EXHIBIT 4.9
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SHARE PURCHASE AGREEMENT
dated as of
November 17, 2005
by and among
NICE SYSTEMS LTD.,
and
THE SELLING SHAREHOLDERS LISTED ON EXHIBIT A
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SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "AGREEMENT") is made and entered into
as of November 17, 2005 by and among Nice Systems Ltd., an Israeli corporation
(the "PURCHASER"), and the Selling Shareholders listed on EXHIBIT A (the
"SELLING SHAREHOLDERS").
RECITALS
A. FAST Video Security AG (the "Company") is a corporation
(AKTIENGESELLSCHAFT) duly established and validly existing under the laws of
Switzerland with its corporate seat in ▇▇▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
and registered with the commercial register of the Canton of Zug under
CH-170.3.019.722-2. The stated capital of the Company amounts to eight hundred
thousand Swiss Francs (CHF 800,000) divided into eight hundred (800) bearer
shares fully paid up in cash with a par value of CHF 1,000 each, of which seven
hundred sixty (760) shares are held by the Selling Shareholders and forty (40)
shares are held by the Company.
B. The Selling Shareholders are the legal and beneficial owners of seven
hundred sixty (760) shares of the Company, and desire to sell all seven hundred
sixty (760) of such shares of the Company to the Purchaser, upon the terms and
subject to the conditions set forth herein.
C. CornerstoneCapital Beteiligungen GmbH and IDP Investments GmbH (each a
"Lender" and collectively the "Lenders") are the lenders of shareholders' loans
in the total amount of CHF 600,000 to the Company under a loan agreement dated
July 29, 2003 (the "Shareholders' Loans").
D. The Purchaser desires to acquire all of the issued and outstanding share
capital of the Company from the Selling Shareholders, upon the terms and subject
to the conditions set forth herein (the "ACQUISITION"), such that upon
consummation of the Acquisition the Purchaser will own all of the issued and
outstanding share capital of the Company not being held by the Company itself.
E. As an inducement for the Purchaser to consummate the Acquisition, the
Selling Shareholders have agreed to make certain representations, warranties,
covenants and other agreements in connection with the Acquisition, all as set
forth herein.
AGREEMENT
In consideration of the mutual promises, agreements, warranties and
provisions contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF SHARES.
(a) TRANSFER OF SHARES; RECEIVING CONSIDERATION. Subject to the terms
and conditions of the Transaction Documents, the Purchaser hereby agrees to
purchase at the Closing (as defined below) and each of the Selling
Shareholders agrees to sell, convey, transfer, assign and deliver to the
Purchaser at the Closing, all right, title and interest in and to that
number of shares of the Company set forth next to such Selling
Shareholder's name in EXHIBIT A, comprising in total seven hundred sixty
(760) shares of the Company with a par value of CHF 1,000 each,
representing all of the issued and outstanding shares of the Company and/or
any rights to acquire shares of the Company, together with all rights
attached or accruing to them (the "SHARES") except for the forty (40)
shares held by the Company itself. The Shares are represented by the share
certificates listed in EXHIBIT A (THE "SHARE CERTIFICATES").
(b) Upon consummation of the Closing the Purchaser shall be the sole
owner of all the Shares.
(c) The Purchaser shall not be obliged to complete the purchase of any
of the Shares unless the purchase of all of the Shares is completed
simultaneously.
(d) The Selling Shareholders hereby irrevocably waive all rights of
pre-emption, first refusal, and other rights over the Shares conferred on
them either by the Charter Documents or in any other way.
1.2 CONSIDERATION.
(a) PURCHASE PRICE. The aggregate purchase price for the Shares (the
"Purchase Price") shall be the sum of the Base Payment (as defined below),
the Earn Out 1 (as defined below), and the Earn Out 2 (as defined below),
in each case payable in U.S. Dollars, as calculated and adjusted in
accordance with the terms of this Agreement.
(b) BASE PAYMENT. At the Closing, the amount of twenty-one million
U.S. dollars ($21,000,000) shall be paid by the Purchaser as follows (the
"Base Payment"):
(i) Three million U.S. dollars ($3,000,000) (the "ESCROW FUNDS")
shall be paid by the Purchaser to UBS AG or such other agent as shall
be mutually agreed among the parties hereto (the "ESCROW AGENT"), for
deposit in escrow (the "ESCROW"), for the purpose of satisfying or
contributing towards the satisfaction of Damages (as defined in
Section 7 below) in accordance with the terms of the Escrow Agreement
to be entered into by and among the Purchaser, the Selling
Shareholders and the Escrow Agent in the form attached hereto as
EXHIBIT B subject only to amendments required by the Escrow Agent and
agreed by the Purchaser and the Shareholder Representative (the
"ESCROW AGREEMENT"); and
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(ii) an additional amount determined in accordance with this
Section 1.2(b)(ii) (the "PURCHASE RESERVE") shall be paid by the
Purchaser to the Escrow Agent, pending resolution of the adjustment
procedure of the Purchase Price set forth in Section 1.3 below. If the
Estimated Closing Shareholders Equity (as defined below) is zero or
positive, then the Purchase Reserve shall be eight hundred thousand
U.S. dollars ($800,000); if the Estimated Closing Equity (as defined
below) is a deficit of more than zero, then the Purchase Reserve shall
be an amount equal to such deficit plus eight hundred thousand U.S.
dollars ($800,000); and
(iii) an amount equal to 120% of the Estimate (as defined in
Section 5.10(b)) shall be transferred to the Escrow Agent (the "Audit
Fee Reserve");
(iv) any amount by which the Purchase Price is to be reduced
pursuant to Section 6.3(j) of this Agreement shall be retained by the
Purchaser and deducted from the Base Payment; and
(v) the balance ("the "CLOSING CONSIDERATION"), shall be paid by
wire transfer to a bank account in the name of the Selling
Shareholders at UBS AG, Zug (the "Selling Shareholders Bank Account")
simultaneously with the delivery of the Shares to the Purchaser.
Selling Shareholders will deliver written instructions to the
Purchaser designating such bank account no less than five (5) days
prior to the Closing. Such payment shall fully release the Purchaser
from the Purchaser's payment obligation with respect to the Closing
Consideration.
(c) ADVANCE. At Closing, subject to satisfaction of the conditions set
forth in this Section 1.2(c), the Purchaser will pay three million U.S.
dollars ($3,000,000) as an advance on account of Earn Out 1 (the "Earn Out
1 Advance"), paid by wire transfer to the Selling Shareholders Bank
Account. Such payment shall fully release the Purchaser from the
Purchaser's payment obligation with respect to the Earn Out 1 Advance. The
conditions for payment of the Earn Out 1 Advance are: (i) Delivery by the
Company to the Purchaser of evidence satisfactory to the Purchaser that
Honeywell International Inc. (including its subsidiaries and branch
offices) ("Honeywell") has placed written purchase orders during 2005 for
delivery of products by the Company with a value based upon the dollar
amount of such written purchase orders equal to or greater than five
million U.S. dollars ($5,000,000); and (ii) Delivery by the Company to the
Purchaser of a written confirmation from Honeywell satisfactory to the
Purchaser in which Honeywell confirms its firm commitment to place orders
in 2006 for delivery of products by the Company with a value based upon the
dollar amount of such written purchase orders of five million U.S. dollars
($5,000,000) to eight million U.S. dollars ($8,000,000).
(d) EARN OUT 1. Not later than thirty (30) calendar days after
publication of the Nice Systems, Limited audited financial statements for
the fiscal year ended December 31, 2006, the Purchaser shall pay to the
Selling Shareholders an aggregate amount calculated as follows: In the
event that revenue shall be recognized by the Purchaser pursuant to U.S.
GAAP in fiscal year 2006 (as shown in the Purchaser's audited financial
statements in accordance with U.S. GAAP standards of revenue recognition
applied consistent with the Purchaser's past practices) from sales to
Honeywell and all its subsidiaries and branch offices of the Company's
products, with a value based upon the dollar amount of the written purchase
orders with respect to such sales (the "Honeywell 2006 Sales") of between
four million U.S. dollars ($4,000,000) and eight million U.S. dollars
($8,000,000, then the Purchaser shall pay the amount (the "Earn Out 1") of
between three million U.S. dollars ($3,000,000) and seven million U.S.
dollars ($7,000,000), calculated as three million dollars ($3,000,000) plus
an amount equal to that portion of Honeywell 2006 Sales which is greater
than four million dollars ($4,000,000) but not more than eight million
dollars ($8,000,000) (i.e., a payment of three million dollars ($3,000,000)
if Honeywell 2006 Sales are four million dollars ($4,000,000), or a payment
of seven million dollars ($7,000,000) if Honeywell 2006 Sales are eight
million dollars ($8,000,000)), less the amount paid (if paid) as Earn Out 1
Advance, paid by wire transfer to the Selling Shareholders Bank Account.
Such payment shall fully release the Purchaser from the Purchaser's payment
obligation with respect to Earn Out 1. For avoidance of doubt, it is
clarified that (i) in no event shall the Earn Out 1 exceed seven million
U.S. dollars ($7,000,000), and (ii) should the Honeywell 2006 Sales be less
than four million U.S. dollars ($4,000,000) then there shall be no payment
made with respect to Earn Out 1, provided that any payment made as Earn Out
1 Advance will be retained by the Selling Shareholders and not subject to
refund to the Purchaser.
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(e) EARN OUT 2. Not later than thirty (30) calendar days after
publication of the Purchaser's audited financial statements for the fiscal
year ended December 31, 2008, the Purchaser shall pay to the Selling
Shareholders an aggregate amount calculated as follows: In the event that
the Purchaser's Revenues from gaming (whether from Purchaser or ex-Company
products) in the fiscal year ended December 31, 2008, are equal to or
greater than thirty million U.S. dollars ($30,000,000), then the Purchaser
shall pay the amount of two million U.S. dollars ($2,000,000), plus an
amount (the "Earn Out 2") equal to twenty percent (20%) of that portion of
the Purchaser's Revenues derived from gaming (whether from Purchaser or
ex-Company products) in Fiscal Year 2008 which is between thirty million
U.S. dollars ($30,000,000) and forty-five million U.S. dollars
($45,000,000), paid by wire transfer to the Selling Shareholders Bank
Account. Such payment shall fully release the Purchaser from the
Purchaser's payment obligation with respect to Earn Out 2. Notwithstanding
the foregoing, however, (i) in no event shall the Earn Out 2 exceed five
million U.S. dollars ($5,000,000), and (ii) should Purchaser's Revenues
derived from gaming (whether from Purchaser or ex-Company products) in
fiscal year 2008 be lower than thirty million U.S. dollars ($30,000,000)
then no payment will be made on account of Earn Out 2. For the purpose of
this calculation the Purchaser's Revenues will be computed as recognized in
the Purchaser's audited financial statements in accordance with U.S. GAAP
standards of revenue recognition applied consistent with the Purchaser's
past practices.
(f) PROCEDURE. With respect to Earn Out 1 and Earn Out 2, the
Purchaser shall, in each case within ten (10) calendar days following
publication of the Purchaser's audited financial statements for the
relevant year, deliver to the Shareholder Representative a copy of such
audited financial statements and a written statement of the amount of Earn
Out 1 or Earn Out 2, as the case may be.
(i) Following such delivery, during a period of ten (10) calendar
days, the Shareholder Representative shall be entitled (upon
reasonable prior notice and during normal business hours) to meet with
the Chief Financial Officer of the Purchaser (or his designee) and
representatives of the Purchaser's auditors, and (subject to execution
of a customary nondisclosure agreement) to review any documents
reasonably necessary in order for the Shareholder Representative to
verify the calculation of Earn Out 1 or Earn Out 2, as the case may
be. After such ten (10) calendar day period, within five (5) calendar
days the Shareholder Representative may notify Purchaser in writing
(in this Section 1.2(f), the "DISPUTE NOTICE") of any good faith
reasonable objections to the calculation of the Closing Shareholders
Equity or the Post-Closing Financial Certificate as it affects such
calculation, setting forth a reasonably specific and detailed
description of such objections. If the Shareholder Representative
shall not have delivered a Dispute Notice within such five (5)
calendar day period, the Selling Shareholders shall be deemed to have
agreed with the calculations of the Earn Out 1 or Earn Out 2, as the
case may be. If the Shareholder Representative delivers a Dispute
Notice, Purchaser and the Shareholder Representative shall attempt to
resolve any such objections within ten (10) calendar days of the
receipt by Purchaser of the Dispute Notice. If a final resolution of
such dispute is reached, the agreed upon amount of the Earn Out 1 or
Earn Out 2, as the case may be, shall be deemed final and binding on
Purchaser and the Selling Shareholders.
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(ii) If, after such ten (10) day period, the Shareholder
Representative and Purchaser cannot resolve such dispute, then
Purchaser and the Shareholder Representative shall mutually agree upon
a Swiss recognized accounting firm affiliated with the "Big Four"
international accounting firms to resolve such dispute, or if they
cannot agree on such a firm within five (5) calendar days, within
three (3) business days they shall each designate a nationally
recognized accounting firm, and the two firms shall agree upon a Swiss
recognized accounting firm affiliated with the "Big Four"
international accounting firms, which does not represent either party,
which firm shall have the sole authority to resolve such dispute. If
the two designated accounting firms are unable to reach agreement,
then the Chairman of the Swiss Chamber of Audit Firms (Treuhand ▇▇▇▇▇▇
or its successor) will make such designation. The firm so agreed upon
(the "FIRM") shall as promptly as practicable make a final
determination of the Earn Out 1 or the Earn Out 2, as the case may be,
based upon the Purchaser's audited financial statements for the
relevant year, which shall be binding on the parties. Each of
Purchaser and the Shareholder Representative shall provide the Firm
with all information and documentation that the Firm requests. The
Purchaser on the one part and the Shareholder Representative on the
other part shall each pay half of the total fees and expenses of the
Firm.
1.3 POST-CLOSING PURCHASE PRICE ADJUSTMENTS.
(i) Within thirty (30) calendar days following the delivery to the
Purchaser of the Closing Balance Sheet (as defined below), the Purchaser
shall deliver to the Shareholder Representative (as defined below) a copy
of the Closing Balance Sheet and a calculation of the Company's
shareholders equity as of Closing, excluding the effects of capitalized
software development costs and related amortization, prepared in accordance
with U.S. GAAP (the "Closing Shareholders Equity"), certified by the
Purchaser's Chief Financial Officer (the "Post- Closing Financial
Certificate"), which shall form the basis of an adjustment of the Purchase
Price in accordance with this Section 1.3.
(ii) Following delivery by Purchaser to the Shareholder Representative
of the Post-Closing Financial Certificate, the Shareholder Representative
shall have ten (10) calendar days during which to notify Purchaser in
writing (in this Section 1.3, the "DISPUTE NOTICE") of any good faith
reasonable objections to the calculation of the Closing Shareholders Equity
or the Post-Closing Financial Certificate as it affects such calculation,
setting forth a reasonably specific and detailed description of such
objections. If the Shareholder Representative shall not have delivered a
Dispute Notice within such ten (10) calendar day period, the Selling
Shareholders shall be deemed to have agreed with the calculations of the
Closing Shareholders Equity set forth in the Post-Closing Financial
Certificate. If the Shareholder Representative delivers a Dispute Notice,
Purchaser and the Shareholder Representative shall attempt to resolve any
such objections within ten (10) calendar days of the receipt by Purchaser
of the Dispute Notice. If a final resolution of such dispute is reached,
the agreed upon amount of the Closing Shareholders Equity shall be deemed
final and binding on Purchaser and the Selling Shareholders.
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(iii) If, after such ten (10) day period, the Shareholder
Representative and Purchaser cannot resolve such dispute, then Purchaser
and the Shareholder Representative shall mutually agree upon a Swiss
recognized accounting firm affiliated with the "Big Four" international
accounting firms to resolve such dispute, or if they cannot agree on such a
firm within five (5) calendar days, they shall each designate a nationally
recognized accounting firm, and the two firms shall agree upon a Swiss
recognized accounting firm affiliated with the "Big Four" international
accounting firms, which does not represent either party, which firm shall
have the sole authority to resolve such dispute. The firm so agreed upon
(the "FIRM") shall as promptly as practicable (and in any event within
thirty (30) calendar days) make a final determination of the Closing
Shareholders Equity based upon the Closing Balance Sheet, which shall be
binding on the parties. Each of Purchaser and the Shareholder
Representative shall provide the Firm with all information and
documentation that the Firm requests. The Purchaser on the one part and the
Shareholder Representative on the other part shall each pay half of the
total fees and expenses of the Firm.
(iv) The Purchase Price shall be adjusted following the Closing (the
"POST-CLOSING ADJUSTMENT") as follows: (a) In the event that the Closing
Shareholders Equity (as such Closing Shareholders Equity shall be finally
determined pursuant to the procedures set forth in this Section 1.3) is a
deficit, the amount of such deficit in Closing Shareholders Equity shall be
deducted from the Purchase Price. Any net subtraction from the Purchase
Price pursuant to this clause (iv) is referred to herein as the
"POST-CLOSING ADJUSTMENT". For the avoidance of doubt, it is explicitly
stated that in the event that the Closing Shareholders Equity is positive
or is zero, the Selling Shareholders are not entitled to any positive
adjustment of the Purchase Price.
(v) In the event that the Purchase Price is to be reduced by the
Post-Closing Adjustment in accordance with Section 1.3(iv) above, the
Selling Shareholders shall pay to the Purchaser, within ten (10) calendar
days from the date of final determination of the Post-Closing Adjustment
pursuant to the procedures set forth in this Section 1.3, the Post-Closing
Adjustment by wire transfer in accordance with written instructions
provided by the Purchaser, PROVIDED HOWEVER that such payment shall first
be made from the Purchase Reserve, and PROVIDED FURTHER that if the
Post-Closing Adjustment exceeds the Purchase Reserve, the Selling
Shareholders, jointly and severally, shall pay the Purchaser such amount in
excess, in addition to the transfer of the Purchase Reserve to the
Purchaser. If the Post-Closing Adjustment is lower than the Purchase
Reserve, then, upon payment of the Post-Closing Adjustment to the Purchaser
from the funds of the Purchase Reserve, the remainder of the Purchase
Reserve shall be paid by the Escrow Agent by wire transfer to the Selling
Shareholders Bank Account. Such payment shall be in full settlement of, and
fully release the Purchaser and the Escrow Agent from, the Purchaser's
and/or the Escrow Agent's respective payment obligation with respect to the
Purchase Reserve.
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(vi) Any order to the Escrow Agent with respect to the Purchase
Reserve in accordance with this Section 1.3 shall be signed either by the
Purchaser and the Shareholders Representative or by the Firm and shall be
final and binding upon the parties, and the Escrow Agent shall be
instructed to comply with such order.
SECTION 2
CLOSING
2.1 CLOSING DATE. Unless mutually agreed to otherwise in writing, the
closing of the Acquisition (the "CLOSING") shall be held at the offices of CMS
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, at 10:00 a.m.
CET time on January 3, 2006 (the "CLOSING DATE"). As used in the Transaction
Documents, "BUSINESS DAY" means any day except a Friday, Saturday, Sunday or a
day on which banking institutions in Switzerland or in Israel are obligated or
permitted by law, regulation or governmental order to close.
2.2 ACTIONS AT THE CLOSING. At the Closing, the Company, the Selling
Shareholders and the Purchaser shall take such actions and execute and deliver
such agreements and other instruments and documents as necessary or appropriate
to effect the transactions contemplated by this Agreement in accordance with its
terms.
2.3 NO FURTHER OWNERSHIP RIGHTS IN SHARES. The Shares shall represent all
outstanding shares, options, warrants or other rights to acquire shares of the
Company. The payment of the Purchase Price (as adjusted) in accordance with
Section 1.2 above shall be deemed to be full satisfaction of each Selling
Shareholder's rights pertaining to such Shares.
2.4 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
date hereof, any further action is necessary or desirable to carry out the
purposes of this Agreement and to ensure that the Company retains full right,
title and possession to all of its assets, property, rights, privileges, and
powers, the Purchaser, the Selling Shareholders and the officers and directors
of the Company are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action.
SECTION 3
REPRESENTATIONS AND WARRANTIES
OF THE SELLING SHAREHOLDERS
In this Agreement, any reference to any event, change, condition or effect
being "MATERIAL" with respect to any entity or group of entities means any
material event, change, condition or effect related to the condition (financial
or otherwise), properties, assets (including intangible assets), liabilities,
business, operations, results of operations or prospects of such entity or group
of entities which, where quantifiable, is individually greater than or equal to
forty thousand U.S. dollars ($40,000) or is individually in lesser amounts which
are in the aggregate greater than or equal to two hundred thousand U.S. dollars
($200,000). In this Agreement, any reference to a "MATERIAL ADVERSE EFFECT" with
respect to any entity or group of entities means any event, change or effect
that, when taken individually or together with all other adverse changes and
effects, is or is reasonably likely to be materially adverse to the condition
(legal, financial, business or otherwise), properties, assets (including
intangible assets), liabilities, business, operations, results of or prospects
of such entity and its subsidiaries, taken as a whole, or to prevent or
materially delay consummation of the transactions contemplated under this
Agreement and on any other agreement, exhibit or document attached to this
Agreement (this Agreement and such other agreements, exhibits and documents are
collectively referred to herein as the "TRANSACTION DOCUMENTS") or otherwise to
prevent such entity and its subsidiaries from performing their obligations under
the Transaction Documents; PROVIDED, HOWEVER, that the parties agree that any
event, change or affect that has an adverse impact on the Company and its
Subsidiaries which, where quantifiable, is individually greater than or equal to
forty thousand U.S. dollars ($40,000) or is individually in lesser amounts which
are in the aggregate greater than or equal to two hundred thousand U.S. dollars
($200,000) shall be deemed a Material Adverse Effect for purposes of the
Transaction Documents.
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In this Agreement, any reference to a party's "KNOWLEDGE" means what such
party knew or ought reasonably to have known had it made due and diligent
inquiry of its and the Group Companies' officers, directors, employees, and
legal counsel and auditors of such party and of the Group Company reasonably
believed to have knowledge of such matters.
The Selling Shareholders hereby, jointly and severally, represent and
warrant to the Purchaser that the statements contained in this Section 3
(including any of its subsections) are true and correct on the date hereof and
will be true and correct on the date of the Closing, except as expressly, fully,
fairly and specifically set forth in the disclosure schedule delivered by the
Selling Shareholders to the Purchaser on or before the date of this Agreement
and attached hereto as Exhibit C (the "COMPANY DISCLOSURE SCHEDULE"). In all
other respects, Article 200 of the Swiss Code of Obligations is not applicable
to this Agreement. The Company Disclosure Schedule shall be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Section 3. For purposes of this Section 3, the "COMPANY" shall be deemed to
include each of the Company's Subsidiaries.
3.1 ORGANIZATION, STANDING AND POWER; SUBSIDIARIES. Each of the Company and
each subsidiary of the Company (each a "SUBSIDIARY") is a company with limited
liability duly organized and validly existing and, if applicable, in good
standing under the laws of its jurisdiction of organization. Each of the Company
and each Subsidiary has the requisite corporate power and authority and has all
necessary Swiss and German government, municipal and other approvals to own,
lease and operate its properties and to carry on its business as now being
conducted. Each of the Company and each Subsidiary (each a "Group Company" and
together the "Group Companies") is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing necessary, except where the
lack to be so qualified or licensed would not have a Material Adverse Effect.
SECTION 3.1 of the Company Disclosure Schedule contains a true and complete list
of all the Subsidiaries. SECTION 3.1 of the Company Disclosure Schedule also
contains a true and complete listing of the locations of all sales offices of
any Group Company, manufacturing facilities, and any other office or facilities
of the Group Companies, a true and complete list of all jurisdictions in which
the Group Companies maintain any directors, officers or employees, and a true
and complete list of the jurisdiction of incorporation of each Group Company and
all jurisdictions in which any Group Company is licensed to transact business as
a foreign corporation. The Company is the owner of all outstanding shares of
capital stock of each Subsidiary and all such shares are duly authorized,
validly issued, fully paid and nonassessable. All of the outstanding shares of
capital stock of each Subsidiary are owned by the Company free and clear of all
encumbrances or rights of others. There are no outstanding subscriptions,
options, warrants, puts, calls, rights, exchangeable or convertible securities
or other commitments or agreements of any character relating to the issued or
unissued capital stock or other securities of any Group Company, or otherwise
obligating any Group Company to issue, transfer, sell, purchase, redeem or
otherwise acquire any such securities. No Group Company directly or indirectly
owns, nor has any Group Company committed or agreed to acquire, any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, limited liability company, joint venture or other business
association or entity.
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3.2 COMMERCIAL REGISTER; ARTICLES OF ASSOCIATION, MEMORANDUM OF ASSOCIATION
AND BYLAWS. Attached as Section 3.2 of the Company Disclosure Schedule are an
excerpt from the Commercial Register and a true and correct copy of the Articles
of Association, Memorandum of Association and Bylaws or other charter documents
(collectively, the "CHARTER DOCUMENTS"), as applicable, of each Group Company,
each as amended to date, and no amendments have been made thereto or have been
authorized since the date thereof. No Group Company is in violation of any of
the provisions of its Charter Documents or equivalent organizational documents.
No further or other signature rights than reflected in the excerpts from the
Commercial Register exist, except for the amendments as per Section
6.3(c)(iii)(A) and 6.3(m) below as requested by the Purchaser.
3.3 CAPITAL STRUCTURE.
(a) The stated capital of the Company amounts to eight hundred
thousand Swiss Francs (CHF 800,000) divided into eight hundred (800) bearer
shares fully paid up in cash with a par value of CHF 1,000 each, of which
seven hundred sixty (760) shares are held by the Selling Shareholders and
forty (40) shares are held by the Company. There are no other outstanding
shares or voting securities of the Company and no outstanding commitments
to issue any shares or voting securities of the Company other than as set
forth above.
All outstanding shares of the Group Companies were issued in
compliance with all applicable securities and corporate laws of the
jurisdiction in which such Companies are incorporated and are duly
authorized, validly issued, fully paid and nonassessable.
The issued and outstanding share capital of the Company is held
legally and beneficially and of record by the Selling Shareholders as set
forth on Exhibit A, free and clear of all Encumbrances (as defined below).
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(b) Except for the rights created pursuant to the Transaction
Documents, there are no options, warrants, rights (including conversion or
preemptive rights and rights of first refusal or similar rights) or
agreements, orally or in writing, for the purchase or acquisition from any
Group Company of any shares of its share capital, commitments, agreements
or arrangements of any character to which the Company or any Subsidiary is
a party to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of any Group
Company or obligating any Group Company to grant, extend, accelerate the
vesting of, change the price of, or otherwise amend or enter into any such
option, warrant, call, right, commitment or agreement (collectively,
"Company Rights"). Except as set forth in the Company Disclosure Schedule,
there are no contracts, commitments or agreements relating to the voting,
purchase or sale of any Group Company's share capital between such Group
Company and any shareholder or among any such shareholders. There is no
action, proceeding, claim or, to the Selling Shareholders' knowledge,
investigation against any Selling Shareholder or the Selling Shareholders'
assets or properties, pending or, to such Selling Shareholders' knowledge,
threatened, at law or in equity, by or before any court, arbitrator or
other tribunal, or before any administrative law judge, hearing officer or
administrative agency relating to or in any other manner impacting upon the
Shares held by such Selling Shareholder.
(c) There is no Company stock option plan.
(d) The Shares are the only shares of the Company.
(e) The delivery by the Selling Shareholders of the respective bearer
share certificates to the Purchaser and the Purchaser's payment for and
acceptance thereof, will transfer to the Purchaser good, valid and
marketable title to all of the outstanding share capital of the Company
free and clear of any Encumbrances. Immediately following the Closing, the
Purchaser will own 100% of the outstanding share capital of the Company,
and all options, warrants and other rights to acquire shares of the
Company, free and clear of all pledges, liens, encumbrances, charges,
mortgages, security interests or other third party rights (whether IN REM
or IN PERSONAM), irrespective of whether such third party rights arise
under any agreement or other instrument, by the mere operation of statutory
or other laws or by means of a judgment, order or decree of any court,
judicial or administrative authority, including the requirement to obtain
any approval or consent from a third party or authority to the exercise or
full vesting of a right or title ("Encumbrances", and "Encumber" shall be
construed accordingly).
3.4 AUTHORIZATION. Each Selling Shareholder has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of each Selling
Shareholder, and no further action is required on the part of the Company nor
the Selling Shareholders to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Selling Shareholders. This Agreement constitutes, assuming the due
authorization, execution and delivery by the other parties hereto, the valid and
legally binding obligation of the Selling Shareholders, enforceable by the
Purchaser against the Selling Shareholders in accordance with its terms.
- 10 -
3.5 NO CONFLICT. Except as disclosed in Section 3.5 of the Disclosure
Schedule, the execution and delivery of this Agreement by the Selling
Shareholders does not, and the consummation of the transactions contemplated
hereby will not, conflict with, or result in any termination, violation, or
breach of, or default under (with or without notice or lapse of time, or both),
or give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any benefit under, or give rise to right to amend or
renegotiate, or result in the creation or imposition of any Encumbrance upon any
Selling Shareholder's Shares due to (any such event, a "CONFLICT") (a) any
provision of the Charter Documents of any Group Company or any Selling
Shareholder, or (b) any mortgage, indenture, lease, contract or other agreement
or instrument, permit, concession, franchise or license to which any Selling
Shareholder or any Group Company or any of their respective properties or assets
is subject, or (c) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to any Group Company or any Selling Shareholder or their
respective properties or assets. Except as set forth in the Company Disclosure
Schedule, the Company and the Selling Shareholders, to their knowledge, are not
aware that any party to any Company Contract would in any way change such
party's course of performance of such Company Contract following the Closing.
Following the Closing, each Group Company and the Purchaser will be permitted to
exercise all of such Group Company's rights under the Company Contracts without
the payment of any additional amounts or consideration other than ongoing fees,
royalties or payments which such Group Company would otherwise be required to
pay had the transactions contemplated by the Transaction Documents not occurred.
3.6 CONSENTS. Except as set forth in the Disclosure Schedule for Section
3.5, no consent, waiver, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any court,
administrative agency or commission or any governmental authority,
instrumentality, agency or commission ("GOVERNMENTAL ENTITY") or any third
party, including a party to any agreement with the Company or any Selling
Shareholder, is required by or with respect to the Company or any Selling
Shareholder in connection with, the execution and delivery of the Transaction
Documents or the consummation of the transactions contemplated thereby.
3.7 COMPANY FINANCIAL STATEMENTS.
(a) Attached as Section 3.7(a) of the Company Disclosure Schedule are
the audited balance sheets of FAST Video Security AG as of December 31,
2002, December 31, 2003 and December 31, 2004 (the "Balance Sheet Date")
and the related statements of income for the years then ended, accompanied
by the report of the Company's independent auditors thereon, and the
unaudited balance sheets of FAST Video Security GmbH as of December 31,
2002, December 31, 2003, and December 31, 2004 and the related statements
of income for the years then ended, and the unaudited consolidated balance
sheets of FAST Video Security AG and FAST Video Security GmbH as of
December 31, 2002, December 31, 2003, and December 31 2004 and the related
consolidated statements of income for the years then ended (the "Financial
Statements"). Attached as Section 3.7(b) of the Company Disclosure Schedule
are the unaudited consolidated balance sheet of the FAST Video Security AG
and FAST Video Security GmbH as of September 30, 2005 and the related
consolidated statement of income for the nine months then ended (the
"Unaudited Interim Financial Statements"). Each of the Financial Statements
(including, in each case, the related notes thereto) and the Unaudited
Interim Financial Statements were prepared in accordance with Swiss GAAP
applied on a consistent basis throughout the periods involved, and fairly
present the financial position, and where specified above the consolidated
financial position, of FAST Video Security AG and FAST Video Security GmbH
as at the respective dates thereof and the results of their operations, and
where specified above the consolidated results of their operations, for the
periods indicated, except that the Unaudited Interim Financial Statements
and the consolidated balance sheets and related consolidated statements of
income for FAST Video Security AG and FAST Video Security GmbH do not
contain notes that may be required by Swiss GAAP.
- 11 -
(b) The Group Companies maintain and will continue to maintain a
standard system of accounting established and administered in accordance
with Swiss GAAP. The Group Companies maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with Swiss GAAP
and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management's general or specific authorization, and
(iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect
to any differences. The Company has made available to Purchaser complete
and correct copies of, all existing written descriptions of, and all
existing policies, manuals and other documents promulgating, such internal
accounting controls. The Company's Unaudited Interim Financial Statements
shall be referred to herein as the "Company Current Balance Sheet."
3.8 ACCOUNTS RECEIVABLE. All accounts receivable reflected on the Company
Current Balance Sheet or arising after such Company Current Balance Sheet date
have arisen from bona fide transactions in the ordinary course of business
consistent with past practice and in accordance with Swiss GAAP applied on a
consistent basis and are not subject to valid defenses, setoffs or
counterclaims. The Group Company's reserve for contractual allowances and
doubtful accounts is adequate and has been calculated in a manner consistent
with past practice. Since the Balance Sheet Date, no Group Company has modified
or changed in any material respect its sales practices or methods including,
without limitation, such practices or methods in accordance with which such
Group Company sells goods or services, fills orders or records sales.
3.9 NO UNDISCLOSED LIABILITIES. No Group Company has any liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other,
which individually or in the aggregate (i) has not been reflected in or reserved
against in the Company Current Balance Sheet, and (ii) has not arisen in the
ordinary course of business consistent with past practices since the Balance
Sheet Date. The reserve set forth in the Company Current Balance Sheet for
returns of Company products due to temperature malfunction is adequate to cover
anticipated returns, and no Company products in excess of such reserve will be
returned. There is no commitment or liability, express or implied, oral or
written, to any supplier or other party with which the Company has any
agreement, with respect to estimates or projections of futures purchases or
sales of the Company's products.
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3.10 NO CHANGES. Since the Balance Sheet Date there has not been, occurred
or arisen any:
(a) transaction by any Group Company except in the ordinary course of
business and consistent with past practices;
(b) amendment or change to the Charter Documents of any Group Company;
(c) capital expenditure or capital commitment by any Group Company
except in the ordinary course of business consistent with past practice but
in any event not in excess of forty thousand U.S. dollars ($40,000);
(d) destruction of, damage to or loss of any material assets, material
business or material customer of any Group Company (whether or not covered
by insurance);
(e) work stoppage, labor strike or other labor trouble, or any action,
suit, claim, labor dispute or grievance relating to any labor, safety or
discrimination matter involving any Group Company, including, without
limitation, charges of wrongful termination of employment or other unlawful
labor practices or actions;
(f) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by any Group Company other
than as required by Swiss GAAP;
(g) revaluation by any Group Company of any of its respective assets;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to any shares of any Group Company or any direct
or indirect redemption, purchase or other acquisition by any Group Company
of its share capital;
(i) other than the compensation set forth in Section 3.21 of the
Company Disclosure Schedule, increase in the salary or other compensation
payable or to become payable by any Group Company to any of its officers,
directors, employees or advisors, or the declaration, payment or commitment
or obligation of any kind for the payment, by any Group Company, of a bonus
or other additional salary or compensation to any such person, or the entry
by any Group Company into an agreement by which any person is newly
employed;
(j) agreement, contract, covenant, instrument, lease, or commitment to
which any Group Company is a party or by which it or any of its assets is
bound and which is material to any Group Company's business or any
termination, extension, amendment or modification of the terms of any such
agreement, contract, covenant, instrument, lease, or commitment to which
any Group Company is a party or by which it or any of its assets is bound,
other than licenses of the Company Intellectual Property which are governed
by subsection (q) below, and except as set forth in Section 3.10(j) of the
Disclosure Schedule;
(k) sale, lease, license (other than licenses of the Company
Intellectual Property entered into in the ordinary course of business
consistent with past practice) or other disposition of any of the material
assets or properties of any Group Company or any creation of any security
interest in such assets or properties;
- 13 -
(l) loan by any Group Company to any person or entity, incurring by
any Group Company of any indebtedness, guaranteeing by any Group Company of
any indebtedness, issuance or sale of any debt securities of any Group
Company or guaranteeing of any debt securities of others;
(m) waiver or release of any right or claim of any Group Company
material to any Group Company's business, including any write-off or other
compromise, not disclosed in the Unaudited Interim Financial Statements, of
any account receivable of any Group Company
(n) commencement or notice or, to the Selling Shareholders' knowledge,
threat or reasonable basis therefor, of any lawsuit or, to the Selling
Shareholder's knowledge, proceeding, audit or investigation against any
Group Company or their affairs except as set forth in the Disclosure
Schedule for Section 3.9, other than as would not have a Material Adverse
Effect;
(o) notice of any claim or, to the best knowledge of the Selling
Shareholders, potential claim of ownership by any person other than the
relevant Group Company of any of the Company Intellectual Property (as
defined in Section 3.14 hereof) owned by or developed or created by the
relevant Group Company or of infringement by any Group Company of any other
person's Intellectual Property (as defined in Section 3.14 hereof);
(p) issuance or sale, or contract to issue or sell, by any Group
Company of any SHARES or securities exchangeable, convertible or
exercisable therefor, or any securities, warrants, options or rights to
purchase any of the foregoing;
(q) (i) sale by any Group Company of any Company Intellectual Property
or the entering into of any license agreement, security agreement,
assignment or other conveyance or option, with respect to Company
Intellectual Property with any person or entity (other than standard
customer license agreements entered into in the ordinary course of business
consistent with past practice), or (ii) the purchase or other acquisition
of any Intellectual Property or the entering into of any license agreement,
security agreement, assignment or other conveyance or option with respect
to the Intellectual Property of any person or entity (other than standard
license agreements entered into as a result of purchases in the ordinary
course of business consistent with past practice), or (iii) the material
change in pricing or royalties set or charged by any Group Company to its
customers or licensees or in pricing or royalties set or charged by persons
who have licensed Intellectual Property to any Group Company;
(r) event or condition of any character not disclosed elsewhere in
this Section 3.10 that has had or is reasonably likely to have a Material
Adverse Effect with respect to any Group Company; or
(s) negotiation or agreement by any Group Company or any director,
officer or employees thereof to do any of the things described in the
preceding clauses (a) through (r) (other than negotiations with Purchaser
and its representatives regarding the transactions contemplated by the
Transaction Documents or negotiations related to actions or agreements set
forth in the Disclosure Schedules for this Section).
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3.11 TAX MATTERS.
(a) DEFINITION OF TAXES. For the purposes of this Agreement, "TAX" or,
collectively, "TAXES", means (i) any and all domestic and foreign taxes,
assessments and other similar governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, distributions, and value added,
ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise and property taxes, and customs duties, together with
all interest, penalties and additions imposed with respect to such amounts;
(ii) any liability for the payment of any amounts of the type described in
clause (i) as a result of being a member of an affiliated, consolidated,
combined or unitary group for any period; and (iii) any liability for the
payment of any amounts of the type described in clause (i) or (ii) as a
result of any express or implied obligation to indemnify any other person
or as a result of any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) TAX RETURNS AND AUDITS.
(i) Each Group Company as of the Closing Date will have prepared
and timely filed all domestic and foreign returns, estimates,
information statements and reports ("RETURNS") required to be filed
prior to the Closing Date relating to any and all Taxes of such Group
Company or its operations, and such Returns are and will be true and
correct and have been and will be completed in accordance with
applicable law.
(ii) Each Group Company as of the Closing Date will have: (A)
paid all Taxes it is required to pay and withheld with respect to its
directors, officers and employees all income taxes and other Taxes
required to be withheld, and (B) accrued on the Company Current
Balance Sheet all Taxes attributable to the periods covered by the
Company Current Balance Sheet and/or to previous periods and has not
incurred any liability for Taxes for the period after the date of the
Company Current Balance Sheet and prior to the Closing Date other than
in the ordinary course of business consistent with past practice.
(iii) No Group Company has been delinquent in the payment of any
Tax, nor is there any Tax deficiency outstanding, assessed or proposed
against any Group Company, nor has any Group Company executed any
currently effective waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
(iv) No audit, investigation or other examination of any Return
of any Group Company is (to the Selling Shareholders' knowledge)
presently in progress, nor has any Group Company been notified of any
request for such an audit, investigation or other examination.
(v) No Group Company has any liabilities for unpaid Taxes
incurred prior to the date of the Company Current Balance Sheet
(including without limitation any liabilities for Taxes as a result of
being a member of a consolidated, combined or unitary group) which
have not been accrued or reserved on the Company Current Balance
Sheet, whether asserted or unasserted, contingent or otherwise
(including without limitation any liabilities for Taxes as a result of
being a member of a consolidated, combined or unitary group), and no
Group Company has incurred any such liability for Taxes since the date
of the Company Current Balance Sheet other than in the ordinary course
of business.
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(vi) Each Group Company has given the Purchaser or the
Purchaser's representatives access to copies of all foreign, state and
local income and all value added tax Returns for or including any
Group Company filed for all periods since January 1, 2002.
(vii) There are no Encumbrances of any sort on the assets of any
Group Company relating to or attributable to Taxes other than liens
for Taxes not yet due and payable.
(viii) Neither the Company nor any Selling Shareholder has
knowledge of any basis for the assertion of any claim relating or
attributable to Taxes which, if adversely determined, would result in
any Encumbrance on the assets of any Group Company.
(ix) No Group Company is a party to any tax sharing,
indemnification or allocation agreement nor does any Group Company owe
any amount under any such agreement.
(x) Each Group's Company's tax basis in its assets for purposes
of determining its future amortization, depreciation and other income
Tax deductions is accurately reflected on such Group Company's tax
books and records.
(xi) There is no contract, agreement, plan or arrangement to
which any Group Company is a party, including but not limited to the
provisions of the Transaction Documents, covering any employee or
former employee of any Group Company, which, individually or
collectively, could give rise to the payment of any amount that would
not be deductible pursuant to the applicable tax laws and regulations.
(xii) No Group Company has been treated for any taxation purposes
as resident in a country other than its country of incorporation and
has not had a branch agency or permanent establishment in a country
other than in its country of incorporation.
(xiii) No Group Company has had or currently has the benefit of
any tax concession or clearance, including in particular, the benefit
of which will or might be lost upon or as a consequence of
implementation of the arrangements contemplated by the Transaction
Documents.
(xiv) Each Group Company has paid all stamp duties and tax duties
for which they are or were liable.
(xv) The Group Companies have at their disposal all supporting
documents in connection with (i) all filed tax returns, reports and
other filings, and (ii) all tax returns, reports and other filings
still to be filed which refer to assessment periods (partially or
fully) before the Closing Date, in each case in form and substance in
accordance with the statutory requirements.
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(xvi) None of the Shares or the shares of any Subsidiary or the
assets of any Group Company are subject to any restriction periods
during which (i) the transfer of such shares or assets, or (ii)
distributions with respect to such shares, or (iii) mergers or other
restructurings involving such shares or assets, or (iv) any other
dealings with or in relation to these shares or assets, or (v) the
loss of common control over a Group Company and another company would
trigger or increase a liability for Taxes of any Group Company, of the
Purchaser or of any third party, and none of the Group Companies has
any contingent liability with regard to such restriction periods
encumbering shares or assets of other companies.
(xvii) There are no special agreements with, or concessions from,
tax or other authorities, formal or informal, which have an impact on
the Taxes chargeable on any of the Group Companies.
(c) REPAYMENT OF SHAREHOLDERS' LOANS NOT TO TRIGGER TAXES
The Selling Shareholders represent that the waiver of repayment
of the Shareholders Loans according to paragraph 6.3 (g) will not
trigger for the Company (i) Swiss stamp duty, (ii) the loss of
reclaimable VAT, or (iii) a reduction of available tax loss carry-
forwards and that the Selling Shareholders and/or the Company shall
obtain rulings from the competent tax authorities to that effect.
3.12 RESTRICTIONS ON BUSINESS ACTIVITIES.
(a) No Group Company is a party to or is bound by nor has it made any
offer or tender to enter into: (i) any obligation outside the ordinary
course of such Group Company's business, or of an onerous long term nature
(for which purposes a long term obligation shall mean one which is not
terminable by such Group Company without liability to damages within six
months from the Closing), or (ii) any agreement, arrangement or
understanding which in any respect is unusual having regard to the usual
practice of the such Group Company or other entities carrying on similar
businesses, or (iii) other than in the ordinary course of business, any
agreement, arrangement or understanding under which any Group Company is or
may become liable to pay any service, management or similar charge or any
interest or other periodic payment.
(b) There is no agreement (non-compete or otherwise), commitment,
judgment, injunction, order or decree to which any Group Company is a party
or otherwise binding upon any Group Company which has or may reasonably be
expected to have the effect of prohibiting or impairing in any respect any
business practice of such Group Company, any acquisition of property
(tangible or intangible) by any Group Company or the overall conduct of
business by any Group Company as currently conducted or as proposed to be
conducted by any Group Company except as set forth in the Disclosure
Schedule for Section 3.12(a). Without limiting the foregoing, neither any
Group Company has entered into any agreement under which such Group Company
is restricted from selling, licensing or otherwise distributing any of its
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 except as set forth in the Disclosure
Schedule for Section 3.12(a).
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3.13 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION OF
EQUIPMENT.
(a) Each Group Company has good and marketable title to all of its
respective properties and assets, real, personal and mixed, reflected in
the Company Current Balance Sheet or acquired after the date of the Company
Current Balance Sheet, or with respect to leased properties and assets,
valid leasehold interests in, free and clear of all Encumbrances of any
kind or character. The plants, property and equipment of the Group
Companies that are used in the operations of their businesses are in good
operating condition and repair. All properties used in the operations of
the Group Company are reflected in the Company Current Balance Sheet to the
extent GAAP requires the same to be reflected. SECTION 3.13(A) of the
Company Disclosure Schedule sets forth a true, correct and complete list of
all real property owned or leased by each Group Company, the name of the
lessor, the start and end dates of the lease and each amendment thereto,
the aggregate monthly and annual rental and other fees payable under such
lease, and any additional material terms. Such leases are in good standing,
are valid and effective in accordance with their respective terms, and
there is not under any such leases any existing default or event of default
(or event which with notice or lapse of time, or both, would constitute a
default).
(b) THE EQUIPMENT owned or leased by each Group Company is, taken as a
whole, (i) adequate for the conduct of the business of each Group Company
as currently conducted, and (ii) such equipment which is so used is in good
operating condition, regularly and properly maintained, subject to normal
wear and tear. The Company has good and valid title to all of the equipment
listed in Section 3.13(b) of the Company Disclosure Schedule which is
located at Formatest AG, at BMK professional electronics GmbH and at PLG
Produktions - und Leistungs-Gesellschaft, and has no reason to believe that
the Company would not be able to remove and take possession of such
equipment at any time.
(c) No Group Company nor any Selling Shareholder has sold or otherwise
released for distribution any of any Group Company's customer files and
other customer information relating to such Group Company's current and
former customers (the "CUSTOMER INFORMATION") except for disclosure during
due diligence performed by one potential acquirer in 2005; provided,
however, that such potential acquirer was party to a customary
nondisclosure agreement with the Company. No person other than the Group
Companies possesses any claims or rights with respect to use of the
Customer Information.
(d) All inventory of the Company's products and all raw materials
therefore currently located at Formatest AG are suitable and useable in
their current condition for the current and anticipated future versions of
the Company's "Alpha Blue" product.
3.14 INTELLECTUAL PROPERTY.
(a) For the purposes of this Agreement, the following terms have the
following definitions:
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(i) "INTELLECTUAL PROPERTY" shall mean any or all of the
following and all rights in, arising out of, or associated therewith:
(i) all Swiss, German, European, United States, and foreign patents
and applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part
thereof; (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information,
know how, methods, teaching and learning techniques, technology,
technical data, statistical and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyright
registrations and applications therefor and all other rights
corresponding thereto throughout the world; (iv) all mask works, mask
work registrations and applications therefor; (v) all industrial
designs and any registrations and applications therefor throughout the
world; (vi) all trade names, logos, common law trademarks and service
marks; trademark and service ▇▇▇▇ registrations and applications
therefor and all goodwill associated therewith throughout the world;
(vii) all databases and data collections and all rights therein
throughout the world; (viii) all computer software including all
source code, object code, firmware, development tools, test suites,
files, records and data, all media on which any of the foregoing is
recorded, all Web addresses, sites and domain names; and (ix) all
documentation related to any of the foregoing irrespective of the
media on which it is recorded.
(ii) "COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual
Property that is owned by or exclusively licensed to any Group
Company.
(iii) "REGISTERED INTELLECTUAL PROPERTY" shall mean all: (i)
patents and patent applications (including provisional applications);
(ii) registered trademarks, applications to register trademarks,
intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered copyrights and applications
for copyright registration; (iv) any mask work registrations and
applications to register mask works; and (v) any other Intellectual
Property that is the subject of an application, certificate, filing,
registration or other document issued by, filed with, or recorded by,
any state, government or other public legal authority.
(b) SECTION 3.14(B) of the Company Disclosure Schedule lists all
Registered Intellectual Property owned by, or filed in the name of, any
Group Company (the "COMPANY REGISTERED INTELLECTUAL PROPERTY") and lists
any commencement or notice or to the knowledge of the Selling Shareholders,
threat of any proceedings or actions before any court, tribunal (including
the United States Patent and Trademark Office (collectively, the "PTO") or
equivalent authority anywhere in the world) related to any of the Company
Registered Intellectual Property.
(c) Each item of the Company Intellectual Property, including all
Company Registered Intellectual Property listed in SECTION 3.14(B) of the
Company Disclosure Schedule and all Intellectual Property licensed to
Company is free and clear of any Encumbrances. Each Group Company (i) is
the exclusive owner of all trademarks and trade names set forth in the
Disclosure Schedule used in connection with the operation or conduct of the
business of the Company, including the sale of any products or technology
or the provision of any services by the Company, and (ii) owns exclusively,
and has good title to, all copyrighted works that are its products or other
works of authorship that is otherwise purports to own.
(d) To the extent that any Intellectual Property has been developed or
created by any person other than the Group Company for which such Group
Company has, directly or indirectly, paid (including but not limited to
directors, officers, employees and consultants, and former directors,
officers, employees and consultants of the Company), such Group Company has
a written agreement with such person with respect thereto and such Group
Company thereby has obtained ownership of, and is the exclusive owner of,
all such Intellectual Property by operation of law or by valid assignment
and does not owe any consideration to any third party in connection
therewith.
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(e) No Group Company has transferred ownership of or granted any
license of or right to use or authorized the retention of any rights to use
any Intellectual Property that is or was Company Intellectual Property, to
any other person other than licenses or rights to use contained in standard
customer license agreements entered into in the ordinary course of business
consistent with past practice.
(f) The Company Intellectual Property constitutes all the Intellectual
Property used in and/or necessary to the conduct of the Group Company's
business as it currently is conducted or is reasonably contemplated to be
conducted by the Group Companies, including, without limitation, the
design, development, manufacture, marketing, use, import and sale of the
products, technology and services of the Group Companies (including
products, technology or services currently under development).
(g) The contracts, licenses and agreements listed in Section 3.14(g)
of the Company Disclosure Schedule include all contracts, licenses and
agreements to which any Group Company is a party with respect to any
Intellectual Property (the "COMPANY LICENSES") other than standard customer
license agreements entered into in the ordinary course of business. No
person who has licensed Intellectual Property to any Group Company has
ownership rights or license rights to improvements made by any Group
Company in such Intellectual Property which has been licensed to such Group
Company.
(h) SECTION 3.14(H) of the Company Disclosure Schedule lists all
contracts, licenses and agreements between any Group Company and any other
person wherein or whereby such Group Company has agreed to, or assumed, any
obligation or duty to warrant, indemnify, reimburse, defend, hold harmless,
guaranty or otherwise assume or incur any obligation or liability or
provide a right of rescission with respect to the infringement or
misappropriation by such Group Company or such other person of the
Intellectual Property of any person other than such Company, other than
standard customer license agreements and OEM or reseller agreements entered
into in the ordinary course of business consistent with past practice.
(i) The operation of the business of each Group Company as it
currently is conducted, or as is currently contemplated to be conducted by
such Group Company, including but not limited to such Group Company's
design, development, use, import, manufacture and sale of the products,
technology or services (including products, technology or services
currently under development) of such Group Company does not infringe upon
or misappropriate the Intellectual Property of any person, violate the
rights of any person (including rights to privacy or publicity), or (to the
knowledge of the Selling Shareholders) constitute unfair competition or
trade practices under the laws of any jurisdiction, and no Group Company
has received notice or threat in writing thereof from any person claiming
that such operation or any act, product, technology or service (including
products, technology or services currently under development) of such Group
Company infringes or misappropriates the Intellectual Property of any
person or constitutes unfair competition or trade practices under the laws
of any jurisdiction (nor is any Group Company or any of the Selling
Shareholders aware of any basis therefor).
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(j) Each item of Registered Intellectual Property is valid and
subsisting, all necessary registration, maintenance and renewal fees in
connection with such Registered Intellectual Property have been paid and
all necessary documents and certificates in connection with such Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities, for the purposes of maintaining such
Registered Intellectual Property.
(k) There are no contracts, licenses or agreements between any Group
Company and any other person with respect to Company Intellectual Property
under which there is any dispute known to such Group Company or the Selling
Shareholders regarding the scope of such agreement, or performance under
such agreement, including with respect to any payments to be made or
received by such Group Company thereunder.
(l) To the best knowledge of the Selling Shareholders, no person is
infringing or misappropriating any Company Intellectual Property.
(m) Each Group Company has taken all appropriate steps to protect such
Group Company's rights in confidential information and trade secrets of
such Group Company or provided by any other person to such Group Company.
Without limiting the foregoing, each Group Company has and enforces a
policy requiring each director, officer, employee, consultant and
contractor with access to Company Intellectual Property to execute
proprietary information, confidentiality and assignment agreements in Group
Company's standard forms, and all current and former directors, officers,
employees, consultants and contractors of each Group Company have executed
such an agreement, true, correct and complete copies of which have been
provided to Purchaser.
(n) No Company Intellectual Property or product, technology or service
of any Group Company is subject to any pending proceeding or outstanding
decree, order, judgment, agreement or stipulation that restricts in any
manner the use, transfer or licensing thereof by such Group Company or may
affect the validity, use or enforceability of the Company Intellectual
Property.
(o) No (i) product, technology, service or publication of any Group
Company, (ii) material published or distributed by any Group Company or
(iii) conduct or statement of any Group Company constitutes obscene
material or a defamatory statement or constitutes false advertising.
(p) Except as set forth in the Disclosure Schedules, no Group Company
has any escrow agreement or arrangement between such Group Company and any
person or entity that would permit such person or entity or any other party
to obtain a copy of such Group Company's source code and program
documentation (or any portion thereof) upon the liquidation, dissolution or
winding up of such Group Company or any Selling Shareholder or upon
termination, breach or alleged breach of any contract or agreement between
such Group Company and such person or entity, or under any other
circumstances. Without limiting the generality of the foregoing, no portion
of the software products of any Group Company is subject to the provisions
of any open source or other third party license agreement that (i) requires
the distribution of source code in connection with the distribution of such
software in object code form; (ii) prohibits or limits such Group Company
from charging a fee or receiving consideration in connection with
sublicensing or distributing such licensed software (whether in source code
or object code form); or (iii) allows a customer or requires that a
customer have the right to decompile, disassemble or otherwise reverse
engineer the software by its terms and not by operation of law.
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(q) No Group Company has registered the word "FAST" or any name
containing the said word, or variation thereof, with any registry, as a
company, trade name or otherwise, or in any part of the world, except as
set forth in Section 3.14(b) to the Company Disclosure Schedule.
3.15 AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Except as set forth in the Company Disclosure Schedule, no Group
Company is a party to or otherwise bound by
(i) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a firm or
other organization;
(ii) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting
of benefits of which will be accelerated, by the occurrence of any of
the transactions contemplated by the Transaction Documents or the
value of any of the benefits of which will be calculated on the basis
of any of the transactions contemplated by the Transaction Documents;
(iii) any fidelity or surety bond or completion bond;
(iv) any lease of personal property to any Group Company;
(v) any agreement, contract or commitment containing any covenant
limiting the freedom of any Group Company to engage in any line of
business or to compete with any person,
(vi) any agreement, contract or commitment relating to material
capital expenditures and involving future payments;
(vii) any agreement, contract or commitment relating to the
leasing, licensing, disposition or acquisition of assets or any
interest in any business enterprise outside the ordinary course of any
Group Company business;
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(viii) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other agreements or instruments
relating to the borrowing of money or extension of credit;
(ix) any purchase order or contract for the purchase of materials
outside the ordinary course business consistent with past practice,
but in any event not for more than forty thousand U.S. dollars
($40,000);
(x) any construction contracts;
(xi) any dealer, agency, distribution, joint marketing,
development or indemnification agreement;
(xii) any sales representative, original equipment manufacturer,
value added, remarketer, reseller or other agreement for distribution
of any Group Company's products or services, or the products or
services of any person;
(xiii) any agreement, contract or commitment that involves or
that could reasonably be expected to involve (i) aggregate payments by
any Group Company, or the receipt by any Group Company, of forty
thousand U.S. dollars ($40,000) or more individually or in the
aggregate and that is not cancelable without penalty within thirty
(30) calendar days, (ii) minimum purchase commitments by any Group
Company, or (iii) ongoing service or support obligations and that are
not cancelable without penalty or refund within third (30) calendar
days; or
(xiv) any agreement under which such Group Company has made any
representations or warranties whose time limits have not yet expired
in connection with the acquisition, disposal or any other transfer of
shares or other assets or under which such Group Company could be held
liable in connection with such representations or warranties under
guarantees, suretyships or similar engagements or in any other way,
and there are no claims of third parties based on such representations
or warranties, or such guarantees, suretyships or similar engagements,
which may be set off against claims of any of the Group Companies.
(b) Each Group Company is in material compliance in all respects with
and has not breached, violated or defaulted under, or received notice that
it has breached, violated or defaulted under, any of the terms or
conditions of any agreement, contract, covenant, instrument, lease, license
or commitment to which any Group Company is a party or by which it is bound
(each, a "COMPANY CONTRACT"), nor is any Group Company or any Selling
Shareholder aware of any event that would constitute such a breach,
violation or default with the lapse of time, giving of notice or both. Each
Company Contract is in full force and effect and, to the knowledge of the
Selling Shareholders, is not subject to any material default thereunder by
any party obligated to any Group Company pursuant thereto. Each Group
Company has obtained or will obtain prior to the Closing all necessary
consents, waivers and approvals of the parties listed in EXHIBIT F as are
required for the Company Contracts with such parties to remain in effect
without modification after the Acquisition.
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(c) No Group Company, or any of its directors, officers, employees,
representatives, or agents has for the purpose of securing any contract or
advantage to any Group Company given or offered any bribe, kick-back, or
any corrupt, unlawful or immoral payment or contribution.
(d) Except as set forth in the Company Disclosure Schedule, no Company
Contract has been entered into otherwise than pursuant to normal "arm's
length" commercial terms.
3.16 GOVERNMENTAL AUTHORIZATION. SECTION 3.16 of the Company Disclosure
Schedule accurately lists each consent, license, permit, grant or other
authorization (i) issued to any Group Company by a Governmental Entity presently
held by any Group Company in connection with the conduct of its business (herein
collectively called "COMPANY AUTHORIZATIONS"); and (ii) required by any Group
Company under any applicable law in order to conduct its business as currently
conducted and as proposed to be conducted ("GOVERNMENTAL AUTHORIZATIONS"). The
Company Authorizations are in full force and effect and constitute all
Governmental Authorizations required to permit any Group Company to operate or
conduct its businesses as presently conducted or hold any interest in its
properties or assets, and to permit the Purchaser to continue to conduct the
business of any Group Company following the Closing
3.17 LITIGATION. Other than as set forth in SECTION 3.9 of the Company
Disclosure Schedule, there is no action, suit or proceeding of any nature
pending, or, to the Company's or the Selling Shareholders' knowledge,
threatened, before any civil, administrative or criminal court, arbitral panel
or administrative or regulatory agency against any Group Company, their
properties or any of its officers, employees or directors in their capacities as
such, nor is there any reasonable basis therefor. Other than as set forth in
SECTION 3.9 of the Company Disclosure Schedule, there is no investigation
pending or threatened, against any Group Company, its respective properties or
any of their respective officers, employees or directors in their capacities as
such (nor is there any reasonable basis therefor) by or before any Governmental
Entity. No Governmental Entity has at any time challenged or questioned the
legal right of any Group Company to conduct its operations as presently or
previously conducted.
3.18 MINUTE BOOKS AND REGISTERS. The minutes of each Group Company to which
counsel for the Purchaser was given access are the only minutes of the board of
directors and shareholders of such Group Company since January 1, 2003, and
contain true and accurate copies of all resolutions adopted by the Board of
Directors (or committees thereof) of such Group Company and its shareholders
since such date, and no other material resolutions have been adopted the time of
incorporation of such Group Company. The share register and the register of
directors of each Group Company, if applicable, completely and accurately set
forth the information required to be included therein.
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3.19 ENVIRONMENTAL MATTERS.
As used in this Agreement:
(i) "ENVIRONMENTAL CLAIM" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims,
Encumbrances, investigations, proceedings or notices of noncompliance or
violation by any person or entity (including any Governmental Entity)
alleging liability or potential liability (including, without limitation,
potential responsibility for or liability for enforcement costs,
investigatory costs, cleanup costs, governmental response costs, removal
costs, remedial costs, natural resources damages, property damages,
personal injuries, fines or penalties) arising out of, based on or
resulting from (a) the presence, or Release or threatened Release into the
environment, of any Hazardous Materials at any location, whether or not
owned, operated, leased or managed by any Group Company; or (b)
circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law; or (c) any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any Hazardous
Materials.
(ii) "ENVIRONMENTAL LAWS" means all Swiss, German, and foreign (to the
extent applicable) laws, rules, regulations and requirements of common law
relating to pollution, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata)
or protection of human health as it relates to protection of the
environment including, without limitation, laws and regulations relating to
Releases or threatened Releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials.
(iii) "HAZARDOUS MATERIALS" means (a) any petroleum or petroleum
products, radioactive materials, asbestos, urea formaldehyde foam
insulation and transformers or other equipment that contain dielectric
fluid containing polychlorinated biphenyls ("PCBs") in regulated
concentrations; and (b) any chemicals, materials or substances which are
now defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants," or
words of similar import, under any Environmental Law; and (c) any other
chemical, material, substance or waste, which is regulated under any
Environmental Law in a jurisdiction in which any Group Company operates.
(iv) "RELEASE" means any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or property.
No Hazardous Material is present, as a result of the actions or
omissions of any Group Company or, to the Selling Shareholders' knowledge,
any third party or otherwise, in, on or under any property, including the
land and the improvements, ground water and surface water, that any Group
Company owns, operates, occupies or leases. No underground storage tanks
are or were present under any such property at such time as any Group
Company owned, operated, occupied or leased such property. No Group Company
has notified any Governmental Entity or third party, or been required under
any law, rule, regulation, order or agreement to notify any Governmental
Entity or third party, of any Release of any Hazardous Material.
- 25 -
At all times, each Group Company has transported, stored, used,
manufactured, disposed of, released or exposed its directors, officers and
employees or others to Hazardous Materials (collectively, "Hazardous
Materials Activities") in compliance with all Environmental Laws.
Each Group Company currently holds all environmental approvals,
permits, licenses, clearances and consents (the "Environmental Permits")
necessary for the conduct of its business as such business is currently
being conducted and is in material compliance with all such Environmental
Permits. No environmental report, closure activity, investigation or
assessment, and no notification to or approval, consent or authorization
from, any Governmental Entity with jurisdiction regarding environmental
matters or Hazardous Materials is required to be obtained in connection
with any of the transactions contemplated by the Transaction Documents.
No Environmental Claim is pending or threatened. The Company and the
Selling Shareholders are not aware of any fact or circumstance, including
any Release, which could reasonably be expected to involve any Group
Company in any Environmental Claim or impose upon any Group Company any
liability concerning Hazardous Materials Activities.
3.20 BROKERS' AND FINDERS' FEES. No Group Company and no Selling
Shareholder has incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with the Agreement or any transaction contemplated hereby
except those to Corum Group International S.a.r.l., which are the responsibility
and liability solely of the Selling Shareholders.
3.21 EMPLOYEE AND EMPLOYEE BENEFIT MATTERS.
(a) Particulars of all the directors, officers, employees and
consultants of each Group Company (each, a "COMPANY EMPLOYEE"), including
maternity leave, military or civil defense service, illness or accident,
necessary work permits and their present compensation packages, are
disclosed in Section 3.21 of the Company Disclosure Schedule, which
particulars show all material benefits including, without limitation,
salaries, directors' fees, social benefits, bonuses, commissions, profit
shares, automobile, reimbursement of expenses and benefits in kind
("BENEFITS"), payable now or in the future (based upon current obligations)
or which such Group Company is bound to provide to each director, officer,
employee and consultant of such Group Company and are true, accurate and
complete.
(b) Except as set forth in SECTION 3.21 of the Company Disclosure
Schedule, no employee of any Group Company has been dismissed in the last
six months or has given notice of termination of his employment. There are
no, and except as set forth in SECTION 3.9 of the Company Disclosure
Schedule there were not in the past, any claims from or on behalf of the
Company Employees threatened or pending against any Group Company or the
Selling Shareholders.
- 26 -
(c) Section 3.21 of the Company Disclosure Schedule includes the form
of contracts under which the Company Employees are engaged.
(d) Except as set forth in SECTION 3.21 of the Company Disclosure
Schedule, there are no agreements or arrangements (whether legally
enforceable or not) for the payment of any pensions, allowances, lump sums,
or other like benefits on retirement or on death or termination or during
periods of sickness or disablement for the benefit of any director or
former director, officer or former officer, consultant or former
consultant, or employee or former employee of any Group Company or for the
benefit of the dependents of any such individual in operation.
(e) Each Group Company has complied with all legislative or other
official provisions relating to the Company Employees and their terms and
conditions of employment and has made all deductions and payments required
to be made by law or any other deductions or payments required by law,
including (without limitation) deductions and payments to the social
security and tax authorities.
(f) Each Company Employee's claims under any mandatory and voluntary
pension fund schemes are fully funded. All other liabilities of any Group
Company to the Company Employees were properly accrued in the Financial
Statements.
(g) No Group Company operates any share incentive scheme, share option
scheme or profit sharing scheme for the benefit of any of its directors,
officers, employees or consultants.
(h) Neither the execution, delivery or performance of the Transaction
Documents, nor the consummation of any of the other transactions
contemplated thereby, will result in any payment (including any bonus,
golden parachute or severance payment) to any current or former employee,
consultant, officer or director of any Group Company (whether or not under
any Plan), or materially increase the benefits payable under any Plan, or
result in any acceleration of the time of payment or vesting of any such
benefits, except as provided therein.
(i) Except as set forth in Section 3.21 of the Company Disclosure
Schedule, each Group Company is in compliance in all respects with all
applicable employment laws and contracts relating to employment, employment
practices, wages, bonuses and terms and conditions of employment, including
employee compensation matters, equal treatment and non- discrimination
provisions.
(j) No Group Company is party to or otherwise bound by the terms of
any collective bargaining agreement. To the best knowledge of the Company
and the Selling Shareholders, there are no organizational campaigns,
petitions or other unionization activities seeking recognition of a
collective bargaining unit which could affect any Group Company; nor are
the Company and the Selling Shareholders aware of any controversies,
strikes, slowdowns or work stoppages pending or threatened between any
Group Company and any of its directors, officers, consultants or employees.
The consummation of any of the transactions contemplated by the Transaction
Documents will not have a material adverse effect on any Group Company's
labor relations, and except as set forth in the Disclosure Schedule for
3.21, none of any Group Company's directors, officers, or employees has
notified any Group Company of any intention to terminate his or her
employment with any Group Company.
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(k) To the best knowledge of the Company and the Selling Shareholders,
no Company Employee is or was in violation of any term of any employment
contract, patent disclosure agreement, proprietary information agreement,
noncompetition agreement, or any other contract, agreement or restrictive
covenant relating to the right of any such Company Employee to be employed
by any Group Company because of the nature of the business conducted or to
be conducted by any Group Company or relating to the use of trade secrets
or proprietary information of others.
(l) Mr. Beat ▇▇▇▇▇ will not seek to terminate the ▇▇▇▇▇ Employment
Agreement (as defined below) or otherwise fully or partially cease to work
for the Company in accordance with the terms of the ▇▇▇▇▇ Employment
Agreement during its initial fixed term of two (2) years, except for
reasons of incapability of performing such work due to death or disability
of Mr. Beat ▇▇▇▇▇ or in case of a justified termination of the employment
agreement by Mr. Beat ▇▇▇▇▇ for cause (art. 337 Swiss Code of Obligations).
3.22 INSURANCE. SECTION 3.22 of the Company Disclosure Schedule lists all
insurance policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of each Group Company.
The Group Companies have the insurance coverage customary in their line of
business. Such insurance coverage is sufficient both with regard to its kind and
the coverage amounts in order to cover the risks which reasonably have to be
expected for businesses such as the ones conducted by the Companies in all
material aspects. There is no, and has not been in the past, any material claim
by any Group Company pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums due and payable under all such policies and
bonds, and all past policies and bonds, have been paid, and each Group Company
is otherwise in compliance with the terms of such policies and bonds (or other
policies and bonds providing substantially similar insurance coverage). No Group
Company has knowledge of any threatened termination of, or premium increase with
respect to, any of such policies.
3.23 NO CONFLICT OF INTEREST. Except as disclosed in the Financial
Statements, at the time of Closing, no Group Company is indebted, directly or
indirectly, to any Selling Shareholder nor to any Group Company's or Selling
Shareholder's employees, officers or directors or to their respective spouses or
children, in any amount whatsoever other than in connection with expenses or
advances of expenses incurred in the ordinary course of business or relocation
expenses of directors, officers and employees. Except as set forth in the
Disclosure Schedule for Section 3.15(d), as of the Closing, no Selling
Shareholder, nor any Group Company's nor any Selling Shareholder's employees,
officers or directors, or any members of their immediate families, are, directly
or indirectly, indebted to any Group Company or have any direct or indirect
ownership interest in any firm or corporation with which any Group Company is
affiliated or with which any Group Company has a business relationship, or any
firm or corporation which competes with any Group Company except that employees,
officers and directors of any Group Company may own stock in (but not exceeding
two percent of the outstanding capital stock of) any publicly traded companies
that may compete with any Group Company. Except as set forth in the Disclosure
Schedule for Section 3.15(d) no Selling Shareholder, nor any Group Company's or
Selling Shareholder's employees, officers or directors or any members of their
immediate families are, directly or indirectly, interested in any material
contract with any Group Company. No Group Company is a guarantor or indemnitor
of any indebtedness of any other person, firm or corporation.
- 28 -
3.24 CERTAIN ADVANCES; GUARANTEES. There are no receivables or other
amounts payable to any Group Company owing by any director, officer, employee,
consultant of any Group Company or by the Selling Shareholders or owing by any
affiliated person or entity of any director, officer, employee, consultant of
any Group Company or the Selling Shareholders. The Selling Shareholders have not
agreed to, or assumed, any obligation or duty to guaranty or otherwise assume or
incur any obligation or liability of any Group Company. No Group Company has
agreed to, or assumed, any obligation or duty to guaranty or otherwise assume or
incur any obligation or liability of any Selling Shareholder.
3.25 CUSTOMERS. No material customer of any Group Company has cancelled or
otherwise terminated, or made any threat to any Group Company to cancel or
otherwise terminate its relationship with such Group Company, or has at any time
on or after December 31, 2004 decreased materially its usage of the services or
products of any Group Company, and to the best knowledge of the Company and the
Selling Shareholders no such customer intends to cancel or otherwise terminate
its relationship with such Group Company or to decrease materially usage of the
services or products of such Group Company or change in any material respect the
terms upon which it trades with such Group Company. No Group Company has
knowingly breached, any agreement with, or engaged in any fraudulent conduct
with respect to, any customer of any Group Company.
3.26 COMPLIANCE WITH LAWS. Each Group Company has complied in all respects
with, is not in violation in any respect of, and has not received any notices of
violation with respect to, any Swiss, German, or foreign law or regulation.
3.27 BANKS / ACCOUNTING AFFAIRS. The records to be handed over to the
Purchaser in accordance with Section 6.3(m) below correctly and completely
document all current dealings of the Group Companies with any bank, in
particular the signature rights for all bank accounts of the Group Companies.
3.28 OFFERS. Each Group Company and the Selling Shareholders have suspended
or terminated, and have the legal right to suspend or terminate, all
negotiations and discussions with respect to any bona fide offer or proposal
for, or any indication of interest in, other than the transactions contemplated
by the Transaction Documents, any (a) sale, license, disposition or acquisition
of all or a material portion of the business or assets of any Group Company, (b)
issuance, grant, disposition or acquisition of (i) any capital stock or other
equity security of any Group Company, (ii) any option, call, warrant or right
(whether or not immediately exercisable) to acquire any capital stock of any
Group Company, or (iii) any security, instrument or obligation that is or may
become convertible into or exchangeable for any capital stock or other equity
security of any Group Company; or (c) any merger, consolidation, business
combination, share exchange, reorganization or similar transaction involving any
Group Company. The suspension and termination of any such negotiations and
discussions has not and will not result in the requirement of any payment by any
Group Company or the Selling Shareholders.
- 29 -
3.29 INSOLVENCY.
(a) No Group Company: (i) has been liquidated, or is subject to a
resolution to be liquidated or dissolved, and there is no action or request
pending to accomplish such liquidation or dissolution, (ii) is bound as a
party to any merger or similar transaction, (iii) has been declared
bankrupt or insolvent, and there is no action or request pending to declare
it bankrupt or insolvent, or (iv) is subject to any order, petition or
resolution with respect to insolvency, bankruptcy or composition
proceedings, appointment of a receiver, liquidator or administrator,
appointment of trustee, or any similar actions or proceedings.
(b) There has not been and there is not, in respect of any Group
Company or any part of its respective business, any unsatisfied judgment or
court order outstanding, or any delay in the payment of any material
obligations due for payment, which might lead to any of the foregoing.
3.30 RECORDS. All of the records, control and other systems, data and
information of each of any Group Company are recorded, stored, maintained or
operated or otherwise held by such Group Company and are not wholly or partly
dependent on any means (including but not limited to electronic, mechanical or
photographic process, computerized or otherwise) which (and all means of access
to and from which) are not under the exclusive ownership and direct control of
such Group Company.
3.31 DISCLOSURE. The Company and the Selling Shareholders have disclosed to
the Purchaser all material information relating to the operations and business
of any Group Company or the transactions contemplated by the Transaction
Documents. The representations and warranties by the Selling Shareholders in the
Transaction Documents and the Company Disclosure Schedule do not contain any
untrue statement of a fact or omit to state a fact required to be stated herein
or necessary in order to make such statements, in light of the circumstances
under which they were made, not misleading. The Company and the Selling
Shareholders have delivered or made available to Purchaser or its
representatives true and complete copies of all documents which are referred to
in this Section 3 or in the Company Disclosure Schedule. Without derogating from
any representations and warranties contained in this Section 3, the Company and
the Selling Shareholders have disclosed to Purchaser all information of which
the Company or the Selling Shareholders have knowledge, and have provided to the
Purchaser all documents in their possession relating specifically to any Group
Company, in each case, regarding facts or circumstances that could reasonably be
expected to have a Material Adverse Effect on any Group Company.
3.32 ACKNOWLEDGMENT. Each Selling Shareholder hereby acknowledges that such
Selling Shareholder has read this Agreement and the other documents to be
delivered in connection with the consummation of the transactions contemplated
hereby and has made an independent examination of the transactions contemplated
hereby and thereby (including the tax consequences thereof). Each Selling
Shareholder acknowledges that the Selling Shareholder has had an opportunity to
consult with and has relied solely upon the advice, if any, of the Selling
Shareholder's legal counsel, financial advisors, or accountants with respect to
the transactions contemplated hereby and by the Transaction Documents to the
extent the Selling Shareholder has deemed necessary, and has not been advised or
directed by the Purchaser, the Company or their respective legal counsel or
other advisors in respect of any such matters and has not relied on any such
parties in connection with this Agreement and the transactions contemplated
hereby.
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SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Selling Shareholders as
follows:
4.1 AUTHORIZATION. All corporate action on the part of the Purchaser, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of the Transaction Documents, the performance of all obligations of
the Purchaser hereunder and thereunder has been taken or will be taken prior to
the Closing, and the Transaction Documents, when executed and delivered by the
Purchaser, shall constitute the valid and legally binding obligations of the
Purchaser, enforceable against Purchaser in accordance with their respective
terms.
4.2 NO VIOLATION. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate any
provisions of the Certificate of Incorporation or Bylaws of the Purchaser;
violate, or be in conflict with, or constitute a default under or cause or
permit the acceleration of the maturity of any debt or obligation pursuant to,
any agreement or commitment to which the Purchaser is a party or by which the
Purchaser is bound, or violate any statute or law or any judgment, decree,
order, regulation, or rule of any court or Governmental Entity.
4.3 CORPORATE ORGANIZATION. Purchaser is a corporation duly organized and
validly existing under the Laws of Israel and has the full corporate power,
authority, and necessary approvals to own or use its assets and properties and
to conduct its business as the same is presently being conduction. Purchaser has
procured that it will at the Closing have the necessary funds at its disposal to
finance the transaction contemplated by these Transaction Documents.
SECTION 5
ADDITIONAL AGREEMENTS
5.1 EXPENSES. Each party hereto shall be responsible for the payment of its
own costs and expenses, including investment advisory and attorney's fees, in
connection with the transactions contemplated by the Transaction Documents;
PROVIDED FURTHER, that any transaction expenses incurred by or on behalf of the
Company will be paid in full by the Selling Shareholders prior to the Closing.
Any obligations that are not paid or accrued as of the Closing will be paid
directly by the Selling Shareholders.
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5.2 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing, the Selling Shareholders with respect to each Group
Company's businesses agree (except to the extent expressly contemplated by this
Agreement or as consented to in writing by the Purchaser) to cause such Group
Companies to carry on such businesses in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted, to pay debts and Taxes
when due subject to good faith disputes over such debts or Taxes, to pay or
perform other obligations when due, and to use all reasonable efforts consistent
with past practice and policies to preserve intact its present business
organization, keep available the services of its present officers and key
employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it,
to the end that its goodwill and ongoing businesses shall be unimpaired at the
Closing Date. The Selling Shareholders with respect to each Group Company's
businesses agree to promptly notify the Purchaser of any event or occurrence not
in the ordinary course of its business, of any event which could have a Material
Adverse Effect, and immediately upon becoming aware of any breach of the Selling
Shareholders' representations and warranties set forth in Section 3 above.
Without limiting the foregoing, except as expressly contemplated by this
Agreement, no Selling Shareholder with respect to the each Group Company's
businesses shall do, cause or permit any of the following, without the prior
written consent of the Purchaser:
(a) CHARTER DOCUMENTS. Cause or permit any amendments to its Charter
Documents.
(b) ISSUANCE OF SECURITIES. Issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, or purchase or propose the
purchase of, any shares of its capital stock or securities convertible
into, or subscriptions, rights, warrants or options to acquire, convertible
loans, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities.
(c) DIVIDENDS; CHANGES IN CAPITAL STOCK. Declare or pay any dividends
on or make any other distributions (whether in cash, stock or property) in
respect of any of its capital stock, or split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly,
any shares of its capital stock.
(d) CONTRACTS. Enter into any contract or commitment, or violate,
amend or otherwise modify or waive any of the terms of any of its contracts
with an aggregate value greater than ten thousand U.S. dollars ($10,000),
except for purchase and sale agreements in the ordinary course of business
consistent with past practice.
(e) INTELLECTUAL PROPERTY. License or transfer to any person or entity
any rights to its Intellectual Property except through standard customer
licenses in the ordinary course of business consistent with past practice.
(f) EXCLUSIVE RIGHTS. Enter into or amend any agreements pursuant to
which any other party is granted exclusive marketing or other exclusive
rights of any type or scope with respect to any of its products or
services;
- 32 -
(g) DISPOSITIONS. Sell, lease, license or otherwise dispose of or
encumber any of its properties or assets other than sales, or licenses to
customers in the ordinary course of business consistent with past practice.
(h) INDEBTEDNESS. Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others except for existing bank lines of
credit. In particular, and not as a limitation of the foregoing, no Group
Company will increase its outstanding indebtedness to any lender without
the prior written consent of the Purchaser other than in the ordinary
course of business consistent with past practice, and in no event will any
Group Company make or allow to be made any material increase in the
currently outstanding amount under any bank credit line or other facility,
nor in the amount currently available thereunder; provided, however, that
the Company may increase the amount outstanding under its current bank
credit line (solely within the amount currently available thereunder)
solely for payment of expenses incurred in the ordinary course of business
consistent with past practice.
(i) LEASES. Enter into or terminate operating leases or leases for
real property.
(j) PAYMENT OF OBLIGATIONS. Pay, discharge or satisfy any claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course of
business, other than the payment, discharge or satisfaction of then-due
liabilities reflected or reserved against in the Company Financial
Statements, except the assignment of the Shareholders' Loans to equity
reserves described in this Agreement.
(k) CAPITAL EXPENDITURES. Make any capital expenditures, capital
additions or capital improvements except in the ordinary course of business
and consistent with past practice.
(l) INSURANCE. Reduce the amount of any insurance coverage provided by
existing insurance policies.
(m) TERMINATION OR WAIVER. Terminate or waive any right of substantial
value.
(n) EMPLOYEE BENEFIT PLANS; NEW HIRES; PAY INCREASES. Adopt or amend
any employee benefit or stock purchase or option plan, or hire any new
director, officer, consultant or employee, pay any special bonus or special
remuneration to any employee, officer, consultant or director, or increase
the salaries or wage rates or benefits of its directors, officers,
consultants or employees; in each case, other than as specifically
disclosed in the Company Disclosure Schedule.
(o) SEVERANCE ARRANGEMENT. Grant any severance or termination pay (i)
to any director or officer or (ii) to any other employee or consultant
except payments made pursuant to standard written agreements outstanding.
- 33 -
(p) LAWSUITS. Commence or settle a lawsuit other than (i) for the
routine collection of bills, (ii) in such cases where it in good faith
determines that failure to commence suit would result in the material
impairment of a valuable aspect of its business, provided that it consults
with the Purchaser prior to the filing of such a suit;
(q) ACQUISITIONS. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the shares or
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets which are
material, individually or in the aggregate, to the Group Companies'
business, taken as a whole.
(r) TAXES. Other than in the ordinary course of business and except
for claims for Taxes disclosed in the Company Disclosure Schedule, make or
change any election in respect of Taxes, adopt or change any accounting
method in respect of Taxes, file any Tax Return or any amendment to a Tax
Return, enter into any closing agreement, settle any claim or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation
period applicable to any claim or assessment in respect of Taxes.
(s) NOTICES. Fail to give any notices or other information required to
be given to the employees of any Group Company or any Selling Shareholder,
any collective bargaining unit representing any group of employees of any
Group Company or any Selling Shareholder, and any applicable government
authority under any applicable law in connection with the transactions
provided for in this Agreement.
(t) REVALUATION. Revalue any assets, including without limitation
writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business.
(u) OTHER. Take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.2(a) through (t) above, or any action which
would make any of its representations or warranties contained in this
Agreement untrue or incorrect or prevent it from performing or cause it not
to perform its covenants hereunder.
5.3 NON-COMPETE; NON-SOLICITATION; NON-USE OF NAMES.
(a) Until three (3) years after the Closing, Beat ▇▇▇▇▇, ▇▇▇▇▇▇▇
Neufing, ▇▇▇▇▇▇▇▇ ▇▇▇▇, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall not, directly or
indirectly, own an interest in, manage, operate, join, control, advertise,
market or participate in or be connected with, as an officer, employee,
partner, stockholder, director, consultant or otherwise, any person or
organization that, at such time, competes with any Group Company's business
as conducted and as proposed to be conducted at any date following the
Closing; provided that this shall not preclude the foregoing Selling
Shareholders from owning a stock interest not greater than 2% in a publicly
traded company. In addition to the foregoing, Mr. Beat ▇▇▇▇▇ is subject to
a separate, personal noncompetition obligation set forth in his employment
agreement with the Company which shall be in effect from and after the
Closing.
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(a1) Until three (3) years after the Closing, CornerstoneCapital AG
and IDP Investments GmbH, shall procure that none of their employees or
partners who served as Directors of the Company shall, directly or
indirectly, be involved as a director or otherwise participate in the
management of an interest in, manage, operate, join, control, advertise,
market or participate in or be connected with, any person or organization
that, at such time, competes with any Group Company's business as conducted
and as proposed to be conducted at the Closing; provided that this shall
not preclude such employees and partners of the foregoing Selling
Shareholders from owning a stock interest not greater than 2% in a publicly
traded company. (b) Until three (3) years after the Closing, the Beat
▇▇▇▇▇, ▇▇▇▇▇▇▇ Neufing, ▇▇▇▇▇▇▇▇ ▇▇▇▇, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall not,
directly or indirectly solicit, canvass or entice away from any Group
Company the custom of any person firm or a client of such company where the
custom relates to products and/or services which are competitive to the
type supplied by such company.
(b1) Until three (3) years after the Closing, CornerstoneCapital AG
and IDP Investments GmbH, shall procure that none of their employees or
partners who served as Directors of the Company shall, directly or
indirectly solicit, canvass or entice away from any Group Company the
custom of any person firm or a client of such company where the custom
relates to products and/or services which are competitive to the type
supplied by such company.
(c) Until three (3) years after the Closing, the Beat ▇▇▇▇▇, ▇▇▇▇▇▇▇
Neufing, ▇▇▇▇▇▇▇▇ ▇▇▇▇, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall not, directly or
indirectly solicit, canvass or entice away from any Group Company any of
the directors, officers, employees, consultants, representatives, or agents
of any Group Company.
(c1) Until three (3) years after the Closing, CornerstoneCapital AG
and IDP Investments GmbH, shall procure that none of their employees or
partners who served as Directors of the Company shall, directly or
indirectly solicit, canvass or entice away from any Group Company any of
the directors, officers, employees, consultants, representatives, or agents
of any Group Company.
(d) The Selling Shareholders, except ▇▇▇▇▇▇▇▇ ▇▇▇▇ (as to which
specific obligations are set forth in Section 5.3(e)), agree and undertake
not to make any use whatsoever in the future of the name "FAST" or name
containing the said word, or any variation thereof, and acknowledges that
such name is the sole and exclusive property of the Company.
(e) Notwithstanding Section 5.3(d), on his own behalf and on behalf of
any Company controlled by him (including, without limitation, FAST TV
Server AG), ▇▇▇▇▇▇▇▇ ▇▇▇▇ undertakes not to use the logotype "FAST"
currently used by the Company nor any similar logotype. For absence of
doubt, the current logotype used by FAST TV Server AG is not considered to
be similar.
- 35 -
5.4 NO SOLICITATION. The Selling Shareholders and the officers, directors,
employees, representatives, consultants, or other agents of the Company and the
Selling Shareholders will not, directly or indirectly, and will cause the
Company not to, directly or indirectly, (i) take any action to solicit, initiate
or encourage any Acquisition Proposal (as defined below) or (ii) engage in
negotiations with, continue negotiations with or disclose any nonpublic
information relating to any Group Company or the Selling Shareholders to, or
afford access to the properties, books or records of any Group Company or the
Selling Shareholders to, any person that has advised any Group Company or the
Selling Shareholders that it may be considering making, or that has made, a
Acquisition Proposal. The Selling Shareholders will, and will cause the Company
to, promptly notify the Purchaser after receipt of any Acquisition Proposal or
any notice that any person is considering making an Acquisition Proposal or any
request for nonpublic information relating to any Group Company or for access to
the properties, books or records of any Group Company by any person that has
advised any Group Company or the Selling Shareholders that it may be considering
making, or that has made, an Acquisition Proposal and will keep the Purchaser
fully informed of the status and details of any such Acquisition Proposal notice
or request. For purposes of this Agreement, "ACQUISITION PROPOSAL" shall mean
any transaction involving: (i) the sale, license, disposition or acquisition of
all or a material portion of the business or assets of any Group Company; (ii)
the issuance, grant, disposition or acquisition of (A) any capital stock or
other equity security of any Group Company, (B) any option, call, warrant or
right (whether or not immediately exercisable) to acquire any capital stock or
other equity security of any Group Company, or (C) any security, instrument or
obligation that is or may become convertible into or exchangeable for any
capital stock or other equity security of any Group Company; or (iii) any
merger, demerger, consolidation, business combination, share exchange,
reorganization or similar transaction involving any Group Company.
5.5 ACCESS; CONFIDENTIALITY. The Selling Shareholders agree to make,
procure that the Company makes, available to the Purchaser and its
representatives and advisors all books, records, facilities, directors,
officers, employees, non-employee agents (such as patent and regulatory counsel)
and information necessary for the Purchaser to evaluate the businesses,
operations, properties and financial condition of any Group Company, except such
documents where confidentiality obligations prevent the identity of the parties
executing the documents from being disclosed (in which case the Company will
provide the Purchaser with redacted versions). Each party shall keep
confidential and shall not make use of any information treated by the other
party as confidential (including, without limitation, the existence of the
Transaction Documents or the consummation of the Acquisition or the failure of
such a consummation), obtained from the other party concerning the assets,
properties, business or operations of the other party other than to disclose to
legal counsel, consultants, financial advisors, officers, key employees, lenders
and investment bankers where such disclosure is related to the performance of
obligations under the Transaction Documents or the consummation of the
transactions contemplated under the Transaction Documents (all of whom shall be
similarly bound by the provisions of this Section 5.5), except as may be
required to be disclosed by applicable law or regulations (including of any
stock exchange) or as may be required to obtain the consents, waivers or
releases from any Governmental Entity or other third party. Notwithstanding the
foregoing, the foregoing confidentiality restrictions shall not apply to any
information which (a) becomes generally available to the public through no fault
of the receiving party or its employees, agents or representatives; (b) is
independently developed by the receiving party without benefit of the
above-described information (and such independent development is substantiated
in writing), or rightfully received from another source on a non-confidential
basis; (c) when such disclosure is required by a court or governmental authority
or any stock exchange or is otherwise required by law or is necessary to
establish rights under the Transaction Documents or any agreement contemplated
hereby. Purchaser agrees that upon signing of these Transaction Documents,
Company may inform employees of the current status of the contemplated
transaction using an announcement the form and content of which will be agreed
in advance with the Purchaser. Furthermore, for the avoidance of doubt, it is
explicitly stated that nothing herein shall restrict the Purchaser and the Group
Companies in any way in their use of any information relating to any of the
Group Companies after consummation of the Closing.
- 36 -
5.6 PUBLIC ANNOUNCEMENTS. No party hereto shall without the prior written
consent of the other parties (which consent shall not be unreasonably withheld)
disclose to any third party (other than to legal counsel, consultants, financial
advisors, key employees and lenders where such disclosure is related to the
performance of obligations under this Agreement or the consummation of the
transactions contemplated hereunder) the existence of this Agreement, the
identity of the other parties hereto or the transactions contemplated hereby
except (a) as required by law or regulations (including of any stock exchange),
(b) as reasonably necessary to obtain any consents, waivers or releases from any
Governmental Entity or other third party, or (c) as reasonably requested by any
Governmental Entity. The Selling Shareholders acknowledge that the Purchaser
will release one or more public announcements of this transaction in
substantially the form and substance attached hereto as EXHIBIT D, and that the
Purchaser shall also be entitled to make any announcements and to include
information in any public filings which the Purchaser deems necessary or
desirable in accordance with the Purchaser's obligations under applicable law
and the rules and regulations of any stock exchange.
5.7 COOPERATION. Each party hereto will fully cooperate with the other
parties, their counsel and accountants in connection with any steps required to
be taken as part of its obligations under this Agreement. The Selling
Shareholders will use reasonable efforts to cause all conditions to this
Agreement to be satisfied as promptly as possible and to obtain all consents and
approvals necessary for the due and timely performance of this Agreement and for
the satisfaction of the conditions hereof. No party will undertake any course of
action inconsistent with this Agreement or which would make any representations,
warranties or agreements made by such party in this Agreement untrue or any
conditions precedent to this Agreement unable to be satisfied at or prior to the
Closing. In addition, and not as a limitation of the foregoing, the Purchaser
will participate in meetings, at reasonable times and upon reasonable prior
notice, with the Company and Formatest during which the Company will discuss
with Formatest the matters set forth in Section 6.3(n) of this Agreement.
5.8 EMPLOYEES OF THE COMPANY'S BUSINESS. Between the date of this Agreement
and the Closing Date, the Company shall allow the Purchaser to have free access
to the premises, directors, officers and employees of any Group Company for
discussions regarding employment after the Closing Date. .
5.9 NOTIFICATION OF CLAIMS. From the date of this Agreement to and
including the Closing Date, the Company and the Selling Shareholders shall
promptly notify the Purchaser in writing of the commencement or threat of any
claims, litigation or proceedings against or affecting any Group Company.
- 37 -
5.10 U.S. GAAP AUDIT.
(a) At the sole expense and responsibility of the Selling
Shareholders, the Selling Shareholders shall procure that the Company's
independent auditors (the Swiss affiliate of KPMG) shall deliver to the
Purchaser, within forty-five (45) calendar days following the Closing (the
"U.S. GAAP Audit Period"), an audited balance sheet of the Company as of
December 31, 2005, and the related statements of income for the year then
ended, prepared in accordance with U.S. GAAP, including comparisons to an
unaudited balance sheet of the Company as of December 31, 2004 and the
related statements of income for the year then ended, also prepared in
accordance with U.S. GAAP, accompanied by the unqualified report of the
Company's independent auditors thereon (the "2005 Financials"), and an
audited balance sheet of the Company as of the Closing Date, prepared in
accordance with U.S. GAAP, accompanied by the unqualified report of the
Company's independent auditors thereon, except for qualification to the
extent that such report is limited only to the balance sheet and a
restriction regarding its limitation of use by other than the Purchaser or
the Selling Shareholders (the "Closing Balance Sheet"; collectively with
the 2005 Financials, the "U.S. GAAP Audit"), and that, to the extent the
2005 Financials are required to be included or incorporated by reference in
any filing with the U.S. Securities and Exchange Commission ("SEC"), KPMG
shall timely provide its consent in customary form to the filing of such
audit in connection with any registration statements or other SEC filings
by the Purchaser. For the avoidance of doubt, and not a limitation of the
foregoing, the U.S. GAAP Audit shall include a reserve for the full amount
of potential liability with respect to the German tax liability described
in Section 3.9 of the Disclosure Schedule, including, but not limited to,
interests, penalties, fees of attorneys, accountants and other consultants
with respect to any contesting or resolution of such German tax liability.
(b) Prior to the Closing, the Selling Shareholders shall procure that
KPMG shall deliver a written, nonbinding estimate of the fees and expenses
(and any tax thereon) for the U.S. GAAP Audit, including the timely
delivery of KPMG's consent in customary form to the filing of such audit
with the SEC in connection with any registration statements or other SEC
filings by the Purchaser (the "Estimate"). Following delivery by KPMG to
the Company of its full and final invoice with respect to the U.S. GAAP
Audit, the Escrow Agent will pay such invoice in full out of the Audit Fee
Reserve. If the amount of the final invoice exceeds the amount of the Audit
Fee Reserve then any excess shall be paid, promptly and in full, directly
by the Selling Shareholders, and if the amount of the final invoice is less
than the amount retained in the Audit Fee Reserve then the remaining Audit
Fee Reserve amount shall be distributed to the Selling Shareholders.
(c) Purchaser agrees to cooperate fully with Selling Shareholders and
the Company's independent auditors in the preparation of the U.S. GAAP
Audit including, without limitation, provision of representations if
required, access to information and records, and access to personnel. To
the extent that Selling Shareholders are unable to deliver the U.S. GAAP
Audit due to a failure by the Purchaser to provide access to information or
to personnel, the U.S. GAAP Audit Period shall be extended to reflect any
delay reasonably arising therefrom.
- 38 -
(d) During a period of five (5) business days following delivery to
the Purchaser of the U.S. GAAP Audit, the Purchaser may notify the
Shareholder Representative in writing that the Purchaser believes that any
portion of the U.S. GAAP Audit does not conform with U.S. GAAP in any
respect (a "GAAP Objection"). Following delivery of a GAAP Objection, the
Purchaser and the Shareholder Representative will meet and confer during a
period of five (5) business days in an effort to agree on the form of the
U.S. GAAP Audit. If the Purchaser and the Shareholder Representative agree
on the final form of any amendments to the U.S. GAAP Audit, then the
financial statements as so amended shall be the "U.S. GAAP Audit"
(regardless of whether they are formally approved by the Company's
auditor), and within ten (10) business days the Selling Shareholders shall
use their best efforts to procure that the Company's auditor shall deliver
the U.S. GAAP Audit to the Purchaser amended in accordance with such
agreement. In the event that the Purchaser and the Shareholder
Representative fail to agree on the form of the U.S. GAAP Audit, then the
then Purchaser and the Shareholder Representative shall mutually agree upon
a Swiss recognized accounting firm affiliated with the "Big Four"
international accounting firms to resolve such dispute, or if they cannot
agree on such a firm within five (5) business days, within three (3)
business days they shall each designate a nationally recognized accounting
firm, and the two firms shall agree upon a Swiss recognized accounting firm
affiliated with the "Big Four" international accounting firms, which does
not represent either party, which firm shall have the sole authority to
resolve such dispute. If the two designated accounting firms are unable to
reach agreement, then the Chairman of the Swiss Chamber of Audit Firms
(Treuhand ▇▇▇▇▇▇ or its successor) will make such designation. The firm so
agreed upon (the "FIRM") shall as promptly as practicable make a final
determination of the U.S. GAAP Audit, which shall be binding on the
parties. If the Firm determines that amendments are necessary, then the
financial statements as so amended shall be the "U.S. GAAP Audit"
(regardless of whether they are formally approved by the Company's
auditor), and within ten (10) business days the Selling Shareholders shall
use their best efforts to procure that KPMG shall deliver the revised
financial statements to the Purchaser amended in accordance with the Firm's
final determination. Each of Purchaser and the Shareholder Representative
shall provide the Firm with all information and documentation that the Firm
requests. The Purchaser on the one part and the Selling Shareholders on the
other part shall each pay half of the total fees and expenses of the Firm.
The period between delivery of the U.S. GAAP Audit and the resolution of
any dispute shall not be included in the U.S. GAAP Audit Period; provided,
however, that any portion of such period which exceeds any of the time
limits set forth in this Section 5.10(d) shall be included in the U.S. GAAP
Audit Period.
(e) In the event that the U.S. GAAP Audit is not delivered to the
Company on or before the end of the U.S. GAAP Audit Period, then starting
on the first Business Day thereafter the Selling Shareholders will pay to
the Purchaser a penalty on the first Business Day of each one week period
calculated as follows: fifty thousand U.S. dollars for the first week (or
portion thereof); plus fifty thousand U.S. dollars for the second week (or
portion thereof); plus one hundred thousand U.S. dollars ($100,000) for the
third week (or portion thereof); plus one hundred thousand U.S. dollars
($100,000) for the fourth week (or portion thereof); plus two hundred
thousand U.S. dollars ($200,000) for the fifth week (or portion thereof);
plus five hundred thousand U.S. dollars ($500,000) for the sixth week (or
portion thereof); which penalties may be deducted (at the Purchaser's
discretion) from the Purchase Reserve. It is understood that if the delay
in delivery of the U.S. GAAP Audit continues for more than six (6) weeks,
then the foregoing penalty would not adequately compensate the Purchaser
for its damages and in such case the Purchaser would be entitled to seek
its total actual damages in addition to such penalty (subject to the
aggregate limitations set forth in Section 7.3(c)).
- 39 -
5.11 FURTHER ACTS. After the Closing Date, each party hereto, at the
request of the other parties, will take any further actions necessary or
desirable to carry out the purposes of the Transaction Documents and to vest in
the Purchaser full title to all properties, assets and rights of any Group
Company transferred pursuant to the Transaction Documents.
SECTION 6
CONDITIONS; CLOSING ACTIONS; DELIVERABLES
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations of
each party to this Agreement to consummate and effect the Closing and the other
transactions contemplated hereby shall be subject to the satisfaction on or
prior to the Closing Date of each of the following conditions, any of which may
be waived by agreement in writing of all the parties hereto:
(a) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the transactions contemplated
hereby shall be in effect, nor shall any proceeding brought by any
Governmental Entity, foreign or domestic, seeking any of the foregoing be
pending; nor shall there be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
transactions contemplated hereby, which makes the consummation of such
transactions illegal.
(b) GOVERNMENTAL APPROVAL. The Purchaser, the Group Companies and the
Selling Shareholders shall have timely obtained from each Governmental
Entity all approvals, waivers and consents, in an unqualified form and
substance satisfactory for the Purchaser, necessary for consummation of or
in connection with the transactions contemplated hereby.
6.2 CONDITIONS TO OBLIGATIONS OF THE SELLING SHAREHOLDERS; ACTIONS TAKEN BY
THE PURCHASER. The obligations of the Selling Shareholders to consummate and
effect the Closing and the other transactions contemplated hereby shall be
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, by the Selling
Shareholders:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) Each of the
representations and warranties of the Purchaser in this Agreement that is
expressly qualified by a reference to materiality shall be true in all
respects as so qualified, and each of the representations and warranties of
the Purchaser in this Agreement that is not so qualified shall be true and
correct in all respects, on and as of the Closing as though such
representation or warranty had been made on and as of the Closing (except
that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date), and (ii)
the Purchaser shall have performed and complied in all material respects
with all covenants, obligations and conditions of this Agreement required
to be performed and complied with by the Purchaser as of the Closing.
- 40 -
(b) ESCROW AGREEMENT. The Purchaser and the Escrow Agent shall have
delivered executed copies of the Escrow Agreement to the Selling
Shareholders.
6.3 CONDITIONS TO OBLIGATIONS OF THE PURCHASER; ACTIONS TAKEN BY THE
COMPANY AND THE SELLING SHAREHOLDERS. The obligations of the Purchaser to
consummate and effect the Closing and the other transactions contemplated hereby
shall be subject to the satisfaction on or prior to the Closing Date of each of
the following conditions, any of which may be waived, in writing, by the
Purchaser:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) Each of the
representations and warranties of the Selling Shareholders in this
Agreement that is expressly qualified by a reference to materiality shall
be true in all respects as so qualified, and each of the representations
and warranties of the Selling Shareholders in this Agreement that is not so
qualified shall be true and correct in all respects, on and as of the
Closing as though such representation or warranty had been made on and as
of the Closing (except that those representations and warranties which
address matters only as of a particular date shall remain true and correct
as of such date), (ii) the Selling Shareholders shall have performed and
complied in all respects with all covenants, obligations and conditions of
this Agreement required to be performed and complied with by them as of the
Closing, and (iii) all of the agreements listed on EXHIBIT E shall remain
in full force and effect as of the Closing, and neither the Company nor any
Selling Shareholder shall have received notice or shall have any reason to
believe any termination, suspension or allegation of the breach of any such
agreement by any party thereto has occurred or is reasonably likely to
occur or that any basis for any such termination, suspension or allegation
exists. For avoidance of doubt, continuation of the business relationship
with Honeywell International Inc. is not a condition to Closing and the
discontinuation of the business relationship by an act on the part of
Honeywell International Inc. is not a Material Adverse Effect.
(b) NO MATERIAL ADVERSE CHANGES. There shall not have occurred any
Material Adverse Effect.
(c) CERTIFICATES OF THE COMPANY AND THE SELLING SHAREHOLDERS.
(i) COMPLIANCE CERTIFICATE OF THE COMPANY. The Purchaser shall
have been provided with a certificate executed on behalf of the
Company by its Chief Executive Officer and its Chief Financial Officer
to the effect that, as of the Closing, each of the conditions set
forth in Sections 6.3(a) and (b) above has been satisfied.
(ii) COMPLIANCE CERTIFICATE OF THE SELLING SHAREHOLDERS. The
Purchaser shall have been provided with a certificate executed by each
of the Selling Shareholders to the effect that, as of the Closing,
each of the conditions set forth in Sections 6.3(a) and (b) above has
been satisfied and, as to any Selling Shareholder which is an entity,
certifying the incumbency of the officers of such Selling Shareholder
executing this Agreement and any agreements and documents contemplated
by this Agreement.
- 41 -
(iii) CERTIFICATE OF SECRETARY OF THE COMPANY. The Purchaser
shall have been provided with a certificate executed by the Secretary
of the Company to the following effect:
(A) certifying and attaching resolutions duly adopted by the
Board of Directors (i) amending the signature rights of each
Group Company, and (ii) canceling all existing powers of attorney
granted by any Group Company;
(B) certifying that the Charter Documents of each Group
Company, as in effect immediately prior to the Closing, are those
included in the Company Disclosure Schedule and have not been
amended since the date hereof; and
(C) certifying the incumbency of the officers of the Company
executing any agreements and documents contemplated by this
Agreement.
(iv) CLOSING DEBT CERTIFICATE. Not later than one full business
day prior to the Closing, the Purchaser shall have been provided with
a certificate executed by the Chief Financial Officer of the Company
confirming that there is no outstanding debt from the Company to any
Selling Shareholder as of the Closing and setting forth an estimate of
the Closing Shareholders Equity, based upon an attached estimated
balance sheet of the Company as of the Closing Date (prepared in
accordance with Swiss GAAP) certified by the Chief Financial Officer
of the Company (the "Estimated Closing Shareholders Equity").
(d) DUE DILIGENCE. The Purchaser's due diligence review of each Group
Company, solely as to the share capital of the Company and as to the review
of any documents or other disclosures delivered or made to the Purchaser on
or after November 11, 2005, shall have been completed to the sole and
complete satisfaction of the Purchaser.
(e) SHARES. Each Selling Shareholder will deliver to the Purchaser a
certificate or certificates representing all of the Shares
(f) THIRD PARTY CONSENTS. The Purchaser shall have been furnished with
evidence satisfactory to it that the Selling Shareholders and any Group
Company have obtained those consents, waivers, approvals or authorizations
of those Governmental Entities and third parties listed in EXHIBIT F.
(g) SHAREHOLDER LOANS. Repayment of the Shareholder Loans shall have
been waived by the Lenders in full and in compliance with all applicable
law.
(h) INJUNCTIONS OR RESTRAINTS; CONDUCT OF BUSINESS. No proceeding
brought by any Governmental Entity, foreign or domestic, seeking to prevent
the consummation of the transactions contemplated by the Transaction
Documents shall be pending or threatened. In addition, no temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Purchaser's conduct or
operation of the business of any Group Company following the Closing shall
be in effect, nor shall any proceeding brought by an administrative agency
or commission or other Governmental Entity, domestic or foreign, seeking
the foregoing be pending.
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(i) ESCROW AGREEMENT. The Selling Shareholders and the Escrow Agent
shall have delivered executed copies of the Escrow Agreement to the
Purchaser.
(j) EMPLOYMENT AGREEMENTS. The Employment Agreement entered into by
and between Mr. Beat ▇▇▇▇▇ and the Company concurrent with signing this
Agreement (the "▇▇▇▇▇ Employment Agreement") shall remain in full force and
effect and no notice of termination shall have been delivered thereunder.
In addition, the employment agreements between at least five of the persons
listed in EXHIBIT G and the relevant Group Company shall remain in full
force and effect and no notice of termination shall have been delivered
thereunder; provided, however, that if any person listed in Exhibit G shall
not be employed at the Closing or shall have given notice of the
termination of his employment then the Purchase Price shall be reduced by
one hundred thousand U.S. dollars ($100,000) for each such person.
(k) LEGAL OPINION. Purchaser shall have received, concurrent with the
signing of this Agreement, a legal opinion from Urs Lichtsteiner, legal
counsel to the Selling Shareholders, substantially in the form attached
hereto as EXHIBIT H1. In addition, Purchaser shall have received,
concurrent with the signing of this Agreement or as soon as possible
thereafter but not later than the Closing, a legal opinion from legal
counsel (reasonably acceptable to Purchaser) to any Selling Shareholder
which is an entity, substantially in the form attached hereto as EXHIBIT
H2.
(l) RESIGNATION OF DIRECTORS. The Purchaser shall have received
letters of resignation from each of the directors of any Group Company in
office immediately prior to the Closing, which resignations in each case
shall be effective as of the Closing. Such letters to acknowledge that such
directors have no claims of whatsoever nature against any Group Company.
(m) BANKS/ACCOUNTING AFFAIRS. The Purchaser shall have received: (i)
access to all the cheque books of any Group Company, (ii) access to all the
Group Companies books, (iii) original lease agreements and deeds of all
leased assets of any Group Company, (iv) certificates as to balances of all
bank accounts of each Group Company immediately prior to Closing, (v)
certificate from all the banks in which any Group Company's accounts are
handled, certifying and acknowledging the amendment in such Group Company's
signature rights.
(n) FORMATEST. The Company and Formatest AG shall have entered into a
written amendment of the Manufacturing and Delivery Agreement between them
dated December 10, 2004, in which amendment Formatest undertakes to make a
twenty percent (20%) to thirty percent (30%) reduction in cost effective
not more than six (6) months after the date of such amendment, in form and
substance to the satisfaction of the Purchaser.
- 43 -
(o) FAST TV SERVER. The Selling Shareholders shall procure that the
Company and FAST TV Server shall have entered into an agreement, in the
form attached at Exhibit I, amending the terms of the existing agreement
between the Company and FAST TV Server dated 4 April 2002.
SECTION 7
ESCROW AND INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants to be
performed prior to the Closing, and all representations and warranties in the
Transaction Documents or in any instrument delivered pursuant to the Transaction
Documents shall survive the consummation of the Closing and continue until the
end of the Escrow Period (as defined in Section 7.4) (the "ESCROW TERMINATION
DATE"); PROVIDED that if any claims have been asserted with respect to any such
representations and warranties prior to the Escrow Termination Date, the
representations and warranties on which any such claims are based shall continue
in effect until final resolution of any claims, and PROVIDED, FURTHER, that (a)
the representations and warranties of the Selling Shareholders in Sections 3.3
(Capital Structure), 3.11 (Tax), 3.14 (Intellectual Property), and 3.32
(Acknowledgment) shall survive until the first anniversary of the date on which
the statutes of limitations for all claims which third parties or Governmental
Entities may make, and for all investigations and proceedings which Governmental
Entities may initiate, against any Group Company or the Purchaser in connection
with the respective representation and warranty expire, and (b) the
representation and warranty of the Selling Shareholders in Section 3.21(l) shall
survive until the second anniversary of the Closing Date. All covenants to be
performed after the date of this Agreement shall continue indefinitely.
7.2 ESCROW FUNDS. The Escrow Funds shall be deposited at the Closing with
the Escrow Agent. Such deposit shall constitute the Escrow and shall be governed
by the terms set forth herein and in the Escrow Agreement (which shall include,
without limitation, that the fees and expenses of the Escrow Agent are to be
borne equally by the Purchaser and by the Selling Shareholders). In the event
that any Damages (as defined in Section 7.3(a) below) arise, the applicable
portion of the Escrow shall be available to compensate the Purchaser pursuant to
the indemnification obligations of the Selling Shareholders pursuant to Section
7.3 and in accordance with the Escrow Agreement.
7.3 INDEMNIFICATION.
(a) SELLING SHAREHOLDER INDEMNIFICATION OBLIGATIONS. Subject to the
limitations set forth in this Section 7 and as set forth in the Escrow
Agreement, from and after the Closing Date the Selling Shareholders,
severally (and jointly solely to the extent of the Escrow and any set-offs
against the Earn Out 1 and Earn Out 2), shall protect, defend, indemnify
and hold harmless the Purchaser from and against any and all losses, costs
(including costs of investigation), amounts paid or payable, damages,
injuries, decline in value, liabilities, settlements, judgments, awards,
fines, penalties, Taxes, fees (including without limitation attorneys'
fees) and expenses of any nature, regardless of whether or not such damages
relate to any third-party claim (collectively, the "DAMAGES"), that the
Purchaser incurs by reason of or in connection with (i) any inaccuracy in
or breach of any representation or warranty of any Selling Shareholder in
the Transaction Documents, (ii) any claim, demand, action or cause of
action alleging misrepresentation, breach of, or default in connection
with, any of the representations, warranties, covenants or agreements of
any Selling Shareholder contained in the Transaction Documents, including
any exhibits or schedules attached hereto, and the Escrow Agreement; (iii)
the material non fulfillment of any covenant, undertaking, agreement or
other obligation of any Selling Shareholder under the Transaction Documents
or any material failure of any Selling Shareholder to perform any of its
obligations under the Transaction Documents; or (iv) any claims (in excess
of provision therefore in the Financial Statements) brought by directors,
officers, employees, representatives, agents, or consultants of any Group
Company who were or who are terminated by any Group Company prior to or as
of the Closing (not including, for the avoidance of doubt, any officers or
employees who continue as officers or employees of any Group Company after
the Closing).
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(b) PURCHASER INDEMNIFICATION OBLIGATIONS. Subject to the limitations
set forth in this Section 7, from and after the Closing Date the Purchaser
shall protect, defend, indemnify and hold harmless the Selling Shareholders
(each Selling Shareholder is hereinafter referred to individually as a
"SHAREHOLDER INDEMNIFIED PERSON" and collectively as the "SELLING
SHAREHOLDER INDEMNIFIED PERSONS") from and against any and all Damages,
that any of the Selling Shareholder Indemnified Persons incurs by reason of
or in connection with any claim, demand, action or cause of action alleging
misrepresentation, breach of, or default in connection with, any of the
representations, warranties, covenants or agreements of the Purchaser
contained in this Agreement and the Escrow Agreement, including any
exhibits or schedules attached hereto, which becomes known to the Selling
Shareholders. The party seeking indemnification under this Section 7
(whether the Purchaser or a Selling Shareholder Indemnified Person) is
referred to in this Section 7 as an "INDEMNIFIED PERSON" and the party from
whom such indemnification is sought is referred to in this Section 7 as an
"INDEMNIFYING PERSON". Notwithstanding the foregoing, the aggregate
liability of the Purchaser pursuant to this Agreement shall be limited to
the Purchase Price.
(c) LIMITATIONS. The maximum aggregate liability of the Selling
Shareholders for any breach of a representation, warranty or covenant of
any Selling Shareholder shall be limited to ten million U.S. dollars
($10,000,000) (and the Selling Shareholders acknowledge that such liability
is NOT limited to the Escrow Funds); PROVIDED, HOWEVER, that maximum
liability of the Selling Shareholders shall be limited to the Purchase
Price, as adjusted (and the Selling Shareholders acknowledge that such
liability is NOT limited to the Escrow Funds) with respect to: (A)
liability of any Selling Shareholder for any breach of a representation,
warranty or covenant pursuant to Section 8.2 if the Acquisition does not
close, (B) liability of any Selling Shareholder in connection with any
breach by such Selling Shareholder of a representation or warranty of such
Selling Shareholder pursuant to Section 3.3, 3.4, 3.5, 3.6, 3.11, 3.14, or
3.32, or (C) liability of any Selling Shareholder or any officer or
director of any Group Company for any material misrepresentation by any
Selling Shareholder constituting fraud, or (D) liability of any Selling
Shareholder for breach of such Selling Shareholder's obligations set forth
in Section 1.1. Nothing contained in this Section 7 is intended to limit
the application of Section 8.2 in the event this Agreement is terminated
pursuant to Section 8.1.
- 45 -
(d) DAMAGE THRESHOLD. Notwithstanding the foregoing, any Indemnifying
Person shall have no liability under this Section 7 and the Indemnified
Person may not receive any payment for Damages unless and until a written
notice or notices for an aggregate amount of Damages in excess of fifty
thousand U.S. dollars ($50,000) has been delivered to the Escrow Agent;
PROVIDED, HOWEVER, that after a written notice or notices for an aggregate
of fifty thousand U.S. dollars ($50,000) in Damages has been delivered, the
Purchaser shall be entitled to receive payment equal in value to the full
amount of Damages identified in such written notice or notices without
deduction.
(e) The Selling Shareholders hereby waive any right of recourse or
other claim in connection with the Transaction Documents which they may
have against any Group Company or any of their directors, officers,
employees, representatives, agents or consultants, it being expressly
stated, for the sake of clarity, however that this Section 7.3(f) shall not
apply to rights and obligations (including rights of recourse) which a
Selling Shareholder may have against another Selling Shareholder in his
capacity as a Selling Shareholder only and not as director, officer,
employee, representative, agent or consultant of any of the Group
Companies. Notwithstanding the foregoing, the Selling Shareholders hereby
waive any right of recourse or other claim in connection with the
Transaction Documents which they may have against Mr. Beat ▇▇▇▇▇ in excess
of the amount of the Purchase Price actually received by him
7.3A REDUCTION OF PURCHASE PRICE. The Selling Shareholders acknowledge and
agree that a substantial part of the goodwill of the Company paid by the
Purchaser as part of the Purchase Price is dependent upon Mr. Beat ▇▇▇▇▇'▇
continued employment with the Company on the terms and conditions of the ▇▇▇▇▇
Employment Agreement, but that it may be difficult to assess the damage caused
to the Purchaser and the Company by a breach of the representation and warranty
of Section 3.21(l) above in absolute figures. Therefore, the Parties agree that
Section 7.3 above shall not apply to a breach of that representation and
warranty, but that instead in case of breach of that representation and warranty
the Purchase Price shall be reduced as follows (such reduction, or
indemnification therefore, to be applied pro rata among the Selling
Shareholders):
(i) If such breach is occurring on or before the date which is one
year following the Closing, by one million U.S. dollars ($1,000,000),
(ii) If such breach is occurring after the date which is one year
following the Closing but on or before the date which is two years
following the Closing, by five hundred thousand U.S. dollars ($500,000),
regardless of the occurrence of actual damages.
- 46 -
7.4 ESCROW PERIOD. Subject to the following requirements, the Escrow Fund
shall terminate at 5:00 p.m. Swiss Time, on the date eighteen (18) months after
the Closing Date (the period from the Closing Date to the date eighteen (18)
months after the Closing Date referred to as the "ESCROW PERIOD"); PROVIDED,
HOWEVER, that on the date which is twelve (12) months after the Closing Date
(the "Early Release Date") one-half of the Escrow Fund shall be released to the
Selling Shareholders; PROVIDED FURTHER, HOWEVER, that following the Escrow
Period the amount of five hundred thousand U.S. dollars ($500,000) shall be
retained in the Escrow Fund until the date which is twenty-four (24) months and
one (1) day after the Closing Date (the "Additional Release Date"), solely for
the purpose of securing the obligations described in Sections 3.21(l) and 7.3A
of this Agreement; PROVIDED FURTHER, HOWEVER, that all or part of the Escrow
Funds which, in the reasonable judgment of the Purchaser, are necessary to
satisfy any unsatisfied claims specified in any written notice theretofore
delivered to the Escrow Agent and the Selling Shareholders prior to termination
of the Escrow Period with respect to Damages claimed or litigation threatened or
pending prior to expiration of the Escrow Period, or prior to the Early Release
Date with respect to Damages claimed or litigation threatened or pending prior
to the Early Release Date, shall remain in the Escrow Fund until such issues
have been finally resolved. As soon as all such claims have been resolved, the
Escrow Agent shall deliver by wire transfer to the Selling Shareholders Bank
Account all Escrow Funds and other property remaining in escrow and not required
to satisfy such claims. During the Escrow Period (or, with respect to Sections
3.21(l) and 7.3A of this Agreement, at any time prior to the Additional Release
Date), the Purchaser may submit to the Escrow Agent (with a copy to the
Shareholders Representative) a written instruction to release all or any portion
of the Escrow Funds to the Purchaser to cover indemnifiable Damages. If the
Shareholders Representative does not deliver to the Escrow Agent (with a copy to
the Purchaser) a written objection to such instruction within thirty (30)
calendar days of delivery of the Purchaser's written instruction, then the
Escrow Agent shall release funds in accordance with the Purchaser's written
instruction. If the Shareholders Representative delivers such a timely written
objection, then Section 7.6 shall apply.
7.5 METHOD OF ASSERTING CLAIMS. An Indemnified Person under this Agreement
shall, with respect to claims asserted against such party by any third party,
give written notice to each Indemnifying Person of any liability which might
give rise to a claim for indemnity under this Agreement promptly (and in any
event within sixty (60) days) upon the receipt of any written claim from any
such third party, and with respect to other matters for which the Indemnified
Person may seek indemnification, give prompt written notice to each Indemnifying
Person of any liability or loss which might give rise to a claim for indemnity;
provided, however, that any failure to give such notice on a timely basis will
not waive any rights of the Indemnified Person except to the extent the rights
of the Indemnifying Person are materially prejudiced. As to any claim, action,
suit or proceeding by a third party, the Indemnifying Person may assume the
defense of such matter, including the employment of counsel and the payment of
all expenses relating thereto. The Indemnifying Person shall give written notice
to each Indemnified Person of its assumption of the defense of any action, suit
or proceeding within fifteen (15) days of receipt of notice from the Indemnified
Person with respect to such matter. The Indemnified Person shall have the right
to employ its or their own counsel in any such matter, but the reasonable fees
and expenses of such counsel shall be the responsibility of such Indemnified
Person unless (i) the Indemnifying Person has not reasonably promptly employed
counsel satisfactory to such Indemnified Person, or (ii) the Indemnified Person
has reasonably concluded that the conduct of such proceedings by the
Indemnifying Person and counsel of its choosing will prejudice the rights of the
Indemnified Person. The Indemnified Person shall provide such cooperation and
such access to its books, records and properties as the Indemnifying Person
shall reasonably request with respect to such matter; and the parties hereto
agree to cooperate with each other in order to ensure the proper and adequate
defense thereof. An Indemnified Person shall not make any settlement of any
claim without the written consent of the Indemnifying Person, which consent
shall not be unreasonably withheld. Without limiting the generality of the
foregoing, it shall not be deemed unreasonable to withhold consent to a
settlement involving consideration or relief other than the payment of money.
After settlement and payment thereof, the Indemnifying Person shall have no
right to dispute or object to the amount of the settlement or a claim for
indemnification based thereon. With regard to claims of third parties for which
indemnification is payable hereunder, such indemnification shall be paid by the
Indemnifying Person upon the earlier to occur of: (i) the entry of a judgment
against the Indemnified Person and the expiration of any applicable appeal
period, or if earlier, five days prior to the date that the judgment creditor
has the right to execute the judgment; (ii) the entry of an unappealable
judgment or final appellate decision against the Indemnified Person; (iii) the
date required in any agreement for the settlement of the claim; or (iv) with
respect to indemnities for liabilities relating to Tax, upon the issuance of any
resolution by a taxation authority. Notwithstanding the foregoing, provided that
there is no dispute as to the applicability of indemnification, expenses of
counsel to the Indemnified Person shall be reimbursed on a current basis by the
Indemnifying Person if such expenses are a liability of the Indemnifying Person.
- 47 -
7.6 RESOLUTION OF CONFLICTS.
(a) In the event that the Indemnifying Party shall object in writing
to any claim or claims made in any written notice within thirty (30)
calendar days after delivery of such written notice, the parties shall
attempt in good faith to agree upon the rights of the respective parties
with respect to each of such claims.
(b) If no such agreement can be reached after good faith negotiation,
either party shall be entitled to file a claim with the competent court,
and the rules set forth in Section 9.7 below shall apply. Notwithstanding
anything in this Section 7.6(b) to the contrary, in such case the Escrow
Agent shall not take any action with respect to the Escrow Fund except in
accordance with a decision of such competent court or in accordance with a
written instruction signed jointly by the Purchaser and the Shareholder
Representative, and the Escrow Agent shall be entitled and obliged to act
in accordance with any decision of the competent court and make or withhold
payments from the Escrow Funds in accordance therewith.
7.7 SHAREHOLDER REPRESENTATIVE.
(a) Effective as of the date hereof, and without further act of any
Selling Shareholder, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ is hereby appointed as agent and
attorney-in-fact (or its successor appointed pursuant to this Section 7.7,
the "Shareholder Representative") for each Selling Shareholder, for and on
behalf of such Selling Shareholder: (i) to give and receive notices and
communications; notices or communications to or from the Shareholder
Representative shall constitute notice to or from each of the Selling
Shareholders; (ii) to seek indemnification from the Purchaser pursuant to
the provisions of this Agreement, to defend indemnification claims by
Purchaser, 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 indemnification or any other claims relating to
this Agreement; and (iii) to take all actions necessary or appropriate in
the judgment of the Shareholder Representative for the accomplishment of
the foregoing.
- 48 -
(b) A decision, act, consent or instruction of the Shareholder
Representative shall constitute a decision of all the Selling Shareholders
and shall be final, binding and conclusive upon each of such Selling
Shareholders only with regard to the Shareholder Representative's
performance of his powers granted under 7.7(a), and the Purchaser and the
Company may rely upon any such decision, act, consent or instruction of the
Shareholder Representative as being the decision, act, consent or
instruction of every such Selling Shareholder. Each of Purchaser and the
Company is hereby relieved from any liability to any person for any acts
done by it in accordance with such decision, act, consent or instruction of
the Shareholder Representative.
(c) The Shareholder Representative may be removed by the Selling
Shareholders representing a majority in interest of the Selling
Shareholders (based on the proportions set forth in Exhibit A) (the
"Required Sellers") upon not less than ten (10) calendar days' prior
written notice to the other parties hereto, which notice shall be
accompanied with an instrument executed by a substitute agent, which must
be a Selling Shareholder, accepting the position of a Shareholder
Representative. In the event of a dissolution of the Shareholder
Representative or any other vacancy in its position, the Required Sellers
may appoint a substitute agent upon not less than ten (10) calendar days'
prior written notice to the other parties hereto, which notice shall be
accompanied with an instrument executed by a substitute agent, which must
be a Selling Shareholder, accepting the position of a Shareholder
Representative. After the end of such prior notice period, the successor
Shareholder Representative shall, without further acts, be vested with all
the rights, powers, and duties of the predecessor Shareholder
Representative as if originally named as Shareholder Representative. If the
position of Shareholder Representative shall be vacant for more than thirty
(30) calendar days, Purchaser may file a petition to the court of competent
jurisdiction set forth in Section 9.7 to appoint a successor to such
position.
SECTION 8
TERMINATION
8.1 TERMINATION. Notwithstanding anything herein to the contrary, this
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing Date:
(a) By mutual written consent of the Purchaser and the Selling
Shareholders;
(b) By the Purchaser, if any of the conditions set forth in Sections
6.1 and 6.3 shall have become reasonably incapable of fulfillment prior to
January 15, 2006, through no fault of the Purchaser, and such condition(s)
shall not have been waived in writing by the Purchaser;
(c) By the Selling Shareholders, if any of the conditions set forth in
Sections 6.1 and 6.2 shall have become reasonably incapable of fulfillment
prior to January 15, 2006, through no fault of the Selling Shareholders,
and such condition(s) shall not have been waived in writing by the Selling
Shareholders;
- 49 -
(d) By the Purchaser if any representation or warranty of the Selling
Shareholders shall be untrue, incomplete or incorrect, or any covenant or
agreement of the Selling Shareholders set forth in this Agreement shall be
breached, in either case such that the conditions in Section 6.3(a) would
not be satisfied; PROVIDED, HOWEVER, that if such breach or such failure to
be true, complete or correct is curable by the Selling Shareholders through
the exercise of its reasonable efforts prior to the Closing and the Selling
Shareholders continue to exercise such reasonable efforts during such
period, the Purchaser may not terminate this Agreement under this Section
8.1(d); or
(e) By the Selling Shareholders if any representation or warranty of
the Purchaser shall be untrue, incomplete or incorrect, or any covenant or
agreement of the Purchaser set forth in this Agreement shall be breached,
in either case such that the conditions in Section 6.2(a) would not be
satisfied; PROVIDED, HOWEVER, that if such breach or such failure to be
true, complete or correct is curable by the Purchaser through the exercise
of its reasonable efforts prior to the Closing and the Purchaser continues
to exercise such reasonable efforts during such period, the Selling
Shareholders may not terminate this Agreement under this Section 8.1(e).
(f) by either party, if the Closing does not occur by January 15,
2006; PROVIDED, HOWEVER, that the right to terminate this Agreement under
this Section 8.1(f) shall not be available to any party whose action or
failure to act has been a principal cause of or resulted in the failure to
close on or before such date and such action or failure to act constitutes
a breach of this Agreement.
8.2. SURVIVAL. If this Agreement is terminated prior to Closing and the
transactions contemplated hereby are not consummated as described above, this
Agreement shall become void and of no further force and effect, except for the
provisions of this Section 8.2 (survival); Section 8.1 (termination); Section
5.1 (expenses); Section 5.5 (confidentiality); and Section 9 (miscellaneous
provisions).
SECTION 9
MISCELLANEOUS
9.1 NOTICES. Any notice required or permitted by this Agreement shall be in
writing in English, and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, if
such notice is addressed to the party to be notified at such party's address or
facsimile number as set forth below, or as subsequently modified by written
notice,
(a) if to Purchaser, to:
Nice Systems, Ltd.
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇'▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Corporate Executive Vice President
President of Nice Vision
Facsimile No.: ▇▇▇▇-▇-▇▇▇-▇▇▇▇
- 50 -
with a copy to:
Nice Systems,
Ltd.
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Attention: Yechiam ▇▇▇▇▇
Corporate Vice President
General Counsel & Corporate Secretary
Legal Department
Facsimile No.: ▇▇▇▇-▇-▇▇▇-▇▇▇▇
(b) if to the Selling Shareholders, to the addresses set forth in
Exhibit A,
with a copy to:
Urs Lichtsteiner Rechtsanwalt
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Attention: Urs Lichtsteiner
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9.2 INTERPRETATION. When a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
indicated. The words "INCLUDE," "INCLUDES" and "INCLUDING" when used herein
shall be deemed in each case to be followed by the words "WITHOUT LIMITATION."
The phrases "THE DATE OF THIS AGREEMENT", "THE DATE HEREOF," and terms of
similar import, unless the context otherwise requires, shall be deemed to refer
to the latest date listed on the signature page of this Agreement. The word
"Person" or "person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization or other
entity, as well as any governmental agency or department thereof. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. This Agreement is drawn up in the English language; if this Agreement
is translated into any language other than English, the English language text
shall prevail.
9.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
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9.4 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; ASSIGNABILITY. This
Agreement (including the documents and the instruments referred to herein) (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, (b) are not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder; and (c) shall not be
assigned by operation of law or otherwise except with the written agreement of
the parties.
9.5 SEVERABILITY. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith, in order to maintain the economic position enjoyed by
each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (a) such provision shall be
excluded from this Agreement, (b) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (c) the balance of the
Agreement shall be enforceable in accordance with its terms.
9.6 REMEDIES CUMULATIVE. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.7 GOVERNING LAW; JURISDICTION. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of Switzerland, without giving effect to principles of conflicts of law. Any
dispute, controversy or claim arising out of or in relation to this contract,
including the validity, invalidity, breach or termination thereof, shall be
settled by arbitration in accordance with the Swiss Rules of International
Arbitration of the Swiss ▇▇▇▇▇▇▇▇ of Commerce in force on the date when the
Notice of Arbitration is submitted in accordance with these Rules. The seat of
the arbitration shall be in Zurich, the arbitral proceedings shall be conducted
in English.
9.8 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
9.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended or
waived only with the written consent of the Purchaser and the Selling
Shareholders, or their respective successors and assigns. Any amendment or
waiver effected in accordance with this Section 9.9 shall be binding upon all
parties and their respective successors and assigns.
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9.10 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
Notwithstanding anything to the contrary contained in Section 9.2, it is
accordingly agreed that the parties shall be entitled to injunctive relief to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
9.11 STAMP DUTY. All stamp duties and stamp taxes related to any of the
Transaction Documents or any document executed in connection with this Agreement
shall be borne and paid by the Selling Shareholders.
Signature Pages Follow
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[SIGNATURE TO SHARE PURCHASE AGREEMENT DATED NOVEMBER 17, 2005]
The parties have duly executed this Share Purchase Agreement as of the date
last written below.
PURCHASER:
NICE SYSTEMS LTD.
By: /s/ ▇▇▇▇ ▇▇▇▇▇ /s/ Ran Oz
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Date: 17.11.2005 17.11.2005
Name: ▇▇▇▇ ▇▇▇▇▇ Ran Oz
Title: CEO CFO
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[SIGNATURE TO SHARE PURCHASE AGREEMENT DATED NOVEMBER 17, 2005]
The parties have duly executed this Share Purchase Agreement as of the date
last written below.
SELLING SHAREHOLDERS:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Date: 17.11.2005
/s/ Beat ▇▇▇▇▇
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BEAT ▇▇▇▇▇
Date: 17.11.2005
CORNERSTONECAPITAL AG
By: /s/ CORNERSTONECAPITAL AG
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Date: 17.11.2005
Name: ________________________
Title: ________________________
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[SIGNATURE TO SHARE PURCHASE AGREEMENT DATED NOVEMBER 17, 2005]
The parties have duly executed this Share Purchase Agreement as of the date
last written below.
IDP INVESTMENTS GMBH
By: /s/ ▇.▇. ▇▇▇▇▇▇▇
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(signature)
Date: 17.11.2005
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Name: ▇.▇. ▇▇▇▇▇▇▇
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Title: Managing Director
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/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇▇▇▇ (signature)
Date: 17.11.2005
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/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (signature)
Date: 17.11.2005
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/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (signature)
Date: 17.11.2005
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/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (signature)
Date: 17.11.2005
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[SIGNATURE TO SHARE PURCHASE AGREEMENT DATED NOVEMBER 17, 2005]
The parties have duly executed this Share Purchase Agreement as of the date
last written below.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (signature)
Date: 17.11.2005
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TRADE INTERNATIONAL CO. ESTABLISHMENT
By: /s/ TRADE INTERNATIONAL CO. ESTABLISHMENT
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(signature)
Date: ______________________________
Name: ______________________________
Title: ______________________________
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