EXECUTION COPY
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
POLYCOM, INC.,
MERGER SUB LTD.
AND
ACCORD NETWORKS LTD.
DATED AS OF DECEMBER 5, 2000
TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER................................................ 2
1.1 The Merger.................................................. 2
1.2 Closing Date................................................ 2
1.3 Effective Time.............................................. 2
1.4 Articles of Association..................................... 2
1.5 Directors and Officers...................................... 2
1.6 Effect on Capital Stock..................................... 2
1.7 Surrender of Certificates................................... 4
1.8 Company's Transfer Books Closed; No Further Ownership Rights
in Company Shares......................................... 5
1.9 Lost, Stolen or Destroyed Certificates...................... 5
1.10 Certain Tax and Accounting Consequences..................... 6
1.11 Taking of Necessary Action; Further Action.................. 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY................ 6
2.1 Organization and Qualification; Subsidiaries................ 6
2.2 Memorandum of Association; Articles of Association.......... 7
2.3 Capitalization.............................................. 7
2.4 Authority Relative to this Agreement........................ 8
2.5 No Conflict; Required Filings and Consents.................. 9
2.6 Compliance; Permits......................................... 10
2.7 SEC Filings; Financial Statements........................... 10
2.8 No Undisclosed Liabilities.................................. 11
2.9 Absence of Certain Changes or Events........................ 11
2.10 Absence of Litigation....................................... 11
2.11 Employee Matters and Benefit Plans.......................... 12
2.12 Registration Statement; Proxy Statement/Prospectus.......... 16
2.13 Restrictions on Business Activities......................... 16
2.14 Title to Property........................................... 16
2.15 Taxes....................................................... 16
2.16 Brokers..................................................... 18
2.17 Intellectual Property....................................... 18
2.18 Agreements, Contracts and Commitments....................... 22
2.19 Environmental Matters....................................... 23
2.20 Opinion of Financial Advisor................................ 24
2.21 Insurance................................................... 24
2.22 Board Approval.............................................. 24
2.23 Inapplicability of Certain Statutes......................... 24
2.24 Grants, Incentives and Subsidies............................ 24
2.25 Pooling of Interests........................................ 24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB............................................................... 25
3.1 Organization and Qualification; Subsidiaries................ 25
3.2 Certificate of Incorporation and Bylaws..................... 25
3.3 Capitalization.............................................. 25
3.4 Authority Relative to this Agreement........................ 26
3.5 No Conflict; Required Filings and Consents.................. 26
3.6 SEC Filings; Financial Statements........................... 27
3.7 No Undisclosed Liabilities.................................. 27
3.8 Absence of Litigation....................................... 27
3.9 Registration Statement; Proxy Statement/Prospectus.......... 28
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PAGE
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3.10 Pooling of Interests........................................ 28
3.11 Compliance; Permits......................................... 28
3.12 No Prior Activities......................................... 28
3.13 Obligations to Creditors.................................... 28
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME...................... 29
4.1 Conduct of Business by Company.............................. 29
4.2 Conduct of Business by Parent............................... 32
ARTICLE V ADDITIONAL AGREEMENTS..................................... 32
5.1 Proxy Statement/Prospectus; Registration Statement.......... 32
5.2 Merger Proposal............................................. 33
5.3 Company General Meeting..................................... 34
5.4 Notification................................................ 35
5.5 Israeli Approvals........................................... 35
5.6 Confidentiality; Access to Information...................... 37
5.7 No Solicitation............................................. 37
5.8 Public Disclosure........................................... 39
5.9 Commercially Reasonable Efforts; Regulatory Filings......... 39
5.10 Third Party Consents........................................ 40
5.11 Stock Options and Employee Benefits......................... 40
5.12 Form S-8.................................................... 41
5.13 Company Warrants............................................ 41
5.14 Indemnification............................................. 42
5.15 Nasdaq Listing.............................................. 42
5.16 Company Affiliate Agreement................................. 42
5.17 Pooling of Interests........................................ 43
5.18 Merger Sub Approval......................................... 43
5.19 Ezenia! Settlement Agreement................................ 43
5.20 Repayment of OCS Grants..................................... 43
ARTICLE VI CONDITIONS TO THE MERGER................................. 43
6.1 Conditions to Obligations of Each Party to Effect the
Merger.................................................... 43
6.2 Additional Conditions to Obligations of Company............. 44
6.3 Additional Conditions to the Obligations of Parent and
Merger Sub................................................ 44
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER....................... 45
7.1 Termination................................................. 45
7.2 Notice of Termination; Effect of Termination................ 47
7.3 Fees and Expenses........................................... 47
7.4 Amendment................................................... 48
7.5 Extension; Waiver........................................... 48
ARTICLE VIII GENERAL PROVISIONS..................................... 48
8.1 Non-Survival of Representations and Warranties.............. 48
8.2 Notices..................................................... 48
8.3 Interpretation; Knowledge................................... 49
8.4 Counterparts................................................ 50
8.5 Entire Agreement; Third Party Beneficiaries................. 50
8.6 Severability................................................ 50
8.7 Other Remedies; Specific Performance........................ 50
8.8 Applicable Law.............................................. 51
8.9 Rules of Construction....................................... 51
8.10 Assignment.................................................. 51
8.11 Waiver of Jury Trial........................................ 51
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INDEX OF EXHIBITS
Exhibit A Form of Company Voting Agreement
Exhibit B Form of Company Affiliate Agreement
Exhibit C Form of Parent Affiliate Agreement
Exhibit D Form of Noncompetition Agreement
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "Agreement") is
made and entered into as of December 5, 2000, among Polycom, Inc., a Delaware
corporation ("PARENT"), Merger Sub Ltd., an Israeli corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB"), and Accord Networks Ltd., an
Israeli corporation ("COMPANY").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Israeli Companies Law-5759-1999 (the "ISRAELI COMPANIES
LAW"), Parent and Company intend to enter into a business combination
transaction to effect the merger of Merger Sub with and into the Company,
pursuant to which Merger Sub will cease to exist and the Company will become a
wholly-owned subsidiary of Parent.
B. The Board of Directors of Company has unanimously (i) determined that
the Merger (as defined in Section 1.1) is consistent with and in furtherance of
the long-term business strategy of Company and fair to, and in the best
interests of, Company and its shareholders, and, assuming the accuracy of the
representations and warranties of Parent and Merger Sub contained herein that no
reasonable concern exists that the Surviving Corporation (as defined in
Section 1.1) will be unable to fulfill the obligations of Company to its
creditors (ii) approved this Agreement, the Merger and the other transactions
contemplated by this Agreement and (iii) determined to recommend that the
shareholders of Company adopt and approve this Agreement and approve the Merger.
C. The Board of Directors of each of Parent and Merger Sub has approved
this Agreement and the Merger and determined that no reasonable concern exists
that the Surviving Corporation will be unable to fulfill the obligations of
Merger Sub to its creditors.
D. Concurrently with the execution of this Agreement as a condition and
inducement to Parent's willingness to enter into this Agreement, (i) all
directors and officers and certain principal shareholders of Company are
entering into Voting Agreements, including the irrevocable proxies contained
therein, in substantially the form attached hereto as EXHIBIT A (the "COMPANY
VOTING AGREEMENTS"), (ii) certain shareholders of Company who may be deemed to
be affiliates (the "COMPANY AFFILIATES") are entering into Company Affiliate
Agreements in substantially the form attached hereto as EXHIBIT B (the "COMPANY
AFFILIATE AGREEMENTS"), (iii) certain stockholders of Parent who may be deemed
to be affiliates (the "PARENT AFFILIATES") are entering into Parent Affiliate
Agreements in substantially the form attached hereto as EXHIBIT C (the "PARENT
AFFILIATE AGREEMENTS") and (iv) certain individuals are entering into
Noncompetition Agreements in substantially the form attached hereto as
EXHIBIT D (the "NONCOMPETITION AGREEMENT").
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE").
F. It is also intended by the parties hereto that the Merger shall qualify
for accounting treatment as a "pooling of interests." Parent has received
(i) from Xxxxxxxxx & Xxxxxxxxx, independent auditors for Company, a letter
addressed to Company and Parent dated as of the date hereof to the effect that
Xxxxxxxxx & Xxxxxxxxx concurs with Company management's conclusion that, as of
the date hereof, no conditions exist that would preclude Company from being a
party to a merger accounted for as a "pooling-of-interest" in accordance with
Opinion 16 of the Accounting Principles Board and (ii) from
PricewaterhouseCoopers LLP, independent accountants for Parent, a letter
addressed to Parent and Company dated as of the date hereof to the effect had
the Merger been consummated on the date hereof PricewaterhouseCoopers LLP would
be in a position to concur with Parent management's conclusion that, as of the
date of the letter, no conditions exist that would preclude accounting for the
Merger as a "pooling-of-interests", and the parties hereto have agreed not to
take any action that would interfere with Parent's ability to account for the
Merger as a "pooling of interests."
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants, promises and representations set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.3) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Israeli Companies Law, Merger Sub (as the target
company (CHEVRAT HA'YAAD) in the Merger) shall be merged with and into Company
(as the absorbing company (HACHEVRA HA'KOLETET) in the Merger) (the "MERGER"),
the separate corporate existence of Merger Sub shall cease and Company
(i) shall continue as the surviving corporation (sometimes referred to herein as
the "SURVIVING CORPORATION"), (ii) shall be governed by the laws of the State of
Israel, (iii) shall maintain a registered office in the State of Israel, and
(iv) shall succeed to and assume all of the rights, properties and obligations
of Merger Sub and Company in accordance with the Israeli Companies Law.
1.2 CLOSING DATE. The closing of the Merger and the other transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, 650 Page Mill
Road, Palo Alto, California, USA, at a time and on a date to be designated by
the parties (the time and date upon which the Closing actually occurs being
referred to herein as the "CLOSING DATE"), which shall be no later than the
later to occur of (i) the second business day after the satisfaction or waiver
of the conditions set forth in Article VI or (ii) the 71st day after the
delivery of the Merger Proposal (as defined in section 5.2 hereof) to the office
of the Registrar of Companies of the State of Israel, (the "COMPANIES
REGISTRAR"), or at such other time, date and location as the parties hereto
shall mutually agree.
1.3 EFFECTIVE TIME. As soon as practicable after the satisfaction or
waiver of the conditions to Closing set forth in Article VI, Merger Sub shall
deliver (and Parent shall cause Merger Sub to deliver) to the Companies
Registrar a notice (the "MERGER SUB NOTICE") informing the Companies Registrar
that the Merger was approved by the general shareholders meeting of Merger Sub.
The Merger shall become effective at the later of: (i) the time of the delivery
of the Merger Sub Notice to the Companies Registrar or (ii) the 71st day after
the delivery of the Merger Proposal to the Companies Register (the "EFFECTIVE
TIME") in the manner provided in Section 323 of the Israeli Companies Law.
1.4 ARTICLES OF ASSOCIATION. At the Effective Time, the Articles of
Association of Company shall be the Articles of Association of the Surviving
Corporation until thereafter amended in accordance with the Israeli Companies
Law and such Articles of Association.
1.5 DIRECTORS AND OFFICERS. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, each to hold office in accordance with the Articles of
Association of the Surviving Corporation until their respective successors are
duly elected or appointed and qualified. The initial officers of the Surviving
Corporation shall be the officers of Merger Sub immediately prior to the
Effective Time, each to hold office in accordance with the Articles of
Association of the Surviving Corporation until their respective successors are
duly appointed.
1.6 EFFECT ON CAPITAL STOCK. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Merger Sub, Company or the holders of any of the following
securities, the following shall occur:
(a) CONVERSION OF COMPANY SHARES. Each Ordinary Share, NIS 0.01 par
value per share, of Company (the "COMPANY SHARES") issued and outstanding
immediately prior to t he Effective Time, other than any Company Shares
(i) owned by Parent or Merger Sub or any subsidiary thereof or (ii) held in
Company's treasury, shall automatically be converted into and represent the
right to
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receive (subject to Sections 1.6(e) and (f)) 0.3065 (the "EXCHANGE RATIO")
shares of Common Stock, $0.0005 par value per share, of Parent (the "PARENT
COMMON STOCK"). If any Company Shares outstanding immediately prior to the
Effective Time are unvested or are subject to a repurchase option, risk of
forfeiture or other condition under any applicable restricted stock purchase
agreement or other agreement with Company, then the shares of Parent Common
Stock issued in exchange for such Company Shares will also be unvested and
subject to the same repurchase option, risk of forfeiture or other
condition, and the certificates representing such shares of Parent Common
Stock may accordingly be marked with appropriate legends. The Company shall
take all action that may be necessary to ensure that, from and after the
Effective Time, Parent is entitled to exercise any such repurchase option or
other right set forth in any such restricted stock purchase agreement or
other agreement. Upon the issuance of any Parent Common Stock hereunder, and
consistent with, pursuant to and subject to Parent's existing Preferred
Shares Rights Agreement, dated as of September 15, 1998 (as the same may be
amended from time to time, the "RIGHTS AGREEMENT"), between Parent and
BankBoston N.A., as rights agent, one right issuable pursuant to the Rights
Agreement or any other right issued in substitution thereof (a "RIGHT")
shall be issued together with and shall attach to each share of Parent
Common Stock issued pursuant to the terms and conditions of this Agreement,
unless the Rights shall have expired or been redeemed prior to the Effective
Time.
(b) PARENT-OWNED STOCK. At the Effective Time, each Company Share held
in the treasury of the Company or owned by Merger Sub, Parent or any direct
or indirect wholly-owned subsidiary of Company or of Parent immediately
prior to the Effective Time shall remain outstanding, shall not be exchanged
under Section 1.6(a) and no shares of Parent Common Stock shall be delivered
with respect thereto.
(c) STOCK OPTIONS; WARRANTS. (i) At the Effective Time, all options to
purchase Company Shares then outstanding under Company's 1995 Employee Share
Ownership and Option Plan, Share Ownership and Option Plan (2000), 2000
Share Option Plan and 2000 Non-Employee Director Stock Option Plan
(collectively, the "COMPANY OPTION PLANS"), and all options to purchase
Company Shares then outstanding which are not under any Company Option Plan,
in each case whether vested or unvested, and the Company Option Plans
themselves, shall be assumed by Parent in accordance with Section 5.11
hereof and (ii) at the Effective Time all warrants to purchase Company
Shares then outstanding (collectively, the "COMPANY WARRANTS") shall be
assumed by Parent in accordance with Section 5.13 hereof.
(d) CAPITAL STOCK OF MERGER SUB. Each Ordinary Share, NIS 1.00 par
value per share, of Merger Sub (the "MERGER SUB SHARES") issued and
outstanding immediately prior to the Effective Time shall be converted into
one validly issued, fully paid and nonassessable Ordinary Share, NIS 0.01
par value per share, of the Surviving Corporation. Each certificate
evidencing ownership of Merger Sub Shares immediately prior to the Effective
Time shall, as of the Effective Time, evidence ownership of such shares of
the Surviving Corporation.
(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be
adjusted to reflect appropriately the effect of any forward or reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Shares), cash dividends,
reorganization, recapitalization, reclassification, combination, exchange of
shares or other like change with respect to Parent Common Stock or Company
Shares occurring on or after the date hereof and prior to the Effective
Time.
(f) FRACTIONAL SHARES. No fraction of a share of Parent Common Stock
will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Shares who would otherwise be entitled to a fraction of a
share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock that otherwise would be received by such holder) shall,
upon surrender of such holder's Certificates(s) (as defined in
Section 1.7(c)) receive from Parent an amount of cash (rounded
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to the nearest whole cent), without interest, equal to the product of
(i) such fraction, multiplied by (ii) the average closing price of one share
of Parent Common Stock for the five (5) most recent days that Parent Common
Stock has traded ending on the trading day ending immediately prior to the
Effective Time, as reported on the Nasdaq National Market ("NASDAQ"). The
parties acknowledge that payment of the cash consideration in lieu of
issuing fractional shares was not separately bargained for consideration,
but merely represents a mechanical rounding off for purposes of simplifying
the corporate and accounting complexities that would otherwise be caused by
the issuance of fractional shares.
1.7 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Parent shall select Boston EquiServe N.A., or
another bank or trust company reasonably acceptable to the Company, to act
as the exchange agent (the "EXCHANGE AGENT") in the Merger.
(b) PARENT TO PROVIDE COMMON STOCK. Promptly following the Effective
Time, Parent shall deposit with the Exchange Agent, for exchange in
accordance with this Article I, the shares of Parent Common Stock issuable
pursuant to Section 1.6 in exchange for outstanding Company Shares, and cash
in an amount sufficient for payment in lieu of fractional shares pursuant to
Section 1.6(f) and any dividends or distributions to which holders of shares
of Company Shares may be entitled pursuant to Section 1.7(d).
(c) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each holder
of record (as of the Effective Time) of a certificate or certificates (each,
a "CERTIFICATE and collectively, the "CERTIFICATES"), which immediately
prior to the Effective Time represented outstanding Company Shares whose
shares were converted into the right to receive shares of Parent Common
Stock pursuant to Section 1.6 hereof, cash in lieu of any fractional shares
pursuant to Section 1.6(f) hereof, and any dividends or other distributions
pursuant to Section 1.7(d) hereof, (i) a letter of transmittal in customary
form (which shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock, cash in lieu of any fractional
shares pursuant to Section 1.6(f) and any dividends or other distributions
pursuant to Section 1.7(d). Upon surrender of Certificates for cancellation
to the Exchange Agent or to such other agent or agents as may be appointed
by Parent, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, the holders of
such Certificates shall be entitled to receive in exchange therefor
certificates representing the number of whole shares of Parent Common Stock
into which their shares of Company Shares were converted at the Effective
Time, payment in lieu of fractional shares which such holders have the right
to receive pursuant to Section 1.6(f) and any dividends or distributions
payable pursuant to Section 1.7(d), and the Certificates so surrendered
shall forthwith be canceled. Until so surrendered, outstanding Certificates
will be deemed from and after the Effective Time for all corporate purposes,
subject to Section 1.7 hereof, as to dividends and other distributions, to
evidence only the ownership of the number of full shares of Parent Common
Stock into which such shares of Company Shares shall have been so converted
and the right to receive an amount in cash in lieu of the issuance of any
fractional shares in accordance with Section 1.6(f) and any dividends or
distributions payable pursuant to Section 1.7(d).
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time
will be paid to the holders of any unsurrendered Certificates with respect
to the shares of Parent Common Stock represented thereby until the holders
of record of such Certificates shall surrender such Certificates. Subject to
applicable law, following surrender of any
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such Certificates, the Exchange Agent shall deliver to the record holders
thereof, without interest, certificates representing whole shares of Parent
Common Stock issued in exchange therefor along with payment in lieu of
fractional shares pursuant to Section 1.6(f) hereof and the amount of any
such dividends or other distributions with a record date after the Effective
Time payable with respect to such whole shares of Parent Common Stock.
(e) TRANSFERS OF OWNERSHIP. If certificates representing shares of
Parent Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will
be properly endorsed and otherwise in proper form for transfer and that the
persons requesting such exchange will have paid to Parent or any agent
designated by it any transfer or other taxes required by reason of the
issuance of certificates representing shares of Parent Common Stock in any
name other than that of the registered holder of the Certificates
surrendered, or established to the satisfaction of Parent or any agent
designated by it that such tax has been paid or is not payable.
(f) REQUIRED WITHHOLDING. Each of the Exchange Agent, Parent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to
any holder or former holder of Company Shares such amounts as may be
required to be deducted or withheld therefrom under the Code, the Israel Tax
Ruling (as hereinafter defined) or under any provision of state, local or
foreign law or any other applicable requirement. To the extent such amounts
are so deducted or withheld, such amounts shall be treated for all purposes
under this Agreement as having been paid to the person to whom such amounts
would otherwise have been paid.
(g) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation
nor any party hereto shall be liable to a holder of shares of Parent Common
Stock or Company Shares for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.8 COMPANY'S TRANSFER BOOKS CLOSED; NO FURTHER OWNERSHIP RIGHTS IN COMPANY
SHARES. Upon the Effective Time, (i) the share transfer books of the Company
shall be deemed closed, and no transfer of any certificates theretofore
representing Company Shares shall thereafter be made or consummated; and
(ii) all holders of certificates representing Company Shares that were
outstanding immediately prior to the Effective Time shall cease to have any
rights as shareholders of the Company. No further transfer of any such Company
Shares shall be made on such share transfer books after the Effective Time. If,
after the Effective Time, a valid Certificate is presented to the Exchange Agent
or to the Surviving Corporation or Parent, such Certificate shall be canceled
and shall be exchanged as provided in this Article I. All shares of Parent
Common Stock issued in accordance with the terms hereof (including any cash paid
in respect thereof pursuant to Section 1.6(f) or 1.7(d)) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Shares.
1.9 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event that any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Parent Common Stock into which the shares of Company
Shares represented by such Certificates were converted pursuant to Section 1.6,
cash for fractional shares, if any, as may be required pursuant to
Section 1.6(f) and any dividends or distributions payable pursuant to
Section 1.7(d); PROVIDED, HOWEVER, that Parent and the Exchange Agent may, in
their discretion and as a condition precedent to the issuance of such
certificates representing shares of Parent Common Stock, cash and other
distributions, require the owner of such lost, stolen or destroyed Certificates
to deliver a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against Parent, the Surviving Corporation or the
Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
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1.10 CERTAIN TAX AND ACCOUNTING CONSEQUENCES.
(a) It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Code.
The parties hereto adopt this Agreement as a "plan of reorganization" within
the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations.
(b) It is intended by the parties hereto that the Merger shall be
treated as a "pooling of interests" for accounting purposes.
1.11 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company and Merger Sub, the officers and directors of Company
and Merger Sub will take all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company represents and warrants to Parent and Merger Sub, subject to
such exceptions as are specifically disclosed in writing (with reference to a
specific section of this Agreement to which each exception applies) in a
disclosure letter supplied by the Company to Parent, dated as of the date hereof
and signed by a duly authorized officer of Company (the "COMPANY DISCLOSURE
LETTER"), which disclosure shall provide an exception to or otherwise qualify or
respond to the representations or warranties of the Company specifically
referred to in such disclosure and any other representation or warranty of the
Company to the extent that it is reasonably apparent from such disclosure that
such disclosure is applicable to such other representation or warranty, as
follows:
2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Except as set forth in Section 2.1(a) of the Company Disclosure
Letter, each of the Company and its subsidiaries is a corporation duly
organized and validly existing and, where applicable, in good standing,
under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its assets
and properties and to carry on its business as it is now being conducted.
Each of the Company and its subsidiaries is in possession of all franchises,
grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("APPROVALS") necessary to own, lease and
operate the properties it purports to own, operate or lease and to carry on
its business as it is now being conducted, except where the failure to have
such Approvals would not, individually or in the aggregate, be material to
the Company. Each of the Company and its subsidiaries is duly qualified or
licensed as a foreign corporation to do business, and, where applicable is
in good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
(b) Section 2.1(b) of the Company Disclosure Letter lists each of the
Company's subsidiaries, the jurisdiction of incorporation of each such
subsidiary, and the Company's equity interest therein. Except as set forth
in Section 2.1(b) of the Company Disclosure Letter, neither Company nor any
of its subsidiaries has agreed nor is obligated to make nor is bound by any
written or oral agreement, contract, subcontract, lease, binding
understanding, instrument, note, option, warranty, purchase order, license,
sublicense, insurance policy, benefit plan, commitment or undertaking of any
nature, as of the date hereof or as may hereafter be in effect (a
"CONTRACT") under which it may become obligated to make, any future
investment in or capital contribution to any other entity. Other than
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Company's interests in its subsidiaries, and except as set forth in
Section 2.1(b) of the Company Disclosure Letter, neither Company nor any of
its subsidiaries directly or indirectly owns any equity or similar interest
in or any interest convertible, exchangeable or exercisable for, any equity
or similar interest in, any corporation, partnership, joint venture or other
business, association or entity.
2.2 MEMORANDUM OF ASSOCIATION; ARTICLES OF ASSOCIATION. Company has
previously furnished to Parent a complete and correct copy of its Memorandum of
Association and Articles of Association as amended to the date of this Agreement
(together, the "COMPANY CHARTER DOCUMENTS"). Such Company Charter Documents and
equivalent organizational documents of each of its subsidiaries are in full
force and effect. Except as set forth in Section 2.2 of the Company Disclosure
Letter Company is not in violation of any of the provisions of the Company
Charter Documents, and no subsidiary of Company is in violation of its
equivalent organizational documents.
2.3 CAPITALIZATION.
(a) The registered (authorized) share capital of Company consists of
50,000,000 Ordinary Shares, NIS 0.01 par value per share, and 5,000,000
Preferred Shares ("COMPANY PREFERRED SHARES"). As of the close of business
on December 4, 2000, (i) 20,557,474 Company Shares were issued and
outstanding (including 245,227 shares in a trust, the trustee of which is
Xxxxxx Xxxxxx (the "Xxxxxx Trust"), of which 99,147 Common Shares are being
held in trust on behalf of employees who have exercised their options under
the Company's 1995 Employee Share Ownership and Option Plan, all of which
were validly issued, fully paid and nonassessable; (ii) no Company Shares
were held in treasury by Company or by subsidiaries of Company;
(iii) 2,759,898 Company Shares were reserved for issuance upon the exercise
of options or the grant of rights to purchase Company Shares under the
Company's 1995 Employee Share Ownership and Option Plan of which options to
purchase 2,752,401 Common Shares were outstanding under such plan (including
options to purchase 145,810 Common Shares that will be satisfied from the
Xxxxxx Trust (which are already outstanding)), (iv) 750,000 Company Shares
were reserved for issuance upon the exercise of options or the grant of the
rights to purchase Company Shares under the Company's Share Ownership and
Option Plan (2000) of which options to purchase 742,679 Common Shares were
outstanding under such plan; (v) 750,000 Company Shares were reserved for
issuance upon the exercise of options to purchase Company Shares under the
Company's 2000 Share Option Plan of which options to purchase 750,000 Common
Shares were outstanding under such plan; (vi) 20,000 Company Shares were
reserved for issuance upon the exercise of options to purchase Company
Shares under the Company's 2000 Non-Employee Director Stock Option Plan of
which options to purchase 50,000 Common Shares were outstanding under such
plan; (vii) 502,734 Company Shares were reserved for issuance upon the
exercise of outstanding options to purchase Company Shares granted outside
of the Company Option Plans; (viii) and 137,061 Company Shares were reserved
for issuance upon the exercise of outstanding warrants to purchase Company
Shares. As of the date hereof, no Company Preferred Shares were issued or
outstanding. As of the date hereof, other than as set forth above, Company
has no other securities authorized, reserved for issuance, issued or
outstanding.
(b) Section 2.3(b) of the Company Disclosure Letter sets forth the
following information with respect to each Company Stock Option (as defined
in Section 5.11) outstanding as of the date of this Agreement: (i) the name
of the optionee; (ii) the number of Company Shares subject to such Company
Stock Option; (iii) the exercise price of such Company Stock Option;
(iv) the date on which such Company Stock Option was granted; and (v) the
applicable vesting schedule, including the vesting commencement date.
Company has made available to Parent accurate and complete copies of all
Company Option Plans, if any, pursuant to which the Company has granted such
Company Stock Options that are currently outstanding and the form of all
stock option agreements evidencing such Company Stock Options. All Company
Shares subject to issuance as aforesaid have been duly authorized and, upon
issuance on the terms and conditions specified in the instrument pursuant to
which they are issuable, will be validly issued, fully paid and
nonassessable. Except as set forth in
7
Section 2.3(b) of the Company Disclosure Letter, there are no commitments,
agreements or understandings of any character to which the Company is bound
obligating the Company to accelerate the vesting of any Company Stock Option
as a result of the Merger. All outstanding Company Shares, all outstanding
Company Stock Options, and all outstanding shares of capital stock of each
subsidiary of the Company have been issued and granted in compliance with
(i) all laws applicable to the issuance of securities or stock options and
(ii) all requirements set forth in applicable Contracts, other than any
failure to comply with any such requirements that would not, individually,
or in the aggregate, reasonably be expected to have a Material Adverse
Effect on the Company.
(c) Except for securities Company owns free and clear of all liens,
pledges, hypothecations, charges, mortgages, security interests,
encumbrances, claims, infringements, intereferences, options, right of first
refusals, preemptive rights, community property interests or restrictions of
any nature (including any restriction on the voting of any security, any
restriction on the transfer of any security or other asset, any restriction
on the possession, exercise or transfer of any other attribute of ownership
of any asset) directly or indirectly through one or more subsidiaries, and
except for shares of capital stock or other similar ownership interests of
subsidiaries of the Company that are owned by certain nominee equity holders
as required by the applicable law of the jurisdiction of organization of
such subsidiaries (which shares or other interests do not materially affect
the Company's control of such subsidiaries), as of the date of this
Agreement, there are no equity securities, partnership interests or similar
ownership interests of any class of equity security of any subsidiary of the
Company, or any security exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership
interests, issued, reserved for issuance or outstanding. Except as set forth
in Sections 2.3(b) and (c) of the Company Disclosure Letter or as set forth
in Section 2.3(a) hereof, there are no subscriptions, options, warrants,
equity securities, partnership interests or similar ownership interests,
calls, rights (including preemptive rights), commitments or agreements of
any character to which Company or any of its subsidiaries is a party or by
which it is bound obligating Company or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase,
redeem or otherwise acquire, or cause the repurchase, redemption or
acquisition of, any shares of capital stock, partnership interests or
similar ownership interests of the Company or any of its subsidiaries or
obligating the Company or any of its subsidiaries to grant, extend,
accelerate the vesting of or enter into any such subscription, option,
warrant, equity security, call, right, commitment or agreement. Except as
contemplated by this Agreement or as set forth in Section 2.3(c) of the
Company Disclosure Letter, there are no registration rights and there is,
except for the Company Voting Agreements, no voting trust, proxy, rights
plan, antitakeover plan or other agreement or understanding to which the
Company or any of its subsidiaries is a party or by which they are bound
with respect to any equity security of any class of the Company or with
respect to any equity security, partnership interest or similar ownership
interest of any class of any of its subsidiaries. Shareholders of the
Company will not be entitled to dissenters' rights under applicable law in
connection with the Merger.
2.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Company has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and, subject to obtaining the approval of the
shareholders of Company of this Agreement and the Merger, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Company and the consummation by Company of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of Company and no other corporate proceedings on the part of Company
are necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than, with respect to the Merger, the approval and adoption
of this Agreement and the approval of the Merger by holders of a majority of the
voting shares of Company Shares in accordance with the Israeli Companies Law and
the Company Charter Documents). Except as set forth in Section 2.4 of the
Company Disclosure Letter, this Agreement has been duly and validly executed and
delivered by Company and, assuming the due authorization, execution and delivery
by Parent and Merger Sub,
8
constitutes a legal and binding obligation of Company, enforceable against
Company in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting creditors' rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies. Assuming neither the Parent nor Merger Sub, nor any of their
respective affiliates as defined in Section 320(c) of the Israeli Companies Law,
vote any shares they own, the affirmative vote of a simple majority of the
voting power of the Company present and voting at the Company General Meeting at
which a quorum is present (the "REQUIRED COMPANY SHAREHOLDER VOTE") is the only
vote of the holders of any shares of the Company necessary to approve the
Merger. The quorum required for the Company General Meeting is two or more
shareholders who hold at least 50% of the voting rights of the issued share
capital of the Company. No vote or approval of (i) any creditor of the Company
(subject to the rights of creditors under Section 319 of the Israeli Companies
Law), (ii) any holder of any option or warrant granted by the Company, or
(iii) any shareholder of any of the Company's subsidiaries is necessary in order
to approve or permit the consummation of the Merger.
2.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in Section 2.5 of the Company Disclosure Letter,
the execution and delivery of this Agreement by Company does not, and the
performance of this Agreement by Company shall not, (i) conflict with or
violate the Company Charter Documents or the equivalent organizational
documents of any of Company's subsidiaries, (ii) subject to obtaining the
approval of Company's shareholders in favor of the approval and adoption of
this Agreement and the approval of the Merger and compliance with the
requirements set forth in Section 2.5(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Company or
any of its subsidiaries or by which its or any of their respective
properties is bound, or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become
a default) under, or materially impair Company's or any of its subsidiaries'
rights or alter the rights or obligations of any third party under, or give
to others any rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or encumbrance on any of the
properties or assets of Company or any of its subsidiaries pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which
Company or any of its subsidiaries is a party or by which Company or any of
its subsidiaries or its or any of their respective properties are bound
except to the extent such conflict, violation, breach, default, impairment
or other effect would not in the case of clauses (ii) or (iii) individually
or in the aggregate, (A) reasonably be expected to have a Material Adverse
Effect on Company or (B) prevent or materially delay consummation of the
Merger or otherwise prevent Company from performing its obligations under
this Agreement.
(b) The execution and delivery of this Agreement by Company does not,
and the performance of this Agreement by Company shall not, require any
consent, approval, authorization or permit of, or filing with or
notification to, any court, administrative agency, commission, governmental
or regulatory authority, domestic or foreign (a "GOVERNMENTAL ENTITY"),
except (i) for applicable requirements, if any, of the Securities Act of
1933, as amended (the "SECURITIES ACT"), the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), state securities laws ("BLUE SKY
LAWS"), the pre-merger notification requirements (the "HSR APPROVAL") of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), the consent of the Israeli Investment Center of the Israeli Ministry
of Trade & Industry (the "INVESTMENT CENTER"), the consent of the Office of
the Chief Scientist of the Israeli Ministry of Trade & Industry ("OCS") and
the approval of the Israeli Commissioner of Restrictive Trade Practices, if
necessary, the filing and recordation of the Merger Proposal and
Shareholders Approval Notice and other filings as required by Israeli
Companies Law, the exemption of the Israel Securities Authority and of
foreign Governmental Entities and the rules and regulations thereunder, and
the rules and regulations of the Nasdaq, and (ii) where the failure to
9
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not, individually or in the aggregate,
(A) reasonably be expected to have a Material Adverse Effect on Company or
(B) prevent or materially delay consummation of the Merger or otherwise
prevent Company from performing its obligations under this Agreement.
2.6 COMPLIANCE; PERMITS.
(a) Except as set forth in Section 2.6(a) of the Company Disclosure
Letter, neither the Company nor any of its subsidiaries is in conflict with,
or in default or violation of, (i) any law, rule, regulation, order,
judgment or decree applicable to the Company or any of its subsidiaries or
by which its or any of their respective properties is bound or (ii) any
material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries or its or any of their respective properties is bound,
except for any conflicts, defaults or violations that (individually or in
the aggregate) would not reasonably be expected to have a Material Adverse
Effect on the Company. No investigation or review by any governmental or
regulatory body or authority is, to the knowledge of the Company, pending or
threatened against the Company or its subsidiaries, nor, to the knowledge of
the Company, has any governmental or regulatory body or authority indicated
an intention to conduct the same, other than, in each such case, those the
outcome of which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company.
(b) Except as set forth in Section 2.6(b) of the Company Disclosure
Letter, Company and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals and other authorizations from governmental
authorities which are material to the operation of the business of Company
and its subsidiaries taken as a whole (collectively, the "COMPANY PERMITS").
Company and its subsidiaries have been and are in compliance in all material
respects with the terms of the Company Permits and any conditions placed
thereon.
2.7 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Company has made available to Parent a correct and complete copy of
each report, schedule, registration statement and definitive proxy statement
filed by Company with the Securities and Exchange Commission ("SEC") since
the filing of the Company's Registration Statement on Form F-1 (the "COMPANY
SEC REPORTS"), which are all the forms, reports and documents required to be
filed by Company with the SEC since such time. The Company SEC Reports
(i) were prepared in accordance with the requirements of the Securities Act
or the Exchange Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder, and (ii) did not at the time they were filed
(and if any Company SEC Report filed prior to the date of this Agreement was
amended or superseded by a filing prior to the date of this Agreement then
on the date of filing of such amendment or superseded filing) contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of Company's subsidiaries is required to file any reports
or other documents with the SEC.
(b) As of their respective dates, each set of consolidated financial
statements (including, in each case, any related notes thereto) contained in
the Company SEC Reports, (i) complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto,
(ii) was prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q of the Exchange Act)
and each fairly presents the consolidated financial position of Company and
its subsidiaries at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods
10
indicated, except that the unaudited interim financial statements were or
are subject to normal adjustments which were not or are not expected to be
material in amount.
(c) Company has previously furnished to Parent a complete and correct
copy of any amendments or modifications, which have not yet been filed with
the SEC but which are required to be filed as of the date hereof, to
agreements, documents or other instruments which previously had been filed
by Company with the SEC pursuant to the Securities Act or the Exchange Act.
2.8 NO UNDISCLOSED LIABILITIES. Neither Company nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise) of
a nature required to be disclosed on a balance sheet or in the related notes to
the consolidated financial statements prepared in accordance with GAAP which
are, individually or in the aggregate, material to the business, results of
operations, assets or financial condition of Company and its subsidiaries taken
as a whole, except (i) liabilities provided for in Company's balance sheet as of
September 30, 2000 set forth in the Company SEC Reports or (ii) liabilities
incurred since September 30, 2000 in the ordinary course of business, none of
which is material to the business, results of operations or financial condition
of Company and its subsidiaries, taken as a whole.
2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 2.9 of the Company Disclosure Letter, since September 30, 2000, there
has not been: (i) any Material Adverse Effect on Company, (ii) any declaration,
setting aside or payment of any dividend on, or other distribution (whether in
cash, stock or property) in respect of, any of Company's or any of its
subsidiaries' capital stock, or any purchase, redemption or other acquisition by
Company of any of Company's capital stock or any other securities of Company or
its subsidiaries or any options, warrants, calls or rights to acquire any such
shares or other securities except for repurchases from employees following their
termination pursuant to the terms of their pre-existing stock option or purchase
agreements, (iii) any split, combination or reclassification of any of Company's
or any of its subsidiaries' capital stock, (iv) any granting by Company or any
of its subsidiaries of any increase in compensation or fringe benefits, except
for normal increases of cash compensation in the ordinary course of business
consistent with past practice, or any payment by Company or any of its
subsidiaries of any bonus, except for bonuses made in the ordinary course of
business consistent with past practice, or any granting by Company or any of its
subsidiaries of any increase in severance or termination pay or any entry by
Company or any of its subsidiaries into any currently effective employment,
severance, termination or indemnification agreement or any agreement the
benefits of which are contingent or the terms of which are materially altered
upon the occurrence of a transaction involving Company of the nature
contemplated hereby, (v) entry by Company or any of its subsidiaries into any
licensing or other agreement with regard to the acquisition or disposition of
any Intellectual Property (as defined in Section 2.19) other than licenses in
the ordinary course of business consistent with past practice or any amendment
or consent with respect to any licensing agreement which has been filed or is
required to be filed by Company with the SEC, (vi) any material change by
Company in its accounting methods, principles or practices, except as required
by concurrent changes in GAAP, or (vii) any revaluation by Company of any of its
assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable, or (viii) any sale of
assets of the Company other than in the ordinary course of business consistent
with past practice.
2.10 ABSENCE OF LITIGATION. Except as specifically disclosed in the
Company SEC Reports as of the date hereof, there are no claims, actions, suits
or proceedings that have a reasonable likelihood of success on the merits
pending or, to the knowledge of Company, threatened (or, to the knowledge of
Company, any governmental or regulatory investigation pending or threatened)
against Company or any of its subsidiaries or any properties or rights of
Company or any of its subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, except for those claims, actions, suits or proceedings which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
11
2.11 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) DEFINITIONS. With the exception of the definition of "Affiliate"
set forth in Section 2.11(a)(i) below (which definition shall apply only to
this Section 2.11), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or entity under common
control with Company within the meaning of Section 414(b), (c), (m) or
(o) of the Code and the regulations issued thereunder;
(ii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iii) "CODE" shall mean the Internal Revenue Code of 1986, as amended;
(iv) "COMPANY EMPLOYEE PLAN" shall mean any plan, program, policy,
practice, contract, agreement (excluding any "Employment Agreement" as
defined below) or other arrangement providing for compensation,
severance, termination pay, deferred compensation, material performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written or unwritten or
otherwise, funded or unfunded, including without limitation, each
"employee benefit plan," within the meaning of Section 3(3) of ERISA
which is maintained, contributed to, or required to be contributed to, by
Company or any Affiliate for the benefit of any Employee, or with respect
to which Company or any Affiliate has or may have any liability or
obligation;
(v) "DOL" shall mean the Department of Labor;
(vi) "EMPLOYEE" shall mean any current employee, consultant or
director of Company or any Affiliate;
(vii) "EMPLOYMENT AGREEMENT" shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas,
work permit or other agreement, contract or understanding between Company
or any Affiliate and any Employee as to which the Company has or may
incur material liability;
(viii) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended;
(ix) "FMLA" shall mean the Family Medical Leave Act of 1993, as
amended;
(x) "INTERNATIONAL EMPLOYEE PLAN" shall mean each Company Employee
Plan and each government-mandated plan or program that has been adopted
or maintained by Company or any Affiliate, whether informally or
formally, or with respect to which Company or any Affiliate will or may
have any material liability, for the benefit of Employees who perform
services outside the United States;
(xi) "IRS" shall mean the Internal Revenue Service;
(xii) "MULTIEMPLOYER PLAN" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(xiii) "PENSION PLAN" shall mean each Company Employee Plan which is an
"employee pension benefit plan," within the meaning of Section 3(2) of
ERISA.
(b) SCHEDULE. Schedule 2.11(b) contains an accurate and complete list
of each Company Employee Plan, International Employee Plan, and each
Employment Agreement. Company does not have any commitment to establish any
new Company Employee Plan, International Employee Plan, or Employment
Agreement, to modify any Company Employee Plan or Employment Agreement
(except
12
to the extent required by law or to conform any such Company Employee Plan
or Employment Agreement to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement), or to adopt or enter into any Company Employee Plan,
International Employee Plan, or Employment Agreement.
(c) DOCUMENTS. Company has provided to Parent or will provide Parent
before the Effective Time, correct and complete copies of: (i) all documents
embodying each Company Employee Plan, International Employee Plan, and each
Employment Agreement including (without limitation) all amendments thereto
and all related trust documents, administrative service agreements, group
annuity contracts, group insurance contracts, and policies pertaining to
fiduciary liability insurance covering the fiduciaries for each Plan;
(ii) the most recent annual actuarial valuations, if any, prepared for each
Company Employee Plan; (iii) the three (3) most recent annual reports (Form
Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code in connection with each Company
Employee Plan; (iv) if Company Employee Plan is funded, the most recent
annual and periodic accounting of Company Employee Plan assets; (v) the most
recent summary plan description together with the summary(ies) of material
modifications thereto, if any, required under ERISA with respect to each
Company Employee Plan; (vi) all IRS determination or opinion letters;
(vii) all currently applicable material communications material to any
Employee or Employees relating to any Company Employee Plan; (viii) all
currently applicable material correspondence to or from any governmental
agency relating to any Company Employee Plan; (ix) all current model COBRA
forms and related notices (or such forms and notices as required under
comparable law); (x) the three (3) most recent plan years discrimination
tests for each Company Employee Plan; and (xi) all registration statements,
annual reports (Form 11-K and all attachments thereto) and prospectuses
prepared in connection with each Company Employee Plan.
(d) EMPLOYEE PLAN COMPLIANCE. Except as set forth on
Schedule 2.11(d), (i) Company has performed in all material respects all
obligations required to be performed by it under, is not in default or
violation of, and has no knowledge of any default or violation by any other
party to each Company Employee Plan, and each Company Employee Plan has been
established and maintained in all material respects in accordance with its
terms and in substantial compliance with all applicable laws, statutes,
orders, rules and regulations, including but not limited to ERISA or the
Code; (ii) each Company Employee Plan intended to qualify under
Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code has either received a favorable determination or
opinion letter from the IRS with respect to each such Company Employee Plan
as to its qualified status under the Code, including all amendments to the
Code effected by the Tax Reform Act of 1986 and subsequent legislation, or
has remaining a period of time under applicable Treasury regulations or IRS
pronouncements in which to apply for such a letter and make any amendments
necessary to obtain a favorable determination as to the qualified status of
each such Company Employee Plan; (iii) no "prohibited transaction," within
the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA,
and not otherwise exempt for which the Company would incur material
liability has occurred with respect to any Company Employee Plan;
(iv) there are no actions, suits or claims pending, or, to the knowledge of
Company, threatened or reasonably anticipated (other than routine claims for
benefits) against any Company Employee Plan or against the assets of any
Company Employee Plan; (v) each Company Employee Plan (other than any stock
option plan) can be amended, terminated or otherwise discontinued after the
Effective Time, without material liability to Parent, Company or any of its
Affiliates (other than for benefits accrued to date and ordinary
administration expenses); and (vi) there are no audits, inquiries or
proceedings pending or, to the knowledge of Company or any Affiliates,
threatened by the IRS or DOL with respect to any Company Employee Plan.
13
(e) PENSION PLAN. Neither Company nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the
Code.
(f) COLLECTIVELY BARGAINED, MULTIEMPLOYER AND MULTIPLE EMPLOYER
PLANS. At no time has Company or any Affiliate contributed to or been
obligated to contribute to any Multiemployer Plan. Neither Company, nor any
Affiliate has at any time ever maintained, established, sponsored,
participated in, or contributed to any multiple employer plan, or to any
plan described in Section 413 of the Code.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in
Schedule 2.11(g), no Company Employee Plan provides, or reflects or
represents any liability to provide retiree health to any person for any
reason, except as may be required by COBRA or other applicable statute, and
Company has never represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to Employees as a
group) or any other person that such Employee(s) or other person would be
provided with retiree health, except to the extent required by statute.
(h) HEALTH CARE COMPLIANCE. Neither Company nor any Affiliate has,
prior to the Effective Time and in any material respect, violated any of the
health care continuation requirements of COBRA, the requirements of FMLA to
the extent applicable, the requirements of the Health Insurance Portability
and Accountability Act of 1996, the requirements of the Women's Health and
Cancer Rights Act of 1998, the requirements of the Newborns' and Mothers'
Health Protection Act of 1996, or any amendment to each such act, or any
similar provisions of state law applicable to its Employees, except where
such violation would not have a Material Adverse Effect on the Company.
(i) EFFECT OF TRANSACTION. Except as set forth on Schedule 2.11(i),
the execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company
Employee Plan, Employment Agreement, trust or loan that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(j) EMPLOYMENT MATTERS. Company: (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules
and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld and reported all amounts required by law or by
agreement to be withheld and reported with respect to wages, salaries and
other payments to Employees; (iii) is not liable for any arrears of wages or
any taxes or any penalty for failure to comply with any of the foregoing;
and (iv) is not liable for any payment to any trust or other fund governed
by or maintained by or on behalf of any governmental authority, with respect
to unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice). To the
Company's knowledge, there are no pending, threatened or reasonably
anticipated claims or actions against Company under any worker's
compensation policy or long-term disability policy.
(k) LABOR. No work stoppage or labor strike against Company is
pending, threatened or reasonably anticipated. Company does not know of any
activities or proceedings of any labor union to organize any Employees.
Except as set forth in Section 2.11(k) of the Company Disclosure Letter,
there are no actions, suits, claims, labor disputes or grievances pending,
or, to the knowledge of Company, threatened relating to any labor, safety or
discrimination matters involving any Employee, including, without
limitation, charges of unfair labor practices or discrimination complaints,
which, if adversely determined, would, individually or in the aggregate,
result in any material liability to Company. Neither Company nor any of its
subsidiaries has engaged in any unfair labor practices within the meaning of
the National Labor Relations Act. Except as set forth in Section 2.11(k) of
the
14
Company Disclosure Letter, Company is not presently, nor has it been in the
past, a direct party to, or directly bound by, any collective bargaining
agreement or union contract with respect to Employees and no collective
bargaining agreement is being negotiated by Company.
(l) INTERNATIONAL EMPLOYEE PLAN. Each International Employee Plan has
been established, maintained and administered in substantial compliance with
its terms and conditions and with the requirements prescribed by any and all
statutory or regulatory laws that are applicable to such International
Employee Plan. Furthermore, no International Employee Plan has unfunded
liabilities, that as of the Effective Time, will not be offset by insurance
or fully accrued. Except as required by law, no condition exists that would
prevent Company or Parent from terminating or amending any International
Employee Plan at any time for any reason without liability to the Company or
its Affiliates (other than ordinary administration expenses or routine
claims for benefits).
(m) EMPLOYEES RESIDENT IN ISRAEL. Notwithstanding anything contained
in this Agreement to the contrary, and solely with respect to employees of
the Company who reside in Israel ("ISRAELI EMPLOYEES") and except as set
forth in Section 2.11(m) of the Company Disclosure Letter: (i) the Company
is not a direct party to any collective bargaining contract, collective
labor agreement or other contract or arrangement with a labor union, trade
union or other organization or body involving any of its Israeli Employees,
or is otherwise required (under any legal requirement, under any contract or
otherwise) to provide benefits or working conditions beyond those required
by law or pursuant to rules and regulations thereunder (including expansion
orders of the Ministry of Labor or Welfare) or of the Histardrut (General
Federation of Labor) or the Coordinating Bureau of Economic Organization and
the Industrialists' Association. The Company has not recognized or received
a demand for recognition from any collective bargaining representative with
respect to any of its Israeli Employees. The Company is subject to extension
orders (tzavei harchava) issued by the Minister of Labor and Welfare with
respect to employment or termination thereof; (ii) all of the Israeli
Employees are "at will" employees subject to the termination notice
provisions included in employment agreements or applicable law;
(iii) except for the employment agreements described in the Company
Disclosure Letter, there is no contract between the Company and any of its
Israeli Employees or directors that cannot be terminated by the Company upon
less than three months notice without giving rise to a claim for damages or
compensation (except for statutory severance pay); (iv) the Company's
obligations to provide severance pay to its Israeli Employees are either
fully funded or have been properly provided for in the Company's financial
statements in accordance with Israeli GAAP; (v) except as set forth in the
Company Disclosure Letter, the Company is not aware of any circumstance that
could give rise to any valid claim by a current or former Israeli Employee
for compensation on termination of employment (beyond the statutory
severance pay to which employees are entitled); (vi) all amounts that the
Company is legally or contractually required either (x) to deduct from its
employees' salaries or to transfer to such employees' pension or provident,
life insurance, incapacity insurance, continuing education fund or other
similar funds or (y) to withhold from their employees' salaries and to pay
to any Governmental Entity as required by the Israeli Tax Ordinance or
otherwise have, in each case, been duly deducted, transferred, withheld and
paid, and the Company does not have any outstanding obligation to make any
such deduction, transfer, withholding or payment (other than outstanding
obligations in the ordinary course of business consistent with past
practice); and (vii) the Company 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 its Israeli Employees. All
obligations of the Company with respect to statutorily required severance
payments have been either fully satisfied or have been funded by
contributions to appropriate insurance funds, or have been properly provided
for in the Company's financial statements in accordance with United States
generally accepted accounting principles.
15
2.12 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. None of the
information supplied or to be supplied by Company in writing for inclusion in
(i) the registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of the Parent Common Stock in or as a result of the
Merger (the "FORM S-4") will, at the time the Form S-4 becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading; and (ii) the proxy statement/prospectus to be filed with
the SEC by Parent and Company pursuant to Section 5.1(a) hereof (the "PROXY
STATEMENT/PROSPECTUS") will, at the date or dates mailed to the shareholders of
Company, at the time of the shareholders meeting of Company (the "COMPANY
GENERAL MEETING") in connection with the transactions contemplated hereby,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. With respect to the information supplied or to be supplied by
Company in writing for inclusion in the Proxy Statement/Prospectus only, the
Proxy Statement/Prospectus will comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations promulgated by
the SEC thereunder, and the Israeli Companies Law and the rules and regulations
promulgated thereunder. If at any time prior to the Effective Time, any event
relating to Company or any of its affiliates, officers or directors should be
discovered by Company which should be set forth in an amendment to the Form S-4
or a supplement to the Proxy Statement/Prospectus, Company shall promptly inform
Parent. Notwithstanding the foregoing, Company makes no representation or
warranty with respect to any information other than the information supplied or
to be supplied by Company in writing for inclusion in the Form S-4 or the Proxy
Statement/Prospectus.
2.13 RESTRICTIONS ON BUSINESS ACTIVITIES. Except as disclosed in
Section 2.13 of the Company Disclosure Letter, there is no agreement,
commitment, judgment, injunction, order or decree binding upon Company or its
subsidiaries or to which Company or any of its subsidiaries is a party which has
or could reasonably be expected to have the effect of prohibiting or impairing
any business practice of Company or any of its subsidiaries, any acquisition of
property by Company or any of its subsidiaries or the conduct of business by
Company or any of its subsidiaries as currently conducted.
2.14 TITLE TO PROPERTY. Neither Company nor any of its subsidiaries owns
any material real property. Company and each of its subsidiaries have good and
defensible title to, or in the case of leased properties and assets, valid
leasehold interests in, all of their material properties and assets, free and
clear of all liens, charges and encumbrances except liens for taxes not yet due
and payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or materially interfere with the present
use of the property affected thereby; and all leases pursuant to which Company
or any of its subsidiaries lease from others material real or personal property
are in good standing, valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing material default
or event of default of Company or any of its subsidiaries or, to Company's
knowledge, any other party (or any event which with notice or lapse of time, or
both, would constitute a material default and in respect of which Company or
subsidiary has not taken adequate steps to prevent such default from occurring).
All the plants, structures and equipment of Company and its subsidiaries, except
such as may be under construction, are in good operating condition and repair,
in all material respects.
2.15 TAXES.
(a) DEFINITION OF TAXES. For purposes of this Agreement, (i) "TAX" or,
collectively, "TAXES", means (i) any and all United States, Israeli,
federal, provincial, state, local and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities, including taxes
based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts;
(ii) any liability for the payment of any amounts of the type described in
clause (i) as a result of being or
16
ceasing to be a member of an affiliated, consolidated, combined or unitary
group for any period (including, without limitation, any liability under
United States Treas. Reg. Section 1.1502-6 or any comparable provision of
Israeli, foreign, state or local law); and (iii) any liability for the
payment of any amounts of the type described in clause (i) or (ii) as a
result of any express or implied obligation to indemnify any other Person or
as a result of any obligations under any agreements or arrangements with any
other Person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(b) TAX RETURNS AND AUDITS.
(i) The Company and each of its subsidiaries has timely filed all
United States, Israeli, federal, state, local and foreign returns,
estimates, declarations, information statements and reports ("RETURNS")
relating to Taxes required to be filed by Company and each of its
subsidiaries with any Tax authority, and such Returns are true and
correct and have been completed in accordance with applicable law. The
Company and each of its subsidiaries have paid all Taxes shown to be due
on such Returns.
(ii) The Company and each of its subsidiaries (A) has paid or accrued
all Taxes it is required to pay or accrue and (B) has withheld from each
payment made to its past or present employees, officers, directors and
independent contractors, creditors, stockholders or other third parties
all Taxes and other deductions required to be withheld and has, within
the time and in the manner required by law, paid such withheld amounts to
the proper governmental authorities.
(iii) Neither the Company nor any of its subsidiaries has been
delinquent in the payment of any Tax or is there any Tax deficiency
outstanding, proposed or assessed against the Company, nor has the
Company or any of its subsidiaries executed any waiver of any statute of
limitations on or extensions of the period for the assessment or
collection of any Tax.
(iv) To Company's or any of its subsidiaries' knowledge, no audit or
other examination of any Return of the Company or any of its subsidiaries
is currently in progress, nor has the Company or any of its subsidiaries
been notified in writing of any request for such an audit or other
examination, nor is any taxing authority asserting, or to Company's or
any of its subsidiaries' knowledge, threatening to assert against the
Company or any of its subsidiaries any claim for Taxes. There are no
matters relating to Taxes under discussion between any taxing authority
and the Company or any of its subsidiaries.
(v) No adjustment relating to any Returns filed by the Company or any
of its subsidiaries (and no claim by a taxing authority in a jurisdiction
in which the Company does not file Returns that the Company or any of its
subsidiaries may be subject to taxation by such jurisdiction) has been
proposed in writing by any Tax authority to the Company or any of its
subsidiaries or any representative thereof.
(vi) Neither the Company nor any of its subsidiaries has any
liability for any unpaid Taxes (whether or not shown to be due on any
Return) which has not been accrued for or reserved on the Company balance
sheet dated September 30, 2000 in accordance with GAAP, whether asserted
or unasserted, contingent or otherwise, other than any liability for
unpaid Taxes that may have accrued since September 30, 2000 in connection
with the operation of the business of the Company and its subsidiaries in
the ordinary course.
(vii) Neither the Company nor any of its subsidiaries (i) has ever
been a member of an affiliated group filing a consolidated Return,
(ii) has ever been a party to any Tax sharing or Tax allocation
agreement, arrangement or understanding and does not owe any amount under
any such agreement, other than this Agreement, (iii) is liable for the
Taxes of any other person under United States Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise, and
(iv) has ever been a party
17
to any joint venture, partnership or other arrangement that could be
treated as a partnership for income Tax purposes.
(viii) Neither Company nor any of its subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under
Section 355 of the Code (x) in the two years prior to the date of this
Agreement or (y) in a distribution which could otherwise constitute part
of a "plan" or "series of related transactions" (within the meaning of
Section 355(e) of the Code) in conjunction with the Merger.
(ix) The Company and each of its subsidiaries are in full compliance
with all terms and conditions of any Tax exemptions, Tax holiday or other
Tax reduction agreement or order of a territorial or foreign government.
(x) The Company Disclosure Letter lists each material tax incentive
granted to the Company and its subsidiaries under the laws of the State
of Israel, the period for which such tax incentive applies, and the
nature of such tax incentive.
2.16 BROKERS. Except for fees payable to CIBC World Markets Corp. ("CIBC
WORLD MARKETS"), a copy of the engagement letter of which has been provided to
Parent, Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders fees or agent's commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
2.17 INTELLECTUAL PROPERTY.
(a) For the purposes of this (i) Section 2.17 the term "Company" means
the Company and/or any, each or all of its subsidiaries, as the context or
usage permits, and (ii) this Agreement, the following terms have the
following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following
(i) works of authorship including, without limitation, computer programs,
source code and executable code, whether embodied in software, firmware
or otherwise, documentation, designs, files, records, data and mask
works, (ii) inventions (whether or not patentable), improvements, and
technology, (iii) proprietary and confidential information, trade secrets
and know how, (iv) databases, data compilations and collections and
technical data, (v) logos, trade names, trade dress, trademarks and
service marks, (vi) domain names, web addresses and sites, (vii) tools,
methods and processes, and (viii) all instantiations of the foregoing in
any form and embodied in any media.
"INTELLECTUAL PROPERTY RIGHTS" shall mean any and all worldwide,
common law and/or statutory rights in, arising out of, or associated
therewith: (i) all United States and foreign patents and utility models
and applications therefor and all reissues, divisions, re-examinations,
renewals, extensions, provisionals, continuations and
continuations-in-part thereof, and equivalent or similar rights anywhere
in the world in inventions and discoveries including without limitation
invention disclosures ("PATENTS"); (ii) all trade secrets and other
rights in know how and confidential or proprietary information;
(iii) all copyrights, copyrights registrations and applications therefor,
and mask works and mask work registrations and applications therefor, and
all other rights corresponding thereto ("COPYRIGHTS"); (iv) all uniform
resource locators, e-mail and other internet addresses and domain names
and applications and registrations therefore ("URLS"); all trade names,
logos, common law trademarks and service marks, trademark and service
xxxx registrations and applications therefor and all goodwill associated
therewith ("TRADEMARKS"); (v) all "moral" or economic rights of authors
and inventors, however denominated throughout the world, and (vi) any
similar, corresponding or equivalent rights to any of the foregoing.
18
"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual Property
and Intellectual Property Rights, including Registered Intellectual
Property Rights that are owned by or exclusively licensed to the Company.
"REGISTERED INTELLECTUAL PROPERTY RIGHTS" shall mean all United
States, international and foreign: (i) Patents, including applications
therefor; (ii) registered Trademarks, applications to register
Trademarks, including intent-to-use applications, or other registrations
or applications related to Trademarks; (iii) Copyrights registrations and
applications to register Copyrights; and (iv) any other Intellectual
Property Right that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded
by, any state, government or other public legal authority at any time.
(b) Section 2.17(b) of the Company Disclosure Letter lists all
Registered Intellectual Property Rights owned or exclusively licensed by, or
filed in the name of, or applied for by the Company (the "COMPANY REGISTERED
INTELLECTUAL PROPERTY RIGHTS") and lists any proceedings or actions before
any court, tribunal (including the United States Patent and Trademark Office
(the "PTO") or equivalent authority anywhere in the world) related to any of
the Company Registered Intellectual Property Rights or Company Intellectual
Property.
(c) Except as set forth in Section 2.17(c) of the Company Disclosure
Letter, the Company has no knowledge of any facts or circumstances that
would render any Company Intellectual Property invalid or unenforceable.
Without limiting the foregoing, the Company knows of no information,
materials, facts, or circumstances, including any information or fact that
would constitute prior art, that would render any of the Company Registered
Intellectual Property Rights invalid or unenforceable, or would adversely
affect any pending application for any Company Registered Intellectual
Property Right and the Company has not misrepresented, or knowingly failed
to disclose, any facts or circumstances in any application for any Company
Registered Intellectual Property Right that would constitute fraud or a
misrepresentation with respect to such application or that would otherwise
affect the validity or enforceability of any Company Registered Intellectual
Property Right.
(d) Each item of Company Intellectual Property, including all Company
Registered Intellectual Property Rights listed in Section 2.17(b) of the
Company Disclosure Letter and all Intellectual Property licensed to the
Company, is free and clear of any Liens or other encumbrances, it being
specified that with respect to Intellectual Property licensed to the
Company, absense of Liens or other encumbrances refers only to those Liens
and encumbrances of the Company. The Company is the exclusive owner or
exclusive licensee of all Company Intellectual Property.
(e) To the extent that any Intellectual Property has been developed or
created independently or jointly by any person other than the Company for
which the Company has paid, the Company has a written agreement with such
person with respect thereto, and the Company thereby has obtained ownership
of, and is the exclusive owner of, all such Intellectual Property and
associated Intellectual Property Rights by operation of law or by valid
assignment.
(f) Except as set forth in Section 2.17(f) of the Company Disclosure
Letter, the Company Intellectual Property, technology in the public domain
and any Commercial Software (as such term is defined in subsection
(g) below) licensed to the Company, constitutes all the Intellectual
Property and Intellectual Property Rights used in and/or necessary to the
conduct of the business of the Company as it currently is conducted, or
planned to be conducted, including, without limitation, the design,
development, manufacture, use, import and sale of products, technology and
services (including products, technology or services currently under
development).
(g) Other than inbound "shrink-wrap" and similar generally available
commercial binary code end-user or enterprise licenses ("Commercial
Software"), the Company has made available to Parent or its counsel a copy
of all contracts, licenses and agreements to which the Company is a party
with
19
respect to any Intellectual Property and Intellectual Property Rights.
Except as set forth in Section 2.17(g) of the Company Disclosure Letter, to
the knowledge of the Company, (i) all such contracts, licenses and agreement
are in full force and effect and (ii) the consummation of the transactions
contemplated by this Agreement will neither violate nor result in the
material breach, modification, cancellation, termination or suspension of
such contracts, licenses or agreements. The Company is not in material
breach of nor has the Company failed, in any material respect, to perform
under, any of the foregoing contracts, licenses or agreements and, to the
Company's knowledge, no other party to any such contract, license or
agreement is in breach thereof or has failed to perform thereunder. Except
as set forth in Section 2.17(g) of the Company Disclosure Letter, following
the Closing Date, the Surviving Corporation will be permitted to exercise
all of Company's rights under such contracts, license and agreements to the
same extent Company would have been able to had the Merger not occurred and
without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which Company would otherwise be
required to pay. No person who has licensed Intellectual Property or
Intellectual Property Rights to the Company has ownership rights or license
rights to improvements made by the Company in such Intellectual Property
which has been licensed to the Company.
(h) Except (i) as set forth in Section 2.17(h) of the Company Disclosure
Letter, (ii) for Commercial Software, and (iii) for technology in the public
domain, to the knowledge of the Company, (A) all Intellectual Property used
in or necessary to the conduct of the Company's business as presently
conducted or currently contemplated to be conducted by the Company was
written and created solely by (1) employees of the Company acting within the
scope of their employment, or (2) third parties who have validly and
irrevocably assigned all of their rights, including Intellectual Property
Rights therein, to the Company, or (3) third parties who have granted to the
Company a license (sufficient for the conduct of the Company's business as
presently conducted and currently contemplated to be conducted by the
Company) to all such third party's Intellectual Property Rights in such
Intellectual Property, and (B) no third party owns or has any rights to any
of the Company Intellectual Property owned by the Company.
(i) Company has made available to Parent or its counsel all contracts,
licenses and agreements between the Company and any other person wherein or
whereby the Company has agreed to, or assumed, any obligation or duty to
warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume
or incur any obligation or liability or provide a right of rescission with
respect to the infringement or misappropriation by the Company or such other
person of the Intellectual Property Rights of any person other than the
Company.
(j) To the knowledge of the Company, the operation of the business of
the Company as it currently is conducted or is contemplated to be conducted
by the Company, including but not limited to the design, development, use,
import, manufacture and sale of the products, technology or services
(including products, technology or services currently under development) of
the Company does not, and will not when conducted by Parent and/or Surviving
Corporation in substantially the same manner following the Closing, infringe
or misappropriate any Intellectual Property Right of any person or
constitute unfair competition or trade practices under the laws of any
jurisdiction in which the Company operates or distributes its products, and
except as set forth in Section [2.17(j)] of the Company Disclosure Letter,
the Company has not received notice from any person claiming that such
operation or any act, product, technology or service (including products,
technology or services currently under development) of the Company infringes
or misappropriates any Intellectual Property Right of any person or
constitutes unfair competition or trade practices under the laws of any
jurisdiction in which the Company operates or distributes its products.
(k) Each item of Company Registered Intellectual Property Rights is
valid and subsisting, and all necessary registration, maintenance and
renewal fees in connection with such Company Registered Intellectual
Property Rights have been paid and all reasonably necessary documents and
certificates in
20
connection with such Company Registered Intellectual Property Rights have
been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may
be, for the purposes of maintaining such Company Registered Intellectual
Property Rights. There are no actions that must be taken by the Company
within sixty (60) days of the Closing Date, including the payment of any
registration, maintenance or renewal fees or the filing of any responses to
the PTO office actions, documents, applications or certificates for the
purposes of maintaining, perfecting or preserving or renewing any Company
Registered Intellectual Property Rights. In each case in which the Company
has acquired ownership of any Intellectual Property from any person, the
Company has obtained a valid and enforceable assignment sufficient to
irrevocably transfer all rights in such Intellectual Property and the
associated Intellectual Property Rights (including the right to seek past
and future damages with respect thereto) to the Company.
(l) Except as set forth in Section 2.17(l) of the Company Disclosure
Letter, to the knowedge of the Company, there are no contracts, licenses or
agreements between the Company and any other person with respect to Company
Intellectual Property under which there is any dispute regarding the rights
and obligations specified in such agreement, or performance under such
agreement including with respect to any payments to be made or received by
the Company thereunder.
(m) To the knowledge of the Company, no person is infringing or
misappropriating any Company Intellectual Property.
(n) The Company has taken all commercially reasonable steps to protect
the Company's rights in confidential information and trade secrets of the
Company or as required by any other person who has provided its confidential
information or trade secrets to the Company. Without limiting the foregoing,
the Company has, and enforces, a policy requiring each employee, consultant
and contractor to execute proprietary information, confidentiality and
assignment agreements, and all current and former employees, consultants and
contractors of the Company have executed such an agreement, except where the
failure to do so would not be reasonably expected to have a Material Adverse
Effect on the Company. All employees of the Company have entered into a
valid and binding written agreement with the Company assigning to the
Company all Intellectual Property, including all accompanying Intellectual
Property Rights, created by such employee in the scope of his or her
employment with the Company.
(o) Except as set forth in Section 2.17(o) of the Company Disclosure
Letter, to the knowledge of the Company, no Company Intellectual Property or
service of the Company is subject to any proceeding or outstanding decree,
order, judgment, agreement or stipulation that restricts in any manner the
use, transfer or licensing thereof by the Company or may affect the
validity, use or enforceability of such Company Intellectual Property.
(p) Except as set forth in Section 2.17(p) of the Company Disclosure
Letter, all Company Intellectual Property that is owned or licensed by the
Company will be fully (subject only to non-exclusive licenses granted by the
Company with respect thereto) transferable, alienable or licensable by
Surviving Corporation and/or Parent without restriction and without payment
of any kind to any third party.
(q) Except as set forth in Section 2.17(q) of the Company Disclosure
Letter, to the knowledge of the Company, neither this Agreement nor the
transactions contemplated by this Agreement, including the assignment to
Parent or Surviving Corporation, by operation of law or otherwise, of any
contracts or agreements to which the Company is a party, will result in
(i) Parent's or the Surviving Corporation's granting to any third party any
right to or with respect to any Intellectual Property or Intellectual
Property Right owned by, or licensed to, either of them, (ii) either
Parent's or the Surviving Corporation's being bound by, or subject to, any
non-compete or other restriction on the operation or scope of their
respective businesses, or (iii) either Parent's or the Surviving
Corporation's
21
being contractually obligated to pay any royalties or other amounts to any
third party in excess of those payable by Parent or Surviving Corporation,
respectively, prior to the Closing.
(r) Except as set forth in Section 2.17(r) of the Company Disclosure
Letter, none of the Company Intellectual Property was developed by or on
behalf of or using grants of any Governmental Entity.
2.18 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth in
Section 2.18 of the Company Disclosure Letter, neither Company nor any of its
subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment with
any officer, director, Company employee or member of Company's Board of
Directors, or any service, operating or management agreement or arrangement
with respect to any of its properties (whether leased or owned) other than
those that are terminable by Company or any of its subsidiaries on no more
than thirty (30) days' notice without liability or financial obligation to
the Company;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement;
(c) any agreement of indemnification or any guaranty other than any
agreement of indemnification entered into in connection with the sale or
license of products or services in or the licensing of real property in the
ordinary course of business;
(d) any agreement, contract or commitment containing any covenant
limiting in any respect the right of Company or any of its subsidiaries to
engage in any line of business or to compete with any person or granting any
exclusive distribution rights;
(e) any agreement, contract or commitment currently in force relating to
the disposition or acquisition by Company or any of its subsidiaries after
the date of this Agreement of a material amount of assets not in the
ordinary course of business or pursuant to which Company or any of its
subsidiaries has any material ownership interest in any corporation,
partnership, joint venture or other business enterprise other than Company's
subsidiaries;
(f) any dealer, distributor, joint marketing or development agreement
currently in force under which Company or any of its subsidiaries have
continuing material obligations to jointly market any product, technology or
service and which may not be canceled without penalty upon notice of ninety
(90) days or less, or any material agreement pursuant to which Company or
any of its subsidiaries have continuing material obligations to jointly
develop any Intellectual Property that will not be owned, in whole or in
part, by Company or any of its subsidiaries and which may not be canceled
without penalty upon notice of ninety (90) days or less;
(g) any agreement, contract or commitment currently in force to license
any third party to manufacture or reproduce any Company product, service or
technology or any agreement, contract or commitment currently in force to
sell or distribute any Company products, service or technology except
agreements with distributors or sales representative in the normal course of
business cancelable without penalty upon notice of ninety (90) days or less
and substantially in the form previously provided to Parent;
(h) any agreement, contract or commitment currently in force to provide
source code to any third party for any product or technology that is
material to Company and its subsidiaries taken as a whole;
22
(i) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments relating to the
borrowing of money or extension of credit other than trade payables incurred
in the ordinary course of business;
(j) any material settlement agreement under which the Company has
ongoing obligations; or
(k) any other agreement, contract or commitment involving in excess of
$100,000 being paid by or to Company over the term thereof.
Neither Company nor any of its subsidiaries, nor to Company's knowledge any
other party to a Company Contract (as defined below), is in material breach,
violation or default under, and neither Company nor any of its subsidiaries has
received written notice that it has breached, violated or defaulted under, any
of the material terms or conditions of any of the agreements, contracts or
commitments to which Company or any of its subsidiaries is a party or by which
it is bound that are required to be disclosed in the Company Disclosure Letter
(any such agreement, contract or commitment, a "COMPANY CONTRACT") in such a
manner as would permit any other party to cancel or terminate any such Company
Contract, or would permit any other party to seek material damages or other
remedies (for any or all of such breaches, violations or defaults, in the
aggregate). Company has made available to Parent true and correct copies of any
contracts between Company and its top ten customers.
2.19 ENVIRONMENTAL MATTERS.
(a) DEFINITIONS.
(i) "HAZARDOUS MATERIAL" is any material or substance that is
prohibited or regulated by any Environmental Law or that has been
designated by any governmental authority to be radioactive, toxic,
hazardous or otherwise a danger to health, reproduction or the
environment.
(ii) "ENVIRONMENTAL LAWS" are all applicable laws, rules,
regulations, orders, treaties, statutes, and codes promulgated by any
governmental authority which prohibit, regulate or control any Hazardous
Material or any Hazardous Material activity, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, the Resource Recovery and Conservation Act of
1976, the Federal Water Pollution Control Act, the Clean Air Act, the
Hazardous Materials Transportation Act, the Clean Water Act, comparable
laws, rules, regulations, ordinances, orders, treaties, statutes, and
codes of other governmental authorities, the regulations promulgated
pursuant to any of the foregoing, and all amendments and modifications of
any of the foregoing, all as amended to date.
(b) Except as set forth in Section 2.19(b) of the Company Disclosure
Letter, neither Company nor any of its subsidiaries is in conflict with, or
in default or violation of any Environmental Law applicable to Company or
any of its subsidiaries or by which its or any of their respective
properties is bound except for any conflicts, defaults or violations that
(individually or in the aggregate) would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company.
(c) Company has not disposed of, released, discharged or emitted any
Hazardous Materials into the soil or groundwater at any properties owned or
leased at any time by Company, or at any other property, or exposed any
employee or other individual to any Hazardous Materials or any environmental
condition in such a manner as would result in any liability or clean-up
obligation of any kind or nature to Company. To the knowledge of Company, no
Hazardous Materials are present in, on, or under any properties owned,
leased or used at any time by Company, and no reasonable likelihood exists
that any Hazardous Materials will come to be present in, on, or under any
properties owned, leased or used at any time by Company, so as to give rise
to any liability or clean-up obligation under any Environmental Laws.
23
2.20 OPINION OF FINANCIAL ADVISOR. The Board of Directors of Company has
been advised by its financial advisor, CIBC World Markets, to the effect that in
its opinion, as of the date of this Agreement, the Exchange Ratio is fair from a
financial point of view to the holders of Company Shares, and the Company will
provide a copy of the written confirmation of such opinion to Parent for
informational purposes as soon as reasonably practicable and in any event within
five (5) business days of the date thereof.
2.21 INSURANCE. Company maintains insurance policies covering the assets,
business, equipment, properties, operations, employees, officers and directors
of Company and its subsidiaries (collectively, the "INSURANCE POLICIES") which
Company reasonably believes are of the type and in amounts customarily carried
by persons conducting businesses similar to those of Company and its
subsidiaries. Except as set forth in Section 2.21 of the Company Disclosure
Letter, there is no material claim by Company or any of its subsidiaries pending
under any of the material Insurance Policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies.
2.22 BOARD APPROVAL. The Board of Directors of Company has unanimously
(i) determined that the Merger is consistent with and in furtherance of the
long-term business strategy of Company and fair to, and in the best interests
of, Company and its shareholders, and that no reasonable concern exists that the
Surviving Corporation will be unable to fulfill the obligations of Company to
its creditors, (ii) approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) as of the date hereof,
determined to recommend that the shareholders of Company adopt and approve this
Agreement and approve the Merger.
2.23 INAPPLICABILITY OF CERTAIN STATUTES. Other than the Israeli Companies
Law, Company is not subject to any takeover law that might apply to the Merger
or any other transaction contemplated by this Agreement.
2.24 GRANTS, INCENTIVES AND SUBSIDIES. Section 2.24 of the Company
Disclosure Letter provides a complete list of all pending and outstanding
grants, incentives and subsidies (collectively, "GRANTS") from the Government of
the State of Israel or any agency thereof, or from any foreign governmental or
administrative agency, granted to Company, including, without limitation,
(i) Approved Enterprise Status from the Investment Center and (ii) grants from
the OCS. Company has made available to Parent, prior to the date hereof, correct
copies of all documents evidencing Grants submitted by Company and of all
letters of approval, and supplements thereto, granted to Company. Section 2.24
of the Company Disclosure Letter details all material undertakings of Company
given in connection with the Grants. Without limiting the generality of the
above, Section 2.24 of the Company Disclosure Letter includes the aggregate
amounts of each Grant, and the aggregate outstanding obligations thereunder of
Company with respect to royalties, or the outstanding amounts to be paid by the
OCS to Company and the composition of such obligations or amount by the product
or product family to which it relates. Company is in compliance, in all material
respects, with the terms and conditions of their respective Grants and, except
as disclosed in Section 2.24 of the Company Disclosure Letter hereto, have duly
fulfilled, in all material respects, all the undertakings relating thereto.
Company is not aware of any event or other set of circumstances which might lead
to the revocation or material modification of any of the Grants. Subject to the
receipt of the approvals set forth in Section 2.24 of the Company's Disclosure
Letter and compliance by the Surviving Corporation with the applicable
requirements and conditions, to the Company's knowledge, the consummation of the
Merger will not adversely affect the remaining duration of any material tax
incentive granted to the Company or require any recapture of any previously
claimed incentive, and no consent or approval of any Governmental Entity is
required, other than as contemplated by the Disclosure Letter, prior to the
consummation of the Merger in order to preserve the entitlement of the Surviving
Corporation or its subsidiaries to any such incentive.
2.25 POOLING OF INTERESTS. Neither Company nor, to Company's knowledge,
any of its directors, officers or affiliates has taken any action which would
interfere with (i) Parent's ability to account for the Merger as a pooling of
interests or (ii) Parent's, Surviving Corporation's or Company's ability to
continue
24
to account for as a pooling of interests any past acquisition by Company
currently accounted for as a pooling of interests.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to the
Company, subject to such exceptions as are specifically disclosed in writing
(with reference to the specific sections of this Agreement to which each such
exception applies) in the disclosure letter supplied by Parent to the Company,
dated as of the date hereof and signed by a duly authorized officer of Parent
(the "PARENT DISCLOSURE LETTER"), which disclosure shall provide an exception to
or otherwise qualify or respond to the representations or warranties of Parent
and Merger Sub specifically referred to in such disclosure and any other
representation or warranty of Parent and Merger Sub to the extent that it is
reasonably apparent from such disclosure that such disclosure is applicable to
such other representation or warranty, as follows:
3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Parent and its
subsidiaries is a corporation duly organized, validly existing and, where
applicable, in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority to own, lease
and operate its assets and properties and to carry on its business as it is now
being conducted. Each of Parent and its subsidiaries is in possession of all
Approvals necessary to own, lease and operate the properties it purports to own,
operate or lease and to carry on its business as it is now being conducted,
except where the failure to have such Approvals would not, individually or in
the aggregate, be material to Parent. Each of Parent and its subsidiaries is
duly qualified or licensed as a foreign corporation to do business, and, where
applicable, is in good standing, in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, except for such failures to be so
duly qualified or licensed and in good standing that would not, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent. Merger Sub is a newly incorporated Israeli
corporation. Except in connection with this Agreement, Merger Sub has not
conducted any operations nor entered into any agreements, nor will it do either
prior to the Effective Time. Merger Sub has no obligations or liabilities,
either accrued, absolute, contingent or otherwise, nor will it have any such
obligations or liabilities prior to the Effective Time or the earlier
termination of the Agreement.
3.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Parent has previously
furnished to Company complete and correct copies of its Certificate of
Incorporation and Bylaws as amended to date (together, the "PARENT CHARTER
DOCUMENTS") and the Articles of Association of Merger Sub. Such Parent Charter
Documents and equivalent organizational documents of each of its subsidiaries
are in full force and effect. Parent is not in violation of any of the
provisions of the Parent Charter Documents, and no subsidiary of Parent is in
violation of any of its equivalent organizational documents.
3.3 CAPITALIZATION. The authorized capital stock of Parent consists of
(i) 175,000,000 shares of Parent Common Stock, par value $0.0005 per share, and
(ii) 5,000,000 shares of Preferred Stock, par value $0.001 per share ("PARENT
PREFERRED STOCK"). As of the close of business on December 4, 2000, 75,540,963
shares of Parent Common Stock were issued and outstanding. As of the date
hereof, no shares of Parent Preferred Stock were issued or outstanding. As of
December 4, 2000, Parent had reserved an aggregate of 19,177,576 shares of
Parent Common Stock for issuance pursuant to Parent's 1996 Stock Incentive Plan,
ViaVideo 1996 Stock Option/Stock Issuance Plan, under which options to purchase
10,076,454 shares were outstanding, and 1,157,194 shares of Parent Common Stock
were available for issuance pursuant to the Parent Employee Stock Purchase Plan.
Except as set forth in the immediately preceding sentence, no shares of capital
stock or other equity securities of Parent are issued, reserved for issuance or
outstanding except as set forth in the Parent SEC Reports and except for the
Rights. Under the Rights Agreement, until the distribution date, (i) the Rights
will be evidenced (subject to the provisions of Section 3(b) and 3(c) thereof)
by the certificates for Parent Common Stock registered in the names of the
holders of thereof (which certificates shall also be deemed to be Rights
Certificates, as such term is defined in the Rights
25
Agreement) and not by separate Rights Certificates and (ii) the right to receive
Rights Certificates will be transferable only in connection with the transfer of
Parent Common Stock. The authorized capital stock of Merger Sub consists of
1,000 Ordinary Shares, NIS 1.00 par value per share, of which, as of the date
hereof, ten (10) Ordinary Shares are issued and outstanding. All of the
outstanding shares of Parent's and Merger Sub's respective capital stock have
been duly authorized and validly issued and are fully paid and nonassessable.
All shares of Parent Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall, and the shares of Parent Common Stock to be
issued pursuant to the Merger will be, duly authorized, validly issued, fully
paid and nonassessable. All of the outstanding shares of capital stock (other
than directors' qualifying shares) of each of Parent's subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and all such shares
(other than directors' qualifying shares) are owned by Parent or another
subsidiary free and clear of all security interests, liens, claims, pledges,
agreements, limitations in Parent's voting rights, charges or other encumbrances
of any nature whatsoever.
3.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Merger Sub
has all necessary corporate power and authority to execute and deliver this
Agreement, and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and by Merger Sub and the consummation by Parent and Merger Sub of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Parent and Merger Sub, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Parent and by
Merger Sub and, assuming the due authorization, execution and delivery by
Company, constitutes a legal and binding obligation of Parent and of Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting creditors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Parent and Merger
Sub do not, and the performance of this Agreement by Parent and Merger Sub
shall not, (i) conflict with or violate the Parent Charter Documents or
equivalent organizational documents or any of Parent's subsidiaries,
(ii) subject to obtaining the consents, approvals, authorizations and
permits, and making the registrations, filings and notifications set forth
in Section 3.5(b) below (or Section 3.5(b) of the Parent Disclosure Letter),
conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent or any of its subsidiaries or by which it or
their respective properties are bound, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair Parent's or any such subsidiary's
rights or alter the rights or obligations of any third party under, or give
to others any rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or encumbrance on any of the
properties or assets of Parent or any of its subsidiaries pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent
or any of its subsidiaries is a party or by which Parent or any of its
subsidiaries or its or any of their respective properties are bound, except
to the extent such conflict, violation, breach, default, impairment or other
effect could not in the case of clauses (ii) or (iii) individually or in the
aggregate, (A) reasonably be expected to have a Material Adverse Effect on
Parent or (B) prevent or materially delay consummation of the Merger or
otherwise prevent Parent or Merger Sub from performing its obligation under
this Agreement.
(b) The execution and delivery of this Agreement by Parent and Merger
Sub do not, and the performance of this Agreement by Parent and Merger Sub
shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity except (i) for
26
applicable requirements, if any, of the Securities Act, the Exchange Act,
Blue Sky Laws, the pre-merger notification requirements of the HSR Act and
of foreign governmental entities and the rules and regulations thereunder,
the rules and regulations of Nasdaq, (ii) filings with the Investment
Center, (iii) consent of the OCS, (iv) consent or any approval of the
Israeli Commissioner of Restrictive Trade Practices, if necessary, (v) the
Israeli Securities exemption as defined in Section 5.5 and (vi) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the
aggregate, (A) reasonably be expected to have a Material Adverse Effect on
Parent or (B) would not prevent or materially delay consummation of the
Merger or otherwise prevent Parent or Merger Sub from performing its
obligations under this Agreement.
3.6 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has made available to Company a correct and complete copy of
each report, schedule, registration statement and definitive proxy statement
filed by Parent with the SEC on or after December 31, 1999 and prior to the
date of this Agreement (the "PARENT SEC REPORTS"), which are all the forms,
reports and documents required to be filed by Parent with the SEC since such
date. The Parent SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and (ii) did not at the time they were filed (and if any Parent SEC Report
filed prior to the date of this Agreement was amended or superseded by a
filing prior to the date of this Agreement, then on the date of such
amendment or superceded filing) contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of Parent's
subsidiaries is required to file any reports or other documents with the
SEC.
(b) At their respective dates, each set of consolidated financial
statements (including, in each case, any related notes thereto) contained in
the Parent SEC Reports was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated
in the notes thereto or, in the case of unaudited statements, as permitted
by Form 10-Q of the Exchange Act) and each fairly presents the consolidated
financial position of Parent and its subsidiaries at the respective dates
thereof and the consolidated results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial
statements were or are subject to normal adjustments which were not or are
not expected to be material in amount.
(c) Parent has previously furnished to Company a complete and correct
copy of any amendments or modifications, which have not yet been filed with
the SEC but which are required to be filed as of the date hereof, to
agreements, documents or other instruments which previously had been filed
by Parent with the SEC pursuant to the Securities Act or the Exchange Act.
3.7 NO UNDISCLOSED LIABILITIES. Neither Parent nor any of its subsidiaries
has any liabilities (absolute, accrued, contingent or otherwise) of a nature
required to be disclosed on a balance sheet or in the related notes to the
consolidated financial statements prepared in accordance with GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Parent and its subsidiaries taken as a
whole, except (i) liabilities provided for in Parent's balance sheet as of
September 30, 2000 or (ii) liabilities incurred since September 30, 2000 in the
ordinary course of business, none of which is material to the business, results
of operations or financial condition of Parent and its subsidiaries, taken as a
whole.
3.8 ABSENCE OF LITIGATION. Except as specifically disclosed in the Parent
SEC Reports as of the date hereof, there are no claims, actions, suits or
proceedings that have a reasonable likelihood of success on the merits pending
or, to the knowledge of Parent, threatened (or to the knowledge of Parent, any
governmental or regulatory investigation pending or threatened) against Parent
or any property or rights of Parent or any of its subsidiaries, before any
court, arbitrator or administrative, governmental or
27
regulatory authority or body, domestic or foreign, except for those claims,
actions, suits or proceedings which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent.
3.9 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. None of the
information supplied or to be supplied by Parent for inclusion or incorporation
by reference in (i) the Form S-4 will, at the time the Form S-4 becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading; and (ii) the Proxy
Statement/Prospectus will, at the date or dates mailed to the shareholders of
Company, at the time of the Company General Meeting and as of the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Form S-4 and the Proxy Statement/Prospectus will comply as to
form in all material respects with the provisions of the Securities Act and the
rules and regulations promulgated by the SEC thereunder. If at any time prior to
the Effective Time, any event relating to Parent or any of its affiliates,
officers or directors should be discovered by Parent which should be set forth
in any amendment to the S-4 or a supplement to the Proxy Statement/Prospectus,
Parent shall inform Company as soon as reasonably practicable after such
discovery. Notwithstanding the foregoing, neither Parent nor Merger Sub makes
any representation or warranty with respect to any information supplied by the
Company which is contained in any of the foregoing documents.
3.10 POOLING OF INTERESTS. Neither Parent nor, to Parent's knowledge, any
of its directors, officers or affiliates has taken any action which would
interfere with Parent's ability to account for the Merger as a pooling of
interests.
3.11 COMPLIANCE; PERMITS.
(a) Except as set forth in Section 3.11(a) of the Parent Disclosure
Letter, neither Parent nor any of its subsidiaries is in conflict with, or
in default or violation of, (i) any law, rule, regulation, order, judgment
or decree applicable to Parent or any of its subsidiaries or by which its or
any of their respective properties is bound, or (ii) any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which Parent or any of its subsidiaries or its
or any of their respective properties is bound, except for any conflicts,
defaults or violations that (individually or in the aggregate) would not
reasonably be expected to have a Material Adverse Effect on Parent. No
investigation or review by any governmental or regulatory body or authority
is, to the knowledge of Parent, pending or threatened against Parent or its
subsidiaries, nor to the knowledge of Parent has any governmental or
regulatory body or authority indicated an intention to conduct the same,
other than, in each such case, those the outcome of which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent.
(b) Except as set forth in Section 3.11(a) of the Parent Disclosure
Letter, Parent and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals and other authorizations from governmental
authorities which are material to the operation of the business of Parent
and its subsidiaries taken as a whole (collectively, the "PARENT PERMITS").
Parent and its subsidiaries have been and are in compliance in all material
respects with the terms of the Parent Permits and any conditions placed
thereon.
3.12 NO PRIOR ACTIVITIES. Except for obligations incurred in connection
with its incorporation or organization or the negotiation and consummation of
this Agreement and the transactions contemplated hereby, Merger Sub has neither
incurred any obligation or liability nor engaged in any business or activity of
any type or kind or entered into any Agreement or arrangement with any person.
3.13 OBLIGATIONS TO CREDITORS. Parent and Merger Sub intend that the
Surviving Corporation be able to fulfill the obligations of Company and Merger
Sub to creditors on an ongoing basis following the
28
Closing and do not intend to take any action following the Closing which would
impair the ability of the Surviving Corporation to fulfill such obligations.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS BY COMPANY. Except as contemplated by this
Agreement, disclosed in Section 4.1 of the Company Disclosure Letter or
consented to by Parent in writing, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, Company and each of its
subsidiaries shall, carry on its business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and in material
compliance with all applicable laws and regulations, pay its debts and Taxes
when due subject to good faith disputes over such debts or Taxes, pay or perform
other material obligations when due, commence and diligently pursue the
preparation of (together with its independent public accountants) the audit of
its financial statements as of and for the year ended December 31, 2000, and use
its commercially reasonable efforts consistent with past practices and policies
to (i) preserve intact its present business organization, (ii) keep available
the services of its present officers and employees and (iii) preserve its
relationships with customers, suppliers, distributors, licensors, licensees and
others with which it has significant business dealings. In addition, Company
will promptly notify Parent of any material event involving its business or
operations.
In addition, except as permitted by the terms of this Agreement and except
as provided in Section 4.1 of the Company Disclosure Letter, without the prior
written consent of Parent, (which consent, or refusal thereof, shall not be
unreasonably delayed and, in the case of subsections (m), (r) and (t), which
consent shall not be unreasonably withheld) during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company shall not do any
of the following and shall not permit its subsidiaries to do any of the
following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of
such plans;
(b) Grant any severance or termination pay to any officer or employee
except pursuant to written agreements outstanding, or written policies
existing, on the date hereof and as previously disclosed in writing or made
available to Parent, or adopt any new severance plan, or amend or modify or
alter in any manner any severance plan, agreement or arrangement existing on
the date hereof, or, except as permitted by Section 4.1(f), grant any
equity-based compensation, whether payable in cash or stock;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify any rights to the Company Intellectual Property, or enter
into any agreements or make other commitments or arrangements to grant,
transfer or license to any person future patent rights, other than
non-exclusive licenses granted to resellers and end users in the ordinary
course of business consistent with past practices;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Company or its subsidiaries, except repurchases
of unvested shares at cost in connection with the termination of the
employment relationship with any employee pursuant to stock option or
purchase
29
agreements in effect on the date hereof (or any such agreements entered into
in the ordinary course consistent with past practice by Company with
employees hired after the date hereof);
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber or
propose any of the foregoing with respect to any shares of capital stock or
any securities convertible into or exercisable or exchangeable for shares of
capital stock, or subscriptions, rights, warrants or options to acquire any
shares of such capital stock or any securities convertible into shares of
such capital stock, or enter into other agreements or commitments of any
character obligating it to issue any such shares or convertible securities,
other than (x) the issuance delivery and/or sale of (i) shares of Company
Shares pursuant to the exercise of stock options and warrants outstanding as
of the date of this Agreement and (y) the granting of stock options to newly
hired non-officer level employees, in the ordinary course of business and
consistent with the Company's past practices after the closing of its
initial public offering, including as to vesting schedules.
(g) Cause, permit or propose any amendments to the Company Charter
Documents (or similar governing instruments of any of its subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, limited liability company,
general or limited partnership, business trust, unincorporated association
or other business organization, entity or division thereof, or otherwise
acquire or agree to acquire all or substantially all of the assets of any of
the foregoing, enter into any joint ventures, strategic partnerships or
alliances;
(i) Sell, lease, license, encumber, convey, assign, sublicense or
otherwise dispose of or transfer any properties or assets or any interest
therein other than sales and licenses in the ordinary course of business
consistent with past practice, except for the sale, lease or disposition
(other than through licensing permitted by clause (c)) of property or assets
which are not material, individually or in the aggregate, to the business of
Company and its subsidiaries, taken as a whole; modify, amend or terminate
any existing material lease, license or contract affecting the use,
possession or operation of any such properties or assets; grant or otherwise
create or consent to the creation of any material easement, covenant,
restriction, assessment or charge affecting any owned property or leased
property or any material part thereof; commit any waste or nuisance on any
such property; or make any material changes in the construction or condition
of any such property;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
Company, enter into any "keep well" or other agreement to maintain any
financial statement condition or enter into any arrangement having the
economic effect of any of the foregoing, in each case other than in
connection with the financing of ordinary course trade payables, or the
collection of accounts receivable, notes or commercial paper, consistent
with past practice;
(k) Adopt or amend any Company Employee Plan; or enter into any
employment contract or collective bargaining agreement (other than offer
letters and letter agreements entered into in the ordinary course of
business consistent with past practice with employees who are terminable "at
will" and who are not officers of the Company); pay any special bonus or
special remuneration to any director or employee; or increase the salaries
or wage rates or fringe benefits (including rights to severance or
indemnification) of its directors, officers, employees or consultants
except, in each case, as may be required by law, provided, that the Company
may increase the salaries or wage rates of non-officer level employees in
the ordinary course of business consistent with past practices;
30
(l) (i) Pay, discharge, settle or satisfy any litigation (whether or not
commenced prior to the date of this Agreement) or any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms in existence as of the date
hereof, or (ii) waive the benefits of, agree to modify in any manner,
terminate, release any person from or knowingly fail to enforce any
confidentiality or similar agreement to which Company or any of its
subsidiaries is a party or of which Company or any of its subsidiaries is a
beneficiary;
(m) Make any individual or series of related payments outside of the
ordinary course of business in excess of $100,000;
(n) Modify, amend or terminate any material contract or agreement to
which Company or any subsidiary thereof is a party or waive, delay the
exercise of, release or assign any material rights or claims thereunder;
(o) Except as required by GAAP, revalue any of its assets or make any
change in accounting methods, principles or practices;
(p) Enter into, renew or modify any contracts, agreements or obligations
relating to the distribution, sale, license or marketing by third parties of
the products of the Company or any of its subsidiaries, or products licensed
by the Company or any of its subsidiaries, other than nonexclusive
contracts, agreements or arrangements entered into in the ordinary course of
business that can be terminated or cancelled by the Company without penalty
or further payment and without more than 60 days' notice;
(q) Engage in any action with the intent to, directly or indirectly,
adversely impact or materially delay the consummation of the Merger or any
of the other transactions contemplated by this Agreement; or
(r) Hire any officer, or hire any non-officer level employee with an
annual compensation level in excess of $250,000;
(s) Other than (i) fees payable to pursuant to the engagement letter
referred to in Section 2.16 hereof and (ii) fees payable to legal,
accounting and other professional service advisors as disclosed in
Section 4.1(s) of the Company Disclosure Letter, make any individual or
series of related payments outside of the ordinary course of business
(including payments to legal, accounting or other professional service
advisors) in excess of $250,000 in the aggregate;
(t) Incur or enter into any agreement, contract or commitment requiring
Company or any of its subsidiaries to pay in excess of $500,000 over the
term of such agreement, contract or commitment, other than for the purchase
of inventory or raw materials in the ordinary course of business;
(u) Engage in any action that could reasonably be expected to (i) cause
the Merger to fail to qualify as a "reorganization" under Section 368(a) of
the Code or (ii) interfere with Parent's ability to account for the Merger
as a pooling of interests, whether or not (in each case) otherwise permitted
by the provisions of this Article IV;
(v) Make any Tax election or accounting method change inconsistent with
past practice that, individually or in the aggregate, is reasonably likely
to adversely affect in any material respect the Tax liability or Tax
attributes of Company or any of its subsidiaries, settle or compromise any
material Tax liability or consent to any extension or waiver of any
limitation period with respect to Taxes;
(w) Agree in writing or otherwise to take any of the actions described
in Section 4.1(a) through (v) above.
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4.2 CONDUCT OF BUSINESS BY PARENT. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, except as permitted by the terms of
this Agreement and except as provided in Section 4.2 of the Parent Disclosure
Letter, without the prior written consent of Company (which consent, or refusal
thereof, shall not be unreasonably delayed), Parent shall not do any of the
following and shall not permit its subsidiaries to do any of the following:
(a) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any capital stock, unless the Exchange
Ratio shall be appropriately adjusted pursuant to Section 1.6(d) hereof;
(b) Engage in any action with the intent to, or which would, directly or
indirectly, adversely impact or materially delay the consummation of the
Merger;
(c) Engage in any action that could reasonably be expected to (i) cause
the Merger to fail to qualify as a "reorganization" under Section 368(a) of
the Code or (ii) interfere with Parent's ability to account for the Merger
as a pooling of interests; or
(d) Agree in writing or otherwise to take any of the actions described
in Section 4.2(a) through (c) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.
(a) As promptly as practicable after the execution and delivery of this
Agreement, Company and Parent shall prepare and file with the SEC the Proxy
Statement/Prospectus, and Parent shall prepare and file with the SEC the
Form S-4, in which the Proxy Statement/Prospectus will be included as a
prospectus. Each of Company and Parent shall promptly provide to the other
all such information concerning its business and financial statements and
affairs as reasonably may be required or appropriate for inclusion in the
Proxy Statement/Prospectus or the Form S-4, or in any amendments or
supplements thereto, and to cause its counsel and auditors to cooperate with
the other party's counsel and auditors in the preparation of the Proxy
Statement/Prospectus and the Form S-4. Each of Company and Parent shall
respond to any comments of the SEC and shall use its respective commercially
reasonable efforts to have the Form S-4 declared or ordered effective under
the Securities Act as promptly as practicable after such filing, and Company
shall cause the Proxy Statement/Prospectus to be mailed to its shareholders
at the earliest practicable time after the Form S-4 is declared or ordered
effective by the SEC. As promptly as practicable after the date of this
Agreement, each of Company and Parent shall prepare and file any other
filings required to be filed by it under the Exchange Act, the Securities
Act or any other Federal, foreign, state "blue sky" or related laws relating
to the Merger and the transactions contemplated by this Agreement (the
"OTHER FILINGS"). Each of Company and Parent shall notify the other promptly
upon the receipt of any comments or written communication from the SEC or
its staff or any other government officials and of any request by the SEC or
its staff or any other government officials for amendments or supplements to
the Form S-4, the Proxy Statement/Prospectus or any Other Filing, or for
additional information and shall supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC or its staff or any other government officials, on the
other hand, with respect to the Form S-4, the Proxy Statement/Prospectus,
the Merger or any Other Filing. Parent and Company will provide reasonable
representations to the tax counsels or other advisors who prepare the tax
disclosure to be made in the Proxy Statement/Prospectus and the
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Form S-4. All filings by Parent and Company with the SEC in connection with
the transactions contemplated hereby, including the Proxy
Statement/Prospectus, the Form S-4 and any amendment or supplement thereto,
and all Other Filings, with the exception of proxy statements, information
statements and periodic reports filed by Parent under the Exchange Act,
shall be subject to the prior review of the other. Each of Company and
Parent shall cause all documents that it is responsible for filing with the
SEC or other regulatory authorities under this SECTION 5.1(A) to comply as
to form and substance in all material respects with the applicable
requirements of law and the rules and regulations promulgated thereunder,
including (i) the Exchange Act, (ii) the Securities Act, (iii) the rules and
regulations of Nasdaq and (iv) the requirements of the Israeli Companies
Law. Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Proxy Statement/Prospectus, the Form S-4 or
any Other Filing, Company or Parent, as the case may be, shall promptly
inform the other of such occurrence and cooperate in filing with the SEC or
its staff or any other government officials, and/or mailing to the
shareholders of Company, such amendment or supplement.
(b) The Proxy Statement/Prospectus shall include (i) the unanimous
recommendation of the Board of Directors of Company to Company's
shareholders that they vote in favor of approval of this Agreement and the
Merger, unless the Board of Directors of Company shall have withheld,
withdrawn, amended, modified or changed its recommendation in compliance
with Sections 5.3(c) and 5.7 of this Agreement, and (ii) the opinion of CIBC
World Markets referred to in SECTION 2.20 hereof; PROVIDED, HOWEVER, that
the Board of Directors of Company shall submit this Agreement to Company's
shareholders whether or not at any time subsequent to the date hereof such
board determines that it can no longer make such recommendation.
5.2 MERGER PROPOSAL. As promptly as practicable after the execution and
delivery of this Agreement, (a) Company and Merger Sub shall cause a merger
proposal (in the Hebrew language) in the form agreed to by such parties (the
"MERGER PROPOSAL") to be executed in accordance with Section 316 of the Israeli
Companies Law, (b) Company shall call the Company General Meeting, and (c) each
of the Company and Merger Sub shall deliver the Merger Proposal to the Companies
Registrar. Company and Merger Sub shall cause a copy of the Merger Proposal to
be delivered to each of their secured creditors, if any, no later than three
days after the date on which the Merger Proposal is delivered to the Companies
Registrar and shall promptly inform their non-secured creditors of the Merger
Proposal and its contents in accordance with Section 318 of the Israeli
Companies Law and the regulations promulgated thereunder. Promptly after Company
and Merger Sub shall have complied with the preceding sentence and with
subsections (i) and (ii) below, but in any event no more than three days
following the date on which such notice was sent to the creditors, Company and
Merger Sub shall inform the Companies Registrar, in accordance with
Section 317(b) of the Companies Law, that notice was given to their creditors
under Section 318 of the Israeli Companies Law and the regulations promulgated
thereunder. In addition to the above, each of Company and, if applicable, Merger
Sub shall:
(i) Publish a notice to its creditors, stating that a Merger Proposal
was submitted to the Companies Registrar and that the creditors may
review the Merger Proposal at the Companies Registrar, the Company's
registered offices or at such other locations as Company shall determine,
in (A) two daily Hebrew newspapers, on the day that the Merger Proposal
is submitted to the Companies Registrar and (B) a popular newspaper in
the United States, no later than three business days following the day on
which the Merger Proposal was submitted to the Companies Registrar;
(ii) Within three business days from the date of submitting the
Merger Proposal to the Companies Registrar, send a notice by registered
mail to all of the substantial creditors (as such term is defined in the
regulations promulgated under the Israeli Companies Law) that Company is
aware of, in which it shall state that a Merger Proposal was submitted to
the Companies
33
Registrar and that the creditors may review the Merger Proposal at such
additional locations, if such locations were determined in the notice
referred to in subsection (i) above; and
(iii) If it employs 50 or more persons, send to the "workers
committee" or display in a prominent place at the Company's premises, a
copy of the notice published in a daily Hebrew newspaper (as referred to
in subsection (i)(A) above), no later than three business days following
the day on which the Merger Proposal was submitted to the Companies
Registrar.
5.3 COMPANY GENERAL MEETING.
(a) Company shall take all action necessary under all applicable legal
requirements to call (promptly after the execution and delivery of this
Agreement), give notice of and hold a shareholders' meeting to vote on the
proposal to approve this Agreement and the Merger (the "COMPANY GENERAL
MEETING"). Subject to the notice requirements of the Israeli Companies Law
and the rules and regulations promulgated thereunder, and the Articles of
Association of Company, and the Form S-4 becoming effective, the Company
General Meeting shall be held (on a date selected by Company in consultation
with Parent) as promptly as practicable after the date hereof. Subject to
the terms of SECTION 5.3(C) hereof, Company shall use commercially
reasonable efforts to solicit from its shareholders proxies in favor of the
approval of this Agreement and the Merger. Company shall call, notice,
convene, hold and conduct the Company General Meeting and solicit all
proxies in connection with the Company General Meeting, in compliance in all
material respects with all applicable legal requirements, including the
Israeli Companies Law, the Articles of Association of Company, and the rules
of Nasdaq. In the event that Parent, or any affiliate thereof as defined in
the Israeli Companies Law, shall cast any votes in respect of the Merger,
Parent shall, prior to such vote, disclose to Company its interest or its
affiliates respective interests in such shares so voted. Company may adjourn
or postpone the Company General Meeting (i) if and to the extent necessary
to provide any necessary supplement or amendment to the Proxy
Statement/Prospectus to Company's shareholders in advance of a vote on this
Agreement and the Merger, or (ii) if, as of the time for which the Company
General Meeting is originally scheduled (as set forth in the Proxy
Statement/Prospectus), there are insufficient Company Shares represented
(either in person or by proxy) to constitute a quorum necessary to conduct
the business of the Company General Meeting. Notwithstanding anything to the
contrary contained in this Agreement, Company's obligation to call, give
notice of, convene and hold the Company General Meeting in accordance with
this SECTION 5.3(A) shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to Company of any
Acquisition Proposal (as defined below), or by any withholding, withdrawal,
amendment, modification or change of the recommendation of the Board of
Directors of Company with respect to this Agreement and/or the Merger.
(b) Unless the Board of Directors of Company shall have withheld,
withdrawn, amended, modified or changed its recommendation of this Agreement
and the Merger in compliance with Section 5.3(c) hereof: (i) the Board of
Directors of Company shall unanimously recommend that Company's shareholders
vote in favor of and approve this Agreement and the Merger at the Company
General Meeting; (ii) the Proxy Statement/Prospectus shall include a
statement to the effect that the Board of Directors of Company has
unanimously recommended that Company's shareholders vote in favor of and
approve this Agreement and the Merger at the Company General Meeting; and
(iii) neither the Board of Directors of Company nor any committee thereof
shall withhold, withdraw, amend, modify, change or propose or resolve to
withhold, withdraw, amend, modify or change, in each case in a manner
adverse to Parent, the unanimous recommendation of the Board of Directors of
Company that Company's shareholders vote in favor of and approve this
Agreement and the Merger. For all purposes of and under this Agreement, the
foregoing recommendation of the Board of Directors of Company shall be
deemed to have been modified in a manner adverse to Parent if such
recommendation by the Board of Directors of Company or any committee thereof
shall no longer be unanimous.
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(c) Nothing in this Agreement shall prevent the Board of Directors of
Company from withholding, withdrawing, amending, modifying or changing its
unanimous recommendation in favor of the approval of this Agreement and the
Merger and recommending a Superior Proposal (as defined below) if (i) a
Superior Proposal is made to Company and is not withdrawn, (ii) neither
Company nor any of its representatives shall have violated the terms of
SECTION 5.7 hereof, and (iii) the Board of Directors of Company reasonably
concludes in good faith, after consultation with its outside counsel, that,
in light of such Superior Proposal, the withholding, withdrawal, amendment,
modification or changing of such recommendation and recommending such
Superior Proposal are required in order for the Board of Directors of
Company to comply with its fiduciary obligations under Israeli law;
PROVIDED, HOWEVER, that prior to publicly withholding, withdrawing,
amending, modifying or changing its recommendation in favor of the approval
of this Agreement and the Merger, Company shall have given Parent at least
two (2) business days prior written notice (or such lesser prior notice as
provided to the members of Company's Board of Directors) thereof and the
opportunity to meet with Company and its counsel. Nothing contained in this
SECTION 5.3 shall limit Company's obligation to hold and convene the Company
General Meeting (regardless of whether the unanimous recommendation of the
Board of Directors of Company shall have been withheld, withdrawn, amended,
modified or changed pursuant hereto).
(d) No later than three days after the approval of the Merger by
Company's shareholders at the Company General Meeting, Company shall (in
accordance with Section 317(b) of the Companies Law) inform the Companies
Registrar of the decision of the Company General Meeting with respect to the
Merger.
5.4 NOTIFICATION.
(a) Company shall give prompt notice to Parent upon becoming aware that
any representation or warranty made by it contained in this Agreement has
become untrue or inaccurate in any material respect, or of any failure of
Company to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, in each case, such that the conditions set forth in
Section 6.3(a) or 6.3(b) would not be satisfied; PROVIDED, HOWEVER, that no
such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the
parties under this Agreement.
(b) Parent shall give prompt notice to Company upon becoming aware that
any representation or warranty made by it or Merger Sub contained in this
Agreement has become untrue or inaccurate in any material respect, or of any
failure of Parent or Merger Sub to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions
set forth in Section 6.2(a) or 6.2(b) would not be satisfied; PROVIDED,
HOWEVER, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
5.5 ISRAELI APPROVALS.
(a) GOVERNMENT FILINGS. Each party to this Agreement shall use all
commercially reasonable efforts to deliver and file, as promptly as
practicable after the date of this Agreement, each notice, report or other
document required to be delivered by such party to or filed by such party
with any Israeli Governmental Entity with respect to the Merger. Without
limiting the generality of the foregoing:
(i) as promptly as practicable after the date of this Agreement,
Company and Parent shall prepare and file the notifications required
under the Israeli Restrictive Trade Practices Law in connection with the
Merger;
35
(ii) Company and Parent shall respond as promptly as practicable to
any inquiries or requests received from the Israeli Restrictive Trade
Practices Commissioner for additional information or documentation; and
(iii) Company shall use all 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
Merger: (i) approval of the OCS and (ii) approval of the Investment
Center. In this connection, if required, Parent 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 Parent undertakes to comply with
the OCS laws and regulations and confirm to the OCS and the Investment
Center that Company shall continue after the Effective Time to operate in
a manner consistent with its previous undertakings to the OCS and the
Investment Center.
(b) LEGAL PROCEEDINGS. 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 Merger,
(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 Israeli Restrictive Trade Practices Commissioner, the OCS, the
Investment Center, the Israel Securities Authority, the Companies Registrar
or any other Israeli Governmental Entity regarding the Merger or any of the
other 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 Merger. In addition, except as may be prohibited by any Israeli
Governmental Entity or by any Israeli legal requirement, in connection with
any such legal proceeding under or relating to the Israeli Restrictive Trade
Practices Law or any other Israeli antitrust or fair trade law, 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.
(c) ISRAELI INCOME TAX RULING. As soon as reasonably practicable after
the execution of this Agreement, the Company shall cause the Company's
Israeli counsel, advisors and accountants to prepare and file with the
Israeli Income Tax Commissioner an application for a ruling: (i) deferring
any obligation to pay capital gains tax on the exchange of the Company
Shares in the Merger until the earlier of two (2) years after the Closing or
the date on which a shareholder sells the shares of Parent Common Stock
received as of the Closing, and (ii) confirming that the conversion of the
Company Options into options to purchase shares of Parent Common Stock (the
"Assumed Options") will not result in a requirement for an immediate Israeli
tax payment and that the Israeli taxation will be deferred until the
exercise of the Assumed Options, or in the event of Assumed Options which
are part of a "Section 102 Plan," until the actual sale of the shares of
Parent Common Stock by the option holders, provided that any ruling that is
substantially similar to the foregoing will be sufficient to comply with the
conditions set forth in this clause and provided further that Parent is
reasonably satisfied that, in light of such ruling, Parent is not required
to withhold any Taxes in respect of the issuance of Parent Common Stock to
any holder of Shares in connection with the Merger (the "ISRAELI INCOME TAX
RULING"). Each of the Company and Parent shall cause their respective
Israeli counsel to coordinate all activities, and to cooperate with each
other, with respect to the preparation and filing of such application and in
the preparation of any written or oral submissions that may be necessary,
proper or advisable to obtain the Israeli Income Tax Ruling. Subject to the
terms and conditions hereof, the Company shall use reasonable best efforts
to promptly take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable Law
36
to obtain the Israeli Income Tax Rulings, or as appropriate the confirmation
referred to in Section 6.3(d), as promptly as practicable. Notwithstanding
any provisions contained in Section 4.1 hereof to the contrary, Company
shall be permitted to comply with any conditions contained in the ruling
described in this Section 5.5 or reasonable requests made by the Israeli Tax
Commissioner in connection with its delivery of such ruling; PROVIDED,
HOWEVER, (i) that Company shall give Parent at least three (3) days written
notice of any such conditions or requests prior to compliance with such
conditions or requests, and (ii) that in no event shall Company comply with
any such condition or request in the event any such condition or request
might reasonably be expected to (A) have a Material Adverse Effect on
Company, (B) prohibit or impair any business practice of the Company, any
acquisition of property by the Company or any of its subsidiaries or the
conduct of business by the Company of any of its subsidiaries, or
(C) adversely impact or materially delay the consummation of the Merger or
any of the other transactions contemplated by this Agreement.
(d) ISRAELI SECURITIES LAW EXEMPTION. As soon as reasonably
practicable after the execution of this Agreement, Parent shall (i) prepare
and file with the Israeli securities authority ("ISA") an application for an
exemption from the requirements of the Israeli Securities Law, 1968
concerning the publication of a prospectus in respect of the exchange of the
Company Stock Options for the assumed Options, pursuant to Section 15D of
the Securities Law of Israel and (ii) if required by the Israeli Securities
Law, 1968, prepare and file with the ISA an application for an exemption
from the requirements of the Israeli Securities Law, 1968 concerning the
publication of a prospectus, or an application for a pre-ruling regarding no
action by the ISA, in respect of the exchange of the Company Shares for the
Parent Common Stock, and the exchange of the Company Warrants for the
assumed Warrants (the "ISRAELI SECURITIES EXEMPTION"). Each of Parent and
the Company shall cause their respective Israeli counsel to coordinate all
activities, and to cooperate with each other, with respect to the
determination of such facts as are required to assess Parent's obligations
under the Israeli Securities Law, 1968, and with respect to the preparation
and filing of such application and in the preparation of any written or oral
submissions that may be necessary, proper or advisable to obtain the Israeli
Securities Exemption. Subject to the terms and conditions hereof, Parent
shall use its reasonable best efforts to promptly take, or cause to be
taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable Law to obtain the Israeli Securities
Exemption as promptly as practicable.
5.6 CONFIDENTIALITY; ACCESS TO INFORMATION. The parties acknowledge that
Company and Parent have previously executed a Confidentiality Agreement, dated
as of November 20, 2000 (the "CONFIDENTIALITY AGREEMENT"), which Confidentiality
Agreement will continue in full force and effect in accordance with its terms
except as otherwise provided herein. Each of Parent and Company will afford the
other party and the other party's accountants, counsel and other representatives
reasonable access during normal business hours, upon reasonable notice, to its
properties, books, records and personnel during the period prior to the
Effective Time to obtain all information concerning the business, including,
without limitation, the status of product development efforts, properties,
results of operations and personnel, as the other may reasonably request. Each
of the parties hereto will hold, and will cause its accountants, counsel and
other representatives to hold, in confidence all documents and information
furnished to it by or on behalf another party to this Agreement in connection
with the transactions contemplated by this Agreement pursuant to the terms of
the Confidentiality Agreement. No information or knowledge obtained by a party
in any investigation pursuant to this Section 5.6 will affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.7 NO SOLICITATION.
(a) From and after the date of this Agreement until the earlier to occur
of the Effective Time or termination of this Agreement pursuant to
Article VII, Company and its subsidiaries will not, nor will they authorize
or permit any of their respective officers, directors, affiliates or
employees or any investment banker, attorney or other advisor or
representative retained by any of them to, directly or
37
indirectly, (i) solicit, initiate, or take any action intended to encourage
or induce the making, submission or announcement of any Acquisition Proposal
(as defined below), (ii) engage or participate in any discussions or
negotiations with any person regarding, or furnish to any person any
information with respect to, or take any other action intended to facilitate
any inquiries or the making of any proposal that constitutes or may
reasonably be expected to lead to, any Acquisition Proposal, (iii) approve,
endorse or recommend any Acquisition Proposal without complying with
Section 5.3(c) or (iv) enter into any letter of intent or similar document
or any contract, agreement or commitment contemplating or otherwise relating
to any Acquisition Transaction (as defined below); PROVIDED, HOWEVER, that
prior to the approval of this Agreement and the Merger by the requisite vote
of the shareholders of Company, nothing contained in this Agreement shall
prohibit the Board of Directors of Company from (i) complying with
Rule 14d-9 or 14e-2(a) promulgated under the Exchange Act or Section 329 of
the Israeli Companies Law with regard to a tender or exchange offer or
(ii) in response to an unsolicited, bona fide written Acquisition Proposal
that is not withdrawn and that Company's Board of Directors reasonably
concludes constitutes a Superior Proposal (as defined below), engaging or
participating in discussions or negotiations with and furnishing information
to the person making such Acquisition Proposal if (A) the Board of Directors
of the Company determines in good faith after consultation with its outside
legal counsel that that such action is required in order for the Board of
Directors of Company to comply with its fiduciary obligations under Israeli
law, (B) (x) at least two (2) days prior to furnishing any such information
to, or entering into discussions or negotiations with, such party, Company
gives Parent written notice of the identity of such person or group and of
Company's intention to furnish information to, or enter into discussions or
negotiations with, such party and (y) Company receives from such party an
executed confidentiality agreement at least as restrictive (after giving
effect to Section 7.2 hereof) as the Confidentiality Agreement, and
(C) contemporaneously with furnishing any such information to such party,
Company furnishes such information to Parent (to the extent such information
has not been previously furnished by the Company to Parent). Company and its
subsidiaries will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with
respect to any Acquisition Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in this
Section 5.7 by any officer or director of Company or any of its subsidiaries
or any investment banker or attorney of Company or any of its subsidiaries
shall be deemed to be a breach of this Section 5.7 by Company.
For purposes of this Agreement, (i) "ACQUISITION PROPOSAL" shall mean
any offer or proposal (other than an offer or proposal by Parent) relating
to any Acquisition Transaction. For the purposes of this Agreement;
(ii) "ACQUISITION TRANSACTION" shall mean any transaction or series of
related transactions other than the transactions contemplated by this
Agreement involving: (A) the acquisition or purchase from the Company by any
person or "group" (as defined under Section 13(d) of the Exchange Act and
the rules and regulations thereunder) of more than a 15% interest in the
total outstanding voting securities of the Company or any of its
subsidiaries or any tender offer or exchange offer that if consummated would
result in any person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) beneficially owning
15% or more of the total outstanding voting securities of the Company or any
of its subsidiaries or any merger, consolidation, business combination or
similar transaction involving the Company pursuant to which the shareholders
of the Company immediately preceding such transaction hold less than 85% of
the equity interests in the surviving or resulting entity of such
transaction; (B) any sale, lease (other than in the ordinary course of
business), exchange, transfer, license (other than in the ordinary course of
business), acquisition or disposition of more than 15% of the assets of the
Company; or (C) any liquidation, dissolution, recapitalization or other
significant corporate reorganization of the Company; and (iii) "SUPERIOR
PROPOSAL" shall mean any bona fide, unsolicited written Acquisition Proposal
involving the acquisition of all outstanding voting securities of the
Company with respect to which (A) if any cash consideration is involved,
shall not be subject to any financing contingency, and with
38
respect to which Company's Board of Directors shall have reasonably
determined (taking into account the advice of Company's financial advisors)
that the acquiring party is capable of consummating the proposed Acquisition
Transaction on the terms proposed, and (B) Company's Board of Directors
shall have reasonably and in good faith determined that the proposed
Acquisition Transaction provides greater value to the shareholders of
Company than the Merger (taking into account the advice of Company's
financial advisors).
(b) In addition to the obligations of Company set forth in
paragraph (a) of this Section 5.7, Company as promptly as practicable, and
in any event within 24 hours, shall advise Parent orally and in writing of
(i) any request for information which Company reasonably believes would lead
to an Acquisition Proposal, or (ii) the receipt of any Acquisition Proposal,
or any inquiry with respect to or which Company reasonably believes would
lead to any Acquisition Proposal; (iii) the material terms and conditions of
such request, Acquisition Proposal or inquiry; and (iv) the identity of the
person or group making any such request, Acquisition Proposal or inquiry.
Company shall keep Parent informed in all material respects of the status
and details (including material amendments or proposed amendments) of any
such request, Acquisition Proposal or inquiry. In addition to the foregoing,
Company shall (i) provide Parent with at least 48 hours prior notice (or
such lesser prior notice as provided to the members of Company's Board of
Directors but in no event less than eight hours) of any meeting of Company's
Board of Directors at which Company's Board of Directors is reasonably
expected to consider an Acquisition Proposal and (ii) provide Parent with at
least one (1) business day prior written notice of a meeting of Company's
Board of Directors at which Company's Board of Directors is reasonably
expected to recommend a Superior Proposal to its shareholders and together
with such notice a copy of the definitive documentation relating to such
Superior Proposal.
5.8 PUBLIC DISCLOSURE. Parent and Company will consult with each other,
and to the extent practicable, agree, before issuing any press release or
otherwise making any public statement with respect to the Merger, this Agreement
or an Acquisition Proposal and will not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
law or any listing agreement with a national securities exchange or quotation
system (including Nasdaq), in which case reasonable efforts to consult with the
other party will be made prior to any such release or public statement. The
parties have agreed to the text of the joint press release announcing the
signing of this Agreement.
5.9 COMMERCIALLY REASONABLE EFFORTS; REGULATORY FILINGS.
(a) Subject to the terms and conditions set forth in this Agreement,
each of the parties shall use all commercially reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, as soon as reasonably
practicable, the Merger and the other transactions contemplated by this
Agreement, including using commercially reasonable efforts to accomplish the
following: (i) causing the conditions precedent set forth in Article VI to
be satisfied, (ii) the obtaining of all necessary actions or nonactions,
waivers, consents, approvals, orders and authorizations from Governmental
Entities and the making of all necessary registrations, declarations and
filings (including registrations, declarations and filings with Governmental
Entities, if any) and the taking of all commercially reasonable steps as may
be necessary to avoid any suit, claim, action, investigation or proceeding
by any Governmental Entity, (iii) the defending of any suits, claims,
actions, investigations or proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions
contemplated hereby, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Entity vacated
or reversed and (iv) the execution or delivery of any additional instruments
reasonably necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. In connection with and
without limiting the foregoing, Company and its Board of Directors shall, if
any state takeover statute or similar statute or regulation is or becomes
applicable to the Merger, this
39
Agreement or any of the transactions contemplated by this Agreement, use all
commercially reasonable efforts to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly
as practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger, this
Agreement and the transactions contemplated hereby. Notwithstanding anything
to the contrary contained in this Agreement, neither Parent nor Company
shall have any obligation under this Agreement: (i) to dispose or transfer
or cause any of its subsidiaries to dispose of or transfer any assets, or to
commit to cause Company to dispose of any assets; (ii) to discontinue or
cause any of its subsidiaries to discontinue offering any product or
service, or to commit to cause Company to discontinue offering any product
or service; (iii) to license or otherwise make available, or cause any of
its subsidiaries to license or otherwise make available, to any person, any
technology, software or other proprietary asset, or to commit to cause
Company to license or otherwise make available to any Person any technology,
software or other proprietary asset; (iv) to hold separate or cause any of
its subsidiaries to hold separate any assets or operations (either before or
after the Closing Date), or to commit to cause Company to hold separate any
assets or operations; (v) to make or cause any of its subsidiaries to make
any commitment (to any Governmental Entity or otherwise) regarding its
future operations or the future operations of Company; or (vi) to contest
any legal proceeding relating to the Merger, except, in the case of any
action described in clauses (i) through (vi) of this sentence, where such
action would not, in Parent's sole good faith judgement, be reasonably
expected to be burdensome to Parent, Company and their subsidiaries taken as
a whole, or, in the case of any action described in clause (vi) of this
sentence, if Company determines in good faith that contesting such legal
proceeding might not be advisable.
(b) As soon as may be reasonably practicable, Company and Parent each
shall file with the United States Federal Trade Commission (the "FTC") and
the Antitrust Division of the United States Department of Justice ("DOJ")
Notification and Report Forms relating to the transactions contemplated
herein as required by the HSR Act, as well as comparable pre-merger
notification forms required by the merger notification or control laws and
regulations of any applicable jurisdiction, as agreed to by the parties.
Company and Parent each shall promptly (a) supply the other with any
information which may be required in order to effectuate such filings and
(b) supply any additional information which reasonably may be required by
the FTC, the DOJ or the competition or merger control authorities of any
other jurisdiction and which the parties may reasonably deem appropriate;
PROVIDED, HOWEVER, that Parent shall not be required to agree to any
divestiture by Parent or the Company or any of Parent's subsidiaries or
affiliates of shares of capital stock or of any business, assets or property
of Parent or its subsidiaries or affiliates or of the Company, its
affiliates, or the imposition of any limitation on the ability of any of
them to conduct their businesses or to own or exercise control of such
assets, properties and stock which Parent, in the good faith exercise of its
reasonable judgment, reasonably expects to be burdensome to Parent, Company
and their subsidiaries, taken as a whole.
5.10 THIRD PARTY CONSENTS. As soon as practicable following the date
hereof, Parent and Company will each use their respective commercially
reasonable efforts to obtain any consents, waivers and approvals under any of
its or its subsidiaries' respective agreements, contracts, licenses or leases
required to be obtained in connection with the consummation of the transactions
contemplated hereby, all of which are set forth on Section 2.5 of the Company
Disclosure Letter.
5.11 STOCK OPTIONS AND EMPLOYEE BENEFITS.
(a) STOCK OPTIONS. At the Effective Time, each outstanding option to
purchase Company Shares (each, a "COMPANY STOCK OPTION"), whether or not
granted under the Company Option Plans, whether or not vested, shall by
virtue of the Merger be assumed by Parent. Each Company Stock Option so
assumed by Parent under this Agreement will continue to have, and be subject
to, the same terms and conditions of such options immediately prior to the
Effective Time (including, without
40
limitation, any repurchase rights or vesting provisions and provisions
regarding the acceleration of vesting on certain transactions), except that
(i) each Company Stock Option will be exercisable (or will become
exercisable in accordance with its terms) for that number of whole shares of
Parent Common Stock equal to the product of the number of Company Shares
that were issuable upon exercise of such Company Stock Option immediately
prior to the Effective Time multiplied by the Exchange Ratio, rounded down
to the nearest whole number of shares of Parent Common Stock and (ii) the
per share exercise price for the shares of Parent Common Stock issuable upon
exercise of such assumed Company Stock Option will be equal to the quotient
determined by dividing the exercise price per Company Share at which such
Company Stock Option was exercisable immediately prior to the Effective Time
by the Exchange Ratio, rounded up to the nearest whole cent. Parent shall
comply with the terms of all such Company Stock Options and use its best
efforts to ensure, to the extent required by, and subject to the provisions
of, the Company Option Plans and permitted under the Code or other relevant
laws and regulations that any Company Stock Options that qualified for tax
treatment under Section 424(b) of the Code prior to the Effective Time and
that any Company Stock Options that qualified for tax treatment under
Section 102 of the Israel Tax Ordinance prior to the Effective Time continue
to so qualify after the Effective Time. Parent shall take all corporate
actions necessary to reserve for issuance a sufficient number of shares of
Parent Common Stock for delivery upon exercise of all Company Stock Options
on the terms set forth in this Section 5.11(a).
(b) 401(K) PLAN. Company shall terminate, effective as of the day
immediately preceding the Effective Time, any and all 401(k) plans unless
Parent provides notice to Company, no less than ten (10) business days prior
to the Effective Time, that such 401(k) plan(s) shall not be terminated.
Parent shall receive from Company evidence that Company's plan(s) and/or
program(s) have been terminated pursuant to resolutions of each such
entity's Board of Directors (the form and substance of such resolutions
shall be subject to review and approval of Parent), effective as of the day
immediately preceding the Effective Time.
5.12 FORM S-8. Parent agrees to file a registration statement on Form S-8
(or a Form S-8/S-3, if applicable) for the shares of Parent Common Stock
issuable with respect to assumed Company Stock Options as soon as is reasonably
practicable after the Effective Time.
5.13 COMPANY WARRANTS.
(a) At the Effective Time, each outstanding Company Warrant, whether or
not exercisable, will be assumed by Parent. Each Company Warrant so assumed
by Parent under this Agreement will continue to have, and be subject to, the
same terms and conditions set forth in the applicable Company Warrant
immediately prior to the Effective Time, except that (i) each Company
Warrant will be exercisable (or will become exercisable in accordance with
its terms) for that number of whole shares of Parent Common Stock equal to
the product of the number of shares of Company Shares that were issuable
upon exercise of such Company Warrant immediately prior to the Effective
Time multiplied by the Exchange Ratio, rounded to the nearest whole number
of shares of Parent Common Stock, and (ii) the per share exercise price for
the shares of Parent Common Stock issuable upon exercise of such assumed
Company Warrant will be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which such Company
Warrant was exercisable immediately prior to the Effective Time by the
Exchange Ratio, rounded to the nearest whole cent. As soon as reasonably
practicable after the Effective Time, Parent will issue to each holder of an
outstanding Company Warrant a notice describing the foregoing assumptions of
such Company Warrant by Parent.
(b) Parent will reserve sufficient shares of Parent Common Stock for
issuance under Section 5.13(a) and under Section 1.6(e) hereof.
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5.14 INDEMNIFICATION.
(a) From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of Company
pursuant to any indemnification agreements between Company and its directors
and officers in effect immediately prior to the Effective Time (the
"INDEMNIFIED PARTIES") and any indemnification provisions under the Company
Charter Documents as in effect on the date hereof to the maximum extent
permitted by law. The Articles of Association of the Surviving Corporation
will contain provisions with respect to exculpation and indemnification that
are at least as favorable to the Indemnified Parties as those contained in
the Company Charter Documents as in effect on the date hereof, which
provisions will not be amended, repealed or otherwise modified in any manner
that would adversely affect the rights thereunder of individuals who,
immediately prior to the Effective Time, were directors, officers, employees
or agents of Company, unless such modification is required by law.
(b) For a period of three (3) years after the Effective Time, Parent
will cause the Surviving Corporation to maintain in effect, if available,
directors' and officers' liability insurance covering those persons who are
currently covered by the Company's directors' and officers' liability
insurance policy in an amount and on terms no less advantageous, when taken
as a whole, to those applicable to the current directors and officers of the
Company; PROVIDED, HOWEVER, that in no event will Parent or the Surviving
Corporation be required to expend more than $750,000, in the aggregate, for
such coverage (and if the cost for such coverage is in excess of such amount
the Surviving Corporation shall only be required to maintain such coverage
as is available for such amount).
(c) In the event the Surviving Corporation or any of their respective
successors or assigns (i) consolidates with or merges into any other person
and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, proper provisions shall be made so that
the successors and assigns of the Surviving Corporation, assume or continue
the obligations set forth in this Section 5.14.
(d) The provisions of this Section 5.14 shall survive the consummation
of the Merger at the Effective Time and continue for the periods specified
in this Section 5.14 and are (i) intended to be for the benefit of, and will
be enforceable by, each of the Indemnified Parties and their respective
heirs and representatives and (ii) in addition to, and not in substitution
for, any other rights to indemnification or contribution that any such
person may have by contract or otherwise.
5.15 NASDAQ LISTING. Parent shall cause the shares of Parent Common Stock
issuable, and those required to be reserved for issuance, in connection with the
Merger, to be approved for listing or trading on Nasdaq prior to the Effective
Time.
5.16 COMPANY AFFILIATE AGREEMENT.
(a) Set forth in Section 5.16 of the Company Disclosure Letter is a list
of those persons who may be deemed to be, in Company's reasonable judgment,
affiliates of Company within the meaning of Rule 145 promulgated under the
Securities Act or Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations (each, a "COMPANY AFFILIATE"). Company
will provide Parent with such information and documents as Parent reasonably
requests for purposes of reviewing such list. Company shall use its
commercially reasonable efforts to deliver or cause to be delivered to
Parent, as promptly as practicable on or following the date hereof, from
each Company Affiliate who has not delivered a Company Affiliate Agreement
on or prior to the date hereof, an executed Company Affiliate Agreement.
(b) Set forth in Section 5.16 of the Parent Disclosure Letter is a list
of those persons who may be deemed to be, in Parent's reasonable judgment,
affiliates of Parent within the meaning of Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations (each, a "PARENT
AFFILIATE"). Parent shall use its commercially reasonable efforts to obtain
and provide a copy to
42
Company, as promptly as practicable on or following the date hereof, from
each Parent Affiliate who has not delivered a Parent Affiliate Agreement on
or prior to the date hereof, an executed Parent Affiliate Agreement.
5.17 POOLING OF INTERESTS. Each of Parent and Company shall use
commercially reasonable efforts to cause the transactions contemplated by this
Agreement to be accounted for as a pooling of interests under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations.
5.18 MERGER SUB APPROVAL. Parent (as the sole stockholder of Merger Sub)
shall approve the Merger at a general meeting of Merger Sub. No later than the
later to occur of (i) the second business day after the satisfaction or waiver
of the conditions set forth in Article VI or (ii) the 71st day after the
delivery of the Merger Proposal, Merger Sub shall (in accordance with
Section 317(b) of the Israeli Companies Law and the regulations thereunder)
inform the Companies Registrar of the decision of Merger Sub's general meeting
to approve the Merger.
5.19 EZENIA! SETTLEMENT AGREEMENT. Company shall pay to Ezenia! Inc.
("EZENIA") the $6,000,000 payable to Ezenia pursuant to the Settlement Agreement
dated June 16, 2000 between the Company and Ezenia at least one (1) business day
prior to the Effective Time.
5.20 REPAYMENT OF OCS GRANTS. Company shall repay all Grants from the OCS,
including all principal, interest and any other amounts owed by Company to the
OCS no later than December 31, 2000.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions, any of which may be waived, in writing, by mutual
agreement of Parent and Company:
(a) SHAREHOLDER APPROVAL. This Agreement shall have been approved and
adopted, and the Merger shall have been duly approved, by the requisite vote
under applicable law, by the shareholders of Company.
(b) REGISTRATION STATEMENT EFFECTIVE; PROXY STATEMENT. The SEC shall
have declared the Form S-4, and any required post-effective amendment to the
Form S-4, effective. No stop order suspending the effectiveness of the
Form S-4 or any part thereof shall have been issued and no proceeding for
that purpose, and no similar proceeding in respect of the Proxy
Statement/Prospectus, shall have been initiated or threatened in writing by
the SEC.
(c) NO ORDER; HSR ACT. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of
making the Merger illegal or otherwise prohibiting consummation of the
Merger. All waiting periods, if any, under the HSR Act relating to the
transactions contemplated hereby will have expired or been terminated early
and all material foreign antitrust approvals required to be obtained prior
to the Merger in connection with the transactions contemplated hereby shall
have been obtained.
(d) TAX OPINIONS. Parent and Company shall each have received written
opinions from their respective tax counsel (Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, Professional Corporation, and Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP) dated
as of the Closing Date, in form and substance reasonably acceptable to
Parent and Company, respectively, substantially to the effect that on the
basis of facts, representations and assumptions set forth in such opinions
which are consistent with the state of facts existing at the Closing Date,
the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. In
rendering such opinions, Xxxxxx
43
Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, and Xxxxx, Xxxxxxx &
Xxxxxxxxx, LLP may (i) require and rely upon (and may incorporate by
reference) representations and covenants, including those contained in
certificates of officers of Parent, Company, Merger Sub and others, and
(ii) make such reasonable and customary assumptions as they may determine
necessary. Such opinions shall not have been withdrawn; PROVIDED, HOWEVER,
that if the counsel to either Parent or the Company shall not render such
opinion, this condition shall nonetheless be deemed to be satisfied with
respect to such party if counsel to the other party hereto shall render such
opinion to such party. The parties to this Agreement agree to make such
reasonable representations as requested by such counsel for the purpose of
rendering such opinions.
(e) ISRAELI GOVERNMENTAL ENTITY APPROVALS. All Israeli Governmental
Entity approvals required pursuant to Israeli legal requirements for the
consummation of the Merger shall have been obtained including, without
limitation, approval of the OCS, the Investment Center and the Israeli
Commissioner of Restrictive Trade Practices if required by applicable law;
and receipt by the Parent of the Israel Securities Exemption.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY. The obligation of
Company to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent and Merger Sub contained in this Agreement shall have been true
and correct as of the date of this Agreement and shall be true and correct
on and as of the Closing Date with the same force and effect as if made on
the Closing Date except (A) in each case, or in the aggregate, where the
failure to be true and correct would not reasonably be expected to have a
Material Adverse Effect on Parent, (B) for those representations and
warranties which address matters only as of a particular date (which
representations shall have been true and correct, subject to the
qualifications as set forth in the preceding clause (A), as of such
particular date) and for inaccuracies resulting from changes or actions
contemplated or permitted by this Agreement (it being understood that, for
purposes of determining the accuracy of such representations and warranties,
(i) all "Material Adverse Effect" qualifications and other qualifications
based on the word "material" or similar phrases contained in such
representations and warranties shall be disregarded and (ii) any update of
or modification to the Parent Disclosure Letter made or purported to have
been made after the date of this Agreement shall be disregarded). Company
shall have received a certificate with respect to the foregoing signed on
behalf of Parent by an authorized officer of Parent.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Closing Date, and Company shall have received a
certificate to such effect signed on behalf of Parent by an authorized
officer of Parent.
(c) ISRAELI INCOME TAX RULING. The Company shall have obtained the
Israeli Income Tax Ruling.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Company contained in this Agreement shall have been true and correct as
of the date of this Agreement and shall be true and correct on and as of the
Closing Date with the same force and effect as if made on and as of the
Closing Date except (A) in each case, or in the aggregate, where the failure
to be true and correct would not reasonably be expected to have a Material
Adverse Effect on Company (i) PROVIDED, HOWEVER, such Material Adverse
Effect qualifier shall be inapplicable with respect to representations and
warranties contained in Section 2.3(a), 2.16, 2.20, and 2.25, and (B) for
those representations and
44
warranties which address matters only as of a particular date (which
representations shall have been true and correct, subject to the
qualifications as set forth in the preceding clause (A), as of such
particular date) and for inaccuracies resulting from changes or actions
contemplated by this Agreement (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (i) all
"Material Adverse Effect" qualifications and other qualifications based on
the word "material" or similar phrases contained in such representations and
warranties shall be disregarded and (ii) any update of or modification to
the Company Disclosure Letter made or purported to have been made after the
date of this Agreement shall be disregarded). Parent shall have received a
certificate with respect to the foregoing signed on behalf of Company by the
Chief Executive Officer and the Chief Financial Officer of Company.
(b) AGREEMENTS AND COVENANTS. Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to such effect signed on
behalf of Company by the Chief Executive Officer and the Chief Financial
Officer of Company.
(c) CONSENTS. The Company shall have obtained the consents, waivers
and approvals required to be obtained in connection with the consummation of
the transactions contemplated hereby, which consents, waivers and approvals
are set forth in Section 6.3(c) of the Company Disclosure Letter.
(d) ISRAELI TAX RULING. Company shall have received from the Israeli
Income Tax Commissioner either (i) the Israeli Income Tax Ruling
satisfactory to Parent in accordance with Section 5.5(c) or
(ii) confirmation of the mechanism for withholding taxes in connection with
the Merger, which mechanism shall be reasonably acceptable to Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the requisite approval of the
shareholders of Company:
(a) by mutual written consent duly authorized by the Boards of Directors
of Parent and Company;
(b) by either Company or Parent if the Merger shall not have been
consummated by May 31, 2001 for any reason; PROVIDED, HOWEVER, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has been a principal
cause of or resulted in the failure of the Merger to occur on or before such
date and such action or failure to act constitutes a breach of this
Agreement;
(c) by either Company or Parent if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree, ruling or other action shall
have become final and nonappealable;
(d) by either Company or Parent if the required approval of the
shareholders of Company contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at the Company
General Meeting or at any adjournment thereof; PROVIDED, HOWEVER, that the
right to terminate this Agreement under this Section 7.1(d) shall not be
available to Company or Parent where the failure to obtain Company
shareholder approval shall have been caused by the action or failure to act
of Company or Parent, respectively (including, in the case of Parent, the
failure of Parent to vote the Company Shares subject to the Company Voting
Agreements in favor of the Merger), and such action or failure to act
constitutes a breach by Company or Parent, respectively, of this Agreement;
45
(e) by Company, upon a breach of any representation, warranty, covenant
or agreement on the part of Parent or Merger Sub set forth in this
Agreement, or if any representation or warranty of Parent or Merger Sub
shall have become untrue, in either case such that the conditions set forth
in Section 6.2(a) or Section 6.2(b) would not be satisfied as of the time of
such breach or as of the time such representation or warranty shall have
become untrue, PROVIDED, that if such inaccuracy in Parent's or Merger Sub's
representations and warranties or breach by Parent or Merger Sub is curable
by Parent or Merger Sub through the exercise of its or their commercially
reasonable efforts, then Company may not terminate this Agreement under this
Section 7.1(e) for thirty (30) days after delivery of written notice from
Company to Parent of such breach or inaccuracy, as long as Parent and Merger
Sub continue to exercise commercially reasonable efforts to cure such breach
or inaccuracy (it being understood that Company may not terminate this
Agreement pursuant to this paragraph (e) if such breach or inaccuracy by
Parent or Merger Sub is cured during such thirty (30)-day period);
(f) by Parent, upon a breach of any representation, warranty, covenant
or agreement on the part of Company set forth in this Agreement, or if any
representation or warranty of Company shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, PROVIDED, that if such
inaccuracy in Company's representations and warranties or breach by Company
is curable by Company through the exercise of its commercially reasonable
efforts, then Parent may not terminate this Agreement under this
Section 7.1(f) for thirty (30) days after delivery of written notice from
Parent to Company of such breach, as long as Company continues to exercise
commercially reasonable efforts to cure such breach or inaccuracy (it being
understood that Parent may not terminate this Agreement pursuant to this
paragraph (f) if such breach or inaccuracy by Company is cured during such
thirty (30)-day period);
(g) by Parent, if an event has occurred or a circumstance has arisen
that would reasonably be expected to have a Material Adverse Effect on the
Company that is not curable by the Company through the exercise of its
commercially reasonable efforts; or
(h) by Company, if an event has occurred or a circumstance has arisen
that would reasonably be expected to have a Material Adverse Effect on
Parent that is not curable by Parent through the exercise of its
commercially reasonable efforts; or
(i) by Parent if a Triggering Event (as defined below) shall have
occurred.
For the purposes of this Agreement, a "TRIGGERING EVENT" shall be deemed to
have occurred if: (i) the Board of Directors of Company or any committee thereof
shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Parent its recommendation in favor of, the approval of the
Agreement or the Merger; (ii) Company shall have failed to include in the Proxy
Statement/Prospectus the recommendation of the Board of Directors of Company in
favor of the approval of the Agreement and the Merger; (iii) Board of Directors
of Company fails to reaffirm its recommendation in favor of the approval of the
Agreement and the Merger within ten (10) business days after Parent requests in
writing that such recommendation be reaffirmed at any time following the public
announcement and during the pendency of an Acquisition Proposal; (iv) the Board
of Directors of Company or any committee thereof shall have approved or
recommended any Acquisition Proposal; (v) the provisions of Section 5.7 of this
Agreement shall have been breached in any material respect; (vi) Company shall
have entered into any letter of intent or similar document or any agreement,
contract or commitment accepting any Acquisition Proposal; or (vii) a tender or
exchange offer relating to securities of Company shall have been commenced by a
person unaffiliated with Parent and Company shall not have sent to its
securityholders pursuant to Rule 14e-2 promulgated under the Securities Act or
Section 329 of the Israeli Companies Law, within ten (10) business days after
such tender or exchange offer is first published sent or given, a statement
disclosing that Company recommends rejection of such tender or exchange offer.
46
7.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon (or, if the
termination is pursuant to Section 7.1(e) or Section 7.1(f) and the proviso
therein is applicable, thirty (30) days after) the delivery of written notice by
the terminating party to the other parties hereto. In the event of the
termination of this Agreement as provided in Section 7.1, this Agreement shall
be of no further force or effect, except (i) as set forth in this Section 7.2,
Sections 5.6, 7.3 and Article VIII (General Provisions), each of which shall
survive the termination of this Agreement (PROVIDED, HOWEVER, that the
standstill provisions of the Confidentiality Agreement referred to in
Section 5.6 shall cease to be of any force or effect if this Agreement is
terminated by Parent pursuant to Section 7.1(i)), and (ii) nothing herein shall
relieve any party from liability for any intentional or willful breach of this
Agreement. No termination of this Agreement shall affect the obligations of the
parties contained in the Confidentiality Agreement, all of which obligations
shall survive termination of this Agreement in accordance with their terms.
7.3 FEES AND EXPENSES.
(a) GENERAL. Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses
whether or not the Merger is consummated; PROVIDED, HOWEVER, that Parent and
Company shall share equally all fees and expenses, other than attorneys' and
accountants fees and expenses, incurred in relation to the printing and
filing (with the SEC) of the Proxy Statement/ Prospectus (including any
preliminary materials related thereto) and the Form S-4 (including financial
statements and exhibits) and any amendments or supplements thereto and any
fees required to be paid under the HSR Act.
(b) COMPANY PAYMENTS.
(i) The Company shall pay to Parent in immediately available funds,
within one (1) business day after demand by Parent, an amount equal to
$9,500,000 (the "TERMINATION FEE") if this Agreement is terminated by
Parent pursuant to Section 7.1(i); PROVIDED, HOWEVER, that the
Termination Fee shall not be payable if this Agreement is terminated by
Parent following the occurrence of a Triggering Event other than that
specified in clause (v) of the definition thereof and, prior to such
termination, the closing condition set forth in Section 6.1(a) shall have
been satisfied.
(ii) If (A) this Agreement is terminated by Parent or Company, as
applicable, pursuant to Sections 7.1(b) or (d), (B) prior to such
termination, there shall exist or have been publicly announced an
Acquisition Proposal and (C) within nine (9) months following the
termination of this Agreement a Company Acquisition (as defined below) is
consummated or Company enters into an agreement or letter of intent
providing for a Company Acquisition, or a third party commences a tender
or exchange offer for a Company Acquisition, then Company shall pay
Parent in immediately available funds at or prior to consummating such
Company Acquisition, respectively, an amount equal to the Termination
Fee.
(iii) Company acknowledges that the agreements contained in this
Section 7.3(b) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Parent would not
enter into this Agreement; accordingly, if Company fails to pay in a
timely manner the amounts due pursuant to this Section 7.3(b) and, in
order to obtain such payment, Parent makes a claim that results in a
judgment against Company for the amounts set forth in this
Section 7.3(b), Company shall pay to Parent its reasonable costs and
expenses (including reasonable attorneys' fees and expenses) in
connection with such suit, together with interest on the amounts set
forth in this Section 7.3(b) at the prime rate of Bank of America N.T. &
S.A. in effect on the date such payment was required to be made. Payment
of the fees described in this Section 7.3(b) shall not be in lieu of
damages incurred in the event of the intentional or wilfull breach of any
covenant or agreement set forth in this Agreement. For the
47
purposes of this Agreement, "COMPANY ACQUISITION" shall mean any of the
following transactions (other than the transactions contemplated by this
Agreement): (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving Company pursuant to which the shareholders of Company
immediately preceding such transaction hold less than 50% of the
aggregate equity interests in the surviving or resulting entity of such
transaction, (ii) a sale or other disposition by Company of assets
representing in excess of 50% of the aggregate fair market value of
Company's business immediately prior to such sale or (iii) the
acquisition by any person or group (including by way of a tender offer or
an exchange offer or issuance by Company), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of 50% of the voting power of the then outstanding
shares of capital stock of Company.
7.4 AMENDMENT. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of Parent and Company.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time, any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. Delay in exercising any right under
this Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Company, Parent and Merger Sub contained in this Agreement
shall terminate at the Effective Time, and only the covenants that by their
terms survive the Effective Time shall survive the Effective Time.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Polycom, Inc.
0000 Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Telecopy No.:(000) 000-0000
48
and to:
Xxxxx Xxxxx & Co.
00 Xxxxxx Xxxxxx
Xxxxxxxxx 00000, Xxxxxx
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Telecopy No.: (000-0) 000-0000
(b) if to Company, to:
Accord Networks Ltd.
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
and to:
Xxxxx Xxxxx--Xxxxx Xxxxx Law Xxxxxxx
00 Xxxx Xxxxxx Xxxx
Xxxxx-Xxx Xxxxxx
Attention: Xxxxx Xxxxx, Esq.
Telecopy No.: 011-972-3-753-1001
8.3 INTERPRETATION; KNOWLEDGE. When a reference is made in this Agreement
to Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement. Unless otherwise
indicated the words "include," "includes" and "including" when used herein shall
be deemed in each case to be followed by the words "without limitation." The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. When reference is made herein to "the business of" an entity,
such reference shall be deemed to include the business of all direct and
indirect subsidiaries of such entity. Reference to the subsidiaries of an entity
shall be deemed to include all direct and indirect subsidiaries of such entity.
(a) For purposes of this Agreement, the term "KNOWLEDGE" means with
respect to a party hereto, with respect to any matter in question, knowledge
of the executive officers or directors of such party, provided that such
persons shall have made due and diligent inquiry of those officers,
directors and other managers of such party who report directly to such
executive officers or directors and whom such executive officers reasonably
believe would have actual knowledge of the matters represented.
(b) The word "AGREEMENT" when used herein shall be deemed in each case
to mean any contract, commitment or other agreement, whether oral or
written, that is legally binding.
(c) For purposes of this Agreement, the term "PERSON" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization,
entity or Governmental Entity.
49
(d) When used in connection with Parent, or Company, as the case may be,
the term "MATERIAL ADVERSE EFFECT" means any change or effect that,
individually or when taken together with all other such changes or effects
that have occurred prior to the date of determination of the occurrence of
the Material Adverse Effect, is or is reasonably likely to be materially
adverse to the business, assets (including intangible assets), financial
condition or results of operations of such entity and its subsidiaries,
taken as a whole; PROVIDED, HOWEVER, that in no event shall any of the
following, alone or in combination, be deemed to constitute, nor shall any
of the following be taken into account in determining whether there has been
or will be, a Material Adverse Effect on any entity: (i) any change in such
entity's stock price or trading volume or any failure by such entity to meet
internal projections or forecasts or published revenue or earnings
projections, in each case in and of itself; or (ii) any change or effect
that results or arises from changes affecting any of the industries in which
such entity operates generally or the United States economy generally (which
changes or effects in each case do not materially disproportionately affect
such entity); (iii) any change or effect that results or arises from changes
affecting general worldwide economic or capital market conditions (which
changes in each case do not materially disproportionately affect such
entity) or (iv) any change or effect resulting from the disruption or loss
of any existing or prospective customer, distributor or supplier
relationships and any delays or cancellations in customer or distributor
orders in that results from the public announcement or pendency of the
transactions contemplated hereby.
(e) The words "FOREIGN" and "DOMESTIC" when used herein shall be deemed
a reference to a country outside the United States and the United States,
respectively.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts (including counterparts executed and delivered by facsimile, which
shall be as counterparts executed and delivered manually), all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party, it being understood that all parties need not sign the same
counterpart.
8.5 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Confidentiality Agreement,
the Company Disclosure Letter and the Parent Disclosure Letter (a) constitute
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, it being understood
that the Confidentiality Agreement shall continue in full force and effect until
the Closing and shall survive any termination of this Agreement except as
provided in Section 7.2 hereof; and (b) are not intended to confer upon any
other person any rights or remedies hereunder, except as specifically provided
in Section 5.11 and 5.14 hereof.
8.6 SEVERABILITY. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce
50
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
8.8 APPLICABLE LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware; PROVIDED,
HOWEVER, that (a) any matter involving the internal corporate affairs of Company
or any party hereto shall be governed by the provisions of the jurisdictions of
its incorporation and (b) the form and content of the Merger and the
consequences of the filing thereof shall be governed by the Israeli Companies
Law.
8.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
8.11 WAIVER OF JURY TRIAL. EACH OF PARENT, COMPANY AND MERGER SUB HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, COMPANY OR MERGER SUB IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
*****
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
POLYCOM, INC.
By: /s/ XXXXXX X. XXXXXXX
-----------------------------------------------
Name: Xxxxxx X. Xxxxxxx
-----------------------------------------------
Title: CEO
-----------------------------------------------
MERGER SUB LTD.
By: /s/ XXXXXXX X. XXXXX
-----------------------------------------------
Name: Xxxxxxx X. Xxxxx
-----------------------------------------------
Title: Director
-----------------------------------------------
ACCORD NETWORKS LTD.
By: /s/ XXXXX X. XXXXXXX
-----------------------------------------------
Name: Xxxxx X. XxXxxxx
-----------------------------------------------
Title: Chairman & CEO
-----------------------------------------------
***AGREEMENT AND PLAN OF MERGER AND REORGANIZATION***
52
