Exhibit 2.7
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SHARE PURCHASE AGREEMENT
among
RAVISENT TECHNOLOGIES INC.,
EMATION, LTD.
and certain of
THE SHAREHOLDERS OF
EMATION, LTD.
Amended and restated as of July 27, 2001
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TABLE OF CONTENTS
Page
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ARTICLE I. DEFINITIONS............................................................................................2
SECTION 1.01. Certain Defined Terms......................................................................2
ARTICLE II. SALE AND TRANSFER OF COMPANY SHARES; CLOSING; PURCHASE PRICE.........................................11
SECTION 2.01. Sale and Transfer of Company Shares.......................................................11
SECTION 2.02. Closing...................................................................................11
SECTION 2.03. Delivery of Company Shares and Payment of Purchase Price..................................12
SECTION 2.04. Fractional Shares.........................................................................13
SECTION 2.05. Calculation of Adjustments................................................................13
SECTION 2.06. Piggy-back Registration...................................................................14
ARTICLE III. REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY....................................................15
SECTION 3.01. Organization, Standing and Power..........................................................15
SECTION 3.02. Memorandum................................................................................15
SECTION 3.03. Capital Structure.........................................................................15
SECTION 3.04. Authority Relative to this Agreement......................................................17
SECTION 3.05. No Conflicts; Required Filings and Consents...............................................17
SECTION 3.06. Officers and Directors....................................................................18
SECTION 3.07. Bank Accounts.............................................................................18
SECTION 3.08. Subsidiaries, Etc.........................................................................18
SECTION 3.09. Absence of Certain Changes or Events......................................................19
SECTION 3.10. Title to Assets...........................................................................21
SECTION 3.11. Sufficiency of Assets.....................................................................22
SECTION 3.12. Fixtures and Equipment....................................................................22
SECTION 3.13. Contracts.................................................................................22
SECTION 3.14. Permits...................................................................................24
SECTION 3.15. Financial Statements......................................................................24
SECTION 3.16. Liabilities...............................................................................26
SECTION 3.17. Litigation................................................................................26
SECTION 3.18. Labor Matters.............................................................................27
SECTION 3.19. Employee Plans............................................................................28
SECTION 3.20. [Reserved]................................................................................31
SECTION 3.21. Compliance with Law.......................................................................31
SECTION 3.22. Intellectual Property.....................................................................32
SECTION 3.23. Tax Matters...............................................................................34
SECTION 3.24. Insurance.................................................................................37
SECTION 3.25. Payments..................................................................................37
SECTION 3.26. Customers and Suppliers...................................................................38
SECTION 3.27. Environmental Matters.....................................................................38
SECTION 3.28. Brokers; Transaction Costs................................................................39
SECTION 3.29. Information Supplied......................................................................39
SECTION 3.30. Products Liability........................................................................40
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SECTION 3.31. Real Property and Leased Real Property....................................................40
SECTION 3.32. Transactions with Related Parties.........................................................41
SECTION 3.33. Certain Business Practices................................................................41
SECTION 3.34. Business Activity Restriction.............................................................41
SECTION 3.35. Grants, Incentives and Subsidies..........................................................42
SECTION 3.36. Full Disclosure...........................................................................42
SECTION 3.37. Signatories...............................................................................43
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS...................................................43
SECTION 4.01. Authorization of Agreements, Etc..........................................................43
SECTION 4.02. Validity..................................................................................43
SECTION 4.03. Title to Shares...........................................................................43
SECTION 4.04. Investment Representations................................................................44
SECTION 4.05. No Registration Of Purchaser Shares.......................................................45
SECTION 4.06. Purchaser Shares Are Restricted Securities................................................45
SECTION 4.07. Obligation to Register....................................................................46
SECTION 4.08. Brokers...................................................................................46
SECTION 4.09. Tax Withholding...........................................................................46
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.......................................................46
SECTION 5.01. Organization and Qualification; Subsidiaries..............................................46
SECTION 5.02. Capitalization............................................................................47
SECTION 5.03. Authority Relative to this Agreement......................................................47
SECTION 5.04. No Conflict; Required Filings and Consents................................................47
SECTION 5.05. SEC Filings; Financial Statements.........................................................48
SECTION 5.06. Absence of Certain Changes or Events......................................................49
ARTICLE VI. COVENANTS............................................................................................49
SECTION 6.01. Conduct of Business by the Company Pending the Closing....................................49
SECTION 6.02. No Solicitation...........................................................................50
SECTION 6.03. Notices of Certain Events.................................................................50
SECTION 6.04. Access to Information; Confidentiality....................................................51
SECTION 6.05. Further Action; Consents; Filings.........................................................51
SECTION 6.06. Certain Tax Matters.......................................................................52
SECTION 6.07. Public Announcements......................................................................52
SECTION 6.08. Legend....................................................................................52
SECTION 6.09. Information Statement.....................................................................53
SECTION 6.10. Tax-Free Reorganization...................................................................53
SECTION 6.11. Review Report.............................................................................53
ARTICLE VII......................................................................................................54
ARTICLE VII. ADDITIONAL AGREEMENTS...............................................................................54
SECTION 7.01. Proxy Statement...........................................................................54
SECTION 7.02. Purchaser Stockholders' Meeting...........................................................54
SECTION 7.03. [Reserved]................................................................................55
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SECTION 7.04. Assumption of Company Options.............................................................55
SECTION 7.05. Registration Statements on Form S-8.......................................................56
SECTION 7.06. Resignations of Officers and Directors....................................................56
SECTION 7.07. General Release and Waiver................................................................56
SECTION 7.08. Bridge Loan...............................................................................57
ARTICLE VIII. CONDITIONS PRECEDENT...............................................................................58
SECTION 8.01. Conditions Precedent to the Obligations of Each Party.....................................58
SECTION 8.02. Conditions Precedent to the Obligation of the Purchaser...................................58
SECTION 8.03. Conditions Precedent to the Obligations of the Company and the Shareholders...............61
ARTICLE IX. INDEMNIFICATION......................................................................................62
SECTION 9.01. Escrow Fund...............................................................................62
SECTION 9.02. Indemnification...........................................................................62
SECTION 9.03. Escrow Period.............................................................................65
SECTION 9.04. Claims upon Escrow Fund...................................................................65
SECTION 9.05. Shareholders' Agent.......................................................................67
SECTION 9.06. Actions of the Shareholders' Agent........................................................67
SECTION 9.07. Third-Party Claims........................................................................68
ARTICLE X. TERMINATION AND ABANDONMENT...........................................................................69
SECTION 10.01. Survival of Representations and Warranties...............................................69
SECTION 10.02. Termination..............................................................................69
SECTION 10.03. Procedure and Effect of Termination......................................................70
ARTICLE XI. MISCELLANEOUS........................................................................................70
SECTION 11.01. Expenses, Etc............................................................................70
SECTION 11.02. Notices..................................................................................71
SECTION 11.03. Waivers..................................................................................72
SECTION 11.04. Amendments, Supplements, Etc.............................................................73
SECTION 11.05. Governing Law............................................................................73
SECTION 11.06. Waiver of Jury Trial.....................................................................73
SECTION 11.07. Headings; Interpretation.................................................................73
SECTION 11.08. Counterparts.............................................................................74
SECTION 11.09. Entire Agreement.........................................................................74
SECTION 11.10. Third Party Beneficiaries/Parties in Interest............................................74
SECTION 11.11. Assignability............................................................................74
Schedule Description
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I Shareholders of the Company
II Management Shareholder
III Post Closing Company and Subsidiary Officers and Directors
IV Post Closing Purchaser Officers and Directors
V Net Debt Amount Lenders
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Exhibit Description
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A Form of Escrow Agreement
B Form of Opinion of Yigal, Arnon & Co., Israeli Counsel to the Company
C Form of Opinion of Ropes & ▇▇▇▇, U.S. Counsel to the Company
D Form of ▇▇▇▇ ▇▇▇▇▇▇ Executive Employment and Non-Competition Agreement
E Form of Executive Employment and Non-Competition Agreement for Key
Employees other than ▇▇▇▇ ▇▇▇▇▇▇
F Form of Non Competition and Confidentiality Agreement
G Form of Lock-up Agreement
H Form of Opinion of ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP, U.S. Counsel to
the Purchaser
I Form of Company 2001 Stock Option Plan
J Form of Investor Suitability Certificate
K Form of Bridge Loan Agreement
L Form of Guaranty
M Form of Opinion of counsel to the Shareholders
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SHARE PURCHASE AGREEMENT
SHARE PURCHASE AGREEMENT, amended and restated as of July 27, 2001,
among RAVISENT Technologies Inc., a Delaware corporation (the "Purchaser"),
eMation, Ltd., a private company organized under the laws of the State of Israel
(the "Company"), and certain of the shareholders of the Company named in
Schedule I hereto who have executed this Agreement (hereinafter sometimes
referred to individually as a "Shareholder" and collectively as the
"Shareholders").
WHEREAS, the authorized share capital of the Company consists of the
following classes and series of shares: Ordinary Shares (the "Ordinary Shares");
Series A Preferred Shares (the "Series A Preferred Shares"); Series B Pr ferred
Shares (the "Series B Preferred Shares"); Series C Preferred Shares (the "Series
C Preferred Shares"); and Series D Redeemable Preferred Shares (the "Series D
Preferred Shares"), each of NIS 0.05 nominal value (collectively, together with
the Series E Preferred Shares, the "Company Shares"); and
WHEREAS, the Company shall, immediately prior to the Closing, issue
shares of a new series of preferred share which shall be designated as Series E
Preferred Shares (the "Series E Preferred Shares") to certain holders of
preferred shares of the Company pursuant to and in accordance with the terms and
conditions contained in an agreement dated as of June 25, 2001 among the Company
and such holders (the "Shareholder Bridge Facility"), a copy of which has been
provided to the Purchaser; and
WHEREAS, the Purchaser desires to purchase all of the issued and
outstanding Company Shares at the Closing; and
WHEREAS, the Purchaser has made an offer to purchase all of the issued
Company Shares of all classes and series (the "Buyout offer");
WHEREAS, the Shareholders desire to sell and the Purchaser desires to
purchase all of the Company Shares owned by the Shareholders, on the terms and
subject to the conditions hereinafter set forth; and
WHEREAS, the parties intend that the purchase of Company Shares
qualify as a reorganization under Section 368 of the Code for U.S. tax purposes,
and hereby adopt this agreement as a plan of reorganization within the meaning
of Section 368 of the Code; and
WHEREAS, as an inducement to the Company and the Shareholders to enter
into this Agreement, the Purchaser and the Company shall use their best efforts
to cause Luico Inc., a subsidiary of the Purchaser, and eMation, Inc., a
subsidiary of the Company, respectively, to enter into the Secured Promissory
Note and Agreement (the "Bridge Loan Agreement") substantially in the form
attached hereto as Exhibit K, along with the Intellectual Property Security
Agreement and the Security Agreement referred to therein, within five Business
Days of the original execution of this Agreement by the Company, the Purchaser
and holders of no less than ninety percent (90%) of each class and series of the
Company Shares outstanding on the date hereof, pursuant to which, among other
things, Luico Inc. will provide bridge financing (the "Bridge Loan") to eMation,
Inc. and in return eMation, Inc. will provide a security interest in its assets
and intellectual property to Luico Inc.; and
WHEREAS, as an inducement to Luico Inc. to provide the Bridge Loan,
the Company will, concurrently with the execution of the Bridge Loan Agreement,
execute a Guaranty (the "Guaranty") substantially in the form attached hereto as
Exhibit L, along with the Guarantor Intellectual Property Security Agreement and
the Guarantor Security Agreement referred to therein, pursuant to which, among
other things, the Company will guarantee the obligations of eMation, Inc.
pursuant to the Bridge Loan Agreement and provide a security interest in its
assets and intellectual property to Luico Inc.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. Certain Defined Terms. Unless the context otherwise
requires, the following terms, when used in this Agreement, shall have the
respective meanings specified below (such meanings to be equally applicable to
the singular and plural forms of the terms defined):
"Accounts Receivable" means any and all accounts receivable, bills
receivable, trade accounts, book debts and insurance claims recorded as
receivable in the Books and Records and any other amount due to the Company or a
Company Subsidiary including any refunds and rebates, and the benefit of all
security (including cash deposits), guarantees and other collateral held by the
Company or a Company Subsidiary.
"Action" shall mean any legal, administrative, governmental or
regulatory proceeding or other action, suit, proceeding, claim, arbitration,
mediation, alternative dispute resolution procedure, inquiry or investigation by
or before any arbitrator, mediator, court or other Governmental Entity.
"Adjustment Shares" shall mean that number of Purchaser Shares equal
to the quotient obtained by dividing the Net Debt Amount by $3.00, provided
however, that in no event shall such quotient be less than zero.
"Affiliate" of a Person shall mean any other Person which directly or
indirectly controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or partnership interests, by
contract or otherwise.
"Affiliated Group" shall mean any affiliated group within the meaning
of Section 1504(a) of the Code or any similar group defined under any similar
Law.
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"Assets" shall mean with respect to any Person, all of its right,
title and interest in and to its properties, assets and rights of any kind,
whether tangible or intangible, real or personal.
"Balance Sheet Date" shall mean December 31, 2000.
"Benefit Arrangement" shall mean with respect to any Person, any
employment, consulting, severance or other similar contract, arrangement or
policy and each plan, arrangement (written or oral), program, agreement or
commitment providing for insurance coverage (including any self-insured
arrangements and managers' insurance), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits, life, health, disability or accident benefits (including any
"voluntary employees' beneficiary association" as defined in Section 501(c)(9)
of the Code providing for the same or other benefits) or for deferred
compensation, profit-sharing bonuses, share options, stock appreciation rights,
share purchases or other forms of incentive compensation or post-retirement
insurance, compensation or benefits whether or not legally binding, which (A) is
not a Welfare Plan, Pension Plan or Multiemployer Plan, (B) is or has been
entered into, maintained, contributed to or required to be contributed to, by
such Person, or an ERISA Affiliate thereof or under which such Person, or any
ERISA Affiliate thereof may incur any Liability, and (C) covers or has covered
any employee or former employee of such Person, or any ERISA Affiliate thereof
(with respect to their relationship with such entities).
"Books and Records" shall mean, with respect to any Person, (a) all
product, business and marketing plans, sales and promotional literature and
artwork relating to its Assets or Business, (b) all books, records, lists,
ledgers, financial data, files, reports, product and design manuals, plans,
drawings, technical manuals and operating records of every kind relating to its
Assets or Business (including records and lists of customers, distributors,
suppliers and personnel) and (c) all telephone and fax numbers used in its
Business, in each case whether maintained as hard copy or stored in computer
memory and whether owned by such Person or its respective Affiliates.
"Business" shall mean, with respect to any Person, the business of
such Person as conducted on the date hereof.
"Business day" shall mean any day other than a Friday, Saturday,
Sunday or any other day on which banking institutions in the State of New York
or the State of Israel ("Israel") are not open for the transaction of normal
banking business.
"Closing" shall mean the consummation of the transactions contemplated
by this Agreement on the Closing Date.
"Code" shall mean Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Company Disclosure Schedule" shall mean the disclosure schedule
delivered by the Company to the Purchaser prior to the execution of this
Agreement and forming a part hereof.
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"Company Financial Advisor" shall mean BNY Capital Markets, Inc.
"Company Material Adverse Effect" shall mean any change in or effect
on the business of the Company or any Company Subsidiary that, individually or
in the aggregate, is, or is reasonably likely to be, materially adverse to (a)
the business, Assets, Liabilities, financial condition or results of operations
of the Company and the Company Subsidiaries or (b) the ability of the Company to
perform its obligations under this Agreement or the Transaction Documents to
which the Company is a party or to effect the transactions contemplated hereby
or thereby; provided that continuing operating losses by the Company and the
Company Subsidiaries in the ordinary course of business consistent with past
results will not be deemed to be a Company Material Adverse Effect.
"Company Options" shall mean options to purchase shares of the Company
granted and those obligations to grant such options to employees, consultants or
directors under or subject to the terms of any of the Company 2000 Option Plans,
the Company 1988 Option Plans or pursuant to other Contracts of the Company or
any Company Subsidiary.
"Company 2000 Option Plans" shall mean the Company's 2000
International Stock Option Plan adopted by the Company's Board of Directors and
as in effect as of the date hereof, and the Company's 2000 Master Share Option
Plan adopted by the Company's Board of Directors and as in effect as of the date
hereof.
"Company 1988 Option Plans" shall mean the PC Soft International
(1988) Ltd. Israeli Employee Stock Option Plan adopted by the Company's Board of
Directors and as in effect as of the date hereof, and the PC Soft International
(1988) Ltd. International Employee Stock Option Plan adopted by the Company's
Board of Directors and as in effect as of the date hereof.
"Company Option Plans" shall mean the Company 2000 Option Plans and
the Company 1988 Option Plans.
"Company Proprietary Property" shall mean all Proprietary Rights which
are used or are proposed to be used in connection with the conduct of the
business of the Company and the Company Subsidiaries as currently conducted or
as currently contemplated to be conducted.
"Company Subsidiary" shall mean any Subsidiary of the Company.
"Company Warrants" shall mean warrants to purchase shares of the
Company granted and those obligations to grant such warrants pursuant to
Contracts of the Company or any Company Subsidiary.
"Confidentiality Agreement" shall mean the confidentiality agreement
dated February 27, 2001 between the Purchaser and the Company.
"Consents" shall mean consents, approvals, requirements, exemptions,
orders, waivers, allowances, novations, authorizations, declarations, filings,
registrations and notifications.
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"Contracts" shall mean, with respect to any Person, all agreements,
undertakings, contracts, obligations, arrangements, promises, understandings and
commitments (whether written or oral and whether express or implied) (i) to
which such Person is a party, (ii) under which such Person has any rights, (iii)
under which such Person has any Liability or (iv) by which such Person, or any
of the Assets owned or used by such Person, is bound.
"$" shall mean United States Dollars.
"Default" with respect to any Person shall mean (a) a breach of or
default under any Contract of such Person, (b) the occurrence of an event that
with the passage of time or the giving of notice or both would constitute a
breach of or default under any such Contract, or (c) the occurrence of an event
that with or without the passage of time or the giving of notice or both would
give rise to a right of termination or acceleration under any such Contract.
"Employee Contract" shall mean each management, employment,
consulting, non-compete, confidentiality, proprietary rights or similar Contract
between the Company or any Company Subsidiary and any employee or consultant of
the Company or a Company Subsidiary insofar as any such person performs services
for the Company or any Company Subsidiary or pursuant to which the Company or
any Company Subsidiary has or may have any Liability and any other undertaking
or commitment of any such person toward the Company or any Company Subsidiary,
including but not limited to Contracts with present or former officers or
directors of the Company or any Company Subsidiary and Contracts providing for
severance, termination, "golden parachute," or other similar payments to any
present or former employee following termination of employment or otherwise as a
result of the consummation of the transactions contemplated by this Agreement
and the Transaction Documents to which the Company or any Company Subsidiary are
a party.
"Employee Plans" shall mean, with respect to any Person, all of its
respective Benefit Arrangements, Multiemployer Plans, Pension Plans and Welfare
Plans.
"Encumbrance" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, hypothecation,
right-of-way, encroachment, building or use restriction, conditional sales
agreement, encumbrance or other similar right of any third parties, whether
voluntarily incurred or arising by operation of Law, and includes any agreement
to give any of the foregoing in the future, any contingent sale or other title
retention agreement or lease in the nature thereof and, in the case of
securities, any purchase option, call proxy, right of first refusal, right of
preemption, voting trusts, attachments and any restriction on voting or transfer
or similar right or claim of a third party with respect to such securities.
"Environmental Conditions" mean, with respect to any Person, the
introduction into the environment of any Hazardous Substance as a result of
which such Person, has or is reasonably likely to become liable to any other
Person or by reason of which any of its Assets is reasonably likely to suffer or
be subjected to any Encumbrance.
"Environmental Law" shall mean any Law and any enforceable judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to pollution or protection of the
environment or natural resources,
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including, without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Substances, as in effect as of the date hereof.
"Environmental Permit" shall mean any Permit required under or issued
pursuant to any applicable Environmental Law.
"Escrow Agent" shall mean the person mutually chosen by the Purchaser
and the Company prior to the Closing Date to act as the escrow agent under the
Escrow Agreement, or any successor thereof.
"Escrow Agreement" shall mean the Escrow Agreement, to be dated as of
the Closing Date, by and among the Company, the Purchaser, the Shareholders
Agent and the Escrow Agent, in substantially the form attached hereto as
Exhibit A.
"Escrow Shares" shall mean the shares of Purchaser Common Stock to be
held in escrow by the Escrow Agent pursuant to the Escrow Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean, with respect to any Person, any entity
which is (or at any relevant time was) a member of a "controlled group of
corporations" under "common control," or an "affiliated service group" with such
Person as defined in Section 414(b), (c) or (m) of the Code or is under "common
control" with such Person within the meaning of Section 4001(a)(14) of ERISA.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"Expenses" shall mean, with respect to any party hereto, all
reasonable out-of-pocket expenses (including, without limitation, all reasonable
fees and out-of-pocket expenses of counsel, accountants, investment bankers,
experts and consultants to a party hereto and its Affiliates) incurred by such
party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of its obligations pursuant
to this Agreement and the consummation of the transactions contemplated by this
Agreement and the Transaction Documents, and all other matters related to the
transactions contemplated hereby or thereby.
"Fixtures and Equipment" shall mean, with respect to any Person, all
of the furniture, fixtures, furnishings, office equipment, development tools and
equipment, lab equipment, spare parts, tooling, molds, mask sets, database
tapes, test tapes, test fixtures and equipment, patterns, dies, computers and
software (including any source or object codes therefore or documentation
relating thereto and computer aided design equipment and software), and other
tangible personal property owned or leased by such Person, wherever located and
including any such Fixtures and Equipment in the possession of any of its
respective suppliers or other vendors.
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"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time and consistently
applied.
"Governmental Entity" shall mean in any jurisdiction, including
without limitation the United States and Israel, any (i) supranational,
national, federal, state, local, foreign or international government, (ii)
court, arbitral or other tribunal, (iii) governmental or quasi-governmental
authority of any nature (including any political subdivision, instrumentality,
branch, department, official or entity) or (iv) agency, commission, authority or
body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory or taxing authority or power of any
nature.
"Governmental Order" shall mean, with respect to any Person, any
judgment, decision, consent decree, injunction, ruling or order of any
Governmental Entity that is binding on such Person or its Assets under
applicable Law.
"Hazardous Substance" shall mean (i) any petroleum, petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials or polychlorinated biphenyls or (ii) any chemical,
material or substance defined or regulated as toxic or hazardous or as a
pollutant or contaminant or waste under any applicable Environmental Law.
"Indebtedness" of any Person shall mean, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of payments not yet made for services already provided or property already owned
by the Person, (f) all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Encumbrance on Assets owned or acquired by such Person,
whether or not the Indebtedness secured thereby has been assumed; (g) all
guarantees by such Person of Indebtedness of others, (h) all capital lease
obligations of such Person, (i) all obligations, contingent or otherwise, of
such Person as an account party in respect of letters of credit and letters of
guaranty and (j) all obligations, contingent or otherwise, of such Person in
respect of bankers' acceptances. The Indebtedness of any Person shall include
the Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a
result of such Person's ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such
Person is not liable therefor.
"IRS" shall mean the U.S. Internal Revenue Service.
"Law" shall mean in any jurisdiction, including, without limitation,
the United States and Israel, any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, notice requirement, agency guidelines,
principles of law, other requirement or principle of law, Governmental Order or
determination of any Governmental Entity, including but not limited to
Environmental Laws, energy, motor vehicle safety, public utility, zoning,
building and health
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codes, occupational safety and health and laws respecting employment practices,
employee documentation, terms and conditions of employment and wages and hours.
"Leased Real Property" means all premises which are leased, subleased,
licensed or otherwise occupied by the Company or any Company Subsidiary and the
interest of the Company or any Company Subsidiary in all plants, buildings,
structures, fixtures, erections, improvements, easements, rights-of-way and
other appurtenances situate on or forming part of such premises.
"Liability" shall mean any and all claims, debts, liabilities,
obligations and commitments of whatever nature, whether asserted or reasonably
expected to be asserted, fixed, absolute or contingent, matured or unmatured,
accrued or unaccrued, liquidated or unliquidated or due or to become due, and
whenever or however arising (including those arising out of any Contract or
tort, whether based on negligence, strict liability or otherwise) regardless of
whether the same would be required by GAAP to be reflected as a liability in
financial statements or disclosed in the notes thereto.
"Multiemployer Plan" shall mean, with respect to any Person, any
"multiemployer plan," as defined in Sections 4001(a)(3) of ERISA or 3(37) of the
Code, (A) which such Person or any ERISA Affiliate thereof maintains,
administers, contributes to or is required to contribute to, or, after September
25, 1980, maintained, administered, contributed to or was required to contribute
to, or under which such Person or any ERISA Affiliate thereof may incur any
Liability and (B) which covers any employee or former employee of such Person or
any ERISA Affiliate thereof (with respect to their relationship with such
entities).
"NIS" shall mean the New Israeli Shekel, the lawful currency of the
State of Israel.
"Net Debt Amount" shall mean the aggregate amount of all Indebtedness
of the Company and the Company Subsidiaries to the Persons set out on Schedule
V, on a consolidated basis, as of the Closing Date in excess of $5,000,000,
calculated in accordance with GAAP.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean, with respect to any Person, any "employee
pension benefit plan" as defined in Section 3(2) of ERISA (other than a
Multiemployer Plan) (A) which such Person or any ERISA Affiliate thereof
maintains, administers, contributes to or is required to contribute to, or,
within the six years prior to the Closing Date, maintained, administered,
contributed to or was required to contribute to, or under which such Person or
any ERISA Affiliate thereof may incur any Liability and (B) which covers any
employee or former employee of such Person or any ERISA Affiliate thereof (with
respect to their relationship with such entities).
"Permits" shall mean all licenses, Consents, permits, franchises,
approvals or authorizations of any Governmental Entity.
"Person" shall mean an individual, corporation, partnership, private
company, limited partnership, limited liability company, limited liability
partnership, syndicate, person
8
(including, without limitation, a "person" as defined in Section 13(d)(3) of the
Exchange Act), trust, association, entity or Governmental Entity.
"Proprietary Rights" shall mean (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereon, and all patents, patent applications and patent disclosures, together
with all reissues, continuations, continuations-in-part, revisions, divisions,
extensions and reexaminations thereof, (b) all registered and unregistered
trademarks, service marks, trade dress, logos, trade names, domain names,
business, corporate and product names, together with all translations,
adaptations, derivations, and combinations thereof, and including all goodwill
associated therewith, and all applications, registrations and renewals in
connection therewith, (c) all copyrightable works, all copyrights, and all
applications, registrations and renewals in connection therewith, (d) all mask
works and all applications, registrations and renewals in connection therewith,
(e) all trade secrets, confidential business and technical information
(including but not limited to ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
methods, plans, models, engineering notebooks, schematics, technology,
flowcharts, block diagrams, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information and business and
marketing plans and proposals), (f) all computer and electronic data, data
processing programs, documentation and software, both source code and object
code (including flow charts, diagrams, descriptive texts and programs, computer
print-outs, underlying tapes, computer databases and similar items), computer
applications and operating programs, (g) all licenses, sublicenses, permissions
or Contracts in connection with any of the foregoing, (h) all rights to ▇▇▇ for
and remedies against past, present and future infringements of any or all of the
foregoing and rights of priority and protection of interests therein under the
Laws of any jurisdiction worldwide, (i) all copies and tangible embodiments of
any or all of the foregoing (in whatever form or medium, including electronic
media), and (j) all other proprietary, intellectual property and other rights
relating to any or all of the foregoing.
"Purchaser Common Stock" shall have the meaning attributed to such
term in Section 2.03(b).
"Purchaser Financial Advisor" shall mean Bear, ▇▇▇▇▇▇▇ & Co. Inc.
"Purchaser Material Adverse Effect" shall mean any change in or effect
on the business of Purchaser and its Subsidiaries that, individually or in the
aggregate, is, or is reasonably likely to be, materially adverse to (a) the
business, Assets, Liabilities, financial condition or results of operations of
the Purchaser and the Purchaser Subsidiaries or (b) the ability of the Purchaser
to perform its obligations under this Agreement or the Transaction Documents to
which the Purchaser is a party or to effect the transactions contemplated hereby
or thereby; provided that neither (i) continuing operating losses by the
Purchaser and its Subsidiaries in the ordinary course of business consistent
with past results nor (ii) a decrease in the Purchaser's stock price will be
deemed to be a Purchaser Material Adverse Effect.
"Purchaser Net Asset Value" shall mean the total assets of the
Purchaser minus the total liabilities of the Purchaser, determined in accordance
with GAAP.
9
"Purchaser Share Closing Price" shall mean the average of the last
sale price of shares of Purchaser Common Stock through the Nasdaq National
Market (as reported in the Wall Street Journal of, in the event of dispute,
another authoritative source) for the twenty (20) trading days ending on the
third trading day immediately proceeding the Closing Date.
"Purchaser Shares" shall have the meaning attributed to such term in
Section 2.03(b).
"Purchaser Subsidiary" shall mean any Subsidiary of the Purchaser.
"Real Property Leases" means those agreements to lease, leases,
subleases or licenses or other occupancy rights pursuant to which the Company or
any Company Subsidiaries use or occupy the Leased Real Property.
"Related Party" shall mean as to any Person, any of such Person's
officers and directors, any Affiliate thereof or the respective officers and
directors of any such Affiliate.
"Release" shall mean and includes any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing into the environment or the workplace of any Hazardous Substance,
and otherwise as defined in any Environmental Law.
"Representative" shall mean, with respect to any Person, any officer,
director, principal, attorney, accountant, agent, employee or other
representative of such Person.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"Subsidiary" shall mean, with respect to any Person, (A) any
corporation in an unbroken chain of corporations beginning with such Person if
each of the corporations other than the last corporation in the unbroken chain
then owns stock possessing 20 percent or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain; (B) any
partnership in which such Person is a general partner; (C) any partnership in
which such Person is a partner; or (D) any limited liability company, joint
venture, association or other entity in which such Person possesses a direct or
indirect equity interest.
"Tax" shall mean any and all taxes, fees, levies, duties, tariffs and
imposts (together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any Governmental
Entity or taxing authority, including, without limitation, income, franchise,
windfall or other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation, unemployment
compensation and net worth taxes; other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value-added or gains taxes; license,
registration and documentation fees; and customs duties, tariffs and similar
charges.
10
"Tax Return" shall mean any return, report, declaration, statement or
form (including, without limitation, any estimated tax reports or return,
withholding tax reports or return and information report or return, any schedule
or attachment thereto and any amendment thereof) required to be filed with
respect to any Taxes.
"To the knowledge" or "knowledge" of a party (or similar phrases)
shall mean to the best of the knowledge, information and belief of such party
after reviewing all relevant records and making due inquiries regarding the
relevant matter of all relevant employees of the party and, in the case of the
knowledge of the Company, ▇▇▇▇ ▇▇▇▇▇▇ (President & CEO),▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (CFO),
▇▇▇▇▇ ▇▇▇▇▇▇▇ (Corporate Controller), ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (Vice President,
Marketing), ▇▇▇▇▇ ▇▇▇▇▇ (Vice President, Sales), Grant Challenger (Director,
North American Sales), ▇▇▇▇ ▇▇▇▇▇▇▇ (Vice President, R&D), ▇▇▇ ▇▇▇▇▇▇ (CTO),
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (Director, Human Resources) and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Transaction Documents" shall mean this Agreement and all other
instruments, certificates and agreements delivered or required to be delivered
pursuant to this Agreement.
"WARN" shall mean the Worker Adjustment and Retraining Notification
Act of 1988.
"Welfare Plan" shall mean with respect to any Person any "employee
welfare benefit plan" as defined in Section 3(1) of ERISA, (A) which such Person
or any ERISA Affiliate thereof maintains, administers, contributes to or is
required to contribute to, or under which such Person or any ERISA Affiliate
thereof has or may incur any Liability and (B) which covers any employee or
former employee of such Person or any ERISA Affiliate (with respect to their
relationship with such entities) thereof.
ARTICLE II.
SALE AND TRANSFER OF COMPANY SHARES;
CLOSING; PURCHASE PRICE
SECTION 2.01. Sale and Transfer of Company Shares. Subject to the
terms and conditions set forth herein, each Shareholder shall sell, transfer,
assign, convey and deliver to the Purchaser, and the Purchaser shall purchase
and acquire from such Shareholder, on the Closing Date (as hereinafter defined),
the number of Company Shares set forth opposite the name of such Shareholder in
Schedule I hereto (it being understood that such schedule shall be updated to
reflect changes in share capital of the Company prior to Closing permitted
pursuant to this Agreement) under the respective headings "Company Shares" and
all other shares of the Company owned by such Shareholder immediately prior to
the Closing, in each case free and clear of any and all Encumbrances.
SECTION 2.02. Closing. The Closing shall take place, subject to, and
no later than five Business Days after, the satisfaction or waiver of all the
conditions set forth in Article VIII hereunder, at 1:00 P.M. at the offices of
the Purchaser or at such other place or time as the Purchaser and the
Shareholders may mutually agree (the date and time of the Closing is herein
called the "Closing Date").
11
SECTION 2.03. Delivery of Company Shares and Payment of Purchase
Price.
(a) At the Closing, each Shareholder shall deliver to the Purchaser a
certificate or certificates registered in such Shareholder's name representing
the Company Shares to be sold and transferred by such Shareholder, free and
clear of any Encumbrances, accompanied by a share transfer deed (in form
reasonably satisfactory to Purchaser) duly signed by such Shareholder evidencing
the Company Shares being sold and transferred by such Shareholder hereunder.
(b) Subject to the terms and conditions set forth herein, in
consideration for the sale, assignment, conveyance, transfer and delivery of the
Company Shares being sold, conveyed, transferred, assigned and delivered
hereunder, Purchaser will deliver to each Shareholder at the Closing, subject to
Section 2.03(c) and Section 2.04, stock certificates duly registered in the name
of such Shareholder representing that number of shares ("Purchaser Shares") of
common stock, $0.001 par value per share, of the Purchaser ("Purchaser Common
Stock") equal to the product of:
(i) in the case of Ordinary Shares, 550,000, multiplied by a fraction,
(x) the numerator of which shall equal the number of Ordinary Shares owned
by such Shareholder immediately prior to the Closing and (y) the
denominator of which shall be the number of issued and outstanding Ordinary
Shares immediately prior to the Closing;
(ii) in the case of Series E Preferred Shares, 700,000, multiplied by
a fraction, (x) the numerator of which shall equal the number of Series E
Preferred Shares owned by such Shareholder immediately prior to the Closing
and (y) the denominator of which shall be the number of issued and
outstanding Series E Preferred Shares immediately prior to the Closing; and
(iii) in the case of each of the Series A, B and D Preferred Shares,
the applicable Series Share Allocation (as defined below) multiplied by a
fraction, (x) the numerator of which shall equal the number of Company
Shares of such series owned by such Shareholder immediately prior to the
Closing and (y) the denominator of which shall be the number of issued and
outstanding Company Shares of such series immediately prior to the Closing.
"Series Share Allocation" shall mean the product obtained by
multiplying (i) 6,750,000 minus the Adjustment Shares by (ii) a fraction,
(x) the numerator of which shall equal the aggregate liquidation preference
payable to all shares of such series outstanding immediately prior to the
Closing, pursuant to section 72 of the Bylaws (as defined herein) as it
reads on the date hereof and (y) the denominator of which shall equal the
total aggregate liquidation preference payable to all series of preferred
shares outstanding immediately prior to the Closing, pursuant to section 72
of the Bylaws (as defined herein) as it reads on the date hereof.
(c) Stock certificates representing the number of Purchaser Shares
issued to each of the Shareholders pursuant to Sections 2.03(b)(ii) and (iii) of
this Agreement equal to the
12
Escrow Allocation (as defined below) for such Shareholder shall be deposited in
an escrow account (the "Escrow Fund") to be held in escrow pursuant to the
Escrow Agreement.
"Escrow Allocation" shall mean the product obtained by multiplying (i)
a number equal to 20% of the Purchaser Shares issued pursuant to or in
connection with the transactions contemplated by this Agreement by (ii) a
fraction, (x) the numerator of which shall equal the Purchaser Shares issued to
such Shareholder pursuant to Sections 2.03(b)(ii) and (iii) of this Agreement
and (y) the denominator of which shall equal the total Purchaser Shares issued
to all Shareholder pursuant to Sections 2.03(b)(ii) and (iii) of this Agreement.
SECTION 2.04. Fractional Shares. With respect to any payment by
Purchaser to be made by delivery of Purchaser Shares pursuant to Section 2.03,
no fractional shares of Purchaser Shares will be issued and any holder of
Company Shares entitled pursuant to this Agreement to receive a fraction of a
share of Purchaser Shares but for this Section 2.04 will be entitled only to
receive the number of shares of Purchaser Shares to be issued to each such
Shareholder rounded to the nearest whole share.
SECTION 2.05. Calculation of Adjustments.
(a) Adjustments at the Closing. To facilitate the calculation of the
Adjustment Shares (if any), Company shall prepare and deliver to Purchaser, not
less than five (5) Business Days prior to the Closing, an unaudited estimated
consolidated balance sheet of the Company and the Company Subsidiaries as of
immediately prior to the Closing (the "Estimated Closing Balance Sheet") and all
working papers and documents supporting the Estimated Closing Balance Sheet. The
Estimated Closing Balance Sheet shall be prepared in good faith in accordance
with GAAP in a manner consistent with Company's accounting policies and past
practices used in the preparation of the Company Balance Sheet (as defined in
Section 3.15). At the Closing, the Adjustment Shares shall be estimated on the
basis of the Estimated Closing Balance Sheet.
(b) Post-Closing Adjustments. The Estimated Closing Balance Sheet
shall become final and binding unless Purchaser gives written notice of its
disagreement (a "Notice of Disagreement") to the Shareholders' Agent designated
pursuant to Article IX within one hundred twenty (120) days following the
Closing Date. The Notice of Disagreement shall specify in reasonable detail the
nature of any disagreement so asserted. The Shareholders Agent shall have twenty
(20) days following its receipt of the Notice of Disagreement to review the
Notice of Disagreement and to give notice of any disagreement therewith (the
"Counter-Notice of Disagreement") to Purchaser. If the Shareholders' Agent does
not give a Counter-Notice of Disagreement within such period, the Estimated
Closing Balance Sheet shall be adjusted as set forth in the Notice of
Disagreement and, as so adjusted (the "Adjusted Balance Sheet"), shall be final
and binding upon all parties. If the Shareholders' Agent gives timely
Counter-Notice of Disagreement, Purchaser and the Shareholders' Agent shall
attempt in good faith to resolve their disagreements. If Purchaser and the
Shareholders' Agent are unable to resolve all of their disagreements with
respect to the Estimated Closing Balance Sheet within twenty (20) days following
delivery of a Counter-Notice of Disagreement, Purchaser shall prepare an audited
balance sheet of Company immediately prior to the Closing (the "Audited Closing
Balance Sheet"). The Audited Closing Balance Sheet shall be audited by KPMG (or,
if requested by the
13
Shareholders' Agent, another firm of independent public accountants mutually
acceptable to Purchaser and the Shareholders' Agent), shall be prepared in
accordance with GAAP in a manner consistent with Company's accounting policies
used in the preparation of the Company Balance Sheet, and shall be final and
binding on all parties. Any additional Adjustment Shares that would not have
been issued to the Shareholders at Closing if the Estimated Closing Balance
Sheet delivered prior to Closing had been an Adjusted Balance Sheet or an
Audited Closing Balance Sheet, or if the Estimated Closing Balance Sheet
reflected the resolution of any dispute by the Purchaser and the Shareholders'
Agent, as the case may be, may be recovered by Purchaser from the Escrow Fund
pro rata. The fees and disbursements of the audit shall be paid fifty percent
(50%) by Purchaser and fifty percent (50%) by Shareholders out of the Escrow
Fund pro rata.
SECTION 2.06. Piggy-back Registration.
If, after the Closing Date, Purchaser proposes to register any
Purchaser Common Stock under the Securities Act for sale to the public, whether
for its own account or for the account of other security holders or both (except
pursuant to a registration statement on Form S-4 or S-8 (or any substitute form
adopted by the SEC) or any other form that does not permit the inclusion of
shares by its security holders), Purchaser will give written notice to the
Shareholders of its intention to do so and, upon the written request of any such
Shareholder given within ten (10) Business Days after receipt of any such notice
(which request shall specify the number of Purchaser Shares intended to be sold
or disposed of by such Shareholder up to the maximum number of shares set forth
opposite the name of such Shareholder on Schedule I hereto under the heading
"Company Shares"), Purchaser will use its commercially reasonable efforts to
cause the Purchaser Shares that such Shareholders shall have requested the
registration of to be included in such registration and the related registration
statement proposed to be filed by Purchaser; provided, however, that nothing
herein shall prevent Purchaser from, at any time, abandoning, delaying or
suspending the effectiveness of any such registration. If any such registration
shall be underwritten in whole or in part, Purchaser may require the Purchaser
Shares requested for inclusion pursuant to this Section 2.06 to be included in
the underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters. If any such registration shall be
underwritten in whole or in part and the managing underwriters in good faith
advise Purchaser in writing that, in their opinion, the number of Purchaser
Shares and all other shares requested by right to be included in such
underwriting exceeds the largest number of shares which can be sold in such
offering without having an adverse effect on such offering, then the number of
Purchaser Shares to be included in such an underwriting may be reduced (pro rata
among the requesting holders (other than Purchaser and any other persons
demanding registration pursuant to rights existing on the date hereof who are
entitled to be protected against any such reduction) based upon the number of
shares so requested to be registered. All expenses of such offering, except the
brokers' commissions or underwriting discounts payable by the Shareholders,
shall be borne by Purchaser.
14
ARTICLE III.
REPRESENTATIONS AND WARRANTIES AS TO
THE COMPANY
The Company and the Shareholder listed on Schedule II (the "Management
Shareholder") hereto severally represent and warrant to the Purchaser, subject
to such exceptions as disclosed in the Company Disclosure Schedule delivered
herewith and dated as of the date hereof, all of which shall be deemed to be
made elsewhere in the Company Disclosure Schedule if the text of the disclosure
in the Company Disclosure Schedule read together with the applicable sections of
this Agreement makes such other disclosure clearly relevant, as follows:
SECTION 3.01. Organization, Standing and Power. The Company is a
private company duly organized and validly existing under the laws of Israel.
The Company has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing in each jurisdiction where the nature of its Business and Assets
require it to be so qualified, except where failure to be so qualified has not
had, and would not reasonably be expected to have, a Company Material Adverse
Effect. Each jurisdiction in which the Company is qualified to do business as a
foreign corporation is set forth in Section 3.01 of the Company Disclosure
Schedule.
SECTION 3.02. Memorandum. True, complete and correct copies of the
Company's current memorandum of association (the "Charter") and its articles of
association (the "Bylaws"), each as amended, are included in Section 3.02 of the
Company Disclosure Schedule. Such Charter and Bylaws are in full force and
effect. The Company is not in violation of any of the provisions of its Charter
or Bylaws. The Company has properly filed or delivered all reports, resolutions
and other documents that are required under applicable Law to be filed with or
delivered to the Israeli Registrar of Companies, except where the failure to
file or deliver any such report, resolution or other document has not had and
would not reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.03. Capital Structure.
(a) The authorized share capital of the Company consists of 8,000,007
Ordinary Shares, 1,890,333 Series A Preferred Shares, 2,500,000 Series B
Preferred Shares, 200,000 Series C Preferred Shares and 6,000,000 Series D
Preferred Shares, of which there are issued and outstanding, as of the date
hereof, 3,246,826 Ordinary Shares, 1,388,000 Series A Preferred Shares,
1,451,447 Series B Preferred Shares, zero Series C Preferred Shares and
5,228,051 Series D Preferred Shares (collectively, the "Issued Company Shares").
None of Company's Ordinary Shares or Series A, B, C or D Preferred Shares are
subject to vesting restrictions. There are no other issued Company Shares or
voting or other securities and no outstanding commitments to issue any Company
Shares or other securities other than pursuant to the exercise of Company
Options or pursuant to Company Warrants. Section 3.03(a) of the Company
Disclosure Schedule sets forth a complete capitalization table of the Company as
of the date hereof, including the names, numbers and types of securities held by
all holders of Issued Company Shares, securities convertible into, or
exchangeable for, shares of the Company (including, without limitation, Company
Warrants) and other rights to acquire Company Shares
15
or securities convertible into, or exchangeable for, Company Shares (including,
without limitation, Company Options). Section 3.03(a) of the Company Disclosure
Schedule sets forth, with respect to any Company Options issued to employees or
Issued Company Shares subject to repurchase prior to vesting, the vested and
unvested portions, and with respect to all Issued Company Shares, the purchase
date. Prior to the Closing, the Company shall authorize shares of Series E
Preferred Shares, all of which shall be (i) issued pursuant to and in accordance
with the terms and conditions of the Shareholder Bridge Facility, (ii) duly
authorized, validly issued, fully paid and non-assessable and (iii) outstanding
as of the Closing.
(b) Except for the Company Options and Company Warrants set forth on
Section 3.03(a) of the Company Disclosure Schedule and except as disclosed in
Section 3.03(b) of the Company Disclosure Schedule, there are no other options,
warrants, calls, demands, rights, commitments or agreements of any character to
which the Company is a party or by which it is bound obligating the Company to
issue, allot, sell, repurchase or redeem, or cause to be issued, allotted, sold,
repurchased or redeemed, any shares or other securities of the Company or
obligating the Company to grant, extend, accelerate the vesting of, change the
price of, or otherwise amend, modify or enter into any such option, warrant,
call, right, commitment or agreement. The Company will not issue or grant
additional options under the Company Option Plans, except as set forth in
Section 7.04(c). True and complete copies of all agreements and instruments
relating to or issued under the Company Option Plans have been provided to
Purchaser and such agreements and instruments have not been amended, modified or
supplemented, and there are no agreements to amend, modify or supplement such
agreements or instruments in any case from the form provided to Purchaser.
Except as set forth in Section 3.03(b) of the Company Disclosure Schedule,
neither the execution and delivery of this Agreement and the Transaction
Documents to which the Company or any Company Subsidiary are a party nor the
consummation of the transactions contemplated hereby or thereby will result in
the acceleration or vesting of exercisability of Company Options or the Company
Warrants.
(c) The Issued Company Shares constitute all issued shares of the
Company and all Issued Company Shares are duly authorized, validly issued, fully
paid and non-assessable and are free of any Encumbrances other than any
Encumbrances created by the holders thereof or imposed upon the holders pursuant
to the Charter or Bylaws of the Company, and, are not issued in violation of or,
except as set out in Section 3.03(c) of the Company Disclosure Schedule, subject
to preemptive rights or rights of first refusal created by statute, the Charter
or Bylaws of the Company or any Contract to which the Company is a party or by
which it is bound.
(d) Each share of Series A, B, C and D Preferred shares of the Company
is convertible into one (1) Ordinary Share. As of the close of business on the
date hereof, the Company has authorized (i) sufficient Ordinary Shares for
issuance upon conversion of the outstanding Series A, B, C, and D Preferred
shares of the Company, (ii) sufficient Ordinary Shares for issuance to employees
and consultants pursuant to the Company Options and Company Warrants, of which
2,339,440 shares are subject to outstanding, unexercised Company Options, (iii)
1,256,262 Ordinary Shares for issuance pursuant to the Company Warrants, (iv)
462,334 Series A Preferred Shares for issuance pursuant to the Company Warrants,
(v) 988,130 Series B Preferred Shares for issuance pursuant to the Company
Warrants, (vi) 165,289 Series C Preferred Shares for issuance pursuant to the
Company Warrants, and (vii) 189,043 Series D Preferred Shares for issuance
pursuant to the Company Warrants.
16
(e) Except as set forth in Section 3.03(e) of the Company Disclosure
Schedule, there are no Contracts relating to voting or future purchase or sale
of Company Shares (i) between or among the Company and any of its shareholders
and (ii) to the Company's knowledge, between or among any of the Company's
shareholders.
(f) All Issued Company Shares and all securities convertible into or
exchangeable for shares of the Company issued by the Company were issued in
compliance with all applicable securities Laws. At the Closing, upon completion
of the deliveries and payments contemplated by Section 2.03, the Purchaser will
acquire good, valid and marketable title to all issued shares of the Company,
free and clear of any Encumbrances other than as provided in the Company's
Charter and Bylaws.
SECTION 3.04. Authority Relative to this Agreement. Except as set
forth in Section 3.04 of the Company Disclosure Schedule, the Company has all
necessary corporate power and authority to execute and deliver this Agreement
and the Transaction Documents to which the Company is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the other Transaction Documents to which the Company is a party by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action, and except as set forth in Section 3.04 of the Company
Disclosure Schedule, no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or such Transaction Documents to which
the Company is a party or to consummate the transactions contemplated hereby and
thereby. This Agreement and the other Transaction Documents to which it is a
party have been, or will be upon execution and delivery, duly and validly
executed and delivered by the Company. Assuming the due authorization, execution
and delivery by the other parties hereto and thereto, each of this Agreement and
the other Transaction Documents to which it is a party constitutes, or will
constitute upon execution and delivery, the legal, valid and binding obligation
of the Company, enforceable against it in accordance with its terms, except to
the extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other Laws affecting the enforcement of creditors'
rights generally or by general equitable principles.
SECTION 3.05. No Conflicts; Required Filings and Consents
(a) The execution and delivery of this Agreement and the other
Transaction Documents to which it is a party by the Company do not, and the
performance by the Company of its obligations hereunder and thereunder, and the
consummation of the transactions contemplated hereby and thereby will not, (i)
conflict with or violate any provision of the Charter or Bylaws of the Company,
(ii) conflict with or violate any Law or Permit applicable to the Company or by
which any Asset of the Company is bound or affected or (iii) except for the
Permits, Consents or approvals referenced in Sections 3.05(b) and 3.05(c) of the
Company Disclosure Schedule, result in any breach in any material respect of or
constitute a material Default under any Contract or any Law or Permit applicable
to the Company or any Company Subsidiary.
17
(b) Section 3.05(b) of the Company Disclosure Schedule lists all of
the Permits, Consents or approvals of Governmental Entities (notwithstanding any
explicit or implied references to Permits, Consents or approvals of Governmental
Entities in other sections of the Company Disclosure Schedule) necessary for the
execution, delivery and performance of this Agreement by the Company or the
consummation by the Company of the transactions contemplated by this Agreement
and the Transaction Documents to which it is a party or with respect to any
Company Subsidiary.
(c) Section 3.05(c) of the Company Disclosure Schedule lists all of
the Consents of any third party to any Contract with the Company or any Company
Subsidiary (notwithstanding any explicit or implied references to Consents of
any third party to any Contract with the Company or any Company Subsidiary in
other sections of the Company Disclosure Schedule) required by reason of the
transactions contemplated by this Agreement and the Transaction Documents to
which the Company or any Company Subsidiary are a party except as has not had
and would not reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.06. Officers and Directors. Section 3.06 of the Company
Disclosure Schedule contains a list of all of the officers and directors of the
Company.
SECTION 3.07. Bank Accounts. Section 3.07 of the Company Disclosure
Schedule contains a list of all bank accounts, safe deposit boxes, and related
powers of attorney of the Company and the Company Subsidiaries, and persons
authorized to draw thereon or have access thereto. Neither the Company nor any
Company Subsidiary has any outstanding powers of attorney except as contemplated
above.
SECTION 3.08. Subsidiaries, Etc.
(a) Section 3.08(a) of the Company Disclosure Schedule contains a list
of any equity interests held by the Company (other than in a Company Subsidiary)
or any Company Subsidiary. Other than the equity interests provided on Section
3.08(a) of the Company Disclosure Schedule, the Company and the Company
Subsidiaries do not own or hold beneficially or otherwise, directly or
indirectly, any capital stock or share capital of, or other securities, equity
or ownership interest of any kind, or have any obligation to form or participate
in, any corporation, company, partnership or other Person.
(b) Section 3.08(b) of the Company Disclosure Schedule lists for each
Company Subsidiary, its name, the type of entity it is, its jurisdiction and
date of incorporation, organization, or formation, its officers and directors,
its authorized stock, partnership capital or equivalent, the number and type of
its issued and outstanding shares of capital stock, partnership interests or
similar ownership interests and the current owners of its equity and their
respective ownership interests therein and any jurisdictions in which it is
qualified to do business as a foreign corporation, each as of the date of this
Agreement. Each Company Subsidiary (i) is a business entity duly organized and
validly existing under the Laws of its respective jurisdiction of organization,
(ii) has all necessary corporate power and authority to own, operate or lease
the Assets now owned, operated or leased by such Subsidiary and to carry on its
business in all respects as currently conducted by such Subsidiary or as
currently contemplated by such
18
Subsidiary and (iii) is duly qualified as a foreign corporation to do business
and is in good standing, in each jurisdiction where the character of its Assets
owned, operated or leased or the nature of its activities requires such
qualification, except where failure to be so qualified has not had, and would
not reasonably be expected to have, a Company Material Adverse Effect. Copies of
the charter and bylaws (or similar organizational documents) of each Company
Subsidiary heretofore delivered to the Purchaser are accurate and complete.
Except as set forth on Section 3.08(b) of the Company Disclosure Schedule, such
charter and bylaws (or similar organizational documents) are in full force and
effect and each Subsidiary Company is not in violation of any of its respective
charter or bylaws (or similar organizational documents). All of the shares of
capital stock of each Company Subsidiary owned by the Company are owned free and
clear of any Encumbrances of any kind and such shares are duly authorized,
validly issued, fully paid and nonassessable and none of such shares were issued
in violation of, are subject to, any preemptive rights, rights of first refusal
or any other similar right. There are no options, warrants or rights of
conversion or any other Contract relating to any Company Subsidiary obligating
such Subsidiary, directly or indirectly, to issue additional shares or capital
stock or other securities.
(c) Except as set forth in Sections 3.08(a) or (b) or in Section
3.08(c) of the Company Disclosure Schedule, there are outstanding (i) no other
shares of capital stock or other securities of any Company Subsidiary, (ii) no
securities of the Company or any Company Subsidiary convertible into or
exchangeable for shares of capital stock or voting securities of any Company
Subsidiary, (iii) no options, preemptive rights or other rights to acquire from
the Company or any Company Subsidiary, and no obligation of the Company or any
Company Subsidiary to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of any
Company Subsidiary, (iv) no equity equivalent interests in the ownership or
earnings of the Company or any Company Subsidiary or other similar rights, (v)
no agreements, arrangements or understandings of the Company or any Company
Subsidiary, to the knowledge of the Company, relating to or otherwise affecting
the shares of capital stock of any Company Subsidiary, and (vi) no rights or
obligations of the Company or any Company Subsidiary to repurchase, redeem or
otherwise acquire any securities of any Company Subsidiary. Except as set forth
in Section 3.08(c) of the Company Disclosure Schedule, no Company Subsidiary
owns any capital stock or other voting securities of any other Company
Subsidiary.
SECTION 3.09. Absence of Certain Changes or Events. Except as set
forth on the corresponding subsections (a) through (t) of Section 3.09 of the
Company Disclosure Schedule, since the Balance Sheet Date there has not been
any:
(a) Company Material Adverse Effect;
(b) failure to operate the business of the Company and the business of
the Company Subsidiaries in the ordinary course or failure to use commercially
reasonable efforts to preserve such business and to preserve the continued
services of the employees and independent contractors of the Company and the
Company Subsidiaries and the goodwill of suppliers, customers and others having
business relations with the Company or any Company Subsidiaries or their
Representatives;
19
(c) resignation or termination of any officer or key employee, or any
material increase in the rate of compensation payable or to become payable to
any officer, employee or representative of the Company or any Company
Subsidiary, including the making of any loan to, or the payment, grant or
accrual of any bonus, incentive compensation, service award or other similar
benefit to, any such Person, or the addition to, modification of, or
contribution to any Employee Plan of the Company or any Company Subsidiary other
than the extension of coverage under such plan to others who became eligible
after the Balance Sheet Date;
(d) payment, loan or advance of any amount to or in respect of, or the
sale, transfer or lease of any Assets of the Company or any Company Subsidiary
to, or entering into of any Contract with, any Related Party of the Company or
any Company Subsidiary, except (i) directors' fees, (ii) compensation to
employees at the rates disclosed pursuant to Section 3.18(e); (iii) advances and
payments relating to intercompany indebtedness; and (iv) Contracts entered into
solely between or among one or more of the Company and the Company Subsidiaries;
(e) sale, assignment, license, transfer or encumbrance of any material
Assets of the Company or any Company Subsidiary, tangible or intangible, other
than solely between or among the Company and Company Subsidiaries and sales of
products and services and licenses in the ordinary course of business and
consistent with past practice;
(f) new Contracts of the Company or any Company Subsidiary, or
extensions, modifications, terminations or renewals thereof, except for such
Contracts entered into, modified or terminated in the ordinary course of
business and consistent with past practice or entered into in connection with
the transactions contemplated hereby or by any Transaction Document;
(g) actual or threatened termination of any material customer account
or group of accounts or actual or threatened material reduction in purchases or
royalties payable by any such customer or, to the knowledge of the Company, the
occurrence of any event that is likely to result in any such termination or
reduction;
(h) disposition or lapsing of any Company Proprietary Property, in
whole or in part, or, to the knowledge of the Company, any disclosure of any
trade secret, process or know-how to any Person not an employee of the Company
or its Affiliates in the absence of a nondisclosure agreement with such Person
entered into in the ordinary course of business;
(i) change in accounting methods or practices by the Company or any
Company Subsidiary, change in policies or procedures with respect to cash flow
management or payment of accounts payable and other current liabilities with the
intent or effect of reducing outstanding Indebtedness to the Persons listed on
Schedule V;
(j) material revaluation by the Company or any Company Subsidiary of
any of its respective Assets, including writing off notes or Accounts Receivable
other than for which reserves have been established;
(k) damage, destruction or loss (whether or not covered by insurance)
that has had or would reasonably be expected to have a Company Material Adverse
Effect;
20
(l) declaration, setting aside or payment of dividends or
distributions in respect of any stock of the Company or any redemption, purchase
or other acquisition of any of the Company's securities;
(m) capital expenditure or execution of any lease or any incurring of
Liability therefor by the Company or any Company Subsidiary, involving payments
in excess of $25,000 in the aggregate;
(n) failure to pay any material obligation of the Company or any
Company Subsidiary when due;
(o) cancellation of any Indebtedness in a principle amount in excess
of $5,000 or waiver of any rights of substantial value to the Company or any
Company Subsidiary, except in the ordinary course of business and consistent
with past practice;
(p) material Indebtedness incurred by the Company or any Company
Subsidiary for borrowed money or any commitment to borrow money entered into by
the Company or any Company Subsidiary, or any material loans made or agreed to
be made by the Company or any Company Subsidiary (other than with respect to the
Bridge Loan);
(q) material Liability incurred by the Company or any Company
Subsidiary except in the ordinary course of business and consistent with past
practice (other than with respect to the Bridge Loan), or any increase or change
in any assumptions underlying or methods of calculating any bad debt,
contingency or other reserves;
(r) payment, discharge or satisfaction of any Liabilities of the
Company or any Company Subsidiary, other than the payment, discharge or
satisfaction (i) in the ordinary course of business and consistent with past
practice of Liabilities reflected or reserved against in the Company Financial
Statements or incurred in the ordinary course of business and consistent with
past practice since the Balance Sheet Date, (ii) of other Liabilities of the
Company or any Company Subsidiary involving $25,000 or less in the aggregate and
(iii) of any intercompany indebtedness;
(s) acquisition by the Company or any Company Subsidiary of any equity
interest in any other Person; or
(t) agreement by the Company or any Company Subsidiary to do any of
the foregoing.
SECTION 3.10. Title to Assets. Each of the Company and the Company
Subsidiaries has good, valid and marketable title to its respective Assets
except as set forth on Section 3.10 of the Company Disclosure Schedule. Except
as set forth on Section 3.10 of the Company Disclosure Schedule, none of the
Assets of the Company or any Company Subsidiary are subject to any Encumbrances,
other than mechanics' liens and other statutory encumbrances, liens on equipment
created pursuant to leasing or financing agreements for the purchase of such
equipment requiring the payment of $100,000 or less and the lien of current
Taxes not yet due and payable.
21
SECTION 3.11. Sufficiency of Assets. The Assets of the Company and the
Company Subsidiaries constitute all of the assets, rights and properties,
tangible or intangible, real or personal, which are required for the operation
of their Businesses.
SECTION 3.12. Fixtures and Equipment. Section 3.12 of the Company
Disclosure Schedule contains accurate lists and summary descriptions of all
Fixtures and Equipment of the Company and the Company Subsidiaries where the
value of an individual item exceeds $10,000 or where an aggregate of similar
items exceeds $10,000. All tangible assets and properties of the Company and the
Company Subsidiaries are in good operating condition and repair, normal wear and
tear excepted, and are usable in the ordinary course of business.
SECTION 3.13. Contracts
(a) Disclosure. The corresponding subsections (i) through (xiv) of
Section 3.13 of the Company Disclosure Schedule set forth a complete and
accurate list of all Contracts of the Company and the Company Subsidiaries of
the following categories that are currently enforceable with respect to any
provision thereof:
(i) Contracts not made in the ordinary course of business;
(ii) License agreements, whether the Company or any Company Subsidiary
is the licensor or licensee thereunder (other than (A) software licenses
available to and used by businesses generally and (B) standard form license
agreements in the form(s) attached to Section 3.13(a)(ii) of the Company
Disclosure Schedule);
(iii) Confidentiality and non-disclosure agreements (whether the
Company or any Company Subsidiary is the beneficiary or the obligated party
thereunder), other than Employee Contracts;
(iv) Customer orders or sales contracts entered into after the Balance
Sheet Date under which the customer was or is to make payments after the
Balance Sheet Date of $50,000 or more;
(v) Original equipment manufacturer agreements or distributor
agreements and joint development agreements;
(vi) Research agreements;
(vii) Contracts involving future expenditures or Liabilities, actual
or potential, in excess of $25,000 after the date hereof or otherwise
material to the Business or Assets of the Company and the Company
Subsidiaries, taken as a whole, other than those Contracts listed in
response to clause (ii) above and other than Real Property Leases;
(viii) Contracts or commitments relating to commission or royalty
arrangements with Persons other than employees;
(ix) Employee Contracts;
22
(x) Promissory notes, loans, agreements, indentures, evidences of
indebtedness, letters of credit, guarantees, or other Contracts relating to
an obligation to pay money in excess of $25,000, whether the Company or any
Company Subsidiary shall be the borrower, lender or guarantor thereunder
(excluding credit provided by the Company or any Company Subsidiary in the
ordinary course of business to purchasers of its products, obligations to
pay vendors in the ordinary course of business and consistent with past
practice and obligations to employees for accrued salary, vacation,
benefits or for reimbursable expenses);
(xi) Contracts containing covenants limiting the freedom of the
Company or any Company Subsidiary or, to the knowledge of the Company, any
officer, director, employee or Affiliate of the Company or any Company
Subsidiary, to engage in any line of business or compete with any Person
that, to the knowledge of the Company, relates directly or indirectly to
its business or the business of the Purchaser or the Purchaser
Subsidiaries;
(xii) Any Contract with any Governmental Entity (excluding purchase
orders for off-the-shelf products);
(xiii) Any written Contract requiring payment by or to the Company or
a Company Subsidiary in excess of $25,000 or, to the knowledge of the
Company, any oral Contract, in each case with a Related Party of the
Company or any Company Subsidiary; and
(xiv) All Contracts containing any restrictions with respect to
payment of dividends or any other distributions in respect of the Company
Shares which will continue in effect after the Closing.
True, correct and complete copies of all of the Contracts (including a true and
complete written summary of all oral Contracts) listed on Section 3.13 of the
Company Disclosure Schedule, including all amendments and supplements thereto,
have been made available to the Purchaser.
(b) Absence of Defaults. To the knowledge of the Company, all
Contracts of the Company and any Company Subsidiary are, including, without
limitation, the Contracts listed in Section 3.13 of the Company Disclosure
Schedule, in full force and effect, valid, binding and enforceable in accordance
with their terms with no existing (or to the knowledge of the Company,
threatened) Default or dispute except such Defaults that have not had and would
not reasonably be expected to have a Company Material Adverse Effect. To the
knowledge of the Company, the Company and each Company Subsidiary have
fulfilled, or taken all action necessary to enable them to fulfill when due, all
of their obligations under each such Contract. To the knowledge of the Company,
all parties to such Contracts have complied in all material respects with the
provisions thereof, no party is in Default thereunder and no written notice of
any claim of Default has been given to the Company or any Company Subsidiary.
The Company has no reason to believe that the products and services called for
by any unfinished Contracts of the Company or any Company Subsidiary cannot be
supplied in accordance with the terms of such Contract, including time
specifications.
23
(c) Product Warranty. To the knowledge of the Company neither the
Company nor any Company Subsidiary has committed any act, and there has been no
omission, which may result in, and there has been no occurrence which may give
rise to, product liability or Liability for breach of warranty (whether covered
by insurance or not) on the part of the Company or any Company Subsidiary, with
respect to products designed, manufactured, assembled, sold, repaired,
maintained, delivered or installed or services rendered prior to or on the
Closing Date other than as set forth in the Company Financial Statements or as
may have occurred in the ordinary course of business.
SECTION 3.14. Permits. Section 3.14 of the Company Disclosure Schedule
sets forth a complete list of all material Permits of the Company and each
Company Subsidiary. The Company and each Company Subsidiary have, and at all
times had, all Permits required under any applicable Law in their operation of
their business or in the ownership of their Assets, and own or possess such
Permits free and clear of all Encumbrances, except where the failure to have
such Permits has not had, or would not be reasonably expected to have a Company
Material Adverse Effect. Neither the Company nor any Company Subsidiary is in
default, nor has the Company or any Company Subsidiary received any notice of
any claim of default, with respect to any such Permit and, to the knowledge of
the Company, no claims or complaints are threatened, alleging that the Company
or any Company Subsidiary is in violation of any such Permit. Except as
otherwise governed by Law or would not reasonably be expected to have a Company
Material Adverse Effect, all such Permits are renewable by their terms or in the
ordinary course of business, and except as set forth on Section 3.14 of the
Company Disclosure Schedule, will not be adversely affected by the completion of
the transactions contemplated by this Agreement or the Transaction Documents to
which the Company or any Company Subsidiary are a party.
SECTION 3.15. Financial Statements
(a) Section 3.15 of the Company Disclosure Schedule includes copies of
(i) the consolidated audited balance sheets of the Company as at December 31,
1999 and 2000, together with the related statements of operations, shareholders'
equity and cash flows for the years ended December 31, 1999 and 2000 and the
notes thereto, (ii) the consolidated unaudited interim balance sheet of the
Company at March 31, 2001 (the "Company Balance Sheet"), together with the
related statement of operations, shareholders' equity and cash flows for the
three months ended March 31, 2001, and (iii) the consolidated unaudited interim
balance sheet of the Company at May 31, 2001, together with the related
statement of operations, shareholders' equity and cash flows for the five months
ended May 31, 2001 (collectively, the "Company Financial Statements"). The
Company Financial Statements: (x) were prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby; (y) present fairly
the financial position, results of operations and cash flows of the Company and
the Company Subsidiaries as of such dates and for the periods then ended
(subject, in the case of unaudited statements, to normal and recurring
immaterial year-end adjustments); and (z) are correct and complete in all
material respects, and can be reconciled with the Books and Records of the
Company and the Company Subsidiaries. Except as set forth in Section 3.15 of the
Company Disclosure Schedule, the reserves set forth in the Company Financial
Statements which have been set aside to cover severance payments to the
employees of the Company and any Company Subsidiary, constitute, in the
aggregate, a sufficient reserve to enable the Company
24
and the Company Subsidiaries to discharge all of their respective obligations
towards their employees under applicable Law and applicable Employee Contracts
as of the date of the Company Financial Statements.
(b) Except as and to the extent set forth or reserved against on the
balance sheets of the Company as reported in the Company Financial Statements,
the Company or any Company Subsidiary do not have any Liabilities of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on a balance sheet or in notes thereto prepared in accordance with
GAAP, except for Liabilities incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date.
(c) The Company and the Company Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed with management's authorizations, (ii) transactions
are recorded as necessary to permit preparation of the Company Financial
Statements in accordance with GAAP and to maintain accountability for Assets,
(iii) access to Assets is permitted only in accordance with management's
authorization and (iv) the recorded accountability for Assets is compared with
existing Assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(d) The Books and Records of the Company and the Company Subsidiaries,
in reasonable detail, accurately and fairly reflect the activities of the
Company and the Company Subsidiaries and their business in all material respects
and have been provided or made available to the Purchaser for its inspection.
(e) The Accounts Receivable are good and collectible at the aggregate
recorded amounts, except to the extent of any reserves provided for such
accounts in the Books and Records, and are not subject to any defense,
counterclaim or set off.
(f) Neither the Company nor any Company Subsidiary has engaged in any
financial transaction, maintained any bank account or used any corporate funds,
except for transactions, bank accounts or funds which have been and are
reflected in the normally maintained Books and Records of the Company and the
Company Subsidiaries.
(g) The register of members, stock records and minute books of the
Company covering the five-year period ending on the date hereof heretofore made
available to the Purchaser and its Representatives are complete in all material
respects and reflect for such period all material actions and proceedings of its
shareholders and Board of Directors and all committees thereof and all
issuances, transfers and redemptions of the Company's share capital of which the
Company has knowledge through the date hereof.
SECTION 3.16. Liabilities. Neither the Company nor any Company
Subsidiary has any material Liabilities except (i) Liabilities which are
reflected or disclosed and properly reserved against in the Company Financial
Statements, (ii) Liabilities incurred in the ordinary course of business and
consistent with past practice since the Balance Sheet Date and (iii) Liabilities
arising under the Contracts of the Company and the Company Subsidiaries
(other than
25
obligations which are required to be reflected on a balance sheet prepared
in accordance with GAAP) and which have arisen or been incurred in the ordinary
course of business.
SECTION 3.17. Litigation
(a) Except as set forth on Section 3.17 of the Company Disclosure
Schedule, there is no Action pending or, to the knowledge of the Company,
threatened or anticipated against, relating to or affecting the Company or any
Company Subsidiary, any of their respective Assets or any of their officers and
directors as such, including, without limitation, that which (i) seeks to enjoin
or obtain damages in respect of the transactions contemplated hereby or by the
Transaction Documents to which the Company or any Company Subsidiary are a
party, (ii) with respect to which there is a reasonable likelihood of a
determination that would prevent the Company or any of the Shareholders from
consummating the transactions contemplated hereby and by the Transaction
Documents to which they are a party or (iii) which, if adversely determined
against the Company or any Company Subsidiary, their directors or officers, or
any other Person could reasonably be expected to result in a loss to the Company
or any Company Subsidiary, individually or in the aggregate, in excess of
$100,000.
(b) Except for matters which are applicable or affect all companies
engaged in a business comparable or similar to the Business of the Company and
the Company Subsidiaries and except as specified in Section 3.17 of the Company
Disclosure Schedule, to the knowledge of the Company there are presently no
Governmental Orders affecting the Company or any Company Subsidiary, their
Businesses or any of their Assets which (i) have had or could reasonably be
expected to have a Company Material Adverse Effect or (ii) affect the ability of
the Shareholders to perform their obligations under this Agreement or the
Transaction Documents they are a party to or to effect the transactions
contemplated hereby or thereby.
(c) Section 3.17 of the Company Disclosure Schedule contains a
complete and accurate description of all Actions since January 1, 1996 to which
the Company or any Company Subsidiary has been a party or which related to any
of their Assets or officers or directors as such, in each case involving more
than $50,000 in issue other than Actions brought by the Company or any Company
Subsidiary for collection of monies owed in the ordinary course of business.
(d) None of the Actions required to be set forth in Section 3.17 of
the Company Disclosure Schedule, if adversely determined, are reasonably
expected to have a Company Material Adverse Effect. No order has been made,
petition presented or resolution passed for the winding-up of the Company or any
Company Subsidiary and no meeting has been convened for the purposes of
winding-up of the Company or any Company Subsidiary. No steps have been taken
for the appointment of an administrator or receiver of all or any part of any of
the Assets of the Company or any Company Subsidiary. Neither the Company nor any
Company Subsidiary has made or proposed any arrangement or composition with its
creditors or any class of its creditors. Neither the Company nor any Company
Subsidiary is insolvent, or is unable to pay its debts within the meaning of
insolvency Laws applicable to such company and has not stopped paying its debts
as they fall due.
26
SECTION 3.18. Labor Matters
(a) Neither the Company nor any Company Subsidiary is or has been a
party to, or bound by, any labor agreement with respect to its employees with
any labor organization, group or association and has not experienced any attempt
by organized labor or its representatives to make the Company or any Company
Subsidiary conform to demands of organized labor relating to their respective
employees or to enter into a binding agreement with organized labor that would
cover the employees of the Company or any Company Subsidiary. The Company and
the Company Subsidiaries are not subject to, nor do any of their employees
benefit from, any collective bargaining agreement by way of any applicable
employment Laws and extension orders ("tzavei harchava"), other than tzavei
harchava applying generally to all employers in Israel or to all employees in
the Company's field of business. Except as set forth in Section 3.18(a) of the
Company Disclosure Schedule, the Company has no custom with respect to
termination of employment. There are no unfair labor practice charges or
complaints pending or, to the knowledge of the Company, threatened against the
Company or the Company Subsidiaries. There is no unfair labor practice charge or
complaint against either the Company or any Company Subsidiary pending before
the National Labor Relations Board or any other Governmental Entity arising out
of the activities of the Company or any Company Subsidiary, and the Company is
neither involved in, nor has any knowledge of any facts or information which
would give rise thereto, including any labor dispute, grievance, or litigation
relating to labor matters involving any current, former, or retired employee,
officer, consultant, independent contractor, agent or director of the Company or
any Company Subsidiary, including, without limitation, violation of any labor,
safety or employment Laws; there is no work stoppage, labor strike or labor
disturbance pending or threatened against the Company or any Company Subsidiary
nor is any grievance currently being asserted against it; and neither the
Company nor any Company Subsidiary has experienced a work stoppage, labor strike
or other general labor difficulty. There are no material controversies pending
or, to the knowledge of the Company, threatened between the Company or any
Company Subsidiary and any of their respective employees, and the Company is not
aware of any facts which are reasonably likely to result in any such
controversy.
(b) The Company and each Company Subsidiary are in compliance with all
applicable Laws respecting employment practices, terms and conditions of
employment, wages and hours, equal employment opportunity, and the payment of
social security and similar taxes, and each has not and is not engaged in any
unfair labor practice, except where failure to do so has not had and would not
reasonably be expected to have a Company Material Adverse Effect. The Company
and each Company Subsidiary are in compliance with the terms and conditions of
each Employee Contract except where failure to do so has not had and would not
reasonably be expected to have a Company Material Adverse Effect.
(c) Except as set forth in Section 3.18(c) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement, the Transaction
Documents nor the consummation of the transactions contemplated hereby or
thereby will result in the acceleration or vesting of any other rights of any
Person to benefits under any Employee Plans of the Company or any Company
Subsidiary.
27
(d) Except as set forth on Section 3.18(d) of the Company Disclosure
Schedule, in the last year no employee has given notice to, or received notice
from, the Company, any Company Subsidiary or any of their Representatives that
any such employee's employment or service may be terminated or advised the
Company or any Company Subsidiary of an intention to give such notice to, or is
expected to receive notice from, the Company any Company Subsidiary or any of
their Representatives that any such employee's employment or service may be
terminated.
(e) Section 3.18(e) of the Company Disclosure Schedule contains a list
of the names of all the present employees, consultants and independent
contractors of the Company and the Company Subsidiaries and their current job
titles, locations, salary or hourly wages, duration of employment and accrued
vacation days as of the date hereof. Such list shall be organized by location
including, without limitation, the United States, Israel, the Netherlands, the
United Kingdom, France and Japan locations of the Company and the Company
Subsidiaries.
(f) Neither the Company nor any Company Subsidiary is delinquent in
payments to any of its employees, consultants, or independent directors for any
wages, salaries, commissions, bonuses or other compensation for any services
performed by them to the date hereof.
SECTION 3.19. Employee Plans
(a) Disclosure; Delivery of Copies of Relevant Documents and Other
Information. Section 3.19(a) of the Company Disclosure Schedule contains a
complete list of material Employee Plans with respect to the Company or any
Company Subsidiary (the "Company Plans"). True and complete copies of each of
the following documents have been delivered or made available to the Purchaser
by the Company with respect to each such plan: (i) each Welfare Plan and Pension
Plan (and, if applicable, related trust agreements) and all amendments thereto,
all written interpretations thereof and written descriptions thereof and all
annuity contracts or other funding instruments, (ii) each Benefit Arrangement
including written interpretations thereof and written descriptions thereof and a
complete description of any such Benefit Arrangement which is not in writing,
(iii) the most recent determination letter issued by the IRS with respect to
each Welfare Plan and Pension Plan, (iv) for the three most recent plan years,
Annual Reports on Form 5500 Series required to be filed with any Governmental
Entity for each Pension Plan, and (v) a description setting forth the amount of
any Liability of the Company as of the Closing Date for payments more than 30
days past due with respect to each Employee Plan.
(b) Representations.
(i) Pension Plans. None of the Pension Plans sponsored or maintained
by the Company, any Company Subsidiary or any ERISA Affiliate is subject to
the minimum funding requirements of Title IV of ERISA or the Code with
respect to each such Pension Plan which is intended to be qualified under
Section 401(a) of the Code. Either (x) the Internal Revenue Service has
issued determination letters stating that each such Pension Plan is
qualified and each related trust agreement, annuity contract or other
funding instrument is tax-exempt under the provisions of Code Sections
401(a) (or
28
403(a), as appropriate) and 501(a)respectively, or (y) each such Pension Plan
has been established under a standardized prototype plan for which an Internal
Revenue Service opinion letter has been obtained by the plan sponsor and is
valid as to the adopting employer, and in either case, to the knowledge of the
Company, nothing has occurred or not occurred that would adversely affect such
qualified and tax-exempt status, respectively or as to which any correction
would reasonably be expected to have a Company Material Adverse Effect.
(ii) Multiemployer Plans. Neither the Company nor any ERISA Affiliate
thereof contributes to, or within the past six years has been obligated to,
contribute to or has incurred any withdrawal Liability under any
Multiemployer Plan.
(iii) Welfare Plans. Except for the applicable health care
continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA) and the proposed regulations thereunder,
the Company Subsidiaries organized under the laws of a state of the United
States do not and are not obligated to provide any benefits in the nature
of medical care or life insurance to any former employees or their
dependents after termination of employment.
(iv) Compliance with Law. With respect to each Company Plan and except
where failure to do so has not had and would not reasonably be expected to
have a Company Material Adverse Effect (i) the Company, each Company
Subsidiary and each ERISA Affiliate have performed all obligations required
to be performed by them under each Employee Plan and Employee Contract and
neither the Company, any Company Subsidiary nor any ERISA Affiliate is in
default under or in violation of, Employee Plan, (ii) each Employee Plan
has been established and maintained in accordance with its terms and in
compliance with all applicable Laws, including but not limited to ERISA and
the Code where applicable, including without limiting the foregoing, the
timely filing of all required reports, documents and notices, where
applicable, with the IRS and the Department of Labor or any other
Governmental Entity; (iii) there are no Actions, proceedings, arbitrations,
suits or claims pending, or to the knowledge of the Company, any Company
Subsidiary or any ERISA Affiliate, threatened or anticipated (other than
routine claims for benefits) against the Company, any Company Subsidiary or
any ERISA Affiliate or any administrator, trustee or other fiduciary of any
benefit plan with respect to any Employee Plan or Employee Contract, or
against any Employee Plan or against the assets of any Employee Plan; (iv)
no event or transaction has occurred with respect to any Employee Plan that
would result in the imposition of any Tax under Chapter 43 of Subtitle D of
the Code; (v) each Employee Plan can be amended, terminated or otherwise
discontinued without Liability to the Company, any Company Subsidiary or
any ERISA Affiliate; (vi) no Employee Plan is under audit or investigation
by the IRS, the Department of Labor, the PBGC or any other Governmental
Entity, and to the knowledge of the Company, any Company Subsidiary or any
ERISA Affiliate no such audit or investigation is pending or threatened;
and (vii) no Liability under any Employee Plan has been funded nor has any
such obligation been satisfied with the purchase of a contract from an
insurance company as to which the Company or any Company Subsidiary has
received notice that such insurance company is insolvent or is in
rehabilitation or any similar proceeding
29
(v) 501(c)(9) Trust. No Employee Plan nor Employee Contract is funded
by a trust described in Section 501(c)(9) of the Code.
(vi) Welfare Plan Funding. With respect to each Welfare Plan
applicable to employees located in the United States, all claims incurred
(including claims incurred but not reported) by employees thereunder for
which the Company is, or will become, liable are (A) insured pursuant to a
contract of insurance whereby the insurance company bears any risk of loss
with respect to such claims; (B) covered under a contract with a health
maintenance organization (an "HMO") pursuant to which the HMO bears the
Liability for such claims, or (C) reflected as a liability or accrued for
on the Company Financial Statements.
(vii) At-Will Employment. Except as set forth in Section 3.19(b)(vii)
of the Company Disclosure Schedule, and except as provided by Law, the
employment of all employees of the Company or any Company Subsidiary is
terminable at will, at any time and without advance notice.
(viii) Unrelated Business Taxable Income. No Employee Plan of the
Company or any Company Subsidiary (or trust or other funding vehicle
pursuant thereto) is subject to any Tax under Code Section 511.
(ix) Deductibility of Payments. Except as disclosed in Section
3.19(b)(ix) of the Company Disclosure Schedule, there is no Contract or
bonus plan, covering any employee or former employee of the Company or a
Company Subsidiary (with respect to their relationship with such entities)
that, individually or collectively, provides for the payment by the Company
or any Company Subsidiary of any amount (i) that is not deductible under
Section 162(a)(1) or 404 of the Code, (ii) would be reasonably likely to
give rise to the payment of any amount that would result in a material loss
of tax deductions pursuant to Section 162(m) of the Code, or (iii) that is
an "excess parachute payment" pursuant to Section 280G of the Code.
(x) Fiduciary Duties and Prohibited Transactions. Neither the Company,
any Company Subsidiary, nor any plan fiduciary of any Welfare Plan or
Pension Plan which covers or has covered employees or former employees of
the Company or any ERISA Affiliate, has engaged in any transaction in
violation of Sections 404 or 406 of ERISA or any "prohibited transaction,"
as defined in Section 4975(c)(1) of the Code, for which no exemption exists
under Section 408 of ERISA or Section 4975(c)(2) or (d) of the Code. No
action or failure to act and no transaction or holding of any Asset by, or
with respect to, any Employee Plan has or may subject the Company, any
Company Subsidiary or any ERISA Affiliate or any fiduciary to any Tax,
penalty or other Liability, whether by way of indemnity or otherwise.
(xi) No Amendments. Neither the Company, any Company Subsidiary nor
any ERISA Affiliate thereof has any plan or legally binding commitment to
create any additional Employee Plans or Employee Contracts, to amend,
modify or terminate any existing Employee Plan or Employee Contract, nor
has any intention to do any of the foregoing been communicated to
employees.
30
(xii) No Acceleration of Rights or Benefits. Except as set forth in
Section 3.19(b)(xii) of the Company Disclosure Schedule, neither the
execution and delivery of this Agreement or any of the Transaction
Documents to which the Company or any Company Subsidiary are a party nor
the consummation of the transactions contemplated hereby or thereby will
result in any payment, the acceleration or creation of any rights of any
person to benefits under any of the Employee Plans or any Employee
Contract, including but not limited to the acceleration of the
exercisability of any stock options, the acceleration of the vesting of any
restricted stock, the forgiveness of any indebtedness, the acceleration of
the accrual or vesting of, distribution of or increase in any benefits
under or the funding of any Pension Plan or the creation of rights under
any severance, parachute or change of control agreement, or result in the
triggering or imposition of any restrictions or limitations on the right of
the Company, any Company Subsidiary or the Purchaser to amend or terminate
any Employee Plan and receive the full amount of any excess Assets
remaining or resulting from such amendment or termination, subject to
applicable taxes.
(c) To the knowledge of the Company, no employees of the Company or
any Company Subsidiary are in violation of any term of any restrictive covenant
to a former employer relating to the right of any such employee to be employed
by the Company or any Company Subsidiary because of the nature of the business
conducted or presently proposed to be conducted by the Company or any Company
Subsidiary or to the use of trade secrets or proprietary information of others.
SECTION 3.20. [Reserved]
SECTION 3.21. Compliance with Law. The Company and each Company
Subsidiary have conducted their business in compliance with all applicable Laws,
Permits and Governmental Orders, except where the failure to do so has not had,
and would not reasonably be expected to have a Company Material Adverse Effect.
Neither the Company nor any Company Subsidiary has received any notice to the
effect that, or has otherwise been advised that, the Company or any Company
Subsidiary is not in compliance with any applicable Laws, Permits or
Governmental Orders, and the Company has no knowledge of any existing
circumstances that are likely to result in any violation of any of the
foregoing. No investigation, inquiry, or review by an Governmental Entity with
respect to the Company or any Company Subsidiary is pending, or, to the
knowledge of the Company, threatened, nor has any Governmental Entity indicated
an intention to conduct any such investigation, inquiry or review.
SECTION 3.22. Intellectual Property. Each item of Company Proprietary
Property which is (i) a registered patent or pending application therefor; (ii)
a registered trademark, service ▇▇▇▇ or domain name or pending application
therefor, or constitutes a trade dress, logo, trade name or corporate name;
(iii) a registered copyright or maskwork or pending application therefor; (iv)
material and is (A) licensed or sublicensed or (B) subject to an agreement or
permission to use to or from a third party, is set forth on Section 3.22(a)
parts (i) through (iv) of the Company Disclosure Schedule, and the Company has
delivered to the Purchaser correct and complete copies of all written
documentation evidencing ownership and prosecution of, or rights arising from,
each item identified in Section 3.22 of the Company Disclosure Schedule. Except
as noted and set forth on Section 3.22 parts (a) through (q) of the Company
Disclosure Schedule:
31
(a) the Company or a Company Subsidiary either (i) is the sole and
exclusive owner of, with all right, title and interest in and to (free and clear
of any Encumbrances) all Company Proprietary Property (including but not limited
to the Proprietary Rights set forth in Section 3.22 of the Company Disclosure
Schedule), or (ii) has rights to the use and, as necessary, distribute all
Company Proprietary Property pursuant to license, sublicense or other Contract
(and is not contractually or otherwise obligated to pay any compensation or
royalties or grant any rights to any third party in respect thereof);
(b) the Company or a Company Subsidiary has the right to require the
applicant, inventor, or author of any Company Proprietary Property which
constitutes an application for registration, including, but not limited to, all
patent applications, trademark applications, service ▇▇▇▇ applications,
copyright applications and mask work applications, to transfer ownership
including all right, title and interest in and to (including any moral rights)
to the Company of the application and of the registration once it issues;
(c) all Company Proprietary Property was either (i) conceived and
developed entirely by employees of the Company or the Company Subsidiaries
during the time they were employees thereof or by independent contractors who
have assigned all of their rights to such Company Proprietary Property to the
Company or a Company Subsidiary, as the case may be, or (ii) acquired from third
parties in connection with the acquisition of substantially all of the assets or
all of the shares of such third party.
(d) all Company Proprietary Property which are registrations,
including, but not limited to, all issued patents, trademarks, service marks,
copyrights and mask works, are valid and subsisting and in full force and
effect;
(e) no claims have been asserted or, to the knowledge of the Company,
threatened by any Person, nor is the Company aware of any basis for any bona
fide claims, challenging the ownership, legality, use, validity, enforceability
or effectiveness of any of the Company Proprietary Property;
(f) the Company has no knowledge of any third party interfering with,
infringing upon, misappropriating, or using without authorization any Company
Proprietary Property, and, to the knowledge of the Company, no employee or
former employee of the Company or a Company Subsidiary, has interfered with,
infringed upon, misappropriated, used without authorization, or otherwise come
into conflict with any Company Proprietary Property;
(g) neither the Company nor any Company Subsidiary has agreed with any
Person not to ▇▇▇ or otherwise enforce any legal rights with respect to any
Company Proprietary Property;
(h) to the knowledge of the Company, neither the Company nor any
Company Subsidiary has infringed on, interfered with, misappropriated or
otherwise come in conflict with, and the continued operation of the Business of
the Company and the Company Subsidiaries as currently conducted and as currently
contemplated to be conducted, will not infringe on, interfere with,
misappropriate or otherwise come into conflict with, any Proprietary Right of
any other Person; and no such claim, complaint, charge, demand or notice has
been asserted or, to the
32
knowledge of the Company, has been threatened by any Person (including any claim
that the Company must license or refrain from using any Proprietary Rights of
any third party) nor is the Company aware of any basis for any claims therefor;
(i) except as set forth in Section 3.22(a)(iv) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary has granted
any licenses (implied or express) to or other rights in Company Proprietary
Property to any Person (including, without limitation, Governmental Entities);
(j) To the Company's knowledge, the Company Proprietary Property are
all the Proprietary Rights that are necessary for the ownership and operation of
the Assets and business of the Company and the Company Subsidiaries as currently
conducted or currently contemplated to be conducted;
(k) the execution, delivery and performance by the Company of this
Agreement and associated documents and the consummation of the transactions
contemplated hereby and thereby will not alter, impair, diminish or result in
the loss of any rights or interests of the Company or any Company Subsidiary in
any Company Proprietary Property;
(l) none of the Company Proprietary Property is subject to any
outstanding order or Contract restricting in any material manner the use or
licensing thereof by the Company or the Company Subsidiaries;
(m) the Company and each Company Subsidiary have taken all necessary
action to maintain and protect the confidentiality of each item of Company
Proprietary Property. In particular, and without limiting the foregoing, all
employees, agents, consultants, contractors and other Persons who have
contributed to or participated in the creation, conception or development of the
Company Proprietary Property (the "Company Proprietary Rights Development
Personnel") have executed agreements obligating them to maintain the Company
Proprietary Property in confidence. Except as set forth in Section 3.22(m)(1) of
the Company Disclosure Schedule, each of the Company Proprietary Rights
Development Personnel has executed an agreement, in a form substantially as
provided in Section 3.22(m)(2) of the Company Disclosure Schedule in all
material respects, assigning to the Company any rights or claims they may have
to any Company Proprietary Property.
(n) except as set forth in Section 3.22(n) of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary owes or will owe any
royalties or fees or other payments to third parties in respect of any Company
Proprietary Property or any use thereof. All royalties, fees or other payments
that have accrued prior to the Closing will have been timely paid by the Company
prior to the Closing Date.
(o) To the Company's knowledge, the Company and the Company
Subsidiaries have the right to use all of the Company Proprietary Property in
all jurisdictions in which the Company or the Company Subsidiaries have
conducted, conducts, and currently contemplates conducting business utilizing
such Company Proprietary Property;
(p) Except as set out on Section 3.22(p) of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary has entered into any
Contract to indemnify
33
any other person for or against any charge of infringement or misappropriation
of, or interference or conflict with respect to, any of the Company Proprietary
Property; and
(q) all of the Company Proprietary Property is in compliance in all
material respects with all applicable Laws (including payment of filing,
examination and maintenance fees).
SECTION 3.23. Tax Matters.
Except as set forth on the corresponding subsections (a) through (p)
of Section 3.23 of the Company Disclosure Schedule:
(a) Filing of Tax Returns. The Company and each Company Subsidiary
have timely filed with the appropriate taxing authorities all Tax Returns in
respect of Taxes required to be filed by them. The Tax Returns filed are
complete and accurate in all material respects. Each Affiliated Group of which
the Company or any Company Subsidiary has ever been a member has timely filed
all Tax Returns that it was required to file for each taxable period for which
any of the Company or any Company Subsidiary was a member of such Affiliated
Group, other than Tax Returns for which an immaterial amount of Taxes would be
properly shown, and each such Tax Return was correct and complete in all
material respects when filed. Neither the Company nor any Company Subsidiary has
requested any extension of time within which to file Tax Returns in respect of
any Taxes. No claim has ever been made by any taxing authority in a jurisdiction
where the Company or any Company Subsidiary does not file Tax Returns that it is
or may be subject to taxation by that jurisdiction, or liable for Taxes owing to
that jurisdiction. Section 3.23(a) of the Company Disclosure Schedule lists all
federal, state, local and foreign income Tax Returns filed with respect to any
of the Company and the Company Subsidiaries for taxable periods ended on or
after December 31, 1997. The Company and each Company Subsidiary have delivered
to the Purchaser or its Representatives complete, correct and accurate copies of
their respective foreign, federal, state and local Tax Returns, examination
reports and statements of deficiencies assessed against or agreed to by any of
the Company and each Company Subsidiary for the years ended December 31, 2000,
December 31, 1999, December 31, 1998 and December 31, 1997.
(b) Payment of Taxes. All Taxes with respect to the Company and each
Company Subsidiary for periods or portions of periods through March 31, 2001
have been paid in full or reflected on the Company Balance Sheet in accordance
with GAAP. Each of the Company and the Company Subsidiaries has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party. Each of the Company and the Company
Subsidiaries has no unpaid Taxes accruing after March 31, 2001 other than Taxes
incurred in the ordinary course of business and any stamp Taxes incurred as a
result of the transactions contemplated by this Agreement.
(c) Audits, Investigations or Claims. No deficiencies for Taxes of the
Company or any Company Subsidiary have been claimed, proposed or assessed in
writing by any taxing authority or other Governmental Entity. There is no
dispute or claim concerning any Tax liability of the Company or any Company
Subsidiary either (A) claimed or raised by any taxing
34
authority in writing or (B) as to which any of the directors and officers (and
employees responsible for Tax matters) of the Company or any Company Subsidiary
has knowledge based upon personal contact with any agent of such taxing
authority. Each deficiency resulting from any audit or examination relating to
Taxes by any taxing authority has been paid. No issues relating to Taxes were
raised by the relevant taxing authority during any presently pending audit or
examination, and no issues relating to Taxes were raised by the relevant taxing
authority in any completed audit or examination that can reasonably be expected
to recur in a later taxable period. No audits of foreign, federal, state and
local Tax Returns by the relevant taxing authorities are, to the knowledge of
the Company, currently ongoing with respect to the Company or any Company
Subsidiary and neither the Company nor any Company Subsidiary has been notified
in writing that any taxing authority intends to audit a Tax Return for any other
period. No extension of a statute of limitations relating to Taxes is in effect
with respect to the Company or any Company Subsidiary and none of the Company or
the Company Subsidiaries has waived any statute of limitations in respect of
Taxes.
(d) Encumbrance. There are no Encumbrances for Taxes (other than for
current Taxes not yet due and payable) on any Assets of the Company or any
Company Subsidiary.
(e) Tax Elections. All elections with respect to Taxes affecting the
Company or any Company Subsidiary as of the date hereof that are required to be
set forth on such Tax Returns are set forth on the Company's latest Tax Returns.
Neither the Company nor any Company Subsidiary (i) has made nor will make a
deemed dividend election under Reg. ss. 1.1502-32(f)(2) or a consent dividend
election under Section 565 of the Code; (ii) has consented at any time under
Section 341(f)(1) of the Code to have the provisions of Section 341(f)(2) of the
Code apply to any disposition of its Assets; (iii) has agreed, or is required,
to make any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise; (iv) has made an election, or is required, to
treat any Asset as owned by another Person, pursuant to the provisions of
Section 168(f) of the Code or as tax-exempt bond financed property or tax-exempt
use property within the meaning of Section 168 of the Code; (v) owns any Assets
that secure any debt the interest on which is tax-exempt under Section 103(a) of
the Code; (vi) has made an election pursuant to Sections 338 or 336(e) of the
Code or the regulations thereunder or any comparable provisions of any foreign
or other tax law; (vii) is subject to any constructive elections under Section
338 of the Code or the regulations thereunder; (viii) has been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code; or (ix) has made any of the foregoing elections or is required to apply
any of the foregoing rules under any comparable state or local Tax provision.
(f) Prior Affiliated Groups. Neither the Company nor any Company
Subsidiary (A) has ever been a member of an affiliated group of corporations
within the meaning of Section 1504 of the Code (other than an affiliated group
of which the Company is the common parent) or (B) has any Liability for the
Taxes of any Person (other than any of the Company and the Company Subsidiaries)
under Treas. Reg. ss.1502-6 (or any similar provision of state, local or foreign
law) or (C) has any Liability for the Taxes of any Person as a transferee or
successor, by contract or otherwise.
35
(g) Partnerships. Each partnership with respect to which the Company
or any Company Subsidiary owns an interest, directly or indirectly, is a
partnership for Tax purposes. Each entity that has made an election to be
treated as a partnership under applicable Tax laws, with respect to which the
Company or any Company Subsidiary owns an interest, directly or indirectly, will
be treated as a partnership for Tax purposes. Each entity that has made an
election to be disregarded as a separate entity under applicable Tax laws, with
respect to which the Company and or any Company Subsidiary owns an interest,
directly or indirectly, will be disregarded for Tax purposes.
(h) Transfer Pricing Agreements. Neither the Company nor any Company
Subsidiary has entered into transfer pricing agreements or other like agreements
with respect to any foreign jurisdiction.
(i) International Boycott. Neither the Company nor any Company
Subsidiary has participated in or cooperated with an international boycott or
has been requested to do so in connection with any transaction or proposed
transaction.
(j) Investment in U.S. Property. As of the Closing Date, no Company
Subsidiary organized under the laws of a country other the United States (the
"Foreign Companies") has an investment in U.S. property within the meaning of
Section 956 of the Code.
(k) Engaged in U.S. Trade or Business. None of the Foreign Companies
is (i) engaged in a United States trade or business for U.S. federal income tax
purposes, (ii) a passive foreign investment company within the meaning of the
Code or (iii) a foreign investment company within the meaning of the Code.
(l) Tax Sharing Agreements. There are no Tax-sharing agreements or
similar arrangements (including indemnity agreements) with respect to or
involving the Company or any Company Subsidiary, and, after the Closing Date,
neither the Company nor any Company Subsidiary shall be bound by any such
Tax-sharing agreements or similar arrangements (entered into prior to the
Closing) or have any Liability thereunder for amounts due by the Company or any
Company Subsidiary in respect of periods prior to or after the Closing Date.
(m) Intercompany Transactions. Neither the Company nor any Company
Subsidiary has any "excess loss accounts" or "deferred gains" with respect to
any "deferred intercompany transactions" within the meaning of Treas. Reg.
Sections 1.1502-19 and 1.1502-13, respectively.
(n) Net Operating Losses. Any net operating loss carryforward of the
Company and any Company Subsidiary as of March 31, 2001 for federal or Israeli
income Tax is accurately reflected on the Company Financial Statements (without
regard to any valuation allowance).
(o) Section 355 Neither the Company nor any Company Subsidiary has
distributed the stock of a "controlled corporation" (within the meaning of that
term as used in Section 355(a) of the Code) in a transaction subject to Section
355 of the Code within the past two years.
36
(p) Section 957. The Company is not and never has been a "controlled
foreign corporation" (within the meaning of that term as used in Section 957 of
the Code).
SECTION 3.24. Insurance. Section 3.24 of the Company Disclosure
Schedule contains a complete and accurate list of all policies or binders of
insurance (showing as to each policy or binder the carrier, policy number,
coverage limits, expiration dates, annual premiums, a general description of the
type of coverage provided, including whether it is a "claims made" or an
"occurrence" policy and a brief description of the interests insured thereby,
and any pending claims thereunder) of which the Company or any Company
Subsidiary is the owner, insured or beneficiary. All of such policies are
sufficient for (i) compliance with all material Laws and all Contracts of the
Company and the Company Subsidiaries, (ii) covering all reasonably foreseeable
damage to and liabilities or contingencies relating to the conduct by the
Company and the Company Subsidiaries of their Business and (iii) providing
replacement cost insurance coverage for all Fixtures and Equipment of the
Company and the Company Subsidiaries and all their leasehold improvements.
Neither the Company nor any Company Subsidiary is in Default under any of such
policies or binders, nor has it failed to give any notice or to present any
claim under any such policy or binder in a due and timely fashion. There are no
facts known to the Company upon which an insurer might be justified in reducing
or denying coverage or increasing premiums on existing policies or binders.
There are no outstanding unpaid claims under any such policies or binders. Such
policies and binders are in full force and effect on the date hereof and shall
be kept in full force and effect through the Closing Date.
SECTION 3.25. Payments. Neither the Company nor any Company Subsidiary
nor any of their Representatives acting on their instructions have, directly or
indirectly, paid or delivered any fee, commission or other sum of money or
property, however characterized, to any finder, agent, government official or
other party, in the U.S. or any other country which was illegal under any
federal, state or local laws of the U.S. or any other country having
jurisdiction. Neither the Company nor any Company Subsidiary nor any of their
Representatives acting on their instructions, have accepted or received any
unlawful contributions, payments, gifts or expenditures.
SECTION 3.26. Customers and Suppliers. Section 3.26 of the Company
Disclosure Schedule sets forth a complete and accurate list of the names and
addresses of (i) the ten customers who purchased from the Company and any
Company Subsidiaries the greatest dollar volume of products during the Company's
last fiscal year, showing the approximate total sales in dollars to each such
customer during such fiscal year; and (ii) suppliers, other than service
providers, with sales to the Company and any Company Subsidiaries greater than
(A) $100,000 during the year ending on December 31, 2000 or (B) $25,000 during
the period commencing on January 1, 2001 and ending on March 31, 2001, showing
the approximate total purchases in dollars by the Company and the Company
Subsidiaries from each such supplier during such period. Since the Balance Sheet
Date, there has been no change in the business relationship of the Company or
any Company Subsidiary with any customer or supplier named on Section 3.26 of
the Company Disclosure Schedule except as has not had, and would not reasonably
be expected to have a Company Material Adverse Effect. Neither the Company nor
any Company Subsidiary has received any communication, written or otherwise,
from any customer or supplier named on such Section 3.26 of any intention to
return, terminate or materially reduce purchases from or supplies to the Company
or any Company Subsidiary. The
37
Company is not aware that the consummation of the transactions hereunder should
adversely affect the business relationship with any such customer or supplier.
SECTION 3.27. Environmental Matters
(a) Definition. "The Company" for purposes of this Section 3.27
includes (A) all Company Subsidiaries, (B) all partnerships, joint ventures and
other entities or organizations in which the Company was at any time or is a
partner, joint venturer, member or participant and (C) all predecessor or former
corporations, partnerships, joint ventures, organizations, businesses or other
entities, whether in existence as of the date hereof or at any time prior to the
date hereof, the Assets or obligations of which have been acquired or assumed by
the Company or to which the Company has succeeded.
(b) The Company is in material compliance with all applicable
Environmental Laws, has obtained, and is in compliance with, all permits,
licenses, authorizations, registrations and other governmental consents required
by applicable Environmental Laws ("Environmental Permits"), and has made all
appropriate filings for issuance or renewal of such Environmental Permits.
(c) Notice of Violation. The Company has not received any notice of
alleged, actual or potential responsibility for, or any inquiry or investigation
regarding, (i) any Release or threatened Release by the Company of any Hazardous
Substance at any location or (ii) an alleged violation of or non-compliance by
the Company with the conditions of any Permit required under any Environmental
Law or the provisions of any Environmental Law. The Company has not received any
notice of any other claim, demand or Action by any Person alleging any actual or
threatened injury or damage to any Person, property, natural resource or the
environment arising from or relating to any Release or threatened Release by the
Company of any Hazardous Substances.
(d) Environmental Conditions. To the knowledge of the Company, there
are no present or past Environmental Conditions in any way relating to the
Company or the Company Subsidiaries, their Business or their Assets.
(e) Notices, Warnings and Records. The Company has given all notices
and warnings, made all reports, and has kept and maintained all records required
by and in compliance with all Environmental Laws.
(f) The Company has not used any waste disposal site, or otherwise
disposed of, transported, or arranged for the transportation of, any Hazardous
Substances to any place or location, or in violation of any Environmental Laws.
(g) The Company has delivered to the Purchaser true and complete
copies and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by the Company pertaining to Hazardous Substances at, on,
about, under, or within any real property currently or formerly owned, leased or
operated by the Company, or concerning compliance by the Company, or any other
Person for whose conduct they are or may be held responsible, with Environmental
Laws.
38
SECTION 3.28. Brokers; Transaction Costs
(a) Except for its arrangements with the Company Financial Adviser
(the terms of which are described on Section 3.28(a) of the Company Disclosure
Schedule), the Company has not entered into and will not enter into any
contract, agreement, arrangement or understanding with any Person which will
result in the obligation of the Purchaser or the Company to pay any finder's
fee, brokerage commission or similar payment in connection with the transactions
contemplated hereby. The Company shall not otherwise be liable for any costs or
expenses pertaining to any finder's fees, brokerage commission or similar
payment incurred by or on behalf of the Company as a result of the consummation
of the transactions contemplated hereby.
(b) The amount of all of the Company's Expenses shall not exceed
$925,000 (inclusive of any value added Tax) in the aggregate.
SECTION 3.29. Information Supplied. None of the information supplied
or to be supplied by the Company for inclusion in the proxy statement (the
"Proxy Statement") prepared by the Purchaser with respect to the annual and
special meeting of Purchaser 's stockholders to be held to consider the
Purchaser Meeting Proposal (as defined herein) (the "Purchaser Stockholders'
Meeting") will, at the date such information is supplied and at the time of the
Purchaser Stockholders' Meeting, 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, in light of the circumstances under which they are
made, not misleading.
SECTION 3.30. Products Liability. There are no claims against the
Company or any Company Subsidiary, fixed or contingent, asserting (a) any
damage, loss or injury caused by any product or (b) any breach of any express or
implied product warranty or any other similar claim with respect to any product
other than standard warranty obligations (to replace, repair or refund) made by
the Company or any Company Subsidiary in the ordinary course of business, except
for those claims that, if adversely determined against the Company or any
Company Subsidiary, would not reasonably be expected to have a Company Material
Adverse Effect. As used herein, "product" shall mean any products manufactured,
designed, developed, distributed, sold, re-sold, customized or serviced by the
Company or any Company Subsidiary.
SECTION 3.31. Real Property and Leased Real Property
(a) Real Property Matters. Neither the Company nor any Company
Subsidiary owns any real property.
(b) Leased Real Property. Section 3.31 of the Company Disclosure
Schedule sets forth a complete list of the Leased Real Property by reference to
municipal address and Real Property Leases by reference to all relevant
documents including details of parties thereto and dates of documents as well as
details of annual rent payable, current term, and security deposits (or prepaid
rent).
(c) The Real Property Leases are in full force and effect. As at the
Closing Date, the Real Property Leases shall not have been altered or amended
from their form on the date hereof except with the consent of the Purchaser
which shall not be unreasonably withheld.
39
(d) There are no agreements or understandings between the landlord and
tenant, or sublandlord and subtenant, other than as contained in the Real
Property Leases, pertaining to the rights and obligations of the parties thereto
relating to the use and occupation of the Leased Real Property.
(e) To the Company's knowledge, all interests held by the Company or
any Company Subsidiary as lessee or occupant under the Real Property Leases are
free and clear of all Encumbrances.
(f) All payments required to be made by the Company or any Company
Subsidiary pursuant to the Real Property Leases have been duly paid, and neither
the Company nor any Company Subsidiary are otherwise in Default in meeting any
of their obligations under any of the Real Property Leases except as has not
had, and would not reasonably be expected to have, a Company Material Adverse
Effect.
(g) To the Company's knowledge, none of the parties (other than the
Company or any Company Subsidiary) to any Real Property Lease is in Default in
meeting any of its obligations under such Real Property Lease.
(h) To the Company's knowledge, no Default exists by any party to any
of the Real Property Leases and no party to any Real Property Lease is claiming
any such Default or taking any Action purportedly based upon any such Default.
(i) Neither the Company nor any Company Subsidiary has waived, or
omitted to take any action in respect of any substantial rights under any of the
Real Property Leases.
SECTION 3.32. Transactions with Related Parties. Section 3.32 of the
Company Disclosure Schedule sets forth the names and addresses of each Person
who is, in the Company's reasonable judgement, an Affiliate of the Company.
Except for reasonable compensation arrangements in the ordinary course of
business or except as disclosed on Section 3.32 of the Company Disclosure
Schedule, no Related Party of the Company or any Company Subsidiary has (a)
borrowed or loaned money or other property to the Company or any Company
Subsidiary which has not been repaid or returned, (b) any currently enforceable
contractual or other claims, express or implied, of any kind whatsoever against
the Company or any Company Subsidiary or (c) has or in the past three years had
any interest in any property currently used by the Company or any Company
Subsidiary or in any transaction which the Company or any Company Subsidiary
were a party to. To the knowledge of the Company, no current or former employee
or Related Party of the Company or a Company Subsidiary is presently or at the
Closing Date shall be, or, in the last three years has been, the direct or
indirect owner of an interest in any corporation, firm, association, or business
organization which is a present (or potential) competitor, supplier or customer
of the Company. Except for normal salaries, compensation and bonuses and
reimbursement of ordinary expenses, since December 31, 2000, the Company has not
made any payments, loans or advances of any kind, or paid any dividends or
distributions of any kind, to or for the benefit of the Shareholders, or any of
their respective Affiliates, associates or family members.
40
SECTION 3.33. Certain Business Practices. Neither the Company or any
Company Subsidiary, nor any directors, officers, agents or employees of the
Company or any Company Subsidiary (in their capacities as such) has (i) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or (iii) made any other unlawful payment.
SECTION 3.34. Business Activity Restriction. Except as set forth in
Section 3.34 of the Company Disclosure Schedule, there is no non-competition or
other similar agreement, commitment, judgment, injunction, order or decree to
which the Company or any Company Subsidiary are a party or subject to that has
or could reasonably be expected to have the effect of prohibiting or impairing
the conduct of business by the Company or any Company Subsidiary. Except as set
forth in Section 3.34 of the Company Disclosure Schedule, neither the Company
nor any Company Subsidiary has entered into any agreement under which the
Company or any Company Subsidiary is restricted from selling, licensing or
otherwise distributing any of its technology or products to, or providing
services to, customers or potential customers or any class of customers, in any
geographic area, during any period of time or in any segment of the market or
line of business.
SECTION 3.35. Grants, Incentives and Subsidies. Except as set forth in
Section 3.35 of the Company Disclosure Schedule, neither the Company nor any
Company Subsidiary has received any grants, incentive and subsidy programs
("Grants") from any Governmental Entity, including but not limited to (a)
Approved Enterprise Status granted by the Investment Center of the Israeli
Ministry of Industry and Trade, (b) Grants under Certificates of Approval of the
Chief Scientist of the Israeli Ministry of Industry and Trade, and (c) Grants
from the Israeli Fund for the Promotion of Marketing. Except as set forth in
Section 3.35 of the Company Disclosure Schedule, neither the Company nor any
Company Subsidiary has paid to date any royalties to the Office of the Chief
Scientist on account of any Grants. Correct copies of all material applications
submitted by the Company or any Company Subsidiary to any Governmental Entity
with respect to any Grants (including all rights and obligations with respect to
any Grants which were transferred to the Company or any Company Subsidiary from
any Shareholder or third party), and copies of all letters of approval, and
supplements thereto, granted to the Company or any Company Subsidiary with
respect to any Grants and all undertakings made by any Company or any Company
Subsidiary with respect to such Grants have been provided or made available to
the Purchaser. The Company and Company Subsidiaries are in material compliance
with the terms and conditions of the Grants and have fulfilled all the
undertakings and obligations relating thereto in all material respects. To the
knowledge of the Company there is no event which might lead to the annulment or
limitation of any of the Grants. Schedule 3.35 sets forth the amount of Grants
approved by the Office of the Chief Scientist under each certificate of approval
and the amount of Grants actually received by the Company under each such
certificate of approval.
SECTION 3.36. Full Disclosure
(a) No representation or warranty of the Company contained in this
Agreement, and no Document (as defined below) furnished by or on behalf of the
Company to the Purchaser
41
or its Representatives pursuant to this Agreement or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements made therein, in the context in
which made, not false or misleading. There is no fact that the Company has not
disclosed to the Purchaser or its Representatives in writing that has, or is
likely to have, a Company Material Adverse Effect or materially adversely
affects, or is likely to materially adversely affect, the ability of the Company
to perform the transactions contemplated by this Agreement. "Document" shall
mean all certificates, consents, schedules (including the Company Disclosure
Schedule when read together with the corresponding representation or warranty)
agreements and financial statements delivered by or on behalf of the Company in
connection with this Agreement and the transactions contemplated hereby.
(b) Any financial projection or forecast delivered to the Purchaser
with respect to the revenues or profitability which may arise from the operation
of the Business either before or after the Closing Date (collectively, the
"Projections") has been prepared by the Company in good faith, on the basis of
the assumptions set forth in the Projections which the Company believes to be
reasonable and using accounting methods and principles consistent with the
accounting methods and principles used historically to prepare both (i) the
Company Financial Statements and (ii) projections and forecasts of the Company
in the ordinary course of business. The Company has no reason to believe that
the Projections require any material change.
SECTION 3.37. Signatories. Holders of no less than ninety percent
(90%) of each class and series of the Company Shares outstanding on the date
hereof have entered into this Agreement and are bound by its terms.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS
Each Shareholder, severally but not jointly, represents and warrants
to the Purchaser as follows:
SECTION 4.01. Authorization of Agreements, Etc.
(a) Such Shareholder has full legal competence and capacity and
unrestricted power to execute and deliver each Transaction Document to which
such Shareholder is a party, and to perform his, her or its obligations
hereunder and thereunder.
(b) The execution and delivery by such Shareholder of this Agreement
and each Transaction Document to which such Shareholder is a party, and the
performance by such Shareholder of his, her or its obligations hereunder and
thereunder, have been duly authorized by all requisite action, and will not
violate any provision of Law, any order of any court or other agency of
government, any judgment, award or decree or any provision of any Contract or
other instrument to which such Shareholder is a party, or by which such
Shareholder is bound, or conflict with, result in a breach of or constitute a
Default under any such Contract or other instrument.
42
SECTION 4.02. Validity. This Agreement has been duly executed and
delivered by such Shareholder and, assuming the due authorization, execution and
delivery by the other parties thereto, constitutes, and each other Transaction
Document to which such Shareholder is a party, when executed and delivered by
such Shareholder as contemplated hereby, will constitute, the legal, valid and
binding obligations of such Shareholder, enforceable against such Shareholder in
accordance with their respective terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other Laws affecting the enforcement of creditors' rights
generally or by general equitable principles.
SECTION 4.03. Title to Shares. Such Shareholder has good and valid
title to and is the lawful holder of record and beneficial owner of the number
of Company Shares set forth opposite the name of such Shareholder in Schedule I
to this Agreement under the heading "Company Shares", (and as of the Closing
will have good and valid title to, and will be the legal and beneficial owner of
such Company Shares and all other shares of the Company owned by such
Shareholder immediately prior to Closing) in each case free and clear of any and
all Encumbrances of any nature whatsoever. The delivery by such Shareholder of
share transfer deeds duly executed, to the Purchaser pursuant to Section 2.03(a)
above, together with a resolution of the Company's Board of Directors approving
such transfer of shares and registering the transfer in the Company's Register
of Members, will transfer legal, good, valid and full title to and the legal and
beneficial ownership of said Company Shares and any additional Company Shares
issued to such Shareholder on the exercise of the Company Option or Company
Warrants to the Purchaser, free and clear of any Encumbrances of any nature
whatsoever. Except as set forth in the Charter, Bylaws, Company Warrants and the
Company Option Plans, there are no (i) outstanding options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights or other similar
Contracts relating to such Shareholder's Company Shares, (ii) outstanding stock
appreciation, phantom stock, profit participation or similar rights with respect
to such Shareholder's Company Shares, (iii) voting trusts, proxies, or other
Contracts or understandings with respect to the voting of such Shareholder's
Company Shares, (iv) transfer restrictions with respect to such Shareholder's
Company Shares, or (v) Actions pending or, to the knowledge of such Shareholder,
threatened or anticipated, which, if determined adversely to such Shareholder,
would enjoin, restrict or prohibit the transfer of all or any part of the
Company Shares as contemplated by this Agreement.
SECTION 4.04. Investment Representations
(a) Such Shareholder understands that such Shareholder must bear the
economic risk of the Purchaser Shares for an indefinite period of time because
the Purchaser Shares are not registered under the Securities Act or any
applicable state securities Laws, and may not be resold unless subsequently
registered under the Securities Act and such other Laws or unless an exemption
from such registration is available. Such Shareholder hereby agrees and
covenants that he or she will not pledge, transfer, convey or otherwise dispose
of any of the Purchaser Shares except in a transaction that is the subject of
either (i) an effective registration statement under the Securities Act and any
applicable state securities Laws, or (ii) an opinion of counsel to the effect
that such registration is not required (which opinion and counsel shall be
reasonably satisfactory to the Purchaser, and may be relied on by the Purchaser
in making such
43
determination). The Purchaser will not require opinions of counsel for
transactions made pursuant to Securities and Exchange Commission Rule 144 except
in unusual circumstances.
(b) Such Shareholder has sufficient knowledge and experience in
investing to be able to evaluate the risks and merits of the transactions
contemplated by this Agreement and such Shareholder has the ability to bear the
economic risks of such Shareholder's investment in the Purchaser Shares for an
indefinite period of time. Such Shareholder has had the opportunity to ask
questions of, and receive answers from, officers of the Purchaser with respect
to the business and financial condition of the Purchaser and the terms and
conditions of the offering of the Purchaser Shares and to obtain additional
information necessary to verify such information or can acquire it without
unreasonable effort or expense.
(c) If such Shareholder is listed as a non U.S. person on Schedule I,
such Shareholder represents and warrants to the Purchaser that he, she or it has
satisfied himself, herself or itself as to the full observance of the Laws of
its jurisdiction in connection with the issuance of Purchaser Shares to such
Shareholder, including (i) the legal requirements within its jurisdiction for
the purchase of the Purchaser Shares, (ii) any foreign exchange restrictions
applicable to such purchase, (iii) any governmental or other consents that may
need to be obtained, and (iv) the income tax and other tax consequences, if any,
that may be relevant to the purchase, holding, redemption, sale or transfer of
the Purchaser Common Stock. The Shareholder's receipt of, and its continued
beneficial ownership of the Purchaser Common Stock will not violate any
applicable securities or other Laws of its jurisdiction.
(d) Accredited Investor. Shareholder has accurately completed and
returned to the Purchaser the Investor Suitability Certificate in the form
attached hereto as Exhibit J. Shareholder is an "accredited investor" as defined
in Rule 501, Regulation D, promulgated by the Securities and Exchange Commission
on March 8, 1982, as amended, or has appointed a purchaser representative and
together with such purchaser representative has such knowledge and experience in
financial and business matters that Shareholder is capable of evaluating the
merits and risks of the prospective investment in Purchaser Common Stock.
Shareholder is only a resident of the State or country set forth in such
Shareholder's address on such Schedule I.
(e) No Advertising. Shareholder has not seen, received, been presented
with, or been solicited by any leaflet, public promotional meeting, newspaper or
magazine article or advertisement, radio or television advertisement, or any
other form of advertising or general solicitation with respect to the sale of
the Purchaser Shares.
(f) Investment Intent. Shareholder is acquiring the Purchaser Shares
for investment purposes for Shareholder's own account only and not with a view
to or for sale in connection with any distribution of all or any part of the
Purchaser Shares, other than in compliance with applicable securities Laws.
(g) Fair Consideration. Such Shareholder hereby acknowledge he, she or
it is receiving fair consideration for his, her or its Company Shares pursuant
to this Agreement and that the allocation of the Purchaser Shares amongst each
class and series of shares of the Company pursuant to this Agreement is fair and
equitable.
44
SECTION 4.05. No Registration Of Purchaser Shares. Shareholder
acknowledges that the Purchaser Shares have not been registered under the
Securities Act or any other applicable state blue sky laws in reliance, in part,
on Shareholder's representations, warranties, and agreements herein.
SECTION 4.06. Purchaser Shares Are Restricted Securities. Shareholder
understands that the Purchaser Shares are "restricted securities" under the Act,
and that the Purchaser Shares may be resold without registration under the
Securities Act only in certain limited circumstances and that otherwise the
Purchaser Shares must be held indefinitely. In this regard, Shareholder
understands the resale limitations imposed by the Securities Act and is familiar
with Securities and Exchange Commission Rule 144, as presently in effect, and
the conditions which must be met in order for that Rule to be available for
resale of "restricted securities," including the requirement that the securities
must be held for at least two (2) years after purchase thereof from the Company
prior to resale (subject to certain exceptions) and the condition that there be
available to the public current information about the Company under certain
circumstances.
SECTION 4.07. Obligation to Register. Shareholder represents,
warrants, and agrees that the Purchaser is under no obligation to register or
qualify the Purchaser Shares under the Securities Act or under any state
securities law, or to assist Shareholder in complying with any exemption from
registration and qualification, except as set forth in Section 2.06.
SECTION 4.08. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of such Shareholder.
SECTION 4.09. Tax Withholding. Except as explicitly disclosed in
writing to Purchaser no less than 14 days prior to Closing, amounts payable, if
any, or Purchaser Shares issued by Purchaser to such Shareholder hereunder are
not subject to any withholding or similar Taxes imposed by a tax jurisdiction
with respect to the sale or exchange of the Company Shares.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF the Purchaser
Purchaser hereby represents and warrants to the Company and the
Shareholders, subject to such exceptions as disclosed in the Purchaser
Disclosure Schedule delivered herewith and dated as of the date hereof, all of
which shall be deemed to be made elsewhere in the Purchaser Disclosure Schedule
if the text of the disclosure in the Purchaser Disclosure Schedule read together
with the applicable sections of this Agreement makes such other disclosure
clearly relevant, as follows:
SECTION 5.01. Organization and Qualification; Subsidiaries. The
Purchaser and each Purchaser Subsidiary has been duly organized and is validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation or organization, as the case may be, and has the requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted.
45
Purchaser and each Purchaser Subsidiary are duly qualified or licensed to do
business, and are in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by them or the nature of their business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that could not reasonably be
expected to have, individually or in the aggregate, a Purchaser Material Adverse
Effect.
SECTION 5.02. Capitalization.
(a) The authorized capital stock of the Purchaser consists of
50,000,000 shares of Purchaser Common Stock, of which 17,475,445 shares were
issued and outstanding as of May 8, 2001. All of the outstanding shares of the
Purchaser Common Stock have been validly issued and are fully paid and
nonassessable and not subject to preemptive rights.
(b) All Purchaser Shares to be issued to the Shareholders in
connection with the transactions contemplated hereby, when issued in accordance
with this Agreement, will be validly issued, fully paid and nonassessable, free
and clear of any and all pledges, security interests, liens, charges or other
encumbrances of any nature whatsoever, other than any such encumbrances imposed
pursuant to the Transaction Documents and not subject to preemptive rights or
similar contractual rights granted by the Purchaser.
SECTION 5.03. Authority Relative to this Agreement. The Purchaser has
all necessary corporate power and authority to execute and deliver this
Agreement and each other Transaction Document to which it is a party, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby, provided the Purchaser Meeting Proposal (as
defined herein) is approved as required by the Purchaser Stockholders at the
Purchaser Stockholders' Meeting (as defined herein) pursuant to its certificate
of incorporation, bylaws and the Delaware General Corporation Law (the
"Purchaser Stockholder Approval"). The execution and delivery of this Agreement
and each other Transaction Document to which it is a party by the Purchaser and
the consummation by the Purchaser of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
(other than Purchaser Stockholder Approval), and no other corporate proceedings
on the part of the Purchaser are necessary to authorize this Agreement or any
other Transaction Document to which the Purchaser is a party or to consummate
such transactions. This Agreement has been, and each other Transaction Document
to which it is a party will be, duly executed and delivered by the Purchaser.
Assuming the due authorization, execution and delivery by the Company and the
Shareholders, this Agreement constitutes, and each other Transaction Document to
which it is a party will constitute, legal, valid and binding obligations of the
Purchaser, enforceable against the Purchaser in accordance with their respective
terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other Laws affecting the enforcement
of creditors' rights generally or by general equitable principles.
SECTION 5.04. No Conflict; Required Filings and Consents
(a) The execution and delivery of this Agreement and the other
Transaction Documents to which it is a party by the Purchaser do not, and
subject to receiving the Purchaser
46
Stockholder Approval, the performance by the Purchaser of its obligations
hereunder and thereunder, and the consummation of the transactions contemplated
hereby and thereby will not, (i) conflict with or violate the certificate of
incorporation or bylaws of the Purchaser, (ii) conflict with or violate any Law
or Permit applicable to the Purchaser or by which any Asset of the Purchaser is
bound or affected or (iii) except as disclosed on Section 5.04(a) of the
Purchaser Disclosure Schedule, result in any breach in any material respect of
or constitute a Default under any Contract of the Purchaser or any Law or Permit
applicable to the Purchaser.
(b) Assuming the accuracy of the representations and warranties set
forth in Article III and Article IV, the execution and delivery of this
Agreement by the Purchaser do not, and the execution of each other Transaction
Document to which it is a party will not, and the performance by the Purchaser
of its obligations hereunder and the consummation of the transactions
contemplated hereby will not, require on behalf of Purchaser any consent,
approval, authorization or permit of, or filing by the Purchaser with or
notification by the Purchaser to, any Governmental Entity other than (i) any
filings or consents as may be required under applicable state securities laws
and the securities laws of any foreign jurisdiction (including, to the extent
required, an exemption from prospectus requirements under Section 15D of the
Israeli Securities Law, 1968 with respect to the assumption by the Purchaser of
the Company Options as set forth in Section 7.04(d)), (ii) any consent as may be
required from Israeli Tax authorities confirming that the assumption by the
Purchaser of the Company Options and the Company's 2001 Plan will not result in
a taxable event with respect to any such Company Option, and (iii) such other
consents, authorizations, filings, approvals and permits which, if not obtained
or made, would not reasonably be expected to have a Purchaser Material Adverse
Effect or impair in any material respect the ability of Purchaser to perform its
obligations under this Agreement.
SECTION 5.05. SEC Filings; Financial Statements
(a) The Purchaser has timely filed all forms, reports, statements and
documents required to be filed by it with the SEC and the Nasdaq National Market
in the last twelve months (collectively, together with any such forms, reports,
statements and documents the Purchaser may file subsequent to the date hereof
until the Closing Date, (other than exhibits appended to such forms, reports,
statements and documents) the "Purchaser Reports"). Each Purchaser Report (i)
was prepared in accordance with the requirements of the Securities Act, the
Exchange Act or Nasdaq, as the case may be, and (ii) did not at the time it was
filed or, if amended, supplemented or superseded, as of the date of such
amendment, supplement or superseding filing, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. No Purchaser
Subsidiary is subject to the periodic reporting requirements of the Exchange Act
or required to file any form, report or other document with the SEC, Nasdaq any
other stock exchange or any other comparable governmental entity.
(b) Except as is provided in the Purchaser Reports, each of the
consolidated financial statements (including, in each case, any notes thereto)
contained in the Purchaser Reports complied as to form in all
47
material respects with applicable accounting requirements, was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and each presented
fairly, in all material respects, the consolidated financial position of the
Purchaser and the consolidated Purchaser Subsidiaries as at the respective dates
thereof and the consolidated results of operations and cash flows of the
Purchaser and the consolidated Purchaser Subsidiaries for the respective periods
indicated therein, except as otherwise noted therein (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments).
SECTION 5.06. Absence of Certain Changes or Events. Except as
disclosed in the Purchaser Reports filed prior to the date of this Agreement,
since March 31, 2001, there has not been (a) any condition, event, occurrence or
development that has had or would reasonably be expected to have, individually
or in the aggregate, a Purchaser Material Adverse Effect or which could
reasonably be expected to prevent, hinder or materially delay the ability of the
Purchaser to consummate the transactions contemplated hereby, (b) any material
change by the Purchaser or any Purchaser Subsidiary in its accounting methods,
principles or practices, or (c) any event pursuant to which the Purchaser or any
Purchaser Subsidiary has incurred any material liabilities (direct, contingent
or otherwise) or engaged in any material transaction or entered into any
material agreement, in each case, outside of the ordinary course of business
which, individually or in the aggregate, could be reasonably expected to have a
Purchaser Material Adverse Effect.
ARTICLE VI.
COVENANTS
SECTION 6.01. Conduct of Business by the Company Pending the Closing.
The Company and the Shareholders agree and undertake that, between the date of
this Agreement and the Closing Date, except for the transactions contemplated
herein (including without limitation, the issuance of Series E Preferred Shares
as contemplated in Section 3.03(a) of this Agreement) or unless the Purchaser
shall otherwise agree in writing, (a) the businesses of the Company and the
Company Subsidiaries shall be conducted only in, and the Company and the Company
Subsidiaries shall not take any action except in the ordinary course of business
consistent with past practice, (b) the Company and the Company Subsidiaries
shall use all reasonable efforts to keep available the services of such of the
current officers, significant employees and consultants of the Company and the
Company Subsidiaries and to preserve the current relationships of the Company
and the Company Subsidiaries with such of the corporate partners, customers,
suppliers and other Persons with which the Company and the Company Subsidiaries
have significant business relations in order to preserve substantially intact
its business organization. By way of amplification and not limitation, the
Company and the Company Subsidiaries shall not, between the date of this
Agreement and the Closing Date, directly or indirectly, do, agree to do, or
cause to be done any of the actions of the Company described in Section 3.09
without the prior written consent of the Purchaser, and (c) the Company, the
Company Subsidiaries and the Shareholders will not engage in any transaction or
take any action which would constitute a breach of the representations and
warranties of the Company or the Shareholders under Articles III and IV or would
materially delay or materially impair the ability of Company, the Company
Subsidiaries or any Shareholder to perform their obligations under this
Agreement or the Transaction Documents to which they are a party or to effect
the transactions contemplated hereby or thereby. The Company shall inform the
Purchaser, in writing, of (a) any meeting of the Company's or any
48
Company Subsidiary's shareholders and/or of the Company's or any Company
Subsidiary's Board of Directors, or of any committee thereof, at least 48
(forty-eight) hours in advance, allow an observer on behalf of the Purchaser to
attend such a meeting, and provide the Purchaser with copies of all minutes and
resolutions thereof and of all actions in writing made within this period, by
the Company's or any Company Subsidiary's shareholders and/or Board of
Directors, and (b) any material event not in the ordinary course of the Company
or any of the Company Subsidiaries' businesses and of any event which could
reasonably be expected to have a Company Material Adverse Effect.
SECTION 6.02. No Solicitation.(a) Until the earlier of the Closing
Date or the date of termination of this Agreement pursuant to the provisions of
Section 10.02 hereof, the Company will not, nor will the Company permit any of
its Representatives to (directly or indirectly): (i) solicit, encourage,
initiate, entertain, review or participate in any negotiations or discussions
with respect to an offer or proposal, oral, written, or otherwise, formal or
informal to acquire all or any part of Company, whether by purchase of Assets,
exclusive license, joint venture formation, purchase of stock, business
combination or otherwise, (ii) disclose any information not customarily
disclosed to any Person concerning Company and which Company believes would be
used for the purposes of formulating any such offer or proposal, (iii) assist,
cooperate with, facilitate or encourage any Person to make any offer or proposal
to acquire all or any part of Company (directly or indirectly) (a "Competing
Proposed Transaction"), or (iv) agree to, enter into a contract regarding,
approve, recommend or endorse any transaction involving a Competing Proposed
Transaction. Company shall notify Purchaser as promptly as practical if any
proposal or offer (formal or informal, oral, written or otherwise), or any
inquiry or contact with any Person with respect thereto, regarding a Competing
Proposed Transaction is made or is outstanding on the date hereof, such notice
to include the identity of the Person proposing such Competing Proposed
Transaction and the terms thereof, and shall keep Purchaser apprised, on a
current basis of the status of any such Competing Proposed Transaction and of
any modifications to the terms thereof. Company immediately shall cease and
cause to be terminated all existing discussions or negotiations with any parties
other than Purchaser conducted heretofore with respect to any Competing Proposed
Transaction.
SECTION 6.03. Notices of Certain Events. Each of the Purchaser, the
Company and the Shareholders shall give prompt notice to the others of (i) any
notice or other communication from any Person alleging that the consent of such
Person is or may be required in connection with the transactions contemplated
hereby, other than any such consent disclosed in this Agreement as required by
one of the parties hereto; (ii) any notice or other communication from any
Governmental Entity in connection with the transactions contemplated hereby;
(iii) any Actions, suits, claims, investigations or proceedings commenced or, to
its knowledge, threatened against, relating to or involving or otherwise
affecting the Purchaser or the Company, or that relate to the consummation of
the transactions contemplated hereby; (iv) the occurrence of a Default under any
material Contract of the Purchaser, the Company or any of their Subsidiaries;
and (v) any change that could reasonably be expected to have a Purchaser
Material Adverse Effect or a Company Material Adverse Effect, or to delay or
impede the ability of the Purchaser, the Company or any of the Shareholders to
perform their respective obligations pursuant to this Agreement and to effect
the consummation of the transactions contemplated hereby.
49
SECTION 6.04. Access to Information; Confidentiality
(a) Except as required pursuant to the Confidentiality Agreement or
any similar agreement or arrangement to which the Purchaser or the Company is a
party or pursuant to applicable Laws or requirements of any stock exchange or
other regulatory organization with whose rules a party hereto is required to
comply, from the date of this Agreement to the Closing Date, the Purchaser and
the Company shall (i) provide to the other and their Representatives access at
reasonable times upon prior notice to its officers, employees, agents,
properties, offices and other facilities and to the books and records thereof,
and (ii) furnish promptly such information concerning its business,
shareholders, Contracts, Assets, Liabilities and personnel as the other party or
its Representatives may reasonably request. No investigation conducted pursuant
to this Section 6.04 shall affect or be deemed to modify any representation or
warranty made in this Agreement.
(b) The parties hereto shall comply with, and shall cause their
respective Representatives to comply with, all of their respective obligations
under the Confidentiality Agreement with respect to the information disclosed
pursuant to this Section 6.04 or pursuant to the Confidentiality Agreement. The
Shareholders hereby agree to be bound by the terms of the Confidentiality
Agreement as if they were parties thereto.
SECTION 6.05. Further Action; Consents; Filings
(a) Subject to the terms and conditions of this Agreement and
applicable Law, the Company, each Shareholder and the Purchaser will use their
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things reasonably necessary, proper or advisable under
applicable Laws or otherwise to consummate and make effective the transactions
contemplated herein as soon as practicable including such actions or things as
any other party hereto may reasonably request in order to cause any of the
conditions to such other party's obligation to consummate such transactions
specified in Article VIII to be fully satisfied. Without limiting the generality
of the foregoing, subject to applicable Law, (x) the Company, the Shareholders
and the Purchaser shall (i) make all necessary filings and thereafter make any
other required or appropriate submissions, with respect to this Agreement and
the transactions contemplated hereby required under any applicable Laws, and
cooperate and consult with each other in connection with the making of all such
filings, and (ii) give any notices to third Persons, and use reasonable efforts
to obtain any consents from third Persons necessary, proper or advisable (as
determined in good faith by the Purchaser with respect to such notices or
consents to be delivered or obtained by the Company or the Shareholders) to
consummate the transactions contemplated by this Agreement, and (y) the Company
and the Shareholders shall use their best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things reasonably necessary,
proper or advisable under applicable Laws or otherwise to consummate and make
effective the transactions set forth in Section 3.04 of the Company Disclosure
Schedule.
(b) From time to time, as and when requested by any party to this
Agreement, the other parties will execute and deliver, or cause to be executed
and delivered, all such documents and instruments and will take, or cause to be
taken, all such reasonable actions, as such other
50
party may reasonably deem necessary or desirable to consummate the transactions
contemplated herein, including powers of attorney and any required corporate
resolutions.
(c) The Company, the Shareholders and the Purchaser shall use their
reasonable best efforts to cause all holders of Company Shares to execute this
Agreement prior to Closing, and any shareholder of the Company who executes this
Agreement after the date hereof shall become a party to this Agreement and shall
have the rights and obligations of a Shareholder hereunder.
SECTION 6.06. Certain Tax Matters
(a) Taxes. Each party will, at its own expense, file all necessary Tax
Returns and other documentation with respect to all Taxes and fees incurred at
Closing, as required by applicable Law.
(b) Withholding Obligations. The Shareholders understand and agree
that the issuance of Purchaser Shares to the Shareholders will be made in
compliance with any applicable Tax withholding obligations under applicable Law
and that Purchaser shall be entitled to withhold any amounts required to be
withheld by any applicable Law from the amounts payable to the Shareholders
hereunder.
SECTION 6.07. Public Announcements. Until the earlier of termination
of this Agreement or the Closing Date, the Purchaser, on the one hand, and the
Company and the Shareholders, on the other hand, will consult with each other
before issuing any press release or otherwise making any public statements with
respect to the Agreement or the transactions contemplated hereby and shall not
issue any such press release or make any such public statement that is not
approved by the other party, except as may be required by Law or the rules of
the Nasdaq National Market, in which case the parties will make reasonable
efforts to consult with each other prior to the making of such public statement.
SECTION 6.08. Legend. Each stock certificate evidencing Purchaser
Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF (i) AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID
ACT OR (ii) AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT."
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS
OF THAT CERTAIN LOCK UP AGREEMENT BETWEEN THE COMPANY AND THE NAMED
STOCKHOLDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH SUCH AGREEMENT. THE COMPANY WILL UPON
WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF
WITHOUT CHARGE."
51
SECTION 6.09. Information Statement.
As promptly as practicable following the execution hereof, Purchaser
and Company shall jointly prepare an information statement (the "Information
Statement") to be issued to the holders of Company Shares who are not accredited
investors. The Information Statement shall constitute a disclosure document for
the offer by the Purchaser to issue the Purchaser Shares (the "Offer") to
holders of Company Shares who are not accredited investors in consideration for
such holders' Company Shares. Purchaser and Company shall each use their
reasonable best efforts to cause the Information Statement to comply with
applicable federal, state and foreign securities Law requirements. Each of
Purchaser and Company shall, and shall cause their respective Representatives
to, fully cooperate with the other such parties and their respective
Representatives in the preparation of the Information Statement, a letter of
transmittal and related instructions for use (collectively, together with any
amendments and supplements thereto, the "Offer Documents"), and Company shall
promptly provide to Purchaser such information concerning it and its Affiliates,
directors, officers and securityholders as Purchaser may reasonably request in
connection with the preparation of the Information Statement or the Offer
Documents. Each of Purchaser and Company represents and warrants to the other
that all information supplied by the same for inclusion in the Information
Statement or the Offer Documents shall not at the time the Information Statement
(including any amendments or supplements thereto) is first distributed to
holders of Company Shares who are not accredited investors or while the Offer
remains outstanding 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; provided, however, that no representation or warranty is
made by Purchaser or Company with respect to information supplied by the others
for inclusion in the Information Statement or the Offer Documents. If at any
time that the Offer is outstanding, any event or information should be
discovered by Company or Purchaser which should be set forth in an amendment to
the Information Statement, Company or Purchaser, as applicable, shall promptly
inform the other. Each of Purchaser and Company agrees promptly to correct any
information provided by it for use in the Information Statement or the Offer
Documents if and to the extent that it shall have become false and misleading in
any material respect.
SECTION 6.10. Tax-Free Reorganization. The Purchaser and the Company
will each use their commercial best efforts to cause the purchase of Company
Shares to be treated as a reorganization within the meaning of Section 368 of
the Code.
SECTION 6.11. Review Report
Within fifteen Business Days following the execution hereof, the
Company shall provide to the Purchaser a review report from the Company's
independent public accountants, reasonably satisfactory in form and substance to
the Purchaser, with respect to the consolidated unaudited interim balance sheet
of the Company at March 31, 2001 and the related statement of operations,
shareholders' equity and cash flows for the three months ended March 31, 2001
disclosed in Schedule 3.15 of the Company Disclosure Schedule.
52
ARTICLE VII.
ADDITIONAL AGREEMENTS
SECTION 7.01. Proxy Statement.
(a) As promptly as reasonably practicable after the execution of this
Agreement, Purchaser shall prepare the Proxy Statement, which complies with the
rules and regulations promulgated by the SEC. The Company shall, upon request by
the Purchaser, furnish the Purchaser with all information concerning itself, its
Subsidiaries, directors, executive officers and shareholders, and such other
matters and shall furnish consents as may be reasonably necessary or advisable
in connection with the Proxy Statement or any other statement, filing, notice or
application made by or on behalf of the Purchaser or any of its Subsidiaries to
any third party and/or any Governmental Entity in connection with the
transactions contemplated by this Agreement, including, without limitation,
providing financial information regarding the Company and any related consents
from the Company's independent public accountants for inclusion of such
financial information in the Proxy Statement. In addition, the Company shall
obtain any consents from its independent public accountants that are necessary
for inclusion of the financial information provided by the Company in any
filings that are required to be made by Purchaser with the SEC including, but
not limited to, the Proxy Statement and Purchaser's Annual Report on Form 10-K
for the year ended December 31, 2001.
(b) The Proxy Statement shall include (i) the approval of the issuance
of the Purchaser Shares to the Shareholders pursuant to this Agreement ("Share
Issuance"), (ii) the opinion of the Purchaser Financial Advisor, and (iii) such
other matters requiring approval of the Purchaser's stockholders ((i) above, the
"Purchaser Meeting Proposal").
(c) The Company shall use its reasonable best efforts to ensure that
none of the information supplied by Company for inclusion or incorporation by
reference in the Proxy Statement shall, at the date it or any amendments or
supplements thereto are mailed to the stockholders of the Purchaser, at the time
of the Purchaser Stockholders' Meeting and at the Closing Date, 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 Closing Date any event or circumstance relating to the
Company, or its officers or directors, should be discovered by the Company that
should be set forth in an amendment or a supplement to the Proxy Statement,
Company shall promptly inform Purchaser.
SECTION 7.02. Purchaser Stockholders' Meeting. The Purchaser shall
call and hold the Purchaser Stockholders' Meeting, as promptly as practicable
after the date hereof for the purpose of voting upon the approval of the matters
described in Section 7.01(b), pursuant to the Proxy Statement, and the Purchaser
shall use all reasonable efforts to hold the Purchaser Stockholders' Meeting as
soon as practicable after the date hereof. Except as otherwise contemplated by
this Agreement, and subject to applicable law, the Purchaser shall use all
reasonable efforts to solicit from its stockholders proxies in favor of the
Purchaser Meeting Proposal pursuant to the Proxy Statement and shall take all
other action necessary or advisable to secure the vote or consent of
stockholders required by the applicable stock exchange requirements to obtain
such approval.
53
SECTION 7.03. [Reserved].
SECTION 7.04. Assumption of Company Options.
(a) Prior to the Closing, the Company shall adopt the 2001 Stock
Incentive Plan (the "2001 Plan") substantially in the form attached hereto as
Exhibit I with such changes as the Purchaser and the Company may approve, acting
reasonably.
(b) Prior to the Closing, the Company Options granted pursuant to the
Company Option Plans and outstanding on the date hereof shall have been either
exercised in accordance with their terms or cancelled and terminated in form
reasonably satisfactory to the Purchaser, including without limitation,
obtaining any required consent of Israeli Tax authorities that such cancellation
will not result in a taxable event.
(c) Prior to the Closing, the Company shall have granted Company Stock
Options under the 2001 Plan to acquire up to an aggregate of 9,150,146 Ordinary
Shares to the individuals, at the exercise price, with the vesting commencement
date and on the other terms and conditions as agreed upon between the Company
and the Purchaser, and in a form reasonably satisfactory to the Purchaser.
(d) At the Closing Date, the Company Options to be granted pursuant to
the 2001 Plan in Section 7.04(c) above will be assumed by the Purchaser. Each
such option so assumed by Purchaser under the terms of this Agreement shall
continue to have, and be subject to, the same terms and conditions set forth in
the Company Options (or as agreed upon between the Company and the Purchaser)
and the applicable stock option agreement immediately prior to the Closing Date,
except that (i) such option will be exercisable for that number of whole shares
of Purchaser Common Stock equal to the product of the number of Ordinary Shares
that were issuable upon exercise of such option immediately prior to the Closing
Date multiplied by a fraction, (x) the numerator of which shall be 550,000 and
(y) the denominator of which shall be the number of Ordinary Shares issued and
outstanding immediately prior to Closing (the "Ordinary Exchange Ratio") and
rounded down to the nearest whole number of shares of Purchaser Common Stock,
and (ii) the per share exercise price for the shares of Purchaser Common Stock
issuable upon exercise of such assumed option will be equal to the quotient
determined by dividing the exercise price per Company Ordinary Share at which
such option was exercisable immediately prior to the Closing Date by the
Ordinary Exchange Ratio, rounded up to the nearest whole cent. Consistent with
the terms of the Company Options and the documents governing the outstanding
Company Options (or the terms and conditions agreed upon between the Company and
the Purchaser), the transactions contemplated hereby will not terminate any of
the outstanding Company Options granted under the 2001 Plan or accelerate the
exercisability or vesting of such options or the shares of Purchaser Common
Stock which will be subject to those options upon the Purchaser's assumption of
the options hereunder. Within thirty (30) business days after the Closing Date,
Purchaser will issue to each person who, immediately prior to the Closing Date
was a holder of an outstanding Company Option a document in form and substance
reasonably satisfactory to Company evidencing the foregoing assumption of such
option by Purchaser. Purchaser shall reserve for issuance that number of shares
of Purchaser Common Stock that will become subject to Company Options assumed
under this Section.
54
SECTION 7.05. Registration Statements on Form S-8. Within sixty (60)
Business Days after the Closing Date, the Purchaser shall file with the SEC one
or more registration statements on Form S-8 for the additional shares of
Purchaser Common Stock for reserved issuance pursuant to Section 7.03(a),
provided that such shares qualify for registration on such Form S-8 and will
maintain the effectiveness of such registration statements for so long as any of
such options or other rights remain outstanding.
SECTION 7.06. Resignations of Officers and Directors
(a) The officers and directors of the Company and the Company
Subsidiaries shall be those persons listed on Schedule III hereto, in each case
until their successors are elected or appointed and qualified or until their
resignation or removal. The Company shall deliver at the Closing the voluntary
resignations of each officer and director of the Company and the Company
Subsidiaries from their positions as officers and directors who is not
designated to be an officer or director of the Company and the Company
Subsidiaries in accordance with this subsection 7.05(a) which resignation shall
be effective at the Closing, and the Shareholders undertake that those persons
listed on Schedule III hereto shall have been elected as officers and directors
of the Company and the Company Subsidiaries as of the Closing Date, to hold
office until their successors are elected or appointed and qualified or until
their resignation or removal.
(b) Subject to receiving the Purchaser Stockholder Approval, the
officers and directors of the Purchaser shall be those persons listed on
Schedule IV hereto, in each case until their successors are elected or appointed
and qualified or until their resignation or removal. The Purchaser shall deliver
at the Closing the voluntary resignations of each officer and director of the
Purchaser from their positions as officers and directors who is not designated
to be an officer or director of the Purchaser in accordance with this subsection
7.06(b) which resignation shall be effective as at the Closing, and those
persons listed on Schedule IV hereto shall have been elected as officers and
directors of the Purchaser as of the Closing Date, to hold office until their
successors are elected or appointed and qualified or until their resignation or
removal.
SECTION 7.07. General Release and Waiver
(a) Each Shareholder, for Shareholder, Shareholder's spouse,
relatives, predecessors, heirs, executors, administrators, agents, advisors,
assigns, and successors, as applicable, as of the Closing, fully and generally
waives, releases, remises, acquits, and discharges the Purchaser, the Company
and their present or former officers, directors, shareholders, employees,
agents, attorneys, parents, subsidiaries, affiliates, partners, joint venturers
and successors and assigns (collectively, "Releasees") and covenants not to ▇▇▇
or otherwise institute or cause to be instituted or in any way participate in
(except at the request of the Purchaser) any legal or other proceedings or
actions against any Releasee with respect to any matter whatsoever arising out
of such Shareholder's investment in, or ownership of, Company Shares (other than
matters arising out of the breach of any representation or warranty of Purchaser
made pursuant to Article V of this Agreement or covenant of Purchaser contained
in this Agreement), including, but not limited to, (i) any liquidation
55
right or preference under the Bylaws, the Charter, any agreement or otherwise,
including without limitation any liquidation right or preference exercisable
with respect to the transactions contemplated by this Agreement, (ii) any right
of first refusal or any other right such Shareholder may have for acquiring the
Company Shares subject to this Agreement, whether under the Bylaws, the Charter,
any agreement or otherwise and any right to receive prior notice of such
acquisition, and (iii) any and all Liabilities, claims, demands, Contracts,
debts, obligations, and causes of action of every nature, kind and description,
in law, equity, or otherwise, whether or not now known or ascertained, which
heretofore do, or hereafter may, exist.
(b) Uncertain Claims. Each Shareholder hereby acknowledges that it has
considered the possibility that it may not now fully know the nature or value of
the claims which are generally released pursuant to Section 7.07(a) above and
that such general release extends to all claims of every nature and kind, known
or unknown, suspected or unsuspected, and past or present, however arising, and
that any and all rights granted to Shareholder pursuant to Section 1542 of the
California Civil Code or any analogous applicable Law are hereby expressly
waived. Said Section 1542 of the Civil Code of the State of California reads as
follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH, IF KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
SECTION 7.08. Bridge Loan.
(a) The Purchaser and the Company shall use their best efforts to
cause Luico Inc. and eMation, Inc. to enter into the Bridge Loan Agreement
substantially in the form attached hereto as Exhibit K, along with the
Intellectual Property Security Agreement and the Security Agreement referred to
therein and such additional supporting documents and filings with respect to the
Bridge Loan as the Purchaser or its counsel may reasonably request, within five
Business Days of the original execution of this Agreement by the Company, the
Purchaser and holders of no less than ninety percent (90%) of each class and
series of the Company Shares outstanding on the date hereof.
(b) The Company will, concurrently with the execution of the Bridge
Loan Agreement, execute the Guaranty substantially in the form attached hereto
as Exhibit L, along with the Guarantor Intellectual Property Security Agreement
and the Guarantor Security Agreement referred to therein and such additional
supporting documents and filings as the Purchaser or its counsel may reasonably
request.
(c) Subject to execution and delivery of the Bridge Loan Agreement the
Guaranty and the other documents required pursuant to Sections 7.08(a) and (b),
the Purchaser shall cause its subsidiary, Luico Inc. to advance to eMation,
Inc., bridge loans of up to an aggregate of $2,500,000 for the purpose of
financing operating expenses incurred in the ordinary course of business,
pursuant to the terms set forth in the Bridge Loan Agreement.
56
ARTICLE VIII.
CONDITIONS PRECEDENT
SECTION 8.01. Conditions Precedent to the Obligations of Each Party.
The obligations of the parties hereto to consummate the transactions
contemplated by this Agreement are subject to the satisfaction or, if permitted
by applicable Law, waiver of the following conditions:
(a) no court of competent jurisdiction shall have issued or entered
any order, writ, injunction or decree, and no other Governmental Entity shall
have issued any order, which is then in effect and has the effect of making the
transactions contemplated hereby illegal or otherwise prohibiting their
consummation;
(b) the Purchaser, the Company, the Shareholders' Agent and the Escrow
Agent shall have executed and delivered the Escrow Agreement; and
(c) Purchaser Stockholder Approval. The Purchaser Meeting Proposal
shall have been approved by the Purchaser's stockholders at the Purchaser
Stockholders' Meeting.
SECTION 8.02. Conditions Precedent to the Obligation of the Purchaser.
The obligation of the Purchaser to consummate the transactions contemplated by
this Agreement is subject, at the option of the Purchaser, to the satisfaction
at or prior to the Closing Date of each of the following conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of the Company and each Shareholder contained in this Agreement
or in any certificate or document delivered to the Purchaser pursuant hereto
shall be true and correct in all material respects (other than representations
and warranties subject to "materiality" or "material adverse effect" qualifiers,
which shall be true and correct in all respects) both when made and on and as of
the Closing Date as though made at and as of the Closing Date (other than
representations and warranties which address matters only as of a certain date
which shall be so true and correct as of such certain date, and except for the
issuance of Company Shares pursuant to the exercise of Company Options and
Company Warrants, the details of which shall be certified to the Purchaser in
the certificates referred to below), and the Chief Executive Officer and Chief
Financial Officer of the Company and each Shareholder shall have so certified to
the Purchaser in writing.
(b) Compliance with Covenants. The Company and each Shareholder shall
have performed and complied in all material respects with all terms, agreements,
covenants and conditions of this Agreement to be performed or complied with by
it at or prior to the Closing Date, and the Company and each Shareholder shall
have so certified to the Purchaser in writing.
(c) No Material Adverse Change. There shall not have occurred any
Company Material Adverse Effect, and the Chief Executive Officer and Chief
Financial Officer of the Company shall have so certified to the Purchaser in
writing.
57
(d) Purchase of all of the issued Company Shares. All of the following
shall have been fulfilled to the Purchaser's and its legal counsels' complete
satisfaction: (i) the BuyOut Offer shall have been accepted and this Agreement
and the Investor Suitability Certificate in the form attached hereto as Exhibit
J shall have been signed within a period of 58 days following the date the
Purchaser delivered the BuyOut Offer by shareholders of the Company holding more
than 95% of the issued shares of each class and series of shares of the Company
(Shareholders who did not sign such Transaction Documents shall be referred to
herein as the "Opposing Shareholder(s)"); (ii) no shareholder of the Company
(including, their successors and assigns) shall have instituted legal
proceedings in any court, within a period of ninety-five (95) days following the
date Purchaser delivered the BuyOut Offer to the last shareholder of the Company
objecting to the transactions contemplated herein or to the Purchaser's purchase
of such shareholder's shares of the Company, which proceedings shall not have
been dismissed within one hundred and twenty (120) days following the date
Purchaser delivered the BuyOut Offer to the last shareholder of the Company; and
(iii) all of the shares of the Company issued immediately prior to the Closing,
including shares of the Opposing Shareholders shall have been (A) duly
transferred to the Purchaser free and clear of any and all Encumbrances and (B)
duly registered in the name of the Purchaser in the Company's Register of
Members.
(e) Opinions of Counsel. The Purchaser shall have received the opinion
of (i) Yigal, Arnon & Co., Israeli counsel to the Company, in substantially the
form of Exhibit B hereto (ii) Yigal, Arnon & Co., counsel to the Apax limited
partnerships and the Gemini limited partnerships listed on Schedule I, in
substantially the form of Exhibit M hereto and (iii) Ropes & ▇▇▇▇, United States
counsel to the Company in substantially the form of Exhibit C hereto.
(f) Consents and Approvals. The authorizations, consents, waivers and
approvals set forth in Sections 3.04, 3.05(b)and 3.05(c) of the Company
Disclosure Schedule, if any, and Section 5.04(b) of this Agreement, shall have
been duly obtained and shall be in form and substance satisfactory to counsel
for the Purchaser.
(g) Employment Agreements. An Employment and Non-Competition Agreement
in substantially the form set forth in Exhibit D hereto shall have been executed
and delivered by ▇▇▇▇ ▇▇▇▇▇▇, and Employment and Non-Competition Agreements in
substantially the form set forth in Exhibit E hereto shall have been executed
and delivered by each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ Challenger
(collectively, together with ▇▇▇▇ ▇▇▇▇▇▇, the "Key Employees").
(h) Employees. Each of the employees of the Company and the Company
Subsidiaries and each independent contractor or consultant of the Company and
the Company Subsidiaries shall have executed a Non Competition and
Confidentiality Agreement in the form attached as Exhibit F hereto.
(i) Termination of Agreements. All agreements among the Shareholders
relating to the Business or the Company shall have been terminated and of no
further force or effect as of the Closing Date.
(j) Qualification as a Private Placement. Each of the Shareholders
shall have delivered an executed copy of the Investor Suitability Certificate
dated as of the Closing Date
58
and Purchaser shall be reasonably satisfied that the Purchaser Shares to be
issued in connection with this Agreement pursuant to Section 2.03 are issuable
without registration pursuant to Rule 506 promulgated pursuant to Section 4(2)
of the Securities Act and other applicable SEC rules and regulations promulgated
thereunder and any securities Laws of any applicable jurisdiction.
(k) Company Warrants and Company Options. The Company Warrants and the
Company Options granted pursuant to the Company Option Plans shall have been
either exercised in accordance with their terms or cancelled and terminated in
form reasonably satisfactory to the Purchaser.
(l) Lock-up Agreements. Each Shareholder shall have executed and
delivered to the Purchaser a Lock-up Agreement substantially in the form
attached hereto as Exhibit G.
(m) Supporting Documents. On or prior to the Closing Date, the
Purchaser and its counsel shall have received copies of the following supporting
documents:
(i) a copy of the Bylaws which shall have been amended, to the
satisfaction of Purchaser;
(ii) a certificate of an officer of the Company, dated the Closing
Date and certifying (A) that attached thereto is a true and complete copy
of the Bylaws of the Company as in effect on the date of such
certification; and (B) the Charter and the Bylaws of the Company as in
effect on the date of such certification;
(iii) a resolution of the Company's board of directors approving the
BuyOut Offer in accordance with the Bylaws;
(iv) a resolution of the Company's board of directors approving the
transfer of all the Company Shares which are issued immediately prior to
the Closing to Purchaser and registering the Purchaser in the Company's
Register of Members as the holder of all issued shares of the Company;
(v) duly completed notices of transfer regarding the transfer of all
the issued shares of the Company as provided above in form and substance
acceptable for immediate filing with the Israeli Registrar of Companies;
and
(vi) such additional supporting documents and other information with
respect to the operations and affairs of the Company as the Purchaser or
its counsel may reasonably request.
All such documents shall be reasonably satisfactory in form and substance to the
Purchaser and its counsel.
SECTION 8.03. Conditions Precedent to the Obligations of the Company
and the Shareholders. The obligations of the Company and the Shareholders to
consummate the transactions contemplated by this Agreement are subject, at the
option of the Company and the Shareholders, to the satisfaction at or prior to
the Closing Date of each of the following conditions:
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(a) Accuracy of Representations and Warranties. The representations
and warranties of the Purchaser contained in this Agreement or in any
certificate or document delivered to the Company and the Shareholders pursuant
hereto shall be true and correct in all material respects (other than (i)
representations and warranties subject to "materiality" or "material adverse
effect" qualifiers, which shall be true and correct in all respects and (ii) the
representations and warranties set forth in Section 5.06(a) as to which no
representation or warranty shall be made by Purchaser at Closing) both when made
and on and as of the Closing Date as though made at and as of the Closing Date
(other than representations and warranties which address matters only as of a
certain date which shall be so true and correct as of such certain date), and
the Purchaser shall have so certified to the Company and the Shareholders in
writing.
(b) Compliance with Covenants. The Purchaser shall have performed and
complied in all material respects with all terms, agreements, covenants and
conditions of this Agreement to be performed or complied with by it at or prior
to the Closing Date, and the Purchaser shall have so certified to the Company
and the Shareholders in writing.
(c) Opinion of Counsel. The Company shall have received the opinion of
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, U.S. counsel to the Purchaser, in substantially
the form of Exhibit H hereto.
(d) Purchaser Net Asset Value. (i) The Purchaser shall have prepared
and delivered to the Company, not less than two (2) Business Days prior to the
Closing, an unaudited consolidated balance sheet of the Purchaser and the
Purchaser Subsidiaries as at the end of the month ending not less than five (5)
Business Days prior to the Closing, which shall have been prepared in good faith
in accordance with GAAP in a manner consistent with Purchaser's accounting
policies and past practices; (ii) the Purchaser Net Asset Value determined based
on such unaudited consolidated balance sheet shall be greater than fifty-five
million dollars ($55,000,000); and (iii) the Company shall have received on the
Closing Date an officer's certificate from the Purchaser that the Purchaser Net
Asset Value on the Closing Date is greater than fifty-five million dollars
($55,000,000).
(e) Shareholder Bridge Facility. All loans and advances made pursuant
to the Shareholder Bridge Facility shall be repaid in full and there shall exist
no obligation or liability of the Company or any Company Subsidiary pursuant to
the Shareholder Bridge Facility.
All such documents shall be reasonably satisfactory in form and substance to the
Company and its counsel.
ARTICLE IX.
INDEMNIFICATION
SECTION 9.01. Escrow Fund. On the Closing Date, the Purchaser shall
deliver to the Escrow Agent the Escrow Shares. The Escrow Shares shall be held
by the Escrow Agent under the Escrow Agreement pursuant to the terms set forth
therein and shall be available to compensate the Indemnified Persons (as defined
herein) pursuant to the indemnification
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obligations of the Shareholders set forth in this Article IX and to compensate
the Purchaser for any post Closing adjustments made pursuant to Section 2.05.
SECTION 9.02. Indemnification.
(a) Subject to the limitations set forth in Section 9.02(d) and
elsewhere in this Article IX, the Shareholders agree to and will, indemnify and
hold harmless Purchaser, the Purchaser Subsidiaries (including the Company after
Closing) and their officers, directors, agents and employees, and each person,
if any, who controls or may control Purchaser within the meaning of the
Securities Act (hereinafter referred to individually as an "Indemnified Person"
and collectively as "Indemnified Persons") from and against any and all losses
(including lost profits or diminution in value), costs, damages, fines, fees,
liabilities, penalties, deficiencies and expenses arising from claims, demands,
actions, causes of action, including reasonable fees of attorneys, accountants,
investigators and experts, and court costs, less the amount of any tax benefit
then actually received by Purchaser as a result of such losses, costs, damages
etc., amounts then actually recovered by Purchaser under existing insurance
policies of Purchaser or Company (net of any related increase in premiums paid
by Purchaser or Company) or indemnities from third parties or, in the case of
third party claims, any amount then actually recovered by Purchaser pursuant to
counterclaims made by Purchaser directly relating to the facts giving rise to
such third party claims, (collectively, "Losses") asserted against, resulting
to, imposed upon or incurred by the Company, the Purchaser or any Indemnified
Person, by reason of, resulting from or arising out of:
(i) a breach of any representation, warranty (without regard to any
qualification as to materiality or knowledge or Company Material Adverse
Effect), covenant or agreement given or made by the Company or any
Shareholder in this Agreement, the Company Disclosure Schedule, or any
certificate, instrument or document delivered by the Company pursuant to
this Agreement and any of the representations, warranties, covenants or
agreements given or made by any Shareholder in such Shareholder's Investor
Suitability Certificate pursuant to this Agreement except as and to the
extent that Section 9.02(b) below shall be applicable thereto, in which
case the provisions of said Section 9.02(b) shall govern;
(ii) the satisfaction of the condition set forth in Section 8.02(d),
including without limitation, any mandatory share transfer, bring-along
procedure, compulsory acquisition of shares, take-over scheme of
arrangement, statutory merger or other procedure in accordance with
applicable Law or pursuant to the Company's Charter and Bylaws with the
intention of making the Company a direct or indirect wholly owned
subsidiary of the Purchaser, or any resolution, action or procedure,
relating to any of the foregoing.
(b) Subject to the limitations set forth in Section 9.02(d) and
elsewhere in this Article IX, the Shareholders agree to and will indemnify and
hold harmless, from and after the Closing Date, each Indemnified Person from and
against (A) all Liability for Taxes of Company and each Company Subsidiary for
the periods or portions of periods prior to the Closing Date (each such period a
"Pre-Closing Tax Period"); (B) all Liability for Taxes (as a result of Treasury
Regulation Section 1.1502-6 or any comparable provision of state, local or
foreign Tax
61
law) of any person which at any time prior to the Closing is or has ever been
affiliated with Company or any Company Subsidiary or with which at any time
prior to the Closing Company or any Company Subsidiary joins or has ever joined
or is or has ever been required to join in filing any affiliated, consolidated,
combined, unitary or aggregate Tax Return; (C) all Liability for Taxes that
result from Company's or any Company Subsidiary failure to withhold from amounts
paid by Company or any Company Subsidiary prior to the Closing Date; (D) all
Liability for Taxes of Company or any Company Subsidiary for any tax period or
portion of any tax period after the Closing Date (each such period, a
"Post-Closing Tax Period") that result by reason of the application in a
Pre-Closing Tax Period of Section 481 of the Code or any comparable provisions
of state, local, domestic or foreign Tax law; (E) all Liability for Taxes
required to be paid after the Closing Date by Company or any Company Subsidiary
under any Tax sharing, Tax indemnity, Tax allocation or similar contract
(whether or not written) to which Company or any Company Subsidiary is or was a
party prior to the Closing; (F) all Liability for share transfer Taxes due as a
result of the sale of the Company Shares to Purchaser pursuant to this Agreement
and the filing, recording, registration, stamp, documentary and other similar
Taxes and fees payable in connection thereto; and (G) all Liability for
reasonable legal and accounting fees and expenses for or with respect to any
item in clause (A), (B), (C), (D), (E) or (F) above ; provided, however, that
the aggregate indemnification obligation in respect of Taxes described in each
of clauses (A) through (F) above shall be reduced to the extent of amounts in
respect of such Taxes have otherwise been adequately reserved for on the
Estimated Closing Balance Sheet or if a Notice of Disagreement is provided by
the Purchaser, the Adjusted Balance Sheet or the Audited Closing Balance Sheet,
as the case may be. In the case of any taxable period that includes (but does
not end on) the Closing Date (a "Straddle Period"): (A) real, personal and
intangible property Taxes ("Property Taxes") of Company with respect to which
the Indemnified Persons shall be indemnified shall be equal to the amount of
such Property Taxes for the entire Straddle Period multiplied by a fraction, the
numerator of which is the number of days during the Straddle Period that are in
the Pre-Closing Tax Period and the denominator of which is the number of days in
the Straddle Period; and (B) the Taxes of Company and each Company Subsidiary
(other than Property Taxes) for the Pre-Closing Tax Period shall be computed as
if such Taxable period ended as of the close of business on the Closing Date,
and, in the case of any Taxes of Company or any Company Subsidiary attributable
to the ownership by Company of any equity interest in any partnership or other
"flowthrough" entity, as if a Taxable period of such partnership or other
"flowthrough" entity ended as of the close of business on the Closing Date. All
indemnification payments hereunder shall be due on the later of (i) the date on
which the relevant Taxes are required to be paid to the relevant Taxing
Authority (including with respect to estimated Taxes) and (ii) five business
days after Purchaser notifies the Representative that such Taxes are due (and
the amount thereof).
(c) Notwithstanding anything to the contrary herein, the Shareholders
shall not be liable to any Indemnified Person for any Losses asserted against,
resulting to, imposed upon or incurred by the Company, the Purchaser or any
Indemnified Person by reason of, resulting from or arising out of (x) the
matters referred to in Sections 9.02(a)(i) and (ii) or (y) any stamp Taxes due
as a result of the sale of the Company Shares to Purchaser pursuant to this
Agreement, unless and until all such Losses exceed $200,000 in which case the
Shareholders shall be liable for the full amount of such Losses.
62
(d) The Escrow Fund shall be available as a source for payment of the
indemnification obligations of the Shareholders set forth in this Section 9.02,
subject to the following:
(i) subject to the exception set forth in subparagraph (ii) below, the
liability of each Shareholder, as a source for payment of the
indemnification obligations of the Shareholders set forth in Section
9.02(a) and Section 9.02(b), shall be limited with respect to all Losses,
other than those arising from a breach of the representations, warranties,
covenants or agreements given or made by such Shareholder in such
Shareholder's Investor Suitability Certificate or this Agreement, to such
Shareholder's pro rata share of the Escrow Fund;
(ii) the liability of the Management Shareholder as a source for
payment of the indemnification obligations of the Shareholders set forth in
Section 9.02(a) and Section 9.02(b) shall be limited with respect to all
Losses arising from a breach of the representations and warranties given or
made by the Management Shareholder in Article III hereof, to his pro rata
share of the Escrow Fund, except in the case of fraud, in which case the
Management Shareholder's liability shall be unlimited;
(iii) subject to the exception set forth in subparagraph (ii) above,
the liability of each Shareholder, as a source for payment of the
indemnification obligations of the Shareholders set forth in Section
9.02(a) and Section 9.02(b), shall be limited with respect to all Losses
arising from a breach of the representations, warranties, covenants or
agreements given or made by any Shareholder in such Shareholder's Investor
Suitability Certificate or this Agreement, to an amount equal to the number
of Purchaser Shares issuable to such Shareholder by the Purchaser pursuant
to this Agreement multiplied by Three dollars ($3.00), except in the case
of fraud or gross negligence of such Shareholder, in which case such
Shareholder's liability shall be unlimited;
(iv) no Shareholder shall be liable for indemnification pursuant to
Section 9.02(a) or Section 9.02(b) for the representations and warranties
of any other Shareholder set forth in such other Shareholder's Investment
Suitability Certificate or this Agreement (other than the representations
and warranties of the Management Shareholder set forth in Article III
hereof, subject to the limitations set forth in this Section 9.02) or the
breach of any covenant or agreement by any other Shareholder; and
(e) Nothing in this Agreement shall limit the liability of the Company
or any Shareholder, prior to the Closing, for any breach of any representation,
warranty or covenant by the Company or any such Shareholder, respectively.
(f) Purchaser and Company each acknowledge that the Losses and Taxes
indemnifiable pursuant to this Article IX, if any, would relate to unresolved
contingencies existing at the Closing Date, which if resolved at the Closing
Date would have led to a reduction
63
in the total number of shares Purchaser would have agreed to issue in connection
with this Agreement.
SECTION 9.03. Escrow Period. The Escrow Period shall terminate at the
one year anniversary of the Closing Date; provided, however, that a portion of
the Escrow Fund, which in the reasonable judgment of Purchaser, is necessary to
satisfy any unsatisfied claims specified in any Officer's Certificate (as
defined herein) theretofore delivered to the Escrow Agent prior to termination
of the Escrow Period with respect to facts and circumstances existing prior to
expiration of the Escrow Period, shall remain in the Escrow Fund until such
claims have been resolved. Purchaser shall deliver to the Escrow Agent a
certificate specifying the Closing Date.
SECTION 9.04. Claims upon Escrow Fund.
(a) Except as otherwise set forth in Section 9.04(c), upon receipt by
the Escrow Agent on or before the last day of the Escrow Period of a certificate
signed by any officer of Purchaser (an "Officer's Certificate") specifying in
reasonable detail the individual items of indemnifiable Losses or Taxes included
in the amount so stated, the date each such item was paid, or properly accrued
or arose, and the basis for indemnification, the Escrow Agent shall deliver to
Purchaser out of the Escrow Fund, as promptly as practicable, Purchaser Shares
having a value equal to such Losses.
(b) For the purpose of compensating Purchaser for its Losses pursuant
to this Agreement, the Purchaser Shares in the Escrow Fund shall be valued at
Three dollars ($3), except for purposes of compensating Purchaser for audit fees
payable by the Shareholders pursuant to Section 2.05 and for Expenses of the
Company in excess of $925,000 (inclusive of any value added Tax), the Purchaser
Shares in the Escrow Fund shall be valued at the Purchaser Share Closing Price.
(c) Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, Purchaser shall cause a duplicate copy of such
certificate to be delivered to the Shareholders' Agent (as defined herein) and
for a period of thirty (30) days after such delivery, the Escrow Agent shall
make no delivery to Purchaser unless the Escrow Agent shall have received
written authorization from the Shareholders' Agent to make such delivery. After
the expiration of such thirty (30) day period, the Escrow Agent shall make
delivery of shares of Purchaser Shares from the Escrow Fund, provided that no
such payment or delivery may be made if the Shareholders' Agent shall object in
a written statement to the claim made in the Officer's Certificate, and such
statement shall have been delivered to the Escrow Agent prior to the expiration
of such thirty (30) day period.
(d) Resolution of Conflicts; Arbitration. In case the Shareholders'
Agent shall object in writing to any claim or claims made in any Officer's
Certificate, the Shareholders' Agent and Purchaser shall attempt in good faith
to agree upon the rights of the respective parties with respect to each of such
claims. If the Shareholders' Agent and Purchaser should so agree, a memorandum
setting forth such agreement shall be prepared and signed by both parties and
shall be furnished to the Escrow Agent. The Escrow Agent shall be entitled to
rely on any such memorandum and distribute Purchaser Shares from the Escrow Fund
in accordance with the
64
terms thereof. If no such agreement can be reached after good faith negotiation,
either Purchaser or the Shareholders' Agent may, by written notice to the other,
demand arbitration of the dispute unless the amount of the damage or loss is at
issue in a pending Action involving a third party claim, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either event the matter shall be settled by
arbitration conducted by three (3) arbitrators: one (1) selected by Purchaser,
one (1) selected by the Shareholders' Agent, and one (1) selected by the two (2)
arbitrators selected by Purchaser and the Shareholders' Agent. The arbitrators
shall set a limited time period and establish procedures designed to reduce the
cost and time for discovery of information relating to any dispute while
allowing the parties an opportunity, adequate as determined in the sole judgment
of the arbitrators, to discover relevant information from the opposing parties
about the subject matter of the dispute. The arbitrators shall rule upon motions
to compel, limit or allow discovery as they shall deem appropriate given the
nature and extent of the disputed claim. The arbitrators shall also have the
authority to impose sanctions, including attorneys' fees and other costs
incurred by the parties, to the same extent as a court of law or equity, should
the arbitrators determine that discovery was sought without substantial
justification or that discovery was refused or objected to by a party without
substantial justification. The decision of a majority of the three (3)
arbitrators as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in this Article IX, the Escrow Agent shall be
entitled to act in accordance with such decision and make or withhold payments
out of the Escrow Fund in accordance therewith. Such decision shall be written
and shall be supported by written findings of fact and conclusions regarding the
dispute which shall set forth the award, judgment, decree or order awarded by
the arbitrators. Judgment upon any award rendered by the arbitrators may be
entered in any court having competent jurisdiction. Any such arbitration shall
be held in the city and county of Philadelphia, Pennsylvania under the
commercial rules of arbitration then in effect of the American Arbitration
Association. In any arbitration pursuant to this Section 9.04 to resolve a claim
for indemnification, each party shall pay its own expenses. Shareholders (out of
the Escrow Fund) shall pay a fraction (not to exceed one (1)) of the fees of the
arbitrators and the administrative costs of the arbitration equal to the
quotient obtained by dividing (i) the amount awarded by the arbitrators with
respect to such claim (or agreed in settlement of such claim) by (ii) the
portion of the indemnification claim disputed by the Shareholders' Agent; and
the balance of such fees and administrative costs shall be paid by Purchaser.
SECTION 9.05. Shareholders' Agent.
(a) The Shareholders hereby appoint ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as agent
("Shareholders' Agent") for and on behalf of the Shareholders to carry out the
duties of the Shareholders' Agent as set forth in this Agreement, including
without limitation, (i) to give and receive notices and communications, to
authorize delivery to Purchaser of the Purchaser Shares or other property from
the Escrow Fund in satisfaction of claims by Purchaser, to object to such
deliveries, to agree to, negotiate, enter into settlements and compromises of,
and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, (ii) to receive notices of disputes
regarding the Estimated Closing Balance Sheet, to agree to, negotiate, enter
into settlements and compromises of such disputes, (iii) to extend the time for
the performance of any of the obligations or other actions of the other under
this Agreement, to waive any inaccuracies in the representations or warranties
of the other contained in this Agreement or in
65
any document delivered pursuant to this Agreement, to waive compliance with any
of the conditions or covenants of the other contained in this Agreement or waive
performance of any of the obligations of the other under this Agreement, and
(iv) and to take all actions necessary or appropriate in the judgment of the
Shareholders' Agent for the accomplishment of the foregoing. Such agency may be
changed by the holders of a majority in interest of the Escrow Shares from time
to time upon not less than ten (10) days' prior written notice to Purchaser. No
bond shall be required of the Shareholders' Agent. Notices or communications to
or from the Shareholders' Agent shall constitute notice to or from each of the
Shareholders.
(b) The Shareholders' Agent shall not be liable for any act done or
omitted hereunder as Shareholders' Agent while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith. The
Shareholders shall severally indemnify the Shareholders' Agent and hold him
harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Shareholders' Agent and arising out
of or in connection with the acceptance or administration of his duties
hereunder.
(c) The Shareholders' Agent shall have reasonable access to
information about the Company and the reasonable assistance of officers and
employees of the Company for purposes of performing its duties and exercising
its rights hereunder, provided that the Shareholders' Agent shall treat
confidentially and not disclose any nonpublic information from or about Company
to anyone (except on a need to know basis to individuals who agree to treat such
information confidentially).
SECTION 9.06. Actions of the Shareholders' Agent. A decision, act,
consent or instruction of the Shareholders' Agent shall constitute a decision of
all Shareholders for whom Purchaser Shares otherwise issuable to them are
deposited in the Escrow Fund and shall be final, binding and conclusive upon
each such Shareholder, and the Escrow Agent and Purchaser may rely upon any
decision, act, consent or instruction of the Shareholders' Agent as being the
decision, act, consent or instruction of each and every such Shareholder. The
Escrow Agent and Purchaser are hereby relieved from any Liability to any person
or entity for any acts done by them in accordance with such decision, act,
consent or instruction of the Shareholders' Agent.
SECTION 9.07. Third-Party Claims.
(a) In the event Purchaser becomes aware of a third-party claim which
Purchaser believes may result in a demand against the Escrow Fund, Purchaser
shall promptly notify the Shareholders' Agent of such claim; provided, however,
that no delay in notifying the Shareholders' Agent shall affect the rights of
any Indemnified Person to indemnification hereunder unless (and then solely to
the extent that) the interests of Shareholders in the Escrow Fund are prejudiced
or damaged thereby. By written notice to Purchaser within thirty (30) days after
delivery of notice of such a claim, the Shareholders' Agent and the Shareholders
for whom shares of Purchaser Shares otherwise issuable to them are deposited in
the Escrow Fund shall be entitled, at their expense, to participate in any
defense of such claim by Purchaser, which (subject to the provisions of Section
9.07(b) with respect to certain third-party claims) shall direct the defense and
settlement of such claims. Purchaser shall have the right in its sole discretion
to settle any such claim; provided, however, that Purchaser may not effect the
settlement of any
66
such claim without the consent of the Shareholders' Agent, which consent shall
not be unreasonably withheld. In the event that the Shareholders' Agent has
consented to any such settlement, the Shareholders' Agent shall have no power or
authority to object under Section 9.05 or any other provision of this Article IX
to the amount of any claim by Purchaser against the Escrow Fund for indemnity
with respect to such settlement.
(b) Except in the case of claims for equitable relief and claims for
money damages which may exceed the amounts then remaining and available in the
Escrow Fund for indemnification under this Article IX, the Shareholders' Agent
shall be entitled to assume the defense of such claim, by written notice to
Purchaser within thirty (30) days after delivery of notice of a third-party
claim pursuant to Section 9.07(a). If the Shareholders' Agent assumes the
defense of such a claim, (i) the Shareholders' Agent shall defend the
Indemnified Person against the matter with counsel reasonably satisfactory to
the Indemnified Person; (ii) the Indemnified Person may retain separate
co-counsel at its sole cost and expense (except that the Shareholders' Agent
shall be responsible for the fees and expenses of the separate co-counsel to the
extent that the counsel the Shareholders' Agent has selected has a conflict of
interest); (iii) the Indemnified Person will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Shareholders' Agent (not to be withheld unreasonably);
and (iv) the Shareholders' Agent will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases Purchaser
and the Indemnified Person from all Liability with respect thereto, without the
written consent of Purchaser and the Indemnified Person. In the event the
Shareholders' Agent does not timely assume the defense of such third-party claim
as provided herein, then Purchaser and the Indemnified Person may defend
against, or enter into any settlement with respect to, the matter in any manner
they reasonably may deem appropriate. At any time after commencement of any such
action, the Shareholders' Agent may request an Indemnified Person to accept a
bona fide offer from the other parties to the action for a monetary settlement
payable solely by Shareholders (which does not burden or restrict the Purchaser
or Indemnified Person nor otherwise prejudice the Purchaser or Indemnified
Person) whereupon such settlement shall be accepted unless the Purchaser or
Indemnified Person determines that the dispute should be continued. In the event
such settlement is rejected by the Purchaser or Indemnified Person, Shareholders
shall be liable for indemnity hereunder only to the extent of the lesser of (i)
the amount of the settlement offer or (ii) the amount for which the Purchaser or
Indemnified Person is liable with respect to such action and, if the settlement
offer represents the lesser amount of Liability for the Purchaser or Indemnified
Person (but does not burden or restrict the Purchaser or Indemnified Person nor
otherwise prejudice the Purchaser or Indemnified Person), the Shareholders'
Agent shall be entitled to reimbursement of all costs and legal fees incurred in
connection with the applicable matter after the date of rejection of such
settlement by the Purchaser or Indemnified Person. The party controlling the
defense of any third party claim shall deliver, or cause to be delivered, to the
other party copies of all correspondence, pleadings, motions, briefs, appeals or
other written statements relating to or submitted in connection with the defense
of the third party claim, and timely notices of, and the right to participate in
(as an observer) any hearing or other court proceeding relating to the third
party claim.
67
ARTICLE X.
TERMINATION AND ABANDONMENT
SECTION 10.01. Survival of Representations and Warranties. The
representations and warranties set forth in Articles III and IV, other than
Section 4.03 (Title to Shares) which shall survive until the later of the date
that is ninety (90) days following the expiration of the applicable statute of
limitations, will survive until the first anniversary of the Closing Date. This
Section 10.01 shall not limit any covenants or agreements of the parties hereto
that by their terms contemplate performance after the Closing Date.
SECTION 10.02. Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by the mutual consent of the Company and the Purchaser;
(b) by the Purchaser, on the one hand, or the Company, on the other
hand, if the Closing shall not have occurred on or before October 31, 2001,
or such later date as may be agreed upon by the parties hereto, provided,
however, that the right to terminate this Agreement under this clause (b)
shall not be available to any party (a "Defaulting Party") whose failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in the failure of the Closing to occur on or before such date;
(c) by the Purchaser, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company or any Shareholder set
forth in this Agreement, or if any representation or warranty of the
Company or any Shareholder shall have become untrue, incomplete or
incorrect, in either case such that the conditions set forth in Section
8.02 would not be satisfied or if there shall have occurred events or
circumstances having or which are reasonably likely to have a Company
Material Adverse Effect (a "Terminating Company Breach"), if such
Terminating Company Breach is not curable, or is not cured by the Company
through the exercise of its reasonable efforts within ten (10) days of
receiving written notice of such Terminating Company Breach; or
(d) by the Company, upon breach of any representation, warranty,
covenant or agreement on the part of the Purchaser set forth in this
Agreement, or if any representation or warranty of the Purchaser shall have
become untrue, incomplete or incorrect, in either case such that the
conditions set forth in Section 8.03 would not be satisfied (a "Terminating
Purchaser Breach"), if such Terminating Purchaser Breach is not curable, or
is not cured by the Purchaser through the exercise of its reasonable
efforts within ten (10) days of receiving written notice of such
Terminating Purchaser Breach;
If the Closing shall not have occurred, or this Agreement shall not have been
terminated in accordance with this Section 10.02, by November 15, 2001, this
Agreement shall automatically terminate on said date, provided, however, that
such termination shall not affect the Liability hereunder of any Defaulting
Party.
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SECTION 10.03. Procedure and Effect of Termination. In the event of
termination of this Agreement and abandonment of the transactions contemplated
hereby by any or all of the parties pursuant to Section 10.02 above, written
notice thereof shall forthwith be given to the other parties to this Agreement
(other than in the event of an automatic termination as provided in such
Section) and this Agreement (except for this Section and Sections 6.04(b), 10.02
and 11.01, which shall continue) shall terminate and the transactions
contemplated hereby shall be abandoned, without further action by any of the
parties hereto. If this Agreement is terminated as provided in this Agreement:
(a) the parties hereto will promptly redeliver all documents, work
papers and other material of any other party relating to the transactions
contemplated hereby, whether obtained before or after the execution hereof,
to the party furnishing the same; and
(b) no party shall have any Liability or further obligation to any
other party to this Agreement pursuant to this Agreement except as provided
in this Article X.
ARTICLE XI.
MISCELLANEOUS
SECTION 11.01. Expenses, Etc.
(a) Subject to Section 11.01(b), all Expenses shall be paid by the
party incurring such Expenses.
(b) Upon Closing, Purchaser shall pay all Expenses incurred by both
Purchaser and the Company, provided, however, that Purchaser shall only be
required to pay the Company's Expenses up to the aggregate amount of $925,000
(inclusive of any value added Tax), and further provided that such Expenses
shall be accrued on the Books and Records of the Company, deemed to be
Indebtedness and reflected as such on the Estimated Closing Balance Sheet to be
prepared pursuant to Section 2.05. The Shareholders shall be responsible for the
payment of all of their own expenses incurred in connection with the
transactions contemplated hereby and Purchaser shall not reimburse or compensate
any Shareholder for any such expense.
(c) The Shareholders, on the one hand, and the Purchaser, on the other
hand, will indemnify the other and hold it or them harmless from and against any
claims for finders' fees or brokerage commissions in relation to or in
connection with such transactions as a result of any agreement or understanding
between such indemnifying party and any third party.
SECTION 11.02. Notices. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient and deemed to be received if (i) delivered personally, (ii) mailed by
registered or certified mail, return receipt requested and postage prepaid,
(iii) sent via a nationally recognized overnight courier service, or (iv) sent
via facsimile or e-mail confirmed in writing to the recipient, in each case as
follows:
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if to the Purchaser, to:
RAVISENT Technologies Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
RAVISENT Technologies Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Shiboleth, Yisraeli, Roberts, ▇▇▇▇▇▇ & Co.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Israel
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Adv.
Facsimile No.: (▇▇▇) ▇ ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇ ▇▇▇▇▇▇▇
if to the Company, to:
eMation, Ltd.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
Ropes & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇.
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Barak ▇. ▇▇▇▇▇
Facsimile No.: (▇▇▇-▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇-▇) ▇▇▇-▇▇▇▇
if to any Shareholder, to the address appearing under the name of such
Shareholder in Schedule I hereto;
or such other address or addresses as any party shall have designated by notice
in writing to the other parties.
SECTION 11.03. Waivers. Either the Company, the Shareholders' Agent,
on behalf of the Shareholders, or the Purchaser, may, by written notice to the
other parties, (i) extend the time for the performance of any of the obligations
or other actions of the other under this Agreement, (ii) waive any inaccuracies
in the representations or warranties of the other contained in this Agreement or
in any document delivered pursuant to this Agreement, (iii) waive compliance
with any of the conditions or covenants of the other contained in this
Agreement, or (iv) waive performance of any of the obligations of the other
under this Agreement. Except as provided in the preceding sentence, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver, by the party taking such action, of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.
SECTION 11.04. Amendments, Supplements, Etc. At any time this
Agreement may be amended or supplemented by such additional agreements, articles
or certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of this Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants, terms
or conditions hereof or to effect or facilitate any governmental approval or
acceptance of this Agreement or to effect or facilitate the filing or recording
of this Agreement or the consummation of any of the transactions contemplated
hereby. Any such instrument must be in writing and signed by all parties hereto.
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SECTION 11.05. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware
other than the conflict of laws principles thereof directing the application of
any law other than that of Delaware. Courts within the State of Delaware will
have jurisdiction over all disputes between the parties hereto arising out of or
relating to this agreement and the agreements, instruments and documents
contemplated hereby. The parties hereby consent to and agree to submit to the
exclusive jurisdiction of such courts to the exclusion of any other courts. Each
of the parties hereto waives, and agrees not to assert in any such dispute, to
the fullest extent permitted by applicable law, any claim that (i) such party is
not personally subject to the jurisdiction of such courts, (ii) such party and
such party's property is immune from any legal process issued by such courts or
(iii) any litigation commenced in such courts is brought in an inconvenient
forum.
SECTION 11.06. Waiver of Jury Trial. Each party hereto hereby
irrevocably waives all right to trial by jury in any proceeding (whether based
on contract, tort or otherwise) arising out of or relating to this Agreement or
any transaction or agreement contemplated hereby or the actions of any party
hereto in the negotiation, administration, performance or enforcement hereof.
SECTION 11.07. Headings; Interpretation. The descriptive headings
contained in this Agreement are included for convenience of reference only and
shall not affect in any way the meaning or interpretation of this Agreement. 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 11.08. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 11.09. Entire Agreement. This Agreement (including the
Exhibits, the Transaction Documents, the Company Disclosure Schedule and the
Purchaser Disclosure Schedule) and the Confidentiality Agreement constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with respect
thereto. No addition to or modification of any provision of this Agreement shall
be binding upon any party hereto unless made in writing and signed by all
parties hereto.
SECTION 11.10. Third Party Beneficiaries/Parties in Interest. This
Agreement has been made and is made solely for the benefit of the parties named
as parties to this Agreement, the Shareholders' Agent and the Escrow Agent and
their respective successors and permitted assigns. Nothing in this Agreement is
intended to confer any rights or remedies under or by reason of this Agreement
on any persons other than the parties named as parties to this Agreement, the
Shareholders' Agent and the Escrow Agent and their respective successors and
permitted assigns. Nothing in this Agreement is intended to relieve or discharge
the obligation
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or liability of any third persons other than the Shareholders' Agent to any
party to this Agreement.
SECTION 11.11. Assignability. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party hereto without the
prior written consent of the other parties hereto, except (i) in the case of the
Purchaser, to any Person who shall acquire substantially all of the assets of
the Purchaser or a majority of the voting securities of the Purchaser, whether
pursuant to a merger, consolidation, sale of stock or otherwise, with the
written consent of the Shareholders' Agent (not to be withheld unreasonably) and
(ii) in the case of an individual Shareholder, to the estate of such Shareholder
upon death.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto as of the day and year first above written.
RAVISENT TECHNOLOGIES INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:President and CEO
EMATION, LTD.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:President and CEO
Signature Page to eMation, Ltd. Share Purchase Agreement
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