ASSET PURCHASE AGREEMENT
by and between
GENERAL MICROWAVE ISRAEL ACQUISITION (2008) LTD.
and
EYAL MICROWAVE LTD.
and
EYAL MAG LTD.
DATED AS OF: AUGUST 1, 2008
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of August 1,
2008, by and between GENERAL MICROWAVE ISRAEL ACQUISITION (2008) LTD. ("Buyer"),
a company formed under the laws of Israel with private company number 514167543,
and EYAL MICROWAVE LTD. ("Seller Parent"), a company formed under the laws of
Israel with private company number 512013194, and EYAL MAG LTD. a company formed
under the laws of Israel with private company number 512435959 and a wholly
owned subsidiary of Seller Parent ("Seller Sub"; Seller Parent and Seller Sub
shall be referenced herein, jointly and severally, as "Seller").
RECITAL
The parties hereto desire that Seller sell, transfer and assign to Buyer,
and that Buyer purchase from Seller, all of the assets and business of Seller,
excluding only the Retained Assets (as defined below), and assume certain
liabilities, all on the terms and subject to the conditions set forth in this
Agreement.
In consideration of the respective representations, warranties, covenants
and agreements contained herein, and subject to the terms and conditions set
forth herein, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Specific Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below:
"Affiliate" of a specified person (natural or juridical) means a person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common Control with, the person specified. "Control"
in this context means (i) ownership of more than fifty percent (50%) of the
shares entitled to vote for the election of directors in the case of a
corporation, and more than fifty percent (50%) of the voting power in the case
of a business entity other than a corporation, or (ii) the possession, directly
or indirectly, of the power to affirmatively direct, or affirmatively cause the
direction of, the management and policies of a specified person, whether through
the ownership of voting securities, by contract or otherwise.
"Assets" means all the assets, properties, rights, interests, claims and
business as of the Closing of Seller of every kind, nature and description,
wherever located, whether now owned or hereafter acquired, whether tangible or
intangible, real, personal or mixed, absolute or contingent, known or unknown,
including, but not limited to:
(i) all business, financial, legal, regulatory, tax and other books,
records (computer or otherwise), files, lists and data (including complete
customer and supplier lists, files related to Business Intellectual Property),
reports, plans, drawings and operating records, customer service histories,
warehouse and other Inventories;
(ii) all rights under Contracts including without limitation all rights to
occupancy under real property leases;
(iii) all manufacturing-related assets, benches, molding, machinery,
equipment, fixtures, office furniture, tools, automobiles, other vehicles,
computers, printers, copiers, telecopy machines and other tangible property
held, owned or leased;
(iv) all Inventories, spare parts, service tools, instruments and supplies;
(v) all causes of action, judgments, settlements, claims, indemnity, or
other rights, including all rights to all claims or other causes of action,
whether known or unknown, accrued or to accrue for past or present infringement
or unauthorized use of Intellectual Property or otherwise with respect to monies
or rights accruing to Seller, except for any causes of action, claims or other
rights pertaining to the Retained Liabilities;
(vi) all Intellectual Property, all Intellectual Property licenses (granted
to or by Seller or its Affiliates) required to make, have made, use, modify,
sell or offer to sell any products currently commercialized by or being
developed by Seller including, but not limited to, the Intellectual Property
listed or referenced in Section 6.16 herein;
(vii) all other intangible assets, including goodwill;
(viii) all Authorizations, registrations, licenses, approvals,
certifications, permits and other similar requirements used in connection with
the Business;
(ix) all available product brochures primarily related to products
currently commercialized by Seller;
(x) any security interests, Liens or rights to repossess products or
equipment sold by Seller; and
(xi) all accounts receivable and notes receivable;
(xii) all cash and cash equivalent assets of Seller in Seller's banks or on
hand (subject to Section 2.02(d)); and
(xiii) the right to use the name "Eyal" in connection with the Buyer's
business.
"Business" means all of the business and operations of Seller.
"Contract" means any contract, note, evidence of indebtedness purchase or
sale order, lease, license, instrument, commitment or other agreement to which
Seller is a party or an assignee or other beneficiary thereof or by which the
Seller is bound.
"Current Employees" means all persons who immediately prior to the Closing
are employees of Seller, including any such employee who is on short-term or
long-term disability or other authorized leave of absence and is so identified
in Part 3.18 of the Disclosure Schedule.
"Employee Plans" means any health care plan or arrangement; life insurance
or other death benefit plan or arrangement; deferred compensation or other
pension or retirement plan or arrangement; stock option, bonus or other
incentive plan or arrangement; severance, change of control or early retirement
plan or arrangement; or other fringe or employee benefit plan or arrangement;
managers' insurance; education fund [keren hishtalmut]; or any employment or
consulting contract or executive compensation agreement; whether the same are
written or otherwise, formal or informal, voluntary or required by law or by
Seller's policies or practices, for the benefit of or relating to any present or
former employees, leased employees, consultants, agents, directors, and/or their
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dependents, of Seller, including, without limitation, any pension plan or
similar plan (whether or not any of the foregoing is funded) (i) to which Seller
is a party or by which Seller is bound, (ii) that Seller has at any time
established or maintained for the benefit of or relating to any present or
former employees, consultants, agents, directors, and/or their dependents, of
Seller, or (iii) with respect to which Seller has made any payments or
contributions in any of the last seven (7) years, or otherwise has any liability
(including any such plan or other arrangement formerly maintained by Seller).
"Environmental Laws" means and includes any one or more of the following:
(a) any municipal, local or other statute, law, ordinance or regulation that
relates to or deals with Hazardous Substances, human health or the environment,
all as they may be amended from time to time; and all regulations promulgated by
a regulatory body pursuant to any of the foregoing statutes, laws, regulations,
or ordinances; and (b) judgments, orders, decrees, injunctions, permits,
licenses or agreements, to the extent that either they relate to safety, human
health, the environment or emissions, discharges, or releases of Hazardous
Substances into the environment, or otherwise relate to Hazardous Substances, or
wastes or the investigation, clean-up, or other remediation thereof.
"Hazardous Substance" means any substance that is dangerous, toxic, or
hazardous, or that is a pollutant, contaminant, chemical, material or substance
defined as hazardous or as a pollutant or contaminant in, or the use,
transportation, storage, release or disposal of which is regulated by, any
Environmental Laws.
"Intellectual Property" means any or all of the following and all rights
in, arising out of, or associated therewith: (a) Israeli, international and
other patents and applications therefore and all divisions, continuations,
continuations-in-part, renewals, extensions, revisions, reissues and
re-examinations relative thereto, and all patents, applications, documents and
filings claiming priority to or serving as a basis for priority thereof; (b)
copyrights and all works of authorship including all translations, adaptations,
combinations, compilations and derivations of each of the foregoing, whether or
not registered; (c) registered and unregistered trademarks, trade names, brand
names, service marks, service names, trade dress, logos and corporate names
including all translations, adaptations, combinations and derivations thereof,
together with all common law rights and all goodwill associated with each of the
foregoing; (d) technology, know-how, methods, processes, systems, trade secrets,
inventions (whether or not patentable, copyrightable or susceptible to any other
form of legal protection and whether or not reduced to practice), proprietary
data, formulae, research and development data, and confidential information
(including conceptions, ideas, innovations, manufacturing, development and
production techniques, drawings, specifications, designs, proposals, financial
and accounting data, business and marketing plans, customer and supplier lists
and related information and documentation), in each case irrespective of whether
in human or machine readable form; (e) computer software (including both source
and object code) and all related program listings and data, systems, user and
other documentation; (f) mask works; (g) industrial designs; (h) databases and
data collections and all rights therein; (i) Internet addresses, sites and
domain names and numbers; (j) all applications, registrations, renewals and
extensions for any and each of the foregoing throughout the world; and (k) any
similar or equivalent rights to any of the foregoing anywhere in the world, and
all other forms of right by which one may effectively exclude another from using
or otherwise enjoying any and each of the foregoing.
"Interim Period" means the period commencing on July 1, 2008 and ending on
the Closing Date.
"Inventories" means finished goods, raw materials and ingredients,
work-in-process, consignment goods, wares, merchandise, wrapping, packing
materials and similar items.
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"Key Employees" means the employees listed on Schedule 7.09.
"Kibbutz" means, jointly and severally: Kibbutz Eyal , registered
cooperative society number ▇▇-▇▇▇▇▇▇▇, and Haklaei Hasharon Agricultural
Cooperative Society Ltd., number ▇▇-▇▇▇▇▇▇▇, and Nof Ayal, limited partnership
number ▇▇-▇▇▇▇▇▇▇.
"knowledge" of Seller means actual knowledge of any of the officers and
directors of the Seller and the knowledge that any of such persons, in such
positions, would reasonably be expected to have assuming diligent inquiry.
"Liens" means liens, mortgages, charges (including fixed and/or floating
charges), security interests, pledges or encumbrances.
"Material Adverse Effect" means any state of facts, change, effect,
condition, development, event or occurrence that, individually or in the
aggregate with other related effects, is or could reasonably be expected to be
materially adverse to the business, results of operation or condition (financial
or otherwise) of the Purchased Assets or the Business, considered as a whole, or
is or could reasonably be expected to be materially adverse to the ability of
Buyer to conduct the Business following the Closing as the Business is presently
conducted or presently contemplated to be conducted by Seller.
"OCS" means Office of the Chief Scientist of the Israeli Ministry of
Industry, Trade and Labor.
"OCS Grants" means the grants received by the Seller or its Affiliates in
connection with the R&D Law and/or the OCS.
"Person" means any individual and any legal entity.
"Product Liability" means any liability, claim or expense, including but
not limited to attorneys' fees and medical expenses, arising in whole or in part
out of a breach of any express or implied product warranty, strict liability in
tort, negligent manufacture of product, negligent provision of services, product
recall, or any other allegation of liability arising from the design, testing,
manufacture, packaging, labeling (including instructions for use), marketing,
distribution or sale of products.
"R&D Law" means the Israeli Encouragement of Industrial and Development
Law, 5744-1984, all related regulations, orders and rules, as well as published
OCS policy.
"Registered Intellectual Property" means any or all of the following and
all rights in, arising out of, or associated therewith: (a) Israeli, United
States, international and other patents and applications therefore and all
divisions, continuations, continuations-in-part, renewals, extensions,
revisions, reissues and re-examinations relative thereto, and all patents,
applications, documents and filings claiming priority to or serving as a basis
for priority thereof; (b) registered trademarks, trade names, brand names,
service marks, service names, trade dress, logos and corporate names including
all translations, adaptations, combinations and derivations thereof (but
excluding any common law rights and all goodwill associated with each of the
foregoing); and (c) Internet addresses, sites and domain names.
"Securities" means shares, stock, options, phantom stock, warrants,
convertible securities or other rights to acquire stock of Seller.
"Taxes" (and "Tax") means all taxes, additions to tax, penalties, interest,
linkage differentials [hefreshei hatzmada], fines, duties, withholdings,
assessments, and charges assessed or imposed by any governmental or municipal
authority, including but not limited to all Israeli and foreign income, profits,
gross receipts, import, real and personal property, value added, stamp,
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transfer, withholding, employment, excise, custom, duty, and any other taxes,
obligations and assessments of any kind whatsoever; the foregoing shall include,
but not be limited to, any liability arising as a result of being (or ceasing to
be) a member of any affiliated, consolidated, combined, or unitary group as well
as any liability under any Tax allocation, Tax sharing, Tax indemnity or similar
agreement.
"Transfer and Sales Taxes" means all use taxes, stamp duty taxes,
conveyance taxes, transfer taxes, filing fees, recording fees, prepayment fees
or penalties, reporting fees and other similar duties, taxes and fees, if any,
imposed upon, or resulting from, the transfer of the Purchased Assets or the
Assumed Liabilities hereunder and the filing of any instruments relating to such
transfer, including any sales tax, but not including VAT.
SECTION 1.02 Additional Definitions. The following table sets forth certain
other defined terms and the Section of the Agreement in which the meaning of
each such term appears:
Term Definition in section:
Accounts Receivable Deadline 2.04(d)(i)
Agreement Preamble
Approved Enterprise Status 5.08
Assumed Liabilities 2.03(a)
Audited FS 2007 7.13
Authorizations 3.09
Basic Consideration 2.04(a)(i)
Business Intellectual Property 3.16(g)
Buyer Preamble
Change in Control Payments 5.09
Claim 9.04
Closing 2.06(a)
Closing Date 2.06(a)
Closing Date Assumed Liabilities 2.04(c)(i)
Closing Date Balance Sheet 2.04(c)(i)
Closing Date Net Assets 2.04(c)(i)
Closing Date Net Asset Value 2.04(c)(i)
Defaulted Accounts Receivable 2.04(d)(i)
Delayed Schedule 7.12
Direct Claim 9.03(b)
Disclosure Schedule Article III
Dollars 1.03
Employment Offers 6.01
Loan Repayment Amount 2.04(b)(iii)
Government Grants 3.23(a)
Indemnifiable Losses 9.01
Indemnitee(s) 9.01
Interest 2.04(a)(ii)
Interim Balance Sheet 3.05
Interim Financial Statements 3.05
Interim Income Statement 3.05
Interim Period Cash Flow Statement 2.04(c)
Interim Period Reduction 2.04(c)
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Kibbutz Personnel 6.04(b)
Kibbutz Services Agreement 6.04
Manufacturing Documentation 3.14
New Buyer's Employees 6.05
NIS 1.03
Non-competition Period 5.05
Purchase Price 2.04(a)
Purchased Assets 2.01
Representative Rate 2.04(b)(ii)
Retained Assets 2.02
Retained Liabilities 2.03(b)
Seller Preamble
Seller Audited Financial Statements 3.05
Seller Databases 3.16(l)
Seller Parent Preamble
Seller Product 3.16(a)
Seller Software 3.16(l)
Seller Sub Preamble
Seller's Financial Statements 3.05
Standard Form Agreement 3.16(f)
Surveyed Interim Financial Statements 7.13
Terminated Employees 6.03
Third Party Claim 9.03(a)
Transaction Expenses 5.09
Transaction Bonus Payments 5.09
VAT 2.05(b)
SECTION 1.03 Other Definitional Provisions; Interpretation. The words
"hereof," "herein," and "hereunder" and words of similar import, when used in
this Agreement, shall refer to this Agreement as a whole and not to any
particular provisions of this Agreement. The terms defined in the singular shall
have a comparable meaning when used in the plural, and vice versa. References to
an "Exhibit" or to a "Schedule" are, unless otherwise specified, to one of the
Exhibits or Schedules attached to or referenced in this Agreement, and
references to an "Article" or a "Section" are, unless otherwise specified, to
one of the Articles or Sections of this Agreement. The term "person" includes
any individual, partnership, joint venture, corporation, limited liability
company, trust, unincorporated organization or government or any department or
agency thereof and will also include its permitted successors and assigns. The
term "Dollars" or "$" shall refer to the currency of the United States of
America, and the term "NIS" shall refer to the currency of the State of Israel.
All references to time shall refer to Tel Aviv, Israel time. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". The term "or" is not
exclusive. The word "extent" in the phrase "to the extent" means the degree to
which a subject or other thing extends, and such phrase shall not mean simply
"if". Any agreement or instrument defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement or
instrument as from time to time amended, modified or supplemented. This
Agreement shall be construed without regard to any presumption or other rule
requiring construction hereof against the party causing this Agreement to be
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drafted. Other terms may be defined elsewhere in the text of this Agreement and
shall have the meaning indicated throughout this Agreement
ARTICLE II
PURCHASE AND SALE OF ASSETS
SECTION 2.01 Purchased Assets. Upon the terms and subject to the conditions
set forth in this Agreement, effective as of the Closing, Seller hereby sells,
transfers, assigns and conveys to Buyer, and Buyer hereby purchases, all of the
Assets, other than the Retained Assets (the "Purchased Assets"), free and clear
of all Liens. For avoidance of doubt, any cash included in the Purchased Assets
shall be deposited by Seller into a bank account specified by Buyer on the
Closing.
SECTION 2.02 Retained Assets. Seller hereby retains all of its respective
right, title and interest in and to, and there shall be excluded from sale,
assignment or transfer to Buyer hereunder, the following assets of Seller as of
the Closing (the "Retained Assets"):
(a) this Agreement and the amounts to be received by Seller hereunder;
(b) all Contracts not specifically assumed by Buyer pursuant to Section
2.03(a), provided however, that in the event a Contract was not disclosed to
Buyer prior to the date hereof, and Buyer concludes at its sole discretion that
such Contract is necessary for the conduct of the Business, then Buyer may
notify Seller of its intention to assume such Contract and Seller shall take any
action necessary to facilitate such assumption;
(c) the originals of Seller's minute books, share ledgers, share transfer
records and tax returns, which, however, shall be available for review and
copying by Buyer immediately upon request;
(d) cash in the Sellers bank accounts as of June 30, 2008 in the
approximate amount of NIS 3,771,000, as expressly specified in the Interim
Balance Sheet; less (a) the amount of NIS 1,400,000 which was received by the
Seller prior to June 30, 2008 as advance payments from customers, and (b) an
amount equal to the Interim Period Reduction, and provided that all cash or
other assets accruing or paid to Seller during the Interim Period shall be
included in the Purchased Assets;
(e) shares held by Seller Parent in Eyal Mag Ltd. and Eyal Gal Ltd.;
(f) any assets of Eyal Gal Ltd.; and
(g) (for avoidance of doubt) carry-forward losses of Seller.
SECTION 2.03 Assumed Liabilities; Retained Liabilities.
(a) Assumed Liabilities. Upon the terms and subject to the conditions set
forth in this Agreement, effective as of the Closing, Seller hereby assigns,
transfers, and conveys to Buyer, and Buyer hereby assumes and agrees to pay and
perform according to their respective terms only those liabilities and
obligations of Seller which are listed on Schedule 2.03(a) of this Agreement
(collectively, the "Assumed Liabilities").
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(b) Retained Liabilities. The parties agree that Buyer is not, nor shall be
considered, the successor to Seller, and that Buyer does not hereby agree to
assume or become liable to pay, perform or discharge any obligation or liability
whatsoever of Seller or relating to the Assets or any former or present
employees of Seller, including those that may be hired by Buyer, except as
expressly provided for in Section 2.03(a). Seller shall retain any liability or
obligation of, or responsibility for any claim against, Seller or the Business,
direct or indirect, known or unknown, absolute or contingent, not included in
the Assumed Liabilities (the "Retained Liabilities"), and, notwithstanding
anything to the contrary in the Agreement, none of the following shall be
Assumed Liabilities (and each shall be included in the definition of "Retained
Liabilities"):
(i) the obligations of Seller under this Agreement;
(ii) any obligation, liability or claim that constitutes or arises from a
breach by Seller of any representation, warranty, covenant or agreement
contained in this Agreement;
(iii) any obligation, liability or claim that may arise from any lawsuits,
actions or proceedings against Seller;
(iv) any obligation, liability or claim that may arise from any employee,
or consultant (or any former employee or consultant), for any reason or actions,
including, (i) any claim or demand of a current or former employee relating to
or arising as a result of employment, termination by Seller of the employment of
such employee or consultants (or former employee or consultant) including, for
this purpose, with respect to any Person claiming entitlements or benefits on
the basis of a claimed employer-employee relationship between Seller and such
Person, (ii) any liability under any Employee Plan at any time maintained,
contributed to or required to be contributed to by or with respect to Seller or
its Affiliates or under which Seller or its Affiliates may incur liability, or
any contributions, benefits or liabilities therefor, or any liability with
respect to Seller's or its Affiliates' withdrawal or partial withdrawal from or
termination of any Employee Plan, (iii) subject to the provisions of Section
6.03, any liability of Seller or its Affiliates for severance and/or accrued
vacation days (beyond the liability for vacation days and severance pay
allocated in the Surveyed Interim Financial Statements) and/or mandatory or
customary payment and/or benefit and/or entitlement for employees of Seller or
its Affiliates, (iv) any claim of an unfair and/or discriminatory labor practice
based on acts or omissions by Seller; (v) any settlement or similar amounts paid
to a Current Employee or former employee of the Seller.
(v) Seller's Transaction Expenses;
(vi) Transaction Bonus Payments and Change in Control Payments);
(vii) any other liability or obligation of, or claim against, Seller or the
Business, of any kind or nature whatsoever, whether known or unknown, fixed or
contingent, determined or determinable, due or not yet due, or otherwise, that
is not expressly assumed by Buyer under this Agreement;
(viii) any liability of Seller or its Affiliates with respect to any Tax
attributable to the Purchased Assets or the Business with respect to any
pre-Closing Tax period, including any liability for the breach of the terms of
any "approved enterprise" programs received by the Company under the Law of the
Encouragement of Capital Investments, 1959, which may result from the
transactions contemplated by this Agreement;
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(ix) any liability to the extent arising from any injury to or death of any
person or damage to or destruction of any property, whether based on negligence,
strict liability, enterprise liability or any other legal or equitable theory
arising from defects in or use or misuse of products sold by Seller or from
services performed by or on behalf of Seller;
(x) except as expressly provided in this Agreement, any liability of Seller
to the extent resulting from entering into, performing its obligations pursuant
to or consummating the transactions contemplated by this Agreement;
(xi) any liability of Seller or its Affiliates that arises out of or
relates to any Retained Asset;
(xii) (for avoidance of doubt) any liability of Eyal Gal Ltd.; and
(xiii) any liability of Seller for the payment of fees or expenses of any
broker or finder in connection with the origin, negotiation or execution of this
Agreement or in connection with any transaction contemplated hereby.
SECTION 2.04 Purchase Price; Payment.
(a) Purchase Price. The total consideration for the Purchased Assets (the
"Purchase Price") shall be:
(i) Consideration. The amount of $30,000,000 (Thirty Million Dollars) less
any amount of the Interim Period Reduction which was not included in the
Purchased Assets in accordance with Section 2.02(d) above (the "Basic
Consideration");
(ii) Interest. The amount of $2,740 (Two Thousand Seven Hundred Forty
Dollars) multiplied by the number of days which shall elapse between August 1,
2008 and the Closing Date (for example, if the Closing Date shall occur on
August 20, 2008, then the amount of $52,060 shall be paid [19 x $2,740 =
$52,060]) (the "Interest");
(iii) Assumption of Liabilities. Buyer's assumption of the Assumed
Liabilities pursuant to Section 2.03(a).
Schedule 2.04(a) allocates the Purchase Price among the Purchased Assets
and Seller's other undertakings hereunder. This allocation has been agreed to by
Seller and Buyer after arm's-length negotiations.
(b) Payment of Purchase Price. The Basic Consideration and the Interest
shall be payable as follows:
(i) Closing Cash Consideration. At the Closing, Buyer shall transfer the
Basic Consideration and the Interest to one or two bank accounts in the Seller's
name and designated by Seller.
(ii) Currency; Conversion. The Basic Consideration and the Interest shall
be payable in either US dollars or in New Israeli Shekels calculated in
accordance with the representative rate of exchange published by the Bank of
Israel most recently prior to the date and time of actual payment (the
"Representative Rate") or partially in US dollars and partially in New Israeli
Shekels (per the Representative Rate as aforesaid), at the election of the
Buyer. However, in the event that the Representative Rate shall be lower than
$1=NIS 3.40 (i.e., whereby $1 shall be exchangeable into less than 3.40), then:
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(A) any portion of the Cash Payment paid in US dollars shall be increased
by the ratio of 3.40 to the Representative Rate (for example, in the event that
that $1,000,000 of the Total Cash Consideration is paid in US Dollars and the
Representative Rate is $1=3.35, then an additional amount of $14,925.37 shall be
paid [$1,000,000 x (3.40/3.35) = $1,014,925.37]); and
(B) any portion of the Cash Payment paid in NIS shall be calculated in
accordance with the rate of $1=3.40 regardless of the actual Representative Rate
(for example, in the event that that $1,000,000 of the Total Cash Consideration
is paid in NIS and the Representative Rate is $1=3.35, then such US Dollar
amount shall be converted into NIS 3,400,000 [$1,000,000 x 3.40 = 3,400,000]);
(c) Cash Flow Examination. At least three business days prior to the
Closing Date, Seller shall deliver to Buyer a cash flow statement with respect
to the Seller Parent and Seller Sub, relating to the period commencing on July
1, 2008 and ending on the Closing Date, detailing any individual expenditure
which exceeds the amount of $5,000 (the "Interim Period Cash Flow Statement").
The "Interim Period Reduction" shall mean the total of:
(i) any expenditures (whether or not appearing in the Interim Period Cash
Flow Statement), save for the payment of interest on the Seller's bank loans
accruing between July 1, 2008 and July 31, 2008, which (a) were made during the
Interim Period on account of Retained Liabilities, including without limitation
payment of principal and interest on loans which constitute Retained
Liabilities, and/or (b) were made to, for or on account of any other company,
including without limitation Eyal Gal Ltd., and/or (c) were made in violation of
the provisions of Sections 5.02 and/or 3.07 below, and/or (d) were made to (or
on account of obligations to) the previous GM of the Company; and
(ii) the negative adjustment in the net assets (except for fixed assets,
Inventories, and depreciation) shown in the Surveyed Interim Financial
Statements and the Audited FS 2007, as such terms are defined in Section 7.09
below, from the figures presented in the Interim Financial Statement and the
unaudited financial statements of the Seller for the period ending December 31,
2007 and the statement of earnings relating thereto, attached as Schedule
3.05(i), provided that such amounts are in excess of $30,000;
(d) Defaulted Accounts Receivables Adjustment of Purchase Price.
(i) Schedule 2.04(d) contains a list of the Seller's accounts receivable
included in the Purchased Assets as of the date hereof. "Defaulted Accounts
Receivable" shall mean those accounts receivable included in the Purchased
Assets which shall not be remitted by the debtor in each case, to Seller if paid
before the Closing Date, or to Buyer if paid following the Closing Date, by the
expiration of one hundred twenty (120) days following the Closing Date (the
"Accounts Receivable Deadline").
(ii) Within 30 days following the Accounts Receivable Deadline, Buyer may
assign to Seller any remaining Defaulted Accounts Receivable, by written notice
to Seller, and the Purchase Price shall then be decreased by the amount of the
Defaulted Accounts Receivable so assigned by Buyer to Seller, provided that such
decrease shall apply only to aggregate Defaulted Accounts Receivable in excess
of NIS 1,100,000. Any such decrease shall be immediately refunded by the Seller
to the Buyer, and, without derogating from Seller's obligation under this
section, shall be secured by the Bank Guarantee, as defined below in Section
9.09.
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(iii) In the event Seller shall desire to enforce an assigned Defaulted
Account Receivable, then Seller and Buyer shall discuss the consequences, and
shall resolve in good faith whether such enforcement shall be permitted, taking
into account Buyer's commercial imperatives and its necessity to maintain
positive relationships with its customers.
SECTION 2.05 Taxes.
(a) Transfer and Sales Taxes. Seller shall promptly pay all Transfer and
Sales Taxes.
(b) Israeli Value Added Tax. The Purchase Price is exclusive of Value Added
Tax ("VAT"). No later than the 15th day of the month (or such other statutory
VAT payment date) occurring after the Closing Date, VAT shall be paid by wire
transfer with respect to the Purchase Price against the delivery by Seller to
Buyer of a valid VAT invoice for such amount. VAT shall be paid in NIS.
(c) Withholding. Buyer shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to Seller such
amounts as the Buyer is required to deduct and withhold under applicable Tax
law, with respect to the making of such payment. To the extent that amounts are
so withheld by Buyer, such withheld amounts shall be paid by Buyer to the
applicable Tax Authority and, upon such payment, shall be treated for all
purposes of this Agreement as having been paid to Seller. Buyer will not pay any
such withheld amounts to the applicable Tax Authority earlier than one (1)
business day prior to the date such amounts are required to be paid. If, prior
to or at the Closing, Seller delivers to Buyer a certificate from the Israeli
Tax Authority evidencing an exemption from withholding of Taxes, or a reduced
rate of withholding, which shall be applicable, valid and in effect as of the
Closing, Buyer shall honor such withholding tax exemption or reduction.
SECTION 2.06 Closing.
(a) The consummation of the purchase and sale of the Purchased Assets
provided for herein (the "Closing") shall take place at 10:00 a.m. (local time)
on September 15, 2008, subject to the conditions to closing set forth in Article
VII and Article VIII having been satisfied or waived in writing, or on such
other date and/or at such other time as the parties hereto may agree upon (the
"Closing Date"). The Closing shall take place (i) at the offices of ▇▇▇▇▇ ▇▇▇▇▇
& ▇▇., ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ or (ii) on the mutual agreement of the
parties, by delivery via facsimile or email transmission (with originals sent
via overnight courier service) of the documents to be delivered at the Closing
and wire transfer of the payments to be made in accordance with Section 2.04(b),
or (iii) at such other place or in such other manner as the parties hereto may
agree.
(b) All proceedings taken and all documents executed and delivered by the
parties hereto at the Closing shall be deemed to have been taken and executed
simultaneously and no proceedings shall be deemed taken nor any documents
executed or delivered until all have been taken, executed and delivered.
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SECTION 2.07 Alternative Arrangements. Notwithstanding anything contained
herein, this Agreement shall not constitute an agreement to assign any Contract,
permit or any claim or right or any benefit arising thereunder or resulting
therefrom if an attempted assignment thereof, without the consent of a third
party thereto, would constitute a default thereof. If such consent is not
obtained, or if an attempted assignment thereof would be ineffective or would
affect the rights thereunder so that Buyer would not receive all such rights,
Seller shall, at the expense of Buyer, use commercially reasonable efforts to
effect alternative arrangements in the form of a license, sublease, or operating
agreement in form and substance reasonably satisfactory to Buyer and Seller
until such time as such consent or approval has been obtained that results in
Buyer receiving substantially all of the benefits under and bearing all the
ordinary course costs, liabilities and other obligations with respect to any
such Contract or permit. Upon obtaining the requisite third party consent
thereto, each such non-assignable Contract or permit shall be transferred and
assigned to Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth on the disclosure schedule (the "Disclosure Schedule"),
Seller represents and warrants to Buyer as set forth in this Article III.
Notwithstanding any other provision of this Agreement or such Disclosure
Schedule, each exception set forth in the Disclosure Schedule will be deemed to
qualify only each representation and warranty set forth in this Agreement (i)
that is specifically identified (by cross-reference or otherwise) in the
Disclosure Schedule as being qualified by such exception, or (ii) with respect
to which the relevance of such exception is readily apparent on the face of the
disclosure of such exception set forth in the Disclosure Schedule.
SECTION 3.01 Listing of Certain Assets and Data. Attached hereto as
Schedule 3.01(a) through Schedule 3.01(g) are true and complete lists of the
matters set forth in the following subsections of this Section 3.01, including
in each case all written or oral agreements or understandings and all amendments
and modifications, if any, to each such Contract, document or other instrument
referenced or described (including, in the case of oral arrangements, a written
description of all material terms thereof).
(a) Real Property. Schedule 3.01(a) sets forth a description of all real
property owned, leased or subject to option by Seller or otherwise used by
Seller in the conduct of its business, as well as a list of all purchase
agreements, finance agreements, leases, options, title abstracts, insurance,
licenses, permits, and other material documents relating to such real property
that it has in its possession or control.
(b) Equipment. Schedule 3.01(b) sets forth (a) a list of all material items
of machinery, equipment vehicles and other similar property and assets owned or
leased by Seller or used in the conduct of the Business, setting forth with
respect to all such listed property a summary description of all Liens relating
thereto (except if registered as of the date hereof at the Registrar of
Companies), specifically identifying and describing those items with remaining
total lease or conditional sales payments or other payments due by Seller in
excess of $20,000, identifying the parties thereto, the rental or other payment
terms, expiration date and cancellation and renewal terms thereof, and (b) a
list of the quantities of Inventories possessed by the Company as of June 30,
2008.
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(c) Certain Agreements, etc. Schedule 3.01(c) sets forth a list of each of
the following Contracts, written or otherwise, to which Seller is a party or by
which it is bound (other than Contracts furnished pursuant to other subsections
of this Section 3.01):
(i) any research and development agreement, joint development agreement,
OEM, or other supply agreement whereby products or components are developed or
made by or for Seller;
(ii) any joint venture or franchise agreement, and any purchase or
disposition agreement and related significant agreements involving the
acquisition or disposition of any products or process, or business by Seller;
(iii) any Contract for the purchase of any services, raw materials,
supplies or equipment or other goods, including outstanding purchase orders,
involving remaining payments estimated at more than $20,000 (provided that all
of such non-listed Contracts with an estimated payment of $20,000 or less do not
in the aggregate represent estimated payments in excess of $50,000);
(iv) any Contract for the sale of assets, products or services that is in
any way not yet performed and involving remaining payments estimated at more
than $20,000 (provided that all of such non-listed Contracts with an estimated
payment of $20,000 or less do not in the aggregate represent estimated payments
in excess of $50,000);
(v) any dealer, distributor, broker, agent, sales representative or similar
Contract by Seller for the sale of any products, identifying which Contracts
might create any liability to Buyer or Seller if the right to sell or distribute
new products is not offered by Seller or Buyer pursuant thereto or which cannot
be terminated upon less than 90 days' notice, without cause, by Seller or Buyer
without liability to Seller or Buyer;
(vi) any Contract not made in the ordinary course of business of Seller, or
any other Contract that has or could reasonably be expected to have a Material
Adverse Effect;
(vii) any Contract (A) restricting Seller from engaging, participating, or
competing with any other Person, in any line of business, market or geographic
area, or to make use of any Intellectual Property; (B) granting "most favored"
pricing, exclusive sales, distribution, marketing or other exclusive rights,
rights of first refusal or rights of first negotiation to any other Person; or
(C) otherwise limiting or conditioning the right of Seller to sell, distribute
or manufacture any products or services related thereto;
(viii) any Contract of indemnification or warranty, other than (A) under
Seller's unmodified forms of standard customer/distribution agreements, the
forms of which have been made available to Buyer, or (B) warranties implied by
Law;
(ix) any Contract pursuant to which Seller has acquired or divested a
business or entity, or all or substantially all of the assets of a business or
entity, whether by way of merger, consolidation, purchase of stock, purchase or
sale of assets, license or otherwise;
(x) any Contract between Seller and, or undertaking issued by Seller to,
any governmental entity.
Prior to the Closing Date, Seller shall delivered to Buyer true and
complete copies of all Contracts identified in Schedule 3.01(c). Such copies
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contain all the terms of the agreements, understandings and arrangements between
the parties thereto with respect to the subject matter thereof.
(d) Permits, Licenses, Etc. Schedule 3.01(d) sets forth a list of all
Authorizations, permits, licenses, notifications, registrations, approvals or
similar permissions. Prior to the date of this Agreement, Seller has delivered
to Buyer true and complete copies of all permits, licenses, notifications,
registrations, approvals or other documents identified in Schedule 3.01(d).
(e) Loans and Credit Agreements, Etc. Schedule 3.01(e) sets forth a list of
all outstanding notes, bonds, debentures, loans or other credit agreements or
arrangements, escrow agreements, security agreements, mortgages, deeds of trust,
guaranties, pledges, conditional or installment purchase agreements, letters of
credit and any other instruments evidencing indebtedness, written or otherwise,
to which Seller is a party (as lender, borrower, or guarantor) or which affect
or relate to its property or Assets. Prior to the date of this Agreement, Seller
has delivered to Buyer true and complete copies of all documents identified in
Schedule 3.01(e).
(f) Insurance Policies and Claims. Schedule 3.01(f) sets forth a list of
all policies of insurance maintained by or for the benefit of Seller with
respect to Seller and covering its officers, directors, employees, agents,
properties, buildings, machinery, equipment, furniture, fixtures or operations
and a description of each claim made by or for the benefit of Seller under any
such policy of insurance within the past three years, describing such claim and
the amount thereof. Prior to the date of this Agreement, Seller has delivered to
Buyer true and complete copies of all policies of insurance identified in
Schedule 3.01(f), and true and complete copies of all documentation regarding
claims made thereunder. Within the past three years, no insurer has failed to
renew any such policy, and in the opinion of Seller the coverage provided by the
policies of insurance listed in Schedule 3.01(f) conform to customary practices
in Israel for companies engaged in businesses similar to the that of the Seller.
(g) Employee Plans. Seller shall provide to Buyer, upon request, all
necessary information with respect to Employee Plans and any related insurance
or other contracts and trust and custodial agreements.
SECTION 3.02 Organization. Seller is a limited private company duly
organized, and validly existing under the laws of the State of Israel. Seller
has all necessary power and authority to own its properties and assets and
conduct the business presently being conducted by it.
SECTION 3.03 Subsidiaries. Except as set forth in Schedule 3.03, Seller
does not have any interest, direct or indirect, in any other business,
corporation, joint venture, partnership, proprietorship or other entity. Except
as set forth in Schedule 3.03, none of the business of Seller is conducted
through, and none of the Purchased Assets is owned by or through, any direct or
indirect subsidiary or Affiliate of Seller.
SECTION 3.04 Authority. Seller has full power and authority to enter into
this Agreement and to perform its obligations hereunder. The execution and
delivery by Seller of this Agreement and other agreements contemplated hereby to
which Seller is a party, and the consummation by Seller of the transactions
hereby and thereby, shall, by the Closing, have been duly and validly authorized
by Seller's Board of Directors and shareholders, no other action of Seller's
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Board of Directors or shareholders, or corporate proceedings on the part of
Seller or its Affiliates, shall be necessary to authorize this Agreement and no
other action of Seller's Board of Directors or shareholders, or corporate action
on the part of Seller or its Affiliates, shall be necessary to consummate the
transactions contemplated hereby. This Agreement has been duly authorized by
Seller and duly executed and delivered by Seller, and constitutes a legal, valid
and binding agreement of Seller enforceable against it in accordance with its
terms. Except as disclosed in Schedule 3.04 or Schedule 3.11, neither the
execution and delivery of this Agreement nor compliance by Seller with its terms
and provisions will violate (i) any provision of the articles of association or
other governing instruments of Seller, (ii) any Contract to be transferred to
Buyer or any permit or license of Seller, or (iii) any law, statute, regulation,
or, to the best of Seller's knowledge, injunction, order or decree of any
government agency or authority or court to which Seller or any of the Purchased
Assets is subject.
SECTION 3.05 Financial Statements. Attached hereto as Schedule 3.05(i) are
true and complete copies of audited financial statements of Seller, including
balance sheets at December 31, 2005 and December 31, 2006 and statements of
earnings for the fiscal years then ended ("Seller Audited Financial
Statements"); the unaudited financial statements of the Seller for December 31,
2007 and the statement of earnings, and a balance sheet (the "Interim Balance
Sheet") at June 30, 2008 (a copy of which is attached hereto as Schedule
3.05(ii)) and statement of earnings for the six (6) month period then ended (the
"Interim Income Statement" and together with the Interim Balance Sheet, the
"Interim Financial Statements") (all of the above financial statements, together
with the Interim Cash Flow Statement collectively referred to as the "Seller's
Financial Statements"). The Seller Audited Financial Statements have been
prepared in accordance with generally accepted accounting principles
consistently applied. All the Seller's Financial Statements are true and correct
in all material respects and fairly and accurately present the assets,
liabilities (including all reserves) and financial position of the Seller as of
the dates thereof and the results of operations, shareholders' equity (deficit)
and changes in cash flows of the Seller for the periods then ended, except that
the un-audited Interim Financial Statements do not contain footnotes or
comparisons to the financial results of prior periods and are subject to normal
year-end adjustments which shall not be material. The Seller's Financial
Statements are in accordance with the books and records of Seller. The books and
records of the Company are stated in reasonable detail and accurately reflect in
all material respects all information relating to the Business, the nature,
acquisition, disposition, maintenance, location and collection of its assets and
properties, and the nature of all transactions giving rise to its obligations,
including accounts payable, and rights, including accounts receivable. There
were no changes in the method of application of the Seller's accounting policies
or changes in the method of applying the Seller's use of estimates in the
preparation of the un-audited Interim Financial Statements.
SECTION 3.06 Absence of Undisclosed Liabilities. There are no debts,
liabilities, or obligations, of any nature, of Seller, the Business or the
Purchased Assets, except to the extent expressly set forth or reserved against
in the Seller's Financial Statements. Since the date of the Interim Financial
Statements, there has not been any Material Adverse Effect.
SECTION 3.07 Absence of Certain Changes and Events. Since the date of the
Interim Financial Statements, Seller has not:
(a) made any material change in the accounting methods or practices it
follows other than as required by Law or GAAP;
15
(b) made any capital expenditures or commitments exceeding $5,000 per
expenditure or commitment, or $20,000 in the aggregate in respect of the
Business;
(c) sold, assigned, transferred or licensed any patents, trademarks, trade
names, copyrights, trade secrets or other intangible assets, in each case used
in connection with the Business, except nonexclusive licenses in the ordinary
course of business consistent with past practice;
(d) sold, leased, licensed, transferred, or otherwise disposed of any of
its properties or assets primarily used in the Business, except Inventories sold
or transferred in the ordinary course of business consistent with past practice
and obsolete or worn out equipment sold or otherwise disposed of in a manner
consistent with past practice which was not otherwise material (individually or
in the aggregate) to the Business, or canceled any material indebtedness or
waived any material claims or rights of material value;
(e) suffered any damage to or destruction or casualty of (whether or not
covered by insurance) any asset individually or in the aggregate material to the
operation of the Business;
(f) failed to pay any creditor any amount arising from the operation of the
Business owed to such creditor when due, other than good faith disputes and
trade payables arising in the ordinary course of business and not past due more
than sixty (60) days;
(g) failed to discharge or satisfy any Lien on any of the Purchased Assets,
at or prior to the time that the obligation with respect to such Lien became
due;
(h) defaulted on any material obligation relating to the conduct or
operation of the Business without curing such default;
(i) granted any allowances or discounts with respect to the Business
outside the ordinary course of business consistent with past practice or sold
Inventories materially in excess of reasonably anticipated consumption for the
near term outside the ordinary course of business consistent with past practice;
(j) incurred or assumed any liabilities with respect to the Business other
than in the ordinary course of business consistent with past practice and
liabilities that are not Assumed Liabilities;
(k) amended, cancelled or terminated any Contract or Authorization that is
a Purchased Asset or entered into any Contract or obtained any Authorization
primarily related to the Business, other than in the ordinary course of business
and consistent with past practices;
(l) failed to carry on the Business in the ordinary course and consistent
with past practices so as to preserve the Purchased Assets and the Business and
the goodwill of the suppliers, customers, distributors and others having
business relations with the Business;
(m) dismissed or provided notice of termination of the employment to any of
the Current Employees; or
16
(n) distributed any dividend nor made any other type of distribution,
regardless of the record date thereof;
(o) entered into any agreement or commitment, whether in writing or
otherwise, to do any of foregoing.
SECTION 3.08 Litigation. There are no actions, suits, or proceedings
pending or, to the knowledge of Seller, threatened against or by Seller in,
before, or by any court, arbitrator, or governmental agency or authority. There
are no unsatisfied judgments or outstanding orders, injunctions, decrees,
stipulations or awards (whether rendered by a court or administrative agency or
by arbitration) against or affecting Seller or the Business or against any of
the Purchased Assets. Prior to the date of this Agreement, Seller has made
available to Buyer for review all complaint and litigation files of Seller.
SECTION 3.09 Compliance with Law. To the knowledge of the Seller, the
Business has not violated and is not in violation of any applicable law,
ordinance or regulation of any governmental entity, including, without
limitation, the R&D Law and any legal obligations applicable to Seller in
connection with tax benefits approved by the Investment Center at the Ministry
of Labor, Industry and Trade. To the knowledge of the Seller, all governmental,
municipal and other approvals, registrations, notifications, permits, licenses
and other permissions or authorizations (collectively, "Authorizations")
required in connection with the conduct of the Business have been obtained and
are in full force and effect and are being complied with. Seller has not
received any notification of any asserted past or present violation in
connection with the conduct of the Business of any applicable law, ordinance or
regulation, or any written complaint, inquiry or request for information from
any governmental entity relating thereto. Neither Seller nor the Business nor
any of the Purchased Assets is the subject of any Israeli or other enforcement
action or, to the knowledge of Seller, other investigation, including but not
limited to those relating to Environmental Laws.
SECTION 3.10 Taxes. Seller has timely filed all Tax or assessment reports
and Tax returns (including any applicable information returns) that may be
required by any law or regulation of any jurisdiction to be filed by or on
behalf of Seller or any of its Affiliates, and all such reports and returns are
true, correct and complete in all material respects. Seller has duly paid,
deposited or accrued on its books of account, all Taxes (including estimated
Taxes) pursuant to such reports and returns, or assessed against Seller, or
which Seller or its Affiliates is obligated to withhold from amounts owing to
any employee, service provider, supplier, or any other third party. Seller has
no liability for any Taxes in excess of the amounts stated in the Interim
Balance Sheet with respect to all time periods or portions thereof ending on or
before the date set forth therein. Neither the assessment of any additional
Taxes that by law should have been reported or paid or in accordance with
generally accepted accounting principles should have been accrued, nor any
investigation or audit, is pending or, to the best of Seller's knowledge,
threatened or expected. No Taxing or assessment authority has indicated to
Seller any intent to conduct an audit or other investigation or asserted any
unresolved deficiencies with respect to Tax liabilities of Seller for any
period, and to the knowledge of Seller there are no facts or circumstances that
would give rise thereto. Seller has not waived any statute of limitations in
respect of Israeli or foreign Taxes or agreed to any extension of time with
respect to an assessment of deficiency with respect to such Taxes.
17
SECTION 3.11 Consents. No consent, approval, waiver or authorization is
legally or contractually required on the part of Seller to duly and validly
transfer or assign any of the Purchased Assets as contemplated hereby.
SECTION 3.12 Title to and Condition of the Purchased Assets. Seller has
full right, title and interest to the Purchased Assets and good and marketable
title to the Purchased Assets, free and clear of all Liens, except for the Liens
listed (together with the amount secured by each such Lien) on Schedule 3.12,
which shall be discharged in full by Seller at the Closing. The Purchased Assets
include all assets, properties, rights, interests, claims and business necessary
for or relating to the conduct of the Business as presently conducted by Seller
or as currently proposed to be conducted. The Purchased Assets are suitable for
the uses for which they are presently used by Seller, in normal operating
condition and free from any defects. All of the Purchased Assets are located at
the facilities of Seller (except for certain equipment located in Korea as
disclosed to Buyer). This Section 3.12 does not apply to the Seller's
Intellectual Property; representation and warranties relating to the Seller's
Intellectual Property are set forth in Section 3.16 below.
SECTION 3.13 Contracts. Each Contract required to be listed on any Schedule
to this Agreement is, to the knowledge of Seller, valid and subsisting and is
and following the consummation of the transactions contemplated by this
Agreement, will remain, in full force and effect in accordance with its terms,
and there have been no amendments, modifications, or supplements to any such
Contracts. To the knowledge of Seller, there is no default or claim of default
by Seller under any such Contract and no event has occurred, or will occur as a
result of the consummation of the transactions contemplated by this Agreement,
that, with the passage of time or the giving of notice or both, could reasonably
be expected to constitute a default by Seller or, to the knowledge of Seller,
any other party thereto under any such Contract, or could reasonably be expected
to permit modification, acceleration, or termination of any such Contract, or
result in the creation of any Lien on any of the Purchased Assets. Seller is not
a party to any Contract: (i) that restricts Seller's, or after the closing would
restrict Buyer's, ability to conduct any line of business (except as set forth
in the Memorandum of Agreement dated June 12, 2008 between Seller Parent and L3
Communications ▇▇▇▇▇ Microwave East); or (ii) that the performance of which
results in a net loss for Seller, or after Closing, will result in a net loss
for Buyer.
SECTION 3.14 Manufacturing Processes/Inventories. Seller has made available
to Buyer complete and accurate written documentation of the processes and
procedures used or necessary to manufacture Seller's products in quantities
sufficient for the conduct of the Seller's business as proposed to be conducted
(the "Manufacturing Documentation"). The Business Intellectual Property includes
all processes, methods, techniques, procedures, trade secrets and know how used
or necessary to manufacture such products. The quantities of all Inventories,
materials and supplies of Seller are not obsolete, damaged, slow-moving,
defective or excessive, and are reasonable and balanced in the circumstances of
Seller.
SECTION 3.15 Warranties. All products manufactured or sold, and all
services provided, by Seller have complied, and are in compliance, with all
contractual requirements, warranties or covenants, express or implied,
applicable thereto, and with all applicable governmental, trade association or
regulatory specifications therefore or applicable thereto.
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SECTION 3.16 Intellectual Property.
(a) Products and Services. Schedule 3.16(a) accurately identifies and
describes each product currently being designed, developed, manufactured,
marketed, distributed, provided, licensed, or sold by Seller (each, a "Seller
Product").
(b) Registered IP. Schedule 3.16(b) accurately identifies: (a) each item of
Registered Intellectual Property in which 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
Intellectual Property has been registered or filed and the applicable
registration or serial number; (c) any other Person that has an ownership
interest in such item of Registered Intellectual Property and the nature of such
ownership interest; and (d) each Seller Product identified in Schedule 3.16(a)
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 Intellectual
Property. Seller has provided or otherwise granted access to Buyer complete and
accurate copies of all applications, correspondence with any governmental
entity, and other material documents related to each such item of Registered
Intellectual Property.
(c) Inbound Licenses. Schedule 3.16(c) accurately identifies: (a) each
Contract pursuant to which any Intellectual Property is or has been licensed,
sold, assigned, or otherwise conveyed or provided to Seller (other than (i)
agreements between the Seller and its employees in Seller's standard form
thereof, (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 Seller Product and that is not
otherwise material to the Business, (iii) non-exclusive licenses to any
generally available hardware that is used in the development, manufacturing,
testing, distribution, maintenance or support of any Seller Product and (iv)
generally available off-the-shelf software products or tools that are used for
the operation of the business); and (b) whether the licenses or rights granted
to Seller in each such Contract are exclusive or non-exclusive.
(d) Outbound Licenses. Schedule 3.16(d) accurately identifies each Contract
pursuant to which any Person has been granted any license under, or otherwise
has received or acquired any right or interest in, any Business Intellectual
Property other than a right to use any Seller Product pursuant to any purchase
order. Seller is not bound by, and no Business Intellectual Property is subject
to, any Contract containing any covenant or other provision that in any way
limits or restricts the ability of Seller to use, exploit, assert, or enforce
any Business Intellectual Property owned by Seller anywhere in the world, nor
limits or restricts the ability of Seller to transfer any Business Intellectual
Property to the Buyer.
(e) Royalty Obligations. Schedule 3.16(e) contains a complete and accurate
list and summary of all royalties, fees, commissions, and other amounts payable
by Seller to any other Person upon or for the manufacture, sale, or distribution
of any Seller Product or the use of any Business Intellectual Property owned by
Seller.
(f) Standard Form IP Agreements. Schedule 3.16(f) identifies each standard
form of Intellectual Property Contract upon which a Contract that is currently
effective in any respect, or for which either party under such Contract has any
continuing obligation or right.
(g) Ownership Free and Clear. Seller exclusively owns all right, title and
interest to and in all Registered Intellectual Property. Seller owns all right,
title and interest to and in all Intellectual Property (except that in the
public domain and not owned by a third party) used in or necessary to conduct
the Business as currently conducted or currently contemplated to be conducted
(the "Business Intellectual Property") free and clear of any Liens. Without
limiting the generality of the foregoing:
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(i) Employees and Contractors. No current or former shareholder, officer,
director, employee or contractor of Seller that has any claim, right, or
interest to or in any Business Intellectual Property. Seller has no knowledge of
any employee of Seller that is (a) bound by or otherwise subject to any Contract
restricting him from performing his duties for Seller or (b) in breach of any
Contract with any former employer or other Person concerning Intellectual
Property or confidentiality due to his activities as an employee of Seller.
(ii) Government Rights. Except as set forth under Schedule 3.16(g)(ii), 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
Business Intellectual Property owned by Seller. Seller has not provided the
Business Intellectual Property 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 Form
Agreements, and all Contracts in which any governmental body obtains any rights
to any Business Intellectual Property have been disclosed in the applicable
disclosure schedule as set forth in this Section 3.16.
(iii) Protection of Proprietary Information. Seller has taken all
reasonable steps to maintain the confidentiality of and otherwise protect and
enforce its rights in all proprietary information pertaining to 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 Seller has been
disclosed or licensed to any escrow agent or other Person.
(iv) Past IP Dispositions. Seller has not assigned or otherwise transferred
ownership of, or agreed to assign or otherwise transfer ownership of, any
Intellectual Property that comprises Business Intellectual Property owned by
Seller to any other Person.
(v) Standards Bodies. 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 Seller to grant or offer to any other Person any
license or right to any Business Intellectual Property.
(h) Valid and Enforceable. The Registered Intellectual Property is valid,
subsisting, and enforceable. Without limiting the generality of the foregoing:
(i) Misuse and Inequitable Conduct. Seller has not engaged in patent misuse
or any fraud or inequitable conduct in connection with any Business Intellectual
Property that is Registered Intellectual Property.
(ii) Trademarks. No registered trademark or registered trade name owned,
used, or applied for by Seller conflicts or interferes with any registered
trademark or registered 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)
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has occurred or exists that has resulted in, or could reasonably be expected to
result in, the abandonment of any registered trademark owned, used, or applied
for by Seller.
(iii) Legal Requirements and Deadlines. Each item of Registered
Intellectual Property 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 Registered Intellectual Property 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 Intellectual Property filed by or on behalf of Seller has been
abandoned, allowed to lapse, or rejected. Schedule 3.16(h) accurately identifies
and describes as of the date of this Agreement each action, filing, and payment
that must be taken or made in order to maintain such item of Business
Intellectual Property 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 Seller, threatened, in which the scope, validity, or
enforceability of any Registered Intellectual Property is being, has been, or
could reasonably be expected to be contested or challenged. Seller has no
knowledge of any basis for a claim that any Registered Intellectual Property is
invalid or unenforceable.
(i) Third-Party Infringement of Business Intellectual Property. To the
knowledge of Seller, no Person has infringed, misappropriated, or otherwise
violated, and no Person is currently infringing, misappropriating, or otherwise
violating, any Business Intellectual Property owned by Seller. No letters or
other written or electronic communication or correspondence have been sent or
otherwise delivered by or to Seller or any representative of Seller regarding
any actual, alleged, or suspected infringement or misappropriation of any
Business Intellectual Property owned by Seller.
(j) Effects of This Transaction. Neither the execution, delivery, or
performance of this Agreement nor the consummation of any of the transactions
contemplated by this Agreement 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 Lien on, any Business Intellectual Property; (b) a breach of or
default under any Business Intellectual Property; (c) the release, disclosure,
or delivery of any Business Intellectual Property 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 Business
Intellectual Property.
(k) No Infringement of Third Party IP Rights. To the Seller's knowledge,
Seller has never infringed (directly, contributorily, by inducement, or
otherwise), misappropriated, or otherwise violated or made unlawful use of any
Intellectual Property of any other Person or engaged in unfair competition. No
Seller Product, and no method or process used in the manufacturing of any Seller
Product, infringes, violates, or makes unlawful use of any Intellectual Property
(other than patents), or contains any Intellectual Property (other than patents)
misappropriated from, any other Person, or, to Seller's knowledge, infringes,
violates, or makes unlawful use of any patent, or contains any patent
misappropriated from, any other Person. There is no legitimate basis for a claim
that Seller or any Seller Product has infringed or misappropriated any
Intellectual Property Right (other than patents), or, to Seller's knowledge, any
patent, of another Person or engaged in unfair competition or that any Seller
Product, or any method or process used in the manufacturing of any Seller
Product, infringes, violates, or makes unlawful use of any Intellectual Property
(other than patents), or contains any Intellectual Property (other than patents)
misappropriated from, any other Person, or to Seller's knowledge, infringes,
21
violates, or makes unlawful use of any patents, or contains any patents
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 Seller, threatened
against 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 Seller with respect to such claim or proceeding. 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
Seller, any of their employees or agents, or any Seller Product of any
Intellectual Property of another Person, including any letter or other
communication suggesting or offering that Seller obtain a license to any
Intellectual Property of another Person.
(ii) Other Infringement Liability. Seller is not bound by any 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
Seller's Standard Form Agreements relating to the Business Intellectual Property
owned by Seller).
(l) Data Bases. Schedule 3.16(p) 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 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.
SECTION 3.17 Labor Law and Employees.
(a) Schedule 3.17(a) accurately sets forth, with respect to each employee
of Seller (including any employee of 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 Seller;
(ii) such employee's title, and a general description of such employee's
duties and responsibilities;
(iii) such employee's annualized compensation as of the date of this
Agreement;
(iv) each Employee Plan in which such employee participates or is eligible
to participate;
(v) 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.
22
(b) The employment of each of Seller's employees, subject to applicable
notice periods, is terminable by Seller without restrictions imposed under labor
agreements or collective labor agreements. Seller has delivered or granted to
Buyer 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 Seller.
(c) To the knowledge of Seller:
(i) no employee of Seller intends to terminate his employment with Seller;
(ii) no employee of Seller has received an offer to join a business that
may be competitive with the Business; and
(iii) no employee of 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 Seller; or (B) the
Business.
(d) Schedule 3.17(d) accurately sets forth, with respect to each
independent contractor of Seller:
(i) the name of such independent contractor and the date as of which such
independent contractor was originally engaged by 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
Seller with respect to services performed during 2007;
(iv) the terms of compensation of such independent contractor; and
(v) any Authorization that is held by such independent contractor and that
relates to or is useful in connection with the Business.
(e) Seller is not a party to or bound by, and in the past eight (8) years,
Seller has not been a party to or bound by, any collective employment agreement
(except under ministerial "extension orders") or any union contract, collective
bargaining agreement or similar Contract.
(f) To Seller's knowledge, Seller is not engaged, and 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 Seller or the Business. To Seller's
knowledge, 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 Seller, threatened or reasonably anticipated relating to any labor,
23
safety or discrimination matters involving any Current Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints.
(g) To the knowledge of Seller, none of the current or former independent
contractors of Seller could be reclassified as an employee. To the knowledge of
Seller, no independent contractor of Seller is eligible to participate in any
Employee Plan.
(h) All Current Employees are listed on Schedule 3.17(a). All of the
Current Employees are entitled to termination notice of up to ninety (90) days
prior written notice (save for the current General Manager of Seller Parent who
is entitled to 6 months' prior notice) under the termination notice provisions
included in employment agreements or applicable law. Seller's obligations to
provide statutory severance pay to the Current Employees pursuant to the
Severance Pay Law (5723-1963) are fully funded or accrued on the Seller's
Financial Statements and Seller has not invoked the provisions of Section 14 of
the Severance Pay Law with respect to such statutory severance pay. There are no
circumstances that could give rise to any valid claim by a current or former
employee of Seller for compensation on termination of employment (beyond the
statutory severance pay to which employees are entitled). All amounts that
Seller is legally or contractually required either (A) to deduct from the
Employees' salaries or to transfer to the Employees' pension or provident, life
insurance, incapacity insurance, continuing education fund or other similar
funds or (B) to withhold from the Current 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 Seller does not have any outstanding
obligation to make any such deduction, transfer, withholding or payment; and (C)
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 Current Employees, including The Prior Notice to the Employee
Law, 2002, The Notice to Employee (Terms of Employment) Law, 2002, The
Prevention 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. Seller has not engaged any Current Employees whose employment would
require special licenses or permits. There are no unwritten policies or customs
that, by extension, could entitle Current 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). 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 Seller, including rights to severance pay,
vacation, recuperation pay [dmei havra'ah] and other employee-related statutory
benefits. Seller has provided to Buyer a correct and complete summary of the
calculations concerning the components of the Current Employees' salaries,
including any components that are not included in the basis for calculation of
amounts set aside for purposes of statutory severance pay. Seller has provided
to Buyer (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 Current
Employees.
SECTION 3.18 No Finders. No act of Seller or its Affiliates has given or
will give rise to any claim against Buyer for a brokerage commission, finder's
fee or other like payment in connection with the transactions contemplated
herein.
SECTION 3.19 Product Liability Claims. To Seller's knowledge, Seller
Products that Seller has manufactured, distributed or sold were merchantable,
free from material defects in design, specifications, processing, manufacture,
24
material or workmanship, and suitable for the purpose for which they were
intended. Seller has not incurred any uninsured or insured Product Liability, or
received a claim based upon alleged Product Liability, and, to Seller's
knowledge, no basis for any such claim exists.
SECTION 3.20 Relations with Suppliers and Customers. No current supplier of
Seller has canceled any contract or order for provision of, and, to the
knowledge of Seller there has been no threat by any such supplier not to
provide, raw materials, products, supplies, or services to the Business when
owned by Seller. Seller has not received any information from one or more
customers that accounted for more than 5% of the revenues of Seller during the
last full fiscal year to the effect that such customers intend to decrease the
amount of business they do with the Business when owned by Seller.
SECTION 3.21 Environmental Matters. (a) neither Seller nor the Business or
the Purchased Assets have been or are subject to any actual or threatened
investigations, administrative proceedings, litigation, regulatory hearings, or
other action threatened, proposed or pending that alleges (i) actual or
threatened violation of or noncompliance with any Environmental Law, or (ii)
actual or threatened personal injury or property damage or contamination of any
kind resulting from a release or threatened release of a Hazardous Substance
with respect to the Business and the Purchased Assets; (b) Seller has not taken
or failed to take any action with respect to the Business, the Purchased Assets
or the real property presently or formerly used in connection therewith that
could reasonably be expected to result in (i) actual or threatened violation of
or noncompliance with any Environmental Law, or (ii) actual or threatened
personal injury or property damage or contamination resulting from a release of
a Hazardous Substance that requires remediation or other similar corrective
action under any applicable Environmental Laws; and (c) no Hazardous Substances
have been used, manufactured, generated, transported, released or disposed of in
violation of any Environmental Law by Seller.
SECTION 3.22 Contracts with Related Parties. Except as set forth on
Schedule 3.22, there are no agreements or contracts between Seller and any
officer, director, or shareholder of Seller, any subsidiary of Seller or any
entity in which any such officer, director or shareholder owns more than a five
percent (5%) equity interest.
SECTION 3.23 Government Grants.
(a) Schedule 3.23(a) 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 OCS
including for avoidance of doubt grants received within the framework of MAGNET,
MAGNETON, HEZNEK and other similar programs; (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) Seller has made available to Buyer accurate and complete copies of all
documents requesting or evidencing Government Grants or amendments thereto
submitted by Seller and of all letters of approval, and supplements thereto,
25
granted to Seller, as well as all correspondence or written summaries pertaining
thereto, and has provided Buyer with an accurate and complete description of any
unwritten or informal arrangements or understandings that relate to the
Government Grants.
(c) Schedule 3.23(a) 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
Seller in respect of such Government Grants.
(d) Seller is in compliance with all of the terms, conditions and
requirements of the Government Grants and has duly fulfilled all the
undertakings relating thereto. Seller has no knowledge of any intention of the
Investment Center or the OCS to revoke or modify any of the Government Grants or
that the Investment Center or the OCS believes that Seller is not in compliance
in all 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 Schedule 3.23(a).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
SECTION 4.01 Organization of Buyer. Buyer is a corporation duly organized
and validly existing under the laws of Israel.
SECTION 4.02 Authority. By the Closing, Buyer shall have full power and
authority to enter into this Agreement and to perform its obligations hereunder.
The execution and delivery by Buyer of this Agreement and other agreements
contemplated hereby to which Buyer is a party, and the consummation by Buyer of
the transactions hereby and thereby, shall have been duly and validly authorized
by Buyer's Board of Directors by the Closing, no other action of Buyer's Board
of Directors, or corporate proceedings on the part of Buyer shall be necessary
to authorize this Agreement and no other action of Buyer's Board of Directors,
or corporate action on the part of Buyer, shall be necessary to consummate the
transactions contemplated hereby. This Agreement has been duly authorized,
executed, and delivered by Buyer and constitutes a legal, valid and binding
agreement of Buyer, enforceable against Buyer in accordance with its terms.
Neither the execution and delivery of this Agreement nor compliance by Buyer
with its terms and provisions will violate (i) any provision of the articles of
association of Buyer or (ii) any law, statute, regulation, or to Buyer's
knowledge, injunction, order or decree of any government agency or authority or
court to which Buyer or any of Buyer's assets is subject.
SECTION 4.03 No Finders. No act of Buyer has given or will give rise to any
valid claim against any of the parties hereto for a brokerage commission,
finder's fee or other like payment in connection with the transactions
contemplated herein.
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ARTICLE V
CERTAIN COVENANTS AND AGREEMENTS
SECTION 5.01 Approvals and Consents. Seller and Buyer shall use
commercially reasonable efforts to cause the satisfaction of the conditions to
Closing contained in this Agreement. Each party hereto shall use commercially
reasonable efforts to obtain all Authorizations, consents, orders and approvals
of all governmental authorities and the consents of third parties to the
assignment or transfer, for the benefit of Buyer of the agreements listed on
Article VII or Article VIII that are, may be or become necessary for its
execution and delivery of, and the performance of its obligations pursuant to,
this Agreement and shall cooperate fully with the other party in promptly
seeking to obtain all such Authorizations, consents, orders and approvals. The
parties hereto acknowledge that time shall be of the essence in this Agreement
and agree not to take any action or omit to take any action that will have the
effect of unreasonably delaying, impairing or impeding the receipt of any
required authorizations, consents, orders or approvals.
SECTION 5.02 Conduct of Business. Until the Closing, Seller will operate
the Business and maintain the Purchased Assets, only in the ordinary course of
business consistent with past practice (including continuing to fulfill its
supply obligations and maintenance of customary levels of Inventories), and,
without limiting the foregoing, Seller will:
(a) use commercially reasonable efforts to preserve intact the present
business organization and personnel of Seller;
(b) use commercially reasonable efforts to preserve the goodwill and
relationships of the Business with suppliers, independent contractors,
customers, employees, any governmental authority and other persons material to
the operation thereof;
(c) not incur any obligation, liability, or indebtedness (absolute,
accrued, contingent or other), other than trade payables incurred in the
ordinary course of business consistent with past practice;
(d) not mortgage, pledge or subject to Lien any of the Purchased Assets;
(e) not sell, assign or transfer any asset, property or business or cancel
any debt or claim or waive any right with respect to the Purchased Assets,
except in the ordinary course of business consistent with past practice;
(f) not sell, assign, license, transfer or permit to lapse any right with
respect to Intellectual Property;
(g) not grant any increase in the compensation payable to any officer,
director, consultant, employee or agent who is, or will be offered the
opportunity to be, a New Buyer Employee;
(h) not make or authorize any capital lease or any capital expenditure for
additions to plant and equipment of the Business that would be treated as part
of the Purchased Assets in excess of $5,000 per item or $20,000 in the aggregate
except as may be necessary for ordinary repair, maintenance or replacement;
27
(i) not enter into or amend any contract for the employment of any officer,
employee or other person who is, or may be offered the opportunity to be, a New
Buyer Employee, on a full-time, part-time or consulting basis that is not
terminable upon notice of 30 days or less without cost or other liability to the
Business;
(j) not enter into or amend any contract or collective bargaining agreement
with any labor union related to any Current or New Buyer Employees;
(k) not enter into or amend any bonus, pension, profit-sharing, retirement,
stock purchase, stock option, deferred compensation, incentive compensation,
hospitalization, insurance or similar plan, contract or understanding providing
for employee benefits, including the grant or award of any stock option or stock
appreciation or similar right that would purport to confer rights to shares of
Seller or any of their Affiliates upon the consummation of the transactions
contemplated by this Agreement;
(l) of any real property, whether as lessor or lessee, or any contract for
the purchase or sale of real property;
(m) not enter into any contract, supply agreement, or purchase order;
(n) not accept any order or enter into any agreement with a customer of the
Business for the sale of any product or services of the Business that is at a
price that reflects a discount that is not in the ordinary course of business or
is not in accordance with discounts given on similar products or services of the
Business over the past 6 months, if such agreement would be an Assumed
Liability;
(o) not engage in (i) any trade loading / channel stuffing practices or any
other promotional marketing, sales or discount activity with any customers or
distributors with the effect or any intent of accelerating to prior fiscal
periods sales to the trade or otherwise, that would otherwise be expected (based
on past practice) to occur in subsequent fiscal periods, (ii) any practice which
is intended or would have the effect of accelerating to prior fiscal periods
collections of receivables that would otherwise be expected (based on past
practice) to be made in subsequent fiscal periods or (iii) any practice which is
intended or would have the effect of postponing to subsequent fiscal periods
payments by the Company that would otherwise be expected (based on past
practice) to be made in prior fiscal periods, in each case in clauses (i)
through (iii) in a manner outside the ordinary course of business consistent
with past practices; or
(p) pay accounts payable and pursue collection of its accounts receivable
in the ordinary course of business, consistent with past practices;
(q) not request a tax pre-ruling or otherwise contact the tax authorities
except on routine day-to-day matters, without the express, written permission of
Buyer;
(r) not otherwise take any action that would impair Buyer's rights under
this Agreement or fail to take any action that would preserve Buyer's rights
under this Agreement:
(s) keep in full force all insurance policies;
28
(t) not change any of its methods of accounting or accounting practices in
any respect;
(u) not distribute any dividend nor make any other type of distribution,
regardless of the record date thereof;
(v) not enter into any transaction or take any other action outside the
ordinary course of business;
(w) not agree, commit or offer (in writing or otherwise) to take any of the
actions described in clauses "(a)" through "(w)" of this Section 5.02.
Notwithstanding the foregoing, Seller may implement any of the
restricted actions specified in this Section 5.02, with the prior written
consent of Buyer.
SECTION 5.03 No Solicitation of Other Offers. Prior to the Closing, neither
Seller nor any of its Affiliates shall directly or indirectly discuss or
negotiate with any person (other than Buyer), encourage the submission of
inquiries, proposals or offers from any person (other than Buyer), or otherwise
provide information to any other person, with respect to the sale of or
investment in Seller (whether by merger, combination, sale of assets, sale of
stock, or otherwise) or the sale, licensing, distribution or other disposition
of any products, assets or technology of Seller, other than the sale of product
Inventories in the ordinary course of business.
SECTION 5.04 Access to Information and Records. Except as required pursuant
to any confidentiality agreement or similar agreement or arrangement to which
Seller is a party (in which case the Seller shall use all commercially
reasonable efforts to provide acceptable alternative arrangements, not in
violation of such agreement or arrangement, for disclosure to Buyer or its
advisors) or pursuant to applicable law, Seller shall afford to Buyer and to
Buyer's accountants, officers, directors, employees, counsel, and other
representatives reasonable access during normal business hours upon reasonable
prior notice, from the date hereof through the Closing, to all of the
properties, books, data, contracts, commitments, and records of Seller, and,
during such period, Seller shall furnish promptly to Buyer all information
concerning Seller's prospects, properties, liabilities, results of operations,
financial condition, product evaluations and testing as Buyer may reasonably
request and reasonable opportunity to contact and obtain information from
Seller's officers, employees as Buyer may reasonably request.
SECTION 5.05 Non-competition. As a material inducement and consideration
for Buyer to enter into this Agreement, Seller agrees that from and after the
Closing until five years following the Closing Date (the "Non-competition
Period"), Seller undertakes, not, within any jurisdiction in the world, own,
operate, advise, assist or lend funds to or invest funds in any person in any
manner that would aid or assist any person or entity to compete, in any material
respect, with the Business or any substantially similar business. During the
Non-competition Period, Seller further agrees not to, directly or indirectly,
interfere with, disrupt or attempt to disrupt the relationship between Seller or
any of its Affiliates and any third party, including any customer, collaborator,
supplier or employee of Buyer or any of its Affiliates. The parties hereto agree
that the duration and geographic scope of the non-competition provisions set
forth in this Section are reasonable. If any covenant in this Section is held to
be invalid, illegal or unenforceable by any court of competent jurisdiction or
29
any other governmental entity, it is agreed and understood that such covenant
will not be voided but rather will be construed to impose limitations upon the
activities of Seller that are no greater than allowable under then applicable
laws. Seller undertakes to procure non-competition and non-solicitation
undertakings by the Kibbutz in favor of the Buyer as set forth in this Section
5.05.
SECTION 5.06 Further Assurances; Seller Access to Records. At such time and
from time to time on and after the Closing Date upon request by Buyer, Seller
will execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney, and assurances that may be required
for the better conveying, transferring, assigning, delivering and confirming
ownership to, or reducing to the possession of, Buyer or its respective
successors and assigns all of the Purchased Assets and to otherwise carry out
the purposes of this Agreement. Seller agrees to promptly deliver, remit or
return to Buyer all assets and amounts received by it after the Closing that,
pursuant to the terms hereof, are owned by or are due to Buyer. Buyer shall
permit Seller and its authorized representatives to have reasonable access to,
on a confidential basis, and to copy, at Seller's expense, during regular
business hours and upon reasonable advance notice to Buyer and in a manner
non-disruptive to Buyer's conduct of the Business, such books, records and
documents related to the conduct of the Business prior to the Closing that are
necessary for Seller to comply with any applicable law or regulation or to
respond to any legal or administrative claim or investigation. Seller agrees to
cooperate, and to cause its independent accountants to cooperate, with Buyer and
its accountants in the preparation of any financial statements of Seller as of
the Closing Date.
SECTION 5.07 Approvals. Each party to this Agreement shall use 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 authority
with respect to the transaction contemplated hereby. Without limiting the
generality of the foregoing: (i) Seller shall use reasonable efforts to obtain,
as promptly as practicable after the date of this Agreement, the following
consents, and any other consents that may be required in connection with the
transaction contemplated hereby: (x) approval of the OCS; and (y) approval of
the Investment Center; and (ii) Buyer shall provide to the OCS and the
Investment Center any information reasonably requested by such authorities and
shall, without limitation of the foregoing, execute an undertaking in customary
form in which Buyer undertakes to comply with the R&D Laws and regulations. Each
party to this Agreement shall (i) give the other parties prompt notice of the
commencement of any legal proceeding by or before any Israeli governmental
entity with respect to the transaction contemplated hereby, (ii) keep the other
parties informed as to the status of any such legal proceeding and (iii)
promptly inform the other parties of any communication to the OCS, the
Investment Center or any other Israeli governmental entity regarding any of the
transactions contemplated by this Agreement. The parties to this Agreement will
consult and cooperate with one another, and will consider in good faith the
views of one another, in connection with any analysis, appearance, presentation,
memorandum, brief, argument, opinion or proposal made or submitted in connection
with any Israeli legal proceeding relating to the transaction contemplated
hereby. In addition, except as may be prohibited by any Israeli governmental
entity, each party hereto will permit authorized representatives of the other
party to be present at each meeting or conference relating to any such legal
proceeding and to have access to and be consulted in connection with any
document, opinion or proposal made or submitted to any Israeli governmental
entity in connection with any such legal proceeding.
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SECTION 5.08 Transfer of Approved Enterprise Status. At the request and
expense of Buyer, whether before or after the Closing, Buyer and Seller shall
jointly approach the Investment Center in order to obtain the consent of the
Investment Center to the substitution of Buyer for Seller as the beneficiary of
the Approved Enterprise Status that Seller received in respect of the approved
enterprise status granted to certain facilities of the Company as set forth in
Schedule 3.23(a) (the "Approved Enterprise Status"), such that Buyer shall be
entitled to all rights and entitlements to which 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. Buyer and Seller
shall cooperate and coordinate any communications with the Investment Center in
respect of the transactions contemplated herein.
SECTION 5.09 Fees and Expenses. Whether or not the transaction contemplated
by this Agreement are consummated, all fees and expenses incurred in connection
with this Agreement and the transaction contemplated hereby, shall be the
obligation of the respective party incurring such fees and expenses, and any
expenses incurred by Seller prior to or at the Closing and paid at or after the
Closing shall not be deemed as an Assumed Liability and will considered a
Retained Liability. Fees and expenses incurred by a party in connection with the
transaction contemplated by this Agreement, include: (i) all third party legal,
accounting, financial advisory, consulting and finders fees and expenses and all
other like fees and expenses of third parties incurred by a party in connection
with the negotiation, documentation and effectuation of the terms and conditions
of this Agreement and the other transaction documents and the transactions
contemplated hereby and thereby (collectively "Transaction Expenses"); (ii) any
bonuses, change in control payments to employees or consultants of Seller or its
subsidiaries, which shall be deemed expenses incurred by Seller (the
"Transaction Bonus Payments"), and (iii) any payments in connection with any
change in control obligations or any payment of consideration arising under any
consents, waivers or approvals of any party under any Contract of Seller or its
subsidiary which are effective as of immediately prior to the Closing date,
which shall be deemed expenses of Seller (the "Change in Control Payments").
SECTION 5.10 Notification. During the pre-Closing period, Seller shall
promptly notify Buyer in writing of: (a) the discovery by 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 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 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 Seller; and (d) any event, condition, fact or circumstance that
may make the timely satisfaction of any of the conditions set forth in Articles
VII and Article VIII impossible or unlikely. If any event, condition, fact or
circumstance that is required to be disclosed pursuant to this Section 5.10
requires any change in the Disclosure Schedule, or if any such event, condition,
fact or circumstance would require such a change assuming the Disclosure
Schedule were dated as of the date of the occurrence, existence or discovery of
such event, condition, fact or circumstance, then Seller shall promptly deliver
to Buyer an update to the Disclosure Schedule specifying such change. No such
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update, not approved by Buyer, shall be deemed to supplement or amend the
Disclosure Schedule for the purpose of determining whether any of the conditions
set forth in Article VII or Article VIII have been satisfied.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01 Offer to Employees. At any time after the date hereof but no
less than 7 days prior to the Closing Date, Buyer shall issue an offer to each
Current Employee to become an employee of the Buyer upon the Closing, in such
manner that the Buyer shall assume the rights and obligations of the Seller as
employer of the Current Employees (the "Employment Offers"). Each Employment
Offer shall (a) specify the terms of employment prevailing prior to Closing
between the Current Employee and the Seller (as conveyed to Buyer by Seller),
(b) specify the date of commencement of employment of each Current Employee, (c)
include an IP assignment provision which shall be effective with respect to the
entire term of employment of the Current Employee at the Seller, (d) include a
consent by the Current Employee for the transfer of his/her managers' insurance
policy and other relevant funds from Seller to Buyer; and (e) include a consent
by the Current Employee to inclusion of his/her personal information in the
Buyer's database, and that such information may be included in personnel
databases of the ▇▇▇▇▇▇ group of companies. It is agreed that Buyer shall not be
obligated to employ, nor shall it assume any liability towards, any Current
Employee which does not accept the Employment Offer in writing.
SECTION 6.02 Pension Plans. Buyer and Seller shall cooperate in order to
obtain any requisite approvals from the Tax Authorities in order to transfer the
pension plans and managers' insurance plans from Seller to Buyer.
SECTION 6.03 Other Benefits. Seller shall be responsible for the payment of
all salaries and benefits, including vacation (beyond the liability for vacation
specified in the Surveyed Interim Balance Sheet), convalescence pay [dmei
havraa], sick pay, and any other benefit to which Current Employees (whether or
not they shall accept Employment Offers) may be entitled with respect to their
employment by Seller and/or with respect to the period of time prior to the
Closing Date. Subject to transfer of managers' insurance plans to Buyer
containing sufficient funds to pay each of the Current Employees' contractual
and/or statutory severance pay (according to the higher of the two), Seller
shall be responsible for the severance pay which may be payable to Current
Employees who accept the Employment Offer and become employees of Buyer. Buyer
shall not be responsible for severance pay claimed by or payable to a Current
Employee who does not accept the Employment Offer or does not become an employee
of the Buyer at the Closing. The provisions of this Section 6.04 shall also
apply to any individual employed by Seller at any time, and any individual
retained under another agreement such as a consultancy or representative
agreement, who claims any employment-related benefits, rights or payments in
relation to his/her contractual engagement with Seller.
SECTION 6.04 Kibbutz - Services Agreement. With effect as of the Closing,
the Kibbutz and the Buyer shall enter into a Services Agreement (the "Kibbutz
Services Agreement"), to the satisfaction of Buyer, which shall include, inter
alia, the following provisions:
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(a) The Service Agreement shall be in force for a period of one year from
Closing and shall automatically extend for periods of one year unless one party
elects to terminate the arrangement upon giving the other party not less than 60
days' prior written notice before the anniversary of the expiry of the relevant
year.
(b) The Kibbutz shall be the sole employer of any personnel providing
services to Buyer on behalf of the Kibbutz under the Services Agreement (the
"Kibbutz Personnel") and there shall be no employer/employee relationship
between the Buyer and any Kibbutz Personnel. In such connection, the Kibbutz
undertakes to maintain and fund via a licensed insurance company or licensed
comprehensive pension fund: (i) a personal fund for each of the Kibbutz
Personnel covering the Kibbutz's severance pay liability with respect to the
entire period during which the Kibbutz provided the services of such individual
(during the term of the Service Agreement as well as the term of the service
agreement between Seller and the Kibbutz), (ii) loss of ability to work
benefits, at rates which are generally acceptable in the manufacturing industry,
and (iii) personal funded pension plan.
(c) The Kibbutz shall comply with all applicable employment laws,
regulations, extension orders and judicial rulings with respect to the
employment and termination of the Kibbutz Personnel. The Kibbutz shall make all
required reports and payments to the National Insurance Institute and the tax
authorities with respect to its employment of the Kibbutz Personnel. The Buyer
shall be entitled, upon request, to review and audit the relevant documentation
and funding, and make recommendations for implementation of changes, which if
reasonable shall be promptly implemented by the Kibbutz.
(d) The Kibbutz shall indemnify and hold harmless Buyer from any claims,
demands or allegations by any Kibbutz Personnel against Buyer, whether alleging
that an employment agreement existed between the Buyer and such claimant or
otherwise, whether or not the Kibbutz violated any of its undertakings under the
Service Agreement or its statutory obligations or otherwise. Without derogating
from the Kibbutz's undertaking to indemnify Buyer as aforesaid, Buyer shall be
entitled to set off any amounts payable by Kibbutz to Buyer by virtue of such
indemnification against any amounts payable by Buyer to the Kibbutz, including
under the Service Agreement, any lease agreements, or other amounts. Said
indemnification shall not be subject to the time limits applicable to Seller's
indemnification obligations in Article IX hereto.
(e) The Kibbutz will procure that all the Kibbutz Personnel will execute
non-compete and confidentiality agreements which shall also include provisions
covering the assignment of all intellectual property rights for the benefit of
the Buyer, in the standard form of the Buyer, on or prior to Closing.
ARTICLE VII
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer under this Agreement shall, at its option, be
subject to the satisfaction, on or prior to the Closing Date, of all of the
following conditions:
SECTION 7.01 Representations, Warranties and Covenants. The representations
and warranties of Seller herein shall be true and accurate in all material
respects (except with respect to representations and warranties qualified by
33
materiality, which shall be true and accurate in all respects) at the Closing
with the same effect as though made at such time. Seller shall have performed
all of its obligations and complied with all of its covenants prior to or as of
the Closing. Seller shall have delivered to Buyer approvals and documentation in
evidence thereof, as well as an officers' certificate in a form to be agreed by
Closing, dated as of the Closing and executed by the chief executive of Seller
to all such effects.
SECTION 7.02 Opinion of Counsel for Seller. ▇▇▇▇▇ ▇▇▇▇▇ & Co., counsel for
Seller, shall have delivered to Buyer a written opinion, dated the Closing Date,
in a form to be agreed prior to the Closing.
SECTION 7.03 Corporate Approvals. Unanimous written resolutions of the
shareholders of Seller, in lieu of a general meeting, signed by each of the
shareholders of Seller, and of the board of directors of Seller, in lieu of a
board of directors meeting, and the written consent of the Kibbutz, shall be
delivered to Buyer.
SECTION 7.04 Approvals; Consents; Releases. All permissions, releases,
consents or approvals, governmental or otherwise, necessary on the part of
Seller to consummate the transactions contemplated hereunder shall have been
obtained by Seller and delivered to Buyer, including the release of any and all
Liens on the Purchased Assets not including Liens associated with the Assumed
Liabilities, and completion of all attendant filing procedures at each relevant
official registry, including without limitation the Registrar of Companies and
the Registrar of Pledges, and assignment or issuance to Buyer of all requisite
permits, licenses and business licenses.
SECTION 7.05 Litigation Affecting Closing. No suit, action or other
proceeding shall be pending or threatened by any third party or by or before any
court or governmental agency in which it is sought to restrain or prohibit or to
obtain damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated by this Agreement, and no
investigation that might result in any such suit, action or other proceeding
shall be pending or threatened.
SECTION 7.06 Legislation. No statute, rule, regulation, order, or
interpretation shall have been enacted, entered or deemed applicable by any
domestic or foreign government or governmental or administrative agency or court
that would make the transactions contemplated by this Agreement illegal or
otherwise materially adversely affect the Purchased Assets, the Business or the
conduct of the Business in the hands of Buyer.
SECTION 7.07 Other Agreements. The approvals of the third parties to the
assignment or transfer, as the case may be, of the agreements listed in Schedule
7.07 shall have been obtained in writing without any onerous conditions being
imposed on Buyer, except that Buyer shall be entitled, in its sole discretion,
to waive the omission of any such consent required hereunder, and in such case,
the parties agree to use all reasonable efforts to obtain such consent post
Closing.
SECTION 7.08 Employees. At least 80% of the Key Employees listed in
Schedule 7.09 shall have remained continuously employed with Seller from the
date of this Agreement through the Closing and shall have signed an Employment
Offer. At least 80% of the Current Employees (other than the Key Employees)
shall have signed Employment Offers.
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SECTION 7.09 OCS Approvals. Buyer shall have received from Seller written
approval by the OCS, which shall not impose any condition upon Buyer, except for
the requirement that it undertake to comply with the R&D Law, for the transfer
to Buyer of all rights in and to all know-how of Seller subject to the R&D Law
and/or developed in connection with OCS Grants, with respect to which it is
agreed that Seller shall consult with Buyer in all matters pertaining to such
application, and that Buyer shall cooperate in such regard, including provision
of undertakings required under the R&D Law.
SECTION 7.10 No Material Adverse Effect. There shall not have occurred any
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.
SECTION 7.11 Delayed Schedules. On or before the twentieth day following
the date of this Agreement, Seller shall deliver to Buyer any missing Schedules,
to the extent not delivered on the date hereof (each, a "Delayed Schedule").
Upon receipt by Buyer of any Delayed Schedule and written notification to Seller
of the acceptance by Buyer of such Delayed Schedule (in its sole and absolute
discretion), such Delayed Schedule shall be deemed attached to this Agreement as
if such Delayed Schedule had been delivered on and as of the date hereof. In the
event of any material discrepancy in the information provided in any Delayed
Schedule, including, without limitation, omissions and information different
from that contained or summarized in the Seller's Financial Statements and
information otherwise conveyed by Buyer to Seller, the Buyer shall be entitled,
at its option, to require an adjustment in the Purchase Price, as shall be
agreed between the parties in good faith, and in the absence of agreement, as
shall be decided upon by ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ of Deloitte (or another individual
to whom he shall refer the matter) in his sole discretion, pending resolution or
agreement on the actual adjustment of the Purchase Price.
SECTION 7.12 Lease Agreement. The Kibbutz and the Buyer shall enter into a
new lease agreement effective as of the Closing, to the satisfaction of Buyer,
with respect to the Business premises (the "Lease Agreement"), rental payments
thereunder not to exceed the rates currently applicable under the lease
agreement existing between Seller and the Kibbutz. Under the Lease Agreement,
the Kibbutz as lessor shall undertake to procure all necessary licenses and
permits.
SECTION 7.13 Kibbutz Services Agreement. The Kibbutz and the Buyer shall
enter into a Kibbutz Services Agreement, to the satisfaction of Buyer.
SECTION 7.14 Services Agreement. The Kibbutz and the Buyer shall enter into
an agreement with respect to the provision of ancillary services by the Kibbutz,
to the satisfaction of Buyer.
SECTION 7.15 Audited Financial Statements. On or before the 20th day
following the date hereof, Seller shall deliver to Buyer an audited Interim
Balance Sheet for the 6 month period ending June 30, 2008 and an audited
statement of earnings for said six (6) month period (collectively - "Surveyed
Interim Financial Statements") and the audited financial statements for the year
ended 31st December, 2007 and the statement of earnings for such year ("Audited
FS 2007").
SECTION 7.16 Due Diligence. Seller shall have provided to Buyer all due
diligence documents and explanations relating to the Seller, the Business and
related matters, and Buyer shall not have discovered, during the course of the
35
review of said materials, any fact or circumstance which materially reduces the
benefit expected by Buyer from the transaction contemplated hereby, or
constitutes a Material Adverse Effect, at the discretion of Buyer.
SECTION 7.17 Interim Period Reduction. The parties shall agree on the
amount of the Interim Period Reduction; or, failing to do so, shall appoint ▇▇.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ of Deloitte (or another individual to whom he shall refer the
matter) who shall determine the Interim Period Reduction at his sole discretion.
SECTION 7.18 Indemnification by Kibbutz. The Kibbutz shall provide an
written undertaking to indemnify Buyer in accordance with Article IX
(Indemnification) hereunder, as well as a non-competition undertaking pursuant
to Section 5.05 above.
ARTICLE VIII
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller under this Agreement shall, at its option, be
subject to the satisfaction, on or prior to the Closing Date, of all of the
following conditions:
SECTION 8.01 Representations, Warranties and Covenants. The representations
and warranties of Buyer herein shall be true in all material respects on the
Closing Date with the same effect as though made at such time. Buyer shall have
performed all of its obligations and complied with all of its covenants herein
prior to or as of the Closing Date.
SECTION 8.02 Legislation. No statute, rule, regulation, order or
interpretation shall have been enacted, entered or deemed applicable by any
domestic or foreign government or governmental or administrative agency or court
that would make the transactions contemplated by this Agreement illegal.
SECTION 8.03 Litigation Affecting Closing. No suit, action or other
proceeding shall be pending or threatened by any third party or by or before any
court or governmental agency in which it is sought to restrain or prohibit in
connection with this Agreement or the consummation of the transactions
contemplated by this Agreement.
SECTION 8.04 Corporate Authorization of Seller. At the Closing, Seller
shall have received all requisite approvals for the transaction contemplated by
this Agreement from the shareholders and board of directors of Seller.
SECTION 8.05 Corporate Authorization of Buyer. At the Closing, Buyer shall
have received all requisite approvals for the transaction contemplated by this
Agreement from the board of directors and shareholders (as applicable) of Buyer
and the beneficial owner of Buyer.
SECTION 8.06 Guarantees. Buyer shall provide the guarantees to third
parties as specified in Schedule 8.05 hereto, with respect to the Assumed
Contracts.
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ARTICLE IX
INDEMNIFICATION
SECTION 9.01 Indemnification of Buyer. Subject to the limitations and other
provisions set forth in Sections 9.04 and 9.06, Seller and Kibbutz (without
derogating from its undertakings under the Kibbutz Services Agreement), jointly
and severally, shall indemnify, defend and hold harmless Buyer and each of its
subsidiaries, officers, directors, employees, and shareholders (each an
"Indemnitee" and collectively "Indemnitees") from and against and in respect of
any and all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, interest and penalties, costs and expenses (including,
without limitation, reasonable legal fees and disbursements incurred in
connection therewith and in seeking indemnification therefore, and any amounts
or expenses required to be paid or incurred in connection with any action, suit,
proceeding, claim, appeal, demand, assessment or judgment), whether or not
involving a third-party claim, (collectively "Indemnifiable Losses") resulting
from or incurred by any Indemnitee with respect to any of the following:
(a) any breach of any representation or warranty of Seller contained in
this Agreement, the Disclosure Schedule, or the officers' certificate in the
form of Exhibit B, as of the date of this Agreement and as of the Closing Date;
(b) any breach of any covenant or obligation of Seller contained in this
Agreement;
(c) any failure by Seller to satisfy, perform, pay, discharge or resolve
any liabilities and obligations of, or claims against, Seller not included
within the Assumed Liabilities (whether or not disclosed to Seller);
(d) any liability (other than the Assumed Liabilities) to which the Buyer
or any of the other Indemnitees may become subject and that arises directly or
indirectly from or relates directly or indirectly to Retained Assets or Retained
Liabilities; and
(e) any employee claims directly or indirectly resulting or arising from
employment or termination of employment by Seller, or the period of employment
of an individual by Seller, or from the transaction hereunder or the Closing
(except employee claims which constitute Assumed Liabilities hereunder).
SECTION 9.02 Indemnification of Seller. Subject to the limitations and
other provisions set forth in Sections 9.04 and 9.06 below, Buyer shall
indemnify, defend and hold harmless Seller and each of its officers, directors,
employees and shareholders from and against and in respect of any and all
Indemnifiable Losses resulting from or incurred by any person to be indemnified
hereunder by any of the following reasons: (i) any breach of any representation
or warranty of Buyer contained in this Agreement; (ii) any breach of any
covenant or obligation of Buyer contained in this Agreement; and (iii) Buyer's
failure to satisfy, perform, pay, discharge or resolve any Assumed Liability.
SECTION 9.03 Procedures.
(a) Procedures for Third Party Claims. If a claim by a third party is made
against Buyer or its Indemnitees, within the survival period set forth in
Section 9.04 below, arising out of a matter for which Buyer or any of its
Indemnitees, as the case may be, is entitled to be indemnified pursuant to
Section 9.01 (a "Third Party Claim"), Buyer shall promptly notify Seller in
writing of such claim. The failure to notify promptly Seller hereunder shall not
relieve Seller of its obligations hereunder except to the extent that Seller is
37
actually prejudiced (including by losing the opportunity to mitigate damages) by
such failure. Seller shall be responsible for the fees and expenses of counsel
employed by the Indemnitee; provided that in no event shall Seller be liable for
the fees and expenses of more than one counsel (in addition to any local
counsel) for all Indemnitees in connection with any one action or separate but
similar or related actions arising out of the same general allegations or
circumstances. Seller shall be entitled to participate in the defense of a Third
Party Claim, through counsel of its choice, at the expense of Seller; provided
that with respect to any Third Party Claim, Buyer shall control all proceedings
in connection with such Third Party Claim and, without limiting the foregoing,
may in its sole discretion, subject to this Section 9.03(a), pursue or forego
any and all administrative appeals, proceedings, hearings and conferences with
any governmental entity with respect thereto. So long as Seller is participating
in the defense of a Third Party Claim in good faith, or if Seller so requests in
writing, Buyer shall reasonably cooperate with Seller by providing records and
information that are reasonably relevant to such Third Party Claim. Buyer shall
not settle or compromise any Third Party Claim without the written consent of
Seller, which consent will not be unreasonably withheld or delayed. No such
consent will be required (i) if Buyer agrees in writing to forego all claims for
indemnification from Seller with respect to such Third Party Claim, or (ii)
Buyer reasonably believes itself to be potentially or actually exposed to
Indemnifiable Losses materially in excess of amounts reasonably expected to be
received from Seller, or (iii) Buyer reasonably believes itself to be
potentially or actually exposed to non-monetary remedies; provided, however,
that Buyer uses commercially reasonable efforts to obtain in such settlement a
release of Seller with respect to all such Third Party Claims.
(b) Procedures for Direct Claims. In the event Buyer or any Indemnitee
should have a claim against Seller under this Agreement that does not involve a
Third Party Claim being asserted against or sought to be collected from Buyer or
such Indemnitee (a "Direct Claim"), the Buyer shall deliver notice of such
Direct Claim, within the survival period set forth in Section 9.04 below, with
reasonable promptness to Seller. The failure by Buyer to so notify Seller
hereunder shall not relieve Seller of its obligations hereunder except to the
extent (and only to the extent) that Seller is actually prejudiced by such
failure. If Seller does not notify Buyer within thirty (30) calendar days
following receipt of such notice that Seller disputes its liability to Buyer or
the Indemnitee, as the case may be, such Direct Claim specified by Buyer in such
notice shall be conclusively deemed a liability of Seller (and will be subject
to the limitations set forth in this Article IX).
SECTION 9.04 Termination of Indemnification. Except with respect to fraud,
willful misrepresentation, willful misconduct or willful concealment by or on
behalf of Seller: (i) other than the representations and warranties set forth in
Section 3.02 (Organization) and 3.04 (Authority), the representations and
warranties set forth in this Agreement shall terminate twenty-four (24) months
following the Closing, except that such obligations shall not terminate with
respect to any item as to which Buyer or any Indemnitee has, before the
expiration of such period, previously made a Third Party Claim or a Direct Claim
(a "Claim") against Seller by delivering a notice to Seller in accordance with
this Agreement; and (ii) the representations and warranties set forth in Section
3.02 (Organization) and 3.04 (Authority) shall terminate upon the expiration of
the relevant statute of limitations, taking into account extensions thereof,
except that such obligations shall not terminate with respect to any item as to
38
which Buyer or any Indemnitee has, before the expiration of the relevant period,
previously made a Claim against Seller by delivering a notice to Seller in
accordance with this Agreement; and (iii) the representations made in Section
3.01(b) with respect to quantities of equipment and Inventories shall terminate
one (1) month after the Closing.
SECTION 9.05 Exclusive Remedy Against Seller. Except with respect to fraud,
willful misrepresentation, willful misconduct or willful concealment by or on
behalf of Seller and except for injunctive relief that may be obtained to enjoin
the breach, or threatened breach, of any provision of this Agreement or a Claim
for specific performance, Buyer's or an Indemnitee's right to indemnification
under this Article IX constitutes Buyer's or such Indemnitee's sole and
exclusive remedy with respect to any inaccuracy in, or any breach of, any
representation or warranty or any covenant or agreement of Seller in this
Agreement or in any certificate, instrument, document or agreement delivered by
or on behalf of Seller pursuant to or in connection with this Agreement or any
failure by Seller to perform any covenant, agreement, obligation or undertaking
in this Agreement or any such certificate, instrument, document or agreement.
SECTION 9.06 Limitation of Indemnification. Notwithstanding anything to the
contrary in this Agreement, except with respect to fraud, willful
misrepresentation, willful misconduct or willful concealment by or on behalf of
Seller : (i) Seller shall not be liable for any Indemnifiable Losses pursuant to
this Agreement in the aggregate greater than $2,000,000 (two million dollars),
provided that, with the exception of sub-Section (ii) immediately following,
Seller shall not be liable for any Indemnifiable Losses unless the aggregate
thereof are in excess of $100,000; (ii) Seller shall not be liable for any
Indemnifiable Losses pursuant to the representations made in Section 3.01(b)
with respect to quantities of equipment and Inventories in the aggregate greater
than $100,000 (one hundred thousand dollars), and (iii) Seller shall not be
liable for any Indemnifiable Losses that were not notified to Seller within the
survival period set forth in Section 9.04.
SECTION 9.07 Cooperation as to Indemnified Liability. Each party hereto
shall cooperate fully with the other parties with respect to access to books,
records, or other documentation within such party's control, if deemed
reasonably necessary or appropriate by any party in the defense of any claim
that may give rise to indemnification hereunder.
SECTION 9.08 Nature of Indemnification. Buyer's right to indemnification
and payment of Indemnifiable Losses, or other remedy, based on Seller's
representations, warranties, covenants and obligations, shall not be affected by
any investigation conducted by Buyer or any knowledge acquired (or capable of
being acquired) at any time by Buyer, whether before or after the execution and
delivery of this Agreement or the Closing, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty, covenant or
obligation. The parties recognize and agree that the representations, warranties
and covenants operate as bargained for promises and risk allocation devices and
that, accordingly, Buyer's knowledge, and the waiver of any condition based on
the accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, shall not affect the right to
indemnification or payment of Indemnifiable Losses pursuant to this Article IX,
or other remedy, based on such representations, warranties, covenants, and
obligations.
SECTION 9.09 At the Closing, Seller shall provide to Buyer an autonomous
bank guarantee, or equivalent thereof from Granot Central Cooperative Ltd., in a
form acceptable to Buyer at its reasonable discretion, in the amount of
$1,000,000 (or NIS equivalent according to the Representative Rate, but not less
39
than NIS 3,400,000), for a period of eighteen (18) months from Closing, to
secure its undertakings under this Article IX and under Section 2.04(d) (the
"Bank Guarantee"). The Bank Guarantee shall be exercisable under the terms
detailed in Schedule 9.09 hereto.
ARTICLE X
TERMINATION
SECTION 10.01 Termination Prior to Closing. Notwithstanding any contrary
provisions of this Agreement, this Agreement and the respective obligations of
the parties hereto to consummate the transaction contemplated hereby may be
terminated and abandoned at any time at or before the Closing only as follows:
(a) by either Buyer, on the one hand, or Seller, on the other hand, at the
option of either Buyer or Seller, if the Closing shall not have occurred by
November 30, 2008; provided that the party seeking to terminate shall not have
breached in any material respect its obligations under this Agreement in any
manner that shall have been the proximate cause of, or resulted in, the failure
to consummate the Closing; or
(b) by Buyer (i) if Seller has breached in any material respect any of its
representations, warranties, covenants or other agreements contained in this
Agreement, which breach or failure to perform (A) would give rise to the failure
of a condition set forth in Article VII and (B) has not been or is incapable of
being cured by Seller within 20 days after its receipt of written notice thereof
from Buyer; or (ii) if any of the effects set forth in Section 7.05 (Litigation
Affecting Closing) shall be in effect and shall have become final and
nonappealable; or
(c) by Seller, (i) if Buyer shall have breached in any material respect any
of its representations, warranties, covenants or other agreements contained in
this Agreement, which breach or failure to perform (A) would give rise to the
failure of a condition set forth in Article VIII, and (B) has not been or is
incapable of being cured by Buyer within 20 days after its receipt of written
notice thereof from Seller; or (ii) if any of the effects set forth in Section
8.03 (Litigation Affecting Closing) shall be in effect and shall have become
final and nonappealable.
SECTION 10.02 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.01, 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 willful or
intentional 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 5.09.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Complete Agreement. The Schedules and Exhibits to this
Agreement shall be construed as an integral part of this Agreement to the same
extent as if they had been set forth verbatim herein. This Agreement constitute
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersede all prior proposals, discussions, or agreements,
whether written or oral, relating hereto.
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SECTION 11.02 Waiver, Discharge, Amendment, Etc. The failure of any party
hereto to enforce at any time any of the provisions of this Agreement, including
the election of such party to proceed with the Closing despite a failure of any
condition to such party's closing obligations to occur, shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part thereof or the right of the party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
Any amendment to this Agreement shall be in writing and signed by the parties
hereto.
SECTION 11.03 Notices. All notices or other communications to a party
required or permitted hereunder shall be in writing and shall be given by hand
delivery, courier service (with acknowledgment of receipt), fax or email
transmission (with confirmation of transmission), or by certified mail, postage
prepaid with return receipt requested, addressed to the parties at the following
addresses:
if to Buyer, to: General Microwave Acquisition Israel (2008) Ltd.
c/o General Microwave Israel (1978) Ltd.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
Attention: CEO
Telephone: ▇▇▇▇ ▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇▇ ▇ ▇▇▇▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇.▇▇.▇▇
with a copy (which ▇▇▇▇▇ ▇▇▇▇▇ & Co.
shall not constitute 1 Azrieli Center, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
notice) to: Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Adv.
Telephone: ▇▇▇▇ ▇ ▇▇▇▇▇▇▇
Facsimile: ▇▇▇▇ ▇ ▇▇▇▇▇▇▇
E-mail: ▇▇▇▇▇▇@▇▇▇▇▇.▇▇.▇▇
and if to Seller, to: Eyal Microwave Ltd.
Kibbutz Eyal D.N.
HaSharon HaTichon, 45840
Israel
Attention: General Manager
Telephone: ▇▇▇▇ ▇ ▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇▇ ▇ ▇▇▇ ▇▇▇▇
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with a copy (which shall ▇▇▇▇▇ ▇▇▇▇▇ & Co.
not constitute notice) to: ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Tel.: ▇▇▇▇ ▇ ▇▇▇▇▇▇▇
Facsimile: ▇▇▇▇ ▇ ▇▇▇▇▇▇▇
Email: ▇▇▇▇▇@▇▇▇▇▇-▇▇▇.▇▇.▇▇
Any party may change the above-specified recipient and/or mailing address
by notice to all other parties given in the manner herein prescribed. All
notices shall be deemed given on the day when actually delivered as provided
above (if delivered personally, by courier or by telecopy or email) or on the
day shown on the return receipt (if delivered by mail).
SECTION 11.04 Public Announcement. Each of the parties to this Agreement
hereby agrees with the other parties hereto that, except as may be required to
comply with the requirements of applicable law, no press release or similar
public announcement or communication will be made or caused to be made
concerning the execution or performance of this Agreement unless specifically
approved in advance by Buyer and Seller. The foregoing shall not restrict
Buyer's and Seller's internal communications with employees, shareholders or
customers. Such approval shall not be withheld except on reasonable grounds.
SECTION 11.05 Expenses. Except as otherwise expressly provided herein, each
party hereto shall pay its own expenses (including, but not limited to, all
compensation and expenses of its own counsel, financial advisors, consultants,
actuaries and independent accountants) incident to this Agreement and the
preparation for, and consummation of, the transactions provided for herein.
SECTION 11.06 Governing Law; Forum Selection. The legality, validity,
enforceability and interpretation of this Agreement shall be governed by the
laws of the State of Israel, without giving effect to the principles of conflict
of laws. The courts of the city of Tel-Aviv-Jaffa will have exclusive
jurisdiction over any dispute arising from or in connection with this Agreement.
SECTION 11.07 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and the successors or assigns of
the parties hereto; provided that the rights of Seller herein may not be
assigned, and all or any portion of the rights of Buyer may be assigned only to
a subsidiary of Buyer or to such business organization that shall succeed to the
business of Buyer or of such subsidiary to which this Agreement relates,
provided that Buyer remains liable for the fulfillment by such assignee(s), in
accordance with and subject to the terms and conditions hereof, of Buyer's
obligations hereunder.
SECTION 11.08 Severability. If any provision of this Agreement is held
invalid, unenforceable or void by a court of competent jurisdiction, the
remaining provisions shall nonetheless be enforceable according to their terms.
In such case, the parties agree to use their best efforts to achieve the purpose
of the invalid provision. Further, if any provision is held to be overbroad as
written, such provision shall be deemed amended to narrow its application to the
extent necessary to make the provision enforceable according to applicable law
and shall be enforced as amended.
SECTION 11.09 Benefit. Nothing in this Agreement or the agreements referred
to herein, expressed or implied, shall confer on any person other than the
parties hereto or thereto, or their respective permitted successors or assigns,
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any rights, remedies, obligations or liabilities under or by reason of this
Agreement, the agreements referred to herein, or the transactions contemplated
herein or therein.
SECTION 11.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and shall be enforceable
against the parties actually executing such counterparts, and all of which
together shall constitute one instrument.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, each of the Seller and Buyer has caused this Agreement
to be signed by its officers thereunto duly authorized as of the date first
written above.
GENERAL MICROWAVE ACQUISITION
ISRAEL (2008) LTD.
By:
/s/
-------------------------------------------------
Name:
Title: Director
EYAL MICROWAVE LTD.
By:
/s/
-------------------------------------------------
Name:
Title: Chairman of the Board
EYAL MAG LTD.
By:
/s/
-------------------------------------------------
Name:
Title:
44