EXHIBIT 2.1
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of February 3, 2000, by and among: TERAYON COMMUNICATION SYSTEMS, INC.,
a Delaware corporation ("Terayon"), COMBOX LTD., a private company organized
under the laws of the State of Israel (the "Company") and the persons whose
names are set forth on the signature page attached hereto (each, individually, a
"Seller" and, collectively, the "Sellers"). Certain other capitalized terms
used in this Agreement are defined in Exhibit A.
RECITALS
A. The Company is engaged principally in the development,
manufacturing and marketing of high-speed data transmission systems for standard
digital and analog Cable-TV, as well as digital video broadcast over wireless
and satellite media. The Company is located at 00 Xxxxx Xxxxxx, Xxxxxx Xxxxx,
Xxxxxx.
B. The Sellers, collectively, own all the issued and outstanding
shares of the Company (the "Shares").
C. Terayon desires to acquire all of the Shares and the Sellers
desire to sell such Shares to Terayon.
D. The Sellers and Terayon desire to make certain representations and
warranties and other agreements in connection with the transactions contemplated
hereby.
E. For accounting purposes, it is intended that the transaction
contemplated by this Agreement be treated as a "purchase".
F. This Agreement has been approved by the respective boards of
directors of Terayon, the Sellers (where applicable) and the Company.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION.
1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, on the Closing Date (as defined below), the Sellers shall sell,
transfer, assign, convey and deliver to Terayon, and Terayon shall purchase from
the Sellers such Shares, in each case, free and clear of all Liens. The closing
of the purchase and sale (the "Closing") shall take place at the offices of
Naschitz Xxxxxxx & Co., 0 Xxxxx Xxxxxx, Xxx Xxxx, Xxxxxx at 10:00 a.m., on
February ___, 2000 or such later business day on which all the conditions set
forth in Section 6 and 7 have been satisfied or waived, or on such other date,
time and place as the parties may mutually agree (the "Closing Date"). At the
Closing, the Sellers shall cause the Company to deliver to Terayon one or more
instruments representing the Shares, and Terayon
(i) shall issue the Share Consideration (as defined in Section 1.3 below) to the
Sellers' Representative (as defined in Section 10.1 below) for distribution to
the Sellers in accordance with the column in Schedule A captioned "Share
Consideration", (ii) shall pay the Cash Payment to the Sellers' Representative
for distribution to the Sellers in accordance with the column in Schedule A
captioned "Cash Payment" and, (iii) shall deposit the Escrow Shares (as defined
below) with the Escrow Agent, which amounts together represent the aggregate
Purchase Consideration payable to the Sellers hereunder.
1.2 Further Assurances. If, at any time after the Closing Date, Terayon
shall consider or be advised that any deeds, bills of sale, assignments or
assurances or any other acts or things are reasonably necessary, desirable or
proper (a) to vest, perfect or confirm, of record or otherwise, in Terayon, its
right to, and title or interest in, the Shares or (b) otherwise to carry out the
purposes of this Agreement, Terayon shall so advise the Company in writing, and
the Company thereupon shall execute and deliver all such deeds, bills of sale,
assignments and assurances and do all such other acts and things reasonably
necessary, desirable or proper to vest, perfect or confirm its right, title or
interest in, to or under the Shares, and otherwise to carry out the purposes of
this Agreement.
1.3 Purchase Consideration. The consideration for the Shares shall be
775,000 shares of Common Stock of Terayon (the "Terayon Shares"). In accordance
with Section 1.1, on the Closing Date, Terayon shall issue to the Sellers the
Terayon Shares (the "Share Consideration"), of which 77,500 shares of Common
Stock of Terayon (the "Escrow Shares") shall be deposited with the Escrow Agent
to be held in the Escrow Fund and shall be available to satisfy the
indemnification obligations as provided in Section 9. In lieu of a portion of
the Share Consideration, as set forth in Section 1.4 below, Terayon shall be
entitled to pay the Sellers cash in an amount of up to two hundred and fifty
thousand US Dollars ($250,000) (the "Cash Payment"). The Share Consideration
(which includes the shares to be delivered to the Sellers, the Escrow Shares and
the shares to be delivered to any and all holders of vested options, warrants or
other exercisable or convertible securities of the Company) and the Cash Payment
shall, collectively, be referred to herein as the Purchase Consideration.
1.4 Method of Share Transfer. The Transfer of the Terayon Shares as set
forth in Section 1.3 above shall be made by Terayon to the Sellers'
Representative on the Closing Date. All cash payments made by Terayon to the
Sellers' Representative on the Closing Date shall be made by wire transfer of
immediately available funds to the account specified by the Seller in writing to
Terayon at least two (2) business days prior to the Closing Date (the
"Account"). The Cash Payment shall reduce the Share Consideration by such number
of Terayon Shares, the value of which (calculated using the average closing
prices of the shares of Terayon Common Stock, as reported on the Nasdaq National
Market for the fifteen consecutive trading days immediately preceding the date
which is three days prior to the Closing Date) shall be equal to the Cash
Payment.
1.5 Seller Waivers. Each Seller hereby waives and releases, effective as
of the Closing, any and all rights, claims and causes of action assertable
against the Company in respect of its ownership of any securities of the Company
and any and all agreements
between such Seller and the Company, which agreements shall automatically
terminate as of the Closing Date.
1.6 Accounting Treatment. For accounting purposes, the transaction
contemplated by this Agreement is intended to be treated as a "purchase."
1.7 Employee Options.
(a) There are currently outstanding and unexercised vested options
(the "Vested Options") and unvested options (the "Unvested Options" and
collectively with the Vested Options, the "Options") to acquire Series A
Ordinary Shares issued by the Company to employees, directors and consultants
listed in Schedule A (the "Option Holders"). The names of the Option Holders
and the number of Class A Ordinary Shares covered by each Option are set forth
on Schedule A.
(b) At the Closing, all Options shall be canceled, and in
consideration of such cancellation, Terayon shall deposit such number of options
to purchase Common Stock ("Terayon Options") indicated opposite such Option
Holder's name on Schedule A in a Retention Account, which shall be created
specifically for such purpose. The Terayon Options shall be released to the
Option Holders upon and subject to the terms and conditions set forth in
Schedule 1.7(b). Prior to the Closing, no Option Holder shall exercise or
transfer any Options prior to the Closing.
(c) As soon as practicable following the date hereof and in any
event prior to the Closing, the Company shall secure the written agreement, in
form and substance reasonably acceptable to Terayon, of each Option Holder to
the terms and conditions of this Agreement (the "Option Holder Consent Letter
and Counterpart Signature Page"). For the avoidance of doubt, the Share
Consideration shall include the total number of shares of Common Stock to be
issued to the Sellers and to all the holders of Vested Options hereunder.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants, to and for the benefit of the
Indemnitees, as follows:
2.1 Due Organization; Subsidiaries; Etc.
(a) The Company is duly organized and validly existing under the
laws of the State of Israel. The Company has all requisite corporate power and
authority to conduct its business in the manner in which its business is
currently being conducted and to own and use its assets in the manner in which
its assets are currently owned and used.
(b) Except as set forth in Part 2.1 of the Disclosure Schedule, the
Company has not conducted any business under or otherwise used, for any purpose
or in any jurisdiction, any fictitious name, assumed name, trade name or other
name, other than the name "ComBox Ltd."
(c) The Company is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction, except where the failure to be so qualified, authorized,
registered or licensed has not had and will not have a Material Adverse Effect
on the Company.
(d) Part 2.1 of the Disclosure Schedule accurately sets forth (i)
the names of the members of the Company's board of directors, (ii) the names of
the members of each committee of the Company's board of directors, and (iii) the
names and titles of the Company's officers.
(e) Except for the Company's two wholly owned subsidiaries
(ComBox Inc., a Delaware corporation and MultiBox Ltd., a company formed under
the laws of the State of Israel, collectively, the "Subsidiaries"), the Company
does not own any controlling interest in any Entity and the Company has never
owned, beneficially or otherwise, any shares or other securities of, or any
direct or indirect equity interest in, any Entity. The Company has not agreed
and is not obligated to make any future investment in or capital contribution to
the Subsidiaries or any Entity. The Company has not guaranteed and is not
responsible or liable for any obligation of the Subsidiaries or any of the
Entities in which it owns or has owned any equity interest.
2.2 Articles of Association and Memorandum of Association; Records.
Except as set forth in Part 2.2 of the Disclosure Schedule, the Company has
delivered to Terayon accurate and complete copies of: (1) the Memorandum of
Association and Articles of Association of the Company, including all amendments
thereto; (2) the stock records of the Company; and (3) the minutes and other
records of the meetings and other proceedings (including any actions taken by
written consent or otherwise without a meeting) of the stockholders of the
Company, the board of directors of the Company and all committees of the board
of directors of the Company. There have been no formal meetings or other
proceedings of the stockholders of the Company, the board of directors of the
Company or any committee of the board of directors of the Company that are not
fully reflected in such minutes or other records. Except as set forth in Part
2.2 of the Disclosure Schedule, there has not been any violation of any of the
provisions of the Company's Articles of Association or Memorandum of
Association, nor has the Company taken any action that is inconsistent with any
resolution adopted by the Company's stockholders, the Company's board of
directors or any committee of the Company's board of directors, which would have
a Material Adverse Effect on the Company. Except as set forth in Part 2.2 of
the Disclosure Schedule, the books of account, stock records, minute books and
other records of the Company are accurate, up-to-date and complete in all
material respects, and have been maintained in accordance with prudent business
practices.
2.3 Capitalization.
The authorized share capital of the Company immediately prior to the
Closing shall be two hundred and seventy one (271,000) New Israeli Shekels
consisting of (i) 12,053,000 Ordinary Shares NIS 0.01 nominal value per share,
of which 12,037,000 shares are issued and
outstanding (the "Ordinary Shares"), (ii) 3,500,000 Series A Ordinary Shares,
NIS 0.01 nominal value per shares, none of which are issued and outstanding,
(iii) 5,700,000 Series A Preferred Shares, NIS 0.01 nominal value per share, of
which 5,253,000 are issued and outstanding (the "Series A Preferred Shares"),
and (iv) 5,847,000 Series B Preferred Shares, NIS 0.01 nominal value per share,
all of which are issued and outstanding (the "Series B Preferred Shares" and,
collectively with the Ordinary Shares and the Series A Preferred, the "Shares").
The issued and outstanding share capital of the Company, on a fully diluted and
as-converted basis taking into consideration all convertible or exchangeable
securities and other interests in the Company is set forth in Part 2.3 of the
Disclosure Schedule. Except as set forth in Part 2.3 of the Disclosure Schedule,
at the Closing Date, there will not be any outstanding or authorized
subscriptions, options, warrants, calls, rights, commitments, convertible
securities, or any other agreements of any character directly or indirectly
obligating the Company to issue any additional shares or any securities
convertible into, or exchangeable for, or evidencing the right to subscribe for,
any shares.
2.4 Financial Statements.
(a) The Company has delivered to Terayon the consolidated audited
balance sheets of the Company as of December 31, 1999, 1998, 1997 and 1996, and
the related audited statements of operations and statements of stockholders'
equity of the Company for the years then ended, together with the notes thereto
and the unqualified report and opinion of a recognized firm of independent
certified accountants relating thereto (collectively, the "Company Financial
Statements").
(b) The Company Financial Statements are accurate and complete in all
material respects and present fairly the financial position of the Company as of
the respective dates thereof and the results of operations of the Company for
the periods covered thereby. The Company Financial Statements have been prepared
in accordance with generally accepted accounting principles consistently applied
in Israel throughout the periods covered (except that the financial statements
referred to in Section 2.4(a)(ii) do not contain footnotes and are subject to
normal and recurring year-end audit adjustments, which will not, individually or
in the aggregate, be material in magnitude) and comply with the requirements of
all applicable Israeli regulations.
(c) Except as set forth in Part 2.2 of the Disclosure Schedule, all
proper and necessary books of account, minute books, registers and records have
been maintained by the Company, are in its possession and contain accurate
information relating to all material transactions to which the Company has been
a party, except where the failure to maintain such books of account, minute
books, registers and records would not have a Material Adverse Effect on the
Company.
(d) A complete list of the Company's debts and loan facilities as of
December 31, 1999, is set forth in Part 2.4(d) of the Disclosure Schedule.
2.5 Absence of Changes. Except as set forth in Part 2.5 of the Disclosure
Schedule, since December 31, 1999:
(a) there has not been any material adverse change in the Company's
business, prospects, operations, assets, liabilities, debts, work force or its
condition (financial or otherwise) and no event has occurred that will, or could
reasonably be expected to, have a Material Adverse Effect on the Company;
(b) there has not been any material loss, damage or destruction to, or
any material interruption in the use of, any of the Company's assets (whether or
not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) except as set forth in Part 2.3 of the Disclosure Schedule, the
Company has not sold, issued or authorized the issuance of (i) any capital stock
or other security, (ii) any option or right to acquire any capital stock or any
other security or (iii) any instrument convertible into or exchangeable for any
capital stock or other security;
(e) the Company has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of employee
options plans (written or oral), (ii) any provision of any agreement evidencing
any outstanding Option or Warrant, or (iii) any restricted stock purchase
agreement;
(f) there has been no amendment to the Company's Articles of Association
or Memorandum of Association, and the Company has not effected or been a party
to any Acquisition Transaction, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;
(g) the Company has not formed any subsidiary or acquired any equity
interest or other interest in any other Entity;
(h) the Company has not made any capital expenditure which, when added
to all other capital expenditures made on behalf of the Company since December
31, 1999, exceeds $25,000;
(i) the Company has not (i) entered into or permitted any of the assets
owned or used by it to become bound by any Contract that is or would constitute
a Material Agreement (as defined in Section 2.10(a)), or (ii) amended or
prematurely terminated, or waived any material right or remedy under, any such
Contract;
(j) the Company has not (i) acquired, leased or licensed any right or
other asset from any other Person, (ii) sold or otherwise disposed of, or leased
or licensed, any right or other asset to any other Person, or (iii) waived or
relinquished any right, except for
immaterial rights or other immaterial assets acquired, leased, licensed or
disposed of in the ordinary course of business and consistent with the Company's
past practices;
(k) the Company has not written off as uncollectible, or established any
extraordinary reserve with respect to, any account receivable or other
indebtedness;
(l) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with the Company's past practices;
(m) the Company has not (i) lent money to any Person, or (ii) incurred
or guaranteed any indebtedness for borrowed money.
(n) the Company has not (i) established or adopted any Employee Benefit
Plan, (ii) paid any bonus or made any profit-sharing or similar payment to, or
increased the amount of the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of its directors, officers or
employees, or (iii) hired any new employees;
(o) there has been no resignation or termination of employment of any
officer or key employee of the Company;
(p) the Company has not changed any of its methods of accounting or
accounting practices in any respect;
(q) the Company has not made any Tax election;
(r) the Company has not commenced or settled any Legal Proceeding;
(s) the Company has not entered into any transaction or taken any other
action outside the ordinary course of business or inconsistent with its past
practices; and
(t) the Company has not agreed or committed to take any of the actions
referred to in clauses "(c)" through "(s)" above.
2.6 Properties and Assets. Full and accurate details of the Company's
properties and assets are contained in Part 2.6 of the Disclosure Schedule.
Except as disclosed in Part 2.6 of the Disclosure Schedule or in the notes to
the Company Financial Statements, the Company has good and marketable title to
its assets, including without limitation those reflected in the Company
Financial Statements, free and clear of any right, interest or equity of any
individual or entity (including any right to acquire, option, or right of
preemption) or any mortgage, charge, pledge, lien, or assignment, or any other
encumbrance or security interest or arrangement of whatsoever nature over or in
the relevant property ("Security Interests"). With respect to the assets that
are leased, the Company is in compliance with all material provisions of such
leases, such leases are valid and binding, and, to the best of its knowledge,
the Company holds leasehold interests in such assets free and clear of all
Security
Interests, except for Security Interests that, both individually and in the
aggregate with all other exceptions to any of the representations in this
Section 2 which are not specified in the Disclosure Schedule, would not have a
material adverse effect on the Company.
2.7 Bank Accounts; Receivables.
(a) Part 2.7(a) of the Disclosure Schedule provides accurate information
with respect to each account maintained by or for the benefit of the Company at
any bank or other financial institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate and
complete breakdown of all accounts receivable, notes receivable and other
receivables of the Company as of December 31, 1999. Except as set forth in Part
2.7(b) of the Disclosure Schedule, all existing accounts receivable of the
Company (including those accounts receivable reflected on the Unaudited Balance
Sheet that have not yet been collected and those accounts receivable that have
arisen since December 31, 1999 and have not yet been collected) (i) represent
valid obligations of customers of the Company arising from bona fide
transactions entered into in the ordinary course of business, (ii) are current
and, to the Company's best knowledge, will be collected in full when due,
without any counterclaim or set off (net of an allowance for doubtful accounts
not to exceed $25,000 in the aggregate).
2.8 Equipment; Leasehold.
(a) All material items of equipment and other tangible assets owned by
or leased to the Company are adequate for the uses to which they are being put,
are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of the Company's business in the manner in which such
business is currently being conducted.
(b) The Company does not own any real property or any interest in real
property, except for the leasehold created under the real property lease
identified in Part 2.10 of the Disclosure Schedule.
2.9 Intellectual Property and Other Intangible Assets.
(a) As used herein, the term "Intellectual Property" shall mean all
registered patents, designs and trademarks, all applications for registration
thereof, and all computer programs including, but not limited to, computer
programs embodied in semiconductor chips, and related flow-charts, programmer
notes, updates and data, whether in object or source code form, developed, or
used in connection with the business of the Company, and all hardware,
algorithms, utilities flowcharts, logic, documentation, processes, formulations,
data, experimental methods, or results, descriptions, business or scientific
plans, depictions, customer lists and any other written, printed or
electronically stored materials or information, including specifications,
pricing plans, market research or data, potential marketing strategies,
prospective users and distribution channels, engineering drawings, information
concerning specialized suppliers, specifications for products and/ or processes
and/or software, test protocols, and all other materials relating thereto, and
copies thereof in any storage media, and all other works of authorship,
inventions, concepts, ideas,
and discoveries developed, discovered, conceived, created, made, reduced to
practice, or used by the Company and all intellectual property rights therein,
including, without limitation, all copyrights in the United States, Israel and
elsewhere, including all rights of registration and publication, rights to
create derivative works, and all other rights incident to copyright ownership,
for the residue now unexpired of the present term of any and all such copyrights
and any term thereafter granted during which such information is entitled to
copyright, and all inventions (patentable or unpatentable), trade secrets, know-
how, ideas and confidential information embodied or reflected in such
information, including any shop rights, for the longest period of protection
accorded to such interests under applicable law.
(b) Except as specifically set forth in Part 2.9(b) of the Disclosure
Schedule, the Company (i) owns or has the right to use, free and clear of all
liens, claims and restrictions the Intellectual Property used in the conduct of
its business, and (ii) to the best knowledge of the Company, such Intellectual
Property does not infringe upon or violate any right, lien, or claim of others,
including without limitation of its present or former employees or the former
employers of all such persons. Except as set forth in Part 2.9(b) of the
Disclosure Schedule, the Company is not currently obligated or under any
liability whatsoever to make any payments by way of royalties, fees or otherwise
to any owner or licensee of, or other claimant to, any patent, trademark,
service xxxx, trade name, copyright or other intangible asset, with respect to
the use thereof or in connection with the conduct of its business or otherwise.
(c) Any and all Intellectual Property of any kind which has been developed
or, is currently being developed, by any of the Company or any employees of the
Company shall be the property solely of the Company. The Company has taken
security measures to protect the secrecy, confidentiality and value of all the
Intellectual Property, which measures are reasonable and customary in the
industry in which the Company operates. Each person who, either alone or in
concert with others, developed, invented, discovered, derived, programmed or
designed the Intellectual Property, or who has knowledge of or access to
information about the Intellectual Property, has entered into a written non-
disclosure agreement with the Company regarding ownership and treatment of the
Intellectual Property, in a form reasonably satisfactory to the Company.
(d) Except as specifically set forth in Part 2.9(d) of the Disclosure
Schedule, neither the Company nor, to the best knowledge of the Company, any of
its directors, officers or employees has received any communications alleging
that the Company has violated or by conducting its business as currently
conducted, would violate, any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of any other
person or entity. Except as set forth in Part 2.9(d) of the Disclosure Schedule,
neither the Company nor, to the best knowledge of the Company, any of its
directors, officers or employees has received notice nor is it otherwise aware
of any infringement of or conflict with asserted rights of others, with respect
to any of the Intellectual Property, or of any facts, or assertion of any facts,
which would render any of the Intellectual Property invalid or unenforceable.
(e) To the best knowledge of the Company, none of the Company's
employees, officers or directors are obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of such persons' best efforts to promote the
interests of the Company or that would conflict with the Company's business as
conducted and as proposed to be conducted. To the best knowledge of the Company,
neither the execution nor delivery of the Agreement, nor the carrying on of the
Company's business by employees of the Company, nor the conduct of the Company's
business as proposed to be conducted, will materially conflict with or result in
a material breach of the terms, conditions or provisions of, or constitute a
material default under, any contract, covenant or instrument under which any of
the Company's employees, officers or directors is now obligated. It is not, and
will not become, necessary to utilize any inventions, and specifically, patent
applications, of any of the Company's employees (or people the Company currently
intends to hire) made prior to their employment by the Company other than those
that have been assigned to the Company pursuant to valid and legally binding
instruments of assignment.
(f) The Intellectual Property owned by the Company constitutes all of
the Intellectual Property necessary to enable the Company to conduct its
business in the manner in which such business has been and is being conducted.
Except as set forth in Part 2.9(f) of the Disclosure Schedule, the Company has
not licensed any of the Company Intellectual Property to any Person on an
exclusive basis, nor has the Company entered into any covenant not to compete or
Contract limiting its ability to exploit fully any of its Intellectual Property
or to transact business in any market or geographical area or with any Person.
(g) The Company's products (the "Products") have not and will not
experience fatal errors and/or invalid and/or incorrect results as a result of
the change of year from 1999 to 2000; provided, that the Products receive
correct and properly formatted date inputs from all software and hardware that
exchange data with or provide data to the Products.
2.10 Agreements and Trading.
(a) All the material agreements to which the Company is a party
(including instruments, leases, licenses, arrangements, or undertakings of any
nature, written or oral) (the "Material Agreements") are listed in Part 2.10(a)
of the Disclosure Schedule.
(b) To the best of the Company's knowledge, and except as set forth in
Part 2.10(c) of the Disclosure Schedule, all the Material Agreements are in full
force and effect and the Company has no knowledge of the invalidity of or
grounds for rescission, avoidance or repudiation of any of the Material
Agreements and, except as set forth in Part 2.10(b) of the Disclosure Schedule,
the Company has not received any notice of any intention to terminate any such
agreement.
(c) To the best of the Company's knowledge and other than as set forth
in Part 2.10(c) of the Disclosure Schedule, the Company and all third parties
with whom it has
transacted business have performed in all respects all of their material
obligations under the Material Agreements, except for such non performance that,
both individually and in the aggregate with all other exceptions to any of the
representations in this Section 2 which are not specified on schedules hereto,
would not have a Material Adverse Effect on the Company. To the best of the
Company's knowledge, and except as set forth in Part 2.10(c) of the Disclosure
Schedule, no party to any of the Material Agreements is in breach or in default
in any respect of its material obligations thereunder. Except as set forth in
Part 2.10(c) of the Disclosure Schedule, no party to any of the material
Agreements has made a claim of which the Company is aware to the effect that the
Company has failed to perform a material obligation thereunder.
(d) Except as set forth in Part 2.10(d) of the Disclosure Schedule, there
are no agreements, promises or understandings in force restricting the
competitive freedom of the Company to provide and take goods and services by
such means and from and to such individuals or entities as it may from time to
time think fit.
(e) The Company has delivered to Terayon accurate and complete copies of
all written Material Agreements identified in Part 2.10(a) of the Disclosure
Schedule, including all amendments thereto. Part 2.10(a) of the Disclosure
Schedule provides an accurate description of the terms of each Material
Agreement that is not in written form. Except as set forth in Parts 2.10(b) and
2.10(c) of the Disclosure Schedule, each Material Agreement identified in Part
2.10(a) of the Disclosure Schedule is valid and in full force and effect, and,
to the Company's best knowledge, is enforceable by the Company in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
(f) Except as set forth in Part 2.10(c) of the Disclosure Schedule:
(i) the Company has not violated or breached, or committed any
material default under, any Material Agreement, and, to the Company's best
knowledge, no other Person has violated or breached, or committed any material
default under, any Material Agreement;
(ii) no event has occurred, and no circumstance or condition exists,
that (with or without notice or lapse of time) will, or could reasonably be
expected to, (A) result in a material violation or breach of any of the
provisions of any Material Agreement, (B) give any Person the right to declare a
material default or exercise any remedy under any Material Agreement, (C) give
any Person the right to accelerate the maturity or performance of any Material
Agreement, or (D) give any Person the right to cancel, terminate or modify any
Material Agreement;
(iii) the Company has not received any notice or other communication
regarding any actual or possible material violation or breach of, or material
default under, any Material Agreement; and
(iv) the Company has not waived any of its material rights under any
Material Agreement.
(g) Except as set forth in Part 2.10(c) of the Disclosure Schedule, no
Person is renegotiating, or has a right pursuant to the terms of any Material
Agreement to re-negotiate, any amount paid or payable to the Company under any
Material Agreement or any other material term or provision of any Material
Agreement.
(h) The Material Agreements identified in Part 2.10(a) of the Disclosure
Schedule collectively constitute all of the Contracts necessary to enable the
Company to conduct its business in the manner in which its business is currently
being conducted.
(i) Part 2.10(i) of the Disclosure Schedule identifies and provides a
brief description of each proposed Contract as to which any bid, offer, award,
written proposal, term sheet or similar document has been submitted or received
by the Company regarding the business of the Company since January 1, 1999, or
which is otherwise still pending.
(j) Part 2.10(j) of the Disclosure Schedule provides an accurate
description and breakdown of the Company's backlog under Material Agreements.
2.11 Capital Expenditure and Commitments. Except as disclosed in Part 2.11
of the Disclosure Schedule or in the Company Financial Statements:
(a) The Company has not undertaken to make any material capital
commitment, expenditure or purchase in excess of $50,000.
(b) The Company is not a party to any material hire, hire purchase,
credit sale or conditional sale agreement or any contract providing for payment
on deferred terms in respect of assets purchased by the Company.
(c) The Company is not in breach of any material obligation under any
material deed, agreement or transaction to which it is a party, and to the best
of its knowledge, no third party that has transacted business with the Company
is in breach of any of its material obligations under any material deed,
agreement, or transaction with the Company to which it is a party.
(d) The Company is not aware of any Security Interest on, over or
affecting the issued or unissued share capital of the Company and there is no
agreement or commitment to give or create any such Security Interest and no
claim has been made by any Person to be entitled to any such Security Interest.
(e) The Company has not given any guarantee, indemnity or security for,
or otherwise agreed to become directly or contingently liable for, any
obligation of any other individual or entity, except in its ordinary course of
business, and to the best of its knowledge, no individual or entity has given
any guaranty of or security for any of the Company's obligations.
(f) There are in force no powers of attorney given by the Company with
respect to any asset or business of the Company, and no individual or entity, as
agent, representative, distributor or otherwise, is entitled or authorized to
bind or commit the Company to any obligation not in the ordinary course of the
Company's business.
(g) The Company has not applied for or received any grant or allowance
from any governmental authority.
2.12 Compliance with Legal Requirements.
(a) To the best of its knowledge, information and belief, and except as
set forth in Part 2.12(a) of the Disclosure Schedule, the Company has carried on
its business and affairs in all material respects in accordance with all
applicable laws and regulations, to the extent material to the Company's
business or assets, including, inter alia, in accordance with the provisions of
the Israel Companies Ordinance [New Version], 1983, and in accordance with the
Company's Memorandum of Association and Articles of Association, and, the
Company is not aware of any material violation or default with respect to any
statute, regulation, order, decree, or judgment of any court or any governmental
agency which could have a material adverse effect upon the Company's assets or
business, and the Company has been granted and there are now in force all
material approvals, consents, and licenses necessary for the carrying on of its
business in the places and in the manner in which it is now carried on, and,
except as set forth in Part 2.12(a) of the Disclosure Schedule, the Company is
not aware of any circumstances which evidence or indicate that any such
approvals, consents or licenses, to the extent material to the Company's
business or assets, are likely to be suspended, canceled, revoked or not
renewed.
(b) The copy of each of the Memorandum of Association and Articles of
Association of the Company provided to Terayon, is complete, true and accurate
and has not been amended or repealed.
(c) To the best of the Company's knowledge, and except as specifically
set forth in Part 2.12(c) of the Disclosure Schedule, all documents required to
be filed with or delivered to the Registrar of Companies in respect of the
Company have been properly filed or delivered in a timely manner, except for
such non compliance that, both individually and in the aggregate with all other
exceptions to any of the representations in this Section 2 which are not
specified on schedules hereto, would not have a Material Adverse Effect on the
Company.
2.13 Governmental Authorizations. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by the Company, and the
Company has delivered to Terayon accurate and complete copies of all
Governmental Authorizations identified in Part 2.13 of the Disclosure Schedule.
The Governmental Authorizations identified in Part 2.13 of the Disclosure
Schedule are valid and in full force and effect, and collectively constitute all
Governmental Authorizations necessary to enable the Company to conduct its
business in the manner in which its business is currently being conducted.
Except as set forth in Part 2.13 of the Disclosure Schedule, the Company is, and
at all times since
December 31, 1997 has been, in substantial compliance with the terms and
requirements of the respective Governmental Authorizations identified in Part
2.13 of the Disclosure Schedule. The Company has not received any notice or
other communication from any Governmental Body regarding (a) any actual or
possible violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization.
2.14 Tax Matters.
(a) To the best of the Company's knowledge, except as specifically set
forth in Part 2.14(a) of the Disclosure Schedule, the Company Financial
Statements make full provisions for all Taxes for which the Company was then or
thereafter became or may hereafter become liable or accountable in respect of or
by reference to any income, profit, receipt, gain, transaction, agreement,
distribution or event which was earned, accrued, received, or realized, entered
into except as specifically specified in Part 2.14(a) of the Disclosure
Schedule, paid, made or accrued on or before December 31, 1999, and the Company
promptly paid or fully provided in its books of account for all Taxes for which
it has or may hereafter become liable or accountable in the period from the date
of its incorporation to the Closing Date.
(b) To the best of the Company's knowledge, and except as set forth in
Part 2.14(b) of the Disclosure Schedule, the Company has at all times and within
the requisite time limits promptly, fully and accurately observed, performed and
complied with all material obligations or conditions imposed on it, or to which
any claim, deduction, allowance or relief made, claimed by or afforded to it was
made subject, under any legislation relating to Taxes, except for such non
compliance that, both individually and in the aggregate with all other
exceptions to any of the representations in this Section 2 which are not
specified in the Disclosure Schedule, would not have a Material Adverse Effect
on the Company.
(c) Except as specifically set forth in Part 2.14(c) of the Disclosure
Schedule, the Company is not aware of any circumstances which will or may,
whether by lapse of time or the issue of any notice of assessment or otherwise,
give rise to any dispute with any relevant Government Body in relation to its
liability or accountability for Taxes, any claim made by it, any relief,
deduction, or allowance afforded to it, or in relation to the status or
character of the Company or any of its enterprises under or for the purpose of
any provision of any legislation relating to Taxes, except for such dispute or
claim that, both individually and in the aggregate with all other exceptions to
any of the representations in this Section 2 which are not specified on
schedules hereto, would not have a Material Adverse Effect on the Company.
2.15 Employees.
(a) Full particulars of all the officers, employees and consultants of
the Company (each, an "Employee"), including their present compensation
packages, are disclosed in Part 2.15(a) of the Disclosure Schedule, which
particulars show all material
benefits including, without limitation, salaries, directors' fees, social
benefits, bonuses, commissions, profit shares, automobile, reimbursement of
expenses and benefits in kind ("Benefits") payable or which the Company is bound
to provide (whether now or in the future) to each officer, employee and
consultant of the Company and are true, accurate and complete.
(b) Except as set forth in Part 2.15(b) of the Disclosure Schedule, no key
employee of the Company has been dismissed in the last six months or has given
notice of termination of his employment.
(c) The employment agreements of each of Messrs. Xxxx Xxxxx, Xxx Xxxxx, Xxx
Xxxxxxxx and Xxxxxx Xxxxxxxxxx were previously provided to Terayon and its
counsel. Part 2.15(c) of the Disclosure Schedule includes the form of contracts
under which substantially all the Employees of the Company at the date hereof
are engaged.
(d) Subject to the provisions of any applicable Israeli law and binding
custom and except as set forth in Part 2.15(a) of the Disclosure Schedule, there
are no agreements or arrangements (whether legally enforceable or not) for the
payment of any pensions, allowances, lump sums, or other like benefits on
retirement or on death or termination or during periods of sickness or
disablement for the benefit of any officer or former officer or employee or
former employee of the Company or for the benefit of the dependents of any such
individual in operation at the date hereof.
(e) Except as set forth in Part 2.15(e) of the Disclosure Schedule, all the
Benefits to which any officer or former officer or employee or former employee
of the Company is or may be entitled including, inter alia, severance pay, leave
and health, have been paid or adequately provided for in the Company Financial
Statements.
(f) A complete list of all of the options granted to employees, directors,
officers or consultants of the Company, and their respective vesting schedules,
is set forth in Part 2.15(f) of the Disclosure Schedule. Except as set forth
therein, the Company does not operate any share incentive scheme, share option
scheme or profit sharing scheme for the benefit of any of its directors,
officers, employees or consultants.
(g) Neither the execution, delivery or performance of this Agreement, nor
the consummation of any of the other transactions contemplated by this
Agreement, will result in any payment (including any bonus, golden parachute or
severance payment) to any current or former Employee or director of the Company
(whether or not under any option plan (written or oral), or materially increase
the benefits payable under any option plan (written or oral) or result in any
acceleration of the time of payment or vesting of any such benefits, except as
provided therein.
(h) Part 2.15(a) of the Disclosure Schedule contains a list of all salaried
employees of the Company as of the date of this Agreement, and correctly
reflects, in all material respects, their salaries, any other compensation
payable to them (including compensation payable pursuant to bonus, deferred
compensation or commission arrangements), their dates of employment and their
positions.
(i) Part 2.15(i) of the Disclosure Schedule identifies each Employee who
is not fully available to perform work because of disability or other leave and
sets forth the basis of such leave and the anticipated date of return to full
service.
(j) Except as set forth in Part 2.15(j) of the Disclosure Schedule, the
Company is in compliance in all material respects with all applicable Legal
Requirements and Contracts relating to employment, employment practices, wages,
bonuses and terms and conditions of employment, including employee compensation
matters.
(k) The Company is not aware of any organizational campaigns, petitions
or other unionization activities seeking recognition of a collective bargaining
unit which could affect the Company; nor is the Company aware of any
controversies, strikes, slowdowns or work stoppages pending or threatened
between the Company and any of its employees. To the Company's best knowledge,
the consummation of any of the transactions contemplated by this Agreement will
not have a material adverse effect on the Company's labor relations, and none of
the Company's key employees has notified the Company of any intention to
terminate his or her employment with the Company.
2.16 Environmental Matters. The Company is in compliance in all material
respects with all applicable Environmental Laws, which compliance includes the
possession by the Company of all permits and other Governmental Authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof. The Company has not received any notice or other
communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that the Company is not in
compliance with any Environmental Law, and, to the Company's best knowledge,
there are no circumstances that may prevent or interfere with the Company's
compliance with any Environmental Law in the future. To the Company's best
knowledge, no current or prior owner of any property leased or controlled by the
Company has received any notice or other communication (in writing or
otherwise), whether from a Government Body, citizens group, employee or
otherwise, that alleges that such current or prior owner or the Company is not
in compliance with any Environmental Law with respect to such property. All
Governmental Authorizations currently held by the Company pursuant to
Environmental Laws are identified in Part 2.16 of the Disclosure Schedule. (For
purposes of this Section 2.16: (i) "Environmental Law" means any state, local
or foreign Legal Requirement relating to pollution or protection of human health
or the environment (including ambient air, surface water, ground water, land
surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern; and (ii) "Materials of Environmental
Concern" include chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products and any other substance that is now regulated
by any Environmental Law or that is otherwise a danger to health, reproduction
or the environment.)
2.17 Insurance.
(a) Full and accurate details of the Company's insurance policies are
contained in Part 2.17(a) of the Disclosure Schedule, including such policies as
are required under the Company's agreements with its customers.
(b) Except as specifically set forth in Part 2.17(b) of the Disclosure
Schedule, the Company has the benefit of adequate insurance against all risks
and losses usually insured against by companies carrying on the same or a
similar business and (without prejudice to the generality of the foregoing) for
the full replacement or reinstatement value of all its assets of an insurable
nature and against accident, damage, injury, third party loss (including product
liability) and loss of profits with a well established and reputable insurer.
(c) Except as specifically set forth in Part 2.17(c) of the Disclosure
Schedule, the Company has not done anything or suffered any damage which has
rendered or might render any policies of insurance taken out by it void or
voidable or which might result in an increase in premiums and the Company has
complied with all conditions attached to such policies.
(d) There is no claim outstanding under any of such policies nor, to the
best of the Company's knowledge, are there any circumstances likely to give rise
to such a claim.
(e) The Company's insurance policies will remain in full force and
effect for a period of thirty (30) days following the Closing.
2.18 Related Party Transactions. Except as set forth in Part 2.18 of the
Disclosure Schedule: (a) no Related Party has, and no Related Party has at any
time since December 31, 1997 had, any direct or indirect interest in any
material asset used in or otherwise relating to the business of the Company; (b)
no Related Party is, or has at any time since December 31, 1997 been, indebted
to the Company; (c) since December 31, 1997, no Related Party has entered into,
or has had any direct or indirect financial interest in, any Material Agreement,
transaction or business dealing involving the Company; (d) no Related Party is
competing, or has at any time since December 31, 1997 competed, directly or
indirectly, with the Company; and (e) no Related Party has any claim or right
against the Company (other than rights under Options and rights to receive
compensation for services performed as an employee of the Company). For
purposes of this Section 2.18 each of the following shall be deemed to be a
"Related Party": (i) each of the Sellers if such person owns, or has at any time
in the past owned, an aggregate of five percent (5%) or more of the capital
stock of the Company; (ii) each individual who is, or who has at any time since
December 31, 1997 been, an officer of the Company; (iii) each member of the
immediate family of each of the individuals referred to in clauses '(i)' and
'(ii)' above; and (iv) any trust or other Entity (other than the Company) in
which any one of the individuals referred to in clauses '(i)' '(ii)' and '(iii)'
above holds (or in which more than one of such individuals collectively hold),
beneficially or otherwise, a material voting, proprietary or equity interest.
2.19 Legal Proceedings; Orders.
(a) As of three days prior to the date hereof and three days prior to
the Closing Date, except as set forth in Part 2.19 of the Disclosure Schedule
there is no, nor will there have been any pending Legal Proceeding, and, to the
Company's best knowledge, no Person has threatened to commence any Legal
Proceeding: (i) that involves the Company or any of the assets owned or used by
the Company or any Person whose liability the Company has or may have retained
or assumed, either contractually or by operation of law; or (ii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, any of the transactions contemplated by this
Agreement. To the Company's best knowledge, no event has occurred, and no claim,
dispute or other condition or circumstance exists, that will, or that could
reasonably be expected to, give rise to or serve as a basis for the commencement
of any such Legal Proceeding.
(b) Except as set forth in Part 2.19 of the Disclosure Schedule, no
Legal Proceeding has ever been commenced by or has ever been pending against the
Company.
(c) As of three days prior to the date hereof and three days prior to
the Closing Date, there is no order, writ, injunction, judgment or decree to
which the Company, or any of the assets owned or used by the Company, is
subject. To the Company's best knowledge, no officer or other employee of the
Company is subject to any order, writ, injunction, judgment or decree that
prohibits such officer or other employee from engaging in or continuing any
conduct, activity or practice relating to the Company's business.
2.20 Authority; Binding Nature of Agreement. Except as set forth in Part
2.21 of the Disclosure Schedule, the Company has the absolute and unrestricted
right, power and authority to enter into and to perform its obligations under
this Agreement; and the execution, delivery and performance by the Company of
this Agreement have been duly authorized by all necessary action on the part of
the Company and its board of directors. This Agreement constitutes the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
2.21 Non-Contravention; Consents. Except as set forth in Part 2.21 of the
Disclosure Schedule, neither (1) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement, nor (2)
the consummation of any of the transactions contemplated by this Agreement, will
directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of the
provisions of the Company's Articles of Association or Memorandum of
Association, or (ii) any resolution adopted by the Company's stockholders, the
Company's board of directors or any committee of the Company's board of
directors;
(b) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the transactions
contemplated by this Agreement or to exercise any remedy or obtain any relief
under, any Legal Requirement or any order, writ, injunction, judgment or decree
to which the Company, or any of the assets owned or used by the Company, is
subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the Company's business
or to any of the assets owned or used by the Company;
(d) contravene, conflict with or result in a material violation or
breach of, or result in a material default under, any provision of any Material
Agreement that is or would constitute a Material Agreement, or give any Person
the right to (i) declare a default or exercise any remedy under any such
Material Agreement, (ii) accelerate the maturity or performance of any such
Material Agreement, or (iii) cancel, terminate or modify any such Material
Agreement; or
(e) result in the imposition or creation of any lien or Encumbrance upon
or with respect to any asset owned or used by the Company (except for minor
liens that will not, in any case or in the aggregate, materially detract from
the value of the assets subject thereto or materially impair the operations of
the Company).
Except as set forth in Part 2.21 of the Disclosure Schedule, the Company is not
and will not be required to make any filing with or give any notice to, or to
obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of any of the
transactions contemplated by this Agreement.
2.22 No Conflicting Interest. Except as set forth in Part 2.22 of the
Disclosure Schedule, the Company is not aware that any director, officer, key
employee or Related Party of the Company has any interest in any corporation,
partnership, or other entity that is engaged in a business which is in
competition with that of the Company, is a supplier or customer of the Company,
or is a party to any contract which may have any effect on the business of the
Company.
2.23 Brokers. Except as set forth in Part 2.23 of the Disclosure Schedule,
no broker, finder or investment banker, for which the Company or Terayon may be
liable, is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or any of its directors,
officers, employees or agents or any of the Sellers.
2.24 Full Disclosure. This Agreement (including the Disclosure Schedule)
does not, and the Company Closing Certificate will not, (i) contain any
representation, warranty or information that is false or misleading with respect
to any material fact, or (ii) omit to state any material fact necessary in order
to make the representations, warranties and information contained and to be
contained herein and therein (in the light of the circumstances under
which such representations, warranties and information were or will be made or
provided) not false or misleading.
Section 3. Representations and Warranties of Terayon
Terayon represents and warrants to the Company and each of the Sellers as
follows:
3.1 Due Organization. Terayon is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Terayon
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its businesses as now conducted.
3.2 SEC Filings; Financial Statements.
(a) Terayon has timely filed all required forms, reports and
documents with the SEC since August 17, 1998, each of which has complied in all
material respects with all applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder, each as in
effect on the dates such forms, reports, and documents were filed. Terayon has
made available to the Company and each the Sellers accurate and complete copies
(excluding copies of exhibits) of each report, registration statement (on a form
other than Form S-8) and definitive proxy statement filed by Terayon with the
SEC between August 17, 1998 and the date of this Agreement (the "Terayon SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each of the Terayon SEC Documents, including, any financial
statements or schedules included or incorporated by reference therein, complied
in all material respects with the applicable requirements of the Securities Act
or the Exchange Act (as the case may be); and (ii) none of the Terayon SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) The consolidated financial statements contained in the Terayon
SEC Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered, except as may be indicated in
the notes to such financial statements and (in the case of unaudited statements)
as permitted by Form 10-Q of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to year-end audit
adjustments; and (iii) fairly present the consolidated financial position of
Terayon and its subsidiaries as of the respective dates thereof and the
consolidated results of operations of Terayon and its subsidiaries for the
periods covered thereby. Except as and to the extent disclosed in the Terayon
SEC Reports, since August 17, 1998, there has not been any event, occurrence or
development which does or could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on the Terayon.
3.3 Authority; Binding Nature of Agreement. Terayon has the absolute
and unrestricted right, power and authority to perform their obligations under
this Agreement; and
the execution, delivery and performance by Terayon of this Agreement (including
the contemplated issuance of Common Stock in accordance with this Agreement)
have been duly authorized by all necessary action on the part of Terayon and its
board of directors. No vote of Terayon's stockholders is needed to approve any
of the transactions contemplated by this Agreement. This Agreement constitutes
the legal, valid and binding obligation of Terayon, enforceable against it in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
3.4 Valid Issuance. The Common Stock to be issued in the transactions
contemplated by this Agreement will, when issued in accordance with the
provisions of this Agreement, be validly issued, fully paid and nonassessable.
3.5 Consents and Approvals. Except as set forth on Schedule 3.5 hereto,
no filing or registration with, no notice to and no permit, authorization,
consent or approval of any third party or any Governmental Body is necessary for
the consummation by Terayon of the transactions contemplated by this Agreement.
3.6 No Violation. Neither the execution and delivery of this Agreement by
Terayon, the performance by Terayon of its obligations hereunder nor the
consummation by Terayon of the transactions contemplated hereby will (a)
violate, conflict with or result in any breach of any provision of the
Certificate of Incorporation or Bylaws of Terayon, (b) violate, conflict with or
result in a violation or breach of, or constitute a default (with or without due
notice or lapse of time or both) under the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease or agreement
to which Terayon is a party or (c) violate any order, writ, judgment,
injunction, decree, statute, rule or regulation of any court or domestic or
foreign Governmental Body applicable to Terayon.
3.7 Legal Proceedings. Except as set forth in Schedule 3.7 hereto, Terayon
is not aware of any pending Legal Proceeding, and, to Terayon's best knowledge,
no Person has threatened to commence any Legal Proceeding: (i) that involves
Terayon or any of the assets owned or used by Terayon or any Person whose
liability Terayon has or may have retained or assumed, either contractually or
by operation of law; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the
transactions contemplated by this Agreement. To Terayon's best knowledge, no
event has occurred, and no claim, dispute or other condition or circumstance
exists, that will, or that could reasonably be expected to, give rise to or
serve as a basis for the commencement of any such Legal Proceeding.
3.8 Experience; Receipt of Information. Terayon has such knowledge and
experience in business matters as to be capable of evaluating the merits and
risks relating to the acquisition of the Company, and has reviewed and inspected
all of the data and information provided to it by the Company in connection with
this Agreement. Terayon has been furnished by the Company with all the documents
and information regarding the Company which Terayon has requested, and has been
afforded the opportunity to ask questions of and receive answers from duly
authorized officers or other representatives of the
Company concerning the Company's business, assets and financial position.
3.9 Brokers. No broker, finder or investment banker, for which the
Company or the Seller may be liable, is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Terayon or any of its
directors, officers, employees or agents.
3.10 Full Disclosure. This Agreement does not, and the Terayon Closing
Certificate will not, (i) contain any representation, warranty or information
that is false or misleading with respect to any material fact, or (ii) to the
Terayon's best knowledge, omit to state any material fact necessary in order to
make the representations, warranties and information contained and to be
contained herein and therein (in the light of the circumstances under which such
representations, warranties and information were or will be made or provided)
not false or misleading.
Section 4. Certain Covenants of the company.
4.1 Access and Investigation. During the period from the date of this
Agreement through the Closing, or the earlier termination hereof in accordance
with Section 8 (the "Pre-Closing Period"), the Company shall, and shall cause
its Representatives to: (a) provide Terayon and Terayon's Representatives with
reasonable access to the Company's Representatives, personnel and assets and to
all existing books, records, Tax Returns, work papers and other documents and
information relating to the Company; and (b) provide Terayon and Terayon's
Representatives with copies of such existing books, records, Tax Returns, work
papers and other documents and information relating to the Company, and with
such additional financial, operating and other data and information regarding
the Company, as Terayon may reasonably request.
4.2 Operation of the Company's Business. Other than as contemplated
hereunder, during the Pre-Closing Period:
(a) the Company shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement;
(b) the Company shall use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and maintain its relations and good will with all
suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with the Company;
(c) the Company shall keep in full force all insurance policies
referred to in Part 2.17 of the Disclosure Schedule;
(d) the Company shall cause its officers to report regularly (but in
no event less frequently than weekly) to Terayon concerning the status of the
Company's business;
(e) the Company shall not declare, accrue, set aside or pay any dividend or
make any other distribution in respect of any shares of capital stock, and shall
not repurchase, redeem or otherwise reacquire any shares of capital stock or
other securities
(f) the Company shall not sell, issue or authorize the issuance of (i) any
capital stock or other security, (ii) any option or right to acquire any capital
stock or other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security;
(g) the Company shall not amend or waive any of its rights under, or permit
the acceleration of vesting under, (i) any provision of the plan options
(written or oral), (ii) any provision of any agreement evidencing any
outstanding Option, or (iii) any provision of any restricted stock purchase
agreement;
(h) the Company shall not amend or permit the adoption of any amendment to
the Company's Articles of Association, except to the extent necessary to effect
or permit the Company to become a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(i) the Company shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(j) the Company shall not make any capital expenditure, except for capital
expenditures that, when added to all other capital expenditures made on behalf
of the Company during the Pre-Closing Period, do not exceed $25,000 per month;
(k) the Company shall not, other than in the ordinary course of business,
(i) enter into, or permit any of the assets owned or used by it to become bound
by, any Contract that is or would constitute a Material Agreement, or (ii) amend
or prematurely terminate, or waive any material right or remedy under, any such
Contract;
(l) the Company shall not (i) acquire, lease or license any right or other
asset from any other Person, except for rights or other assets acquired, leased
or licensed in the ordinary course of business, (ii) sell or otherwise dispose
of, or lease or license, any right or other asset to any other Person, except
for rights or other assets disposed of, leased or licensed in the ordinary
course of business, or (iii) waive or relinquish any right, except for assets
acquired, leased, licensed or disposed of by the Company pursuant to Contracts
that are not Material Agreements;
(m) the Company shall not (i) lend money to any Person other than to its
employees, in the ordinary course of business and consistent with past
practices, or (ii) incur or guarantee any indebtedness for borrowed money other
than in the ordinary course of business and consistent with past practices;
(n) the Company shall not (i) establish, adopt or amend any employee
benefit plan, (ii) pay any bonus or make any profit-sharing payment, cash
incentive payment or similar payment to, or increase the amount of the wages,
salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its directors,
officers or employees, or (iii) hire any new key employee;
(o) the Company shall not change any of its methods of accounting or
accounting practices in any material respect;
(p) the Company shall not make any Tax election;
(q) the Company shall not commence or settle any material Legal
Proceeding;
(r) the Company shall not agree or commit to take any of the actions
described in clauses "(e)" through "(q)" above.
Notwithstanding the foregoing, the Company may take any action described in
clauses "(e)" through "(r)" above if Terayon gives its prior written consent to
the taking of such action by the Company, which consent will not be unreasonably
withheld (it being understood that Terayon's withholding of consent to any
action will not be deemed unreasonable if Terayon determines in good faith that
the taking of such action would not be in the best interests of the Company,
currently and/or under the ownership of Terayon).
4.3 Notification; Updates to Disclosure Schedule.
(a) During the Pre-Closing Period, each of the Sellers and/or the
Company shall promptly notify Terayon in writing of:
(i) the discovery by any of the Sellers and/or the Company of
any event, condition, fact or circumstance that existed on or prior to the date
of this Agreement and that caused or constitutes an inaccuracy in or breach of
any representation or warranty made by the Company in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made by
the Company in this Agreement if (x) such representation or warranty had been
made as of the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (y) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(iii) any material breach of any material covenant or obligation
of the Sellers and/or the Company; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to Section 4.3(a) requires any change in the Disclosure
Schedule, or if any
such event, condition, fact or circumstance would require such a change assuming
the Disclosure Schedule were dated as of the date of the occurrence, existence
or discovery of such event, condition, fact or circumstance, then the Company
shall promptly deliver to Terayon an update to the Disclosure Schedule
specifying such change. No such update shall be deemed to supplement or amend
the Disclosure Schedule for the purpose of (i) determining the accuracy of any
of the representations and warranties made by the Company in this Agreement, or
(ii) determining whether any of the conditions set forth in Section 6 has been
satisfied.
4.4 No Negotiation. During the Pre-Closing Period, neither the Sellers
nor the Company shall directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Terayon) relating to a possible Acquisition
Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other than
Terayon) relating to or in connection with a possible Acquisition Transaction;
or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Terayon) relating to a possible Acquisition Transaction.
Each of the Sellers and/or the Company shall promptly notify Terayon in writing
of any inquiry, proposal or offer relating to a possible Acquisition Transaction
that is received by the Company or any of its Representatives during the Pre-
Closing Period.
4.5 Buyer's Name and Logo: Terayon may use, and the Company may continue to
use, the name "ComBox" and the logo and trade marks perpetually and free of any
charges whatsoever. None of the Sellers may not use the "ComBox" name after the
Closing Date.
Section 5. Additional Covenants of the Parties.
5.1 Filings and Consents. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (a) shall make all
filings (if any) and give all notices (if any) required to be made and given by
such party in connection with the transactions contemplated by this Agreement,
and (b) shall use all commercially reasonable efforts to obtain all Consents (if
any) required to be obtained (pursuant to any applicable Legal Requirement or
Contract, or otherwise) by such party in connection with the transactions
contemplated by this Agreement. Each party to this Agreement shall (upon
request) promptly deliver to the other parties a copy of each such filing made,
each such notice given and each such Consent obtained by such party during the
Pre-Closing Period. Each party shall promptly provide the other parties with
copies of all filings made by the other party with the SEC or any other state,
federal or foreign Governmental Body in connection with this Agreement and the
transactions contemplated hereby.
5.2 Public Announcements. During the Pre-Closing Period, (a) the
Company and the Sellers shall not (and the Company shall not permit any of its
Representatives to)
issue any press release or make any public statement regarding this Agreement,
or regarding any of the transactions contemplated by this Agreement, without
Terayon's prior written consent, and (b) Terayon shall not (and Terayon shall
not permit any of its Representatives to) issue any press release or make any
public statement regarding this Agreement, or regarding any of the transactions
contemplated by this Agreement, without Company's prior written consent
Notwithstanding the provisions of the preceding sentence, each party shall be
permitted to issue any press release or make any public statement as such party
is advised by counsel is legally required to be issued or made under any
applicable laws; provided, however, that in such event the party issuing such
press release or making such public statement will provide the other parties
with prompt written notice of such requirement and a copy of the press release
to be issued or public statement to be made, and the parties shall use
reasonable commercial efforts to coordinate the content of such press release or
public statement.
5.3. Tax Ruling. The Sellers shall apply to the Israel Tax Commission to
obtain a pre-ruling (the "Ruling") which is expected to provide a tax deferral
to the Sellers. Terayon and the Sellers agree to defer the Closing, if such
deferral is required by the Sellers in order to obtain the Ruling for a period
of up to ninety (90) days from February ___, 2000.
5.4 Best Efforts. During the Pre-Closing Period, (a) the Company shall
use its best efforts to cause the conditions set forth in Section 6 to be
satisfied on a timely basis, and (b) Terayon shall use its best efforts to cause
the conditions set forth in Section 7 to be satisfied on a timely basis.
5.5 Employment and Non-Competition Agreements. The Company shall use all
commercially reasonable efforts to cause the individuals identified in Exhibit D
to execute and deliver to the Company and Terayon, at the Closing, an Employment
and Non-Competition Agreement in the form set forth as Exhibit E hereto.
5.6 Termination of Employee Plans. At the Closing, the Company shall
terminate its existing stock option plans, and shall ensure that no employee or
former employee of the Company has any rights under any of such plans and that
any liabilities of the Company under such plans (including any such liabilities
relating to services performed prior to the Closing) are fully extinguished at
no material cost to the Company.
5.7 Registration of Shares. Terayon will, as promptly as practicable,
prepare and file with the SEC a registration statement under the Securities Act
with respect to the registration of the shares of Common Stock issuable to the
Sellers in connection with the transactions contemplated by this Agreement (the
"Registration Statement"). Terayon will, and will cause its accountants and
lawyers to, cause the Registration Statement to be declared effective as
promptly as practicable after filing with the SEC, but in no event later than
sixty (60) days following the Closing and the Registration Statement shall be
kept effective continuously for a period of one year following the date on which
the Registration Statement is declared effective by the SEC. None of the
information supplied or to be supplied by Terayon for inclusion or incorporation
by reference in the Registration Statement will, at the time the Registration
Statement is filed with the SEC and at the time it 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 to
make the statements therein not misleading. If at any time prior to the date on
which the Registration Statement is declared effective by the SEC any event in
respect of Terayon, its officers and directors, or any of its subsidiaries
should occur which is required to be described in an amendment of, or a
supplement to, the Registration Statement, Terayon shall promptly so advise the
Sellers' Representative and such event shall be so described, and any such
amendment or supplement to the Registration Statement (which the Sellers'
Representative shall have a reasonable opportunity to review) shall be promptly
filed with the SEC. The Registration Statement will comply as to form in all
material respects with the provisions of the Securities Act and the rules and
regulations thereunder.
5.8 Employees. As soon as practicable after the Closing Date, Terayon
shall provide to all employees of the Company such employee benefits plans,
programs and arrangements as are generally made available to Israeli employees
of Terayon, provided, with respect to each employee, that such employee does not
voluntarily terminate his or her employment with the Company prior to the first
anniversary of the Closing Date.
5.9 Tax Liability. Each party shall be responsible for all its
respective tax obligations deriving from the transactions contemplated in this
Agreement.
Section 6. Conditions Precedent to Obligations of Terayon.
The obligations of Terayon to consummate the transactions contemplated by
this Agreement are subject to the satisfaction, at or prior to the Closing, of
each of the following conditions any or all of which may be waived in writing by
Terayon:
6.1 Accuracy of Representations. Each of the representations and
warranties made by the Company in this Agreement and in each of the other
agreements and instruments delivered to Terayon in connection with the
transactions contemplated by this Agreement shall have been accurate in all
material respects as of the date of this Agreement, and shall be accurate in all
material respects as of the Closing Date as if made on the Closing Date.
6.2 Performance of Covenants. All of the covenants and obligations that
the Company is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
6.3 Consents. All Consents required to be obtained in connection with
the transactions contemplated by this Agreement (including the Consents
identified in Part 2.21 of the Disclosure Schedule) shall have been obtained and
shall be in full force and effect.
6.4 Agreements and Documents. Terayon and the Company shall have
received the following agreements and documents, each of which shall be in full
force and effect:
(a) fully executed Escrow Agreement (the "Escrow Agreement") in the
form and substance reasonably satisfactory to counsel for Terayon, the Sellers'
Representative and counsel for the Company, which shall contain, without
limitation, provisions regarding the following: (i) the release of the Escrow
Shares on the first anniversary of the Closing Date, (ii) the sale of the Escrow
Shares upon instruction of the Sellers' Representative (with the proceeds of
such sale(s) to be deposited in the Escrow in lieu of the Escrow Shares), and
(iii) such other terms and conditions as are standard and customary in
transactions of this nature;
(b) Employment and Non-Competition Agreements in the form of Exhibit E,
executed by the individuals identified on Exhibit D;
---------
(c) confidential invention and assignment agreements, reasonably
satisfactory in form and content to Terayon, executed by all employees of the
Company and by all consultants and independent contractors to the Company who
have not already signed such agreements;
(d) a legal opinion of Xxxxx X. Ne'xxxx, Xxx-Artzi & Co. Adv. in form
and substance reasonably satisfactory to counsel for Terayon, addressed to
Terayon and dated as of the Closing Date;
(e) a certificate executed by two Officers of the Company (but without
personal liability thereto) certifying that each of the representations and
warranties set forth in Section 2 is accurate in all material respects as of the
Closing Date as if made on the Closing Date and that the conditions set forth in
Sections 6.1, 6.2 and 6.3 have been duly satisfied (the "Company Closing
Certificate");
(f) written resignations of all directors of the Company, effective as
of the Closing Date;
(g) certificates representing the Shares accompanied by share transfer
deeds duly executed for transfer in blank; and
(h) Option Holder Consent Letter and Counterpart Signature Pages,
executed by all of the Option Holders.
6.5 Securities Law Requirements. All permits, licenses, consents and
approvals necessary under any laws relating to the sale of securities have been
issued or given, and all restrictions or registration statements filed under any
laws relating to the sale of securities for the issuance of Common Stock
issuable pursuant to this Agreement shall have become effective, and no such
permit, license, consent, approval, registration or registration statement shall
have been revoked, canceled, terminated, suspended or made the subject of any
stop order or proceeding thereof.
6.6 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the
transactions contemplated by this Agreement shall have been issued by any court
of competent jurisdiction and remain in effect, and there shall not be any Legal
Requirement enacted or deemed applicable to the
transactions contemplated by this Agreement that makes consummation of the
transactions contemplated by this Agreement illegal, which Legal Requirement
shall not have been removed within thirty (30) days of enactment.
6.7 No Legal Proceedings. No Person shall have commenced or taken
substantial steps towards any Legal Proceeding challenging or seeking the
recovery of a material amount of damages in connection with the transactions
contemplated by this Agreement or seeking to prohibit or limit the exercise by
Terayon of any material right pertaining to its ownership of stock of the
Company.
6.8 Termination of Employee Plans. The Company shall have provided
Terayon with evidence, reasonably satisfactory to Terayon, as to the termination
of the benefit plans referred to in Section 5.5.
6.9 ISA Exemption. Terayon shall have received from the Israel
Securities Authority an exemption from the obligation to publish a prospectus in
the manner required pursuant to the laws of the State of Israel in connection
with the issuance of the Common Stock to each the Sellers.
Section 7. Conditions Precedent to Obligations of the Company.
The obligations of each of the Sellers and the Company to consummate the
transactions contemplated by this Agreement are subject to the satisfaction, at
or prior to the Closing, of the following conditions any or all of which may be
waived in writing by the Sellers' Representative and the Company:
7.1 Accuracy of Representations. Each of the representations and
warranties made by Terayon in this Agreement shall have been accurate in all
material respects as of the date of this Agreement, and shall be accurate in all
material respects as of the Closing Date as if made on the Closing Date.
7.2 Performance of Covenants. All of the covenants and obligations that
Terayon is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all respects.
7.3 Documents. Each of the Sellers and the Company shall have received
the following agreements and documents, each of which shall be in full force and
effect:
(a) a letter executed by Boston Equiserve, L.P., as Transfer Agent,
Registrar and Exchange Agent (the "Transfer Agent") of the Terayon Common Stock,
stating that it has received irrevocable instructions from Terayon to issue the
Share Consideration in the names of the respective Sellers, and that it will
forward validly executed share certificates covering the Common Stock in the
names of each of the Sellers;
(b) fully executed Escrow Agreement;
(c) a legal opinion of Xxxxxx Godward llp, in form and substance
reasonably satisfactory to counsel for the Sellers, addressed to the Sellers and
dated as of the Closing Date; and
(d) a certificate executed by an Officer of Terayon (but without
personal liability thereto) certifying that each of the representations and
warranties set forth in Section 3 is accurate in all material respects as of the
Closing Date as if made on the Closing Date and that the conditions set forth in
Sections 7.1, 7.2 and 7.5 have been duly satisfied (the "Terayon Closing
Certificate").
7.4 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the
transactions contemplated by this Agreement shall have been issued by any court
of competent jurisdiction and remain in effect, and there shall not be any Legal
Requirement enacted or deemed applicable to the transactions contemplated by
this Agreement that makes consummation of the transactions contemplated by this
Agreement illegal, which Legal Requirement shall not have been removed within
(30) days of enactment.
7.5 Consents. All Consents required to be obtained in connection with
the transactions contemplated by this Agreement (including the Consents
identified in Part 2.21 of the Disclosure Schedule) shall have been obtained and
shall be in full force and effect.
7.6 No Legal Proceedings. No Person shall have commenced any Legal
Proceeding challenging or seeking the recovery of a material amount of damages
in connection with the transactions contemplated by this Agreement or seeking to
prohibit or limit the exercise by Terayon of any material right pertaining to
its ownership of stock of the Company.
Section 8. Termination.
8.1 Termination Events. This Agreement may be terminated prior to the
Closing:
(a) By either the Company and the Sellers' Representative or by
Terayon if a court of competent jurisdiction or Governmental Body shall have
issued an order, decree or ruling or taken any other action (which order, decree
or ruling the parties hereto shall use their best efforts to lift) and such was
not at the request of the party seeking termination of the Agreement, in each
case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling or
other action shall have become final and non-appealable; or
(b) by Terayon if the Closing has not taken place on or before
February 28, 2000 (other than as a result of any failure on the part of Terayon
to comply with or perform any covenant or obligation of Terayon set forth in
this Agreement);
(c) by the Sellers' Representative and the Company if the Closing
has not taken place on or before February 28, 2000 (other than as a result of
the failure on the part of
the Sellers or the Company to comply with or perform any covenant or obligation
set forth in this Agreement or in any other agreement or instrument delivered to
Terayon); or
(d) by the mutual consent of Terayon, the Sellers' Representative
and the Company.
8.2 Termination Procedures. If Terayon wishes to terminate this
Agreement pursuant to Section 8.1(a) or Section 8.1(b), Terayon shall deliver to
the Sellers' Representative and the Company (with a copy to the Company's
counsel) a written notice stating that Terayon is terminating this Agreement and
setting forth a brief description of the basis on which Terayon is terminating
this Agreement. If the Sellers' Representative and the Company wish to terminate
this Agreement pursuant to Section 8.1(a) or Section 8.1(c), the Sellers'
Representative and the Company shall deliver to Terayon (with a copy to
Terayon's counsel) a written notice stating that the Sellers' Representative and
the Company are terminating this Agreement and setting forth a brief description
of the basis on which the Sellers' Representative and the Company are
terminating this Agreement.
8.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) none of the Company, the Sellers or
Terayon shall be relieved of any obligation or liability arising from any prior
breach by such party of any provision of this Agreement; (b) the parties shall,
in all events, remain bound by and continue to be subject to the provisions set
forth in Section 10; and (c) the parties shall, in all events, remain bound by
and continue to be subject to Section 5.2 and Section 8.3A.
8.3A Confidentiality. Terayon agrees that, unless and until the
transaction contemplated by this Agreement shall have been consummated, Terayon
and its representatives will hold in strict confidence all information and
documents received from the Company or the Sellers in connection with the
transaction contemplated herein and shall refrain from using such information
and documents in any manner. If the transaction herein contemplated shall not be
consummated, Terayon will continue to hold such information and documents in
strict confidence; provided, however, that Terayon's obligations under this
Section to maintain such confidentiality shall not apply to any developments
made by Terayon which Terayon can prove were developed by it independently,
without any reference to the information and documents, provided by the Company
and to any information or documents that are in the public domain at the time
furnished by the Company or the Sellers or that become public thereafter through
any means other than as a result of any act of Terayon or its agents, officers
or directors which constitutes a breach of this Agreement. Notwithstanding any
provision to the contrary contained herein, Terayon shall be permitted to
disclose such of the information and documents as it is advised by counsel is
legally required to be disclosed under applicable law.
Section 9. Indemnification, Etc.
9.1 Survival of Representations, Etc.
(a) The representations and warranties made by the Company
(including the representations and warranties set forth in Section 2 and the
representations and warranties set forth in the Company Closing Certificate)
shall survive the Closing and shall expire on the 12-month anniversary of the
Closing Date; provided, however, that if, at any time prior to the 12-month
anniversary of the Closing Date, any Indemnitee (acting in good faith) delivers
to the Sellers' Representative a written notice alleging the existence of an
inaccuracy in or a breach of any of the representations and warranties made by
the Company (and setting forth in reasonable detail the basis for such
Indemnitee's belief that such an inaccuracy or breach may exist) and asserting a
claim for recovery under Section 9.2 based on such alleged inaccuracy or breach,
then the claim asserted in such notice shall survive the 12-month anniversary of
the Closing until such time as such claim is fully and finally resolved.
(b) The representations, warranties, covenants and obligations of
the Company, and the rights and remedies that may be exercised by the
Indemnitees, shall not be limited or otherwise affected by or as a result of any
information furnished to, or any investigation made by or knowledge of, any of
the Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made by
the Company in this Agreement.
(d) The representations and warranties made by Terayon (including
the representations and warranties set forth in Section 3 and the
representations and warranties set forth in Terayon Closing Certificate) shall
survive the Closing and shall expire on the 12-month anniversary of the Closing
Date; provided, however, that if, at any time prior to the 12-month anniversary
of the Closing Date, the Sellers' Representative (acting in good faith) shall
deliver to Terayon a written notice alleging the existence of an inaccuracy in
or a breach of any of the representations and warranties made by Terayon (and
setting forth in reasonable detail the basis for the Sellers belief that such an
inaccuracy or breach may exist) and asserting a claim for recovery under Section
9.2 based on such alleged inaccuracy or breach, then the claim asserted in such
notice shall survive the 12-month anniversary of the Closing until such time as
such claim is fully and finally resolved.
(e) The representations, warranties, covenants and obligations of
Terayon, and the rights and remedies that may be exercised by the Sellers, shall
not be limited or otherwise affected by or as a result of any information
furnished to, or any investigation made by or knowledge of, the Sellers.
9.2 Indemnification.
(a) From and after the Closing Date (but subject to Section 9.1(a)), the
Indemnitees may seek indemnification first from the Escrow Fund and only
thereafter from each of the Sellers, severally but not jointly and to the extent
of such Seller's pro rata shareholdings in the Company, for any Damages (other
than consequential damages) that are suffered or incurred by any of the
Indemnitees or to which any of the Indemnitees may otherwise become subject
(regardless of whether or not such Damages relate to any third-party claim) and
which are from or as a result of, or are connected with: (i) any inaccuracy in
or breach of any representation or warranty set forth in Section 2 or in the
Company Closing Certificate; (ii) any inaccuracy in or breach of any
representation or warranty set forth in Section 2; (iii) any breach of any
covenant or obligation of the Company (including the covenants set forth in
Sections 4 and 5);or (iv) any Legal Proceeding relating to any inaccuracy or
breach of the type referred to in clause "(i)" or "(ii)" above (including any
Legal Proceeding commenced by any Indemnitee for the purpose of enforcing any of
its rights under this Section 9).
(b) Each of the Sellers and the Company acknowledges and agrees that, if
the Company suffers, incurs or otherwise becomes subject to any Damages as a
result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation, then (without limiting any of
its rights as an Indemnitee) Terayon shall also be deemed, by virtue of its
ownership of the stock of the Company, to have incurred Damages as a result of
and in connection with such inaccuracy or breach.
9.3 Defense of Third Party Claims. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against the
Sellers, against Terayon or against any other Person) with respect to which any
of the Indemnitees shall have the right to seek indemnification pursuant to this
Xxxxxxx 0, Xxxxxxx shall have the right, at its election, to proceed with the
defense of such claim or Legal Proceeding on its own. If Terayon so proceeds
with the defense of any such claim or Legal Proceeding:
(a) all reasonable expenses relating to the defense of such claim or
Legal Proceeding shall be borne and paid out of the Escrow Fund;
(b) Terayon shall have the right to settle, adjust or compromise such
claim or Legal Proceeding with the consent of the Sellers' Representative;
provided, however, that such consent shall not be unreasonably withheld.
Terayon shall give the Sellers' Representative prompt notice of the
commencement of any such Legal Proceeding against Terayon or the Company;
provided, however, that any failure on the part of Terayon to so notify the
Sellers' Representative shall not limit any of the rights of the Indemnitees
under this Section 9 (except to the extent such failure materially prejudices
the defense of such Legal Proceeding).
(c) From and after the Closing Date (but subject to Section 9.1(d)), any
Seller may seek indemnification from Terayon for any Damages (other than
consequential
damages) that are suffered or incurred by such Seller or to which such Seller
may otherwise become subject (regardless of whether or not such Damages relate
to any third-party claim) and which arise from or as a result of, or are
directly connected with: (i) any inaccuracy in or breach of any representation
or warranty set forth in Section 3; (ii) any inaccuracy in or breach of any
representation or warranty set forth in Section 3 as if such representation and
warranty had been made on and as of the Closing Date; or (iii) any Legal
Proceeding relating to any inaccuracy or breach of the type referred to in
clause "(i)" or "(ii)" above (including any Legal Proceeding commenced by any
Seller for the purpose of enforcing any of its rights under this Section 9);
provided, however, that the amount of indemnification sought by the Sellers may
not exceed US$60 million.
9.4 Exercise of Remedies by Indemnitees Other Than Terayon. No Indemnitee
(other than Terayon or any successor thereto or assign thereof) shall be
permitted to assert any indemnification claim or exercise any other remedy under
this Agreement unless Terayon (or any successor thereto or assign thereof) shall
have consented to the assertion of such indemnification claim or the exercise of
such other remedy.
9.5 Limitations on Indemnification.
(a) Except as specifically set forth herein, the maximum amount of
indemnifiable Damages that may be recovered from the Sellers arising out of or
resulting from Section 9.2(a) shall be an amount equal to US$60 million, and in
no event shall any Seller have any indemnification liability under this
Agreement greater than his, her or its portion of the Purchase Consideration,
and the total indemnification liability of the Sellers under this Agreement
shall be allocated to each Seller based on such Seller's proportionate share of
the Purchase Consideration.
(b) Notwithstanding anything to the contrary contained in this
Agreement, no Indemnitee shall be entitled to seek indemnification from the
Sellers under this Agreement with respect to any Damages arising out of or
resulting from Section 9.2(a), until the aggregate amount of such Damages
exceeds one hundred thousand US dollars ($100,000), and where such damages
exceed one hundred thousand US dollars ($100,000), the Indemnitees shall be
entitled to indemnification in full (with no deduction of the one hundred
thousand US dollars ($100,000)), subject to the provisions of Section 9.5(a).
(c) Notwithstanding anything to the contrary contained in this
Agreement, the maximum amount of indemnifiable Damages that may be recovered
from Terayon arising out of or resulting from Section 9.2(c) shall be an amount
equal to US$60 million.
(d) Notwithstanding anything to the contrary contained in this
Agreement, the Sellers shall not be entitled to seek indemnification from
Terayon under this Agreement with respect to any Damages arising out of or
resulting from Section 9.2(c), until the aggregate amount of such Damages
exceeds one hundred thousand US dollars ($100,000), and where such damages
exceed one hundred thousand US dollars ($100,000), the Indemnitees shall be
entitled to indemnification in full (with no deduction of the one hundred
thousand US dollars ($100,000)), subject to the provisions of Section 9.5(c).
9.6 Exclusive Remedies. Terayon acknowledges and agrees that its sole and
exclusive remedy (except in the case of fraud, in which case Terayon reserves
all rights available to it under the law with respect to the party committing
such fraud) with respect to any and all claims relating to the subject matter of
this Agreement and the other agreements, documents and certificates specifically
contemplated by this Agreement shall be pursuant to the indemnification
provisions set forth in this Section 9 and specific performance as contemplated
by Section 10.11 below.
9.7 Prospectus Indemnification. Notwithstanding anything to the contrary
in this Agreement, in the event any shares of Common Stock are included in a
registration statement of Terayon:
(a) To the extent permitted by law, Terayon will indemnify and hold
harmless each of the Sellers, the, officers, directors and legal counsel of each
of the Sellers, any underwriter (as defined in the Securities Act) for each of
the Sellers and each person, if any, who controls each of the Sellers or
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation") by Terayon: (i)
any untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission to state
therein a material fact required to be stated therein, or necessary to make the
statements therein not misleading, or (iii) any violation or alleged violation
by Terayon of the Securities Act, the Exchange Act, any state securities law or
any rule or regulation promulgated under the Securities Act, the Exchange Act or
any state securities law in connection with the offering covered by such
registration statement; and Terayon will reimburse each of the Sellers, officer
or director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided however, that the
indemnity agreement contained in this Section 9.7(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of Terayon, which consent shall not
be unreasonably withheld, nor shall Terayon be liable in any such case for any
such loss, claim, damage, liability or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon or in conformity
with written information furnished expressly for use in connection with such
registration by each of the Sellers, partner, officer, director, underwriter or
controlling person of each of the Sellers.
(b) To the extent permitted by law, each of the Sellers will, if
Common Stock held by such Seller are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify and hold
harmless Terayon, each of its directors, its officers, and legal counsel and
each person, if any, who controls Terayon within the meaning of the Securities
Act and any underwriter selling securities under such
registration statement, against any losses, claims, damages or liabilities
(joint or several) to which Terayon or any such director, officer, controlling
person, or underwriter may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon or in conformity with written information
furnished by such Seller specifically for use in connection with such
registration; and such Seller will reimburse any legal or other expenses
reasonably incurred by Terayon or any such director, officer, controlling person
or underwriter in connection with investigating or defending any such loss,
claim, damage, liability or action if it is judicial determined that there was
such a Violation; provided, however, that the indemnity agreement contained in
this Section 9.7(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of such Seller, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section
9.7 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 9.7, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 9.7, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 9.7.
(d) If the indemnification provided for in this Section 9.7 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the Violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or
prevent such statement or omission.
(e) The obligations of Terayon and each of the Sellers under this
Section 9.7 shall survive completion of any offering of Common Stock in a
registration statement and the termination of this Agreement. No indemnifying
party, in the defense of any such claim or litigation, shall, except with the
consent of each indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation.
Section 10. Miscellaneous Provisions.
10.1 Sellers' Representative. Mr. Xxxxxx Xxxx is hereby designated as the
representative of the Sellers for purposes of this Agreement and the Escrow
Agreement and as agent and attorney-in-fact of the Sellers with respect hereto
and thereto (the "Sellers' Representative"). The Sellers' Representative shall
have the authority to take such actions and exercise such discretion on behalf
of its respective principals as are required of the Sellers' Representative
pursuant to the terms of this Agreement and the Escrow Agreement (and any such
actions shall be binding on each of the Sellers represented by such Sellers'
Representative), including without limitation the following:
(i) to execute, acknowledge, deliver, record and file all
ancillary agreements, waivers, consents, certificates and documents which the
Sellers' Representative deems necessary or appropriate in connection with the
consummation of the transactions contemplated by the terms and provisions of
this Agreement;
(iii) to receive and make any payments provided for under this
Agreement and acknowledge receipt and payment thereof;
(iv) to waive any breach or default under the Agreement, or to
waive any condition precedent to the Closing under Section 7 hereof;
(v) to amend or terminate this Agreement pursuant to its terms;
(vi) to receive service of process in connection with any claims
under this Agreement or the Escrow Agreement; and
(vii) to perform the obligations and exercise the rights under the
Escrow Agreement, including the settlement of any claims and disputes arising
thereunder.
The designation and appointment of the Sellers' Representative is
irrevocable and shall not be affected by the subsequent death, incapacity,
insolvency or dissolution of any Seller. Terayon shall have the right to rely
upon all actions taken or omitted by the Sellers' Representative pursuant to
this Agreement, all of which actions and omissions shall be binding on each of
the Sellers. If the Sellers' Representative shall die, become disabled or
otherwise be unable to fulfill his responsibilities as agent of the Sellers,
then the Sellers holding a majority in interest of the capital stock of the
Company (assuming the exercise of
all options and warrants and the exercise and conversion of all exercisable
convertible securities) shall, within ten days after such death or disability,
appoint a successor agent and, promptly thereafter, shall notify Terayon of the
identity of such successor. Any such successor shall become the "Sellers'
Representative" for purposes of this Agreement. The Sellers hereby authorize the
Sellers' Representative to pay all reasonable and documented legal fees and
expenses incurred by the Company and the Sellers (as further described in
Section 10.3 below) from the Purchase Consideration prior to the distribution of
the Purchase Consideration to the Sellers. The Sellers hereby agree to transfer
to the Sellers' Representative such additional cash amounts as shall be
determined by the Sellers' Representative are necessary to pay all legal fees
and expenses incurred by the Company and the Sellers (as further described in
Section 10.3 below).
10.2. Further Assurances. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
10.3 Fees and Expenses. Each of Terayon and the Company shall bear and
pay all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party (and, in the case of the
Sellers, also by the Company) in connection with the transactions contemplated
by this Agreement, including all fees, costs and expenses incurred by such party
in connection with or by virtue of (a) the investigation and review conducted by
Terayon and its Representatives with respect to the Company's business (and the
furnishing of information to Terayon and its Representatives in connection with
such investigation and review), (b) the negotiation, preparation and review of
this Agreement (including the Disclosure Schedule) and all agreements,
certificates, opinions and other instruments and documents delivered or to be
delivered in connection with the transactions contemplated by this Agreement,
and (c) the preparation and submission of any filing or notice required to be
made or given in connection with any of the transactions contemplated by this
Agreement, and the obtaining of any Consent required to be obtained in
connection with any of such transactions.
10.4 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 Notices. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to Terayon:
Terayon Communication Systems, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: Chief Executive Officer
with a copy to:
Xxxxxx Godward LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
and
Naschitz, Xxxxxxx & Co.
0 Xxxxx Xxxxxx
Xxx-Xxxx, Xxxxxx
Fax: 000-0-0000000
Attention: Xxxxxx X. Amir, Adv.
if to the Company:
ComBox Ltd.
00 Xxxxx Xxxxxx
Xxxxxx Xxxxx, Xxxxxx
Fax: 00-0000000
Attention: Chief Executive Officer
with a copy to:
Xxxxx X. Ne'xxxx, Benartzi & Co. Adv.
Xxx Xxxxx 00, Xxxxxxxx Xxxxxx
Xxx Xxxx 00000
Tel. 0000000
Fax. 0000000
Attention: Revital Xxx Xxxxx, Adv.
If to the Sellers' Representative:
Mr. Xxxxxx Xxxx
IES Electronics Industries Ltd.
IES Xxxxxxxx, Xxxxxx Xxxxxx
Xxxxx Xxx 00000
Tel: 00-0000000
Fax: 00-0000000
10.6 Time of the Essence. Time is of the essence of this Agreement.
10.7 Headings. The boldface headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.8 Counterparts. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
10.9 Governing Law. This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of Israel
(without giving effect to principles of conflicts of laws). Each party to this
Agreement consents to the exclusive jurisdiction and venue of the courts of
District of Tel Aviv-Jaffa in the State of Israel.
10.10 Successors and Assigns. This Agreement shall be binding upon: the
Company, each of the Sellers and their respective successors and assigns (if
any); Terayon and its successors and assigns (if any). This Agreement shall
inure to the benefit of: the Company; each of the Sellers the other Indemnitees
(subject to Section 9.5); and the respective successors and assigns (if any) of
the foregoing. Neither party may assign any of its rights under this Agreement
to any other Person without obtaining the consent or approval of the other
parties hereto.
10.11 Specific Performance. The parties to this Agreement agree that, in
the event of any breach or threatened breach by any party to this Agreement of
any covenant, obligation or other provision set forth in this Agreement for the
benefit of any other party to this Agreement, such other party shall be entitled
to (a) a decree or order of specific performance or mandamus to enforce the
observance and performance of such covenant, obligation or other provision, and
(b) an injunction restraining such breach or threatened breach.
10.12 Waiver.
(a) No failure on the part of any Person to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any Person
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
(b) No Person shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver
of such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of such Person; and any
such waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
10.13 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.14 Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.15 Parties in Interest. Except for the provisions of Section 9, none of
the provisions of this Agreement are intended to provide any rights or remedies
to any Person other than the parties hereto and their respective successors and
assigns (if any).
10.16 Entire Agreement. This Agreement and the other agreements referred to
herein set forth the entire understanding of the parties hereto relating to the
subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof.
10.17 Construction.
(a) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall include the
masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement to
"Sections," "Schedules" and "Exhibits" are intended to refer to Sections of this
Agreement and Schedules and Exhibits to this Agreement.
[The Remainder of this Page Intentionally Left Blank]
The parties hereto have caused this Share Purchase Agreement to be executed
and delivered as of the date first above written.
Terayon Communication Systems, Inc.,
a Delaware corporation
By: /s/ Xxxx Xxxxx
---------------------------------------
Name: Xxxx Xxxxx
-------------------------------------
Title: Chief Executive Officer
------------------------------------
ComBox Ltd.,
a company organized under the laws of Israel
By: /s/ Xxxxxx Xxxx
---------------------------------------
Name: Xxxxxx Xxxx
-------------------------------------
Title: Chairman of the Board
------------------------------------
Sellers' Representative
-----------------------
/s/ Xxxxxx Xxxx
---------------------
Mr. Xxxxxx Xxxx
Sellers:
-------
/s/ Xxxxxx Xxxx
-------------------------
I.E.S. Electronics Industries Ltd.
/s/ Xxxxxx Xxxx
-------------------------
I.E.S Electronics Advanced
Investments (1997) Ltd.
/s/ C.T.P. Systems Ltd.
-------------------------
C.T.P. Systems Ltd.
/s/ Xxxxxx Xxxxxx
-------------------------------------------
Xxxxxx Xxxxxx Assets Ltd.
/s/ M.T. Gibor Assets Ltd.
-------------------------------------------
M.T. Gibor Assets Ltd.
/s/ Xxxx Xxxxxx
-------------------------------------------
Xxx. Xxxx Xxxxxx
/s/ Ophir Holdings Ltd.
-------------------------------------------
Ophir Holdings Ltd.
/s/ Xxxxx X. Ne'xxxx
-------------------------------------------
Xx. Xxxxx X. Ne'eman
/s/ Xxx. Xxxxxxx Xxx-Xxxxx
-------------------------------------------
Xxx. Xxxxxxx Xxx-Xxxxx
/s/ Xxxx Xxxx
-------------------------------------------
Xx. Xxxx Agam
/s/ Ascend Technology Venture L.P.
-------------------------------------------
Ascend Technology Venture L.P.
/s/ Feuchtwanger Energy Ventures Ltd.
-------------------------------------------
Feuchtwanger Energy Ventures Ltd.
/s/ The Technology and Growth Fund Limited
Partnership
-------------------------------------------
The Technology and Growth Fund Limited
Partnership
/s/ The Technology and Growth Fund
for the Middle East L.P.
--------------------------------------
The Technology and Growth Fund for the
Middle East L.P.
Exhibit A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a material
portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital stock
or other equity security of the Company (other than Series A Ordinary Shares
issued to employees of the Company, upon exercise of Options or Warrants, (ii)
any option, call, warrant or right (whether or not immediately exercisable) to
acquire any capital stock or other equity security of the Company (other than
stock options granted to employees of the Company in routine transactions in
accordance with the Company's past practices), or (iii) any security, instrument
or obligation that is or may become convertible into or exchangeable for any
capital stock or other equity security of the Company; or
(c) any merger, consolidation, business combination, reorganization or
similar transaction involving the Company.
Agreement. "Agreement" shall mean the Agreement to which this Exhibit A is
attached (including the Disclosure Schedule), as it may be amended from time to
time.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
Damages. "Damages" shall include any loss, damage, injury, liability,
claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including
reasonable attorneys' fees), charge, cost (including costs of investigation) or
expense of any nature.
Disclosure Schedule. "Disclosure Schedule" shall mean the schedule (dated
as of the date of the Agreement) delivered to Terayon on behalf of the Company.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction 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 receipt of any income derived from any asset,
any restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
Entity. "Entity" shall mean any 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 or entity.
Exchange. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
Escrow Fund. "Escrow Fund" shall have the meaning ascribed to it in the
Escrow Agreement.
Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
Governmental Body. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
Indemnitees. "Indemnitees" shall mean the following Persons: (a) Terayon;
(b) Terayon's current and future affiliates (including the Company); (c) the
respective Representatives of the Persons referred to in clauses "(a)" and "(b)"
above; and (d) the respective successors and assigns of the Persons referred to
in clauses "(a)", "(b)" and "(c)" above; provided, however, that the Seller
shall not be deemed to be an "Indemnitee."
Liens. "Liens" shall mean all mortgages, pledges, liens, security
interests, conditional and installment sale agreements, encumbrances, charges or
other claims of third parties of any kind.
Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted,
adopted, promulgated, implemented or otherwise put into effect by or under the
authority of any Governmental Body.
Material Adverse Effect. A violation or other matter will be deemed to
have a "Material Adverse Effect" on the Company if such violation or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement or
in the Company Closing Certificate but for the presence of "Material Adverse
Effect" or other materiality qualifications, or any similar qualifications, in
such representations and warranties) would have a material adverse effect on the
Company's business, condition, assets, liabilities, operations or financial
performance or prospects.
Options. "Options" shall mean options to purchase Series A Ordinary Shares
under an option plan (written or oral).
Person. "Person" shall mean any individual, Entity or Governmental Body.
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax,
transfer tax, stamp tax, sales tax, use tax, property tax, business tax,
withholding tax or payroll tax), levy, assessment, tariff, duty (including any
customs duty), deficiency or fee, and any related charge or amount (including
any fine, penalty or interest), imposed, assessed or collected by or under the
authority of any Governmental Body.
Tax Returns. "Tax Returns" shall mean returns, reports and information
statements with respect to Tax required to be filed by or on behalf of the
Company with the Israel Income Tax Commission, the Israel Value Added Tax
Authority and any other taxing authority domestic or foreign.
Vested Options. "Vested Options" shall mean options to purchase Series A
Ordinary Shares that vest prior to or at the Closing.
