 7.2 Conditions to the Obligations of Parent and Merger Sub..................40
Section 7.3 Conditions to the Obligations of the Company............................41
ARTICLE VIII TERMINATION; AMENDMENT; WAIVER...............................................42
Section 8.1 Termination by Mutual Agreement.........................................42
Section 8.2 Termination by Either Parent or the Company.............................42
Section 8.3 Termination by the Company..............................................42
Section 8.4 Termination by Parent...................................................43
Section 8.6 Amendment...............................................................44
Section 8.7 Extension; Waiver.......................................................45
ARTICLE IX MISCELLANEOUS................................................................45
Section 9.1 Nonsurvival of Representations and Warranties...........................45
Section 9.2 Entire Agreement; Assignment............................................45
Section 9.3 Notices.................................................................45
Section 9.4 Governing Law; Waiver of Jury Trial.....................................46
Section 9.5 Descriptive Headings....................................................46
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TABLE OF CONTENTS
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Section 9.6 Parties in Interest.....................................................46
Section 9.7 Severability............................................................46
Section 9.8 Specific Performance....................................................47
Section 9.9 Brokers.................................................................47
Section 9.10 Counterparts............................................................47
Section 9.11 Interpretation..........................................................47
Section 9.12 Definitions.............................................................48
Exhibits:
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Exhibit A -- Form of Affiliate Letters
Exhibit B -- Irrevocable Proxy
Exhibit C -- Management Consulting Agreement
Exhibit D -- Recovery Plan
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GLOSSARY OF DEFINED TERMS
DEFINED TERMS, PAGE NUMBER
Affiliate Letters, 38
AH&H, 25
Antitrust Law, 39
beneficial ownership, 53
beneficially own, 53
CERCLA, 17
Certificate of Merger, 1
Certificates, 4
Closing, 1
Closing Date, 1
Code, 1
Company, 1
Company Common Stock, 2
Company Disclosure Schedule, 7
Company Permits, 13
Company Real Property Leases, 21
Company Requisite Vote, 9
Company SEC Reports, 10
Company Securities, 8
Company Stockholders Meeting, 37
Confidentiality Agreement, 35
Covered Transactions, 25
DGCL, 1
Dissenting Shares, 5
DOJ, 38
Effective Time, 1
Environmental Costs and Liabilities, 16
Environmental Law, 16
Exchange Act, 9
Exchange Agent, 4
Exchange Fund, 4
Expenses, 44
F-4, 12
FTC, 38
GAAP, 10
Government Entity, 12
Hazardous Material, 17
Indemnified Parties, 41
Indemnified Party, 41
know, 53
knowledge, 53
Law, 13
Lien, 9
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GLOSSARY OF DEFINED TERMS
(CONTINUED)
DEFINED TERMS, PAGE NUMBER
Material Adverse Effect, 53
Merger, 1
Merger Consideration, 2
Merger Sub, 1
OSHA, 17
Parent, 1
Parent Common Stock, 2
Parent Disclosure Schedule, 27
Parent Securities, 28
person, 54
Proxy Statement, 12
Release, 17
Remedial Action, 17
Share, 2
Share Issuance, 28
Shares, 2
subsidiary, 54
Superior Proposal, 40
Surviving Corporation, 1
Takeover Statutes, 25
Termination Date, 47
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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 5, 2002, is by and
among o2wireless Solutions, Inc., a Georgia corporation (the "Company"), ▇▇▇▇▇
Group, Ltd., a corporation organized under the laws of Israel ("PARENT"), and
▇▇▇▇▇ Acquisition Sub, Inc., a Georgia corporation and a direct wholly owned
subsidiary of Parent ("MERGER SUB").
WHEREAS, the Boards of Directors of the Company, Parent and Merger Sub
each have, in light of and subject to the terms and conditions set forth
herein, (i) determined that the Merger (as hereinafter defined) is fair to
their respective stockholders and in the best interests of such stockholders
and (ii) approved the Merger in accordance with this Agreement;
WHEREAS, Merger Sub is entering into a Working Capital Loan Agreement
with the Company and its subsidiaries of even date herewith (the "LOAN
AGREEMENT"), pursuant to which it initially may lend U.S.$5,000,000 to the
Company for working capital purposes, and the Loan Agreement is being made
subject to the terms and conditions of this Agreement and contingent upon the
parties entering into this Agreement; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the United States Internal Revenue Code of 1986, as amended (the "CODE").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company, Parent and Merger Sub hereby
agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time (as hereinafter
defined) and upon the terms and subject to the conditions of this Agreement and
in accordance with the Georgia Business Corporation Code (the "GBCC"), the
Company shall be merged with and into Merger Sub (the "MERGER"). Following the
Merger, Merger sub shall continue as the surviving corporation (the "SURVIVING
CORPORATION") and the separate corporate existence of the Company shall cease.
Section 1.2 Effective Time. Subject to the provisions of this
Agreement, Parent, Merger Sub and the Company shall cause the Merger to be
consummated by filing an appropriate Certificate of Merger or other appropriate
documents (the "CERTIFICATE OF MERGER") with the Secretary of State of the
State of Georgia in such form as required by, and executed in accordance with,
the relevant provisions of the GBCC, as soon as practicable on the Closing Date
(as hereinafter defined). The Merger shall become effective upon such filing or
at such time thereafter as is provided in the Certificate of Merger (the
"EFFECTIVE TIME").
Section 1.3 Closing of the Merger. The closing of the Merger (the
"CLOSING") will take place at a time and on a date to be specified by the
parties (the "CLOSING DATE"), which shall be no later than the second business
day after satisfaction or waiver of
the conditions set forth in Article VII (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the fulfillment
or waiver of those conditions), at the offices of ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇ PC, One Fountain Square, ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other time, date or place as agreed to in
writing by the parties hereto.
Section 1.4 Effects of the Merger. The Merger shall have the
effects set forth in the GBCC. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
Section 1.5 Articles of Incorporation and Bylaws. The articles
of incorporation of the Merger Sub in effect at the Effective Time shall be the
articles of incorporation of the Surviving Corporation until amended in
accordance with applicable law. The bylaws of the Merger Sub in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended
in accordance with applicable law.
Section 1.6 Directors. The directors of Merger Sub at the
Effective Time shall be the initial directors of the Surviving Corporation, to
hold office in accordance with the articles of incorporation and bylaws of the
Surviving Corporation until their successors are duly elected or appointed and
qualified or until their earlier death, resignation or removal.
Section 1.7 Officers. The officers of the Company at the
Effective Time shall be the initial officers of the Surviving Corporation, to
hold office in accordance with the articles of incorporation and bylaws of the
Surviving Corporation until their successors are duly elected or appointed and
qualified or until their earlier death, resignation or removal.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Shares. (a) At the Effective Time, by
virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holders thereof, each share of common stock, par value
U.S.$.0001 per share, of the Company ("COMPANY COMMON STOCK") issued and
outstanding immediately prior to the Effective Time (individually a "SHARE" and
collectively, the "SHARES") (other than (i) Shares held by the Company, (ii)
Shares held by Parent or any of its subsidiaries and (iii) Dissenting Shares
(as hereinafter defined)), shall be converted into and exchangeable for the
right to receive that number of fully paid and non-assessable ordinary shares,
par value NIS1.00 per share ("PARENT STOCK"), of Parent equal to the Exchange
Ratio (as defined below). All such shares of Parent Stock issued, together with
any cash in lieu of fractional shares of Parent Stock to be paid pursuant to
Section 2.7, are referred to as the "MERGER CONSIDERATION." At the Effective
Time, Parent shall, by virtue of the Merger and without any action on the part
of Merger Sub, the Company or Parent, become the sole stockholder of the
Surviving Corporation. For purposes hereof, the "EXCHANGE RATIO" equals
0.032135 shares of Parent Stock for every one share of Company Common Stock,
determined by dividing U.S.$0.45 per share of Company Common Stock by the
average per share closing price on the Tel Aviv Stock Exchange of a share of
Parent Stock during the thirty (30) consecutive trading days prior to June 3,
2002 (converted into a U.S. dollar value using the foreign currency exchange
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rate on each such date, which rate is published in The Financial Times and is
based upon the rate established by the Israel Central Bank). All calculations
made to determine the Exchange Ratio were made through the sixth decimal place
(i.e., rounded to the closest one-millionth).
(b) At the Effective Time, all of the shares of Company Common Stock
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each Certificate previously evidencing any such
shares shall thereafter represent only the right to receive the Merger
Consideration. The holders of such Certificates previously evidencing such
shares of Company Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such shares of Company
Common Stock, except as otherwise provided herein or by law. Such Certificates
previously evidencing shares of Company Common Stock shall be exchanged for
certificates evidencing whole shares of Parent Stock issued in consideration
therefor in accordance with the allocation procedures of this Section 2.1 and
upon the surrender of such Certificates in accordance with the provisions of
Section 2.4. No fractional shares of Parent Common Stock shall be issued, and,
in lieu thereof, a cash payment shall be made pursuant to Section 2.7.
(c) At the Effective Time, each Share held by Parent, each subsidiary
of Parent or the Company immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of Parent, any
subsidiary of Parent or the Company be canceled, retired and cease to exist and
no payment shall be made with respect thereto.
(d) If between the date of this Agreement and the Effective Time the
outstanding shares of Parent Stock shall have been changed into a different
number of shares or different class or a security of a different company by
reason of any stock dividend, subdivision, reclassification, recapitalization,
split, combination, merger or exchange of shares or any similar event, the
amount of shares of Parent Stock constituting the Exchange Ratio shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination, merger or exchange of
shares or such similar event.
Section 2.2 Stock Options and Warrants. (a) At the Effective
Time, each outstanding and unexercised option to purchase shares of Company
Common Stock ("COMPANY OPTIONS") under the Company's 1998 Stock Option Plan
(the "COMPANY OPTION PLAN"), by virtue of the Merger and without any action on
the part of the parties hereto or the holders thereof, shall be terminated.
Following execution of this Agreement, the Company shall provide each option
holder with written notice that any options held by such holder that are
exercisable as of the date of this Agreement must be exercised within sixty
(60) days after the date of such notice, or they will be terminated. Prior to
the Effective Time, Parent agrees to establish a stock option plan (the "PARENT
OPTION PLAN") that will be effective following the Effective Time, pursuant to
which Parent, in its sole discretion, will be entitled to grant options to
purchase Parent Stock (the "PARENT OPTION(S)") to certain employees of the
Company that remain employed by the Surviving Corporation or the Parent
following the Effective Time. The Parent Options will entitle the recipients to
purchase the number of shares of Parent Stock in the amount and on the terms
and conditions to be set forth in the Parent Option Plan and stock option
agreements to be signed by such recipients.
(b) At the Effective Time, each warrant or other right to purchase
Company Common Stock (other than a Company Stock Option) that is then
outstanding either shall be exercised or canceled.
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(c) As soon as practicable after the Effective Time, Parent shall
deliver to the employees of the Company who continue to be employed by the
Surviving Corporation or any affiliate thereof and to whom Parent grants Parent
Options appropriate notices setting forth such employees' rights pursuant to
the Parent Options and the Parent Option Plan.
(d) The shares of Parent Stock issued upon exercise of any Parent
Options granted by Parent after the Effective Time shall be listed on the Tel
Aviv Stock Exchange ("TASE") and the Nasdaq National Market upon issuance
pursuant to the procedures and requirements of the TASE and Nasdaq, as the case
may be, and shall be registered under applicable Israeli and United States
federal securities laws. As soon as practicable following the Closing, Parent
shall take all action necessary to register such shares of Parent Stock to be
issued upon the exercise of such Parent Options with the SEC, including the
filing of a Registration Statement on Form S-8.
Section 2.3 Exchange Fund. Prior to the Effective Time, Parent
shall appoint a commercial bank or trust company with a United States affiliate
reasonably acceptable to the Company to act as exchange agent hereunder for the
purpose of exchanging Shares for the Merger Consideration (the "EXCHANGE
Agent"). At or immediately after the Effective Time, Parent shall deposit with
the Exchange Agent, in trust for the benefit of holders of Shares, certificates
representing Parent Stock issuable pursuant to Section 2.1 in exchange for
outstanding Shares. Parent agrees to make available to the Exchange Agent from
time to time as needed, additional cash in U.S. dollars sufficient to pay cash
in lieu of fractional shares pursuant to Section 2.7 and any dividends and
other distributions pursuant to Section 2.5. Any cash and certificates of
Parent Stock deposited with the Exchange Agent shall hereinafter be referred to
as the "EXCHANGE FUND."
Section 2.4 Exchange Procedures. As soon as reasonably
practicable after the Effective Time, Parent and the Surviving Corporation
shall cause the Exchange Agent to mail to each holder of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares ("CERTIFICATES") (i) a letter of transmittal which shall
specify that delivery shall be effected, and risk of loss and title to
Certificates shall pass, only upon delivery of Certificates to the Exchange
Agent, and which letter shall be in customary form and have such other
provisions as Parent may reasonably specify and (ii) instructions for effecting
the surrender of such Certificates in exchange for the applicable Merger
Consideration. Upon surrender of a Certificate to the Exchange Agent together
with such letter of transmittal, duly executed and completed in accordance with
the instructions thereto, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor (A) certificates for shares of Parent
Stock representing, in the aggregate, the whole number of shares that such
holder has the right to receive pursuant to Section 2.1 (after taking into
account all Shares then held by such holder), and (B) a check in the amount
equal to the cash that such holder has the right to receive pursuant to the
provisions of this Article II, which amount shall equal the sum of cash
dividends pursuant to Section 2.5 and cash in lieu of fractional shares
pursuant to Section 2.7(b) (the "CASH PAYMENTS"). No interest will be paid or
will accrue on any portion of the Cash Payments. In the event of a transfer of
ownership of Company Common Stock which is not registered in the transfer
records of the Company, shares of Parent Stock evidencing, in the aggregate,
the proper number of shares of Parent Stock and a check in the proper amount of
the Cash Payments may be issued with respect to such Shares to such a
transferee if a Certificate or Certificates representing such Shares are
presented to the
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Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have
been paid.
Section 2.5 Distributions with Respect to Unsurrendered
Certificates. No dividends or other distributions declared or made with respect
to shares of Parent Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the shares
of Parent Stock that such holder would be entitled to receive upon surrender of
such Certificate. Further, no cash payment in lieu of fractional shares of
Parent Stock shall be paid to any such holder pursuant to Section 2.7, until
such holder shall surrender such Certificate in accordance with Section 2.4.
Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to such holder of shares of Parent Stock
issuable in exchange therefor, without interest, promptly after the time of
such surrender, the amount of any portion of the Cash Payments payable under
this Article II.
Section 2.6 No Further Ownership Rights in Company Common Stock.
All shares of Parent Stock issued and cash paid upon conversion of the Shares
in accordance with the terms of Article I and this Article II (including any
cash paid pursuant to Sections 2.5 and 2.7) shall be deemed to have been issued
or paid in full satisfaction of all rights pertaining to the Shares.
Section 2.7 No Fractional Shares of Parent Stock. (a) No
certificates or scrip of shares of Parent Stock representing fractional shares
of Parent Stock or book-entry credit of the same shall be issued upon the
surrender for exchange of Certificates and such fractional share interests will
not entitle the owner thereof to vote or to have any rights of a shareholder of
Parent or a holder of shares of Parent Stock.
(b) Notwithstanding any other provision of this Agreement, each holder
of Shares exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a share of Parent Stock (after taking into
account all Certificates delivered by such holder) shall receive, in lieu
thereof, cash in U.S. dollars (without interest) in an amount equal to the
product of (i) such fractional part of a share of Parent Stock multiplied by
(ii) the average per share closing price on the Tel Aviv Stock Exchange of a
share of Parent Stock during the thirty (30) consecutive trading days prior to
June 3, 2002 (converted into a U.S. dollar value using the foreign currency
exchange rate on each such date, which rate is published in The Financial Times
and is based upon the rate established by the Israel Central Bank). As promptly
as practicable after the determination of the aggregate amount of cash to be
paid to holders of fractional interests, the Exchange Agent shall notify Parent
and Parent shall deposit such amount with the Exchange Agent and shall cause
the Exchange Agent to forward payments to such holders of fractional interests
subject to and in accordance with the terms hereof.
Section 2.8 Dissenting Shares. (a) Shares of capital stock of
the Company held by a stockholder who has properly exercised dissenters' rights
with respect thereto in accordance with Section 14-2-1302 of the GBCC
(collectively, the "DISSENTING SHARES") shall not be converted into Merger
Consideration. From and after the Effective Time, a stockholder who has
properly exercised such dissenters' rights shall no longer retain any rights of
a stockholder of the Company or the Surviving Corporation, except those
provided under Section 14-2-1323 of the GBCC.
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(b) The Company shall give Parent (i) prompt notice of any
written demands under Section 14-2-1321 of the GBCC with respect to any shares
of capital stock of the Company, any withdrawal of any such demand and any
other instruments served pursuant to the GBCC and received by the Company and
(ii) the right to participate in all negotiations and proceedings with respect
to any such demands. The Company shall cooperate with Parent concerning, and
shall not, except with the prior written consent of Parent, voluntarily make
any payment with respect to, or offer to settle or settle, any such demands.
Section 2.9 Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of Certificates for
twelve months after the Effective Time shall be delivered to the Surviving
Corporation or otherwise on the instruction of the Surviving Corporation, and
any holders of the Certificates who have not theretofore complied with this
Article II shall thereafter look only to the Surviving Corporation and Parent
for the Merger Consideration with respect to the Shares formerly represented
thereby to which such holders are entitled pursuant to Section 2.1 and Section
2.4 and any dividends or distributions with respect to shares of Parent Stock
to which such holders are entitled pursuant to Section 2.5. Any such portion of
the Exchange Fund remaining unclaimed by holders of Shares seven years after
the Effective Time (or such earlier date immediately prior to such time as such
amounts would otherwise escheat to or become property of any Governmental
Entity (as hereinafter defined)) shall, to the extent permitted by law, become
the property of the Surviving Corporation free and clear of any claim or
interest of any person previously entitled thereto.
Section 2.10 No Liability. None of Parent, Merger Sub, the
Company, the Surviving Corporation or the Exchange Agent shall be liable to any
person in respect of any Merger Consideration from the Exchange Fund delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar Law.
Section 2.11 Investment of the Exchange Fund. The Exchange Agent
shall invest any cash included in the Exchange Fund as directed by Parent on a
daily basis. Any interest and other income resulting from such investments
shall promptly be paid to Parent.
Section 2.12 Lost, Stolen or Destroyed Certificates. If any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation, the posting
by such person of a bond in such reasonable amount as the Surviving Corporation
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will deliver in exchange for
such lost, stolen or destroyed Certificate the applicable Merger Consideration
with respect to the Shares formerly represented thereby and unpaid dividends
and distributions on shares of Parent Stock deliverable in respect thereof
pursuant to this Agreement.
Section 2.13 Withholding Rights. Each of the Surviving Corporation
and Parent shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as it is required to deduct and withhold with respect to
the making of such payment under the Code and the rules and regulations
promulgated thereunder (e.g., backup withholding), or any provision of a Law
relating to Taxes, including the tax laws of Israel. To the extent that amounts
are so withheld by the Surviving Corporation or Parent, as the case may be,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the
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Shares in respect to which such deduction and withholding was made by the
Surviving Corporation or Parent, as the case may be.
Section 2.14 Stock Transfer Books. The stock transfer books of
the Company shall be closed immediately upon the Effective Time and there shall
be no further registration of transfers of Shares thereafter on the records of
the Company. On or after the Effective Time, any Certificates presented to the
Exchange Agent or Parent for any reason shall be converted into the Merger
Consideration with respect to the Shares formerly represented thereby and any
dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.5.
Section 2.15 Further Assurance. At and after the Effective Time,
the officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger Sub,
any ▇▇▇▇▇, ▇▇▇▇ of sale, assignments or assurances and to take and do, in the
name and on behalf of the Company or Merger Sub, any other actions and things
to vest, perfect or confirm of record or otherwise in the Surviving Corporation
any and all right, title and interest in, to and under any of the rights,
properties or assets acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the
Company to Parent prior to the execution of this Agreement (the "COMPANY
DISCLOSURE SCHEDULE") (each section of which qualifies the
correspondingly-numbered representation and warranty or covenant to the extent
specified therein), the Company hereby represents and warrants to each of
Parent and Merger Sub as follows:
Section 3.1 Organization and Qualification; Subsidiaries. (a) The
Company and each of its subsidiaries (as hereinafter defined) is a corporation
or legal entity duly organized, validly existing and in good standing (where
such concept is recognized) under the Laws of the jurisdiction of its
incorporation or formation and has all requisite corporate, partnership or
similar power and authority to own, lease and operate its properties and to
carry on its businesses as now conducted and proposed by the Company to be
conducted.
(b) Section 3.1(b) of the Company Disclosure Schedule identifies all
subsidiaries of the Company and the state or jurisdiction of incorporation or
formation for each subsidiary. Section 3.1(b) of the Company Disclosure
Schedule also identifies all other entities that are not subsidiaries in which
the Company or any of its subsidiaries has acquired an equity interest, the
state or jurisdiction of incorporation or formation of each such entity and the
terms and conditions of each such equity interest.
(c) Each of the Company and its subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so duly qualified or licensed and in good standing does not
and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on the Company.
7
(d) The Company has made available to Parent accurate and complete
copies of the certificate of incorporation and bylaws or equivalent constituent
or organizational documents, as currently in effect, of the Company and each of
its subsidiaries.
Section 3.2 Capitalization of the Company and Its Subsidiaries.
(a) The authorized capital stock of the Company consists of: (i) 100,000,000
Shares, of which 27,937,737 Shares were issued and outstanding and no Shares of
which were held in the Company's treasury, in each case, as of the close of
business on the date of this Agreement, (ii) 100,000 shares of Class A
Convertible Preferred Stock, par value of $.01 per share, no shares of which
are outstanding, and (iii) 10,000,000 shares of Serial Preferred Stock, with no
par value, of which none are issued and outstanding. All of the issued and
outstanding Shares have been validly issued, and are duly authorized, fully
paid, non-assessable and free of preemptive rights. As of April 30, 2002, there
were 3,104,247 Shares reserved for issuance and issuable pursuant to the
Company Option Plan or otherwise deliverable in connection with the exercise of
outstanding Company Stock Options issued pursuant to the Company Option Plan.
In addition, as of the date of this Agreement, there were 2,557,175 Shares
reserved for issuance and issuable pursuant to various warrant agreements with
third parties or otherwise deliverable in connection with the exercise of
outstanding Common Stock warrants. Section 3.2(a) of the Company Disclosure
Schedule includes a list of all holders of Company Options and a summary of the
terms of each option including the exercise price, vesting period, grant date
and expiration date, as of the date of this Agreement. Section 3.2(a) of the
Company Disclosure Schedule also lists all persons, to the Company's knowledge,
that hold, directly or indirectly (applying the beneficial ownership rules of
Rule 13d-3 of the Exchange Act), at least five percent (5%) of the number of
shares of the Company's outstanding capital stock or at least five percent (5%)
of the Company's voting power outstanding, as of the date of this Agreement,
determined on an as-converted and fully-diluted basis, and any terms,
conditions, rights, privileges or obligations relating to such ownership that
differ from those set forth in the Company's articles of incorporation and
bylaws. Except as set forth above or on the Company Disclosure Schedule and
except for the warrants to be issued to Parent in connection with the Loan
Agreement, as of the date hereof, there are outstanding (i) no shares of
capital stock or other voting securities of the Company, (ii) no securities of
the Company or its subsidiaries convertible into or exchangeable for shares of
capital stock or voting securities of the Company, (iii) no options or other
rights to acquire from the Company or its subsidiaries, and no obligations of
the Company or its subsidiaries to issue, any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of the Company, and (iv) no equity equivalents, interests in the
ownership or earnings of the Company or its subsidiaries or other similar
rights (including stock appreciation rights) (collectively, "COMPANY
SECURITIES"). There are no outstanding obligations of the Company or its
subsidiaries to repurchase, redeem or otherwise acquire any Company Securities.
Except for the Irrevocable Proxy to be executed pursuant to Section 6.14 of
this Agreement, there are no stockholder agreements, voting trusts or other
agreements or understandings to which the Company is a party or to which it is
bound relating to the voting of any shares of capital stock of the Company,
and, to the Company's knowledge, no such agreements exist between any of the
Company's security holders.
(b) Except as set forth on Section 3.2(b) of the Company Disclosure
Schedule, all of the outstanding capital stock of the Company's subsidiaries is
owned by the Company, directly or indirectly, free and clear of any Lien (as
hereinafter defined) or any other limitation or restriction (including any
restriction on the right to vote or sell the same, except
8
as may be provided as a matter of law). Except as set forth in paragraph (a)
above, there are no securities of the Company or its subsidiaries convertible
into or exchangeable for, no options or other rights to acquire from the
Company or its subsidiaries, and no other contract, understanding, arrangement
or obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly, of, or granting a right of first refusal, first
negotiation, last look or similar right with respect to, any capital stock or
other ownership interests in, or any other securities of, the Company or any
subsidiary of the Company. There are no outstanding contractual obligations of
the Company or its subsidiaries to repurchase, redeem or otherwise acquire any
outstanding shares of capital stock or other ownership interests in any
subsidiary of the Company. For purposes of this Agreement, "LIEN" means, with
respect to any asset (including, without limitation, any security) any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind in
respect of such asset, except for interests relating to the financing or
leasing of assets.
Section 3.3 Authority Relative to This Agreement. (a) The Company
has all necessary corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. No other
corporate proceedings on the part of the Company are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby (other
than, with respect to the Merger, the Company Requisite Vote (as hereinafter
defined)). This Agreement has been duly and validly executed and delivered by
the Company and constitutes a valid, legal and binding agreement of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(b) The Board of Directors of the Company (the "Company Board") has
duly and validly authorized the execution and delivery of this Agreement and
approved the consummation of the transactions contemplated hereby, and has
taken all corporate actions required to be taken by the Company Board for the
consummation of the transactions, including the Merger, contemplated hereby
and, subject to Section 6.6(b), has resolved (i) to deem this Agreement and the
transactions contemplated hereby, including the Merger, taken together,
advisable and fair to and in the best interests of the Company and its
stockholders, and (ii) to recommend that the stockholders of the Company
approve and adopt this Agreement. The Company Board has directed that this
Agreement be submitted to the stockholders of the Company for their approval.
The affirmative approval of the holders of Shares representing a majority of
the votes that may be cast by the holders of all outstanding Shares (the
"COMPANY REQUISITE VOTE") is the only vote of the holders of any class or
series of capital stock of the Company necessary to adopt this Agreement and
approve the transactions contemplated hereby, including the Merger.
Section 3.4 SEC Reports; Financial Statements; Other Reports.
The Company has filed all required forms, reports and documents with the SEC
since August 21, 2000, each of which has complied in all material respects with
all applicable requirements of the Securities Act and the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), each as in effect on the dates
such forms, reports and documents were filed. The Company has heretofore made
available to Parent, in the form filed with the SEC (including any amendments
thereto), (i) its Annual Reports on Form 10-K for its fiscal years ended
December 31, 2000 and December 31, 2001, respectively, (ii) its Quarterly
Reports on Form 10-Q for the periods ended March 31, 2001, June 30, 2001,
September 30, 2001 and March
9
31, 2002, respectively, (iii) all definitive proxy statements relating to the
Company's meetings of stockholders (whether annual or special) held or to be
held since August 21, 2000, and (iv) all other reports or registration
statements filed by the Company with the SEC since August 21, 2000 (the
"COMPANY SEC REPORTS"). None of such forms, reports or documents, including,
without limitation, any financial statements or schedules included or
incorporated by reference therein, contained, when filed, any untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of the Company included in
the Company SEC Reports complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto and fairly present, in conformity with United
States generally accepted accounting principles applied on a consistent basis
("GAAP") (except as may be indicated in the notes thereto), the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and their consolidated results of operations and changes in
financial position for the periods then ended (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments). All
registers required to be kept by the Company or any of the Company's
subsidiaries under the provisions of any applicable law are true, complete and
accurate in all material respects. All returns, particulars, resolutions,
reports and other documents required to be filed with or delivered to any
Governmental Entity (as hereinafter defined) in respect of the Company or its
subsidiaries are true, complete and accurate in all material respects and have
been properly filed or delivered in a timely manner or a proper exemption from
such filing was obtained.
Section 3.5 No Undisclosed Liabilities. Except as and to the
extent publicly disclosed by the Company in the Company SEC Reports, none of
the Company or its subsidiaries has any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, and there is no
existing condition, situation or set of circumstances which would reasonably be
expected to result in such a liability or obligation, other than liabilities or
obligations provided for in the consolidated balance sheet of the Company
(including the notes thereto) as of March 31, 2002, liabilities or obligations
under this Agreement and liabilities or obligations which would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company.
Section 3.6 Absence of Changes. Except as and to the extent
publicly disclosed in the Company SEC Reports or as expressly permitted by
Section 5.1, since March 31, 2002, the Company and its subsidiaries have
conducted their business in the ordinary and usual course consistent with past
practice and there has not been:
(a) any event, occurrence or development relating to the Company or
any of its subsidiaries which does or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company or
its subsidiaries;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company or any
of its subsidiaries, or any repurchase, redemption or other acquisition by the
Company or any subsidiary of the Company of any Company Securities;
(c) any amendment of any term of any outstanding security of the
Company or any subsidiary of the Company that would materially increase the
obligations of the Company or such subsidiary under such security;
10
(d) (x) any incurrence or assumption by the Company or any subsidiary
of the Company of any indebtedness for borrowed money, other than borrowings
under existing credit facilities (or any renewals, replacements or extensions
that do not increase the aggregate commitments thereunder) that are incurred
(A) in the ordinary and usual course of business consistent with past practice
(it being understood that any indebtedness incurred prior to the date hereof in
respect of capital expenditures in excess of $100,000 shall not be considered
to have been in the ordinary and usual course of business consistent with past
practice) or (B) in connection with (1) any acquisition or capital expenditure
permitted by Section 5.1 or (2) the transactions contemplated hereby, or (y)
any guarantee, endorsement or other incurrence or assumption of liability
(whether directly, contingently or otherwise) by the Company or any subsidiary
of the Company for the obligations of any other person (other than the Company
or any wholly owned subsidiary of the Company), other than in the ordinary and
usual course of business consistent with past practice;
(e) any creation or assumption by the Company or any subsidiary of the
Company of any Lien on any asset of the Company or any subsidiary of the
Company other than in the ordinary and usual course of business consistent with
past practice;
(f) any making of any loan, advance or capital contribution to or
investment in any person by the Company or any subsidiary of the Company other
than (i) loans, advances or capital contributions to or investments in wholly
owned subsidiaries of the Company or (ii) loans or advances to employees of the
Company or any subsidiary made in the ordinary and usual course of business
consistent with past practice, provided that any such loan, advance or capital
contribution was approved or ratified by the Company Board;
(g) (i) any contract or agreement entered into by the Company or any
subsidiary of the Company on or prior to the date hereof relating to any
material acquisition or disposition of any assets or business other than in the
ordinary course of business or (ii) any modification, amendment, assignment,
termination or relinquishment by the Company or any subsidiary of the Company
of any contract, license or other right (including any insurance policy naming
it as a beneficiary or a loss payable payee) that does or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company;
(h) any material change in any method of accounting or accounting
principles or practice by the Company or any subsidiary of the Company, except
for any such change required by reason of a change in GAAP;
(i) except as disclosed on Section 3.6 of the Company Disclosure
Schedule, any (i) grant of any severance or termination pay to any director,
officer, employee or individual providing services to the Company or any of its
subsidiaries, (ii) entering into any employment, deferred compensation, change
in control or other similar agreement (or any amendment to any such existing
agreement) with any director, officer, employee or individual providing
services to the Company or any of its subsidiaries, (iii) increase in benefits
payable under any existing severance or termination pay policies or employment
agreements or (iv) increase in compensation, bonus or other benefits payable to
directors, officers, employees or individual providing services to the Company
or any of its subsidiaries other than, in the case of clause (i) with respect
to non-executive employees and clause (iv) only, in the ordinary course of
business consistent with past practice; or
11
(j) any issuance of stock, convertible securities, options, warrants
or other securities of the Company or its subsidiary, other than pursuant to
the exercise of outstanding options and warrants; or
(k) any damage, destruction or other casualty loss with respect to any
asset or property owned, leased or otherwise used by the Company or any of its
subsidiaries in the conduct of their respective businesses, to the extent such
damage, destruction or other loss was not fully covered by insurance.
Section 3.7 Information Supplied. None of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in (i) the registration statement on Form F-4 to be filed with the
SEC by Parent in connection with the registration of shares of Parent Stock
pursuant to the Merger (the "F-4") will, at the time the F-4 is filed with the
SEC and at the time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, (ii) the report (the "REPORT") to be filed by the Parent with the
Israeli Securities Authority ("ISA") in connection with the Merger, will, at
the time the Report is filed with the ISA, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (iii) the proxy
statement/prospectus relating to the Company Stockholders Meeting (as
hereinafter defined) to be held in connection with the Merger, respectively
(the "PROXY STATEMENT"), will, at the date mailed to stockholders and at the
times of the meetings of stockholders to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with respect
to the Company, its officers and directors or any of its subsidiaries should
occur which is required to be described in an amendment of, or a supplement to,
the F-4, the Report or the Proxy Statement, the Company shall promptly so
advise Parent and such event shall be so described, and such amendment or
supplement (which Parent shall have a reasonable opportunity to review) shall
be promptly filed with the SEC and the ISA and, as required by Law,
disseminated to the stockholders of the Company and Parent, as applicable. The
Proxy Statement, insofar as it relates to the Company Stockholders Meeting,
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
Section 3.8 Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the Exchange
Act, the HSR Act (as defined herein), state securities or blue sky laws, the
filing and recordation of the Certificate of Merger as required by the GBCC and
as otherwise set forth in Section 3.8 to the Company Disclosure Schedule, no
filing with or notice to, and no permit, authorization, consent or approval of,
any court or tribunal or administrative, governmental or regulatory body,
agency or authority (a "GOVERNMENTAL ENTITY") or other third party is necessary
for the execution and delivery by the Company of this Agreement or the
consummation by the Company of the transactions contemplated hereby, except
where the failure to obtain such permits, authorizations, consents or approvals
or to make such filings or give such notice does not and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company.
12
Section 3.9 No Default. Except as disclosed on Section 3.9 of
the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries are in violation of any term of (i) its articles of incorporation,
bylaws or other organizational documents, (ii) any agreement or instrument
related to indebtedness for borrowed money or any other agreement to which it
is a party or by which it is bound, or (iii) any foreign or domestic law,
order, writ, injunction, decree, ordinance, award, stipulation, statute,
judicial or administrative doctrine, rule or regulation enacted by a
Governmental Entity ("LAW") applicable to the Company, its subsidiaries or any
of their respective properties or assets, the consequence of which violation
does or would reasonably be expected to (A) have, in the case of (ii) or (iii),
individually or in the aggregate, a Material Adverse Effect on the Company or
(B) prevent or materially delay the performance of this Agreement by the
Company. Except as set forth in Section 3.9 of the Company Disclosure Schedule,
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby will not (i) violate the articles of
incorporation, bylaws or other organizational documents of the Company or any
of its subsidiaries, (ii) violate or conflict with, constitute a default under,
require any consent, waiver or notice under any term of, or result in the
reduction or loss of any benefit or the creation or acceleration of any right
or obligation under, any agreement, note, bond, mortgage, indenture, contract,
lease, Company Permit (as hereinafter defined) or other obligation or right to
which the Company or any of its subsidiaries is a party or by which any of the
assets or properties of the Company or any of its subsidiaries is bound, (iii)
violate any applicable Law, or (iv) result in the creation or imposition of any
Lien upon any of the properties or assets of the Company or any of its
subsidiaries, except, in the case of clauses (ii) through (iv) only, where any
of the foregoing do not or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
Section 3.10 Litigation. Section 3.10 of the Company Disclosure
Schedule sets forth each instance in which any of the Company and its
subsidiaries (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is a party or, to the knowledge of any of the
Company, its subsidiaries and their respective directors and officers (and
employees with responsibility for litigation matters), is threatened to be made
a party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator. Except as
described therein, none of the actions, suits, proceedings, hearings,
arbitrations and investigations set forth in Section 3.10 of the Company
Disclosure Schedule could reasonably be expected to result in any Material
Adverse Effect on any of the Company and its subsidiaries.
Section 3.11 Compliance with Applicable Law. The Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "COMPANY PERMITS"), except for failures to
hold such permits, licenses, variances, exemptions, orders and approvals which
do not or would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. The Company and its
subsidiaries are in compliance with the terms of the Company Permits, except
where the failure to so comply does not or would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company. The businesses of the Company and its subsidiaries are not being
conducted in violation of any Law applicable to the Company or its
subsidiaries, except for violations or possible violations which do not and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. Except as set forth on Section 3.11 of
the Company
13
Disclosure Schedule, to the Company's knowledge, no investigation or review by
any Governmental Entity with respect to the Company or its subsidiaries is
pending or threatened, nor, to the Company's knowledge, has any Governmental
Entity indicated an intention to conduct the same, other than, in each case,
those which do not or would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on the Company. The consummation of
the Merger will not cause any of the Company Permits to be revoked, annulled,
terminated or canceled in any way, except to the extent such revocation,
annulment, termination or cancellation would not reasonably be expected to have
a Material Adverse Effect on the Company.
Section 3.12 Employee Plans. (a) Section 3.12(a) of the Company
Disclosure Schedule lists all "employee benefit plans," as defined in Section
3(3) of ERISA, including any "multiemployer plan", as defined in Section 3(37)
of ERISA (a "MULTIEMPLOYER PLAN") and all other employee benefit plans or other
benefit arrangements, including, without regard to materiality, all executive
compensation, directors' benefit, bonus or other incentive compensation, change
in control, severance, retention, termination, salary continuation, leave of
absence, stock or other equity-related, consulting, employee leasing and
deferred compensation plans or arrangements under which the Company or any of
its subsidiaries has any obligation (contingent or otherwise) relating to any
current or former individual providing services to the Company or any of its
subsidiaries (each an "EMPLOYEE BENEFIT PLAN" and collectively, the "EMPLOYEE
BENEFIT PLANS"). Section 3.12(a) of the Company Disclosure Schedule separately
identifies each Employee Benefit Plan which the Company or any of its
subsidiaries maintains or contributes to directly (each a "COMPANY EMPLOYEE
BENEFIT PLAN" and collectively, the "COMPANY EMPLOYEE BENEFIT PLANS"). True,
correct and complete copies of each Company Employee Benefit Plan (and, where
applicable, the most recent summary plan description, actuarial report,
determination letter, most recent Form 5500 and trust agreement) have been made
available to Parent for review prior to the date hereof.
(b) As of the date hereof, (i) all payments required to be made by or
under any Company Employee Benefit Plan, any related trusts, or any collective
bargaining agreement have been made, or, if not made, are properly reflected on
the financial statements of the Company; (ii) the Company and its subsidiaries
have performed all material obligations required to be performed by them under
any Company Employee Benefit Plan; (iii) the Company Employee Benefit Plans
have been administered in compliance with their terms and the requirements of
ERISA, the Code and other applicable Laws, except for such noncompliance which
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company; (iv) there are no actions, suits,
arbitrations or claims (other than routine claims for benefit) pending or, to
the knowledge of the Company, threatened with respect to any Company Employee
Benefit Plans; (v) to the Company's knowledge, the Company and its subsidiaries
have no liability as a result of any "prohibited transaction" (as defined in
Section 406 of ERISA and Section 4975 of the Code) for any excise tax or civil
penalty; and (vi) in particular, no individual who has performed services for
the Company or any of its Subsidiaries has been improperly excluded from
participation in any Company Employee Benefit Plan.
(c) Neither the Company nor any of its ERISA Affiliates sponsors,
maintains or contributes or has ever sponsored maintained or contributed to
any: (i) Employee Benefit Plans subject to Title IV of ERISA; or (ii)
Multiemployer Plan. An "ERISA Affiliate" is any trade or business (whether or
not incorporated) which is or has been under common control,
14
or which is or has been treated as a single employer, with the Company under
Section 414(b), (c), (m) or (o) of the Code.
(d) Each of the Company Benefit Plans which is intended to be
"qualified" within the meaning of Section 401(a) of the Code is so "qualified"
and has received a favorable determination letter from the Internal Revenue
Service (or is the subject of a pending application for such determination that
was timely filed) and the Company knows of no fact which could reasonably be
expected to adversely affect the qualified status of any such plan.
(e) Except as set forth in Section 3.12(e) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transaction contemplated hereby will (either alone or in
combination with any other event): (i) result in any payment becoming due, or
increase the amount of compensation due, to any current or former employee of
the Company or any of its subsidiaries; (ii) increase any benefits otherwise
payable under any Company Employee Benefit Plan; (iii) result in the
acceleration of the time of payment or vesting of any such benefits; (iv)
result in the failure of any amount payable under any Company Employee Benefit
Plan to be deductible for federal income tax purposes by virtue of Sections
280G or 162(m) of the Code; or (v) result in the payment of any excise taxes by
the Company or any of its employees under Sections 4999 or 5881 of the Code.
Section 3.13 Labor Matters. (a) Section 3.13 of the Company
Disclosure Schedule sets forth a list of all employment, labor or collective
bargaining agreements to which the Company or any subsidiary of the Company is
party (other than the Company's standard form of employment agreement required
to be signed by all employees containing non-solicitation and non-disclosure
covenants and employment agreements that are terminable "at will") and except
as set forth therein, there are no employment, labor or collective bargaining
agreements which pertain to individuals providing services to the Company or
any of its subsidiaries. The Company has heretofore made available to Parent
true and complete copies of (A) employment agreements listed on Section 3.13 of
the Company Disclosure Schedule and (B) labor or collective bargaining
agreements listed on Section 3.13 of the Company Disclosure Schedule, together
with all amendments, modifications, supplements and side letters affecting the
duties, rights and obligations of any party thereunder.
(b) (i) No individual providing services to the Company or any of
its subsidiaries is represented by any labor organization; no labor
organization or group of individuals providing services to the Company or any
of its subsidiaries has made a pending written demand for recognition or
certification; and, to the Company's knowledge, there are no representation or
certification proceedings or petitions seeking a representation proceeding
presently pending or threatened in writing to be brought or filed with the
National Labor Relations Board or any other labor relations tribunal or
authority. To the Company's knowledge, there are no organizing activities
involving the Company or any of its subsidiaries presently being engaged in by
any labor organization or group of individuals providing services to the
Company or any of its subsidiaries;
(ii) There have been no strikes, work stoppages,
slowdowns, lockouts, unfair labor practice charges, arbitrations, grievances or
complaints pending or threatened in writing by or on behalf of any employee or
individuals providing services to the Company or any of its subsidiaries; and
15
(iii) Except as disclosed in Section 3.13 of the Company
Disclosure Schedule, there are no complaints, charges or claims against the
Company or any of its subsidiaries pending, or threatened in writing to be
brought or filed, with any Governmental Entity or arbitrator based on, arising
out of, in connection with, or otherwise relating to the employment or
termination of employment or services of any individual by the Company or any
of its subsidiaries.
(c) The Company and each of its subsidiaries is in substantial
compliance with all Laws relating to the employment of labor, including all
such laws and orders relating to wages, hours, collective bargaining,
discrimination, civil rights, safety and health, workers' compensation and the
collection and payment of withholding and/or Social Security taxes and similar
taxes other than any such non-compliance which does not have or would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. Except as set forth in Section 3.13 of the
Company Disclosure Schedule, none of the Company's or the subsidiaries'
executive officers have left the Company since December 31, 2001.
(d) All employment agreements of the Company are terminable "at will,"
except as set forth on Section 3.13 of the Company Disclosure Schedule. Any
severance or termination benefits payable by the Company as a result of the
termination of any agreements listed on Section 3.13 of the Company Disclosure
Schedule are set forth on such disclosure schedule.
(e) Except as set forth on Schedule 3.13 of the Company Disclosure
Schedule, all of the employees of the Company and any subsidiary of the Company
who have responsibility for developing and/or managing the Company's
Intellectual Property Rights (as defined in Section 3.19 below) or who have
responsibility for sales of products or services to any of the customers of the
Company or the Company's subsidiaries have entered into a standard form of
non-solicitation and non-disclosure agreement previously provided to Parent by
the Company, except where the failure to enter into such agreement or
agreements does not have or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
Section 3.14 Environmental Matters. (a) For purposes of this
Agreement:
(i) "ENVIRONMENTAL COSTS AND LIABILITIES" means any and
all losses, liabilities, obligations, damages (including compensatory, punitive
and consequential damages), fines, penalties, judgments, actions, claims, costs
and expenses (including, without limitation, fees, disbursements and expenses
of legal counsel, experts, engineers and consultants and the costs of
investigation and feasibility studies and cost to clean up, remove, treat, or
in any other way address any Hazardous Materials (as hereinafter defined))
arising from, under or pursuant to any Environmental Law (as hereinafter
defined);
(ii) "ENVIRONMENTAL LAW" means any applicable federal,
state, local or foreign law (including common law), statute, rule, regulation,
ordinance, decree or other legal requirement relating to the protection of
natural resources, the environment and public and employee health and safety or
pollution or the release or exposure to Hazardous Materials (as hereinafter
defined) and shall include, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA") (42 ▇.▇.▇.▇▇. 9601 et
seq.), the Hazardous Materials Transportation Act (49 ▇.▇.▇.▇▇. 1801 et seq.),
the Resource Conservation and Recovery Act (42 ▇.▇.▇.▇▇. 6901 et seq.), the
Clean Water Act (33 U.S.C.
16
ss. 1251 et seq.), the Clean Air Act (33 ▇.▇.▇.▇▇. 7401 et seq.), the Toxic
Substances Control Act (15 ▇.▇.▇.▇▇. 7401 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 ▇.▇.▇.▇▇. 136 et seq.), and the Occupational
Safety and Health Act (29 ▇.▇.▇.▇▇. 651 et seq.)("OSHA") and the regulations
promulgated pursuant thereto, and any such applicable state or local statutes,
and the regulations promulgated pursuant thereto as such laws have been and may
be amended or supplemented through the Closing Date;
(iii) "HAZARDOUS MATERIAL" means any substance, material
or waste which is regulated, classified or otherwise characterized as
hazardous, toxic, pollutant, contaminant or words of similar meaning or
regulatory effect by any Governmental Entity or the United States, and
includes, without limitation, petroleum, petroleum by-products and wastes,
asbestos and polychlorinated biphenyls;
(iv) "RELEASE" means any release, spill, effluent,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching, or migration into the indoor or outdoor environment, or into or out
of any property currently or formerly owned, operated or leased by the
applicable party or its subsidiaries; and
(v) "REMEDIAL ACTION" means all actions, including,
without limitation, any capital expenditures, required by a Governmental Entity
or required under or taken pursuant to any Environmental Law, or voluntarily
undertaken to (A) clean up, remove, treat, or in any other way, ameliorate or
address any Hazardous Materials or other substance in the indoor or outdoor
environment; (B) prevent the Release or threat of Release, or minimize the
further Release of any Hazardous Material so it does not endanger or threaten
to endanger the indoor or outdoor environment; (C) perform pre-remedial studies
and investigations or post-remedial monitoring and care pertaining or relating
to a Release; or (D) bring the applicable party into compliance with any
Environmental Law.
(b) Except as set forth on Section 3.14 of the Company Disclosure
Schedule or as would not reasonably be expected to have, in the aggregate, a
Material Adverse Effect,
(i) The operations of the Company and its subsidiaries
have been and are in compliance with all Environmental Laws, and the Company is
not aware of any facts, circumstances or conditions, which would prevent
compliance in the future;
(ii) The Company and its subsidiaries have obtained and
are in compliance with all permits, authorizations, licenses or similar
approvals required under applicable Environmental Laws for the operations of
their respective businesses;
(iii) The Company and its subsidiaries are not subject to
any outstanding written orders or contracts with any Governmental Entity or
other person respecting (A) Environmental Laws, (B) Remedial Action or (C) any
Release or threatened Release of a Hazardous Material;
(iv) Neither the Company nor any of its subsidiaries has
any actual or contingent liability, and to the Company's knowledge there are no
facts, conditions, situations or set of circumstances that could reasonably be
expected to result in or be the basis for any such liability in connection with
the Release of any Hazardous Material (whether on-site or off-site) nor have
such entities incurred or do such entities reasonably expect to incur any
Environmental Costs and Liabilities;
17
(v) The operations of the Company or its subsidiaries do
not involve the generation, transportation, treatment, storage or disposal of
hazardous waste, as defined and regulated under 40 C.F.R. Parts 260-270 (in
effect as of the date of this Agreement) or any state equivalent;
(vi) No judicial or administrative proceedings are
pending or, to the Company's knowledge, threatened against the Company or its
subsidiaries alleging the violation of or seeking to impose liability pursuant
to any Environmental Law and no claim, summons or order has been received, no
complaint has been filed, no penalty has been assessed, and no investigations,
actions, suits or proceedings are pending or, to the Company's knowledge,
threatened against the Company or any of its subsidiaries under Environmental
Laws; and
(vii) The Company has made available to Parent copies of
any and all environmentally related assessments, audits, investigations,
sampling or similar reports of which the Company has knowledge relating to the
Company or its subsidiaries or any real property currently or formerly owned,
operated or leased by or for the Company or its subsidiaries.
Section 3.15 Taxes. Except as disclosed on Section 3.15 of the
Company Disclosure Schedule:
(a) Each of the Company and each subsidiary has timely filed, or has
caused to be timely filed on its behalf (taking into account any extension of
time within which to file), all material Tax Returns required to be filed by
it, and all such filed Tax Returns are true, complete and accurate in all
material respects. All Taxes shown to be due on such Tax Returns, or otherwise
required to be paid by the Company or a subsidiary, have been timely paid.
(b) The most recent financial statements contained in the Company SEC
Reports reflect an adequate reserve for all Taxes payable by the Company and
its subsidiaries for all taxable periods and portions thereof through the date
of such financial statements. No deficiency with respect to Taxes has been
proposed, asserted or assessed against the Company or any subsidiary.
(c) None of the United States income Tax Returns of the Company or any
subsidiary of the Company have been examined by or settled with the United
States Internal Revenue Service ("IRS")(or the applicable statute of
limitations has expired) for all years through and including taxable year ended
December 31, 2000. The IRS has made no assessments for Taxes due with respect
to such Tax Returns.
(d) Neither the Company nor any subsidiary has any obligation under
any agreement (either with any person or any taxing authority) with respect to
Taxes.
(e) Neither the Company nor any subsidiary has constituted either a
"distributing corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
tax-free treatment under Section 355 of the Code since the later of the
effective date of Section 355(e) of the Code or the inception of the Company.
18
(f) Neither the Company nor any subsidiary has been a member of an
affiliated group of corporations within the meaning of Section 1504 of the
Code, other than the affiliated group of which the Company is the common
parent.
(g) No audit or other administrative or court proceedings are pending
with respect to United States income or state income or franchise Taxes of the
Company or any subsidiary and no notice thereof has been received. No issue has
been raised by any taxing authority in any presently pending United States
income or state income or franchise Tax audit that could be material and
adverse to the Company or any subsidiary for any period after the Effective
Time. Neither the Company nor any of its subsidiaries has any outstanding
agreements, waivers, or arrangements extending the statutory period of
limitations applicable to any claim for, or the period for the collection or
assessment of Taxes.
(h) To the Company's knowledge, no claim has been made by a taxing
authority in a jurisdiction where neither the Company nor any subsidiary files
state income or franchise Tax Returns that the Company or any subsidiary is or
may be subject to income or franchise taxation in that jurisdiction.
(i) Neither the Company nor any subsidiary is a party to any contract,
agreement or other arrangement which provides for the payment of any amount
which would not be deductible by reason of Section 162(m) or Section 280G of
the Code or which would result in the imposition of excise taxes under Section
4999 or Section 5881 of the Code.
(j) The Company has made available to Parent true and complete copies
of (i) all United States income Tax Returns of the Company and its subsidiaries
for the preceding three taxable years and (ii) any audit report issued within
the last three years (or otherwise with respect to any audit or proceeding in
progress) relating to United States income Taxes of the Company or any
subsidiary.
(k) No Liens for Taxes exist with respect to any assets or properties
of the Company or any of its subsidiaries except for Liens for Taxes not yet
due.
(l) The Company and its Subsidiaries have withheld and paid all
material Taxes required to be withheld in connection with any amounts paid or
owing to any employee, creditor, independent contractor or other third party.
(m) For purposes of this Agreement:
"TAXES" means any United States or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code ss.59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not, whenever created or
imposed, and whether imposed by a local, municipal, governmental, state,
foreign, federal or other Governmental Entity, or in connection with any
agreement with respect to Taxes.
19
"TAX RETURNS" means all federal, state, local, provincial and foreign
Tax returns, declarations, statements, reports, schedules, forms and
information returns and any amended Tax return relating to Taxes.
Section 3.16 Material Contracts. Neither the Company nor any
subsidiary of the Company is a party to or bound by, and neither they nor their
properties are subject to, any contract or other agreement required to be
disclosed in a Form 10-K or Form 10-Q of the SEC which is not disclosed in the
Company's 10-K or the Company's 10-Qs. All of such contracts and other
agreements are valid, legally enforceable, subsisting, in full force and effect
and, following the execution of this Agreement and the Effective Time, will
remain in full force and effect, binding upon the Company, and to the knowledge
of the Company, binding upon the other parties thereto in accordance with their
terms, and the Company and the subsidiaries of the Company have paid in full or
accrued all amounts now due from them thereunder and have satisfied in full or
provided for all of their liabilities and obligations thereunder which are
presently required to be satisfied or provided for and are not in default under
any of them, except where failure to take such action or such a default could
not reasonably be expected to have a Material Adverse Effect on the Company,
nor, to the knowledge of the Company, is any other party to any such contract
or other agreement in default thereunder, nor does any condition exist that
with notice or lapse of time or both would constitute a default thereunder,
except where such a default could not reasonably be expected to have a Material
Adverse Effect on the Company.
The Company Disclosure Schedule sets forth a list of the following
contracts and other material agreements to which the Company or any subsidiary
of the Company is a party or by or to which they or their assets or properties
are bound or subject:
(a) any agreement (i) involving research, development or licenses or
(ii) that individually requires aggregate expenditures by the Company and/or
any subsidiary of the Company, both in any one year of more than $100,000;
(b) any indenture, trust agreement, loan agreement or note that
involves or evidences outstanding indebtedness, obligations or liabilities for
borrowed money in excess of $100,000;
(c) any lease, sublease, installment purchase or similar arrangement
for the purchase, use or occupancy of real or personal property (i) that
individually requires aggregate expenditures by the Company and/or any
subsidiary of the Company in any one year of more than $100,000 or (ii)
pursuant to which the Company or any subsidiary of the Company is the lessor of
any real property which has rentals over $100,000 per year, together with the
date of termination of such leases, the name of the other party and the annual
rental payments required to be made under such leases;
(d) any agreement of surety, guarantee or indemnification, other than
(i) an agreement in the ordinary course of business with respect to obligations
in an amount not in excess of $100,000 or (ii) indemnification provisions
contained in leases not otherwise required to be disclosed;
(e) (i) any agreement, including without limitation employment
agreements (other than the Company's standard employment agreement containing
non-solicitation and non-disclosure covenants and any employment agreement that
is terminable "at will") and bonus plans, relating to the compensation of (A)
officers, (B) employees earning more than
20
$100,000, or (C) consultants and (ii) any agreements, contracts or
commitments with any such individuals which contain change of control,
severance or other obligations;
(f) any agreement containing covenants of the Company or a subsidiary
of the Company not to compete in any line of business, in any geographic area
or with any person or covenants of any other person not to compete with the
Company or a subsidiary of the Company or in any line of business of the
Company or a subsidiary of the Company;
(g) any agreement granting or restricting the right of the Company or
any subsidiary of the Company to use a trade name, trade ▇▇▇▇, logo or
proprietary rights;
(h) any agreement with any customer or supplier that cannot be
terminated without penalty in excess of $100,000 by the Company or any
subsidiary of the Company within a six-month period; and
(i) any material agreement with a change of control provision or with
restrictions or limitations on, or consent requirements with respect to,
assignments.
True and complete copies of all of the contracts and other agreements
set forth on the Company Disclosure Schedule have been made available to
Parent.
Section 3.17 Insurance. The insurance policies maintained by the
Company or any of its subsidiaries have been issued by insurers, which, to the
Company's knowledge, are reputable and financially sound, and provide coverage
for the operations conducted by the Company and its subsidiaries of a
reasonably prudent scope and coverage. No notice of any termination or
threatened termination of any such policies has been received and such policies
are in full force and effect. No material insurance claim filed by the Company
within the past twelve months has been denied or rejected by the insurer,
except as disclosed on Section 3.17 of the Company Disclosure Schedule.
Section 3.18 Real Property.
(a) Section 3.18 of the Company Disclosure Schedule sets forth all of
the real property owned in fee by the Company and its subsidiaries. Each of the
Company and its subsidiaries has good and marketable title to each parcel of
real property owned by it free and clear of all Liens, except (i) taxes and
general and special assessments not in default and payable without penalty and
interest, and (ii) other liens, mortgages, pledges, encumbrances and security
interests which do not materially interfere with the Company's or any of its
subsidiaries' use and enjoyment of such real property or materially detract
from or diminish the value thereof.
(b) Section 3.18 of the Company Disclosure Schedule sets forth all
material leases, subleases and other agreements (the "COMPANY REAL PROPERTY
LEASES") under which the Company or any of its subsidiaries uses or occupies or
has the right to use or occupy, now or in the future, any real property. Each
Company Real Property Lease constitutes the valid and legally binding
obligation of the Company or its subsidiaries, enforceable in accordance with
its terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of
general applicability relating to or affecting creditors' rights or by general
equity principles), and is in full force and effect. The consummation of the
transactions contemplated by this Agreement will not
21
result in any termination event or condition or default of a material nature on
the part of the Company or any such subsidiary under any Company Real Property
Lease.
Section 3.19 Intellectual Property.(a) For purposes of this
Agreement, "INTELLECTUAL PROPERTY RIGHTS" shall mean rights arising from or in
respect of the following, whether protected, created or arising under the laws
of the United States or any other jurisdiction:
(i) patents and patent applications, including
continuation, divisional, continuation-in-part, or reissue patent applications
and patents issuing thereon (collectively "PATENTS");
(ii) copyrights and registrations and mask work rights
and registrations and applications therefore (collectively "COPYRIGHTS");
(iii) fictional business names, trade names, corporate
names, trademarks and service marks, logos, Internet domain names (whether
registered or unregistered, including any applications for registration of any
of the foregoing), trade dress rights and general intangibles of a like nature,
industrial or product designs together with the goodwill associated with any of
the foregoing (collectively "MARKS"); and
(iv) trade secrets, know-how, manufacturing and
production processes and techniques, inventions, discoveries, concepts, ideas,
methods, processes, designs, plans, proposals, copyrightable works, formulae,
technical data, drawings, specifications, data bases and other proprietary and
confidential information (including ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice)),
research and development information, customer and supplier lists and
information, financial data and financial and marketing plans (collectively
"TRADE SECRETS").
(b) For purposes of the following, "COMPANY INTELLECTUAL PROPERTY
RIGHTS" shall mean all Intellectual Property Rights owned by the Company or any
of its subsidiaries or material to the operation of the business of the Company
or any of its subsidiaries.
(c) Section 3.19 of the Company Disclosure Schedule contains a
complete and accurate list of all Patents and Marks owned by the Company or any
of its subsidiaries or material to the operation of the business of the Company
or any of its subsidiaries, for each indicating status (e.g., issued, pending
application, registered, unregistered, registration pending, draft), issue or
registration date, filing date, jurisdiction, and, in the case of Marks, the
applicable class of goods or services.
(d) Except as indicated in Section 3.19 of the Company Disclosure
Schedule:
(i) the Company or its subsidiaries own all right, title
and interest in and to all of the Company Intellectual Property Rights, in each
case free and clear of any and all liens and free from any requirement of any
past, present or future payments (other than maintenance and similar payments),
and neither the Company nor any of its subsidiaries has not received any
written notice or claim challenging the Company's complete and exclusive
ownership of the Company Intellectual Property Rights or suggesting that any
other Person has any claim of legal or beneficial ownership with respect
thereto;
22
(ii) there have been no claims made against the Company
or any of its subsidiaries and neither the Company nor any of its subsidiaries
has received written notice or claim, or, to the knowledge of the Company, the
licensors of any such rights have received no written notice asserting the
invalidity, misuse or unenforceability of any of the Company Intellectual
Property Rights, and, to the knowledge of the Company, there are no grounds for
the same;
(iii) to the Company's knowledge, the conduct of the
business of the Company or any of its subsidiaries has not infringed upon or
misappropriated and does not infringe upon or misappropriate any Intellectual
Property Rights of other Persons, nor, to the knowledge of the Company, would
any future conduct of the Company or any of its subsidiaries as presently
contemplated infringe upon any Intellectual Property Rights of other Persons
and neither the Company nor any of its subsidiaries has received notice from
any Person concerning the foregoing;
(iv) to the knowledge of the Company, the Patents of the
Company and its subsidiaries are not presently and have not been infringed upon
or misappropriated by any other Person;
(v) the Company and its subsidiaries have taken
reasonable steps to maintain and protect Company Intellectual Property Rights
and Company Intellectual Property Rights are currently in compliance in all
material respects with legal requirements (including timely payment of filing,
examination and maintenance fees, as well as timely post-registration filing of
affidavits of use, incontestability and renewal applications);
(vi) neither the Company nor any of its subsidiaries has
granted to any Person any right, license or permission to practice any Company
Intellectual Property Rights;
(vii) no Patents or Marks of the Company or any of its
subsidiaries are involved in any interference, reissue, reexamination,
opposition or cancellation proceeding or any other material litigation or
proceeding of any kind in the United States or in any other jurisdiction;
(viii) Company Intellectual Property Rights, the value of
which is contingent upon maintenance of confidentiality thereof, have not been
disclosed to any Person other than employees, independent contractors,
consultants, representatives and agents of the Company and its subsidiaries,
all of whom are bound by confidentiality agreements and the Company and its
subsidiaries have taken reasonable precautions in accordance with standard
industry practice to protect the secrecy, confidentiality and value of all
Trade Secrets owned by the Company and its subsidiaries and, to the Company's
knowledge, there has been no disclosure by the Company or any of its
subsidiaries of Trade Secrets to any other Person;
(ix) for Marks, to the knowledge of the Company, neither
the Company nor any of its subsidiaries has taken any action (or failed to take
any action), conducted its business, or used or enforced any of the Marks, in
each case in a manner that would result in the abandonment, cancellation,
forfeiture, relinquishment, or unenforceability of any of the Marks and the
Company and its subsidiaries have taken all reasonable steps to protect the
Company's and its subsidiaries' rights in and to each of the Marks and to
prevent the unauthorized use thereof by any other Person; and
23
(x) The Company and its subsidiaries have secured valid
written assignments from all consultants and employees who contributed to the
creation or development of Company Intellectual Property Rights or the rights
to such contributions that the Company or any of its subsidiaries does not
already own by operation of law.
(e) Section 3.19 of the Company Disclosure Schedule contains a
complete and accurate list of all licenses, sublicenses, agreements and other
rights granted by the Company or any of its subsidiaries to any third party
with respect to any Intellectual Property Rights and all licenses and other
rights granted by any third party (or assigned) to the Company or any of its
subsidiaries with respect to any Intellectual Property Rights (other than
separate licenses for off-the-shelf software with a retail value less than
$1,000) (collectively defined as "INTELLECTUAL PROPERTY RIGHTS AGREEMENTS"), as
well as a complete and accurate list of all royalty obligations of the Company
or any of its subsidiaries under any of the Intellectual Property Rights
Agreements. Except as may be set forth in Section 3.19 of the Company
Disclosure Schedule, and to the Company's knowledge:
(i) all Intellectual Property Rights Agreements are, and
until and following the Effective Time, are valid and enforceable and will
remain, in full force and effect, and the Company and its subsidiaries have
performed in all material respects all obligations imposed upon it under the
Intellectual Property Rights Agreements, and neither the Company nor, to the
knowledge of the Company, any other party thereto, is in breach of or default
of any Intellectual Property Rights Agreement in any respect nor, to the
knowledge of the Company, is there any event which with notice or lapse of time
or both would constitute a default thereunder and there are no written notices
of any disputes or disagreements with respect to any Intellectual Property
Rights Agreements except where such a default, dispute or disagreement would
not reasonably be expected to have a Material Adverse Effect on the Company;
(ii) the rights licensed under each Intellectual Property
Rights Agreement shall be exercisable by the Surviving Corporation or any of
its subsidiaries after the Effective Time to the same extent as exercisable by
the Company or any of its subsidiaries prior to the Effective Time (subject to
any applicable consent requirement listed in Section 3.19 of the Company
Disclosure Schedule); and
(iii) to the knowledge of the Company, the Intellectual
Property Rights Agreements together expressly confer on the Company or its
subsidiaries valid and enforceable rights under or in respect of all of the
Intellectual Property Rights that are not owned exclusively by the Company or
any of its subsidiaries and that are used by the Company or its subsidiaries
for the operation of its business as presently conducted and as presently
proposed to be conducted.
(f) Neither the Company nor any of its subsidiaries is a party to any
action or proceeding that involves a claim of infringement, misappropriation or
other wrongful use or exploitation, by any Person against the Company or any of
its subsidiaries, of any Intellectual Property Rights used or exploited by the
Company or any of its subsidiaries in the conduct of its business. To the
knowledge of the Company, the Company and each its subsidiaries has the right
to bring actions against any Person that is infringing any Company Intellectual
Property Rights and to retain for itself any damages recovered in any such
action.
24
(g) Neither the Company nor any of its subsidiaries uses in its
business any software (i) exclusively owned by the Company or any of its
subsidiaries or (ii) developed by the Company or any of its subsidiaries at a
cost exceeding $100,000.
Section 3.20 Books and Records. The books of account, minute
books, stock record books, and other records of the Company, all of which have
been made available to Parent, are complete and correct in all material
respects and have been maintained in accordance with sound business practices
and the requirements of Section 13(b)(2) the Exchange Act, including the
maintenance of an adequate system of internal controls. The Company's minute
books contain in all material respects accurate and complete records of all
meetings held of, and corporate action taken by, the stockholders or the
Company Board, and no meeting of any such stockholders or the Company Board has
been held for which minutes have not been prepared and are not contained in
such minute books. At the Closing, all of those books and records will be in
the possession of the Surviving Corporation.
Section 3.21 Opinion of Financial Advisor. Houlihan, Lokey,
▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. ("HL") has delivered to the Company Board its opinion,
dated the date of this Agreement, to the effect that, as of such date, the
Exchange Ratio is fair to the holders of Shares, from a financial point of
view, and such opinion has not been withdrawn or modified as of the date
hereof.
Section 3.22 Fees. Neither the Company nor any subsidiary or
affiliate of the Company has paid or become obligated to pay any fee or
commission to any broker, finder, intermediary or financial adviser in
connection with the transactions contemplated by this Agreement, except for
fees paid or payable by the Company to HL pursuant to the engagement letter
between them dated February 14, 2002, a copy of which letter has been provided
by the Company to Parent.
Section 3.23 Tax Treatment. Neither the Company nor, to the
Company's knowledge, any of its affiliates or stockholders, has taken or agreed
to take (or failed to so take or agree to take) any action or is aware of any
fact or circumstance that could reasonably be expected to prevent the Merger
from qualifying as a reorganization under Section 368 of the Code.
Section 3.24 Takeover Statute. The Company has taken all action
required to be taken by it in order to exempt this Agreement and the
transactions contemplated hereby from, and this Agreement and the transactions
contemplated hereby (the "COVERED TRANSACTIONS") are exempt from, the
requirements of any "moratorium", "control share", "fair price", "affiliate
transaction", "business combination" or other antitakeover Laws and regulations
of any state (collectively, "TAKEOVER STATUTES"), including, without
limitation, Section 14-2-1132 of the GBCC, or any antitakeover provision in the
Company's articles of incorporation or bylaws. The provisions of Section
14-2-1132 of GBCC do not apply to the Covered Transactions as they have not
been adopted by the Company and the transaction has been approved by the
Company Board.
Section 3.25 Bank Accounts, Brokerage Accounts and Powers of
Attorney. Section 3.25 of the Company Disclosure Schedule identifies all bank
accounts or brokerage accounts used in connection with the operations of the
Company and the subsidiaries of the Company, whether or not such accounts are
held in the name of the Company, lists the respective signatories therefor and
lists the names of all persons holding a power of attorney from the Company or
a subsidiary of the Company and a summary of the terms thereof.
25
Section 3.26 Title to Properties. Except as set forth in Section
3.26 of the Company Disclosure Schedule, and except for merchandise and other
property sold, used or otherwise disposed of in the ordinary course of
business, the Company and each of its subsidiaries has good and marketable
title to, or, in the case of leased properties and assets a valid leasehold
interest in, the personal property reflected in the Company's most recent
balance sheet included in the Company SEC Reports, in each case, subject to no
Liens, except for those set forth in Section 3.26 of the Company Disclosure
Schedule. Except as set forth in Section 3.26 of the Company Disclosure
Schedule, each of the Company and its subsidiaries is in compliance with the
terms of all leases of personal property to which it is a party or under which
it is in occupancy, and all such leases are in full force and effect. All
facilities, machinery, computers, hardware, equipment, fixtures, vehicles and
other tangible properties material to the business of the Company and each of
its subsidiaries are in good operating condition suitable for their intended
use, except for (i) maintenance in the ordinary course and (ii) normal wear and
tear.
Section 3.27 Significant Customers and Suppliers. Set forth on
Section 3.27 of the Company Disclosure Schedule is a list of the ten largest
customers and ten largest suppliers of the Company and its subsidiaries for the
most recently completed fiscal year (each a "SIGNIFICANT CUSTOMER" or
"SIGNIFICANT SUPPLIER"), together with the amount of sales or purchases
attributable to such customers or suppliers in the most recently completed
fiscal year expressed in United States dollars and as a percentage of total
sales or purchases, as the case may be. Except as set forth on the Company
Disclosure Schedule, no Significant Customer or Significant Supplier during
fiscal 2001, when compared to fiscal 2000, has terminated or materially reduced
its purchases from or provision of products or services to the Company and its
subsidiaries, as the case may be. Copies of the standard forms of purchase or
supply contracts of the Company and its subsidiaries and sales contracts have
been made available to the Parent or its representatives.
Section 3.28 Related-Party Transactions. To the Company's
knowledge, since the Company's proxy statement dated April 24, 2002, no event
has occurred that would be required to be reported pursuant to Item 404 of
Regulation S-K promulgated by the SEC. To the Company's knowledge, no employee,
officer, 5% stockholder or director of the Company or any of its subsidiaries
or member of his or her immediate family (each, a "RELATED PARTY") has any
direct or indirect ownership interest in any firm or corporation with which the
Company is affiliated or that is a Significant Customer or Significant Supplier
of the Company or any of its subsidiaries, or any firm or corporation that
competes directly with the Company. Except as set forth in Section 3.28 of the
Company Disclosure Schedule and to the best of the Company's knowledge, no
officer, director, or 5% stockholder or any member of their immediate families
is interested in, directly or indirectly, any contract with the Company or its
subsidiaries (other than such contracts as relate to any such person's
ownership of capital stock) or any property or assets of the Company or its
subsidiaries (other than such person's ownership of capital stock of the
Company or any property or assets held indirectly as a result of such
ownership), or any person which is currently a party to any material contract
or agreement with the Company or its subsidiaries.
Section 3.29 Warranties. Except as set forth in Section 3.29 of
the Company Disclosure Schedule, there have not been any deviations from any
warranties and guaranties of the Company or any of its subsidiaries currently
in effect with respect to its products and services, and neither the Company,
any of its subsidiaries nor any of their respective salesmen, employees,
distributors and agents is authorized to undertake obligations to any
26
customer or to other third parties in excess of such warranties or guaranties.
Neither the Company nor any of its subsidiaries has made any material oral
warranty or guaranty with respect to its products or services.
Section 3.30 Disclosure. All documents and schedules delivered or
to be delivered by or on behalf of the Company or its subsidiaries to Parent or
its representatives in connection with this Agreement and the transactions
contemplated hereby are true, correct and complete. Neither this Agreement, nor
any portion of the Company Disclosure Schedule or Exhibit to this Agreement
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Except as set forth in the disclosure schedule delivered by Parent to
the Company prior to the execution of this Agreement (the "PARENT DISCLOSURE
SCHEDULE") (each section of which qualifies the correspondingly-numbered
representation and warranty or covenant to the extent specified therein),
Parent and Merger Sub hereby jointly and severally represent and warrant to the
Company as follows:
Section 4.1 Organization and Qualification; Subsidiaries.
(a) Parent is a company limited by shares duly incorporated in and validly
existing under the Laws of Israel. Each of Parent's subsidiaries is a
corporation or legal entity duly organized, validly existing and in good
standing (where such concept is recognized) under the Laws of the jurisdiction
of its incorporation or formation. Each of Parent and its subsidiaries has all
requisite corporate, partnership or similar power and authority to own, lease
and operate its properties and to carry on its businesses as now conducted and
proposed by Parent to be conducted.
(b) Section 4.1 of the Parent Disclosure Schedule identifies all
subsidiaries of Parent and the state or jurisdiction of incorporation or
formation for each subsidiary.
(c) Each of Parent and its subsidiaries is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing does not and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent.
(d) Parent has heretofore made available to Company accurate and
complete copies of its articles of association, certificate of registration or
equivalent constituent or organizational documents, as currently in effect, of
each of Parent and its subsidiaries, including Merger Sub.
Section 4.2 Capitalization of Parent and Its Subsidiaries.
(a) The authorized capital stock of Parent consists of: 20,000,000 shares of
Parent Stock, of which 7,921,718 shares were issued and outstanding as of the
date of this Agreement. All of the issued and outstanding shares of Parent
Stock are, and all of the shares of Parent Stock to be issued in exchange for
Company Common Stock (including any shares issued upon exercise
27
of stock options) upon consummation of the Merger will be authorized and
reserved for issuance prior to the Effective Time and, when issued in
accordance with the terms of this Agreement, will be duly and validly issued,
fully paid and free of preemptive rights. Except as set forth above or in
Section 4.2(a) to the Parent Disclosure Schedule, as of the date hereof, there
are outstanding (i) no other shares of capital stock or other voting securities
of Parent, (ii) no securities of Parent or its subsidiaries convertible into or
exchangeable for shares of capital stock or voting securities of Parent, (iii)
no options or other rights to acquire from Parent or its subsidiaries, and no
obligations of Parent or its subsidiaries to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of Parent, and (iv) no equity equivalents, interests in the
ownership or earnings of Parent or other similar rights (including stock
appreciation rights) (collectively, "PARENT SECURITIES"). There are no
outstanding obligations of Parent or its subsidiaries to repurchase, redeem or
otherwise acquire any Parent Securities. Except as provided in Section 4.2(a)
of the Parent Disclosure Schedule, there are no stockholder agreements, voting
trusts or other agreements or understandings to which Parent is a party or to
which it is bound relating to the voting of any shares of capital stock of
Parent.
(b) The percentage of the outstanding capital stock of Parent's
subsidiaries, including Merger Sub, owned by Parent, directly or indirectly, is
listed in Section 4.2(b) of the Parent Disclosure Schedule, and, except as
described in such section of the Parent Disclosure Schedule, is free and clear
of any Lien or any other limitation or restriction (including any restriction
on the right to vote or sell the same, except as may be provided as a matter of
law). There are no securities of Parent or its subsidiaries convertible into or
exchangeable for, no options or other rights to acquire from Parent or its
subsidiaries, and no other contract, understanding, arrangement or obligation
(whether or not contingent) or granting a right of first refusal first
negotiation, last look or similar right with respect to, providing for the
issuance or sale, directly or indirectly, of, any capital stock or other
ownership interests in, or any other securities of, any subsidiary of Parent,
except as described in Section 4.2(b) to the Parent Disclosure Schedule. There
are no outstanding contractual obligations of Parent or its subsidiaries to
repurchase, redeem or otherwise acquire any outstanding shares of capital stock
or other ownership interests in any subsidiary of Parent.
Section 4.3 Authority Relative to This Agreement. Each of Parent
and Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and, in the case of Merger Sub, subject to obtaining
necessary approval of its sole shareholder, and, in case of Parent, to
obtaining its board approval for the issuance of the Merger Consideration, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the boards of directors of Parent and
Merger Sub and by Parent as the sole stockholder of Merger Sub, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
other than the issue of a sufficient amount of authorized ordinary share
capital of Parent (the "SHARE ISSUANCE"). This Agreement has been duly and
validly executed and delivered by each of Parent and Merger Sub and constitutes
a valid, legal and binding agreement of each of Parent and Merger Sub,
enforceable against each of Parent and Merger Sub in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
28
Section 4.4 ISA and TASE Reports. Since December 31, 1999, Parent
has filed, in a timely manner, all forms, reports, documents and announcements
with the TASE and the ISA required to be filed by it pursuant to Israeli Law
and the rules of the TASE each of which complied in all material respects with
applicable requirements of Israeli Law and the rules of the TASE, each as in
effect on the dates such forms, reports, documents and announcements were
filed. None of such forms, reports, documents or announcements, including
without limitation any financial statements or accounts included therein,
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Between the date of this Agreement and the Closing Date, Parent
will file in a timely manner all reports, documents and announcements required
to be filed by it pursuant to Israeli and United States Laws in relation to the
Merger.
Section 4.5 Financial Statements. The consolidated audited
accounts of Parent for the financial years of Parent ended December 31, 1999,
2000 and 2001, respectively, (a) have been prepared from, and are in all
material respects in accordance with, the books and records of Parent and its
consolidated subsidiaries and fairly present in all material respects the
consolidated financial position and the consolidated results of operations and
cash flows (and changes in financial position, if any) of Parent and its
consolidated subsidiaries as of those dates and for the financial years covered
by those accounts; and (b) were prepared in accordance with the Laws of Israel
and, in all material respects and save as otherwise noted or disclosed therein,
all applicable Israeli generally accepted accounting principles applied on a
consistent basis. All registers required to be kept by Parent or any of
Parent's subsidiaries under the provisions of any applicable law are true,
complete and accurate in all material respects. All returns, particulars,
resolutions, reports and other documents required to be filed with or delivered
to any Governmental Entity (as hereinafter defined) in respect of Parent or its
subsidiaries are true, complete and accurate in all material respects and have
been properly filed or delivered in a timely manner or a proper exemption from
such filing was obtained, except where the failure to file such true, complete
and accurate returns, particulars, resolutions, reports and other documents
does not and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
Section 4.6 No Undisclosed Liabilities. Except as and to the
extent publicly disclosed by Parent in Parent's TASE or ISA documents or
Parent's financial statements, none of Parent or its subsidiaries had any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, and there is no existing condition, situation or set of
circumstances which would reasonably be expected to result in such a liability
or obligation, other than liabilities or obligations provided for in the
consolidated balance sheet of Parent (including the notes thereto) as of March
31, 2002, liabilities or obligations under this Agreement and liabilities or
obligations which would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent.
Section 4.7 Information Supplied. None of the information
supplied or to be supplied by Parent or Merger Sub for inclusion or
incorporation by reference in the F-4 will, at the time the F-4 is filed with
the SEC, at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. None of the
information supplied or to be supplied by Parent for inclusion or incorporation
by reference in the Report, will, at the time
29
the Report is filed with the ISA, contain any untrue statement of a material
fact or omit to state any 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. None of the
information to be supplied by Parent for inclusion or incorporation by
reference in the Proxy Statement will, at the date it is first mailed to
holders of Company Common Stock or at the time of the Company Stockholders
Meeting, contain any untrue statement of a material fact or omit to state any
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. If at any time prior to the Effective Time any event with
respect to Parent, its officers and directors or any of its subsidiaries should
occur which is required to be described in an amendment of, or a supplement to,
the F-4 or the Proxy Statement, Parent shall promptly so advise the Company and
such event shall be so described, and such amendment or supplement (which the
Company shall have a reasonable opportunity to review) shall be promptly filed
with the SEC and, as required by Law, disseminated to the stockholders of the
Company. The F-4 will comply as to form in all material respects with the
provisions of the Securities Act and the rules and regulations thereunder.
Section 4.8 Absence of Changes. Except as and to the extent
disclosed in Parent's public reports and Section 4.8 of the Parent Disclosure
Schedule, since March 31, 2002, the Parent and its subsidiaries have conducted
their business in the ordinary and usual course consistent with past practice
and there has not been any event, occurrence or development relating to the
Parent or any of its subsidiaries which does or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the Parent
or its subsidiaries.
Section 4.9 Consents and Approvals; No Violations. Except for the
Share Issuance and filings, permits, authorizations, consents and approvals as
may be required under or by, and other applicable requirements of, the
Securities Act, the Exchange Act, the HSR Act, the Nasdaq Stock Market, state
securities or blue sky laws, Israeli securities and Companies Law, the TASE,
the ISA, and the filing and recordation of the Certificate of Merger as
required by the GBCC, no filing with or notice to, and no permit,
authorization, consent or approval of, any Governmental Entity or other third
party is necessary for the execution and delivery by Parent or Merger Sub of
this Agreement or the consummation by Parent or Merger Sub of the transactions
contemplated hereby, including the issuance of the shares of Parent Stock to
the stockholders of the Company, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or give
such notice does not and would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Parent.
Section 4.10 No Default. Neither Parent nor any of its
subsidiaries are in violation of any term of (i) its articles of association or
other organizational documents, (ii) any agreement or instrument related to
indebtedness for borrowed money or any other agreement to which it is a party
or by which it is bound, or (iii) any Law applicable to Parent, its
subsidiaries or any of their respective properties or assets, the consequence
of which violation does or would reasonably be expected to (A) have, in the
case of (ii) or (iii) individually or in the aggregate, a Material Adverse
Effect on Parent or (B) prevent or materially delay the performance of this
Agreement by Parent or Merger Sub. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
will not (i) violate the articles of association or other organizational
documents of Parent or any of its subsidiaries, (ii) violate or conflict with,
constitute a default
30
under, require any consent, waiver or notice under any term of, or result in
the reduction or loss of any benefit or the creation or acceleration of any
right or obligation under, any agreement, note, bond, mortgage, indenture,
contract, lease, Parent Permit (as hereinafter defined) or other obligation or
right to which Parent or any of its subsidiaries is a party or by which any of
the assets or properties of Parent or any of its subsidiaries is bound, (iii)
violate any applicable Law, or (iv) result in the creation or imposition of any
Lien upon any of the properties or assets of Parent or any of its subsidiaries,
except, in the case of clauses (ii) through (iv) only, where any of the
foregoing do not or would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Parent.
Section 4.11 Litigation. Except as and to the extent publicly
disclosed by Parent in Parent's TASE or ISA documents or Parent's financial
statements, there is no suit, claim, action or proceeding pending or, to
Parent's knowledge, threatened, nor to the knowledge of Parent, is there any
investigation pending or threatened, against Parent or any of its subsidiaries
or any of their respective properties or assets which (a) would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on Parent or (b) as of the date hereof, questions the validity of this
Agreement or any action to be taken by Parent in connection with the
consummation of the transactions contemplated hereby or is reasonably likely to
otherwise prevent or delay the consummation of the transactions contemplated by
this Agreement. Except as and to the extent publicly disclosed by Parent in
Parent's TASE or ISA documents or Parent's financial statements, none of Parent
or its subsidiaries is subject to any outstanding order, writ, injunction or
decree which does or would reasonably be expected to have a Material Adverse
Effect on Parent.
Section 4.12 Compliance with Applicable Law. Except as disclosed
by Parent in Parent's TASE or ISA documents or Parent's financial statements,
Parent and its subsidiaries hold all permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "PARENT PERMITS"), except for
failures to hold such permits, licenses, variances, exemptions, orders and
approvals which do not or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent. Except
as set forth in Section 4.12 of the Parent Disclosure Schedule, Parent and its
subsidiaries are in compliance with the terms of the Parent Permits, except
where the failure to so comply does not or would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Parent.
Except as set forth in Section 4.12 of the Parent Disclosure Schedule, the
businesses of the Parent and its subsidiaries are not being conducted in
violation of any Law applicable to Parent or its subsidiaries, except for
violations or possible violations which do not and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on Parent. To Parent's knowledge, no investigation or review by any
Governmental Entity with respect to Parent or its subsidiaries is pending or
threatened, nor, to Parent's knowledge, has any Governmental Entity indicated
an intention to conduct the same, other than, in each case, those which do not
or would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Parent.
Section 4.13 Tax Treatment. Neither Parent nor, to Parent's
knowledge, any of its affiliates, has taken or agreed to take (or failed to so
take or agree to take) any action or is aware of any fact or circumstance that
could reasonably be expected to prevent the Merger from qualifying as a
reorganization under Section 368 of the Code.
Section 4.14 Fees. Neither the Parent nor any subsidiary or
affiliate of the Parent has paid or become obligated to pay any fee or
commission to any broker, finder,
31
intermediary or financial adviser in connection with the transactions
contemplated by this Agreement, except for fees paid or payable by the Parent
to Mercator Securities, LLC, which has served as financial advisor to Parent in
connection with the transactions contemplated hereby.
Section 4.15 No Prior Activities. Except for obligations incurred
in connection with its incorporation or organization or the negotiation and
consummation of this Agreement, the transactions contemplated hereby and under
the Loan Agreement and documents executed in connection therewith, Merger Sub
has neither incurred any obligation or liability nor engaged in any business or
activity of any type or kind whatsoever or entered into any agreement or
arrangement with any person.
Section 4.16 Disclosure. All documents and schedules delivered or
to be delivered by or on behalf of Parent to the Company or its representatives
in connection with this Agreement and the transactions contemplated hereby are
true, correct and complete. Neither this Agreement, nor any portion of the
Parent Disclosure Schedule or Exhibit to this Agreement contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
made, not misleading.
ARTICLE V
COVENANTS RELATED TO CONDUCT OF BUSINESS AND OTHER PRE-
CLOSING COVENANTS
Section 5.1 Conduct of Business of the Company. Except as
contemplated by this Agreement or with the written consent of Parent (which
consent shall not be unreasonably withheld or delayed) and except to the extent
any conduct is inconsistent with the provisions of the Recovery Plan (as
defined in Section 5.5 below), during the period from the date hereof to the
Effective Time, the Company covenants and agrees that it will, and will cause
each of its subsidiaries to, conduct its operations in the ordinary and usual
course of business consistent with past practice and, to the extent consistent
therewith, with no less diligence and effort than would be applied in the
absence of this Agreement, seek to preserve intact its current business
organizations, seek to keep available the service of its current officers and
employees and seek to preserve its relationships with customers, suppliers and
others having business dealings with it to the end that goodwill and ongoing
businesses shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in this
Agreement prior to the Effective Time, the Company agrees that it will not, nor
will any of its subsidiaries, without the prior written consent of Parent:
(a) amend its articles of incorporation or bylaws (or other similar
governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities convertible into or exchangeable for
any stock or any equity equivalents (including, without limitation, any stock
options or stock appreciation rights), except (i) for the issuance or sale
32
of shares pursuant to currently outstanding stock options that are exercised
prior to Closing as set forth in Section 2.1(d) of this Agreement or (ii) the
issuance of other shares of Company Common Stock upon the exercise prior to
Closing of outstanding securities convertible into or exchangeable for such
shares;
(c) (i) split, combine or reclassify any shares of its capital stock,
(ii) declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock except for the payment of regular quarterly cash dividends with usual
record and payment dates in accordance with past dividend practice, (iii) make
any other actual, constructive or deemed distribution in respect of any shares
of its capital stock or otherwise make any payments to stockholders in their
capacity as such, (iv) redeem, repurchase or otherwise acquire any of its
securities or any securities of any of its subsidiaries, or (v) increase the
number of shares reserved under the Company Option Plan, exchange or cancel any
options granted under the Company Option Plan, engage in any transaction that
constitutes a repricing of such options, or amend, modify, alter or change any
terms or conditions of the Company Option Plan or any agreements entered into
with respect to options granted thereunder;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
(other than the Merger);
(e) alter through merger, liquidation, reorganization, restructuring
or in any other fashion the corporate structure or ownership of any subsidiary;
(f) (i) incur or assume any long-term or short-term debt or issue any
debt securities, except for borrowings under the Loan Agreement; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, except for
obligations of the Company's wholly owned subsidiaries; (iii) make any loans,
advances or capital contributions to, or investments in, any other person
(other than to its wholly owned subsidiaries or customary advances to employees
in the ordinary and usual course of business consistent with past practice and
in amounts not material to the maker of such advance); (iv) make, or commit to
make, any capital expenditure; (v) pledge or otherwise encumber shares of its
capital stock or its subsidiaries; or (vi) mortgage or pledge any of its
material assets, tangible or intangible, or create or suffer to exist any
material Lien thereupon;
(g) except as may be required by Law or as contemplated by this
Agreement, enter into, adopt or amend or terminate any bonus, profit sharing,
compensation, severance, termination, stock option, appreciation right,
performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, severance or other employee
benefit agreement, trust, plan, fund, award or other arrangement for the
benefit or welfare of any director, officer, employee or individual providing
services to the Company or any of its subsidiaries in any manner (except for
normal increases solely with respect to non-executive employees in the ordinary
and usual course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company, and as required under existing agreements and in
accordance with the Recovery Plan), or increase in any manner the compensation
or fringe benefits of any director, officer, employee or individual providing
services to the Company or any of its subsidiaries or pay any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock appreciation rights or
performance units);
33
(h) acquire, sell, lease or dispose of any assets which in the
aggregate are material to the Company and its subsidiaries taken as a whole or
have a net book value in excess of $50,000, enter into any commitment or
transaction outside the ordinary and usual course of business and with an
aggregate value of more than $25,000 or grant any exclusive distribution
rights;
(i) except as may be required as a result of a change in Law or in
GAAP, change any of the accounting principles, methods or practices used by the
Company or any of its subsidiaries;
(j) revalue any of its assets, other than in the ordinary and usual
course of business consistent with past practice and as required by GAAP;
(k) make or revoke any Tax election or settle or compromise any Tax
liability or change (or make a request to any taxing authority to change) any
material aspect of its method of accounting for Tax purposes or permit any
insurance policy naming it as a beneficiary or loss-payee to expire, or to be
cancelled or terminated, unless a comparable insurance policy reasonably
acceptable to Parent is obtained and in effect;
(l) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge, or satisfaction in the ordinary and usual course
of business consistent with past practice of liabilities incurred in the
ordinary and usual course of business consistent with past practice, or waive
the benefits of, or agree to modify in any manner, any confidentiality,
standstill or similar agreement to which it or any of its subsidiaries is a
party;
(m) settle or compromise any pending or threatened suit, action or
claim other than a suit, action or claim in which the amount of the controversy
does not exceed $50,000;
(n) take any action (including any action otherwise permitted by this
Section 5.1) that could reasonably be expected to prevent or impede the Merger
from qualifying as a reorganization under Section 368 of the Code;
(o) enter into any agreement or arrangement that (i) provides for
acquisition (by merger, consolidation or acquisition of stock or assets) of any
corporation, partnership or other entity or division thereof or any equity
interest therein; (ii) amends, modifies or waives any right under any material
contract of the Company or any of its subsidiaries; (iv) modifies its standard
warranty terms for its products or services or amends or modifies any product
or service warranties in effect as of the date hereof in any material manner
that is adverse to the Company or any of its subsidiaries; (v) limits or
otherwise restricts it or any of its subsidiaries or any successor thereto or
that is reasonably likely to, after the Effective Time, limit or restrict the
Surviving Corporation and its affiliates (including Parent) or any successor
thereto, from engaging or competing in any line of business or in any
geographic area; or (vi) commits the Company to pay any amount in excess of
$2,500 or requires the Company to perform any service more than one month
following the date of such agreement;
(p) conduct the business of the Company and its subsidiaries other
than in strict compliance with the revised business plan and budget presented
by the Company to Parent on or about April 17, 2002, except as such plan and
budget may be modified by the Recovery Plan or the Recovery Plan Committee; or
34
(q) take, propose to take, or agree in writing or otherwise to take,
any of the actions described in Sections 5.1(a) through 5.1(p) or any action
which would make any of its representations or warranties contained in this
Agreement (i) which are qualified as to materiality untrue or incorrect or (ii)
which are not so qualified untrue or incorrect in any material respect.
Section 5.2 Access to Information. (a) Between the date hereof
and the Effective Time, the Company shall give Parent and its authorized
representatives (including counsel, financial advisors and auditors) reasonable
access during normal business hours to all the Company's and its subsidiaries
employees, offices, and other facilities and to all its and its subsidiaries
books and records (except as otherwise prohibited by law) and will permit the
other to make such inspections as the other may reasonably require and will
cause its officers and those of its subsidiaries to furnish Parent with such
financial and operating data and other information with respect to its
business, properties and personnel and its subsidiaries as Parent may from time
to time reasonably request, provided that no investigation pursuant to this
Section 5.2(a) shall affect or be deemed to modify any of the representations
or warranties contained herein. Between the date hereof and the Effective Time,
the Company shall furnish to Parent at the earliest time they are available,
such quarterly and annual financial statements as are prepared for its Company
SEC Reports which shall be in accordance with such entity's books and records.
Any investigation pursuant to this Section shall be conducted in a manner that
will not interfere unreasonably with the conduct of the business of the other
party.
(b) Between the date hereof and the Effective Time, the Parent shall
furnish to the Company at the earliest time they are available, such quarterly
and annual financial statements as are prepared for its Parent public reports
which shall be in accordance with such entity's books and records. Any
investigation pursuant to this Section shall be conducted in a manner that will
not interfere unreasonably with the conduct of the business of the other party.
(c) Each of the Company and Parent will hold and will cause its
authorized representatives to hold in confidence all documents and information
concerning the other in connection with the transactions contemplated by this
Agreement pursuant to the terms of Section 3 of that certain Letter of Intent
entered into between the Company and Parent dated February 26, 2002 (the
"LOI").
Section 5.3 Notices and Consents. The Company will give (and will
cause each of its subsidiaries to give) any notices to third parties, and the
Company will use its commercial best efforts (and will cause each of its
subsidiaries to use its commercial best efforts) to obtain any third party
consents, that shall be required to consummate the Merger in connection with
any notices required to be sent or consents required to be obtained under
Article III above.
Section 5.4 Appointment of Directors. Immediately following the
execution of this Agreement, the Company will increase the size of the Company
Board to seven (7) members and will appoint ▇▇▇▇ ▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ (the
"PARENT DIRECTORS") as members in the third class of the Company's Board of
Directors. The Parent Directors shall serve until the next annual meeting of
stockholders of the Company at which the term of directors of the third class
of directors expires, unless sooner removed, and until his respective successor
shall be elected and qualify. In the event of the resignation, death, removal
or disqualification of a Parent Director, Parent shall promptly nominate a new
35
director and after written notice of the nomination has been delivered to the
Company, the remaining directors then in office shall elect such nominee to the
Company's Board of Directors. Upon execution of this Agreement, the Company and
certain stockholders will execute an irrevocable proxy in the form attached
hereto as Exhibit B, pursuant to Section 6.14 of this Agreement with respect to
the election and removal of a Parent Director. The Company will provide
directors and officers insurance for the Parent Directors hereunder on the same
terms and conditions as those contained in the Company's existing policies.
Section 5.5 Recovery Plan and Management Consulting Agreement. In
addition to, and without any limitation of, any powers, rights and privileges
given to Parent under Section 5.1 above and in consideration for Parent
agreeing to enter into this Agreement, the Company Board shall have adopted a
detailed business plan and budget acceptable to Parent, pursuant to which the
Company shall reorganize its operations and strictly conduct its business (the
"RECOVERY PLAN") in a manner so as to preserve cash flow for critical
operations, as defined in the Recovery Plan. The Recovery Plan is attached
hereto as Exhibit D. Further, the Company Board shall have appointed a
committee (the "RECOVERY PLAN COMMITTEE") that will report to the Company Board
and will be responsible for implementing the Recovery Plan. The Recovery Plan
Committee shall consist of four members, two of whom shall be appointed by the
Company and two of whom shall be appointed by Parent. Any Recovery Plan
Committee members appointed by the Company may be removed or replaced, and any
vacancy shall be filled, solely by the Company at any time and for any reason,
and any Recovery Plan Committee members appointed by Parent may be removed or
replaced, and any vacancy shall be filled, solely by Parent at any time and for
any reason. The Company Board shall resolve any deadlock in voting arising out
of decisions made by the Recovery Plan Committee and shall approve in advance
of any material changes or modifications to the Recovery Plan. In addition, the
Company will enter into a Management Consulting Agreement with Parent in the
form attached hereto as Exhibit C, pursuant to which Parent will provide
management consulting services to the Company.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Preparation of Disclosure Documents. (a) As soon as
practicable following the date of this Agreement, the Company and Parent shall
prepare the F-4, the Report and Proxy Statement. The Company shall, in
cooperation with Parent, file the Proxy Statement with the SEC as its
preliminary proxy statement and Parent shall, in cooperation with the Company,
prepare and file with the SEC the F-4, in which the Proxy Statement will be
included, and the Report with the ISA. Each of the Company and Parent shall use
reasonable commercial efforts to have the F-4 filed no later than July 15, 2002
and declared effective under the Securities Act as promptly as practicable
after such filing and to keep the F-4 effective as long as is necessary to
consummate the Merger. Each of the Company and Parent shall use reasonable
commercial efforts to respond to any clarification request issued by the ISA
regarding the Report. The Company shall mail the Proxy Statement to its
stockholders as promptly as practicable after the F-4 is declared effective
under the Securities Act and, if required under applicable securities laws,
after the Proxy Statement shall have been so mailed, promptly circulate
supplemental or amended proxy material, and, if required in connection
therewith, resolicit proxies. Parent shall also take any action (other than
qualifying to do business in any jurisdiction in which Parent is not now so
qualified) required to be taken under any applicable United States and state
securities laws in
36
connection with the issuance of shares of Parent Stock in connection with the
Merger, and the Company shall furnish all information concerning the Company
and the holders of the Company Common Stock as may be reasonably requested in
connection with any such action.
(b) (i) The Company shall, as soon as practicable following the date
of this Agreement and the effectiveness of the F-4, duly call, give notice of,
convene and hold a meeting of its stockholders (the "COMPANY STOCKHOLDERS
MEETING") for the purpose of obtaining the required stockholder votes with
respect to this Agreement, (ii) the Company Board unless otherwise required
pursuant to the applicable fiduciary duties of the Company Board to the
stockholders of the Company (as determined in good faith by the Company Board
based upon the advice of outside counsel), shall recommend adoption of this
Agreement by its stockholders, and (iii) the Company shall take all lawful
action to solicit such adoption.
(c) (i) Parent shall, with the assistance of the Company as provided
above and in accordance with the Securities Law, 1968, and the regulations
issued thereunder (the "ISRAELI SECURITIES LAW"), prepare and submit to the ISA
the Report, within seven (7) days following approval by the Parent's board of
directors of the Share Issuance, and shall use reasonable commercial efforts to
respond to any clarification requested by the ISA and shall comply with all
applicable legal requirements and (ii) if necessary, after the Report has been
so filed, promptly circulate amended, supplemental or supplemented materials.
(d) Except as required by law, no amendment or supplement to the Proxy
Statement or the F-4 or to the Report shall be made by Parent or the Company
without the approval of the other party (which approval shall not be
unreasonably withheld). Each party shall advise the other party, promptly after
it receives notice thereof, of the time when the F-4 has become effective or
any supplement or amendment has been filed, of the issuance of any stop order,
of the suspension of the qualification of shares of Parent Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or of any
request by the SEC for amendment of the Proxy Statement or the F-4 or comments
thereon and responses thereto or requests by the SEC for additional information
or any request by the ISA for amendment of the Report or comments thereon and
responses thereto or requests by the ISA for additional information. Each party
shall cooperate with the other party in responding to any request by the SEC or
ISA for additional information, and shall promptly provide such information to
the other party or to the SEC or ISA, as the situation may require.
Section 6.2 Public Announcements and Confidentiality. Any press
release or other information provided or to be provided to the press or any
third party with respect to this Agreement or the transactions contemplated
hereby, or relating to the Company and provided or to be provided by Parent
(including officers of Parent or entities controlled by Parent), or relating to
Parent and provided or to be provided by the Company (including officers of the
Company or entities controlled by the Company), shall require the prior
approval of Parent and the Company, as the case may be, which approval shall
not be unreasonably withheld, provided that a party shall not be prevented from
making such disclosure as it shall be advised by counsel is required by law or
as required in any listing agreement relating to the Parent Stock to be listed
on Nasdaq or the rules of any stock exchange on which shares of Parent Stock
are listed or as required by any regulatory authority or court of competent
jurisdiction. Each party shall keep confidential and shall not use in any
manner any information or documents obtained from the other concerning its
assets, properties, business and operations, unless readily ascertainable from
public
37
information, already known or subsequently developed by such party
independently, received from a third party not under an obligation to keep such
information confidential or otherwise required by law. If this Agreement
terminates, all copies of any documents obtained from another party will be
returned, except that one copy thereof may be retained by counsel to the party
returning such documents in order to evidence compliance hereunder.
Section 6.3 Affiliate Letters. Prior to the Closing Date, the
Company shall identify to Parent all persons who, at the time of the Company
Stockholders Meeting, the Company believes may be "AFFILIATES" of the Company
within the meaning of Rule 145 under the Securities Act. The Company shall use
its best efforts to provide Parent with such information as Parent shall
reasonably request for purposes of making its own determination of persons who
may be deemed to be affiliates of the Company. The Company shall use its best
efforts to deliver to Parent prior to the Closing Date a letter from each of
such affiliates identified by the Company and Parent in substantially the form
attached hereto as Exhibit A (the "AFFILIATE LETTERS").
Section 6.4 Stock Exchange and Nasdaq Listing; Registration under
Exchange Act. Parent shall prepare and submit to the TASE a listing application
covering the shares of Parent Stock to be issued in the Merger and shall use
reasonable commercial efforts to obtain, prior to the Effective Time, agreement
by the TASE for the admission of such shares of Parent Stock for listing on the
TASE, and the Company shall cooperate with Parent with respect to such listing.
In addition, as soon as practicable following the filing of the F-4, but in no
event later than thirty (30) days following the filing of the F-4, Parent shall
submit a listing application to Nasdaq to have (i) all of the outstanding
shares of Parent Stock and (ii) all of the shares of Parent Stock to be issued
in the Merger listed for trading and approved for quotation on Nasdaq and shall
use reasonable commercial efforts to obtain, prior to the Effective Time,
approval by Nasdaq for the admission of such shares of Parent Stock for listing
on the Nasdaq, and the Company shall cooperate with Parent with respect to such
filing. In connection with the listing of its shares on Nasdaq, Parent shall
file a Form 8-A (or such other form as is acceptable to the SEC) as soon as
practicable following the filing of the F-4, but in no event later than thirty
(30) days following the filing of the F-4, for the purpose of registering its
shares under the Exchange Act, and shall use reasonable commercial efforts to
obtain such registration prior to the Effective Time.
Section 6.5 Reasonable Best Efforts. (a) Subject to the terms and
conditions of this Agreement, each party will use its reasonable best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws to consummate the
Merger and the other transactions contemplated by this Agreement.
(b) Each of Parent and the Company shall, in connection with the
efforts referenced in Section 6.5(a), use reasonable best efforts to obtain all
requisite approvals and authorizations for the transactions contemplated by
this Agreement under any Antitrust Law, use its reasonable best efforts to (i)
cooperate in all respects with each other in connection with any filing or
submission and in connection with any investigation or other inquiry, including
any proceeding initiated by a private party; (ii) keep the other party informed
in all material respects of any material communication received by such party
from, or given by such party to, the Federal Trade Commission (the "FTC"), the
Antitrust Division of the Department of Justice (the "DOJ") or any other
Governmental Entity and of any material communication received or given in
connection with any proceeding by a private party, in each case regarding any
of the transactions contemplated hereby; and (iii) permit the other
38
party to review any material communication given by it to, and consult with
each other in advance of any meeting or conference with, the FTC, the DOJ or
any such other Governmental Entity or, in connection with any proceeding by a
private party, with any other person, and to the extent permitted by the FTC,
the DOJ or such other applicable Governmental Entity or other person, give the
other party the opportunity to attend and participate in such meetings and
conferences. For purposes of this Agreement, "ANTITRUST LAW" means the ▇▇▇▇▇▇▇
Act, as amended, the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), the Federal Trade
Commission Act, as amended, and all other Laws that are designed or intended to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade or lessening of competition through merger
or acquisition.
(c) In furtherance and not in limitation of the covenants of the
parties contained in Sections 6.5(a) and (b), each of Parent and the Company
shall use its reasonable best efforts to resolve such objections, if any, as
may be asserted with respect to the transactions contemplated hereby under any
Antitrust Law. In connection with the foregoing, if any administrative or
judicial action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, each of
Parent and the Company shall cooperate in all respects with each other and use
its respective reasonable best efforts to contest and resist any such action or
proceeding and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the transactions contemplated by this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement, nothing
in this Section 6.5 shall (i) limit a party's right to terminate this Agreement
pursuant to Section 8.2(i) so long as such party has up to then complied in all
material respects with its obligations under this Section 6.5 or (ii) require
Parent or the Company to dispose or hold separate any part of its business or
operations or agree not to compete in any geographic area or line of business.
(d) Notwithstanding any other provision in this Agreement, nothing in
this Agreement shall be interpreted to prohibit or restrict the ability or
right of Parent and its affiliates to engage in any transactions with third
parties, and Parent and its affiliates are explicitly permitted to engage in
any transaction which Parent determines is in the best interests of its then
current shareholders; provided that nothing in this provision shall be
interpreted to restrict the right of the Company to enforce its rights under
this Agreement.
Section 6.6 Acquisition Proposals. (a) From the date hereof until
the earlier of the Effective Time or the termination of this Agreement, and
except as expressly permitted by the following provisions of this Section 6.6,
the Company will not, nor will it permit any of its subsidiaries to, nor will
it authorize or permit any of its or its subsidiaries' respective officers,
directors or employees of or any investment banker, attorneys, accountants or
other advisors or representatives to, directly or indirectly, (i) solicit,
initiate or knowingly encourage the submission of any Acquisition Proposal (as
hereinafter defined) or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take
any other action to facilitate, any Acquisition Proposal or any inquiries or
the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Acquisition Proposal; provided, however, that nothing contained in
this Section 6.6(a) shall prohibit the Company Board from furnishing
information to, or entering into discussions or negotiations with, any person
that makes an unsolicited bona fide written
39
Acquisition Proposal if, and only to the extent that (A) the Company
Stockholders Meeting shall not have occurred, (B) the Company Board, after
consultation with and based upon the advice of outside legal counsel,
determines in good faith that such action is necessary for the Company Board to
comply with its fiduciary duties to its stockholders under applicable Law, (C)
the Company Board, after consultation with its financial advisor, determines in
good faith that such Acquisition Proposal, if accepted, is reasonably likely to
be consummated, taking into account all legal, financial and regulatory aspects
of the proposal and the person making the proposal and would, if consummated,
or could reasonably be expected to, result in a transaction more favorable to
the Company's stockholders from a financial point of view than the Merger (any
such more favorable Acquisition Proposal being referred to herein as a
"SUPERIOR PROPOSAL") and (D) prior to taking such action, the Company (x)
provides reasonable notice to Parent to the effect that the Company is taking
such action and (y) receives from such person an executed
confidentiality/standstill agreement in reasonably customary form. Prior to
providing any information to or entering into discussions or negotiations with
any person in connection with an Acquisition Proposal by such person, the
Company shall notify Parent of any Acquisition Proposal (including, without
limitation, the material terms and conditions thereof and the identity of the
person making it) as promptly as practicable (but in no case later than the
next business day) after its receipt thereof. Thereafter, the Company shall
inform Parent on a prompt basis of the status of any discussions or
negotiations with such a third party and any material changes to the terms and
conditions of such Acquisition Proposal and shall promptly give Parent a copy
of any information delivered to such person which has not previously been
reviewed by Parent.
(b) The Company Board will not withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent, its approval or
recommendation of this Agreement or the Merger unless the Company Board
determines in good faith, taking into account all legal, financial and
regulatory aspects, that the failure to do so would constitute a breach by the
Company Board of its fiduciary duties under applicable Law, provided, however,
the Company Board may not approve or recommend (and in connection therewith,
withdraw or modify its approval or recommendation of this Agreement or the
Merger) an Acquisition Proposal unless (i) such an Acquisition Proposal is a
Superior Proposal (and the Company first shall have complied with its
obligations set forth in Section 8.3(a) and the time period referred to in the
last sentence of Section 8.3(a) has expired), and (ii) Parent does not, within
five (5) business days of Parent's receipt of the notice specified in Section
6.6(a), make an offer that is at least as favorable to the Company's
stockholders as such Superior Proposal. Notwithstanding anything herein to the
contrary, the Company shall not be entitled to enter into any agreement with
respect to a Superior Proposal unless and until it has paid Parent the
Termination Fee (as defined in Section 8.5). The Company's provision of (or
failure to provide) any notice to Parent of a Superior Proposal and Parent's
making of any additional offer shall not be deemed to waive the Company's
obligation to pay the Termination Fee to Parent.
(c) Nothing contained in this Section 6.6 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
its stockholders which, in the good faith reasonable judgment of the Company
Board, based on the advice of outside legal counsel, is required under
applicable Law; provided that, except as otherwise permitted in this Section
6.6, the board of directors of the Company may not withdraw or modify, or
propose to withdraw or modify, its position with respect to the Merger or
approve or recommend, or propose to approve or recommend, an Acquisition
Proposal.
40
Notwithstanding anything contained in this Agreement to the contrary, any
action by the Company Board permitted by, and taken in accordance with, this
Section 6.6 shall not constitute a breach of this Agreement by the Company.
Nothing in this Section 6.6 shall (i) permit the Company to terminate this
Agreement (except as provided in Article VIII hereof) or (ii) affect any other
obligations of the Company under this Agreement.
(d) Immediately after the execution and delivery of this Agreement,
the Company will, and will cause its subsidiaries, affiliates, officers,
directors, employees, investment bankers, attorneys, accountants and other
agents to, cease and terminate any existing activities, discussions or
negotiations with any third parties conducted heretofore with respect to any
possible Acquisition Proposal and shall notify each third party that it, or any
officer, director, investment advisor, financial advisor, attorney or other
representative retained by it, has had discussions with during the 30 days
prior to the date of this Agreement that the Company Board no longer seeks the
making of any Acquisition Proposal and shall request the return all
confidential information heretofore furnished to such person by or on behalf of
the Company or any of its subsidiaries. The Company agrees that it will take
the necessary steps to promptly inform the individuals or entities referred to
in the first sentence hereof of the obligations undertaken in this Section 6.6.
(e) For purposes hereof, the term "ACQUISITION PROPOSAL" means any
proposal or offer in writing from any Person (other than Parent, Merger Sub or
any of their affiliates) relating to any merger, consolidation,
recapitalization, liquidation or other direct or indirect business combination
or reorganization, involving the Company or the issuance or acquisition of
shares of capital stock or other equity securities of the Company representing
at least thirty percent (30%) of the outstanding capital stock or other
securities of the Company or any tender or exchange offer that if consummated
would result in any Person, together with all affiliates thereof, beneficially
owning shares of capital stock or other equity securities of the Company
representing at least thirty percent (30%) of the outstanding capital stock or
other securities of the Company, or the sale, lease, transfer or other
disposition of all or substantially all of the assets of the Company.
Section 6.7 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, to the fullest extent permitted by
applicable Law, the Surviving Corporation shall, and Parent shall cause the
Surviving Corporation to, indemnify, defend and hold harmless each person who
is now, or has been at any time prior to the date hereof, or who becomes prior
to the Effective Time, a director, officer or employee of the Company or any
subsidiary thereof (each an "INDEMNIFIED PARTY" and, collectively, the
"INDEMNIFIED PARTIES") against all losses, expenses (including reasonable
attorneys' fees and expenses), claims, damages, liabilities or, subject to the
proviso of the next succeeding sentence, amounts paid in settlement, arising
out of actions or omissions occurring at or prior to the Effective Time and
whether asserted or claimed prior to, at or after the Effective Time that are
in whole or in part (i) based on or arising out of the fact and only to the
extent that such person is or was a director, officer or employee of such party
or a subsidiary of such party or (ii) based on, arising out of or pertaining to
the transactions contemplated by this Agreement, other than a claim of Parent
with respect to the transactions contemplated by this Agreement. In the event
of any such loss, expense, claim, damage or liability (whether or not arising
before the Effective Time), (i) Surviving Corporation shall pay the reasonable
fees and expenses of counsel selected by the Indemnified Parties, which counsel
shall be reasonably satisfactory to Parent, promptly after statements therefor
are received and otherwise advance to such Indemnified Party upon request
reimbursement of documented expenses reasonably
41
incurred, in either case to the extent not prohibited by the GBCC and upon
receipt of any affirmation and undertaking required by the GBCC, (ii) the
Surviving Corporation will cooperate in the defense of any such matter and
(iii) any determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth under the
GBCC and the Surviving Corporation's articles of incorporation or bylaws shall
be made by independent counsel mutually acceptable to Parent and the
Indemnified Party; provided, however, that Surviving Corporation shall not be
liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld). In the event that any Indemnified Party is
required to bring any action to enforce rights or to collect moneys due under
this Agreement and is successful in such action, the Surviving Corporation
shall reimburse such Indemnified Party for all of its expenses in bringing and
pursuing such action. The Indemnified Parties as a group may retain only one
law firm with respect to each related matter except to the extent there is, in
the opinion of counsel to an Indemnified Party, under applicable standards of
professional conduct, a conflict on any significant issue between positions of
any two or more Indemnified Parties.
(b) For four (4) years after the Effective Time, Parent shall cause to
be maintained in effect the policies of directors' and officers' liability
insurance maintained by the Company for the benefit of those persons who are
covered by such policies at the Effective Time (or Parent may substitute
therefor policies of at least the same coverage with respect to matters
occurring prior to the Effective Time), to the extent that such liability
insurance can be maintained or obtained annually at a cost to Parent not
greater than 120 percent of the premium for the current Company directors' and
officers' liability insurance; provided that if such insurance cannot be so
maintained or obtained at such cost, Parent shall maintain or obtain as much of
such insurance as can be so maintained or obtained at a cost equal to 120
percent of the current annual premiums of the Company for such insurance.
(c) In the event Parent or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger
or (ii) transfers all or substantially all of its properties and assets to any
person, then and in either such case, proper provision shall be made so that
the successors and assigns of Parent shall assume the obligations set forth in
this Section 6.7.
(d) In addition to the indemnification provided pursuant to Section
6.7(a), to the fullest extent permitted by Law, from and after the Effective
Time, all rights to indemnification now existing in favor of the employees,
agents, directors or officers of the Company and its subsidiaries with respect
to their activities as such prior to the Effective Time (except with respect to
any claims asserted by Parent hereunder), as provided in the Company's articles
of incorporation or bylaws, in effect on the date hereof, shall survive the
Merger and shall continue in full force and effect for a period of not less
than four (4) years from the Effective Time.
Section 6.8 Notification of Certain Matters. The Company shall
give prompt notice to Parent and Merger Sub, and Parent and Merger Sub shall
give prompt notice to the Company, of (i) the occurrence or nonoccurrence of
any event the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in this Agreement, which is qualified as
to materiality, to be untrue or inaccurate, or any representation or warranty
not so qualified, to be untrue or inaccurate at or prior to the Effective Time,
(ii) any material failure of the Company, Parent or Merger Sub, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder, (iii) any notice of, or other
communication relating to, a default
42
or event which, with notice or lapse of time or both, would become a default,
received by it or any of its subsidiaries subsequent to the date of this
Agreement and prior to the Effective Time under any contract or agreement to
which it or any of its subsidiaries is a party or is subject material to the
financial condition, business or results of operations of it and its
subsidiaries, taken as a whole, (iv) any notice or other communication from any
third party alleging that the consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement, or (v) any
Material Adverse Effect with respect to such party; provided, however, that the
delivery of any notice pursuant to this Section 6.8 shall not cure such breach
or non-compliance or limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
Section 6.9 Tax-Free Reorganization Treatment. (a) The Company,
Parent and Merger Sub shall execute and deliver to ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
LLP, counsel to the Company, certificates in such form and at such time or
times as reasonably requested by such law firm in connection with its delivery
of an opinion with respect to the transactions contemplated hereby. Prior to
the Effective Time, none of the Company, Parent or Merger Sub shall take or
cause to be taken any action which would cause to be untrue any of the
representations in such certificates.
(b) The Company shall prepare and timely file all reports, forms,
returns, or other information required to be filed by it in order for the
Merger to qualify for an exception to the general rule of Section 367(a)(1) of
the Code. After the Merger, Parent shall cause the Surviving Corporation to
prepare and timely file (to the extent legally entitled to do so) all reports,
forms, returns, or other information required to be filed by the Company after
the Merger in order for the Merger to qualify for an exception to the general
rule of Section 367(a)(1) of the Code.
Section 6.10 Employee Matters. (a) Parent shall cause the
Surviving Corporation to honor the obligations of the Company or any of its
subsidiaries under any Company Employee Benefit Plans between and among the
Company or any of its subsidiaries and any current or former officer, director,
consultant or employee of the Company or any of its subsidiaries (collectively
"COMPANY EMPLOYEES") as set forth on Section 3.12(a) of the Company Disclosure
Schedule.
(b) Parent agrees that Company Employees immediately prior to the
Effective Time shall become employees of the Surviving Corporation or Parent
upon the Effective Time; provided, however, that this Section 6.10(b) shall not
be construed to limit the ability of the Surviving Corporation, or the Company
to terminate the employment of any Company Employee at any time. Further, after
prior consultation with the Company, and effective as of the Effective Time,
the Company will terminate such Company Employees as may be designated by
Parent.
(c) The Company shall terminate the Company Option Plan effective as
of the close of business on the date of the Effective Time.
(d) Parent shall reserve for issuance a sufficient number of shares of
Parent Stock for delivery upon exercise of Parent Options issued by Parent
after the Effective Time. Parent shall make commercially reasonable efforts to
file within sixty (60) days after the Effective Date a registration statement
on Form S-8 under the Securities Act covering the shares of Parent Stock
issuable upon the exercise of the Parent Options issued under this Agreement,
and shall use its reasonable efforts to cause such registration statement to
become
43
effective as soon thereafter as practicable and to maintain such registration
in effect until the exercise or expiration of such Parent Options. In addition,
Parent shall prepare and submit to the TASE and Nasdaq separate listing
applications covering the shares of Parent Stock to be issued upon exercise of
the Parent Options and shall use reasonable commercial efforts to obtain, after
the filing of the Form S-8 covering such shares, agreement by the TASE and
Nasdaq for the admission of such shares of Parent Stock for listing on the TASE
and the Nasdaq, and the Company shall cooperate with Parent with respect to
such listings.
Section 6.11 Fees and Expenses. Whether or not the Merger is
consummated, all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
Expenses, except (a) SEC filing fees in connection with the filing of the F-4
shall be paid by Parent, (b) fees incurred in connection with the paper or
electronic filing with the SEC (excluding professional fees of each party), and
printing and mailing of the Proxy Statement shall be shared equally by Parent
and the Company, and (c) if applicable, as provided in Section 8.5. As used in
this Agreement, "EXPENSES" includes all out-of-pocket expenses (including all
fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby, including the preparation, printing, filing and mailing of
the Proxy Statement and the solicitation of stockholder approvals and all other
matters related to the transactions contemplated hereby.
Section 6.12 Obligations of Merger Sub. Parent will take all
action necessary to cause Merger Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth in
this Agreement.
Section 6.13 Antitakeover Statutes. If any Takeover Statute is or
may become applicable to the Merger, each of Parent and Company shall take such
actions as are necessary so that the transactions contemplated by this
Agreement may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
any Takeover Statute on the Merger.
Section 6.14 Consent and Proxy of Certain Company Stockholders.
The Company stockholders listed on Section 6.14 of the Company Disclosure
Schedule have agreed to execute the form of irrevocable proxy attached hereto
as Exhibit B and have executed and delivered such proxy. Each of the
stockholders listed on Section 6.14 of the Company Disclosure Schedule agrees
to abide by the terms and conditions of such irrevocable proxy.
Section 6.15 Retention Bonuses. Parent and Company shall jointly
develop and announce a retention bonus program for employees of the Company
after the Effective Time. The retention bonus program will cover only those
employees of the Company and will be subject to such terms and will be payable
in such amounts as shall be agreed upon by Parent. Prior to execution of this
Agreement, the Company shall provide Parent with evidence of the withdrawal of
approval by the Company's Compensation Committee of any pre-existing retention
bonus programs, including, without limitation, any "stay/pay" bonus program.
Company represents that no further consents, notices, authorizations or
approvals are required to terminate any such retention bonus programs.
44
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.1 Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or prior to
the Effective Time of each of the following conditions, any or all of which may
be waived in whole or in part by the party being benefited thereby, to the
extent permitted by applicable Law:
(a) This Agreement shall have been approved and adopted by the Company
Requisite Vote.
(b) Any waiting period applicable to the Merger under the HSR Act
shall have expired or early termination thereof shall have been granted without
any material limitation, restriction or condition.
(c) There shall not be in effect any Law of any Governmental Entity of
competent jurisdiction, restraining, enjoining or otherwise preventing
consummation of the transactions contemplated by this Agreement or permitting
such consummation only subject to any condition or restriction that has or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company (or an effect on Parent and its
subsidiaries that, were such effect applied to the Company and its
subsidiaries, has or would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company), and no Governmental
Entity shall have instituted any proceeding which continues to be pending
seeking any such Law.
(d) Any governmental or regulatory notices, consents, approvals or
other requirements necessary to consummate the transactions contemplated hereby
and to operate the business of the Company and its subsidiaries after the
Effective Time in all material respects as it was operated prior thereto (other
than under the HSR Act) shall have been given, obtained or complied with, as
applicable.
(e) The F-4 shall have been declared effective by the SEC and shall be
effective at the Effective Time, and no stop order suspending its effectiveness
shall have been issued, no action, suit, proceeding or investigation by the SEC
to suspend the effectiveness thereof shall have been initiated and be
continuing, and all approvals under state securities Laws or the Securities Act
or Exchange Act necessary to carry out the transactions contemplated hereby
shall have been obtained and be in full force and effect.
(f) The Parent Stock to be issued in the Merger has been approved for
registration on the TASE in accordance with the Listing Rules of the TASE. All
approvals and consents of the ISA and other relevant Israeli authorities, to
the extent required, have been obtained.
(g) The outstanding shares of Parent Stock and the shares of Parent
Stock issuable to the stockholders of the Company pursuant to this Agreement
shall have been approved for quotation on Nasdaq subject to official notice of
issuance.
(h) The shares of Parent Stock shall be registered under the Exchange
Act.
45
Section 7.2 Conditions to the Obligations of Parent and Merger
Sub. The respective obligations of Parent and Merger Sub to consummate the
transactions contemplated by this Agreement are subject to the fulfillment at
or prior to the Effective Time of each of the following additional conditions,
any or all of which may be waived in whole or part by Parent and Merger Sub, as
the case may be, to the extent permitted by applicable Law:
(a) The representations and warranties of the Company contained herein
shall be true and correct on and as of the Closing Date as though made on and
as of the Closing Date (except for representations and warranties made as of a
specified date, which need be true and correct only as of the specified date).
(b) The Company shall have performed or complied with all agreements
and conditions contained herein required to be performed or complied with by it
prior to or at the time of the Closing.
(c) The Company shall have delivered to Parent a certificate, dated
the date of the Closing, signed by the President or any Vice President of the
Company (but without personal liability thereto), certifying as to the
fulfillment of the conditions specified in Sections 7.2(a) and 7.2(b).
(d) The Dissenting Shares of Company Common Stock shall not exceed ten
percent (10%) of the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time.
(e) Parent shall have received a Certificate of Good Standing of the
Company and each of its subsidiaries.
(f) On or after the date hereof there shall not have occurred a
Company Material Adverse Effect.
(g) Parent shall have received all of the signed Affiliate Letters.
(h) The Company and its subsidiaries shall have provided all of the
notices and shall have procured all of the third party consents specified in
Section 5.3 above.
(i) Parent shall provide the Company with a list of employees who
shall have agreed to continue as employees of the Surviving Corporation or an
Affiliate of the Parent.
(j) The Company shall have provided all of the notices to option
holders specified in Section 2.2(a) above.
Section 7.3 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the transactions contemplated by this
Agreement are subject to the fulfillment at or prior to the Effective Time of
each of the following conditions, any or all of which may be waived in whole or
in part by the Company to the extent permitted by applicable law:
(a) The representations and warranties of Parent and Merger Sub
contained herein shall be true and correct on and as of the Closing Date as
though made on and as of the Closing Date (except for representations and
warranties made as of a specified date, which need be true and correct only as
of the specified date); provided, however, that for the
46
purposes of this Section 7.3(a) only, such representations and warranties shall
be deemed to be true and correct unless the failure or failures of such
representations and warranties to be so true and correct (without regard to
materiality qualifiers contained therein) has or would reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Parent.
(b) Parent and Merger Sub shall have performed or complied in all
material respects with all agreements and conditions contained herein required
to be performed or complied with by them prior to or at the time of the
Closing.
(c) The outstanding shares of Parent Stock and the shares of Parent
stock issuable to the stockholders of the Company pursuant to this Agreement
shall have been approved for quotation on Nasdaq subject to official notice of
issuance.
(d) Parent shall have delivered to the Company a certificate, dated
the date of the Closing, signed by a director of Parent (but without personal
liability thereto), certifying as to the fulfillment of the conditions
specified in Sections 7.3(a) and 7.3(b).
(e) Each holder of a Company Option under the Company Option Plan
shall have had his/her Company Option terminated and replaced with an option to
purchase shares of the Parent, pursuant to Section 2.2 hereof.
(f) The Company shall have received an opinion of ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, LLP, dated the Effective Time, to the effect that the Merger will
constitute a reorganization for United States federal income tax purposes
within the meaning of Section 368(a) of the Code. In rendering such opinion,
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP may receive and rely upon representations
contained in the certificates of the Company, Parent and Merger Sub referred to
in Section 6.9.
(g) On or after the date hereof, there shall not have occurred a
Parent Material Adverse Effect.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.1 Termination by Mutual Agreement. This Agreement may
be terminated and the Merger may be abandoned at any time prior to the
Effective Time, whether before or after the approval of this Agreement by the
Company Requisite Vote, by mutual written consent of the Company and Parent by
action of their respective Boards of Directors.
Section 8.2 Termination by Either Parent or the Company. This
Agreement may be terminated and the Merger may be abandoned at any time prior
to the Effective Time by action of either the Board of Directors of Parent or
the Company Board if (i) the Merger shall not have been consummated by
September 30, 2002, provided that such date shall be extended to November 15,
2002 if as of September 30, 2002 the Proxy Statement shall have been mailed to
the shareholders of the Company, but the Company Stockholders Meeting shall not
have commenced as of September 30, 2002 (the "TERMINATION DATE"); (ii) the
Company Requisite Vote shall not have been obtained at the Company Stockholders
Meeting or at any adjournment or postponement thereof; or (iii) any Law
permanently restraining,
47
enjoining or otherwise prohibiting consummation of the Merger shall become
final and non-appealable (whether before or after the approval by the Company
Requisite Vote; provided, however, that the right to terminate this Agreement
pursuant to this Section 8.2 shall not be available to any party that has
breached in any material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the occurrence of the failure
of the Merger to be consummated.
Section 8.3 Termination by the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after the approval of this Agreement by the Company
Requisite Vote, by action of the Company Board:
(a) If (i) the Company is not in breach of Section 6.6, (ii) the
Company Stockholders Meeting shall not have occurred, (iii) the Company Board
authorizes the Company, subject to complying with the terms of this Agreement,
to enter into a binding written agreement concerning a transaction that
constitutes a Superior Proposal and the Company notifies Parent in writing that
it intends to enter into such an agreement, attaching the most current version
of such agreement to such notice, (iv) Parent does not make, within five
business days of receipt of the Company's written notification of its intention
to enter into a binding agreement for a Superior Proposal, an offer that the
Company Board determines, in good faith after consultation with its financial
advisors, is at least as favorable, from a financial point of view, to the
stockholders of the Company as the Superior Proposal and (v) the Company prior
to such termination pays to Parent in immediately available funds the
Termination Fee required to be paid pursuant to Section 8.5. The Company agrees
(x) that it will not enter into a binding agreement referred to in clause (iv)
above until at least the fifth (5th) business day after it has provided the
notice to Parent required thereby and (y) to notify Parent promptly if its
intention to enter into the written agreement referred to in its notification
shall change at any time after giving such notification;
(b) The Board of Directors of Parent shall have withdrawn or adversely
modified its approval of this Agreement;
(c) If there is a breach by Parent or Merger Sub of any
representation, warranty, covenant or agreement contained in this Agreement
that is not cured within ten (10) business days and would cause a condition set
forth in Section 7.3(a) or 7.3(b) to be incapable of being satisfied as of the
Termination Date; or
(d) The Merger shall not have been approved by the Company Requisite
Vote.
Section 8.4 Termination by Parent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, by action of the Board of Directors of Parent if:
(a) The Company enters into a binding agreement for a Superior
Proposal or the Company Board shall have withdrawn or adversely modified its
approval or recommendation of this Agreement or the Merger, in accordance with
the terms and conditions set forth in Section 6.6 hereof;
(b) There is a breach by the Company of any representation, warranty,
covenant or agreement contained in this Agreement that is not cured within ten
(10) business
48
days following delivery of notice thereof by Parent and would cause a condition
set forth in Section 7.2(a) or 7.2(b) to be incapable of being satisfied as of
the Termination Date;
(c) Board of Directors of the Company shall have withdrawn or
adversely modified its approval of this Agreement or the Merger;
(d) The Company shall have ceased using reasonable best efforts to
call, give notice of, or convene or hold a shareholders' meeting to vote on the
Merger as promptly as practicable after the date hereof or shall have adopted a
resolution not to effect any of the foregoing; or (e) The Company shall have
convened a meeting of its shareholders to vote upon the Merger and shall have
failed to obtain the Company Requisite Vote at such meeting (including any
adjournments thereof) or the Dissenting Shares of Company Common Stock shall
exceed ten percent (10%) of the shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time.
Section 8.5 Effect of Termination and Abandonment. (a) In the
event of termination of this Agreement and the abandonment of the Merger
pursuant to this Article VIII, this Agreement (other than as set forth in this
Section 8.5 or Sections 5.2(c), 5.4, 6.11, 9.4 and 9.8) shall become void and
of no effect with no liability on the part of any party hereto (or of any of
its directors, officers, employees, agents, legal and financial advisors or
other representatives); provided, however, that no such termination shall
relieve any party hereto of any liability or damages resulting from any willful
breach of this Agreement.
(b) In the event that this Agreement is terminated pursuant to (i)
Section 8.3(a) or Section 8.4(a), (ii) Section 8.4(b) arising out of a breach
of a representation or warranty of the Company or an action by the Company or
failure to take an action by the Company which results in a breach of a
covenant by the Company; or (iv) Section 8.4(c), (d) or (e)[(other than
termination by Parent under Section 8.4(e) if the Dissenting Shares of Company
Common Stock exceed ten percent (10%) of the shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time)]; then the
parties acknowledge that Parent will suffer direct and substantial damages,
which damages cannot be determined with reasonable certainty. To compensate
Parent for such damages, and in addition to any other remedies that Parent,
Merger Sub or their affiliates may have with respect to this Agreement, the
Company shall pay Parent a termination fee of $1,200,000 and reimburse Parent
for reasonable expenses incurred in connection with the transactions
contemplated by this Agreement (collectively, the "TERMINATION FEE") in
immediately available funds prior to such termination. It is specifically
agreed that the amount to be paid pursuant to this Section 8.5(b) represents
liquidated damages and is not a penalty. The Company hereby waives any right to
set-off or counterclaim against such amount. The Company acknowledges that the
agreement contained in this Section 8.5(b) is an integral part of the
transactions contemplated by this Agreement, and that, without such agreement,
the Company, Parent and Merger Sub would not have entered into this Agreement;
accordingly, if the Company fails to promptly pay any amount due pursuant to
this Section 8.5(b), and, in order to obtain such payment, Parent commences a
suit which results in a judgment against the Company for any amount required to
be paid pursuant to this Section 8.5, the Company shall pay Parent its costs
and expenses (including attorneys' fees) in connection with such suit, together
with interest from the date of termination of this Agreement on the amount owed
at the prime rate of ▇▇▇▇▇▇ Guaranty Trust Company of New York in effect from
time to time during such period plus two percent.
49
Section 8.6 Amendment. This Agreement may be amended by action
taken by the Company, Parent and Merger Sub at any time before or after
approval of the Merger by the Company Requisite Vote but, after any such
approval, no amendment shall be made which requires the approval of such
stockholders under applicable Law without such approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of the parties
hereto.
Section 8.7 Extension; Waiver. At any time prior to the Effective
Time, each party hereto (for these purposes, Parent and Merger Sub shall
together be deemed one party and the Company shall be deemed the other party)
may (i) extend the time for the performance of any of the obligations or other
acts of the other party, (ii) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document, certificate
or writing delivered pursuant hereto or (iii) waive compliance by the other
party with any of the agreements or conditions contained herein. Any agreement
on the part of either 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. The failure of either party hereto to assert any of its rights hereunder
shall not constitute a waiver of such rights.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Nonsurvival of Representations and Warranties. None
of the representations, warranties, covenants and agreements in this Agreement
or in any exhibit, schedule or instrument delivered pursuant to this Agreement
shall survive beyond the Effective Time, except for those covenants and
agreements contained herein and therein that by their terms apply or are to be
performed in whole or in part after the Effective Time. This Section 9.1 shall
not limit any covenant or agreement of the parties that by its terms
contemplates performance after the Effective Time.
Section 9.2 Entire Agreement; Assignment. (a) With the exception
of Section 3 of the LOI, which is incorporated herein by reference, this
Agreement and the Loan Agreement constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by operation of law (including, but not
limited to, by merger or consolidation) or otherwise unless consented to by the
parties hereto. Any assignment in violation of the preceding sentence shall be
void. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
Section 9.3 Notices. All notices, requests, instructions or other
documents to be given under this Agreement shall be in writing and shall be
deemed given, (i) five business days following sending by registered or
certified mail, postage prepaid, (ii) when sent, if sent by facsimile; provided
that the fax is promptly confirmed by telephone confirmation thereof, (iii)
when delivered, if delivered personally to the intended recipient and (iv) one
business day following sending by overnight delivery via a national courier
service, and in each case, addressed to a party at the following address for
such party:
50
if to Parent or to Merger Sub, to:
▇▇▇▇▇ Group, Ltd.
▇▇▇▇▇ ▇▇▇▇▇
▇ ▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
Attention: Chairman & CEO
Telephone: (▇▇▇) ▇-▇▇▇▇-▇▇▇
Facsimile: (▇▇▇) ▇-▇▇▇▇-▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ PC
One Fountain Square
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq. or ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and with an additional copy to:
Zellermayer, Pellossof & Co., Adv.
The ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Israel
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Adv., or Guy Even-Ezra, Adv.
Telephone: (▇▇▇) ▇-▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇-▇▇▇-▇▇▇▇
if to the Company, to:
o2wireless Solutions, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President & CEO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
51
Section 9.4 Governing Law; Waiver of Jury Trial. (a) This
Agreement shall be governed by and construed in accordance with the laws of the
State of Georgia applicable to contracts executed in and to be fully performed
in such state, without giving effect to the choice of law principles thereof,
and except to the extent the provisions of this Agreement (including any
documents or instruments referred to herein) are expressly governed by the
GBCC, or to the extent the provisions of this Agreement relate to corporate
matters of Parent, issuance of Parent Stock and required Israeli filings,
procedures, permits and consents, which provisions shall be governed by the
applicable Laws of the State of Israel.
(b) Each of the parties hereto hereby waives any right to trial by
jury in any action or proceeding in connection with this Agreement or any
transaction relating hereto.
Section 9.5 Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
Section 9.6 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto and its successors
and permitted assigns, and, except as provided herein, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 9.7 Severability. The provisions of this Agreement shall
be deemed severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other provisions hereof.
If any provision of this Agreement, or the application thereof to any person or
any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
Section 9.8 Specific Performance. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any court of
the United States located in the State of Georgia or in Georgia state court,
this being in addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto (a) consents to submit
itself to the personal jurisdiction of any federal court located in the State
of Georgia or in Georgia state court in the event any dispute arises out of
this Agreement or any of the transactions contemplated hereby, (b) agrees that
it will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a federal or state court sitting in
the State of Georgia.
Section 9.9 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
52
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Section 9.10 Interpretation. (a) The words "HEREOF," "HEREIN" and
"HEREWITH" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement, and article, section, paragraph, exhibit and
schedule references are to the articles, sections, paragraphs, exhibits and
schedules of this Agreement unless otherwise specified. Whenever the words
"INCLUDE," "INCLUDES" or "INCLUDING" are used in this Agreement, they shall be
deemed to be followed by the words "WITHOUT LIMITATION." The definitions
contained in this Agreement are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as to the feminine and
neuter genders of such terms. Any agreement, instrument or statute defined or
referred to herein or in any agreement or instrument that is referred to herein
means such agreement, instrument or statute as from time to time amended,
qualified or supplemented, including (in the case of agreements and
instruments) by waiver or consent and (in the case of statutes) by succession
of comparable successor statutes and all attachments thereto and instruments
incorporated therein. References to a person are also to its permitted
successors and assigns.
(b) The phrases "THE DATE OF THIS AGREEMENT," "THE DATE HEREOF" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date first set forth above. The phrase "MADE AVAILABLE" in this
Agreement shall mean that the information referred to has been actually
delivered to the party to whom such information is to be made available.
(c) The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
Section 9.11 Definitions. (a) "BENEFICIAL OWNERSHIP" or
"BENEFICIALLY OWN" shall have the meaning provided in Section 13(d) of the
Exchange Act and the rules and regulations thereunder.
(b) "KNOW" or "KNOWLEDGE" means, with respect to any party, the
knowledge of such party's executive officers.
(c) "MATERIAL ADVERSE EFFECT" means with respect to any party, any
event, change, effect, occurrence, violation, inaccuracy, circumstance or other
matter if such event, change, effect, occurrence, violation, inaccuracy,
circumstance or other matter (either individually or when considered together
with all other matters that would constitute either exceptions to the
representations and warranties or breaches of any covenant set forth in the
Agreement but for the presence of "Material Adverse Effect" or other
materiality qualifications, or any similar qualifications, in such
representations and warranties or covenants) were, or could reasonably be
expected to be, materially adverse to: (i) the business, condition,
capitalization, assets, liabilities, prospects, operations or financial
performance of such party and any of its subsidiaries taken as a whole, or (ii)
the ability of a party to consummate the Merger or any of the other
transactions contemplated by the Agreement or to perform any of its obligations
under the Agreement; provided, however, that any change, effect, occurrence,
violation, inaccuracy, circumstance or other matter that
53
results in, or could reasonably be expected to result in, a violation of a
criminal Law will be deemed to constitute a Material Adverse Effect in all
circumstances. In addition and notwithstanding or in limitation of the above,
with respect to any representation or warranty of the Company in Article III
hereof which is subject to a material adverse effect qualification, any change,
effect, occurrence, violation, inaccuracy, circumstance or other matter that
individually results in, or could reasonably be expected to result in, an
economic effect in excess of U.S. $500,000 will be deemed to constitute a
Material Adverse Effect as to such representation or warranty.
(d) "PERSON" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization, other
entity or group (as defined in the Exchange Act).
(e) "SUBSIDIARY" means, when used with reference to any entity, any
corporation or other organization, whether incorporated or unincorporated, (i)
of which such entity or any other subsidiary of such entity is a general or
managing partner or (ii) the outstanding voting securities or interests of
which, having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
corporation or other organization, are directly or indirectly owned or
controlled by such entity or by any one or more of its subsidiaries.
[Signature pages follow.]
54
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be duly executed on its behalf as of the day and year first above written.
▇▇▇▇▇ GROUP, LTD.
By: /s/ ▇▇▇▇ ▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇▇▇
Title: Chairman and Chief Executive Officer
▇▇▇▇▇ ACQUISITION SUB, INC.
By: /s/ ▇▇▇▇ ▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇▇▇
Title: Chief Executive Officer
O2WIRELESS SOLUTIONS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President, Chairman and
Chief Executive Officer
SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER
55