ASSET PURCHASE AGREEMENT among: e-SIM, Ltd., an Israeli company; SKY MobileMedia (Israel) Ltd., an Israeli company; and SKY MobileMedia, Inc. a Delaware corporation Dated as of September 28, 2006
EXHIBIT
1
among:
e-SIM,
Ltd.,
an
Israeli company;
SKY
MobileMedia (Israel) Ltd.,
an
Israeli company;
and
SKY
MobileMedia, Inc.
a
Delaware corporation
____________________________
Dated
as
of September 28, 2006
____________________________
This
Asset Purchase Agreement
is
entered into as of September 28, 2006, by and among: e-SIM,
Ltd.
an
Israeli company (the “Seller”);
SKY
MobileMedia (Israel) Ltd., an
Israeli company (the “Purchaser
Sub”);
and
SKY
MobileMedia, Inc.,
a
Delaware corporation (the “Purchaser”).
Certain capitalized terms used in this Agreement are defined in
Exhibit A.
Recitals
A. Purchaser
Sub is a wholly-owned subsidiary of Purchaser.
B. The
Seller wishes to provide for the sale of substantially all of the assets of
the
Seller to Purchaser Sub on the terms set forth in this Agreement.
C. The
persons listed on Exhibit B
hereto
have executed a Voting Agreement in the form of Exhibit C
to this
Agreement (the “Voting
Agreements”).
Agreement
The
parties to this Agreement, intending to be legally bound, agree as
follows:
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1.
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Sale
of Assets; Related Transactions.
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1.1 Sale
of Assets.
The
Seller shall cause to be sold, assigned, transferred, delivered and conveyed
to
Purchaser Sub, at the Closing, good and valid title to the Assets, free of
any
Encumbrances, other than the Encumbrances identified in Schedule 1.1 to this
Agreement, on the terms and subject to the conditions set forth in this
Agreement. For purposes of this Agreement, “Assets”
shall
mean and include: (a) all of the properties, rights, interests and other
tangible and intangible assets of the Seller (wherever located and whether
or
not required to be reflected on a balance sheet prepared in accordance with
GAAP), including any assets acquired by the Seller during the Pre-Closing
Period; and (b) any other assets that are owned by any Related Party and
that are needed for the conduct of the business of the Seller; provided,
however,
that the
Assets shall not include any Excluded Assets. Without limiting the generality
of
the foregoing, the Assets shall include:
(1) all
equipment, materials, prototypes, tools, supplies, vehicles, furniture,
fixtures, improvements and other tangible assets of the Seller (including
without limitation the tangible assets identified in Part 2.19 of the
Seller Disclosure Schedule);
(2) all
advertising and promotional materials possessed by the Seller;
(3) all
Seller IP and Intellectual Property Rights and related goodwill of the Seller
(including the right to use the name “e-SIM” and variations thereof, and
the
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Seller
IP
and Intellectual Property Rights identified in Part 2.11 of the Seller
Disclosure Schedule);
(4) all
rights of the Seller under the Seller Contracts (including the Seller Contracts
identified in Part 2.12 of the Seller Disclosure Schedule);
(5) all
Governmental Authorizations held by the Seller (including the Governmental
Authorizations identified in Part 2.15 of the Seller Disclosure Schedule),
to the extent such Governmental Authorizations are assignable under applicable
law;
(6) all
claims (including claims for past infringement or misappropriation of
Intellectual Property or Intellectual Property Rights) and causes of action
of
the Seller against other Persons (regardless of whether or not such claims
and
causes of action have been asserted by the Seller), and all rights of indemnity,
warranty rights, rights of contribution, rights to refunds, rights of
reimbursement and other rights of recovery possessed by the Seller (regardless
of whether such rights are currently exercisable), in all cases to the extent
such claims or other rights pertain to Assets;
(7) all
“manager’s insurance” policies, pension funds, continuing education funds and
any other funds or deposits maintained by the Seller on behalf of Newly Hired
Employees which will be transferred into the name of the Purchaser Sub;
and
(8) All
data
and records related to the following: client and customer lists and records,
license information, referral sources, research and development reports and
records, production reports and records, test reports, configuration management
data, quality and process documentation, service and warranty records,
equipment, logs, operating guides and manuals, creative materials, advertising
materials, promotional materials, studies, reports, correspondence and other
similar documents and copies of all personnel records.
1.2 Purchase
Price.
(a) As
consideration for the sale of the Assets to Purchaser Sub:
(i) at
the
Closing, the Purchaser Sub shall pay or have paid to the Seller, in cash, an
amount (the “Cash
Payment”)
equal
to the total of (A) $5,815,075 (five million eight hundred fifteen thousand
and
seventy-five US dollars), less (B) the outstanding principal plus any accrued
but unpaid interest of the Bridge Loan, less (C) the Acquired Receivables
Amount, to the extent actually collected by Seller prior to Closing, less (D)
the Severance Funding Shortfall and plus (E) the Seller Interim Period
Expenditures approved by Purchaser Sub;
(ii) at
the
Closing, the Purchaser shall issue the Escrow Shares and the Belzberg Shares
to
Seller, and shall thereafter immediately cancel the Belzberg Shares and re-issue
the Belzberg Shares in the name of Belzberg;
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(iii) at
the
Closing, Purchaser shall deposit the Escrow Shares, represented by a stock
certificate registered in the name of Seller, and the Belzberg Shares,
represented by a stock certificate registered in the name of Belzberg, in an
escrow account (the “Escrow
Account”)
to be
established as of the Closing Date pursuant to an Escrow Agreement among the
Seller, the Purchaser, the Purchaser Sub and Law Debenture (the “Escrow
Agent”),
in
substantially the form of Exhibit D
to this
Agreement (the “Escrow
Agreement”).
The
Escrow Shares, together with any cash paid in connection with the repurchase
of
such Escrow Shares in accordance with Section 9.3 and any other property
received in respect of the Escrow Shares shall be held as an escrow fund (the
“Escrow
Fund”)
to
secure the indemnification, compensation and reimbursement rights of Purchaser
and Purchaser Sub and the other Indemnitees under this Purchase
Agreement;
(iv) Purchaser
shall cancel, discharge and forgive all amounts owing under the Bridge Loan;
and
(v) at
the
Closing, Purchaser Sub shall assume the Assumed Liabilities by delivering to
the
Seller an Assumption Agreement in substantially the form of Exhibit E
to this
Agreement (the “Assumption
Agreement”).
(b) For
purposes of this Agreement “Assumed
Liabilities”
shall
mean only the following liabilities of the Seller:
(i) the
liabilities of the Seller under or pertaining to the Seller Contracts assigned
to Purchaser Sub, which shall include all obligations relating to the
performance of such Seller Contracts following the Cut Off Date, but only to
the
extent such liabilities or obligations (A) arise after the Cut Off Date, (B)
do
not arise from or relate to the assignment of any such Contracts or any Breach
on or prior to the Cut Off Date by the Seller of any provision of any of such
Contracts, and, (C) do not arise from or relate to any event, circumstance
or
condition occurring or existing on or prior to the Cut Off Date that, with
notice or lapse of time, would constitute or result in a Breach of any of such
Contracts, and (D) are ascertainable (in nature and amount) solely by reference
to the express terms of such Contracts;
(ii) up
to
$500,000 in liabilities of the Seller under the OCS Agreement arising prior
to
the Cut Off Date, as set forth on Schedule 1.2(b)(ii); and
(iii) without
derogating from item (i) above, the liabilities of Seller to Jataayu Software
Private Limited in the aggregate amount of $1,050,000 (one million and fifty
thousand US dollars)
(iv) the
severance pay (including notice period) and accrued Liabilities of the Seller
to
Newly Hired Employees, including, accrued vacation days, sick days, pension
plans, recuperation
pay and
education plans.
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provided,
however,
that
notwithstanding the foregoing, and notwithstanding anything to the contrary
contained in this Agreement, the Assumed Liabilities shall not include, and
the
Purchaser shall not be required to assume or to perform or
discharge:
(1) the
Liabilities of the Seller listed on Schedule 1.2(b)(1) or any Liability of
any
Person, except for the Seller;
(2) any
Liability of the Seller arising out of or relating to the execution, delivery
or
performance of any of the Transactional Agreements;
(3) any
Liability of the Seller for any fees, costs or expenses described in
Section 10.3(a) of this Agreement;
(4) any
Liability of the Seller arising from or relating to any action taken by the
Seller, or any failure on the part of the Seller to take any action, at any
time
after the Closing Date;
(5) any
Liability of the Seller arising from or relating to (x) any services performed
by the Seller for any customer, or (y) any existing claim or Proceeding against
the Seller (i) relating to a Seller Contract and (ii) in respect of any other
Asset, relating to any event prior to the Cut Off Date;
(6) any
Liability of the Seller for the payment of any Tax accrued, due and payable
prior to the date hereof;
(7) any
Liability of the Seller to any employee or former employee of the Seller who
is
not a Newly Hired Employee;
(8) any
Liability of the Seller to any Related Party other than those referenced in
Sections 1.2(b)(ii) and 1.2(b)(iii) above;
(9) any
Liability under any Seller Contract, if the Seller shall not have obtained,
prior to the Closing Date, any Consent required to be obtained from any Person
with respect to the assignment or delegation to the Purchaser of any rights
or
obligations under such Contract;
(10) any
Outstanding Obligations;
(11) any
Liability that is inconsistent with or constitutes an inaccuracy in, or that
arises or exists by virtue of any Breach of, (x) any representation or
warranty made by the Seller in any of the Transactional Agreements, or
(y) any covenant or obligation of the Seller contained in any of the
Transactional Agreements; or
(12) any
other
Liability that is not referred to in clauses “(i)” through "(iv)" of Section
1.2(b).
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1.3 Sales
Taxes; Israeli Value Added Tax.
The
Seller shall bear and pay all taxes payable by it in connection with the
performance of the sale of the Assets to the Purchaser Sub under any applicable
Tax law. Seller shall not be liable for any Tax levied against or otherwise
payable under applicable Tax law by the Purchaser or the Purchaser Sub. The
Purchase Price is exclusive of Value Added Tax (“VAT”).
Purchaser Sub shall be entitled to file a request pursuant to Section 20 of
Israeli Value Added Tax Law with respect to the Transactions (the “VAT
Request”).
At
Purchaser Sub’s request, the Seller shall cooperate with the Purchaser Sub in
preparing and filing VAT Request. If the VAT Request is not approved by the
Closing, the applicable VAT, to the extent required to be paid, shall be paid
by
the Purchaser or Purchaser Sub to the Seller at any time after the date on
which
the applicable portion of the Purchase Price is payable in accordance with
this
Agreement, but not later than two business days prior to the date upon which
Seller is required to remit the applicable VAT to the Israeli VAT authorities
at
against receipt by Purchaser or Purchaser Sub of a valid VAT invoice from the
Seller.
1.4 Withholding.
The
Purchaser Sub shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to Seller such amounts as the
Purchaser and Purchaser Sub are required to deduct and withhold under applicable
Tax law, with respect to the making of such payment; provided,
however,
that
Purchaser shall gross-up Seller for any non-Israeli tax withheld at Closing.
To
the extent that amounts are so withheld by the Purchaser or Purchaser Sub,
such
withheld amounts shall be paid by Purchaser Sub or Purchaser to the applicable
Tax Authority and, upon such payment, shall be treated for all purposes of
this
Agreement as having been paid to the Seller in respect of whom such deduction
and withholding was made by the Purchaser or Purchaser Sub. If, at the Closing,
the Seller delivers to the Purchaser and Purchaser Sub a certificate from the
Israeli Tax Authority evidencing an exemption from withholding of Taxes, which
shall be applicable, valid and in effect as of the Closing, the Purchaser and
Purchaser Sub shall honor such withholding tax exemption.
To avoid
doubt, Purchaser Sub's obligation to withhold with respect to the consideration
payable under this Agreement also applies with respect to the deposit of the
Escrow Shares, and the amount of such withholding will be deducted and withheld
from the Cash Payment payable hereunder at the Closing, unless an appropriate
certificate of exemption from withholding is provided.
1.5 Allocation.
At or
prior to the Closing, the Purchaser and Seller shall agree upon a statement
setting forth the parties’ good faith determination of the manner in which the
consideration referred to in Sections 1.2(a) is to be allocated among the
Assets. Such allocation shall be conclusive and binding upon the Seller for
all
purposes, and the Seller shall not file any Tax Return or other document with,
or make any statement or declaration to, any Governmental Body that is
inconsistent with such allocation.
1.6 Closing.
(a) The
closing of the sale of the Assets to Purchaser Sub (the “Closing”)
shall
take place at the offices of ▇▇▇▇▇ ▇▇▇▇▇ & Co. in Jerusalem, Israel,
at
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10:00
a.m. on the date that is two (2) business days following the approval of this
Agreement by the shareholders of the Seller as contemplated herein; provided,
however,
that if
any condition set forth in Section 5 has not been satisfied as of such
date, then the Purchaser Sub may, at its election, unilaterally postpone the
Scheduled Closing Time until the condition has been satisfied or waived by
Purchaser Sub. “Closing
Date”
shall
mean the time and date as of which the Closing actually takes
place.
(b) At
the
Closing:
(i) the
Seller shall execute and deliver to Purchaser Sub a ▇▇▇▇ of Sale (“▇▇▇▇
of Sale”)
in the
form of Exhibit F
to this
Agreement and such other documents as may be required to evidence or effect
the
transfer of the Assets;
(ii) Seller
shall deliver to Purchaser Sub a schedule of payments to be made by Purchaser
Sub on Seller’s behalf to third parties in satisfaction of obligations owed by
Seller to such third parties (the “Outstanding
Obligations”);
(iii) Purchaser
Sub shall pay to the Seller the Cash Payment (less the amount of any Outstanding
Obligations);
(iv) Purchaser
shall pay the Outstanding Obligations to the applicable third
parties;
(v) the
parties hereto shall execute and deliver the Escrow Agreement, and the Purchaser
shall deposit the Escrow Shares and the Belzberg Shares in the Escrow Account
as
contemplated by Section 1.2(a)(ii);
(vi) Purchaser
Sub and Seller shall execute and deliver the Assumption Agreement;
(vii) The
Seller and Purchaser Sub shall execute notices to any third parties to whom
an
Assumed Liability is owed and whose consent to the assumption by Purchaser
Sub
of such Assumed Liability was not required or obtained;
(viii) the
Seller shall execute and deliver to the Purchaser and Purchaser Sub a
certificate (the “Closing
Certificate”)
setting
forth the representations and warranties of the Seller (A) all of the
representations and warranties made by the Seller in this Agreement (considered
collectively), and each of said representations and warranties (considered
individually), were accurate in all material respects as of the date of this
Agreement, (B) that all of the covenants and obligations that the Seller
are required to comply with or to perform at or prior to the Closing (considered
collectively), and each of said covenants and obligations (considered
individually), have been duly complied
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with
and
performed in all material respects, (C) that except as expressly set forth
in the Closing Certificate, each of the conditions set forth in Sections 5.3,
5.4, 5.5 and 5.7 has been satisfied in all respects; and (D) setting forth
the Acquired Receivables Amount and the Severance Fund Amount;
(ix) the
Secretary of the Seller shall execute and deliver to the Purchaser and Purchaser
Sub a certificate (the “Secretary’s
Certificate”)
having
attached thereto (i) the resolutions approved by the Board of Directors of
the
Seller authorizing the Transactions and (ii) resolutions approved by the
Seller’s shareholders authorizing the Transactions, dated as of the Closing
Date;
(x) Each
of
the Purchaser, the Seller and Belzberg shall execute and deliver to each other
the Financing Agreements; and
(xi) Seller
shall cause a transfer certificate in the form attached hereto as Exhibit G
(the
“Transfer
Certificate”)
duly
executed by Belzberg to be delivered to Purchaser.
1.7 Consents.
(a) If
there
are any Consents that have not yet been obtained (or otherwise are not in full
force and effect) as of the Closing with respect to the assignment or delegation
to Purchaser Sub of any rights or obligations under any Seller Contract, in
the
case of each such Seller Contract as to which a Consent was not obtained (or
otherwise is not in full force and effect) (collectively, the “Restricted
Contracts”),
Purchaser Sub, in its sole discretion, may waive any closing condition as to
any
such Consent and either:
(i) accept
the assignment and liability of such Restricted Contract, in which case, as
between Purchaser Sub and Seller, such Restricted Contract shall, to the maximum
extent practicable and notwithstanding the failure to obtain the applicable
Consent, be transferred at the Closing pursuant to the Assumption Agreement
as
elsewhere provided under this Agreement; or
(ii) elect
to
have Seller continue its efforts to obtain such Consent, in which case,
notwithstanding Sections 1.1 and 1.2, neither this Agreement nor the Assumption
Agreement nor any other document related to the consummation of the Transactions
shall constitute a sale, assignment, assumption, transfer, conveyance or
delivery or an attempted sale, assignment, assumption, transfer, conveyance
or
delivery of the Restricted Contracts, and following the Closing, the parties
shall use commercially reasonable efforts, and cooperate with each other, to
obtain the Consent relating to each Restricted Contract as quickly as
practicable. Pending the obtaining of such Consents relating to any Restricted
Contract, the parties shall cooperate with each other in any reasonable and
lawful arrangements designed to provide to Purchaser Sub the benefits of use
and
liabilities of the Restricted Contract for its term (or any right or benefit
arising thereunder, including the enforcement for the benefit of Purchaser
Sub
of any and all rights of Seller against a third party thereunder or the renewal
or
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extension
of the term thereof). Once a Consent for the sale, assignment, assumption,
transfer, conveyance and delivery of a Restricted Contract is obtained, Seller
shall promptly assign, transfer, convey and deliver such Restricted Contract
to
Purchaser Sub, and Purchase Sub shall assume the obligations under such
Restricted Contract assigned to Purchaser Sub from and after the date of
assignment to Purchaser Sub pursuant to a special-purpose assignment and
assumption agreement substantially similar in terms to those of the Assumption
Agreement (which special-purpose agreement the parties shall prepare, execute
and deliver in good faith at the time of such transfer, all at no additional
cost to Purchaser Sub).
(b) Notwithstanding
the aforesaid, in the event that any Restricted Contract has a Liability not
exceeding $25,000 (twenty five thousand US dollars), Purchaser Sub shall waive
any closing condition as to any such Consent and apply one of the alternative
provisions of Section 1.7(a) above; provided,
however,
that
Purchaser Sub shall only waive any closing condition as to any such Consent
for
two (2) such Restricted Contracts.
(c) In
the
event that the Purchaser and Purchaser Sub waive the closing condition with
respect to the failure to obtain any Consent with respect to any Restricted
Contract, Purchaser and Purchaser Sub shall not be entitled to any reduction
in
or set off against the purchase price otherwise payable by Purchaser and
Purchaser Sub as a result of such failure to obtain such Consent.
1.8 Escrow
Shares Adjustment.
(a) In
the
event that there has been no Next Financing prior to the expiration of the
Indemnification Period, the Seller, Purchaser and Purchaser Sub shall mutually
make a determination of the fair market value of the Purchaser’s Series B
Preferred Stock as of the Closing Date (the “Series
B Fair Value”)
and the
number of Escrow Shares and Belzberg Shares in the Escrow Account shall be
adjusted as necessary to reflect any difference between the Series B Fair Value
and $0.775.
(b) In
the
event that Seller, Purchaser, and Purchaser Sub cannot agree on the Series
B
Fair Value, within thirty (30) days after the end of the Indemnification Period,
Seller, Purchaser, and Purchaser Sub shall retain an appraiser selected jointly
by the Seller, Purchaser, and Purchaser Sub to establish such Series B Fair
Value. If the Seller and Purchaser Sub are unable to agree on an appraiser
within ten (10) days, the Seller and Purchaser shall each select an appraiser
and those appraisers shall select a third appraiser, which appraiser shall
determine such Series B Fair Value. The expenses of such firm shall shared
equally by Seller and Purchaser Sub.
(c) The
parties shall use commercially reasonable efforts to cooperate with any such
appraiser and to cause such valuation to be completed as soon as possible,
and
in any event within sixty (60) days after the retention of such firm.
Immediately upon determination of the Series B Fair Value, the Purchaser shall
cause notice thereof and a copy of the written report or analysis prepared
by
the Appraiser to be delivered to the Seller and the number of Escrow Shares
and
Belzberg Shares in the Escrow Account
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shall
be
promptly adjusted as necessary to reflect any difference between the Series
B
Fair Value and $0.775.
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2.
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Representations
and Warranties of the Seller.
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The
Seller, as of the date hereof (and, with respect to Section 2.30 only, as of
the
date hereof and as of the Closing Date), represents and warrants, to and for
the
benefit of the Purchaser and Purchaser Sub, that, except as set forth on the
Seller Disclosure Schedule:
2.1 Due
Organization; No Subsidiaries; Etc.
The
Seller is a company duly organized and validly existing under the laws of
Israel. The Seller is in good standing as a foreign corporation in each of
the
jurisdictions listed in Part 2.1 of the Seller Disclosure Schedule. The Seller
does not have any subsidiaries, and does not own, beneficially or otherwise,
any
shares or other securities of, or any direct or indirect interest of any nature
in, any other Entity other than e-SIM Inc., a Delaware corporation, e-SIM Japan,
Ltd., a Japanese corporation, and e-SIM Europe SARL, a French corporation.
The
Seller has never conducted any business under or otherwise used, for any purpose
or in any jurisdiction, any fictitious name, assumed name, trade name or other
name, other than “e-SIM, Ltd.” & “Emultek Ltd.”.
2.2 Articles
of Association; Records.
The
Seller has delivered to (or made available for inspection by) the Purchaser
and
Purchaser Sub accurate and complete copies of: (i) the memorandum of association
and articles of association of the Seller, including all amendments thereto;
(ii) the share registry of the Seller; and (iii) the minutes and other records
of the meetings and other proceedings (including any actions taken by written
consent or otherwise without a meeting) of the shareholders of the Seller,
the
board of directors of the Seller and all committees of the board of directors
of
the Seller. Since January 31, 1999, there have been no meetings or other
proceedings of the shareholders of the Seller, the board of directors of the
Seller or any committee of the board of directors of the Seller that are not
fully reflected in such minutes or other records. The books of account, stock
records, minute books and other records of the Seller are accurate, up-to-date
and complete, and have been maintained in accordance with sound and prudent
business practices. All of the records of the Seller are in the actual
possession and direct control of the Seller.
2.3 Financial
Statements.
The
Seller has delivered to the Purchaser the following financial statements
(collectively, the “Seller
Financial Statements”):
(a)
the audited financial statements of the Seller as of and for the fiscal years
ended January 31, 2004 and January 31, 2005 (including in each case a balance
sheet, income statement and statement of cash flows or their equivalent); and,
(b) the unaudited financial statements of the Seller as of and for the fiscal
year ended January 31, 2006; and, (c) of the unaudited financial statements
as
of and for the six months ended July 31, 2006, all prepared in accordance with
GAAP. The Seller Financial Statements are accurate and complete in all material
respects, have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered (except that the financial statements
referred to in clause “(b)” and “(c)” of this Section 2.3 do not have notes) and
present
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fairly
the financial position of the Seller as of the respective dates thereof and
the
results of operations and cash flows of the Seller for the periods covered
thereby.
2.4 Absence
Of Changes.
Since
July 31, 2006:
(a) there
has
not been any material adverse change in the Assets or Assumed Liabilities,
and
no event has occurred that might have a Material Adverse Effect;
(b) there
has
not been any loss, damage or destruction to, or any interruption in the use
of,
any of the Assets (whether or not covered by insurance);
(c) the
Seller has not (i) declared, accrued, set aside or paid any dividend or
made any other distribution in respect of its share capital or other securities,
or (ii) repurchased, redeemed or otherwise reacquired any of its share
capital or other securities;
(d) the
Seller has not purchased or otherwise acquired any asset from any other Person,
except for supplies acquired by the Seller in the Ordinary Course of Business;
(e) the
Seller has not leased or licensed any asset from any other Person;
(f) the
Seller has not made any material capital expenditure;
(g) the
Seller has not sold or otherwise transferred, or leased or licensed, any asset
to any other Person other than in the Ordinary Course of Business;
(h) the
Seller has not written off as uncollectible, or established any extraordinary
reserve with respect to, any account receivable or other
indebtedness;
(i) the
Seller has not made any loan or advance to any other Person other than for
advances for travel expenses of employees that do not exceed $25,000 in the
aggregate;
(j) the
Seller has not (i) established or adopted any Seller Employee Plan, or
(ii) paid any bonus or made any profit-sharing or similar payment to, or
increased the amount of the wages, salary, commissions, fees, fringe benefits
or
other compensation or remuneration payable to, any of its directors, officers,
employees or independent contractors;
(k) no
Active
Seller Contract by which the Seller or any of the assets owned or used by the
Seller is or was bound, or under which the Seller has or had any rights or
interest has been amended or terminated;
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(l) the
Seller has not incurred, assumed or otherwise become subject to any Liability,
other than accounts payable (of the type required to be reflected as current
liabilities in the “liabilities” column of a balance sheet prepared in
accordance with GAAP) incurred by the Seller in bona fide transactions entered
into in the Ordinary Course of Business;
(m) the
Seller has not discharged any Encumbrance or discharged or paid any indebtedness
or other Liability, except for accounts payable that (i) are reflected as
current liabilities in the “liabilities” column of the Unaudited Interim Balance
Sheet or have been incurred by the Seller since July 31, 2006, in bona fide
transactions entered into in the Ordinary Course of Business, and (ii) have
been discharged or paid in the Ordinary Course of Business;
(n) the
Seller has not forgiven any debt or otherwise released or waived any right
or
claim;
(o) the
Seller has not changed any of its methods of accounting or accounting practices
in any respect;
(p) the
Seller has not entered into any transaction or taken any other action outside
the Ordinary Course of Business;
(q) the
Seller has not applied for or received a Government Grant; and
(r) the
Seller has not agreed, committed or offered (in writing or otherwise) to take
any of the actions referred to in clauses “(c)” through “(q)”
above.
2.5 Title
To Assets.
The
Seller owns, and has good and valid title to, all of the Assets, including:
all
assets reflected on the Seller’s unaudited balance sheet as of July 31, 2006;
all such assets acquired by the Seller since July 31, 2006; all assets referred
to in Parts 2.8, 2.9, 2.10, 2.11 and 2.12 of the Seller Disclosure Schedule;
and
all rights of the Seller under Active Seller Contracts. All of said assets
are
owned by the Seller free and clear of any Encumbrances. Part 2.5 of the
Seller Disclosure Schedule identifies all of the assets that are being leased
or
licensed to the Seller. The Assets collectively constitute all of the
properties, rights, interests and other tangible and intangible assets necessary
to enable the Seller to conduct its business in the manner in which such
business is currently being conducted.
2.6 Receivables.
Part 2.6
of the Seller Disclosure Schedule provides an accurate and complete breakdown
and aging of all accounts receivable, notes receivable and other receivables
of
the Seller as of July 31, 2006. All existing accounts receivable of the Seller
represent valid obligations of customers of the Seller arising from bona fide
transactions entered into in the Ordinary Course of Business. Part 2.6 of the
Seller Disclosure Schedule identifies all prepayments, unreturned security
deposits and other deposits made by, or held by any Person for the benefit
of,
the Seller, each in excess of $5,000.
-11-
2.7 Customers;
Distributors.
Part 2.7
of the Seller Disclosure Schedule accurately identifies, and provides an
accurate and complete breakdown of the revenues received from, each customer
or
other Person that (together which such customer’s or other Person’s affiliates)
accounted for (i) more than $500,000 of the gross revenues of the Seller in
the fiscal years ending January 31, 2004, 2005 or 2006, or (ii) more than
$500,000 of the gross revenues of the Seller in the first six months of fiscal
year 2007. The Seller has not received any notice or other communication (in
writing or otherwise), and the Seller has not received any other information,
indicating that any customer or other Person identified or required to be
identified in Part 2.7 of the Seller Disclosure Schedule may cease dealing
with
the Seller or may otherwise reduce the volume of business transacted by such
Person with the Seller below historical levels. The Seller has not received
any
notice or other communication (in writing or otherwise), or has received any
other information, indicating that any distributor of any of the Seller’s
products may cease acting as a distributor of such products or otherwise dealing
with the Seller.
2.8 Reserved.
2.9 Equipment,
Etc.
Part 2.9 of the Seller Disclosure Schedule accurately identifies all
equipment, materials, prototypes, tools, supplies, vehicles, furniture,
fixtures, improvements and other tangible assets (other than physical media
on
which any software is included) owned by the Seller, and sets forth the book
value of each category of said assets. Each asset identified or required to
be
identified in Part 2.9 of the Seller Disclosure Schedule complies in all
respects with, and is being operated and otherwise used in full compliance
with,
all applicable Legal Requirements. The assets identified in Part 2.9 of the
Seller Disclosure Schedule are adequate for the conduct of the business of
the
Seller in the manner in which such business is currently being
conducted.
2.10 Real
Property.
The
Seller does not own any real property or any interest in real property, except
for the leaseholds created under the real property leases identified in
Part 2.10 of the Seller Disclosure Schedule. Part 2.10 of the Seller
Disclosure Schedule provides an accurate and complete description of the
premises covered by said leases and the facilities located on such premises.
The
Seller enjoys peaceful and undisturbed possession of such premises. The Seller
is in compliance with all material terms of each lease to which it is a party
or
is otherwise bound.
2.11 Intellectual
Property; Privacy.
(a) Products
and Services.
Part
2.11(a) of the Seller Disclosure Schedule accurately identifies and describes
each Seller Product currently being designed, developed, manufactured, marketed,
distributed, provided, licensed, or sold by the Seller.
(b) Registered
IP.
Part
2.11(b) of the Seller Disclosure Schedule accurately identifies: (a) each item
of Registered IP in which the Seller has or purports to have an ownership
interest of any nature (whether exclusively, jointly with another Person, or
otherwise); (b) the jurisdiction in which such item of Registered IP has been
registered or filed and the applicable registration or serial number; (c) any
other Person
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that
has
an ownership interest in such item of Registered IP and the nature of such
ownership interest; and (d) each Seller Product identified in Part 2.11(a)
of
the Seller Disclosure Schedule that embodies, utilizes, or is based upon or
derived from (or, with respect to Seller Products currently under development,
that is expected to embody, utilize, or be based upon or derived from) such
item
of Registered IP. The Seller has provided or otherwise granted access to the
Purchaser complete and accurate copies of all applications, correspondence
with
any Governmental Body, and other material documents related to each such item
of
Registered IP.
(c) Inbound
Licenses.
Part
2.11(c) of the Seller Disclosure Schedule accurately identifies: (a) each Active
Seller Contract pursuant to which any Intellectual Property Right or
Intellectual Property is or has been licensed, sold, assigned, or otherwise
conveyed or provided to the Seller (other than (i) agreements between the Seller
and its employees in the Seller’s standard form thereof and (ii) non-exclusive
licenses to third-party software that is not incorporated into, or used in
the
development, manufacturing, testing, distribution, maintenance, or support
of,
any Active Seller Product and that is not otherwise material to the Seller’s
business); and (b) whether the licenses or rights granted to Seller in each
such
Active Seller Contract are exclusive or non-exclusive.
(d) Outbound
Licenses.
Part
2.11(d) of the Seller Disclosure Schedule accurately identifies each Active
Seller Contract pursuant to which any Person has been granted any license under,
or otherwise has received or acquired any right (whether or not currently
exercisable) or interest in, any Seller IP. The Seller is not bound by, and
no
Active Seller IP is subject to, any Active Seller Contract containing any
covenant or other provision that in any way limits or restricts the ability
of
the Seller to use, exploit, assert, or enforce any Seller IP anywhere in the
world.
(e) Royalty
Obligations.
Part
2.11(e) of the Seller Disclosure Schedule contains a complete and accurate
list
and summary of all royalties, fees, commissions, and other amounts payable
by
the Seller to any other Person (other than sales commissions paid to employees
according to the Seller’s standard commissions plan) upon or for the
manufacture, sale, or distribution of any Seller Product or the use of any
Seller IP.
(f) Standard
Form IP Agreements.
Part
2.11(f) of the Seller Disclosure Schedule identifies each standard form of
Seller IP Contract upon which a Seller Contract that is currently effective
in
any respect, or has been effective in any respect within the 12 months
immediately preceding the Cut-Off Date, is based, or for which either party
under such Seller Contract has any continuing obligation or right, including
each standard form of (a) employee agreement containing any assignment or
license of Intellectual Property Rights; (b) consulting or independent
contractor agreement containing any intellectual property assignment or license
of Intellectual Property Rights; and (c) confidentiality or nondisclosure
agreement (each such agreement required to be listed, a “Standard
Form Agreement”).
The
Seller has provided to the Purchaser and Purchaser Sub a complete and accurate
copy of each
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Standard
Form Agreement. Part 2.11(f) of the Seller Disclosure Schedule accurately
identifies each Seller IP Contract that is an Active Seller Contract and that
is
not listed on Part 2.12 of the Seller Disclosure Schedule that deviates in
any
material respect from the corresponding Standard Form Agreement provided to
the
Purchaser, including any agreement with an employee, consultant, or independent
contractor in which the employee, consultant, or independent contractor
expressly reserved or retained rights in any Intellectual Property or
Intellectual Property Rights incorporated into or used in connection with any
Seller Product or otherwise related to the Seller’s business, research, or
development.
(g) Ownership
Free and Clear.
The
Seller exclusively owns all right, title, and interest to and in the Seller
IP
(other than Intellectual Property Rights licensed to the Seller, as identified
in Part 2.11(c) of the Seller Disclosure Schedule, which part shall indicate
whether such Intellectual Property Rights are exclusive or not) free and clear
of any Encumbrances (other than licenses and rights granted pursuant to the
Seller Contracts). Without limiting the generality of the
foregoing:
(i) Perfection
of Rights.
All
documents and instruments necessary to establish, perfect, and maintain the
rights of the Seller in the Seller IP have been validly executed, delivered,
and
filed in a timely manner with the appropriate Governmental Body.
(ii) Employees
and Contractors.
Each
Person who is or was an employee or contractor of the Seller and who is or
was
involved in the creation or development of any Seller Product or Seller IP
has
signed a valid and enforceable agreement containing an assignment of
Intellectual Property Rights pertaining to such Seller Product or Seller IP
to
the Seller and confidentiality provisions protecting the Seller IP. No current
or former shareholder, officer, director, employee or contractor of the Seller
that has any claim, right, or interest to or in any Seller IP. The Seller has
no
knowledge of any employee of the Seller that is (a) bound by or otherwise
subject to any Contract restricting him from performing his duties for the
Seller or (b) in breach of any Contract with any former employer or other Person
concerning Intellectual Property Rights or confidentiality due to his activities
as an employee of the Seller.
(iii) Government
Rights.
No
funding, facilities, or personnel of any Governmental Body or any public or
private university, college, or other educational or research institution were
used, directly or indirectly, to develop or create, in whole or in part, any
Seller IP. The Seller has not provided the Seller IP to any Governmental Body,
under license, contract, or otherwise, in any manner that gives such
Governmental Body any additional or different rights than those contained in
Seller’s standard forms of IP Contracts (as described in Section 2.11(f) above,
and all Seller contracts in which any Governmental Body obtains any rights
to
any Seller IP have been disclosed in the applicable disclosure schedule as
set
forth in this Section 2.11.
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(iv) Protection
of Proprietary Information.
The
Seller has taken all necessary steps to maintain the confidentiality of and
otherwise protect and enforce their rights in all proprietary information
pertaining to the Seller or any Seller Product. Without limiting the generality
of the foregoing, no portion of the source code for any software ever owned
or
developed by the Seller has been disclosed or licensed to any escrow agent
or
other Person.
(v) Past
IP Dispositions.
The
Seller has not assigned or otherwise transferred ownership of, or agreed to
assign or otherwise transfer ownership of, any Intellectual Property Right
that
comprises Seller IP to any other Person.
(vi) Standards
Bodies.
The
Seller is not and has never been a member or promoter of, or a contributor
to,
any industry standards body or similar organization that could require or
obligate the Seller to grant or offer to any other Person any license or right
to any Seller IP.
(vii) Sufficiency.
The
Seller owns or otherwise has, and after the Closing the Purchaser will have,
all
Intellectual Property Rights needed to conduct its business as currently
conducted.
(h) Valid
and Enforceable.
Seller
IP is valid, subsisting,
and, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or
other laws of general application affecting enforcement of creditors’ rights
generally, and by laws relating to the availability of specific performance,
injunctive relief or other estoppels or equitable remedies, is enforceable.
Without limiting the generality of the foregoing:
(i) Misuse
and Inequitable Conduct.
The
Seller has not engaged in patent or copyright misuse or any fraud or inequitable
conduct in connection with any Seller IP that is Registered IP.
(ii) Trademarks.
To the
knowledge of the Seller, no trademark or trade name owned, used, or applied
for
by the Seller conflicts or interferes with any trademark or trade name owned,
used, or applied for by any other Person. No event or circumstance (including
a
failure to exercise adequate quality controls and an assignment in gross without
the accompanying goodwill) has occurred or exists that has resulted in, or
could
reasonably be expected to result in, the abandonment of any trademark (whether
registered or unregistered) owned, used, or applied for by the
Seller.
(iii) Legal
Requirements and Deadlines.
Each
item of Seller IP that is Registered IP is and at all times has been in
compliance with all legal requirements and all filings, payments, and other
actions required to be made or taken to maintain such item of Seller IP in
full
force and effect have been made by the applicable deadline. No application
for a
patent or a copyright, mask work, or trademark registration or any other type
of
Registered IP filed by or on behalf of the Seller has been abandoned, allowed
to
lapse, or rejected. Part 2.11(h)(iii) of the Seller Disclosure Schedule
accurately identifies and describes as of the date of this
Agreement
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each
action, filing, and payment that must be taken or made on or before the date
that is 120 days after the date of this Agreement in order to maintain such
item
of Seller IP in full force and effect.
(iv) Interference
Proceedings and Similar Claims.
No
interference, opposition, reissue, reexamination, or other Proceeding is or
has
been pending or, to the knowledge of the Seller, threatened, in which the scope,
validity, or enforceability of any Seller IP is being, has been, or could
reasonably be expected to be contested or challenged. The Seller has no
knowledge of any basis for a claim that any Seller IP is invalid or
unenforceable.
(i) Third-Party
Infringement of Seller IP.
To the
knowledge of the Seller, no Person has infringed, misappropriated, or otherwise
violated, and no Person is currently infringing, misappropriating, or otherwise
violating, any Seller IP. Part 2.11(i) of the Seller Disclosure Schedule
accurately identifies (and the Seller has provided to the Purchaser a complete
and accurate copy of) each letter or other written or electronic communication
or correspondence that has been sent or otherwise delivered by or to the Seller
or any Representative of the Seller regarding any actual, alleged, or suspected
infringement or misappropriation of any Seller IP, and provides a brief
description of the current status of the matter referred to in such letter,
communication, or correspondence.
(j) Effects
of This Transaction.
Neither
the execution, delivery, or performance of this Agreement (or any of the
ancillary agreements) nor the consummation of any of the transactions
contemplated by this Agreement (or any of the ancillary agreements) will, with
or without notice or lapse of time, result in, or give any other Person the
right or option to cause or declare, (a) a loss of, or Encumbrance on, any
Seller IP; (b) a breach of or default under any Seller IP or Seller Contract
that is an Active Seller Contract to be assigned and transferred to Purchaser
Sub; (c) the release, disclosure, or delivery of any Seller IP by or to any
escrow agent or other Person; or (d) the grant, assignment, or transfer to
any
other Person of any license or other right or interest under, to, or in any
of
the Seller IP.
(k) No
Infringement of Third Party IP Rights.
The
Seller has never infringed (directly, contributorily, by inducement, or
otherwise), misappropriated, or otherwise violated or made unlawful use of
any
Intellectual Property Right of any other Person or engaged in unfair
competition. No Seller Product that is not owned by a third party, and no method
or process used in the manufacturing of any Seller Product that is not owned
by
a third party, infringes, violates, or makes unlawful use of any Intellectual
Property Right of, or contains any Intellectual Property misappropriated from,
any other Person. To the knowledge of the Seller, no Seller Product that is
owned by a third party, and no method or process used in the manufacturing
of
any Seller Product that is owned by a third party, infringes, violates, or
makes
unlawful use of any Intellectual Property Right of, or contains any Intellectual
Property misappropriated from, any other Person. There is no legitimate basis
for a claim that the Seller or any Seller Product that is not owned by a third
party has infringed or
-16-
misappropriated
any Intellectual Property Right of another Person or engaged in unfair
competition or that any Seller Product that is not owned by a third party,
or
any method or process used in the manufacturing of any Seller Product that
is
not owned by a third party, infringes, violates, or makes unlawful use of any
Intellectual Property Right of, or contains any Intellectual Property
misappropriated from, any other Person. Without limiting the generality of
the
foregoing:
(i) Infringement
Claims.
No
infringement, misappropriation, or similar claim or Proceeding is pending or,
to
the knowledge of the Seller, threatened against the Seller or, to the knowledge
of the Seller, against any other Person who is or may be entitled to be
indemnified, defended, held harmless, or reimbursed by the Seller with respect
to such claim or Proceeding. The Seller has never received any notice or other
communication (in writing or otherwise) relating to any actual, alleged, or
suspected infringement, misappropriation, or violation by the Seller, any of
their employees or agents, or any Seller Product of any Intellectual Property
Rights of another Person, including any letter or other communication suggesting
or offering that the Seller obtain a license to any Intellectual Property Right
of another Person.
(ii) Other
Infringement Liability.
The
Seller is not bound by any Active Seller Contract to indemnify, defend, hold
harmless, or reimburse any other Person with respect to, or otherwise assumed
or
agreed to discharge or otherwise take responsibility for, any existing or
potential intellectual property infringement, misappropriation, or similar
claim
(other than indemnification provisions in the Seller’s standard forms of Seller
IP Contracts).
(iii) Infringement
Claims Affecting In-Licensed IP.
No
claim or Proceeding involving any Intellectual Property or Intellectual Property
Right licensed to the Seller is pending or has been threatened, against the
Seller or, to the knowledge of the Seller, against any customer, distributor
or
supplier of the Seller, except for any such claim or Proceeding that, if
adversely determined, would not adversely affect (a) the use or exploitation
of
such Intellectual Property or Intellectual Property Right by the Seller, or
(b)
the design, development, manufacturing, marketing, distribution, provision,
licensing or sale of any Seller Product that is not owned by a third
party.
(l) Bugs.
None of
the software (including firmware and other software embedded in hardware
devices) owned, developed, used, marketed, distributed, licensed, or sold by
the
Seller (including any software that is part of, is distributed with, or is
used
in the design, development, manufacturing, production, distribution, testing,
maintenance, or support of any Seller Product, but excluding any third-party
software that is licensed to the Seller on a non-exclusive basis) (collectively,
“Seller
Software”)
(a)
contains any bug, defect, or error (including any bug, defect, or error relating
to or resulting from the display, manipulation, processing, storage,
transmission, or use of date data) that materially and adversely affects the
use, functionality, or performance of such Seller Software or any product or
system containing or used in conjunction with such
-17-
Seller
Software; or (b) fails to comply with any applicable warranty or other
contractual commitment relating to the use, functionality, or performance of
such Seller Software. The Seller has provided to the Purchaser Sub a complete
and accurate list of all known bugs, defects, and errors in each version of
the
Seller Software.
(m) Harmful
Code.
No
Seller Software contains any “back door,” “drop dead device,” “time bomb,”
“Trojan horse,” “virus,” or “worm” (as such terms are commonly understood in the
software industry) or any other code designed or intended to have, or capable
of
performing, any of the following functions: (a) disrupting, disabling, harming,
or otherwise impeding in any manner the operation of, or providing unauthorized
access to, a computer system or network or other device on which such code
is
stored or installed; (b) damaging or destroying any data or file without the
user’s consent; or (c) otherwise interfering with the operation of such Seller
Software.
(n) Source
Code.
The
source code for all Seller Software contains clear and accurate annotations
and
programmer’s comments, and otherwise has been documented in a professional
manner that is both: (i) consistent with customary code annotation conventions
and best practices in the software industry; and (ii) sufficient to
independently enable a programmer of reasonable skill and competence to
understand, analyze, and interpret program logic, correct errors and improve,
enhance, modify and support the Seller Software. No source code for any Seller
Software has been delivered, licensed, or made available to any escrow agent
or
other Person who is not, as of the date of this Agreement, an employee of the
Seller. The Seller has no duty or obligation (whether present, contingent,
or
otherwise) to deliver, license, or make available the source code for any Seller
Software to any escrow agent or other Person. No event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of
time)
will, or could reasonably be expected to, result in the delivery, license,
or
disclosure of the source code for any Seller Software to any other
Person.
(o) Part
2.11(o) of the Seller Disclosure Schedule accurately identifies and describes
(i) each item of Open Source Code that is contained in, distributed with, or
used in the development of the Seller Products or from which any part of any
Seller Product is derived, (ii) the applicable license terms for each such
item
of Open Source Code, and (iii) the Seller Product or Seller Products to which
each such item of Open Source Code relates.
(p) No
Seller
Product contains, is derived from, is distributed with, or is being or was
developed using Open Source Code that is licensed under any terms that (i)
impose or could impose a requirement or condition that any Seller Product or
part thereof (A) be disclosed or distributed in source code form, (B) be
licensed for the purpose of making modifications or derivative works, or (C)
be
redistributable at no charge, or (ii) otherwise impose or could impose any
other
material limitation, restriction, or condition on the right or ability of the
Seller to use or distribute any Seller Product.
-18-
(q) Part
2.11(q) of the Seller Disclosure Schedule contains each Seller Privacy Policy
and identifies, with respect to each Seller Privacy Policy, (i) the period
of time during which such privacy policy was or has been in effect, (ii) whether
the terms of a later Seller Privacy Policy apply to the data or information
collected under such privacy policy, and (iii) if applicable, the mechanism
(such as opt-in, opt-out, or notice only) used to apply a later Seller Privacy
Policy to data or information previously collected under such privacy
policy.
(r) Part
2.11(r) of the Seller Disclosure Schedule identifies and describes each distinct
electronic or other database containing (in whole or in part) Personal Data
maintained by or for the Seller at any time (the “Seller
Databases”),
the
types of Personal Data in each such database, the means by which the Personal
Data was collected, and the security policies that have been adopted and
maintained with respect to each such database. No breach or violation of any
such security policy has occurred or, to the best of the Seller’s Knowledge, is
threatened, and there has been no unauthorized or illegal use of or access
to
any of the data or information in any of the Seller Databases.
(s) The
Seller has complied at all times and in all material respects with all of the
Seller Privacy Policies and with all applicable Legal Requirements pertaining
to
privacy, User Data, or Personal Data, including without limitation the
▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, the European Union Data Protection Directive, Israel’s
Protection of Privacy Act, 1981 and any similar federal, state or foreign
law.
(t) To
the
knowledge of the Seller, neither the execution, delivery, or performance of
this
Agreement (or any of the ancillary agreements) nor the consummation of any
of
the transactions contemplated by this Agreement (or any of the ancillary
agreements), nor the Purchaser’s or Purchaser Sub’s possession or use of the
User Data or any data or information in the Seller Databases as used by Seller,
will result in any violation of any Seller Privacy Policy or any Legal
Requirement pertaining to privacy, User Data, or Personal Data.
2.12 Contracts.
(a) Part
2.12
of the Seller Disclosure Schedule identifies each Active Seller Contract, except
for any Immaterial Contract. The Seller has delivered to the Purchaser or
Purchaser Sub (or granted Purchaser access to) accurate and complete copies
of
all Contracts identified in Part 2.12 of the Seller Disclosure Schedule,
including all amendments thereto. Each Active Seller Contract is valid and
in
full force and effect.
(b) Except
as
set forth in Part 2.12 of the Seller Disclosure Schedule: (i) no Person has
violated or materially breached, or declared or committed any material default
under, any Active Seller Contract; (ii) no event has occurred, and no
circumstance or condition exists, that might (with or without notice or lapse
of
time) (A) result in a violation or breach of any of the provisions of any
Active Seller Contract, (B) give any Person the right to declare a default
or exercise any remedy
-19-
under
any
Active Seller Contract, (C) give any Person the right to accelerate the
maturity or performance of any Active Seller Contract, or (D) give any Person
the right to cancel, terminate or modify any Active Seller Contract; (iii)
the
Seller has not received any notice or other communication (in writing or
otherwise) regarding any actual, alleged, possible or potential violation or
breach of, or default under, any Active Seller Contract; and (iv) the Seller
has
not waived any right under any Active Seller Contract.
(c) To
the
knowledge of the Seller, each Person against which the Seller has or may acquire
any rights under any Active Seller Contract is solvent and is financially able
to satisfy all of such Person’s obligations thereunder.
(d) Except
as
set forth in Part 2.12 of the Seller Disclosure Schedule, the Seller is not
guaranteeing or otherwise committed to guarantee and is not obligated to cause,
insure or become liable for, and non of the Assets are pledged to secure the
performance or payment of any obligation or other Liability of any other
Person.
(e) The
performance of the Active Seller Contracts will not result in any material
violation of or failure to comply with any Legal Requirement.
(f) No
Person
is renegotiating, or, other than as set forth in the Active Seller Contract,
has
the right to renegotiate, any amount paid or payable to the Seller under any
Active Seller Contract or any other term or provision of any Active Seller
Contract.
(g) The
Seller has no knowledge of any basis upon which any party to any Active Seller
Contract has the contractual right to object to (i) the assignment to the
Purchaser Sub of any right under such Active Seller Contract, or (ii) the
delegation to or performance by the Purchaser Sub of any obligation under such
Seller Contract.
(h) The
Contracts identified in Part 2.12 of the Seller Disclosure Schedule collectively
constitute all of the Contracts necessary to enable the Seller to conduct its
business in the manner in which such business is currently being conducted
and
in the manner in which such business is proposed to be conducted.
(i) Part
2.12
of the Seller Disclosure Schedule identifies each proposed Contract as to which
any bid, offer, written proposal, term sheet or similar document has been
submitted or received by the Seller in the 6 (six) month period prior to the
date hereof.
2.13 Liabilities;
Major Suppliers.
(a) The
Seller has no existing Liabilities, except for: (i) liabilities identified
on
Part 2.13 of the Seller Disclosure Schedule; and (ii) obligations under the
Seller Contracts listed on Part 2.12 of the Seller Disclosure Schedule, to
the
extent the existence of such obligations can be ascertained solely by reference
to such Seller Contracts.
-20-
(b) Part 2.13
of the Seller Disclosure Schedule: (i) provides an accurate and complete
breakdown and aging of the accounts payable of the Seller as of the date of
this
Agreement and as of the Cut-Off Date; (ii) provides an accurate and complete
breakdown of any prepayments, customer deposits or other deposits held by the
Seller as of the date of this Agreement and as of the Cut-Off Date; and (iii)
provides an accurate and complete breakdown of all notes payable and other
indebtedness of the Seller as of the date of this Agreement and as of the
Cut-Off Date.
(c) Except
as
set forth in Part 2.13 of the Seller Disclosure Schedule, the Seller has not
paid, and the Seller is not and will not become liable for the payment of,
any
fees, costs or expenses of the type referred to in
Section 10.2(a).
(d) Part 2.13
of the Seller Disclosure Schedule accurately identifies, and provides an
accurate and complete breakdown of the amounts paid to, each supplier or other
Person that (together which such Person’s affiliates) received (i) more than
$100,000 in the aggregate from the Seller in the fiscal years ending January
31,
2004, 2005 or 2006, or (ii) more than $100,000 in the aggregate from the Seller
in the first six months of fiscal year 2007.
(e) The
Seller is not now insolvent nor will the Seller be rendered insolvent by this
Agreement or the consummation of any other transaction contemplated hereby.
As
used in this Section 2.13, “insolvent”
means
that the sum of the present fair saleable value of the assets of an entity
do
not and will not exceed its debts and other probable liabilities. Immediately
after giving effect to the consummation of the transactions contemplated by
this
Agreement, (a) the Seller will be able to pay its liabilities as they
become due in the usual course of business, (b) the Seller will not have
unreasonably small capital with which to conduct its proposed business during
the twelve (12) months following the date of this Agreement, and (c) the
Seller will have assets (calculated at fair market value) that exceed
liabilities. The cash available to the Seller following the Closing, after
taking into account all other anticipated uses of the cash, will be sufficient
to pay all such debts and judgments promptly in accordance with their terms.
The
Purchase Price constitutes reasonably equivalent value for the Assets. The
Seller has not, at any time, (i) made a general assignment for the benefit
of creditors, (ii) filed, or had filed against it, any bankruptcy petition
or similar filing, (iii) suffered the attachment or other judicial seizure
of all or a substantial portion of its assets, (iv) been convicted of, or
pleaded guilty or no contest to, any felony, or (vi) taken or been the
subject of any action that may constitute a Material Adverse Effect.
2.14 Compliance
with Legal Requirements.
(a)
to
the knowledge of the Seller, the Seller is in material compliance with each
Legal Requirement that is applicable to it or to the conduct of its business
or
the ownership or use of any of the Assets; (b) to the knowledge of the Seller,
no event has occurred, and no condition or circumstance exists, that might
(with
or without notice or lapse of time) constitute or result directly or indirectly
in a material violation by the Seller of, or a failure on the part of the Seller
to comply with, any Legal Requirement the repercussions of which
may
-21-
have
a
Material Adverse Effect; and (d) the Seller has not received, at any time,
any
notice or other communication (in writing or otherwise) from any Governmental
Body or any other Person regarding (i) any actual, alleged, possible or
potential violation of, or failure to comply with, any Legal Requirement, or
(ii) any actual, alleged, possible or potential obligation on the part of the
Seller to undertake, or to bear all or any portion of the cost of, any cleanup
or any remedial, corrective or response action of any nature. The Seller have
delivered or granted access to the Purchaser or Purchaser
Sub an
accurate and complete copy of each report, study, survey or other document
which
is in the possession of the Seller that addresses or otherwise relates to the
substantial compliance of the Seller with, or the applicability to the Seller
of, any Legal Requirement. To the best of the knowledge of the Seller, no
Governmental Body has proposed or is considering any Legal Requirement that,
if
adopted or otherwise put into effect, (i) may have an adverse effect on the
business, condition, assets, liabilities, operations, financial performance,
net
income or prospects of the Seller or on the ability of the Seller to comply
with
or perform any covenant or obligation under any of the Transactional Agreements,
or (ii) may have the effect of preventing, delaying, making illegal or
otherwise interfering with any of the Transactions.
2.15 Governmental
Authorizations.
Part 2.15 of the Seller Disclosure Schedule identifies: (a) each
Governmental Authorization that is held by the Seller, including without
limitation all licenses from the Israeli Ministry of Defense or an authorized
body thereof pursuant to Section 2(a) of the Control of Products and Services
Declaration (Engagement in Encryption), 1974, as amended; and (b) each other
Governmental Authorization that, to the best of the knowledge of the Seller,
is
held by any employee of the Seller and relates to or is useful in connection
with the business of the Seller. The Seller has delivered or granted access
to
the Purchaser or Purchaser Sub accurate and complete copies of all of the
Governmental Authorizations identified in Part 2.15 of the Seller
Disclosure Schedule, including all renewals thereof and all amendments thereto.
Each Governmental Authorization identified or required to be identified in
Part 2.15 of the Seller Disclosure Schedule is valid and in full force and
effect. Except as set forth in Part 2.15 of the Seller Disclosure Schedule:
(i) the Seller is and has at all times been in full compliance with all of
the
terms and requirements of each Governmental Authorization identified or required
to be identified in Part 2.15 of the Seller Disclosure Schedule; (ii) no
event has occurred, and no condition or circumstance exists, that might (with
or
without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or requirement
of any Governmental Authorization identified or required to be identified in
Part 2.15 of the Seller Disclosure Schedule, or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, termination
or modification of any Governmental Authorization identified or required to
be
identified in Part 2.15 of the Seller Disclosure Schedule; (iii) the Seller
has never received any notice or other communication (in writing or otherwise)
from any Governmental Body or any other Person regarding (A) any actual,
alleged, possible or potential violation of or failure to comply with any term
or requirement of any Governmental Authorization, or (B) any actual,
proposed, possible or potential revocation, withdrawal, suspension,
cancellation, termination or modification of any Governmental Authorization;
and
(iv) all applications required to
-22-
have
been
filed for the renewal of the Governmental Authorizations required to be
identified in Part 2.15 of the Seller Disclosure Schedule have been duly
filed on a timely basis with the appropriate Governmental Bodies, and each
other
notice or filing required to have been given or made with respect to such
Governmental Authorizations has been duly given or made on a timely basis with
the appropriate Governmental Body. The Governmental Authorizations identified
in
Part 2.15 of the Seller Disclosure Schedule constitute all of the
Governmental Authorizations necessary (i) to enable the Seller to conduct
its business in the manner in which such business is currently being conducted
and in the manner in which such business is proposed to be conducted, and
(ii) to permit the Seller to own and use its assets in the manner in which
they are currently owned and used and in the manner in which they are proposed
to be owned and used.
2.16 Reserved.
2.17 Employee
And Labor Matters.
(a) Part 2.17(a)
of the Seller Disclosure Schedule accurately sets forth, with respect to each
employee of the Seller (including any employee of the Seller who is on a leave
of absence or on layoff status):
(i) the
name
of such employee and the date as of which such employee was originally hired
by
the Seller;
(ii) such
employee’s title, and a general description of such employee’s duties and
responsibilities;
(iii) the
aggregate dollar or New Israeli Shekel amount of the compensation (including
wages, salary, commissions, director’s fees, fringe benefits, bonuses,
profit-sharing payments and other payments or benefits of any type) received
by
such employee from the Seller with respect to services performed in 2005 and
2006;
(iv) such
employee’s annualized compensation as of the date of this
Agreement;
(v) each
Seller Employee Plan in which such employee participates or is eligible to
participate;
(vi) any
Governmental Authorization that is held by such employee and that relates to
or
is useful in connection with the Seller’s business; and
(vii) with
respect to Israeli employees, all accrued vacation day and sick days, all
recuperation pay owed; and any amounts owing to pension funds, managers
insurance, education funds, recuperation pay (dmei
havra’ah)
or for
other social benefits, including all accruals, allocations, severance and
reserve Liabilities.
(b) Part
2.17(b) of the Seller Disclosure Schedule accurately identifies each former
employee of the Seller who is receiving or is scheduled to receive (or
whose
-23-
spouse
or
other dependent is receiving or is scheduled to receive) any benefits (whether
from the Seller or otherwise) relating to such former employee’s employment with
the Seller; and Part 2.17(b) of the Seller Disclosure Schedule
accurately describes such benefits.
(c) The
employment of each of the Seller’s employees, subject to applicable notice
periods, is terminable
by the
Seller at will. The Seller has delivered or granted to the Purchaser access
to
accurate and complete copies of all employee manuals and handbooks, disclosure
materials, policy statements and other materials relating to the employment
of
the current and former employees of the Seller.
(d) To
the
knowledge of the Seller:
(i) no
employee of the Seller intends to terminate his employment with the Seller;
(ii) no
employee of the Seller has received an offer to join a business that may be
competitive with the Seller’s business; and
(iii) no
employee of the Seller is a party to or is bound by any confidentiality
agreement, noncompetition agreement or other Contract (with any Person) that
may
have an adverse effect on: (A) the performance by such employee of any of his
duties or responsibilities as an employee of the Seller; or (B) the Seller’s
business or operations
(e) Part 2.17(e)
of the Seller Disclosure Schedule accurately sets forth, with respect to each
independent contractor of the Seller:
(i) the
name
of such independent contractor and the date as of which such independent
contractor was originally engaged by the Seller;
(ii) a
description of such independent contractor duties and
responsibilities;
(iii) the
aggregate dollar amount of the compensation (including all payments or benefits
of any type) received by such independent contractor from the Seller with
respect to services performed during the first seven (7) months of
2006;
(iv) the
terms
of compensation of such independent contractor; and
(v) any
Governmental Authorization that is held by such independent contractor and
that
relates to or is useful in connection with the Seller’s business.
-24-
(f) The
Seller is not a party to or bound by, and in the past eight (8) years, the
Seller has not been a party to or bound by, any collective employment agreement
or any union contract, collective bargaining agreement
or
similar Contract.
(g) The
Seller is not engaged, and the Seller has never been engaged, in any unfair
labor practice of any nature. There has never been any slowdown, work stoppage,
labor dispute or union organizing activity, or any similar activity or dispute,
affecting the Seller, any such slowdown, work stoppage, labor dispute or union
organizing activity or any similar activity or dispute. No event has occurred,
and no condition or circumstance exists, that might directly or indirectly
give
rise to or provide a basis for the commencement of any such slowdown, work
stoppage, labor dispute or union organizing activity or any similar activity
or
dispute. There
are
no actions, suits, claims, labor disputes or grievances pending or, to the
best
of the knowledge of the Seller, threatened or reasonably anticipated relating
to
any labor, safety or discrimination matters involving any Seller Employee,
including, without limitation, charges of unfair labor practices or
discrimination complaints.
(h) None
of
the current
or
former independent contractors of the Seller could be reclassified as an
employee. The Seller has never had any temporary or leased employees. To the
knowledge of the Seller, no independent contractor of the Seller is eligible
to
participate in any Seller Employee Plan.
(i) All
employees resident or working in Israel (“Israeli
Employees”)
are
listed on the Seller Disclosure Schedule. All of the Israeli Employees
are “at will” employees subject to termination upon up to thirty (30) days prior
written notice under the termination notice provisions included in employment
agreements or applicable law. The Seller’s obligations to provide statutory
severance pay to the Israeli Employees pursuant to the Severance Pay Law
(5723-1963) are fully funded or accrued on the Seller’s financial statements and
the Seller has not invoked the provisions of Section 14 of the Severance Pay
Law
with respect to such statutory severance pay. To Seller’s knowledge, there are
no circumstances that could give rise to any valid claim by a current or former
Israeli Employee for compensation on termination
of
employment (beyond the statutory severance pay to which employees are entitled).
All amounts that the Seller is legally or contractually required either (A)
to
deduct from the Israeli Employees’ salaries or to transfer to the Israeli
Employees’ pension or provident, life insurance, incapacity insurance,
continuing education fund or other similar funds or (B) to withhold from the
Israeli Employees’ salaries and benefits and to pay to any government entity as
required by the Israeli Income Tax Ordinance and National Insurance Law or
otherwise have, in each case, been duly deducted, transferred, withheld and
paid, and the Sellers do not have any outstanding obligation to make any such
deduction, transfer, withholding or payment; and (C) the Seller is in compliance
in all material respects with all applicable legal requirements and contracts
relating to employment, employment practices, wages, bonuses and other
compensation matters and terms and conditions of employment related to the
Israeli Employees, including but not limited to The Prior Notice to the Employee
Law, 2002, The Notice to Employee (Terms of Employment) Law, 2002, The
Prevention
-25-
of
Sexual
Harassment Law, 1998, the Hours of Work and Rest Law, 1951, the Annual Leave
Law, 1951, and The Employment by Human Resource Contractors Law, 1996. The
Seller has not engaged any Israeli Employees whose employment would require
special licenses or permits.
There
are no
unwritten policies or customs that, by extension, could entitle Israeli
Employees to benefits in addition to what they are entitled by law (including,
by way of example but without limitation, unwritten customs concerning the
payment of statutory severance pay when it is not legally required).
The
Seller
has not engaged any consultants, sub-contractors or freelancers who, according
to Israeli law, are entitled to the rights of an employee vis a vis the Seller,
including rights to severance pay, vacation, recuperation pay (dmei
havra’ah)
and
other employee-related statutory benefits. The Seller has provided to Purchaser
a correct and complete summary of the calculations concerning the components
of
the Israeli Employees’ salaries, including any components that are not included
in the basis for calculation of amounts set aside for purposes of statutory
severance pay. The Seller has provided to Purchaser (a) any and all agreements
with human resource contractors, or with consultants, sub-contractors or
freelancers; and (b) full documents, manuals, and written policies relating
to
the employment and termination of Israeli Employees.
2.18 Employee
Benefit Plans and Compensation.
(a) Part
2.18(a) of the Seller Disclosure Schedule contains an accurate and complete
list
as of the date hereof of each Seller Employee Plan. Seller shall deliver to
the
Purchaser a complete list of each Seller Employee Agreement within 40 days
of
the date hereof, but in any event prior to the Closing. The Seller does not
intend nor has it committed to establish or enter into any new Seller Employee
Plan or Seller Employee Agreement, or to modify any Seller Employee Plan or
Seller Employee Agreement (except to conform any such Seller Employee Plan
or
Seller Employee Agreement to the requirements of any applicable Legal
Requirements, in each case as previously disclosed to the Purchaser in writing
or as required by this Agreement).
(b) The
Seller has delivered or granted access to the Purchaser or Purchaser Sub to:
(i)
correct and complete copies of all documents setting forth the terms of each
Seller Employee Plan and each Seller Employee Agreement, including all
amendments thereto, forms of employee option grant agreements and all related
trust documents; and (ii) all written materials provided to any Seller Employee
relating to any Seller Employee Plan and any proposed Seller Employee Plans,
in
each case, relating to any amendments, terminations, establishments,
increases
or
decreases in benefits, acceleration of payments or vesting schedules or other
events that would result in any liability to the Seller.
(c) The
Seller has performed all obligations required to be performed by them under
each
Seller Employee Plan and are not in default or violation of, and the Seller
has
no knowledge of any default or violation by any other party to, the terms of
any
Seller Employee Plan, and each Seller Employee Plan has been established and
maintained substantially in accordance with its terms and in substantial
compliance with all applicable Legal Requirements. There are no claims or
Proceedings pending, or, to
-26-
the
best
of the knowledge of the Seller, threatened or reasonably anticipated (other
than
routine claims for benefits), against any Seller Employee Plan or against the
assets of any Seller Employee Plan. The Seller has made all contributions and
other payments required by and due under the terms of each Seller Employee
Plan.
(d) Except
as
set forth in the Seller Disclosure Schedule, and except as expressly required
or
provided by this Agreement, neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or
upon
the occurrence of any additional or subsequent events) constitute an event
under
any Seller Employee Plan, Seller Employee Agreement, trust or loan that will
or
may result (either alone or in connection with any other circumstance or event)
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Seller Employee.
(e) Except
as
set forth in Part 2.18(e) of the Seller Disclosure Schedule, the Seller: (i)
is,
and at all times has been, in substantial compliance with all applicable Legal
Requirements respecting employment, employment practices, terms and conditions
of employment and wages and hours, in each case, with respect to Seller
Employees; (ii) has withheld and reported all amounts required by applicable
Legal Requirements or by Contract to be withheld and reported with respect
to
wages, salaries and other payments to Seller Employees; (iii) is not liable
for
any arrears of wages or any taxes or any penalty for failure to comply with
the
Legal Requirements applicable of the foregoing; and (iv) is not liable for
any
payment to any trust or other fund governed by or maintained by or on behalf
of
any Governmental Body with respect to unemployment compensation benefits, social
security or other benefits or obligations for Seller Employees (other than
routine payments to be made in the normal course of business and consistent
with
past practice). There
are
no pending or, to the best of the knowledge of the Seller, threatened or
reasonably anticipated claims or Proceedings against the Seller under any
worker’s compensation policy or long-term disability policy.
(a) To
the
best of the knowledge of the Seller,
no
Newly Hired Employee is obligated under any Contract or subject to any judgment,
decree, or order of any court or other Governmental Body that would interfere
with such Person’s efforts to promote the interests of the Seller or that would
interfere with the business of the Seller. Neither the execution nor the
delivery of this Agreement, nor the carrying on of the business of the Seller
as
presently conducted nor any activity of such Newly Hired Employees in connection
with the carrying on of the business of the Seller as presently conducted will,
to
the
best of the knowledge of the Seller,
conflict with, result in a breach of the terms, conditions or provisions of,
or
constitute a default under, any Contract under which any of such Newly Hired
Employee is now bound.
2.19 Environmental
Matters.
(a) The
Seller has never received any notice or other communication (in writing or
otherwise) from any Governmental Body or other Person regarding any
-27-
actual,
alleged, possible or potential Liability
arising
from or relating to the presence, generation, manufacture, production,
transportation, importation, use, treatment, refinement, processing, handling,
storage, discharge, release, emission or disposal of any Hazardous Material.
No
Person has ever commenced or threatened to commence any contribution action
or
other Proceeding against the Seller in connection with any such actual, alleged,
possible or potential Liability; and no event has occurred, and no condition
or
circumstance exists, that may directly or indirectly give rise to, or result
in
the Seller becoming subject to, any such Liability.
(b) The
Seller has never generated, manufactured, produced, transported, imported,
used,
treated, refined, processed, handled, stored, discharged, released or disposed
of any Hazardous Material (whether lawfully or unlawfully). The Seller has
never
permitted (knowingly or otherwise) any Hazardous Material to be generated,
manufactured, produced, used, treated, refined, processed, handled, stored,
discharged, released or disposed of (whether lawfully or unlawfully): (i) on
or
beneath the surface of any real property that is, or that has at any time been,
owned by, leased to, controlled by or used by the Seller; (ii) in or into any
surface water, groundwater, soil or air associated
with or
adjacent to any such real property; or (iii) in or into any well, pit, pond,
lagoon, impoundment, ditch, landfill, building, structure, facility,
improvement, installation, equipment, pipe, pipeline, vehicle or storage
container that is or was located on or beneath the surface of any such real
property or that is or has at any time been owned by, leased to, controlled
by
or used by the Seller.
(c) All
property that is owned by, leased to, controlled by or used by the Seller,
and
all surface water, groundwater,
soil
and air associated with or adjacent to such property: (i) is in clean and
healthful condition; (ii) is free of any Hazardous Material and any harmful
chemical or physical conditions; and (iii) is free of any environmental
contamination of any nature.
2.20 Seller
Interim Period Expenditures.
Schedule
2.20 of the Seller Disclosure Schedule sets forth in reasonable detail Seller’s
reasonable good faith estimate as of the date hereof of the Seller Interim
Period Expenditures.
2.21 Performance
Of Services.
All
services that have been performed on behalf of the Seller were performed
properly and in full conformity with the terms and requirements of all
applicable warranties and other Contracts and with all applicable Legal
Requirements. The Purchaser and Purchaser Sub will not incur or otherwise become
subject to any Liability arising directly or indirectly from any services
performed by the Seller prior to the Cut Off Date, other than in accordance
with
Section 9.11 below. There is no claim pending or being threatened against the
Seller relating to any services performed by the Seller, and to the knowledge
of
the Seller there is no valid and justified basis for the assertion of any such
material claim.
2.22 Insurance.
(a) Part 2.22
of the Seller Disclosure Schedule accurately sets forth, with respect to each
insurance policy maintained by or at the expense of, or for the
direct
-28-
or
indirect benefit of, the Seller: (i) the name of the insurance carrier that
issued such policy and the policy number of such policy; (ii) whether such
policy is a “claims made” or an “occurrences” policy; (iii) a description of the
coverage provided by such policy and the material terms and provisions of such
policy (including all applicable coverage limits, deductible amounts and
co-insurance arrangements and any non-customary
exclusions from coverage); (iv) the annual premium payable with respect to
such
policy, and the cash value (if any) of such policy; and (v) a description of
any
claims pending, and any claims that have been asserted in the past, with respect
to such policy or any predecessor insurance policy. Part 2.22 of the Seller
Disclosure Schedule also identifies (1) each pending application for insurance
that has been submitted by or on behalf of the Seller, (2) each self-insurance
or risk-sharing arrangement affecting the Seller or any of the assets of the
Seller, and (3) all material risks (of the type customarily insured by
Comparable Entities) for which the Seller does not maintain insurance coverage.
The Seller have delivered to the Purchaser and Purchaser
Sub accurate
and complete copies of all of the insurance policies identified in
Part 2.22 of the Seller Disclosure Schedule (including all renewals thereof
and endorsements thereto) and all of the pending applications identified in
Part
2.22 of the Seller Disclosure Schedule. Each of the policies identified in
Part
2.22 of the Seller Disclosure Schedule is valid, enforceable and in full force
and effect, and has been issued by an insurance carrier that, to the best of
the
knowledge the Seller, is solvent, financially sound and reputable. All of the
information contained in the applications submitted in connection with said
policies was (at the times said applications were submitted) accurate and
complete, and all premiums and other amounts owing with respect to said policies
have been paid in full on a timely basis.
(b) Part
2.22
of the Seller Disclosure Schedule identifies each insurance claim made by the
Seller since December 31, 2005. To the best of Seller’s knowledge, no event
has occurred, and no condition or circumstance exists, that might (with or
without notice or lapse of time) directly or indirectly give rise to or serve
as
a basis for any such insurance claim. The Seller has not received: (i) any
notice or other communication (in writing or otherwise) regarding the actual
or
possible cancellation or invalidation of any of the policies identified in
Part
2.22 of the Seller Disclosure Schedule or regarding any actual or possible
adjustment in the amount of the premiums payable with respect to any of said
policies; (ii) any notice or other communication (in writing or otherwise)
regarding any actual or possible refusal of coverage under, or any actual or
possible rejection of any claim under, any of the policies identified in Part
2.22 of the Seller Disclosure Schedule; or (iii) any indication that the issuer
of any of the policies identified in Part 2.22 of the Seller Disclosure Schedule
may be unwilling or unable to perform any of its obligations
thereunder.
2.23 Related
Party Transactions.
(a) no
Related Party has any direct or indirect interest of any nature in any of the
assets of the Seller; (b) no Related Party is, or has at any time since
January 31, 2006 been, indebted to the Seller; (c) since January 31, 2006,
no Related Party has entered into, or has had any direct or indirect financial
interest in, any Seller Contract, transaction or business dealing of any nature
involving the Seller; (d) no Related Party is competing, or has at any time
since January 31, 2006 competed,
-29-
directly
or indirectly, with the Seller; (e) no Related Party has any claim or right
against the Seller; and (f) no event has occurred, and no condition or
circumstance exists, that might (with or without notice or lapse of time)
directly or indirectly give rise to or serve as a basis for any claim or right
in favor of any Related Party against the Seller.
2.24 Certain
Payments, Etc.
The
Seller has not, and no officer, employee, agent or other Person associated
with
or acting for or on behalf of the Seller has, at any time, directly or
indirectly: (a) used any corporate funds (i) to make any unlawful political
contribution or gift or for any other unlawful purpose relating to any political
activity, (ii) to make any unlawful payment to any governmental official or
employee, or (iii) to establish or maintain any unlawful or unrecorded fund
or account of any nature; (b) made any false or fictitious entry, or failed
to
make any entry that should have been made, in any of the books of account or
other records of the Seller; (c) made any payoff, influence payment, bribe,
rebate, kickback or unlawful payment to any Person; (d) performed any favor
or
given any gift which was not deductible for federal income tax purposes; (e)
made any payment (whether or not lawful) to any Person, or provided (whether
lawfully or unlawfully) any favor or anything of value (whether in the form
of
property or services, or in any other form) to any Person, for the purpose
of
obtaining or paying for (i) favorable treatment in securing business, or
(ii) any other special concession; or (f) agreed, committed or offered (in
writing or otherwise) to take any of the actions described in clauses “(a)”
through “(e)” above.
2.25 Proceedings;
Orders.
There is
no pending Proceeding, and, to the knowledge of the Seller, no Person has
threatened to commence any Proceeding against the Seller: (i) that involves
the
Seller or that otherwise relates to or might affect the business of the Seller
or any of the Assets (whether or not the Seller is named as a party thereto);
or
(ii) that challenges, or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with, any of the Transactions. Except
as
set forth in Part 2.25 of the Seller Disclosure Schedule, no event has
occurred, and no claim, dispute or other condition or circumstance exists,
that,
to the knowledge of the Seller, might directly give rise to or serve as a basis
for the commencement of any such Proceeding. There is no Order to which the
Seller, or any of the assets owned or used by the Seller, is subject; and,
to
the knowledge of the Seller, no Related Party is subject to any Order that
relates to the Seller’s business or to any of the assets of the Seller. To the
knowledge of the Seller, no employee of the Seller is subject to any Order
that
may prohibit employee from engaging in or continuing any conduct, activity
or
practice relating to the business of the Seller. There is no Order requested
in
any Proceeding that, if issued or otherwise put into effect, (i) may have a
Material Adverse Effect or materially adversely effect the ability of the Seller
to comply with or perform any covenant or obligation under any of the
Transactional Agreements, or (ii) may have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the
Transactions.
2.26 Authority;
Binding Nature Of Agreements.
The
Seller has the absolute and unrestricted right, power and authority to enter
into and to perform its obligations under each of the Transactional Agreements
to which it is or may become a party, subject
-30-
to
and in
accordance with their terms; and the execution, delivery and performance by
the
Seller of the Transactional Agreements to which it is or may become a party
have
been or shall be by the Closing duly authorized by all necessary action on
the
part of the Seller and its shareholders, board of directors and officers. This
Agreement constitutes the legal, valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms. Upon the execution
of each of the other Transactional Agreements at the Closing, each of such
other
Transactional Agreements to which the Seller is a party will constitute the
legal, valid and binding obligation of the Seller and will be enforceable
against the Seller in accordance with its terms.
2.27 Non-Contravention;
Consents.
Except
as set forth in Part 2.27 of the Seller Disclosure Schedule, neither the
execution and delivery of any of the Transactional Agreements, nor the
consummation or performance of any of the Transactions, will directly or
indirectly (with or without notice or lapse of time):
(a) contravene,
conflict with or result in a material violation of, or give any Governmental
Body or other Person the right to challenge any of the Transactions or to
exercise any remedy or obtain any relief under, any Legal Requirement or any
Order to which any of the Seller, or any of the assets of the Seller, is
subject;
(b) cause
any
of the Assets to be reassessed or revalued by any taxing authority or other
Governmental Body;
(c) contravene,
conflict with or result in a violation of any of the terms or requirements
of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that is to be included
in
the Assets or is held by the Seller or any employee of the Seller;
(d) contravene,
conflict with or result in a material violation or breach of, or result in
a
default under, any provision of any Active Seller Contract;
(e) give
any
Person the contractual right to (i) declare a default or exercise any
remedy under any Active Seller Contract, (ii) accelerate the maturity or
performance of any such Active Seller Contract, or (iii) cancel, terminate
or modify any Active Seller Contract; or
(f) result
in
the imposition or creation of any Encumbrance upon or with respect to any of
the
Assets.
Except
as
set forth in Part 2.27 of the Seller Disclosure Schedule, the Seller was not,
is
not or will not be required to make any filing with or give any notice to,
or to
obtain any Consent from, any Person in connection with the execution and
delivery of any of the Transactional Agreements, the assignment of any Active
Seller Contracts, or the consummation or performance of any of the
Transactions.
2.28 Government
Grants.
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(a) Part
2.28
of the Seller Disclosure Schedule provides a complete list of all pending and
outstanding grants, incentives, exemptions and subsidies from the Government
of
the State of Israel or any agency thereof, or from any non-Israeli governmental
entity, granted to the Seller or assigned to or assumed by the Seller
(collectively, “Government
Grants”),
including, without limitation, (i) the Investment Center of the Ministry of
Industry, Trade and Labor, (ii) the Office of the Chief Scientist of the
Ministry of Industry, Trade and Labor (the “OCS”);
(iii)
the BIRD Foundation and any other similar governmental or government-related
entity, (iv) the Fund for the Encouragement of Marketing, and (v) the Income
Tax
Authorities.
(b) The
Seller has made available to Purchaser accurate and complete copies of all
documents requesting or evidencing Government Grants or amendments thereto
submitted by the Seller and of all letters of approval, and supplements thereto,
granted to the Seller, as well as all correspondence or written summaries
pertaining thereto, and has provided Purchaser with an accurate and complete
description of any unwritten or informal arrangements or understandings that
relate to the Government Grants.
(c) Part
2.28
of the Seller Disclosure Schedule also details all the aggregate amount of
each
Government Grant, the amounts already received under such Government Grant,
the
amounts still receivable under such Government Grant, the royalties paid by
Seller with respect to the and the aggregate outstanding obligations of the
Seller thereunder with respect to royalties, or the outstanding amounts to
be
paid by the Seller in respect of such Government Grants.
(d) The
Seller is in compliance with all of the material terms, conditions and
requirements of the Government Grants and has duly fulfilled all the
undertakings relating thereto. The Seller has no knowledge of any intention
of
the Investment Center or the OCS to revoke or materially modify any of the
Government Grants or that the Investment Center or the OCS believes that the
Seller is not in compliance in all material respects with the terms of any
Grant. Neither the execution or delivery of this Agreement, nor the consummation
of the transactions contemplated hereby does, will or would reasonably be
expected to (with or without notice or lapse of time) give any Governmental
Body
the right to revoke, withdraw, suspend, cancel, terminate or modify any
Government Grant identified or required to be identified in Part 2.29 of the
Seller Disclosure Schedule.
2.29 Brokers.
The
Seller has not agreed or become obligated to pay, or has taken any action that
might result in any Person claiming to be entitled to receive, any brokerage
commission, finder’s fee or similar commission or fee in connection with any of
the Transactions.
2.30 Investment
Representations.
Seller
understands that neither the Belzberg Shares, the Escrow Shares nor the shares
of Common Stock issuable upon conversion of the Belzberg Shares or Escrow Shares
(the “Conversion
Shares”)
have
been registered under the Securities Act. Seller also understands that the
Belzberg Shares
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and
the
Escrow Shares are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon Seller’s and
Belzberg’s representations contained in the Agreement and in the Transfer
Certificate, respectively. Seller hereby represents and warrants as
follows:
(a) Seller
Bears Economic Risk.
Seller
is capable of evaluating the merits and risks of its investment in the Purchaser
and has the capacity to protect its own interests. Seller may not sell, pledge
or otherwise transfer any interest in the Escrow Shares (or the Conversion
Shares underlying the Escrow Shares) unless the Escrow Shares (or the Conversion
Shares underlying the Escrow Shares) are registered pursuant to the Securities
Act or in reliance on an exemption from such registration is available under
the
Securities Act, and in the absence of such registration or exemption, Seller
must bear the economic risk of this investment indefinitely. Seller understands
that the Purchaser has no present intention of registering the Escrow Shares,
the Belzberg Shares, the Conversion Shares or any shares of its Common Stock.
Seller also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Seller to transfer all or any portion
of
the Escrow Shares or the Conversion Shares underlying the Escrow Shares under
the circumstances, in the amounts or at the times Seller might
propose.
(b) Acquisition
for Own Account; Transfer of Belzberg Shares.
Seller
is acquiring the Escrow Shares and the Conversion Shares for Seller’s own
account for investment only, and not with a view towards their distribution.
Seller is acquiring the Belzberg Shares with the view towards their immediate
transfer, at the Closing, to Belzberg. To Seller’s knowledge, Belzberg is
acquiring the Belzberg Shares from Seller for Belzberg’s own account for
investment only, and not with a view towards their distribution. Seller
represents and warrants that Seller has made no general solicitation in
connection with the transfer of the Belzberg Shares to Belzberg and that Seller
has not offered the Belzberg Shares to, or solicited offers from, anyone other
than Belzberg. In connection with the aforementioned transfer, Seller authorizes
the transfer of the Belzberg Shares to Belzberg on the Company’s books and
records and the issuance of a stock certificate representing the Belzberg
Shares.
(c) Seller
Can Protect Its Interest.
Seller
represents that by reason of its, or of its management’s, business or financial
experience, Seller has the capacity to protect its own interests in connection
with the transactions contemplated in Transactional Agreement. Further, Seller
is aware of no publication of any advertisement in connection with the
Transactions.
(d) Purchaser
Information.
Seller
has had an opportunity to discuss Purchaser’s business, management and financial
affairs with directors, officers and management of the Purchaser and has had
the
opportunity to review the Purchaser’s operations and facilities. Seller has also
had the opportunity to ask questions of and receive answers from, the Purchaser
and its management regarding the terms and conditions of this
investment.
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(e) Rule
144.
Seller
acknowledges and agrees that the Escrow Shares, and, if issued, the Conversion
Shares underlying the Escrow Shares, are “restricted securities” as defined in
Rule 144 promulgated under the Securities Act and must be held indefinitely
unless they are subsequently registered under the Securities Act or an exemption
from such registration is available. Seller has been advised or is aware of
the
provisions of Rule 144, which permits limited resale of shares purchased in
a
private placement subject to the satisfaction of certain conditions, including,
among other things: the availability of certain current public information
about
the Purchaser, the resale occurring following the required holding period under
Rule 144 and the number of shares being sold during any three-month period
not
exceeding specified limitations.
(f) Regulation
S.
(i) Seller
hereby represents that it has satisfied itself as to the full observance of
the
laws of its jurisdiction in connection with any invitation to subscribe for
the
Escrow Shares or Belzberg Shares or any use of this Agreement, including (i)
the
legal requirements within its jurisdiction for the purchase of the Escrow Shares
or Belzberg Shares, (ii) any foreign exchange restrictions applicable to such
purchase, (iii) any government or other consents that may need to be obtained,
and (iv) the income tax and other tax consequences, if any, that may be relevant
to the purchase, holding, redemption, sale or transfer of the Escrow Shares
or
Belzberg Shares. The Purchaser’s issuance and Seller’s acquisition of the Escrow
Shares and Belzberg Shares and continued beneficial ownership of the Escrow
Shares will not violate any applicable securities or other laws of Seller’s
jurisdiction.
(ii) The
Belzberg Shares and Escrow Shares are not being acquired for the account or
benefit of, a U.S. Person, and not with a view to the resale or distribution
of
any part thereof in the United States or to a U.S. Person, and Seller has no
present intention of selling, granting any participation in, or otherwise
distributing the same to any U.S. Person.
(iii) Seller
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person in the United States or to a U.S. Person, or any hedging transaction
with
any third person in the United States or to a United States resident, with
respect to any of the Escrow Shares.
(iv) Seller
understands that the Belzberg Shares and Escrow Shares are not registered under
the Securities Act on the ground that the sale provided for in this Agreement
and the issuance of securities hereunder is exempt from registration under
the
Securities Act in part pursuant to Regulation S thereof, and that Purchaser’s
reliance on such exemption is predicated on Seller’s representations set forth
herein.
(v) Seller
is
a person or entity that is not a U.S. Person.
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(vi) Seller
further acknowledges and understands that the certificate evidencing the Escrow
Shares and the Belzberg Shares shall be imprinted with the following legend
(in
addition to any legend required under applicable state or foreign securities
laws):
“THE
SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED PURSUANT TO REGULATION S OF
THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, MORTGAGED,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE THEREWITH,
PURSUANT TO A REGISTRATION UNDER THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM REGISTRATION. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY
PROPOSED TRANSFER OR RESALE IS EITHER IN COMPLIANCE WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS (OTHER THAN WITH RESPECT TO A SALE PURSUANT
TO
RULE 144(K) UNDER THE ACT, PROVIDED THAT THE ISSUER SHALL HAVE RECEIVED
CUSTOMARY REPRESENTATIONS CERTIFYING AS TO THE AVAILABILITY OF SUCH RULE
144(K)). IN ADDITION, NO HEDGING TRANSACTION MAY BE CONDUCTED WITH RESPECT
TO
THESE SECURITIES UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE
ACT.”
|
3.
|
Representations
and Warranties of the Purchaser.
|
The
Purchaser and Purchaser Sub, jointly and severally, represent and warrant,
to
and for the benefit of the Seller, except as set forth on the Purchaser
Disclosure Schedule, as follows:
3.1 Organization,
Good Standing and Qualification of Purchaser.
The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Purchaser has all requisite
corporate power and authority to own and operate its properties and assets,
to
execute and deliver the Transactional Agreements, to issue the Escrow Shares,
and to carry out the provisions of the Transactional Agreement and to carry
on
its business as presently conducted. The Purchaser is duly qualified to do
business and is in good standing as a foreign corporation in all jurisdictions
in which the nature of its activities and of its properties (both owned and
leased) makes such qualification necessary, except for those jurisdictions
in
which failure to do so would not have a material adverse effect on the Purchaser
or its business.
3.2 Organization
and Qualification of Purchaser Sub.
The
Purchaser Sub is a corporation duly organized and validly existing under the
laws of Israel. The Purchaser Sub has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
the Transactional Agreements, and to carry out the provisions of the
Transactional Agreement and to carry on its business as presently conducted.
The
Purchaser is not required to be qualified, authorized, registered or licenses
to
do business as a foreign corporation in any jurisdiction.
3.3 Subsidiaries.
The
Purchaser does not own or control any equity security or other interest of
any
other corporation, limited partnership or other business entity
-35-
other
than the Purchaser Sub. The Purchaser is not a participant in any joint venture,
partnership or similar arrangement. Since its inception, the Purchaser has
not
consolidated or merged with, acquired all or substantially all of the assets
of,
or acquired the stock of or any interest in any corporation, partnership,
association, or other business entity.
3.4 Capitalization;
Voting Rights of Purchaser.
(a) The
authorized capital stock of the Purchaser, as of the date of this Agreement,
consists of (i) 80,000,000 shares of common stock (the “Common
Stock”),
$0.001
par value per share, 26,908,388 shares of which are issued and outstanding,
and
(ii) 39,767,509 shares of preferred stock (the “Preferred
Stock”),
$0.001
par value per share, 19,412,667 of which are designated Series A Preferred
Stock, 19,412,667 of which are issued and outstanding and 20,354,842 of which
are designated Series B Preferred Stock, 19,354,840 of which are issued and
outstanding.
(b) As
of the
date of this Agreement, the Purchaser will have reserved 12,000,000 shares
of
Common Stock for issuance to officers, directors, employees and consultants
of
the Purchaser pursuant to its 2003 Equity Incentive Plan (the “Plan”),
a
complete and accurate copy of which has been made available to Seller prior
to
the date hereof. Of such reserved shares of Common Stock, (i) 763,154 shares
have been issued pursuant to the exercise of outstanding options and are
included in the number of shares reflected as issued and outstanding in
3.4(a)(i) above, (ii) 5,344,401 shares have been issued pursuant to
restricted stock purchase agreements and are included in the number of shares
reflected as issued and outstanding in 3.4(a)(i) above, (iii) no shares
have been issued pursuant to stock bonus award agreements, (iv) options to
purchase 3,425,821 shares have been granted and are currently outstanding,
and
(v) 3,406,566 shares of Common Stock remain available for future issuance
to officers, directors, employees and consultants of the Purchaser.
(c) Other
than the 12,000,000 shares of Common Stock reserved for issuance under the
Plan,
and except as may be granted pursuant to this Agreement, there are no
outstanding options, warrants, rights (including conversion or preemptive rights
and rights of first refusal), proxy or stockholder agreements, or agreements
of
any kind for the purchase or acquisition from the Purchaser of any of its
securities. No stock plan, stock purchase, stock option or other agreement
or
understanding between the Purchaser and any holder of equity securities or
rights to purchase equity securities provides for acceleration or other changes
in the vesting provisions or terms of such agreements or understandings, or
the
lapse of a Purchaser repurchase right, upon the occurrence of any event. Other
than in connection with a recapitalization, stock split or the like, the
Purchaser has never adjusted or amended the exercise price of any stock options
previously awarded, whether through amendment, cancellation, replacement grant,
repricing, or any other means.
(d) All
issued and outstanding shares of the Purchaser’s Common Stock and Preferred
Stock (i) have been duly authorized and validly issued and are
fully
-36-
paid
and
nonassessable, (ii) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities, and (iii) with respect
to
Common Stock only, are subject to a right of first refusal in favor of the
Purchaser upon transfer.
(e) The
rights, preferences, privileges and restrictions of the Common Stock and
Preferred Stock are as stated in the Restated Certificate of Incorporation
of
the Purchaser (as the same may be amended from time to time, the “Restated
Certificate”)
a true
and complete copy of which is attached hereto as Exhibit H.
Each
outstanding series of Preferred Stock is convertible into Common Stock on a
one-for-one basis as of the date hereof and the consummation of the transactions
contemplated hereunder will not result in any anti-dilution adjustment or other
similar adjustment to the outstanding shares of Preferred Stock. Prior to the
issuance of the Escrow Shares, the Conversion Shares will be duly and validly
reserved for issuance. When issued in compliance with the provisions of this
Agreement and the Restated Certificate, the Escrow Shares and the Conversion
Shares will be validly issued, fully paid and nonassessable, and will be free
of
any liens or encumbrances other than liens and encumbrances created by or
imposed upon purchasers of the New Financing Stock; provided,
however,
that
the Escrow Shares and the Conversion Shares may be subject to restrictions
on
transfer under state and/or federal securities laws as set forth herein or
as
otherwise required by such laws at the time a transfer is proposed.
(f) Based
in
part upon the representations of the Seller in Section 2 of this Agreement
and
subject to the provisions of Section 3.5 below, the Escrow Shares and the
Conversion Shares will be issued in compliance with the Securities Act and
all
applicable federal and state securities laws.
(g) All
outstanding shares of Common Stock and Preferred Stock, and all shares of Common
Stock and Preferred Stock issuable upon the exercise or conversion of
outstanding options, warrants or other exercisable or convertible securities
are
subject to a market standoff or “lockup” agreement not to exceed 180 days
following the Purchaser’s initial public offering.
3.5 Capitalization
of Purchaser Sub.
The
authorized share capital of Purchaser Sub, as of the date of this Agreement,
consists of NIS 10,000 divided into 1,000,000 ordinary shares, nominal value
NIS
0.01, of which 100 ordinary shares are issued to Purchaser. All issued and
outstanding shares of Purchaser Sub’s share capital (i) have been duly
authorized and validly issued and are fully paid and nonassessable, (ii) were
issued in compliance with all applicable laws concerning the issuance of
securities, and (iii) are owned by the Purchaser.
3.6 Authorization;
Binding Obligations.
All
corporate action on the part of the Purchaser and Purchaser Sub, and their
respective officers, directors and stockholders, necessary for the authorization
of the Transactional Agreements, the performance of all obligations of the
Purchaser and Purchaser Sub hereunder at the Closing and the authorization,
sale, issuance and delivery of the Escrow Shares pursuant hereto and
the
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Conversion
Shares pursuant to the Restated Certificate, has been or will be taken prior
to
Closing. The Transactional Agreements, when executed and delivered, will be
valid and binding obligations of the Purchaser and Purchaser Sub enforceable
in
accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors’ rights, (b) as limited by
general principles of equity that restrict the availability of equitable
remedies, and (c) to the extent that the enforceability of the
indemnification provisions in this Agreement may be limited by applicable laws.
The issuance of the Escrow Shares and the subsequent conversion of the Escrow
Shares into Conversion Shares are not and will not be subject to any preemptive
rights or rights of first refusal that will not have not been properly waived
or
complied with prior to the issuance of the Escrow Shares.
3.7 Governmental
Consents and Filings.
Assuming the accuracy of the representations made by the Seller in Section
2 of
this Agreement, no consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority is required on the part of the
Purchaser in connection with the consummation of the transactions contemplated
by this Agreement, except for consents, approvals, authorizations,
registrations, qualifications, designations, declarations or filings that will
be obtained, filed or made prior to Closing and filings pursuant to Section
25102(f) of the California Corporate Securities Law of 1968, as amended, and
the
rules thereunder, other applicable state securities laws and Regulation D of
the
Securities Act.
3.8 Financial
Statements. The
Purchaser has made available to the Seller its unaudited balance sheet as at
June 30, 2006 (the “Statement
Date”)
and
unaudited profit and loss statements for the twelve month period ended December
31, 2005 and the six month period ended June 30, 2006 (collectively, the
“Purchaser
Financial Statements”).
The
Purchaser Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods indicated, except as
disclosed therein, and present fairly the financial condition and position
of
the Purchaser as of the dates, and for the periods, indicated therein;
provided,
however,
that the
Purchaser Financial Statements are subject to normal recurring year-end audit
adjustments (which are not expected to be material either individually or in
the
aggregate), do not contain all footnotes required under GAAP and recognize
software revenue on a cash basis rather than under GAAP.
3.9 Changes.
Since
the Statement Date, there has not been:
(a) any
change in the assets, liabilities, financial condition or operating results
of
the Purchaser from that reflected in the Purchaser Financial Statements, except
changes in the ordinary course of business that have not been, in the aggregate,
materially adverse;
(b) any
damage, destruction or loss, whether or not covered by insurance, that
constitutes a material adverse effect on the Purchaser or its
business;
-38-
(c) any
waiver or compromise by the Purchaser of a valuable right or of a material
debt
owed to it;
(d) any
satisfaction or discharge of any lien, claim, or encumbrance or payment of
any
obligation by the Purchaser, except in the Ordinary Course of Business and
the
satisfaction or discharge or which would not have a material adverse effect
on
the Purchaser or its business;
(e) any
material change to a material Contract or agreement by which the Purchaser
or
any of its assets is bound or subject;
(f) any
material change in any compensation arrangement or agreement with any employee,
officer, director or stockholder;
(g) any
sale,
assignment or transfer by the Purchaser of any patents, trademarks, copyrights,
trade secrets or other intangible assets by the Purchaser;
(h) any
resignation or termination of employment of any officer or key employee of
the
Purchaser;
(i) any
material change, except in the Ordinary Course of Business, in a contingent
obligation of the Purchaser by way of guaranty, endorsement, indemnity, warranty
or otherwise;
(j) any
mortgage, pledge, transfer of a security interest in, or lien, created by the
Purchaser, with respect to any of its material properties or assets, except
liens for taxes not yet due or payable and liens that arise in the ordinary
course of business and do not materially impair the Purchaser’s ownership or use
of such property or assets;
(k) any
loans
or guarantees made by the Purchaser to or for the benefit of its employees,
officers or directors, or any members of their immediate families, other than
travel advances and other advances made in the ordinary course of its
business;
(l) any
declaration, setting aside or payment or other distribution in respect to any
of
the Purchaser’s capital stock, or any direct or indirect redemption, purchase,
or other acquisition of any of such stock by the Purchaser;
(m) to
the
Purchaser’s knowledge, any other event or condition of any character, other than
events affecting the economy or the Purchaser’s industry generally, that would
reasonably be expected to result in a material adverse effect on the Purchaser
or its business; or
(n) any
arrangement or commitment by the Purchaser to do any of the things described
in
this Section 3.9.
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3.10 Liabilities.
The
Purchaser has no material liabilities or obligations, contingent or otherwise,
not disclosed in the Purchaser Financial Statements, except current liabilities
incurred in the ordinary course of business which have not been, either in
any
individual case or in the aggregate, materially adverse to the Purchaser or
its
business. Except as disclosed in the Purchaser Financial Statement, the
Purchaser is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
3.11 Agreements;
Action.
(a) Except
for agreements between the Purchaser and its employees with respect to the
sale
of the Purchaser’s Common Stock, there are no agreements, understandings or
proposed transactions between the Purchaser and any of its officers, directors,
employees, affiliates or any affiliate of any of the foregoing.
(b) There
are
no agreements, understandings, instruments, Contracts, proposed transactions,
judgments, Orders, writs or decrees to which the Purchaser is a party or by
which it is bound which may involve (i) future obligations (contingent or
otherwise) of, or payments to, the Purchaser in excess of $100,000 (other than
obligations of, or payments to, the Purchaser arising from purchase or sale
agreements entered into in the ordinary course of business), or (ii) the
transfer or license of any patent, copyright, trade secret or other proprietary
right to or from the Purchaser (other than licenses by the Purchaser of “off the
shelf” or other standard products), or (iii) provisions restricting the
development, manufacture or distribution of the Purchaser’s products or
services, or (iv) indemnification by the Purchaser with respect to
infringements of proprietary rights (other than indemnification obligations
arising from purchase, sale or license agreements entered into in the ordinary
course of business).
(c) The
Purchaser has not (i) declared or paid any dividends, or authorized or made
any distribution upon or with respect to any class or series of its capital
stock, (ii) incurred or guaranteed any indebtedness for money borrowed or
any other liabilities (other than with respect to dividend obligations,
distributions, indebtedness and other obligations incurred in the ordinary
course of business) individually in excess of $100,000 or, in the case of
indebtedness and/or liabilities individually less than $100,000, in excess
of
$100,000 in the aggregate, (iii) made any loans or advances to any person,
other than ordinary advances for travel expenses, or (iv) sold, exchanged
or otherwise disposed of any of its assets or rights, other than the sale of
its
inventory in the ordinary course of business.
(d) For
the
purposes of subsections (b) and (c) above, all indebtedness, liabilities,
agreements, understandings, instruments, Contracts and proposed transactions
involving the same Person (including Persons the Purchaser has reason to believe
are affiliated therewith) shall be aggregated for the purpose of meeting the
individual minimum dollar amounts of such subsections.
3.12 Obligations
to Related Parties.
There
are no obligations of the Purchaser to officers, directors, stockholders, or
employees of the Purchaser or any member of such related party’s immediate
family, or any corporation, partnership or
-40-
other
entity in which such related party is an officer, director or partner or in
which such party has an ownership interest or otherwise controls other than
(a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Purchaser and (c) for other
standard employee benefits made generally available to all employees (including
stock option agreements outstanding under any equity incentive plan approved
by
the Board of Directors of the Purchaser).
3.13 Title
to Properties and Assets; Liens, Etc.
The
Purchaser has good and marketable title to its properties and assets and good
title to its leasehold estates, in each case subject to no mortgage, pledge,
lien, lease, encumbrance or charge, other than (a) those resulting from
taxes which have not yet become delinquent, (b) minor liens and
encumbrances which do not materially detract from the value of the property
subject thereto or materially impair the operations of the Purchaser, and
(c) those that have otherwise arisen in the ordinary course of business and
do not materially impair the Purchaser’s ownership or use of such property or
assets. The Purchaser is in compliance with all material terms of each lease
to
which it is a party or is otherwise bound.
3.14 Intellectual
Property.
(a) The
Purchaser owns or possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information
and
other proprietary rights and processes necessary for its business as now
conducted and to the best of the Purchaser’s knowledge, as presently proposed to
be conducted, without any known infringement of the rights of others. There
are
no outstanding options, licenses or agreements of any kind relating to the
foregoing proprietary rights, nor is the Purchaser bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes of any other person
or
entity other than such licenses or agreements arising from the purchase of
“off
the shelf” or standard products.
(b) The
Purchaser has not received any communications alleging that the Purchaser has
violated or, by conducting its business as presently proposed, would violate
any
of the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity, nor is the
Purchaser aware of any basis therefor.
(c) The
Purchaser is not aware that any of its employees is obligated under any Contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to the Purchaser or that would
conflict with the Purchaser’s business as proposed to be conducted. Each
employee, officer and consultant of the Purchaser has executed a proprietary
information and inventions agreement in one of the forms previously provided
to
counsel for the Seller. The Purchaser is not aware that any of its employees,
officers or consultants is in violation thereof, and the Purchaser has used
commercially reasonable efforts to prevent any such
-41-
violation.
No employee, officer or consultant of the Purchaser has excluded works or
inventions made prior to his or her employment with the Purchaser from his
or
her assignment of inventions pursuant to such employee, officer or consultant’s
proprietary information and inventions agreement. The Purchaser does not believe
it is or will be necessary to use any inventions of any of its employees made
prior to or outside the scope of their employment by the Purchaser. The
Purchaser has not embedded any open source, copy left or community source code
in any of its products generally available or in the development, including
but
not limited to any GNU or GPL libraries or code.
3.15 Compliance
with Other Instruments.
The
Purchaser is not in violation or default of any term of its Restated Certificate
or Bylaws, each as amended, or of any provision of any Contract to which it
is
party or by which it is bound or of any judgment, decree, order or writ other
than any such violation that would not have a material adverse effect on the
Purchaser. The execution, delivery, and performance of and compliance with
the
Transactional Agreements, and the issuance and sale of the Escrow Shares
pursuant hereto and of the Conversion Shares pursuant to the Restated
Certificate, will not, with or without the passage of time or giving of notice,
result in any such material violation, or be in conflict with or constitute
a
material default under any such term, or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of
the
Purchaser or the suspension, revocation, impairment, forfeiture or nonrenewable
of any permit, license, authorization or approval applicable to the Purchaser,
its business or operations or any of its assets or properties.
3.16 Litigation.
There is
no Proceeding or investigation pending or, to the Purchaser’s knowledge,
currently threatened in writing against the Purchaser that questions the
validity of the Transactional Agreements or the right of the Purchaser to enter
into any of such agreements, or to consummate the Transactions, or which would
reasonably be expected to result, either individually or in the aggregate,
in
any material adverse change in the assets, condition or affairs of the
Purchaser, financially or otherwise, or any change in the current equity
ownership of the Purchaser, nor is the Purchaser aware that there is any basis
for any of the foregoing. The foregoing includes, without limitation, actions
pending or, to the Purchaser’s knowledge, threatened in writing involving the
prior employment of any of the Purchaser’s employees, their use in connection
with the Purchaser’s business of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with prior employers. The Purchaser is not a party or to its
knowledge subject to the provisions of any order, writ, injunction, judgment
or
decree of any court or government agency or instrumentality. There is no
Proceeding or investigation by the Purchaser currently pending or which the
Purchaser intends to initiate.
3.17 Tax
Returns and Payments.
The
Purchaser is and always has been a subchapter C corporation. The Purchaser
has
filed all Tax Returns required to be filed by it. All Taxes shown to be due
and
payable on such returns, any assessments imposed, and to the Purchaser’s
knowledge all other Taxes due and payable by the Purchaser on or before the
Closing Date, have been paid or will be paid prior to the time they
become
-42-
delinquent.
The Purchaser has no knowledge of any liability of any Tax to be imposed upon
its properties or assets as of the date of this Agreement that is not adequately
provided for.
3.18 Insurance.
The
Purchaser has in full force and effect fire and casualty insurance policies,
with extended coverage, in amounts customary in industry.
3.19 Employees.
The
Purchaser has no collective bargaining agreements with any of its employees.
There is no labor union organizing activity pending or, to the Purchaser’s
knowledge, threatened with respect to the Purchaser. To the Purchaser’s
knowledge, no employee of the Purchaser, nor any consultant with whom the
Purchaser has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating
to
the right of any such individual to be employed by, or to contract with, the
Purchaser; and to the Purchaser’s knowledge the continued employment by the
Purchaser of its present employees, and the performance of the Purchaser’s
contracts with its independent contractors, will not result in any such
violation. The Purchaser has not received any notice alleging that any such
violation has occurred. No employee of the Purchaser has been granted the right
to continued employment by the Purchaser or to any material compensation
following termination of employment with the Purchaser. The Purchaser is not
aware that any officer, key employee or group of employees intends to terminate
his, her or their employment with the Purchaser, nor does the Purchaser have
a
present intention to terminate the employment of any officer, key employee
or
group of employees. There are no actions pending, or to the Purchaser’s
knowledge, threatened, by any former or current employee concerning such
person’s employment by the Purchaser.
3.20 Registration
Rights and Voting Rights.
Except
as set forth on Part 3.20 of the Purchaser Disclosure Schedule, the Purchaser
is
presently not under any obligation, and has not granted any rights, to register
any of the presently outstanding securities or any of its securities that may
hereafter be issued. To the Purchaser’s knowledge, no stockholder of the
Purchaser has entered into any agreement with respect to the voting of equity
securities of the Purchaser.
3.21 Compliance
with Legal Requirements. The
Purchaser is not in violation of any Legal Requirement in respect of the conduct
of its business or the ownership of its properties which violation would
materially and adversely affect the business, assets, liabilities, financial
condition, operations or prospects of the Purchaser. No United States domestic
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to
be
filed in connection with the execution and delivery of this Agreement or the
issuance of the Escrow Shares or the Conversion Shares, except such as have
been
duly and validly obtained or filed, or with respect to any filings that must
be
made after the Closing, as will be filed in a timely manner. The Purchaser
has
all franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which could
reasonably be expected to materially and adversely affect the business,
properties or financial condition of the Purchaser and believes it can
obtain,
-43-
without
undue burden or expense, any similar authority for the conduct of its business
as planned to be conducted.
3.22 No
Solicitation.
Neither
the Purchaser nor any agent on its behalf has solicited or will solicit any
offers to sell or has offered to sell or will offer to sell all or any part
of
the Escrow Shares to any person or persons so as to bring the sale of such
Escrow Shares by the Purchaser within the registration provisions of the
Securities Act or any state securities laws.
3.23 Employee
Benefit Plans.
Part
3.23 of the Purchaser Disclosure Schedule sets forth all employee benefit plans
maintained, established or sponsored by the Purchaser, or in or to which the
Purchaser participates or contributes. The Purchaser has made all required
contributions and has no liability to any such employee benefit plan, and to
the
Purchaser’s knowledge, has complied with all applicable laws for any such
employee benefit plan.
3.24 Executive
Officers. To
the
knowledge of the Purchaser, no executive officer or person nominated to become
an executive officer of the Purchaser (i) has been convicted in a criminal
proceeding or is a named subject of a pending criminal proceeding (excluding
minor traffic violations) or (ii) is or has been subject to any judgment or
order of, the subject of any pending civil or administrative action by the
SEC
or any self-regulatory organization.
3.25 Permits.
The
Purchaser has all franchises, permits, licenses and any similar authority
necessary for the conduct of its business, the lack of which could reasonably
be
expected to have a material adverse effect on the Purchaser or its business.
The
Purchaser is not in default in any material respect under any of such
franchises, permits, licenses or other similar authority.
3.26 Corporate
Documents.
The
copy of the minute books of the Purchaser provided to the Seller contains
minutes of all meetings of directors and stockholders and all actions by written
consent without a meeting by the directors and stockholders since the date
of
incorporation and accurately reflects, in all material respects, all actions
by
the directors (and any committee of directors) and stockholders with respect
to
all transactions referred to in such minutes.
3.27 83(b)
Elections.
To the
Purchaser’s knowledge, all elections and notices under Section 83(b) of the Code
have been timely filed by all individuals who have purchased shares of Common
Stock.
3.28 Share
Purchase Agreements.
Purchaser has delivered to Seller, pursuant to that certain e-mail transmission
from ▇▇▇ ▇▇▇▇▇▇▇▇▇ of Purchaser to Yaron Eldad of Seller sent at 3:42 p.m.
California time on Monday, September 4, 2006 with the subject “SKY MobileMedia -
Series B”, complete and current copies of the transaction documents pursuant to
which the Purchaser’s Series B Preferred Stock was issued to third
parties.
-44-
| 4. |
Pre-Closing
Covenants of the Parties.
|
4.1 Access
And Investigation.
The
Seller shall ensure that, at all times during the Pre-Closing Period: (a) the
Seller and its Representatives provide the Purchaser or Purchaser Sub and their
respective Representatives with free and complete access to the Seller’s
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to the Seller
and its business; (b) the Seller and its Representatives provide the Purchaser
and Purchaser Sub and their respective Representatives with such copies of
existing books, records, Tax Returns, work papers and other documents and
information relating to the Seller and its business as the Purchaser or
Purchaser Sub may reasonably request in good faith; and (c) the Seller and
its
Representatives compile and provide the Purchaser and Purchaser Sub and their
respective Representatives with such additional financial, operating and other
data and information relating to the Seller and its business as the Purchaser
or
Purchaser Sub may reasonably request in good faith.
4.2 Operation
Of Business.
The
Seller shall ensure that, during the Pre-Closing Period, without the consent
of
the Purchaser or the Purchaser Sub:
(a) the
Seller conducts its business operations exclusively in the Ordinary Course
of
Business, in the same manner as such operations have been conducted prior to
the
date of this Agreement;
(b) the
Seller (i) preserves intact its current business organization, (ii) keeps
available the services of its current officers and employees, and, (iii)
maintains its relations and good will with all suppliers, customers, landlords,
creditors, licensors, licensees, employees, independent contractors and other
Persons having business relationships with the Seller, and (iv) promptly
repairs, restores or replaces any assets that are destroyed or
damaged;
(c) the
Seller keeps in full force all insurance policies;
(d) the
officers of the Seller confer regularly and daily with a representative
designated by Purchaser concerning operational matters and otherwise report
daily to the such representative concerning the status of the Seller’s business,
condition, assets, liabilities, operations, financial performance and
prospects;
(e) the
Purchaser is notified immediately of any inquiry, proposal or offer from any
Person relating to any Acquisition Transaction;
(f) the
Seller and its officers use their Best Efforts to cause the Seller to maximize
revenue and minimize losses;
(g) the
Seller does not (i) declare, accrue, set aside or pay any dividend or make
any
other distribution in respect of any shares of capital stock or other
securities, or (ii) repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities;
-45-
(h) the
Seller does not effect or become a party to any Acquisition
Transaction;
(i) the
Seller does not form any subsidiary or acquire any equity interest or other
interest in any other Entity;
(j) the
Seller does not make any capital expenditure;
(k) the
Seller does not enter into or permit any of its assets to become bound by any
Contract, or amend, modify, terminate or effect any waiver of any right under
any Contract;
(l) the
Seller does not incur, assume or otherwise become subject to any Liability,
without the Purchaser Sub's prior approval;
(m) the
Seller does not hire any employee, terminate the employment of any employee,
establish or adopt any Seller Employee Plan, or pay any bonus or make any
profit-sharing or similar payment to, or increase the amount of the wages,
salary, commissions, fees, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers, employees or independent
contractors;
(n) the
Seller does not make any payment in respect of any account payable or make
any
deposit or prepayment of any expense or pay any amount to any creditor without
Purchaser’s prior approval;
(o) the
Seller does not change any of its methods of accounting or accounting practices
in any respect;
(p) the
Seller does not make any claim against any insurance policy, without Purchaser
Sub or Purchaser's prior approval;
(q) the
Seller does not cause or permit any Asset to become subject to any
Encumbrance;
(r) the
Seller notifies Purchaser promptly upon receipt of any payment of any account
receivable, or of any deposit or prepayment received from any customer of
Seller;
(s) the
Seller does not sell, option, transfer or otherwise dispose of any
Asset;
(t) the
Seller does not commence or settle any Proceeding;
(u) the
Seller does not enter into any transaction or take any other action of the
type
referred to in Section 2.4;
(v) the
Seller does not enter into any transaction or take any other action outside
the
Ordinary Course of Business;
-46-
(w) the
Seller does not enter into any transaction or take any other action that might
cause or constitute, without the consent of the Purchaser, a Breach of any
representation or warranty made by the Seller in this Agreement if (A) such
representation or warranty had been made as of the time of such transaction,
or
action, (B) such transaction had been entered into or such action had been
occurred, on or prior to the date of this Agreement or (C) such representation
or warranty had been made as of the Closing Time;
(x) the
Seller does not agree, commit or offer (in writing or otherwise) to take any
of
the actions described in clauses ”(i)” through “(u)” of this Section
4.2.
4.3 Filings
and Consents.
In
general, the Seller shall ensure that: (a) all filings, notices and Consents
required to be made, given and obtained in order to consummate the Transactions
are made, given and obtained on a timely basis; and (b) during the Pre-Closing
Period, the Seller and its Representatives cooperate with the Purchaser,
Purchaser Sub and with their respective Representatives, and prepare and make
available such documents and take such other actions as the Purchaser may
reasonably request in good faith, in connection with any filing, notice or
Consent that the Purchaser is required or elects to make, give or
obtain.
In
addition:
(a) Israeli
Regulatory Matters.
Each
party to this Agreement shall use its commercially reasonable efforts to deliver
and file, as promptly as practicable after the date of this Agreement, each
notice, report or other document required to be delivered by such party to
or
filed by such party with any Israeli Governmental Body with respect to the
Transactions. Without limiting the generality of the foregoing,
the
parties to this Agreement shall use commercially reasonable efforts to obtain,
as promptly as practicable after the date hereof, the approval of the OCS and
the Investment Center of the Israeli Ministry of Industry, Trade and Labor
(the
“IC”)
and any
other Consents that may be required in connection with the Transactions. The
Purchaser, Purchaser Sub and the Seller shall cause their respective Israeli
counsel and tax advisers to coordinate all activities and to cooperate with
each
other, including by providing each an opportunity to comment on all applications
to Israeli Governmental Bodies, with respect to the preparation and filing
of
such notices or applications for approval and the preparation of any written
or
oral submissions that may be necessary, proper or advisable to obtain such
Consents.
(b) Other
Regulatory Approvals.
Each
party to this Agreement shall use commercially reasonable efforts to file,
as
promptly as reasonably practicable after the date hereof, all notices, reports
and other documents required to be filed by such party with any Governmental
Body with respect to this Agreement and the transactions contemplated hereby,
and to submit promptly any additional information requested by any such
Governmental Body. Without limiting the generality of the foregoing, the
Purchaser and the Seller shall, if required, as promptly as reasonably
practicable after the date of this Agreement, prepare and file any notifications
required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and under any other Legal Requirement
that is designed to prohibit, restrict or regulate actions having the purpose
or
effect of monopolization or restraint of trade
-47-
(collectively,
“Antitrust
Laws”)
and
thereafter make any other required submissions under any Antitrust Laws. The
Purchaser, Purchaser Sub and Seller shall use commercially reasonable efforts
to
(a) respond as promptly as reasonably practicable to: (i) any inquiries or
requests received from the U.S. Federal Trade Commission or the U.S. Department
of Justice for additional information or documentation; and (ii) any inquiries
or requests received from any state attorney general, non-U.S. antitrust
authority or other Governmental Body in connection with antitrust or related
matters; (b) obtain any necessary approvals, and obtain the termination of
any
waiting periods, under any Antitrust Laws that apply to the Transactions.
Provided that Seller complies with its obligations under this Section 4.3(b),
Purchaser shall reimburse Seller’s reasonable expenses incurred in connection
with such compliance.
4.4 Transfer
of Approved Enterprise Status.
At the
request and expense of Purchaser or Purchaser Sub, Purchaser,
Purchaser Sub and Seller shall jointly approach the Investment Center in order
to obtain the consent of the Investment Center to the substitution of Purchaser
Sub for the Seller as the beneficiary of the Approved Enterprise Status that
the
Seller received in respect of the approved enterprise status granted to certain
facilities of the Company as set forth in Part 2.28 of the Seller Disclosure
Schedule (the “Approved
Enterprise Status”),
such
that Purchaser Sub shall be entitled to all rights and entitlements to which
the
Seller is currently entitled pursuant to the Approved Enterprise Status, subject
to the terms and conditions relating to such status. Seller undertakes not
to
take any action that shall prevent, delay or jeopardize the obtaining of such
approval. The Purchaser and Seller shall cooperate and coordinate any
communications with the Investment Center in respect of the transactions
contemplated herein.
4.5 Shareholder
Approval.
As
promptly as practicable after the date of this Agreement, and to the extent
not
performed prior to the date hereof, the Seller shall prepare a proxy statement
with respect to the convening of a general meeting of shareholders for purposes
of approving this Agreement, the Transactions, appointing an external director,
appointing an audit committee and each other matter that may be necessary or
desirable in order to facilitate the consummation of each of the Transactions
(collectively, the “Shareholder
Approvals”),
all as
set forth in a proxy statement in a form to be agreed upon by the Seller and
Purchaser Sub (the “Proxy
Statement”).
The
Seller shall: (i) cause the Proxy Statement to comply with applicable legal
requirements; (ii) provide the Purchaser Sub with a reasonable opportunity
to
review and comment on any draft of the Proxy Statement, and include in the
Proxy
Statement all changes reasonably proposed by the Company; (iii) promptly cause
the Proxy Statement to be submitted to the SEC on a Form 6-K, to the extent
required under applicable law; and (iv) cause the Proxy Statement to be mailed
to the Seller’s shareholders as promptly as practicable following the date of
this Agreement. If any event relating to the Seller occurs, or if the Seller
becomes aware of any information, that should be disclosed in a supplement
to
the Proxy Statement, then the Seller shall promptly inform the Company of such
event or information and shall, in accordance with the procedures set forth
above, (i) prepare and submit to the SEC a Form 6-K that shall include such
amendment or supplement as soon thereafter as is reasonably practicable, to
the
extent required under
-48-
applicable
law, and (ii) if appropriate, cause such supplement to be mailed to the
shareholders of the Seller or otherwise inform the Seller’s shareholders of such
events.
4.6 Notification.
During
the Pre-Closing Period, the Seller shall promptly notify the Purchaser in
writing of: (a) the discovery by the Seller of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes a material Breach of any representation or
warranty made by the Seller in this Agreement; (b) any event, condition, fact
or
circumstance that occurs, arises or exists after the date of this Agreement
and
that would cause or constitute a material Breach of any representation or
warranty made by the Seller in this Agreement if (i) such representation or
warranty had been made as of the time of the occurrence, existence or discovery
of such event, condition, fact or circumstance, or (ii) such event,
condition, fact or circumstance had occurred, arisen or existed on or prior
to
the date of this Agreement; (c) any material Breach of any covenant or
obligation of the Seller; and (d) any event, condition, fact or circumstance
that may make the timely satisfaction of any of the conditions set forth in
Section 5 or Section 6 impossible or unlikely. If any event,
condition, fact or circumstance that is required to be disclosed pursuant to
this Section 4.5 requires any change in the Seller Disclosure Schedule, or
if
any such event, condition, fact or circumstance would require such a change
assuming the Seller Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then the Seller shall promptly deliver to the Purchaser an update
to the Seller Disclosure Schedule specifying such change. No such update, not
approved by the Purchaser or Purchaser Sub, shall be deemed to supplement or
amend the Seller Disclosure Schedule for the purpose of (i) determining the
accuracy of any representation or warranty made by the Seller in this Agreement
or in the Closing Certificate, or (ii) determining whether any of the conditions
set forth in Section 5 have been satisfied.
4.7 No
Negotiation.
The
Seller shall ensure that, during the Pre-Closing Period, neither the Seller,
nor
any Representative of any the Seller, directly or indirectly: (a) solicits
or encourages the initiation of any inquiry, proposal or offer from any Person
(other than the Purchaser) relating to any Acquisition Transaction;
(b) participates in any discussions or negotiations with, or provides any
non-public information to, any Person (other than the Purchaser and Purchaser
Sub) relating to any proposed Acquisition Transaction; or (c) considers the
merits of any unsolicited inquiry, proposal or offer from any Person (other
than
the Purchaser and Purchaser Sub) relating to any Acquisition
Transaction.
4.8 Best
Efforts.
During
the Pre-Closing Period, the Seller shall use its Best Efforts to cause the
conditions set forth in Section 5 to be satisfied on a timely
basis.
4.9 Confidentiality.
Each
party to this Agreement shall ensure that, during the Pre-Closing Period: (a)
it
shall not nor shall any of its Representatives, issue or disseminate any press
release or other publicity or otherwise makes any disclosure of any nature
(to
any supplier, customer, landlord, creditor or employee of the Seller or to
any
other Person) regarding any of the Transactions or the existence or terms of
this
-49-
Agreement,
except to the extent that the Seller is required by law to make any such
disclosure; and (b) if the Seller is required by law to make any such
disclosure, the Seller shall advise the Purchaser and Purchaser Sub at least
five business days (or, if later, immediately upon becoming aware of the
requirement to make such disclosure) before making such disclosure, of the
nature and content of the intended disclosure. Notwithstanding the foregoing,
the Seller may disclose the existence of this Agreement and the Transactions
to
a supplier, customer, landlord, creditor or employee of the Seller or to any
other Person to the extent that such disclosure is necessary to obtain a
required Consent; provided,
however,
that
such disclosure shall not include the terms, including, but not limited to
the
financial terms, of this Agreement.
4.10 Employee
Matters.
(a) Subject
to applicable law, the Purchaser or Purchaser Sub may extend offers of
employment effective the Closing Date, to any Seller Employees, wherever
located, whom Purchaser or Purchaser Sub desires to hire (the “Transferred
Employees”).
Each
such Transferred Employee who accepts employment with Purchaser or Purchaser
Sub
is hereinafter referred to as a “Newly
Hired Employee.”
The
offers of employment to the Newly Hired Employees shall be on terms and
conditions which Purchaser shall determine in its sole discretion and shall
ensure that all such Newly Hired Employees shall receive full credit for the
period of their employment with Seller for the purpose of determining rights
or
benefits accrued or derived from the period of employment and Purchaser or
Purchaser Sub shall assume all accruals, allocations, severance and reserve
Liabilities of Seller towards such Newly Hired Employees all instead of and
in
place of the Seller.
(b) Seller
shall satisfy, concurrent with the Closing, all outstanding liabilities and
pay
all outstanding debts to its employees, including without limitation payment
of
unpaid salaries and benefits due and payable for the period ended prior to
the
Closing.
(c) The
Seller may, in its sole discretion, terminate the employment of any employee
who
is either not offered employment by Purchaser or Purchaser Sub or who does
not
become a Newly Hired Employee. The Seller shall cooperate with and use its
commercially reasonable efforts to assist Purchaser and Purchaser Sub in their
efforts to secure satisfactory employment arrangements with those employees
to
whom Purchaser or Purchaser Sub make offers of employment.
(d) It
is
hereby clarified and agreed that each Newly Hired Employee shall maintain and
enjoy all rights with respect to continuance of employment by Purchaser or
Purchaser Sub, nor shall anything herein interfere with the right of Purchaser
or Purchaser Sub to terminate the employment of any of the Newly Hired Employees
at any time, with or without cause, or restrict Purchaser or Purchaser Sub
the
exercise of its independent business judgment in modifying any of the terms
and
conditions of the employment of the Newly Hired Employees.
-50-
(e) Subject
to applicable law, the offers of employment made by the Purchaser Sub or the
Purchaser shall provide that, and be conditional on, each Newly Hired Employee
voluntarily terminating his or her employment with the Seller upon the Closing
and, executing and delivering to the Seller, Purchaser and Purchaser Sub an
acknowledgement notice in a form satisfactory to Seller and Purchaser (the
“Newly
Hired Employee Acknowledgement”),
stating that, upon receipt of a sum to be specified in the Newly Hired Employee
Acknowledgement representing amounts accrued and owing to such Newly Hired
Employee at such time, such Newly Hired Employee has no claims, rights or
demands the Seller or its affiliates or Related Parties in connection with
employment or engagement with the Seller or transfer to the Purchaser
Sub.
4.11 Management
Authorizations and Consents.
During
the Pre-Closing Period, the Purchaser and Purchaser Sub shall not unreasonably
withhold their consent to the Seller’s performing such actions as may be
required by the Seller to mitigate the Liabilities of the Seller that are not
Assumed Liabilities, provided that in doing such the Seller shall not be
entitled to increase the Assumed Liabilities or reduce the assets of the Seller
that are not Excluded Assets.
4.12 Delivery
of Certain Schedules.
On or
before the 10th
day
following the date of this Agreement, Seller shall deliver to Purchaser and
Purchaser Sub the following parts of the Seller Disclosure Schedule, to the
extent not delivered on the date hereof (each part a “Delayed
Schedule”):
Item
2.11(c) referenced in Part 2.11(c);
Item
2.11(j) referenced in Part 2.11(j);
Item
2.13(e) referenced in Part 2.13;
Item
2.14
referenced in Part 2.14;
Item
2.18(a) referenced in Part 2.18.
Upon
receipt by Purchaser and Purchaser Sub of any Delayed Schedule and written
notification to Seller of the acceptance by Purchaser and Purchaser Sub of
such
Delayed Schedule (in their sole and absolute discretion), such Delayed Schedule
shall form a part of the Seller Disclosure Schedule as if such Delayed Schedule
had been delivered on and as of the date hereof.
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5.
|
Conditions
Precedent to the Purchaser’s and Purchaser Sub’s Obligation to
Close.
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The
Purchaser’s and Purchaser Sub’s obligation to purchase the Assets and to take
the other actions required to be taken by the Purchaser and Purchaser Sub at
the
Closing is subject to the satisfaction, at or prior to the Closing, of each
of
the following conditions (any of which may be waived by the Purchaser and
Purchaser Sub, in whole or in part, in writing):
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5.1 Accuracy
Of Representations.
All of
the representations and warranties made by the Seller in this Agreement
(considered collectively), and each of said representations and warranties
(considered individually), shall have been accurate in all material respects
as
of the date of this Agreement.
5.2 Performance
Of Obligations.
(a) Each
of
the documents referred to in Sections 1.6(b)(i), 1.6(b)(v), 1.6(b)(vi),
1.6(b)(vii), 1.6(b)(viii), 1.6(b)(ix) and 1.6(b)(x) shall have been executed
by
each of the parties thereto and delivered to the Purchaser.
(b) All
of
the covenants and obligations that the Seller are required to comply with or
to
perform at or prior to the Closing (considered collectively), and each of said
covenants and obligations (considered individually), shall have been duly
complied with and performed in all material respects.
5.3 Consents.
Each of
the Consents identified in Part 2.27 of the Seller Disclosure Schedule
shall have been obtained and shall be in full force and effect.
5.4 Shareholder
Approvals. The
Shareholder Approvals shall have been obtained and shall be in full force and
effect.
5.5 No
Material Adverse Effect.
There
shall have occurred no Material Adverse Effect since the date of this Agreement,
and no event shall have occurred and no condition or circumstance shall exist
that could be expected to give rise to any such Material Adverse
Effect.
5.6 Additional
Documents.
The
Purchaser shall have received the following documents:
(a) an
opinion letter from ▇. ▇▇▇▇▇▇ Law Offices, dated the Closing Date, in the form
of Exhibit I
to this
Agreement;
(b) the
Newly
Hired Employee Acknowledgement for each Newly Hired Employee;
(c) the
Transfer Certificate duly executed by Belzberg;
(d) written
confirmation from the board of directors of Seller that all corporate actions
and approvals required for the approval and consummation of the Transactions
have been taken or obtained; and
(e) such
other documents as the Purchaser may reasonably request in good faith for the
purpose of (i) evidencing the accuracy of any representation or warranty made
by
the Seller, (ii) evidencing the compliance by the Seller with, or the
performance by the Seller of, any covenant or obligation set forth in this
Agreement, (iii) evidencing the satisfaction of any condition set forth in
this
Section 5, or (iv) otherwise facilitating the consummation or performance
of any of the Transactions.
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5.7 No
Proceedings.
Since
the date of this Agreement, there shall not have been commenced or threatened
against the Purchaser or Purchaser Sub, or against any Person affiliated with
the Purchaser or Purchaser Sub, any Proceeding (a) involving any material
challenge to, or seeking material damages or other material relief in connection
with, any of the Transactions, or (b) that may have the effect of
preventing, delaying, making illegal or otherwise interfering with any of the
Transactions.
5.8 No
Prohibition.
Neither
the consummation nor the performance of any the Transactions will, result in
a
material violation of any applicable Legal Requirement or Order.
5.9 Employment
and Non-Competition Agreements.
The
individuals listed on Schedule 5.9 to this Agreement shall have executed an
Employment and Non-Competition Agreement in the form of Exhibit J
to this
Agreement (the “Employment
Agreements”).
5.10 Services
Agreement.
The
parties hereto shall have executed the Services Agreement in the form of
Exhibit K
to this
Agreement (the “Services
Agreement”).
5.11 Purchaser
Consents.
The
Purchaser shall have obtained the consent of its stockholders and any other
third party necessary for the issuance of the Escrow Shares, the performance
of
all the Transactions and the performance of this Agreement, and the consummation
of the Transactions shall not constitute a violation of any Legal Requirement
applicable to the Purchaser or Purchaser Sub.
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6.
|
Conditions
Precedent to the Seller’s Obligation to Close.
|
The
Seller’s obligation to sell the Assets and to take the other actions required to
be taken by the Seller at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may
be
waived by the Seller, in whole or in part, in writing):
6.1 Accuracy
Of Representations.
All of
the representations and warranties made by the Purchaser and Purchaser Sub
in
this Agreement (considered collectively), and each of said representations
and
warranties (considered individually), shall have been accurate in all material
respects as of the date of this Agreement.
6.2 Purchaser’s
and Purchaser Sub’s Performance.
(a) The
Purchaser and Purchaser Sub shall have executed and delivered all the
Transactional Agreements to which they are a party, the Escrow Agreement, the
Assumption Agreement, the Employment Agreements and the Services Agreement
and
shall have made the payments contemplated by Section 1.6(b)(ii) and the
deposit contemplated by Section 1.6(b)(iii).
(b) All
of
the other covenants and obligations that the Purchaser and Purchaser Sub are
required to comply with or to perform pursuant to this Agreement at
or
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prior
to
the Closing (considered collectively), and each of said covenants and
obligations (considered individually), shall have been complied with and
performed in all material respects, including the execution and delivery to
the
OCS, the Bird Foundation and the IC of any compulsory undertaking required
by
them with respect to any Encumbrances listed in Schedule 1.1.
6.3 Consents
and Authorizations. The
shareholders of the Seller shall have duly approved the execution, delivery
and
performance of all the Transactions and the performance of this Agreement and
the Transaction Documents and the performance of the Transactions shall not
constitute a violation of any Legal Requirement applicable to the
Seller.
6.4 Acknowledgements.
The
Seller shall have received the Newly Hired Employee Acknowledgement for each
Newly Hired Employee.
6.5 Interim
Period Financing.
The
Purchaser Sub shall, upon the request of the Seller, make funds available to
the
Seller for the payment of any Seller Interim Period Expenditures explicitly
identified on Schedule 2.20 of the Seller Disclosure Schedule. Such funding
shall be by way of a bridge loan, with principle and accrued and unpaid interest
payable to Purchaser Sub upon the earlier to occur of (i) the termination of
this Agreement pursuant to Section 7 hereof or (ii) the Closing (the
“Expenditures
Bridge Loan”).
Notwithstanding the foregoing, in the event of the Closing, the Purchaser Sub
shall waive and the Seller shall not be required to pay to Purchaser Sub any
accrued and unpaid interest on the Expenditures Bridge Loan, and the principle
amount of the Expenditures Bridge Loan shall be set off against the Seller
Interim Period Expenditures.
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7.
|
Termination.
|
7.1 Termination
Events.
This
Agreement may be terminated prior to the Closing:
(a) by
the
Purchaser or Purchaser Sub if (i) there is a material Breach of any
covenant or obligation of the Seller and such Breach shall not have been cured
within fifteen days after the delivery of notice thereof to the Seller, or
(ii) the Purchaser or Purchaser Sub reasonably determines that the timely
satisfaction of any condition set forth in Section 5 has become impossible
or impractical (assuming the party responsible for the satisfaction of such
condition were to use its Best Efforts to cause the condition to be satisfied)
(other than as a result of any failure on the part of the Purchaser or Purchaser
Sub to comply with or perform its covenants and obligations set forth in this
Agreement);
(b) by
the
Seller if (i) there is a material Breach of any covenant or obligation of
the Purchaser or Purchaser
Sub
and such
Breach shall not have been cured within fifteen days after the delivery of
notice thereof to the Purchaser and Purchaser
Sub,
or
(ii) the Seller reasonably determines that the timely satisfaction of any
condition set forth in Section 6 has become impossible or impractical
(assuming the party responsible for the satisfaction of such condition were
to
use its Best Efforts to cause the
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condition
to be satisfied) (other than as a result of any failure on the part of the
Seller to comply with or perform any covenant or obligation set forth in this
Agreement);
(c) by
the
Purchaser or Purchaser
Sub
if the
Closing has not taken place on or before December 31, 2006 (other than as a
result of any failure on the part of the Purchaser or Purchaser
Sub
to
comply with or perform its covenants and obligations under this
Agreement);
(d) by
the
Seller if the Closing has not taken place on or before December 31, 2006
(other than as a result of any failure on the part of the Seller to comply
with
or perform any covenant or obligation set forth in this Agreement);
(e) by
the
Purchaser or Purchaser Sub at any time for any or no reason prior to the
acceptance of all Delayed Schedules by Purchaser and Purchaser Sub as set forth
in Section 4.12; or
(f) by
the
mutual written consent of the Purchaser, Purchaser
Sub
and the
Seller.
7.2 Termination
Procedures.
If the
Purchaser or Purchaser
Sub
wishes
to terminate this Agreement pursuant to Section 7.1(a), Section 7.1(c) or
Section 7.1(e), the Purchaser or Purchaser
Sub, as applicable,
shall
deliver to the Seller a written notice stating that the Purchaser or
Purchaser
Sub
is
terminating this Agreement and setting forth a brief description of the basis
on
which the Purchaser or Purchaser
Sub
is
terminating this Agreement. If the Seller wishes to terminate this Agreement
pursuant to Section 7.1(b) or Section 7.1(d), the Seller shall deliver to
the Purchaser and Purchaser
Sub
a
written notice stating that the Seller is terminating this Agreement and setting
forth a brief description of the basis on which the Seller is terminating this
Agreement.
7.3 Effect
Of Termination.
If
this
Agreement is terminated pursuant to Section 7.1, all further obligations of
the parties under this Agreement shall terminate; provided,
however,
that:
(a) no party shall be relieved of any obligation or other Liability arising
from
any Breach by such party of any provision of this Agreement; (b) the parties
shall, in all events, remain bound by and continue to be subject to the
provisions set forth in Section 10; and (c) the Seller shall, in all
events, remain bound by and continue to be subject to
Section 4.9.
7.4 Nonexclusivity
Of Termination Rights.
The
termination rights provided in Section 7.1 shall not be deemed to be
exclusive. Accordingly, the exercise by any party of its right to terminate
this
Agreement pursuant to Section 7.1 shall not be deemed to be an election of
remedies and shall not be deemed to prejudice, or to constitute or operate
as a
waiver of, any other right or remedy that such party may be entitled to exercise
(whether under this Agreement, under any other Contract, under any statute,
rule
or other Legal Requirement, at common law, in equity or otherwise).
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8.
|
Indemnification,
Etc.
|
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8.1
|
Survival
Of Representations And Covenants.
|
(a) The
representations, warranties, covenants and obligations of each party to this
Agreement shall survive: (i) the Closing and the sale of the Assets to the
Purchaser and Purchaser Sub; (ii) any sale or other disposition of any or all
of
the Assets by the Purchaser and Purchaser Sub; and (iii) the dissolution of
any
party to this Agreement; in each case for a period not to exceed twelve (12)
months from the Closing Date (the “Indemnification
Period”).
(b) The
representations, warranties, covenants and obligations of the Seller, and the
rights and remedies that may be exercised by the Indemnitees, shall not be
limited or otherwise affected by or as a result of any information furnished
to,
or any investigation made by or any knowledge of, any of the Indemnitees or
any
of their Representatives.
(c) For
purposes of this Agreement, a “Claim
Notice”
shall be
deemed to have been given if any Indemnitee, acting in good faith, delivers
to
the Seller a written notice during the Indemnification Period stating that
such
Indemnitee has suffered Damages for which the Seller is obligated to indemnify
such Indemnitee in accordance with the provisions of Section 8.2 and containing
(i) a detailed description of the circumstances supporting such
Indemnitee’s belief that it is entitled to indemnification, and (ii) a
non-binding, preliminary estimate of the aggregate dollar amount of the actual
and potential Damages that have arisen and may arise as a direct or indirect
result of such circumstances.
(d) For
purposes of this Agreement, each statement or other item of information set
forth or referenced in the Seller Disclosure Schedule or in any update to the
Seller Disclosure Schedule shall be deemed to be a representation and warranty
made by the Seller in this Agreement.
8.2 Indemnification
By The Seller.
(a) The
Seller shall hold harmless and indemnify each of the Indemnitees from and
against, and shall compensate and reimburse each of the Indemnitees for, any
Damages that are directly or indirectly suffered or incurred by any of the
Indemnitees or to which any of the Indemnitees is subject at any time
(regardless of whether or not such Damages relate to any third-party claim)
and
that arise directly from or as a direct result of, or are directly connected
with:
(i) any
Breach of any representation or warranty made by the Seller in this Agreement
as
of the date of this Agreement or, with respect to Section 2.30 only, as of
the
date of this Agreement and as of the Closing Date, (without giving effect to
any
qualification as to materiality contained or incorporated in such representation
or warranty, and without giving effect to any update to the Seller Disclosure
Schedule);
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(ii) any
Breach of any representation, warranty, statement, information or provision
contained in the Seller Disclosure Schedule, the Closing Certificate and the
Secretary’s Certificate;
(iii) any
Breach of any covenant or obligation of the Seller contained in any of the
Transactional Agreements;
(iv) any
Liability of the Seller or of any Related Party, other than the Assumed
Liabilities;
(v) any
Liability (other than the Assumed Liabilities) to which the Purchaser, the
Purchaser Sub or any of the other Indemnitees may become subject and that arises
directly or indirectly from or relates directly or indirectly to (A) any product
produced or sold or any services performed by or on behalf of the Seller prior
to the Cut-Off Date, (B) the operation by the Seller of its business, (C) the
assignment of any Seller Contract to Purchase Sub without the Consent of any
Person required to give its Consent to such assignment, (D) any failure to
transfer any Asset to Purchaser at Closing due to the failure of Seller to
secure a needed assignment to such transfer; or (E) any error in the Acquired
Receivable Amount of the Severance Funding Shortfall;
(vi) any
impairment of Seller IP as a result of, or the defense of any claim or
Proceeding brought against any Indemnitee in connection with, any matter
referenced in Part 2.11(g)(iii), 2.11(p) and Part 2.11(k)(i) of the Seller
Disclosure Schedule;
(vii) any
claim
or determination that the consummation of the purchase of the Assets constitutes
a fraudulent transfer or fraudulent conveyance under applicable laws relating
to
bankruptcy and insolvency; or
(viii) any
Proceeding relating directly to any Breach, Liability or matter of the type
referred to in above (including any Proceeding commenced by any Indemnitee
for
the purpose of enforcing any of its rights under this Section 8, to the
extent the Indemnitee is entitled to indemnification by Seller in such
Proceeding, and subject to Section 10.3).
(b) Subject
to Section 8.2(e), the Seller shall not be required to make any
indemnification payment pursuant to Sections 8.2(a)(i), 8.2(a)(ii) or
8.2(a)(iii) for any Breach as set forth in such Sections until such time as
the
total amount of all Damages (including the Damages arising from such Breach
and
all other Damages arising from any other Breaches) that have been directly
suffered or incurred by any one or more of the Indemnitees, or to which any
one
or more of the Indemnitees has or have otherwise become subject, exceeds
$100,000 (one hundred thousand US dollars). (If the total amount of such Damages
exceeds $100,000, the Indemnitees shall be entitled to be indemnified against
and compensated and reimbursed for the entire amount of such Damages, and not
merely the portion of such Damages exceeding $100,000.)
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(c) The
Indemnitee shall only be entitled to indemnification with respect to any Damages
if the Claim Notice with respect to such indemnification matter is given prior
to the expiration of the Indemnification Period. All indemnification payments
shall only be paid from and out of the Escrow Fund, by way of the release of
such number of Escrow Shares (or, to the extent that the Escrow Shares remaining
in the Escrow Fund are insufficient, other property held in the Escrow Account
in respect of the Escrow Shares) from the Escrow Fund having a value equal
to
the indemnification payment due and payable by Seller and up to an aggregate
value of $4,500,000. The value of each Escrow Share for the purpose of this
Section 8.2 shall be the Escrow Share Value. For purposes of clarification,
the
Belzberg Shares (or other property held in the Escrow Account in respect of
the
Belzberg Shares) shall not be paid out of the Escrow Account in connection
with
any indemnification claim.
(d) The
limitations on the indemnification obligations of the Seller that are set forth
in Section 8.2(b) and Section 8.2(c) shall not apply with respect to fraud,
intentional misrepresentation or knowledge of a deliberate or willful Breach
of
any representations, warranties or covenants under this Agreement.
(e) In
no
event will Seller have any Liability to any Indemnitee for any indirect,
incidental, consequential, special or speculative damages, including Damages
for
loss of profits or use, business interruption or loss of goodwill, irrespective
of whether such Damages arise under contract, tort, statute or otherwise and
whether or not the Indemnitee has given the Seller advance notice of the
possibility of such Liability or Damages.
(f) In
no
event will Seller have any Liability to any Indemnitee for any Damages that
were
caused as a direct result of the failure of Purchaser or Purchaser Sub to grant
its consent to any action of the Seller pursuant to Section 4.2 above provided
that Seller made Purchaser and Purchaser Sub aware of the potential for such
Damages at the time such consent was requested.
8.3 Setoff.
Each
obligation and payment owed or due by either party hereto to the other pursuant
hereto until immediately after the Closing shall be the independent obligation
of such party and each of such parties hereby expressly waive any right or
entitlement to setoff any amounts due or payable to such party from amounts
due
or payable to them. The foregoing shall cease to apply immediately following
the
Closing. After the Closing, in addition to any rights of setoff or other rights
that the Purchaser, Purchaser
Sub
or any
of the other Indemnitees may have at common law or otherwise, the Purchaser
and
Purchaser
Sub shall
have the right to withhold and deduct any sum that may be owed to any Indemnitee
under this Section 8 from any amount otherwise payable by any Indemnitee to
the Seller. The withholding and deduction of any such sum shall operate for
all
purposes as a complete discharge (to the extent of such sum) of the obligation
to pay the amount from which such sum was withheld and deducted.
8.4 Nonexclusivity
Of Indemnification Remedies.
The
indemnification remedies and other remedies provided in this Section 8
shall not be deemed to be
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exclusive.
Accordingly, the exercise by any Person of any of its rights under this
Section 8 shall not be deemed to be an election of remedies and shall not
be deemed to prejudice, or to constitute or operate as a waiver of, any other
right or remedy that such Person may be entitled to exercise (whether under
this
Agreement, under any other Contract, under any statute, rule or other Legal
Requirement, at common law, in equity or otherwise). Notwithstanding the
foregoing, from and after the Closing, indemnification under this Section 8
shall be the sole and exclusive remedy of the Indemnitees with respect to any
claim for which monetary damages is the remedy sought or available.
8.5 Defense
Of Third Party Claims.
In the
event of the assertion or commencement by any Person of any claim or Proceeding
(whether against the Purchaser or Purchaser
Sub,
against
any other Indemnitee or against any other Person) with respect to which the
Seller may become obligated to indemnify, hold harmless, compensate or reimburse
any Indemnitee pursuant to this Section 8, the Seller shall have the right
(unless (i) the Seller is also a Person against whom the claim is made and
the
Purchaser determines in good faith that joint representation would be
inappropriate or (ii) Seller fails to provide reasonable assurance to the
Purchaser of its financial capacity to defend such claim and provide
indemnification with respect to such claim) to assume the defense of such claim
or Proceeding at the sole expense of the Seller with counsel reasonably
satisfactory to Purchaser. If the Seller elects to assume the defense of any
such claim or Proceeding:
(a) the
Seller shall proceed to defend such claim or Proceeding in a diligent manner
with counsel reasonably satisfactory to the Purchaser;
(b) the
Purchaser shall make available to the Seller any documents and materials in
the
possession of the Purchaser or Purchaser
Sub that
may
be necessary to the defense of such claim or Proceeding and the full assistance
of the Newly Hired Employees;
(c) the
Seller shall keep the Purchaser and Purchaser
Sub informed
of all material developments and events relating to such claim or
Proceeding;
(d) the
Purchaser and Purchaser
Sub
shall
have the right to participate in the defense of such claim or Proceeding at
their own cost and expense;
(e) the
Seller shall not settle, adjust or compromise such claim or Proceeding without
the prior written consent of the Purchaser or Purchaser
Sub, as applicable, not to be unreasonably withheld; and
(f) such
assumption will conclusively establish for purposes of this Agreement that
the
claims made in that claim are within the scope of and subject to
indemnification.
If
the
Seller does not elect to assume the defense of any such claim or Proceeding,
the
Purchaser or Purchaser Sub may proceed with the defense of such claim or
Proceeding on its own. If the
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Purchaser
or Purchaser Sub so proceeds with the defense of any such claim or Proceeding
on
its own:
(i) all
reasonable expenses relating to the defense of such claim or Proceeding (whether
or not incurred by the Purchaser) shall be borne and paid exclusively by the
Purchaser or the Purchaser Sub, and, subject to Section 8.2 above, shall be
deemed Damages as they are incurred, for which the Indemnitee shall be entitled
to indemnification payment;
(ii) the
Seller shall make available to the Purchaser and Purchaser
Sub any
documents and materials in the possession or control of the Seller that may
be
necessary to the defense of such claim or Proceeding;
(iii) the
Purchaser and Purchaser
Sub shall
keep the Seller informed of all material developments and events relating to
such claim or Proceeding; and
(iv) the
Purchaser and Purchaser
Sub shall
have the right to settle, adjust or compromise such claim or Proceeding with
the
consent of the Seller; provided,
however,
that
the Seller shall not unreasonably withhold such consent.
8.6 Exercise
Of Remedies By Indemnitees Other Than The Purchaser.
No
Indemnitee (other than the Purchaser or Purchaser Sub or any successor thereto
or assign thereof) shall be permitted to assert any indemnification claim or
exercise any other remedy under this Agreement unless the Purchaser or Purchaser
Sub (or any successor thereto or assign thereof) shall have consented to the
assertion of such indemnification claim or the exercise of such other remedy.
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9.
|
Certain
Post-Closing Covenants.
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9.1 Further
Actions.
From and
after the Closing Date, the Seller shall cooperate with the Purchaser and
Purchaser
Sub
and
their respective affiliates and Representatives, and shall execute and deliver
such documents and take such other actions as the Purchaser and Purchaser
Sub
may
reasonably request, for the purpose of evidencing the Transactions and putting
the Purchaser Sub in possession and control of all of the Assets. Without
limiting the generality of the foregoing, from and after the Closing Date,
the
Seller shall promptly remit to the Purchaser Sub any funds that are received
by
the Seller and that are included in, or that represent payment of receivables
included in, the Assets. The Seller: (a) hereby irrevocably authorizes the
Purchaser Sub, at all times on and after the Closing Date, to endorse in the
name of the Seller any check or other instrument that is made payable to the
Seller and that represents funds included in, or that represents the payment
of
any receivable included in, the Assets; and (b) hereby irrevocably nominates,
constitutes and appoints the Purchaser Sub as the true and lawful
attorney-in-fact of the Seller (with full power of substitution) effective
as of
the Closing Date, and hereby authorizes the Purchaser Sub, in the name of and
on
behalf of the Seller, to execute, deliver, acknowledge, certify, file and record
any document, to
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institute
and prosecute any Proceeding and to take any other action (on or at any time
after the Closing Date) that the Purchaser and Purchase Sub may deem appropriate
for the purpose of (i) collecting, asserting, enforcing or perfecting any
claim, right or interest of any kind that is included in or relates to any
of
the Assets, (ii) defending or compromising any claim or Proceeding relating
to any of the Assets, or (iii) otherwise carrying out or facilitating any
of the Transactions, all to the extent not performed by the Seller in accordance
herewith. The power of attorney referred to in the preceding sentence is and
shall be coupled with an interest and shall be irrevocable, and shall survive
the dissolution or insolvency of the Seller.
9.2 Publicity.
The
Seller shall ensure that, on and at all times after the Closing Date no press
release or other publicity concerning any of the Transactions is issued or
otherwise disseminated by or on behalf of the Seller without the prior written
consent of Purchaser and Purchaser
Sub, other than as required for compliance with any applicable law.
9.3 Repurchase
of Shares in Escrow Account.
(a) Escrow
Shares.
At any
time and from time to time on or before the date six (6) months after the
Closing Date, Purchaser will have the option, at Purchaser’s sole discretion, to
repurchase for cash any portion of, or all of, the Escrow Shares. Such
repurchase shall be made at the higher of (i) the Escrow Share Value, and (ii)
the fair market value of the Escrow Shares as of the date of repurchase. All
cash paid as consideration for the repurchase of the Escrow Shares pursuant
to
this Section 9.3(a) shall be placed into the Escrow Account and shall be deemed
to be part of the Escrow Fund available to Purchaser and Purchaser Sub in
accordance herewith.
(b) Belzberg
Shares.
At any
time and from time to time on or before the date six (6) months after the
Closing Date, Purchaser will have the option, at Purchaser’s sole discretion, to
repurchase for cash all, but not less than all, of the Belzberg Shares. Such
repurchase shall be made at the higher of (i) the Escrow Share Value, and (ii)
the fair market value of the Belzberg Shares as of the date of repurchase.
All
cash paid as consideration for the repurchase of the Belzberg Shares pursuant
to
this Section 9.3(b) shall not be placed into the Escrow Account but shall be
paid directly to Belzberg.
9.4 Change
Of Name.
Immediately after the Closing, the Seller shall change its name and the name
of
each of its subsidiaries to a name that does not include the word “e-SIM” or any
variation thereof and that is satisfactory to Purchaser and shall execute a
written consent in form and substance to the satisfaction of the purchaser
whereby it permits the Purchaser and Purchaser Sub to use the name "e-SIM".
9.5 Distribution
of Escrow Fund.
During
the Indemnification Period the Seller shall not distribute any of the Escrow
Fund, or any rights to participate in the Escrow Fund, without receiving the
prior written consent of Purchaser and Purchaser Sub. After the expiration
of
the Indemnification Period and the release of all or any portion of the Escrow
Fund to Seller, the Seller shall be free to distribute any property
so
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released
to Seller to any Person provided that Seller shall provide Purchaser with 45
days advance notice of any distribution of Escrow Shares.
9.6 Confidentiality.
Each
party hereto shall not disclose or use, and will direct its Representatives
not
to disclose or use any Confidential Information with respect to the other
parties hereto furnished, or to be furnished, by either the party,
or
its Representatives to any other party or its Representatives. For the purposes
of this Section 9.6, “Confidential
Information”
means
any information about a party hereto stamped “confidential” or identifies in
writing as such to another party promptly following its disclosure, unless
(i)
such information is already known to the receiving party or its Representatives
or to others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of the receiving party or its
Representatives, (ii) the use of such information is necessary or appropriate
in
making any filing or obtaining any consent or approval required for the
consummation of the Transactions, or (iii) the furnishing or use of such
information is required by or necessary or appropriate in connection with legal
proceedings and provided that any information related to the Assets or Assumed
Liabilities shall not be “Confidential Information”. Upon the written request of
the Purchaser, the Seller will promptly return to the Purchaser or destroy
any
Confidential Information in its possession and certify in writing to the
Purchaser that is has done so. Each party hereto undertakes to comply with
all
confidentiality obligations and requirements as prescribed by any applicable
securities law and regulation.
9.7 Regulation
S Covenants.
(a) Seller
will not, directly or indirectly, offer, sell, pledge, transfer or otherwise
dispose of (or solicit any offers to buy, purchase or otherwise acquire or
take
a pledge of) any of the Escrow Shares or Belzberg Shares except in compliance
with the Securities Act, and the rules and regulations promulgated
thereunder.
(b) Seller
hereby agrees to dispose of, transfer, distribute or resell such Escrow Shares
and Belzberg Shares only in accordance with the provisions of Regulation S,
pursuant to registration under the Securities Act, or pursuant to an exemption
from registration. Seller further agrees not to engage in hedging transactions
with regard to the Escrow Shares or Belzberg Shares unless in compliance with
the Securities Act. In each such case Seller shall, prior to effecting such
disposition, transfer, distribution, sale, hedge or other transaction, submit
to
Purchaser an opinion of counsel in form and substance reasonably satisfactory
to
Purchaser to the effect that the proposed transaction is in compliance with
the
Securities Act (which opinion shall not be required with respect to a sale
pursuant to Rule 144(k) under the Securities Act, provided that the Purchaser
shall have received customary representations certifying as to the availability
of such Rule 144(k)).
9.8 Stop
Transfer Restrictions.
Purchaser hereby agrees, for the benefit of Seller, that it will not register
any transfer of the Escrow Shares not made in accordance with the provisions
of
Regulation S, pursuant to a registration under the Securities Act, or
pursuant to an available exemption from registration.
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9.9 Access
and Investigation.
Upon
reasonable advance notice received from Purchase Sub and in coordination with
Seller, Seller shall afford Purchaser Sub and its Representatives full and
free
access, during regular business hours, to Seller’s personnel (including
employees and contractors), distributors, properties, Contracts, Governmental
Authorizations, books and records and other documents and data for the purpose
of verifying the accuracy of the Closing Certificate, such rights of access
to
be exercised in a manner that does not unreasonably interfere with the
operations of Sellers. In addition, Seller shall cause Seller’s Representatives
to reasonably cooperate with Purchaser’s Representatives in connection with such
review and examination.
9.10 Right
to Convert Escrow Shares.
If the
Purchaser consummates a Next Financing during the Indemnification Period, then
the Seller shall be permitted (subject to Seller’s execution of the Financing
Agreements, or their equivalent, and other documents signed by the purchasers
of
the Next Financing Stock in the Next Financing, other than those imposing
additional obligations or other Liability on the Seller materially different
from the obligations and Liabilities imposed on the purchasers of the Next
Financing Stock in the Next Financing and except that Seller shall not be
required to make investment reps inconsistent with those set forth in Section
2.30 hereof) to exchange the Escrow Shares received at the Closing, on a
dollar-for-dollar basis, for the Next Financing Stock, and all such shares
of
Next Financing Stock shall thereafter be considered Escrow Shares for all
purposes hereunder.
9.11 Discharge
of Liability.
Notwithstanding the provisions of Section 1.2 to this Agreement or of Section
8
above, to the extent that a claim or a demand is made against any Indemnitee
with respect to (i) any Breach by the Seller of any Seller Contract ; (ii)
any
event, circumstance or condition that would entitled such Indemnitee to
indemnification hereunder; or, (iii) otherwise pertaining to any Liability
that
is not an Assumed Liability, and such claim or demand can be satisfied by the
Purchaser or Purchaser Sub providing additional software support or software
upgrades or by the granting of a non-exclusive license in the ordinary course
of
business consistent with the past practices of Seller and at no additional
cost
to Purchaser or Purchaser Sub, the Purchaser and Purchaser Sub shall provide
such additional software support, software upgrades or licenses, and no
Indemnitee shall have any claims against Seller in such respect or otherwise
be
entitled to receive indemnification from the Seller as a result
therefrom.
|
10.
|
Miscellaneous
Provisions.
|
10.1 Further
Assurances.
Each
party hereto shall execute and/or cause to be delivered to each other party
hereto such instruments and other documents, and shall take such other actions,
as such other party may reasonably request (prior to, at or after the Closing)
for the purpose of carrying out or evidencing any of the
Transactions.
10.2 Fees
and Expenses.
(a) The
Seller shall bear and pay all fees, costs and expenses (including all legal
fees
and expenses payable to ▇. ▇▇▇▇▇▇ Law Offices) that have been
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incurred
or that are in the future incurred by, on behalf of or for the benefit of the
Seller in connection with: (i) the negotiation, preparation and review of any
letter of intent or similar document relating to any of the Transactions; (ii)
the investigation and review conducted by the Purchaser and its Representatives
with respect to the business of the Seller (and the furnishing of information
to
the Purchaser and its Representatives in connection with such investigation
and
review); (iii) the negotiation, preparation and review of this Agreement
(including the Seller Disclosure Schedule), the other Transactional Agreements
and all bills of sale, assignments, certificates, opinions and other instruments
and documents delivered or to be delivered in connection with the Transactions;
(iv) the preparation and submission of any filing or notice required to be
made
or given in connection with any of the Transactions, and the obtaining of any
Consent required to be obtained in connection with any of the Transactions;
and
(v) the consummation and performance of the Transactions.
(b) Subject
to the provisions of Section 8 (including the indemnification and other
obligations of the Seller thereunder), the Purchaser and Purchaser
Sub shall
bear and pay all fees, costs and expenses (including all legal fees and expenses
payable to ▇▇▇▇▇▇ Godward llp
and
▇▇▇▇▇
▇▇▇▇▇ & Co.)
that
have been incurred or that are in the future incurred by or on behalf of the
Purchaser and Purchaser
Sub in
connection with: (i) the negotiation, preparation and review of any letter
of
intent or similar document relating to any of the Transactions; (ii) the
investigation and review conducted by the Purchaser and Purchaser
Sub and
their
respective Representatives with respect to the business of the Seller; (iii)
the
negotiation, preparation and review of this Agreement, the other Transactional
Agreements and all assignments, certificates, opinions and other instruments
and
documents delivered or to be delivered in connection with the Transactions;
and
(iv) the consummation and performance of the Transactions.
10.3 Attorneys’
Fees.
If any
legal action or other legal proceeding relating to any of the Transactional
Agreements or the enforcement of any provision of any of the Transactional
Agreements is brought against any party to this Agreement, the prevailing party
shall be entitled to recover reasonable attorneys’ fees, costs and disbursements
(in addition to any other relief to which the prevailing party may be entitled,
but subject to the terms hereof).
10.4 Notices.
Any
notice or other communication required or permitted to be delivered to any
party
under this Agreement shall be in writing and shall be deemed properly delivered,
given and received when delivered (by hand, by registered mail, by courier
or
express delivery service or by facsimile) to the address or facsimile telephone
number set forth beneath the name of such party below (or to such other address
or facsimile telephone number as such party shall have specified in a written
notice given to the other parties hereto):
if
to the
Seller:
e-SIM
Ltd.
▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇
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Facsimile:
(▇▇▇▇)
▇
▇▇▇ ▇▇▇▇
Attn:
Yaron Eldad, CFO
With
a
copy to:
▇▇▇
▇▇▇▇▇, Adv.
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ Law ▇▇▇▇▇▇
▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ Israel
Tel:
(▇▇▇▇) ▇ ▇▇▇ ▇▇▇▇
Fax:
(▇▇▇▇) ▇ ▇▇▇ ▇▇▇▇
Email:
▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇.▇▇
if
to the
Purchaser or Purchaser Sub:
SKY
MobileMedia, Inc.
▇▇▇▇▇
▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Executive Officer
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
With
a
copy to (which copy shall not constitute notice):
▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇, Esq.
Cooley
Godward llp
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇
Tel:
▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Email:
▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
and
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, Adv.
▇▇▇▇▇
▇▇▇▇▇ & Co.,
▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇
Tel:
▇▇▇▇-▇-▇▇▇-▇▇▇▇
Fax:
▇▇▇▇-▇-▇▇▇-▇▇▇▇
Email:
▇▇▇▇▇@▇▇▇▇▇.▇▇.▇▇
10.5 Time
Of The Essence.
Time is
of the essence of this Agreement.
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10.6 Headings.
The
underlined headings contained in this Agreement are for convenience of reference
only, shall not be deemed to be a part of this Agreement and shall not be
referred to in connection with the construction or interpretation of this
Agreement.
10.7 Counterparts.
This
Agreement may be executed in several counterparts, each of which shall
constitute an original and all of which, when taken together, shall constitute
one agreement.
10.8 Governing
Law; Venue.
(a) This
Agreement shall be construed in accordance with, and governed in all respects
by
English law (without giving effect to principles of conflicts of laws).
(b) Any
legal
action or other legal proceeding relating to this Agreement or the enforcement
of any provision of this Agreement may be brought or otherwise commenced in
London, England. Each party to this Agreement:
(i) expressly
and irrevocably consents and submits to the exclusive jurisdiction of the
English courts in connection with any such legal proceeding;
(ii) agrees
that any English court with appropriate jurisdiction shall be deemed to be
a
convenient forum; and
(iii) agrees
not to assert (by way of motion, as a defense or otherwise), in any such legal
proceeding commenced in any English court, any claim that such party is not
subject personally to the jurisdiction of such court, that such legal proceeding
has been brought in an inconvenient forum, that the venue of such proceeding
is
improper or that this Agreement or the subject matter of this Agreement may
not
be enforced in or by such court.
(c) Nothing
in this Section 10.8 shall be deemed to limit or otherwise affect the right
of
any Indemnitee to commence any legal proceeding against the Seller in any forum
or jurisdiction.
(d) The
Seller agrees that, if any Proceeding is commenced against any Indemnitee by
any
Person in or before any court or other tribunal anywhere in the world, then
such
Indemnitee may proceed against the Seller in or before such court or other
tribunal with respect to any indemnification claim or other claim arising
directly from or relating directly to such Proceeding or any of the matters
alleged therein or any of the circumstances giving rise thereto.
10.9 Contracts
(Rights of Third Parties) ▇▇▇ ▇▇▇▇.
Unless
the right of enforcement is specifically set forth in this Agreement, it is
not
the intention of the parties
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that
any
third party should have a right to enforce a provision of this Agreement
pursuant to the Contract (Rights of Third Parties) ▇▇▇ ▇▇▇▇.
10.10 Successors
And Assigns; Parties In Interest.
(a) This
Agreement shall be binding upon the Seller and its successors and assigns (if
any). This Agreement shall inure to the benefit of: the Seller; the Purchaser;
the Purchaser Sub; the other Indemnitees (subject to Section 8.6); and the
respective successors and assigns (if any) of the foregoing.
(b) The
Purchaser and Purchaser Sub may freely assign any or all of their respective
rights under this Agreement (including its indemnification rights under
Section 8), in whole or in part, to any other Person without obtaining the
consent or approval of any other Person; provided, however, that the Purchaser
Sub and the Purchaser, without the prior written consent of the Seller, shall
not transfer or assign this Agreement or any Transaction Agreement or any
obligation or right hereunder under or thereunder until after the expiration
of
the Indemnification Period. The Seller shall not be permitted to assign any
of
his or its rights or delegate any of his or its obligations under this Agreement
without the prior written consent of the Purchaser and Purchaser Sub.
(c) None
of
the provisions of this Agreement is intended to provide any rights or remedies
to any Person other than the parties to this Agreement and their respective
successors and assigns (if any). Without limiting the generality of the
foregoing, (i) no employee of the Seller shall have any rights under this
Agreement or under any of the other Transactional Agreements, and (ii) no
creditor of the Seller shall have any rights under this Agreement or any of
the
other Transactional Agreements.
10.11 Remedies
Cumulative; Specific Performance.
The
rights and remedies of the parties hereto shall be cumulative (and not
alternative). The Seller agrees that in the event of any Breach or threatened
Breach by the Seller of any covenant, obligation or other provision set forth
in
this Agreement, the Purchaser and Purchaser Sub shall be entitled (in addition
to any other remedy that may be available to it) to (i) a decree or order
of specific performance or mandamus to enforce the observance and performance
of
such covenant, obligation or other provision, and (ii) an injunction
restraining such Breach or threatened Breach;.
10.12 Waiver.
(a) No
failure on the part of any Person to exercise any power, right, privilege or
remedy under this Agreement, and no delay on the part of any Person in
exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single
or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege
or
remedy.
-67-
(b) No
Person
shall be deemed to have waived any claim arising out of this Agreement, or
any
power, right, privilege or remedy under this Agreement, unless the waiver of
such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of such Person; and
any
such waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
10.13 Amendments.
This
Agreement may not be amended, modified, altered or supplemented other than
by
means of a written instrument duly executed and delivered on behalf of the
Purchaser, the Purchaser Sub and the Seller.
10.14 Severability.
Any term
or provision of this Agreement that is invalid or unenforceable in any situation
in any jurisdiction shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or enforceability of
the
offending term or provision in any other situation or in any other jurisdiction.
If the final judgment of a court of competent jurisdiction declares that any
term or provision hereof is invalid or unenforceable, the parties hereto agree
that the court making such determination shall have the power to limit the
term
or provision, to delete specific words or phrases, or to replace any invalid
or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
or
unenforceable term or provision, and this Agreement shall be enforceable as
so
modified. In the event such court does not exercise the power granted to it
in
the prior sentence, the parties hereto agree to replace such invalid or
unenforceable term or provision with a valid and enforceable term or provision
that will achieve, to the extent possible, the economic, business and other
purposes of such invalid or unenforceable term.
10.15 Entire
Agreement.
The
Transactional Agreements set forth the entire understanding of the parties
relating to the subject matter thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter thereof.
10.16 Knowledge.
For
purposes of this Agreement, “knowledge”
or
“Knowledge”
shall
mean, with respect to an individual, that such individual is actually aware
of
the relevant fact or matter or would have been aware of the relevant fact or
matter in the reasonable discharge of such individual’s duties. Any Person that
is any entity shall have Knowledge if any officer or director of such Person
as
of the date such knowledge is imputed has Knowledge of such fact or other
matter.
10.17 Construction.
(a) For
purposes of this Agreement, whenever the context requires: the singular number
shall include the plural, and vice versa; the masculine gender shall include
the
feminine and neuter genders; the feminine gender shall include the masculine
and
neuter genders; and the neuter gender shall include the masculine and feminine
genders.
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(b) The
parties hereto agree that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Agreement.
(c) As
used
in this Agreement, the words “include” and “including,” and variations thereof,
shall not be deemed to be terms of limitation, but rather shall be deemed to
be
followed by the words “without limitation.”
(d) Except
as
otherwise indicated, all references in this Agreement to “Sections” and
“Exhibits” are intended to refer to Sections of this Agreement and Exhibits to
this Agreement.
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The
parties to this Agreement have caused this Agreement to be executed and
delivered as of the date first written above.
e-SIM,
Ltd.,
an
Israeli company
By:
Title:
SKY
MobileMedia, Inc.,
a
Delaware corporation
By:
Title:
SKY
MobileMedia (Israel) Ltd.,
an
Israeli company
By:
Title:
-70-
Exhibit
A
CERTAIN
DEFINITIONS
For
purposes of the Agreement (including this Exhibit A):
Acquired
Receivables Amount.
“Acquired
Receivables Amount”
shall
mean the aggregate amount of all new accounts receivable, notes receivable
or
other receivables of Seller, and prepayments,
customer deposits or other deposits
received
by Seller, in each case, as created between the Cut-Off Date and the Closing
Date.
Acquisition
Transaction. “Acquisition
Transaction”
shall
mean any transaction involving: (a) the sale or other disposition of all or
any
material portion of the business or assets of the Seller (other than in the
Ordinary Course of Business); (b) the issuance, sale or other disposition by
the
Seller of (i) any share capital or other securities of the Seller, (ii) any
option, call, warrant or right (whether or not immediately exercisable) to
acquire any share capital or other securities of the Seller, or (iii) any
security, instrument or obligation that is or may become convertible into or
exchangeable for any share capital or other securities of the Seller; or (c)
any
merger, consolidation, business combination, share exchange, reorganization
or
similar transaction involving the Seller.
Active
Seller Contract. “Active
Seller Contract”
shall
mean any Seller Contract that (i) is in effect as of the date hereof and the
Seller received communications from the other parties thereto during the twenty
four (24) month period ending on the Cut Off Date, or (ii) the Seller reasonably
anticipates shall generate a revenue of over $25,000 (twenty five thousand
US
dollars) in the twelve (12) month period following the Cut Off Date, not
including non-disclosure agreements to which the Seller is a party that are
not
incorporated into an Active Seller Contract.
Agreement. “Agreement”
shall
mean the Asset Purchase Agreement to which this Exhibit A is attached
(including the exhibits and schedules attached hereto or delivered in connection
herewith), as it may be amended from time to time.
Antitrust
Laws. “Antitrust
Laws”
shall
have the meaning set forth in Section 4.3(b) of this Agreement.
Approved
Enterprise Status. “Approved
Enterprise Status”
shall
have the meaning set forth in Section 4.4 of this Agreement.
Assets.
“Assets”
shall
have the meaning set forth in Section 1.1 of this Agreement.
Assumed
Liabilities. “Assumed
Liabilities”
shall
have the meaning set forth in Section 1.2(b) of this Agreement.
Assumption
Agreement. “Assumption
Agreement”
shall
have the meaning set forth in Section 1.2(a)(v) of this Agreement.
Belzberg. “Belzberg”
shall
mean ▇▇▇▇ ▇▇▇▇▇▇▇▇.
Belzberg
Shares. “Belzberg
Shares”
shall
mean, if no Next Financing shall have occurred prior to Closing, that number
of
shares of Purchaser’s Series B Preferred Stock equal to $350,000 divided by
$0.775 (subject to adjustment for stock splits, stock combinations, stock
dividends, reclassifications, reorganizations and the like) and, if the Next
Financing shall have occurred prior to Closing, that number of shares of Next
Financing Stock equal to $350,000 divided by the Next Financing Price. In
addition, in the event that a Next Financing occurs during the Indemnification
Period, and the then outstanding Belzberg Shares are converted according to
the
rights set forth in the Transfer Certificate, Escrow Shares shall mean the
Next
Financing Stock issued upon conversion of the Escrow Shares in accordance with
the Transfer Certificate.
Best
Efforts. “Best
Efforts”
shall
mean the efforts that a prudent Person desiring to achieve a particular result
would reasonably use in order to ensure that such result is achieved as
expeditiously as possible.
▇▇▇▇
of Sale. “▇▇▇▇
of Sale”
shall
have the meaning set forth in Section 1.6(b)(i) of this Agreement.
Breach.
There
shall be deemed to be a “Breach”
of a
representation, warranty, covenant, obligation or other provision if there
is or
has been any inaccuracy in or breach (including any inadvertent or innocent
breach) of, or any failure (including any inadvertent failure) to comply with
or
perform, such representation, warranty, covenant, obligation or other provision;
and the term “Breach”
shall be
deemed to refer to any such inaccuracy, breach, failure, claim or
circumstance.
Bridge
Loan. “Bridge
Loan”
shall
mean the $700,000 loaned to Seller by Purchaser pursuant to that certain
Convertible Promissory Note, dated June 16, 2006.
Cash
Payment. “Cash
Payment”
shall
have the meaning set forth in Section 1.2(a)(i) of this Agreement.
Claim
Notice. “Claim
Notice”
shall
have the meaning set forth in Section 8.1(c) of this Agreement.
Closing.
“Closing”
shall
have the meaning set forth in Section 1.6(a) of this Agreement.
Closing
Certificate. “Closing
Certificate”
shall
have the meaning set forth in Section 1.6(b)(viii) of this
Agreement.
Closing
Date. “Closing
Date”
shall
have the meaning set forth in Section 1.6(a) of this Agreement.
Code. “Code”
shall
mean the Internal Revenue Code of 1986, as amended.
Common
Stock. “Common
Stock”
shall
have the meaning set forth in Section 3.4(a) of this Agreement.
Confidential
Information. “Confidential
Information”
shall
have the meaning set forth in Section 9.6 of this Agreement.
Consent. “Consent”
shall
mean any approval, consent, ratification, permission, waiver or authorization
(including any Governmental Authorization).
Contract. “Contract”
shall
mean any written, oral, implied or other binding and effective agreement,
contract, understanding, arrangement, instrument, note, guaranty, indemnity,
warranty, deed, assignment, power of attorney, certificate, purchase order,
work
order, insurance policy, benefit plan, commitment, covenant, binding assurance
or undertaking of any nature.
Conversion
Shares. “Conversion
Shares”
shall
have the meaning set forth in Section 2.30 of this Agreement.
Cut-Off
Date. “Cut-Off
Date”
shall
mean August 31, 2006.
Damages. “Damages”
shall
include any loss, damage, injury, decline in value, lost opportunity, Liability,
claim, settlement, judgment, award, fine, penalty, Tax, fee (including any
legal
fee, expert fee, accounting fee or advisory fee), charge, cost (including any
cost of investigation) or expense of any nature.
Employment
Agreements. “Employment
Agreements”
shall
have the meaning set forth in Section 5.9 of this Agreement.
Encumbrance. “Encumbrance”
shall
mean any lien, pledge, hypothecation, charge, mortgage, security interest,
encumbrance, equity, trust, equitable interest, claim, preference, right of
possession, lease, tenancy, license, encroachment, covenant, infringement,
interference, Order, proxy, option, right of first refusal, preemptive right,
community property interest, legend, defect, impediment, exception, reservation,
limitation, impairment, imperfection of title, condition or restriction of
any
nature (including any restriction on the transfer of any asset, any restriction
on the receipt of any income derived from any asset, any restriction on the
use
of any asset and any restriction on the possession, exercise or transfer of
any
other attribute of ownership of any asset); provided,
however,
that
with respect to Intellectual Property Rights, any non-exclusive license or
non-exclusive lease granted in the Ordinary Course of Business shall not be
deemed an Encumbrance.
Entity. “Entity”
shall
mean any corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, cooperative, foundation, society, political party, union, company
(including any limited liability company or joint stock company), firm or other
enterprise, association, organization or entity.
Escrow
Account. “Escrow
Account”
shall
have the meaning set forth in Section 1.2(a)(iii) of this
Agreement.
Escrow
Agent. “Escrow
Agent”
shall
have the meaning set forth in Section 1.2(a)(iii) of this
Agreement.
Escrow
Agreement. “Escrow
Agreement”
shall
have the meaning set forth in Section 1.2(a)(iii) of this
Agreement.
Escrow
Fund. “Escrow
Fund”
shall
have the meaning set forth in Section 1.2(a)(iii) of this
Agreement.
Escrow
Shares. “Escrow
Shares”
shall
mean, if no Next Financing shall have occurred prior to Closing, that number
of
shares of Purchaser’s Series B Preferred Stock equal to $5,000,000 plus the
Severance Funding Shortfall divided by $0.775 (subject to adjustment for stock
splits, stock combinations, stock dividends, reclassifications, reorganizations
and the like) and, if the Next Financing shall have occurred prior to Closing,
that number of shares of Next Financing Stock equal to $5,000,000 plus the
Severance Funding Shortfall divided by the Next Financing Price. In addition,
in
the event that a Next Financing occurs during the Indemnification Period, and
the then outstanding Escrow Shares are converted according to Section 9.10,
Escrow Shares shall mean the Next Financing Stock into which the Escrow Shares
were converted in accordance with Section 9.10.
Escrow
Share Value. “Escrow
Share Value”
shall
mean, with respect to any shares of Purchaser’s Series B Preferred Stock held in
the Escrow Account, $0.775 (subject to adjustment for stock splits, stock
combinations, stock dividends, reclassifications, reorganizations and the like),
and, with respect to any shares of Next Financing Stock held in the Escrow
Account, the Next Financing Price.
Excluded
Assets. “Excluded
Assets”
shall
mean the assets identified on Exhibit L.
Expenditures
Bridge Loan. “Expenditures
Bridge Loan”
shall
have the meaning set forth in Section 6.5 of this Agreement.
Financing
Agreements.
“Financing
Agreements”
shall
mean the following agreements (as the same may be amended from time to time):
(1) Voting Agreement, (2) Right of First Refusal and Co-Sale Agreement and
(3)
Investors’ Rights Agreement.
GAAP. “GAAP”
shall
mean United States generally accepted accounting principles.
Governmental
Authorization. “Governmental
Authorization”
shall
mean any: (a) permit, license, certificate, franchise, concession, approval,
consent, ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration, qualification or authorization
issued, granted, given or otherwise made available by or under the authority
of
any Governmental Body or pursuant to any Legal Requirement; or (b) right under
any Contract with any Governmental Body.
Governmental
Body. “Governmental
Body”
shall
mean any: (a) nation, principality, state, commonwealth, province, territory,
county, municipality, district or other jurisdiction of any nature; (b) federal,
state, local, municipal, foreign or other government; (c) governmental
or
quasi-governmental
authority of any nature (including any governmental division, subdivision,
department, agency, bureau, branch, office, commission, council, board,
instrumentality, officer, official, representative, organization, unit, body
or
Entity and any court or other tribunal); (d) multi-national organization or
body; or (e) individual, Entity or body exercising, or entitled to exercise,
any
executive, legislative, judicial, administrative, regulatory, police, military
or taxing authority or power of any nature.
Government
Grant. “Government
Grant”
shall
have the meaning set forth in Section 2.28(a) of this Agreement.
Hazardous
Material. “Hazardous
Material”
shall
include: (a) any petroleum, waste oil, crude oil, asbestos, urea formaldehyde
or
polychlorinated biphenyl; (b) any waste, gas or other substance or material
that
is explosive or radioactive; (c) any “hazardous substance,” “pollutant,”
“contaminant,” “hazardous waste,” “regulated substance,” “hazardous chemical” or
“toxic chemical” as designated, listed or defined (whether expressly or by
reference) in any statute, regulation or other Legal Requirement; (d) any other
substance or material (regardless of physical form) or form of energy that
is
subject to any Legal Requirement which regulates or establishes standards of
conduct in connection with, or which otherwise relates to, the protection of
human health, plant life, animal life, natural resources, property or the
enjoyment of life or property from the presence in the environment of any solid,
liquid, gas, odor, noise or form of energy; and (e) any compound, mixture,
solution, product or other substance or material that contains any substance
or
material referred to in clause “(a)”, “(b)”, “(c)” or “(d)” above.
IC. “IC” shall
meaning set forth in Section 4.3(a) of this Agreement.
Immaterial
Contract. “Immaterial
Contract”
shall
mean any Seller Contract that: (a) was entered into by the Seller in the
Ordinary Course of Business; (b) is identical in all material respects to
one of the Standard Form Agreements; (c) has a term of less than 90 days or
may be terminated by the Seller (without penalty) within 90 days after the
delivery of a termination notice by the Seller to the other party thereto;
and
(d) does not contemplate or involve the payment of cash or other
consideration by the Seller in an amount or having a value in excess of
$25,000.00.
Indemnification
Period. “Indemnification
Period”
shall
have the meaning set forth in Section 8.1(a) of this Agreement.
Indemnitees. “Indemnitees”
shall
mean the following Persons: (a) the Purchaser; (b) the Purchaser Sub; (c) the
current and future affiliates of Purchaser and Purchaser Sub; (d) the respective
Representatives of the Persons referred to in clauses “(a)”, “(b)” and “(c)”
above; and (d) the respective successors and assigns of the Persons referred
to
in clauses “(a)”, “(b)” “(c)” and “(d)” above.
Intellectual
Property. “Intellectual
Property”
shall
mean and include all algorithms, application programming interfaces, apparatus,
assay components, biological materials, cell lines, clinical data, chemical
compositions or structures, circuit designs and assemblies, databases and data
collections, diagrams, formulae, gate arrays, IP cores, inventions (whether
or
not
patentable), know-how, logos, marks (including brand names, product names,
logos, and slogans), methods, network configurations and architectures, net
lists, photomasks, processes, proprietary information, protocols, schematics,
specifications, software, software code (in any form including source code
and
executable or object code), subroutines, test results, test vectors, user
interfaces, techniques, URLs, web sites, works of authorship, and other forms
of
technology (whether or not embodied in any tangible form and including all
tangible embodiments of the foregoing such as instruction manuals, laboratory
notebooks, prototypes, samples, studies, and summaries).
Intellectual
Property Rights. “Intellectual
Property Rights”
shall
mean and include all rights of the following types, which may exist or be
created under the laws of any jurisdiction in the world: (a) rights associated
with works of authorship, including exclusive exploitation rights, copyrights,
moral rights, and mask works; (b) trademark and trade name rights and
similar rights; (c) trade secret rights; (d) patents and industrial property
rights; (e) other proprietary rights in Intellectual Property of every kind
and
nature; and (f) all registrations, renewals, extensions, continuations,
divisions, or reissues of, and applications for, any of the rights referred
to
in clauses (a) through (e) above.
IRS.
“IRS”
shall
mean the United States Internal Revenue Service.
Israeli
Employees. “Israeli
Employees”
shall
have the meaning set forth in Section 2.17(i) of this Agreement.
Knowledge.
“knowledge”
shall
have the meaning set forth in Section 10.16 of this Agreement.
Legal
Requirement. “Legal
Requirement”
shall
mean any federal, state, local, municipal, foreign or other law, statute,
legislation, constitution, principle of common law, resolution, ordinance,
code,
edict, decree, proclamation, treaty, convention, rule, regulation, ruling,
directive, pronouncement, requirement, specification, determination, decision,
opinion or interpretation issued, enacted, adopted, passed, approved,
promulgated, made, implemented or otherwise put into effect by or under the
authority of any Governmental Body.
Liability. “Liability”
shall
mean any debt, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation, duty or liability of any nature (including any unknown,
undisclosed, unmatured, unaccrued, unasserted, unfixed, contingent, indirect,
conditional, implied, vicarious, derivative, joint, several or secondary
liability), regardless of whether required to be disclosed on a balance sheet
prepared in accordance with GAAP and regardless of whether immediately due
and
payable.
Material
Adverse Effect. “Material
Adverse Effect”
means
any change or effect that individually is materially adverse to (i) the Assets
being purchased by Purchaser Sub, (ii) the consummation of the Transactions;
or
(iii) the prospects of the business as conducted by the Seller prior to the
Cut-Off Date.
Next
Financing. “Next
Financing” shall
mean the first issuance following the date hereof by Purchaser of shares of
a
newly created series of Purchaser’s Preferred Stock in an equity financing of
parties in an aggregate amount of not less than $5,000,000 (five million US
dollars).
Next
Financing Price. “Next
Financing Price” shall
mean the per share price paid by the purchasers for the Next Financing Stock
in
the Next Financing.
Next
Financing Stock. “Next
Financing Stock” shall
mean shares of the Preferred Stock issued by the Purchaser in a Next Financing
together with any other security or right to receive any security issued by
the
Purchaser to the purchasers of such Preferred Stock in the Next Financing in
exchange for the payment by such purchasers of the purchase price for such
Preferred Stock, but excluding any securities or right to receive any securities
issued pursuant to any obligation to issue such securities or rights that exists
on the date of this Agreement.
Newly
Hired Employee. “Newly
Hired Employee”
shall
have the meaning set forth in Section 4.10(a) of this Agreement.
OCS.
“OCS”
shall
have the meaning set forth in Section 2.28(a) of this Agreement.
OCS
Agreement. “OCS
Agreement”
shall
mean the letter, sent by the OCS to the Seller, dated May 30, 2006.
Open
Source Code. “Open
Source Code”
shall
mean any software code that is distributed as “free software” or “open source
software” or is otherwise distributed publicly in source code form under terms
that permit modification and redistribution of such software. Open Source Code
includes software code that is licensed under the GNU General Public License,
GNU Lesser General Public License, Mozilla License, Common Public License,
Apache License, BSD License, Artistic License, or Sun Community Source
License.
Order. “Order”
shall
mean any: (a) order, judgment, injunction, edict, decree, ruling, pronouncement,
determination, decision, opinion, verdict, sentence, subpoena, writ or award
issued, made, entered, rendered or otherwise put into effect by or under the
authority of any court, administrative agency or other Governmental Body or
any
arbitrator or arbitration panel; or (b) Contract with any Governmental Body
entered into in connection with any Proceeding.
Ordinary
Course of Business.
An
action taken by or on behalf of the Seller shall not be deemed to have been
taken in the “Ordinary
Course of Business”
unless:
(a) such
action is recurring in nature, is consistent with the past practices of the
Seller and is taken in the ordinary course of the normal day-to-day operations
of the Seller; and
(b) such
action is not required to be authorized by the shareholders of the Seller,
the
Board of Directors of the Seller or the audit committee or any other committee
of the Board of Directors of the Seller;
Outstanding
Obligations. “Outstanding
Obligations”
shall
have the meaning set forth in Section 1.6(b)(ii) of this Agreement.
Person. “Person”
shall
mean any individual, Entity or Governmental Body.
Personal
Data.
“Personal
Data”
shall
mean a natural person’s name, street address, telephone number, e-mail address,
photograph, social security number, driver’s license number, passport number, or
customer or account number, or any other piece of information that allows the
identification of a natural person.
Plan.
“Plan”
shall
have the meaning set forth in Section 3.4(b) of this Agreement.
Pre-Closing
Period. “Pre-Closing
Period”
shall
mean the period from the date of the Agreement through the Closing
Date.
Preferred
Stock. “Preferred
Stock”
shall
have the meaning set forth in Section 3.4(a) of this Agreement.
Proceeding. “Proceeding”
shall
mean any action, suit, litigation, arbitration, proceeding (including any civil,
criminal, administrative, investigative or appellate proceeding and any informal
proceeding), prosecution, contest, hearing, inquiry, inquest, audit, examination
or investigation commenced, brought, conducted or heard by or before, or
otherwise involving, any Governmental Body or any arbitrator or arbitration
panel.
Proxy
Statement. “Proxy
Statement”
shall
have the meaning set forth in Section 4.5 of this Agreement.
Purchaser.
“Purchaser”
shall
have the meaning set forth in the caption.
Purchaser
Disclosure Schedule. “Purchaser
Disclosure Schedule”
shall
mean the schedule (dated as of the date of the Agreement) delivered to the
Seller on behalf of the Purchaser and Purchaser Sub, a copy of which is attached
to the Agreement and incorporated in the Agreement by reference.
Purchaser
Financial Statements. “Purchaser
Financial Statements”
shall
have the meaning set forth in Section 3.8 of this Agreement.
Purchaser
Sub. “Purchaser
Sub”
shall
have the meaning set forth in the caption.
Registered
IP. “Registered
IP”
shall
mean all Intellectual Property Rights that are registered, filed, or issued
under the authority of any Governmental Body, including all patents, registered
copyrights, registered mask works, and registered trademarks and all
applications for any of the foregoing.
Related
Party.
Each of
the following shall be deemed to be a “Related
Party”:
(a)
each individual who is, or who has at any time been, an officer of the Seller;
(b) each member of the family of each of the individuals referred to in clause
“(a)” above; and (c) any Entity (other than
the
Seller) in which any one of the individuals referred to in clauses “(a)” and
“(b)” above holds or held (or in which more than one of such individuals
collectively hold or held), beneficially or otherwise, a controlling interest
or
a material voting, proprietary or equity interest.
Representatives. “Representatives”
shall
mean officers, directors, employees, agents, attorneys, accountants, advisors
and representatives.
Restated
Certificate. “Restated
Certificate”
shall
have the meaning set forth in Section 3.4(e) of this Agreement.
Restricted
Contracts. “Restricted
Contracts”
shall
have the meaning set forth in Section 1.7(a) of this Agreement.
SEC.
“SEC”
shall
mean the Securities and Exchange Commission.
Secretary’s
Certificate. “Secretary’s
Certificate”
shall
have the meaning set forth in Section 1.6(b)(ix) of this Agreement.
Securities
Act. “Securities
Act”
shall
mean the Securities Act of 1933, as amended.
Seller.
“Seller”
shall
have the meaning set forth in the caption.
Seller
Contract. “Seller
Contract”
shall
mean any Contract: (x) to which the Seller is a party; and (y) by
which the Seller or any of its assets is or may become bound or under which
the
Seller has, or may become subject to, any obligation; or under which the Seller
has or may acquire any right or interest.
Seller
Databases. “Seller
Databases”
shall
have the meaning set forth in Section 2.11(r) of this Agreement.
Seller
Disclosure Schedule. “Seller
Disclosure Schedule”
shall
mean the schedule (dated as of the date of the Agreement) delivered to the
Purchaser on behalf of the Seller (including any part thereof delivered in
connection with Section 4.12), a copy of which is attached to the Agreement
and
incorporated in the Agreement by reference, and any amendments thereto approved
by the Purchaser or the Purchaser Sub, in their sole and absolute
discretion.
Seller Employee. “Seller
Employee”
shall
mean any current or former employee, independent contractor or director of
the
Seller.
Seller Employee
Agreement. “Seller
Employee Agreement”
shall
mean each management, employment, severance, consulting, relocation,
repatriation or expatriation agreement or other Contract between the Seller
and
any Seller Employee, other than any such management, employment, severance,
consulting, relocation, repatriation or expatriation agreement or other Contract
with a Seller Employee which is terminable “at will” without any obligation on
the part of the Seller to make any payments or provide any benefits in
connection with such termination.
Seller
Employee Plan. “Seller
Employee Plan”
shall
mean any plan, program, policy, practice, Contract or other arrangement
providing for compensation, severance, termination pay, deferred compensation,
performance awards, stock or stock-related awards, fringe benefits or other
employee benefits or remuneration of any kind, whether written, unwritten or
otherwise, funded or unfunded, that is or has been maintained, contributed
to,
or required to be contributed to, by the Seller for the benefit of any Seller
Employee, or with respect to which the Seller has or may have any liability
or
obligation, except such definition shall not include any Seller Employee
Agreement.
Seller
Interim Period Expenditures. “Seller
Interim Period Expenditures”
shall
mean any Assumed Liabilities paid or discharged by the Seller and any
prepayment, security deposits and other deposits made by Seller, all as
occurring after the Cut Off Date and prior to the Closing Date, including under
Seller Employee Plans with respect to employees of Seller that become Newly
Hired Employees, and any other costs or expenses related to the performance
of
the business of the Seller consistent with present practices in the Ordinary
Course of Business.
Seller
Financial Statements. “Seller
Financial Statements”
shall
have the meaning set forth in Section 2.3 of this Agreement.
Seller
IP. “Seller
IP” shall mean
(a)
all Intellectual Property Rights in the Seller Products or methods or processes
used to manufacture the Seller Products, and (b) all other Intellectual Property
Rights owned by or exclusively licensed to the Seller.
Seller
IP Contract. “Seller
IP Contract”
shall
mean any Seller Contract to which the Seller is a party or by which the Seller
is bound, that contains any assignment or license of, or covenant not to assert
or enforce, any Intellectual Property Right or that otherwise relates to any
Seller IP or any Intellectual Property developed by, with, or for the
Seller.
Seller
Pension Plan. “Seller
Pension Plan”
shall
mean each Seller Employee Plan that is an employee pension benefit
plan.
Seller
Privacy Policy. “Seller
Privacy Policy”
shall
mean each external or internal, past or present privacy policy of the Seller,
including any policy relating to (i) the privacy of users of the Seller Products
or of any Seller Website, (ii) the collection, storage, disclosure, and transfer
of any User Data or Personal Data, and (iii) any employee
information.
Seller
Product. “Seller
Product”
shall
mean any product or service designed, developed, manufactured, marketed,
distributed, provided, licensed, or sold by the Seller.
Seller
Software. “Seller
Software”
shall
have the meaning set forth in Section 2.11(l) of this Agreement.
Seller
Web Site. “Seller
Web Site”
shall
mean any public or private website owned, maintained, or operated at any time
by
or on behalf of the Seller.
Series
B Fair Value. “Series
B Fair Value”
shall
have the meaning set forth in Section 1.8(a) of this Agreement.
Services
Agreement. “Services
Agreement”
shall
have the meaning set forth in Section 5.10 of this Agreement.
Severance
Funding Shortfall. “Severance
Funding Shortfall”
shall
mean an amount (which shall not be less than $0 or greater than $400,000) equal
to (A) $400,000 less (B) the amount by which the amount payable with respect
to
the severance obligations of employees or former employees of Seller that are
not Newly Hired Employees exceeds the aggregate amount deposited in the
manager’s insurance fund for such employees or former employees as of the
Closing Date.
Shareholder
Approvals. “Shareholder
Approvals”
shall
have the meaning set forth in Section 4.5 of this Agreement.
Standard
Form Agreement. “Standard
Form Agreement”
shall
have the meaning set forth in Section 2.11(f) of this Agreement.
Statement
Date. “Statement
Date”
shall
have the meaning set forth in Section 3.8 of this Agreement.
Tax. “Tax”
shall
mean any tax (including any income tax, franchise tax, capital gains tax,
estimated tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, occupation tax, inventory tax, occupancy tax, withholding tax or payroll
tax), levy, assessment, tariff, impost, imposition, toll, duty (including any
customs duty), deficiency or fee, and any related charge or amount (including
any fine, linkage differentials, penalty or interest), that is, has been or
may
in the future be (a) imposed, assessed or collected by or under the
authority of any Governmental Body, or (b) payable pursuant to any
tax-sharing agreement or similar Contract.
Tax
Return. “Tax
Return”
shall
mean any return (including any information return), report, statement,
declaration, estimate, schedule, notice, notification, form, election,
certificate or other document, including all appendices and exhibits thereto,
or
information that is, has been or may in the future be filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection or payment of any
Tax
or in connection with the administration, implementation or enforcement of
or
compliance with any Legal Requirement relating to any Tax.
Transferred
Employees. “Transferred
Employees”
shall
have the meaning set forth in Section 4.10(a) of this Agreement.
Transactional
Agreements.
“Transactional
Agreements”
shall
mean: (a) the Agreement; (b) the Escrow Agreement; (c) the Assumption Agreement;
(d) the ▇▇▇▇ of Sale; (e) the Voting Agreements; (f) the Secretary’s
Certificate; (g) the Closing Certificate; (h) the Financing Agreements; and
(i)
any other Contract or instrument which shall or is advisable to be executed
and
delivered in connection with the consummation of the Transactions.
Transactions. “Transactions”
shall
mean (a) the execution and delivery of the respective Transactional
Agreements, and (b) all of the transactions contemplated by
the
respective
Transactional Agreements, including: (i) the sale of the Assets by the Seller
to
the Purchaser Sub in accordance with the Agreement; (ii) the assumption of
the
Assumed Liabilities by the Purchaser Sub pursuant to the Assumption Agreement;
(iii) the issuance and sale of the Preferred Shares of the Purchaser to the
Seller; and, (iv) the performance by the Seller, the Purchaser Sub and the
Purchaser of their respective obligations under the Transactional Agreements,
and the exercise by the Seller, the Purchaser Sub and the Purchaser of their
respective rights under the Transactional Agreements.
Transfer
Certificate. “Transfer
Certificate”
shall
have the meaning set forth in Section 1.6(b)(xi) of this Agreement.
User
Data.
“User
Data”
shall
mean any Personal Data or other data or information collected by or on behalf
of
the Seller from users of the Seller Products or of any Seller
Website.
VAT.
“VAT”
shall
have the meaning set forth in Section 1.3 of this Agreement.
VAT
Request. “VAT
Request”
shall
have the meaning set forth in Section 1.3 of this Agreement.
Voting
Agreement. “Voting
Agreement”
shall
have the meaning set forth in Section C of the Recitals to this
Agreement.
Table
Of Contents
|
PAGE
|
||
|
SALE
OF ASSETS; RELATED TRANSACTIONS
|
1
|
|
|
1.1
|
Sale
of Assets
|
1
|
|
1.2
|
Purchase
Price
|
2
|
|
1.3
|
Sales
Taxes; Israeli Value Added Tax
|
4
|
|
1.4
|
Withholding
|
5
|
|
1.5
|
Allocation
|
5
|
|
1.6
|
Closing
|
5
|
|
1.7
|
Consents
|
6
|
|
1.8
|
Escrow
Shares Adjustment
|
8
|
|
2.
|
REPRESENTATIONS
AND WARRANTIES OF THE SELLER
|
8
|
|
2.1
|
Due
Organization; No Subsidiaries; Etc
|
8
|
|
2.2
|
Articles
of Association; Records
|
8
|
|
2.3
|
Financial
Statements
|
9
|
|
2.4
|
Absence
Of Changes
|
9
|
|
2.5
|
Title
To Assets
|
10
|
|
2.6
|
Receivables
|
11
|
|
2.7
|
Customers;
Distributors
|
11
|
|
2.8
|
Reserved
|
11
|
|
2.9
|
Equipment,
Etc
|
11
|
|
2.10
|
Real
Property
|
11
|
|
2.11
|
Intellectual
Property; Privacy
|
11
|
|
2.12
|
Contracts
|
18
|
|
2.13
|
Liabilities;
Major Suppliers
|
19
|
|
2.14
|
Compliance
with Legal Requirements
|
20
|
|
2.15
|
Governmental
Authorizations
|
20
|
|
2.16
|
Reserved
|
21
|
|
2.17
|
Employee
And Labor Matters
|
21
|
|
2.18
|
Employee
Benefit Plans and Compensation
|
24
|
|
2.19
|
Environmental
Matters
|
25
|
|
2.20
|
Seller
Interim Period Expenditures
|
26
|
Table
Of Contents
(continued)
|
Page
|
||
|
2.21
|
Performance
Of Services
|
26
|
|
2.22
|
Insurance
|
26
|
|
2.23
|
Related
Party Transactions
|
27
|
|
2.24
|
Certain
Payments, Etc
|
27
|
|
2.25
|
Proceedings;
Orders
|
28
|
|
2.26
|
Authority;
Binding Nature Of Agreements
|
28
|
|
2.27
|
Non-Contravention;
Consents
|
28
|
|
2.28
|
Government
Grants
|
29
|
|
2.29
|
Brokers
|
30
|
|
2.30
|
Investment
Representations
|
30
|
|
3.
|
REPRESENTATIONS
AND WARRANTIES OF THE PURCHASER.
|
32
|
|
3.1
|
Organization,
Good Standing and Qualification of Purchaser
|
32
|
|
3.2
|
Organization
and Qualification of Purchaser Sub
|
33
|
|
3.3
|
Subsidiaries
|
33
|
|
3.4
|
Capitalization;
Voting Rights of Purchaser
|
33
|
|
3.5
|
Capitalization
of Purchaser Sub
|
35
|
|
3.6
|
Authorization;
Binding Obligations
|
35
|
|
3.7
|
Governmental
Consents and Filings
|
35
|
|
3.8
|
Financial
Statements
|
35
|
|
3.9
|
Changes
|
35
|
|
3.10
|
Liabilities
|
37
|
|
3.11
|
Agreements;
Action
|
37
|
|
3.12
|
Obligations
to Related Parties
|
38
|
|
3.13
|
Title
to Properties and Assets; Liens, Etc
|
38
|
|
3.14
|
Intellectual
Property.
|
38
|
|
3.15
|
Compliance
with Other Instruments
|
39
|
|
3.16
|
Litigation
|
39
|
|
3.17
|
Tax
Returns and Payments
|
39
|
|
3.18
|
Insurance
|
40
|
|
3.19
|
Employees
|
40
|
Table
Of Contents
(continued)
|
Page
|
||
|
3.20
|
Registration
Rights and Voting Rights
|
40
|
|
3.21
|
Compliance
with Legal Requirements
|
40
|
|
3.22
|
No
Solicitation
|
40
|
|
3.23
|
Employee
Benefit Plans
|
41
|
|
3.24
|
Executive
Officers
|
41
|
|
3.25
|
Permits
|
41
|
|
3.26
|
Corporate
Documents
|
41
|
|
3.27
|
83(b)
Elections
|
41
|
|
3.28
|
Share
Purchase Agreements
|
41
|
|
4.
|
PRE-CLOSING
COVENANTS OF THE PARTIES
|
41
|
|
4.1
|
Access
And Investigation
|
41
|
|
4.2
|
Operation
Of Business
|
42
|
|
4.3
|
Filings
and Consents
|
43
|
|
4.4
|
Transfer
of Approved Enterprise Status
|
44
|
|
4.5
|
Shareholder
Approval
|
45
|
|
4.6
|
Notification
|
45
|
|
4.7
|
No
Negotiation
|
46
|
|
4.8
|
Best
Efforts
|
46
|
|
4.9
|
Confidentiality
|
46
|
|
4.10
|
Employee
Matters
|
46
|
|
4.11
|
Management
Authorizations and Consents
|
47
|
|
4.12
|
Delivery
of Certain Schedules
|
47
|
|
5.
|
CONDITIONS
PRECEDENT TO THE PURCHASER’S AND PURCHASER SUB’S OBLIGATION TO
CLOSE
|
48
|
|
5.1
|
Accuracy
Of Representations
|
48
|
|
5.2
|
Performance
Of Obligations
|
48
|
|
5.3
|
Consents
|
48
|
|
5.4
|
Shareholder
Approvals
|
48
|
|
5.5
|
No
Material Adverse Effect
|
48
|
|
5.6
|
Additional
Documents
|
48
|
Table
Of Contents
(continued)
|
Page
|
||
|
5.7
|
No
Proceedings
|
49
|
|
5.8
|
No
Prohibition
|
49
|
|
5.9
|
Employment
and Non-Competition Agreements
|
49
|
|
5.10
|
Services
Agreement
|
49
|
|
5.11
|
Purchaser
Consents
|
49
|
|
6.
|
CONDITIONS
PRECEDENT TO THE SELLER’S OBLIGATION TO CLOSE
|
49
|
|
6.1
|
Accuracy
Of Representations
|
49
|
|
6.2
|
Purchaser’s
and Purchaser Sub’s Performance
|
50
|
|
6.3
|
Consents
and Authorizations
|
50
|
|
6.4
|
Acknowledgements
|
50
|
|
7.
|
TERMINATION
|
50
|
|
7.1
|
Termination
Events
|
50
|
|
7.2
|
Termination
Procedures
|
51
|
|
7.3
|
Effect
Of Termination
|
51
|
|
7.4
|
Nonexclusivity
Of Termination Rights
|
51
|
|
8.
|
INDEMNIFICATION,
ETC
|
52
|
|
8.1
|
Survival
Of Representations And Covenants
|
52
|
|
8.2
|
Indemnification
By The Seller
|
52
|
|
8.3
|
Setoff
|
54
|
|
8.4
|
Nonexclusivity
Of Indemnification Remedies
|
54
|
|
8.5
|
Defense
Of Third Party Claims
|
55
|
|
8.6
|
Exercise
Of Remedies By Indemnitees Other Than The Purchaser
|
56
|
|
9.
|
CERTAIN
POST-CLOSING COVENANTS
|
56
|
|
9.1
|
Further
Actions
|
56
|
|
9.2
|
Publicity
|
56
|
|
9.3
|
Repurchase
of Shares in Escrow Account
|
57
|
|
9.4
|
Change
Of Name
|
57
|
|
9.5
|
Distribution
of Escrow Fund
|
57
|
|
9.6
|
Confidentiality
|
57
|
|
9.7
|
Regulation
S Covenants
|
58
|
Table
Of Contents
(continued)
|
Page
|
||
|
9.8
|
Stop
Transfer Restrictions
|
58
|
|
9.9
|
Access
and Investigation
|
58
|
|
9.10
|
Right
to Convert Escrow Shares
|
58
|
|
9.11
|
Discharge
of Liability
|
59
|
|
10.
|
MISCELLANEOUS
PROVISIONS
|
59
|
|
10.1
|
Further
Assurances
|
59
|
|
10.2
|
Fees
and Expenses
|
59
|
|
10.3
|
Attorneys’
Fees
|
60
|
|
10.4
|
Notices
|
60
|
|
10.5
|
Time
Of The Essence
|
61
|
|
10.6
|
Headings
|
61
|
|
10.7
|
Counterparts
|
61
|
|
10.8
|
Governing
Law; Venue
|
61
|
|
10.9
|
Contracts
(Rights of Third Parties) ▇▇▇ ▇▇▇▇
|
62
|
|
10.10
|
Successors
And Assigns; Parties In Interest
|
62
|
|
10.11
|
Remedies
Cumulative; Specific Performance
|
62
|
|
10.12
|
Waiver
|
63
|
|
10.13
|
Amendments
|
63
|
|
10.14
|
Severability
|
63
|
|
10.15
|
Entire
Agreement
|
63
|
|
10.16
|
Knowledge
|
63
|
|
10.17
|
Construction
|
64
|
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