EXHIBIT 4.1(i)
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "AGREEMENT") is made and entered into as
of December 9, 2009, by and between VocalTec Communications Ltd., an Israeli
company (the "PURCHASER"), and Outsmart Ltd., a company organized under the laws
of the State of Israel (the "SELLER").
W I T N E S S E T H :
WHEREAS, the Seller provides convergence solutions for telecom operators
(the "BUSINESS"); and
WHEREAS, the Seller wishes to sell to the Purchaser, and the Purchaser
wishes to purchase from the Seller, certain assets of the Seller relating to the
operation of the Business, and in connection therewith, the Purchaser has agreed
to assume certain liabilities of the Seller relating to the purchased assets, on
the terms and conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows, intending to be legally bound:
ARTICLE I.
PURCHASE AND SALE OF ASSETS
1.01 PURCHASE AND SALE OF ASSETS.
Upon the terms and subject to the conditions set forth in this Agreement,
the Seller hereby agrees to sell to the Purchaser, and the Purchaser hereby
agrees to purchase from the Seller, free and clear of any Encumbrance, all of
the right, title and interest of the Seller in the assets set forth in Schedule
1.01 (collectively, the "ASSETS"), as well as the following (solely to the
extent directly related to or associated with the Assets):
a) all customer, marketing, distribution and license contracts to
which Seller is a party, or other contracts or outstanding purchase order
relating to the Assets (the "CONTRACTS"), provided that any such contract
or purchase order shall be deemed a 'Contract' only after and to the extent
it is lawfully assigned to the Purchaser pursuant to its terms;
b) all rights, claims and causes of action against third parties;
c) all existing and pending governmental licenses and permits which
constitute an integral part of an Asset ("PERMITS");
d) all current insurance and indemnity claims;
e) all goodwill;
f) all client customer, and prospects lists and records, production
reports and records, service and warranty records, equipment logs,
operating guides and manuals, creative materials, advertising materials,
promotional materials, studies, reports, correspondence and other similar
documents and records;
g) all insurance benefits relating to the Assets or the Assumed
Liabilities (as defined below), unless expended in accordance with this
Agreement; and
h) certain fixed assets and inventory of the Seller listed in Schedule
1.01 (the "FIXED ASSETS").
Notwithstanding the foregoing, the transfer of the Assets pursuant to this
Agreement shall not include the assumption of any Liabilities unless the
Purchaser expressly assumes such Liabilities pursuant to Section 1.03.
1.02 EXCLUDED ASSETS. Notwithstanding anything to the contrary in Section
1.01, the Seller shall not sell to Purchaser, and Purchaser will not purchase
from the Seller, any assets of the Seller not included specifically as Assets in
Schedule 1.01 (the "EXCLUDED ASSETS"). The Excluded Assets include:
a) all Leases to which Seller is a party;
b) any insurance policies of the Seller, other than rights relating to
claims arising on or prior to the Closing Date in connection with the
Assets;
c) all rights of the Seller under this Agreement and the other
agreements and instruments executed and delivered in connection with this
Agreement;
d) any share capital of the Seller;
e) the minute book, share transfer book and corporate seal of the
Seller;
f) inventory and fixed assets (except those listed in Schedule 1.01)
of the Seller;
g) all cash, Accounts Receivable, marketable securities and any bank
deposits and any interest to be received thereon held by the Seller as of
the Closing Date;
h) all claims, causes of action, rights of recovery and rights of
set-off of any kind against any person or entity arising out of or relating
to the Excluded Assets; and
i) Seller's employee benefit plans or programs.
1.03 LIMITED ASSUMPTION OF LIABILITIES. On the Closing Date, the Purchaser
will assume the following (and only the following) liabilities and/or
obligations of the Seller: (a) (i) all liabilities and obligations of the Seller
in respect of the Contracts to the extent arising after the Closing Date,
including Seller's existing product warranty obligations provided pursuant to
any of the Contracts to the extent (subject to Section 1.03(d) below) relating
to post-Closing periods, and (ii) all obligations of the Seller to deliver
features under each transferred Contract (regardless if such features were to be
delivered before or after the Closing Date) in accordance with the terms of such
transferred Contracts), (b) all liabilities incurred in, resulting from or
arising out of the use, operation or control of the Assets after the Closing
Date, (c) all obligations to pay royalties to the Office of Chief Scientist of
the Israeli Ministry of Industry, Trade and Labor ("OCS") and the Canada-Israel
Industrial Research and Development Foundation ("CIIRDF") in respect of the
Assets after the Closing Date, (d) all bonds that have been issued by the Seller
to its customers pursuant to any Contract that is an Asset, which bonds are
outstanding on the Closing Date and are set forth in Schedule 1.03, shall be
replaced, at the Closing, with Purchaser's bonds, and (e) any bonds required in
connection with any purchase order accepted by the Seller following the date of
the Letter of Intent which was executed by the parties on November 9, 2009 (the
"LETTER OF INTENT") (which purchase order has been approved by Purchaser) shall
be placed by the Purchaser (collectively, the "ASSUMED LIABILITIES"). Except for
the Assumed Liabilities, the Purchaser shall not assume or be responsible for
any claims against or commitments, contracts, agreements, obligations or other
liabilities of the Seller, whether known or unknown, asserted or unasserted,
accrued or un-accrued, absolute or contingent, liquidated or un-liquidated, due
or to become due, and whether contractual, statutory, or otherwise. Without
limiting the generality of the foregoing, the parties acknowledge that the
Purchaser shall not assume or in any way be responsible for any of the following
liabilities or obligations of Seller:
a) liabilities in respect of indebtedness of the Seller (other than as
included in the Assumed Liabilities);
b) product liability and warranty claims arising out of or in any way
relating to or resulting from any product or service of the Seller sold,
performed or delivered on or prior to the Closing Date, provided that
claims relating to Seller's product warranty obligations that are in effect
as of the Closing Date, which claims arise under any Contract that is an
Asset, with respect to events occurring following the Closing Date, shall
be the responsibility of Purchaser, and provided further that the Purchaser
shall be responsible for addressing (and bearing all costs associated
therewith) any inquiry, request or demand for repairs, service or
maintenance, arising under any of the Contracts following the Closing Date;
c) taxes, duties, levies, assessments and other charges, including any
penalties, interests and fines with respect thereto, payable by the Seller
to any Governmental Authority, including taxes arising out of the
transactions contemplated by this Agreement;
d) liabilities with respect to the Hired Employees (as defined in
Section 4.01a)) with respect to the period ending upon the effective
termination date of the employment or consulting relationship of such Hired
Employees with the Seller, including, without limitation any claim and/or
demand relating to any period prior to the Closing Date in connection with
employment-related matters;
e) any Liability of the Seller or claim for Liability of the Seller
related to any lawsuit or threatened lawsuit or claim based upon actions,
omissions or events occurring on or prior to the Closing Date which have
not been expressly assumed herein;
f) any Liability related to Excluded Assets;
g) any Liability to a third party for infringement of such third
party's rights by the Seller prior to the Closing;
h) all Liabilities incurred by Seller in connection with this
Agreement and the transactions contemplated herein;
i) Liabilities of Seller for any breach or failure to perform any of
Seller's covenants and agreements contained in, or made pursuant to, this
Agreement, or, prior to the Closing Date, any Contract;
j) Liabilities of Seller for any violation of or failure to comply
with any statute, law, ordinance, rule or regulation (collectively, "LAWS")
or any order, writ, injunction, judgment, plan or decree (collectively,
"ORDERS") of any Governmental Authority relating solely to the period prior
to the Closing Date;
k) all obligations of Purchaser to pay royalties to the Office of
Chief Scientist of the Israeli Ministry of Industry, Trade and Labor
("OCS") in respect of the Assets relating solely to the period prior to and
ending on November 30, 2009; and
l) all obligations of Purchaser to pay royalties to the Canada Israel
Industrial Research and Development Foundation ("CIIRDF") in respect of the
Assets relating solely to the period prior to and ending on November 30,
2009.
1.04 CONSENTS TO ASSIGNMENT.
Nothing in this Agreement nor the consummation of the transactions
contemplated hereby shall be construed as an attempt or agreement to assign any
Asset, including any Contract, Permit, certificate, approval, authorization or
other right, which by its terms or by applicable law is non-assignable without
the consent of a third party or a Governmental Authority or agency or is
cancelable by a third party in the event of an assignment ("NON-ASSIGNABLE
ASSETS") unless and until such consent shall have been obtained. Each party
shall, and shall cause its respective Affiliates to, use their reasonable best
efforts to obtain such consents prior to the Closing Date, and Seller shall
assist Purchaser in contacting and coordinating meetings with Seller's customers
in order to facilitate the obtaining of such consent prior to the Closing Date.
If any such consent shall not be obtained prior to the Closing Date, Purchaser
shall have the authority to approach the third parties under such Non-assignable
Assets in order to bring to the completion of the assignment of such assets. In
the event that at the Closing the registration of any transferred Intellectual
Property Asset in the name of the Purchaser at the relevant Governmental
Authority was not yet completed and perfected, then, without limitation of any
other rights of the Purchaser, to the extent necessary to grant to the Purchaser
full and unrestricted use of such transferred Intellectual Property Asset, the
Seller hereby grants to the Purchaser, effective as of the Closing Date, an
irrevocable, perpetual, royalty free, fully paid, worldwide, unrestricted,
exclusive license to make any use or exploitation with respect thereto. The
Seller further grants the Purchaser, effective as of the Closing Date, a power
of attorney, appointing Purchaser as an authorized signatory of the Seller in
connection with the registration in the name of the Purchaser of any
Intellectual Property that is part of the Assets that shall not be registered in
the name of the Purchaser through the Closing, in substantially the form
attached hereto as Schedule 1.04.
1.05 PURCHASE PRICE. The aggregate purchase price for the Assets shall be $
285,000 (the "PURCHASE PRICE"), plus applicable VAT, payable in cash and
unregistered ordinary shares of the Purchaser, par value NIS 0.13 per share (the
"ORDINARY SHARES"), valued as specified herein, as follows:
a) An amount in cash of US$185,000 less the amount of US$50,000
extended by the Purchaser to the Seller pursuant to that certain Debenture
dated as of November 22, 2009 attached hereto as Schedule 1.06(a) (the
"DOWN PAYMENT"; the amount in cash including the Down Payment is referred
to herein as the "CASH PAYMENT").
b) On the Closing Date, the Purchaser shall deliver to the Seller
irrevocable instructions to the Purchaser's transfer agent, instructing
such transfer agent to issue to the Seller Ordinary Shares of the Purchaser
having an aggregate value of $100,000, as calculated below (the "CLOSING
SHARES PAYMENT"), of which a certificate representing the Ordinary Shares
constituting the Escrow Shares (as defined below) shall be instructed to be
delivered to the Escrow Agent, on behalf of the Seller, as provided herein.
The Ordinary Shares constituting the Closing Shares Payment shall be valued
at the average closing price of the Purchaser's Ordinary Shares on the
Nasdaq Capital Market during the five (5) Business Days ending on (and
including) the Business Day prior to the date hereof (the "ORDINARY SHARES
PRICE").
c) The "ESCROW SHARES" to be placed in escrow shall be 30% of the
Ordinary Shares constituting the Closing Shares Payment which Purchaser, at
the Closing, shall, pursuant to the Indemnification Escrow Agreement,
deliver to the escrow agent named therein (the "ESCROW AGENT").
d) Payment of the Purchase Price shall be subject to applicable
Israeli tax withholding requirements, unless Seller provides Purchaser a
copy of a valid approval of the Israeli Tax Authority establishing an
exemption from such tax withholding obligations, to the reasonable
satisfaction of Purchaser. To the extent that amounts are withheld from any
payment, such amounts shall be treated for all purposes of this Agreement
as having been paid to the Seller. The Purchaser hereby represents that
with respect to all payments made to the Seller at the Closing, Seller has
provided the Purchaser with a copy of a valid and proper approval of the
Israeli Tax Authority establishing an exemption from such tax withholding
obligations.
e) Except as specifically set forth in Section 1.03 above, Seller
shall be responsible for any documentary and transfer taxes and any sales,
use or other taxes that are customarily imposed on sellers, and which are
imposed on Seller by reason of the transfers of the Assets provided
hereunder and any deficiency, interest or penalty asserted with respect
thereto, as may be required by law.
1.06 ADJUSTMENTS TO PURCHASE PRICE.
a) Seller shall be entitled to receive 10% of any amount in excess of
$1,075,000 (such excess amount is referred to as the "FIRST EXCESS AMOUNT")
actually received by Purchaser (or any of its affiliates) pursuant to
bookings (i.e. binding purchase orders from customers) that are received by
Purchaser (or any of its affiliates) during the period following the
Closing Date through December 31, 2010 (the "FIRST EARNOUT PERIOD"), in
each case with respect to sales of Seller's technology, products or any
part thereof (provided that when such Seller's technology, product or any
part thereof is bundled with other products of Purchaser, the amount deemed
to be booked on account of such product or technology, as applicable, shall
be the portion out of the total price of the product ordered by the
customer attributable to the Seller's product or Intellectual Property
purchased hereunder, which attribution shall be based on the higher of (i)
Seller's price list attached hereto as Schedule 1.07, and (ii) Purchaser's
(or any of its affiliates') attribution in its price lists to Seller's part
of the bundled products (to the extent such attribution exists), provided
that in each such case, if the Purchaser (or any of its affiliates)
provides any discount in connection with the relevant sale, the discount
shall apply pro-rata to both Purchaser's (or any of its affiliates') and
Seller's technology or products, as applicable. For the avoidance of doubt,
if Purchaser makes no attribution in its price lists to Seller's part of
the bundled products, the portion out of the total price allocated to the
Seller's product or Intellectual Property so purchased shall be based on
Seller's price list attached hereto as Schedule 1.07. If the Closing of the
transaction contemplated herein occurs between December 9, 2009 and
December 31, 2009, the threshold amount for the First Excess Amount will be
reduced from $1,075,000 as set forth below:
---------------------------------------- ---------------------------------------
Date of Closing Threshold of First Excess Amount
---------------------------------------- ---------------------------------------
Between December 9 and 16, 2009 $1,050,000
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Between December 17 and 24, 2009 $1,025,000
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Between December 25 and 31, 2009 $1,000,000
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b) In addition, the Seller shall be entitled to receive 10% of any
amount in excess of $1,612,500 (such excess amount is referred to as the
"SECOND EXCESS AMOUNT" and, together with the First Excess Amount, the
"EARNOUT AMOUNT") actually received by the Purchaser (or any of its
affiliates) pursuant to bookings (i.e. binding purchase orders from
customers) that are received by Purchaser (or any of its affiliates) during
the 12-month period following the First Earnout Period (the "SECOND EARNOUT
PERIOD" and, together with the First Earnout Period, the "EARNOUT PERIOD"),
in each case with respect to sales of Seller's technology, products or any
part thereof (provided that when such Seller's product or any part thereof
or any of Seller's technology is bundled with other products of the
Purchaser, the amount deemed to be so booked on account of such product or
technology, as applicable, shall be the portion out of the total price of
the product ordered by the customer attributable to the Seller's product or
Intellectual Property purchased hereunder, which attribution shall be based
on the higher of (i) Seller's price list attached hereto as Schedule 1.07,
and (ii) Purchaser's (or any of its affiliates') attribution in its price
lists to Seller's part of the bundled products (to the extent such
attribution exists), provided that in each such case, if the Purchaser (or
any of its affiliates) provides any discount in connection with the
relevant sale, the discount shall apply pro-rata to both Purchaser's (or
any of its affiliates') and Seller's technology or products, as applicable.
For the avoidance of doubt, if Purchaser makes no attribution in its price
lists to Seller's part of the bundled products, the portion out of the
total price allocated to the Seller's product or Intellectual Property so
purchased shall be based on Seller's price list attached hereto as Schedule
1.07. If the Closing of the transaction contemplated herein occurs between
December 9, 2009 and December 31, 2009, the threshold amount for the First
Excess Amount will be reduced from $1,612,500 as set forth below:
----------------------------------------- --------------------------------------
Date of Closing Threshold of First Excess Amount
----------------------------------------- --------------------------------------
Between December 9 and 16, 2009 $1,575,000
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Between December 17 and 24, 2009 $1,537,500
----------------------------------------- --------------------------------------
Between December 25 and 31, 2009 $1,500,000
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c) Purchaser shall prepare and deliver to the Seller, not later than
thirty (30) days after receipt by it (or any of its affiliates) of any
amount under any booking received by it (or any of its affiliates) during
any of the First Earnout Period and the Second Earnout Period, (i) a
statement setting forth the calculation made in accordance with Sections
1.07(a) or 1.07(b) (each such statement, an "EARNOUT Statement"), and (ii)
the applicable Earnout Amount as reflected in the applicable Earnout
Statement, by wire transfer of immediately available funds to an account
designated by the Seller to the Purchaser in writing.
d) Purchaser shall permit the authorized representatives of Seller (or
the representatives of the Major Shareholder), subject to a customary
confidential undertaking by Seller (or the Major Shareholder, as
applicable), access at all reasonable times, upon reasonable prior notice,
and without unduly interfering with the operations of the Purchaser, to
examine Purchaser's books and records, solely to the extent necessary so as
to validate the accuracy of the Earnout Statements. Seller (or Major
Shareholder, as applicable) shall bear the expenses resulting from such
audit, provided, however, that such expenses shall be borne by the
Purchaser in the event that the audit reveals that the Earnout Amount
supposed to be paid to Seller is at least ten percent (10%) higher than the
Earnout Amount actually paid by Purchaser for the applicable period. Seller
may, within fifteen Business Days following receipt by Seller of an Earnout
Statement, object in writing to the Earnout Statement. If Seller has not
objected to the Earnout Statement within such period, Seller shall be
deemed to have agreed to such statement. In case Seller objects in writing
within such period to the Earnout Statement, Seller and Purchaser shall
attempt in good faith for a period of five Business Days to agree upon the
rights of the Seller with respect to the Earnout Statement. If Seller and
Purchaser reach agreement, a memorandum setting forth such agreement shall
be prepared and signed by them. If no such agreement is reached, either
Purchaser or Seller may demand resolution of the matter in a court of
competent jurisdiction in accordance with Section 8.06.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller hereby represents and warrants to Purchaser as of the date
hereof and as of the Closing Date (unless another date is expressly set forth
below or in the Disclosure Schedule attached hereto) that:
2.01 EXISTENCE AND POWER. The Seller is a corporation duly organized and
validly existing under the laws of the State of Israel, and the Seller has all
requisite power and authority, corporate or otherwise, and all governmental
licenses and permits required to carry on the Business as now conducted.
2.02 AUTHORIZATION.
a) Except as set forth on Schedule 2.04, the execution, delivery and
performance by the Seller of this Agreement and all other documents and
agreements to be executed by the Seller in connection herewith (the
"RELATED DOCUMENTS") and the consummation by the Seller of the transactions
contemplated hereby require no action by or in respect of, or filing with,
any Governmental Authority.
b) The Seller has all requisite power and authority, corporate or
otherwise, to execute and deliver this Agreement and all Related Documents
and to perform its obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement and the Related Documents by the
Seller have been duly authorized by all necessary corporate action on the
part of the Seller, and no other action on the part of the Seller is
necessary to authorize this Agreement or the Related Documents or to
consummate the transactions contemplated hereby and thereby. This Agreement
and the Related Documents have been duly executed and delivered by the
Seller and constitute the valid and legally binding obligation of the
Seller, enforceable against the Seller in accordance with their respective
terms, except as such enforceability may be limited by laws governing
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or other similar laws, without limitation, relating to or affecting
creditors' rights generally. Each Related Document to be delivered by the
Seller following the date hereof will be duly executed and delivered by the
Seller and, when so executed and delivered, will constitute the legal,
valid and binding obligation of the Seller, enforceable against the Seller
in accordance with its terms, except as such enforceability may be limited
by laws governing bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws, without limitation, relating
to or affecting creditors' rights generally.
2.03 NON-CONTRAVENTION. Except as set forth in Schedule 2.03, the
execution, delivery and performance by the Seller of this Agreement and the
Related Documents do not and will not, with or without the giving of notice or
the lapse of time or both:
a) contravene, violate or conflict with the articles of association of
the Seller;
b) assuming compliance with the matters referred to in Section 2.02a),
contravene, violate or conflict with, or constitute a violation of, any
provision of any Law or Order binding upon or applicable to the Seller;
c) conflict with, result in a breach or violation of, or constitute a
default under, or result in a contractual right to cause the termination or
cancellation of or loss of a benefit under, or right to accelerate, any
agreement, contract or other instrument binding upon the Seller or license,
franchise, permit or other similar authorization held by the Seller; or
d) result in the creation or imposition of any Encumbrance on any
Asset.
2.04 GOVERNMENTAL APPROVALS; CERTAIN CONSENTS. Other than as listed in
Schedule 2.04, no notices, reports or other filings are required to be made by
Seller with, nor are any consents, registrations, approvals, permits or
authorizations are required to be obtained by Seller from any Governmental
Authority or under any Contract in connection with the execution, delivery and
performance of this Agreement by Seller.
2.05 LIABILITIES.
Other than the Assumed Liabilities, there are no liabilities, claims, or
obligations, whether accrued, absolute, contingent, anticipated, or otherwise,
whether due or to become due, attached to or otherwise associated with the
Assets.
2.06 ABSENCE OF CERTAIN CHANGES. Since June 30, 2009, there has not been
any Material Adverse Effect on the Assets or any event, occurrence or state of
circumstances or facts which as of the date hereof is reasonably expected to
have a Material Adverse Effect on the Assets.
2.07 TITLE TO ASSETS.
The Seller holds, and effective as of Closing Date, subject to the terms
herein, the Seller shall deliver to Purchaser, good and marketable title to and
valid interests in all of the Assets (including, without limitation, in all of
the Intellectual Property assets that form part of the Assets) free and clear of
any and all Encumbrances. The Seller is not in default or in breach of any
material provision which is required to be performed by it under any of its
leases or licenses and holds a valid ownership, leasehold or licensed interest
in the Assets not outright owned by the Seller. The Assets conform in all
material respects to all applicable Laws, and with respect to the Fixed Assets,
are also in good operation condition and repair.
2.08 INTELLECTUAL PROPERTY.
a) The Seller owns all right, title and interest in and to or is duly
licensed to use, all of the Intellectual Property that is part of the
Assets. To the Seller's Knowledge, the operation of such Intellectual
Property does not infringe, misappropriate or otherwise violate or misuse
any Intellectual Property of any third party ("THIRD PARTY INTELLECTUAL
PROPERTY ASSETS").
b) Schedule 2.08b) lists and describes: (i) all patents and patent
applications and all registered and unregistered trademarks, trade names
and service marks, registered and unregistered copyrights, and mask-works
included in the Intellectual Property Assets that form part of the Assets,
including the jurisdictions in which each such Intellectual Property Asset
has been issued or registered or in which any application for such issuance
and registration has been filed; (ii) all licenses, sublicenses and other
agreements as to which the Seller is a party and pursuant to which any
person or entity is authorized to use any Intellectual Property Assets; and
(iii) all licenses, sublicenses and other agreements as to which the Seller
is a party and pursuant to which the Seller is authorized to use any Third
Party Intellectual Property Assets. Other than as set forth in Schedule
2.08b), the Seller has not (i) licensed to any party any of the
Intellectual Property that is part of the Assets, whether in source code
form or otherwise or (ii) entered into any exclusive agreements with any
party relating to any Intellectual Property that is part of the Assets.
c) There has been no unauthorized use, disclosure, infringement or
misappropriation by the Seller of any Third Party Intellectual Property
Asset licensed by or through the Seller in connection with the Assets, and
to the Knowledge of the Seller by any third party with respect to the
Intellectual Property that is part of the Assets, including any employee,
consultant, or former employee or consultant of the Seller. Except as set
forth in Schedule 2.08c), the Seller has not entered into any agreement to
indemnify any other person or entity against any charge of infringement of
any Intellectual Property that is part of the Assets.
d) To the Seller's Knowledge, all Intellectual Property (whether
registered or not) that is part of the Assets is valid, enforceable and
subsisting. The Seller (i) has not been sued and is not aware of the
possible basis for any suit, action or proceeding which involves a claim of
infringement of any Intellectual Property that is part of the Assets or
violation of any Third Party Intellectual Property Assets; (ii) has no
Knowledge that any Intellectual Property that is part of the Assets
infringes any Third Party Intellectual Property Assets; and (iii) has not
brought and is not aware of the possible basis for bringing any action,
suit or proceeding for infringement of any Intellectual Property that is
part of the Assets or breach of any license or agreement involving any
Intellectual Property that is part of the Assets against any third party.
e) The Seller has secured valid written non-disclosure and invention
assignment agreements from all consultants and employees who contributed to
the creation or development of the Seller's Intellectual Property that is
part of the Assets of all rights to such contributions.
f) Except with respect to licenses of commercial off-the-shelf
software, and except pursuant to the licenses listed on Schedule 2.08b),
the Seller is not required, obligated or under any liability, to make any
payments by way of royalties, fees or otherwise to any owner, licensor of,
or other claimant to any Intellectual Property that is part of the Assets,
or to any Person, with respect to the use thereof.
g) The consummation of the transactions contemplated hereby will not
result in the loss or impairment of Purchaser's right to own or use any
portion of the Intellectual Property that is part of the Assets or any
Contracts currently in effect to which the Seller is a party granting the
Seller a right to use a Third Party Intellectual Property Asset (the
"INTELLECTUAL PROPERTY LICENSES"), assuming receipt of the consents under
such Intellectual Property Licenses specified in Schedule 2.08b).
h) Schedule 2.08h) sets forth a complete list of all contracts
pursuant to which any source code that relates to, or is part of, any
Intellectual Property has been placed in escrow for the benefit of any
third party.
i) Except as set forth in SCHEDULE 2.08I), the Seller has not used in
the development, compilation or creation of its products or under its
current development of Intellectual Property, nor has it embedded,
incorporated or bundled any open source, copy left or community source code
in any of its products, made available to, distributed to, or conveyed to,
any third party, generally available or in development, including but not
limited under any GNU Affero General Public License, GNU General Public
License, GNU Lesser General Public License, Mozilla Public License, BSD
license, Open Source Initiative License, MIT, Apache, and/or Public Domain
licenses, or any other "open source" of freeware type licenses
(collectively, "OPEN SOURCE SOFTWARE"). The use by the Seller of any Open
Source Software will not require the distribution of, or access to, any
source code of the Seller, or restrict the Seller's ability to charge for
distribution of, or to use of its products for commercial purposes, or
permit third parties to reverse engineer or modify the Seller's proprietary
software. The Seller has complied with all material requirements, including
copyright notice requirements and providing copies of licenses, for all
licenses for Open Source Software, including those set forth on SCHEDULE
2.08(i). The Seller has not been sued and is not aware of the possible
basis for any suit, action or proceeding which involves a claim relating to
non-compliance with the licenses for Open Source Software used by it.
2.09 PRODUCT WARRANTY. Each product that is part of the Assets and each
service rendered by the Seller with respect thereto has been in material
conformity with all applicable laws, contracts and all express and implied
warranties, and the Seller is not aware of any Liability that it may currently
have thereunder, and the Seller is not aware of any basis for any present or
future action giving rise to any such Liability relating to any such Asset.
There is no litigation, action, suit, proceeding or governmental investigation
pending or, to the Seller's Knowledge, threatened against, the Seller involving
or relating to product warranty claims related to the Assets. Except as set
forth in Schedule 2.09, no product that is part of the Assets nor any service
rendered by the Seller in connection with such product is subject to any
guaranty, warranty or other indemnity or similar Liability.
2.10 PRODUCT LIABILITY. The Seller does not have any Liability, and to the
Seller's Knowledge there is no basis for, any present or future action against
it giving rise to any such Liability, arising out of any injury to individuals
or property as a result of the ownership, possession or use of any product that
is part of the Assets. There is no litigation, action, suit, proceeding or
governmental investigation pending or, to the Seller's Knowledge, threatened
against, the Seller involving or relating to product liability claims related to
the Assets.
2.11 MATERIAL CONTRACTS. Except as set forth on Schedule 2.11, each of the
Contracts that are part of the Assets may be transferred to the Purchaser
without the consent of any person. All of the Contracts that are part of the
Assets are valid, binding and in full force and effect against the Seller and
the other party or parties thereto. Except as set forth in Schedule 2.11, the
Seller is not in default, and no notice of alleged default has been received by
the Seller under any of such Contracts, and, to the Seller's Knowledge, no other
party thereto is in default thereunder, and, to the Seller's Knowledge, there
exists no condition or event which, with or without notice or lapse of time or
both, would constitute a default under any of such Contracts by the Seller or
any other party thereto. Except as set forth on Schedule 2.11, none of the
execution, delivery or performance of any Related Document or consummation of
the transactions hereunder will, under the terms of any such Contract (A) result
in any increase in any payment or change in any term, (B) give rise to any right
of amendment, termination, cancellation or acceleration of any right or
obligation or to a loss of benefit or (C) result in any Person having any
termination, repayment or repurchase rights. To the Seller's Knowledge, there
are no features which the Seller has undertaken under any transferred Contract
to deliver to any customer prior to the Closing which have not been delivered.
2.12 LICENSES AND PERMITS.
a) All governmental Permits relating to the Assets are valid and in
full force and effect and will not be terminated or impaired or become
terminable as a result of the consummation of the transactions contemplated
hereby and all necessary renewal applications have been timely filed. There
are no Permits which have not been obtained by the Seller which are
required for the operation of all or any portion of the Assets.
b) No written investigation, inquiry or review by any Governmental
Authority with respect to the Assets is pending or, to the Seller's
Knowledge, threatened, nor has any Governmental Authority advised the
Seller of an intention to conduct any such investigation, inquiry or
review.
2.13 EMPLOYEES.
Seller is, and at all times has been, in compliance in all material respects
with all applicable Laws respecting employment, including employment practices,
terms and conditions of employment and wages and hours, severance pay,
termination pay, and social benefits, in each case, with respect to all Hired
Employees. There are no pending or, to the best Knowledge of Seller, threatened
or written claims or proceedings, nor does Seller have any knowledge of any
circumstances that would be reasonably expected to result in any claim or
proceedings, against Seller under any worker's compensation policy with respect
to any Hired Employee.
2.14 COMPLIANCE WITH LAWS; NO DEFAULTS.
a) The Seller is not (i) in violation of any Law or Order of any court
or Governmental Authority to which the Assets are subject, or (ii) to the
Seller's Knowledge, subject to any claim asserted by any Governmental
Authority that the Assets are in violation of any legal requirement.
b) As of the date hereof, the Seller is not in default under, and to
the Seller's Knowledge, no condition exists that with notice or lapse of
time or both would constitute a default under, any Contract or other
instrument binding upon the Seller with respect to the Assets or any
license, authorization, permit, consent or approval held by the Seller
relating to the Assets.
2.15 LEGAL PROCEEDINGS.
a) No judgment, ruling, order, writ, decree, stipulation, settlement,
injunction or determination by or with any arbitrator, court or other
Governmental Authority, which relates to or affects the Assets or the
Assumed Liabilities is in effect.
b) There is no order in which relief is sought involving, affecting,
or relating to the ownership, operation or use of the Assets or that would
prevent, delay or make illegal the transactions contemplated by this
Agreement and there is no litigation, action, suit, proceeding or
governmental investigation pending or, to the Seller's Knowledge,
threatened against, involving, affecting or relating to the Assets or the
transactions contemplated by this Agreement.
2.16 REGULATION S.
a) The Seller is not, and the Seller is not acquiring the Closing
Shares Payment to be issued thereto hereunder, for the account or benefit
of, a "U.S. Person" as defined in Rule 902 of Regulation S ("REGULATION S")
promulgated under the Securities Act.
b) The Seller was not organized under the laws of any United States
jurisdiction, and was not formed for the purpose of investing in securities
not registered under the Securities Act.
c) As of the date hereof, the Seller was outside the United States.
d) The Seller acknowledges that the Ordinary Shares constituting the
Closing Shares Payment are deemed to be "restricted securities" as defined
in Rule 144 promulgated under the Securities Act. Any resale of such
Ordinary Shares will be made only in accordance with the provisions of
Regulation S, pursuant to registration of the securities under the
Securities Act, or pursuant to an exemption from such registration.
Securities acquired upon a resale will continue to be deemed to be
restricted securities, notwithstanding that they were acquired in a resale
transaction made pursuant to Rules 901 or 904 of Regulation S. The Seller
acknowledges, agrees and covenants that it will not engage in hedging
transactions with regard to the Closing Shares Payment prior to the
expiration of the distribution compliance period specified in Rule 903 of
Regulation S, unless in compliance with the Securities Act.
e) The Seller acknowledges and agrees that certificates representing
the Closing Shares Payment (including the Escrow Shares) will contain one
or more legends to the effect that transfer of such securities is
prohibited except in accordance with the provisions of Regulation S,
pursuant to registration under the Securities Act or pursuant to an
available exemption from registration.
f) The Seller acknowledges that the Closing Shares Payment are being
offered and sold to it in reliance on specific provisions of U.S. federal
and state securities laws and that the Purchaser is relying upon the truth
and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Seller set forth herein in order
to determine the applicability of such provisions.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller that:
3.01 EXISTENCE AND POWER. The Purchaser is a corporation duly organized and
validly existing under the laws of the State of Israel, and has all requisite
power and authority, corporate or otherwise, and all governmental licenses and
permits required to carry on the Business as now conducted.
3.02 CORPORATE AUTHORIZATION.
a) The Purchaser has all requisite power and authority, corporate or
otherwise, to execute and deliver this Agreement and all Related Documents
and to perform its obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement and the Related Documents by
Purchaser have been duly authorized by all necessary corporate action on
the part of the Purchaser, and no other action on the part of the Purchaser
is necessary to authorize this Agreement or the Related Documents or to
consummate the transactions contemplated hereby and thereby. This Agreement
and the Related Documents have been duly executed and delivered by the
Purchaser and constitute the valid and legally binding obligation of the
Purchaser, enforceable against Purchaser in accordance with their
respective terms, except as such enforceability may be limited by laws
governing bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws, without limitation, relating to or
affecting creditors' rights generally. Each Related Document to be
delivered by Purchaser following the date hereof will be duly executed and
delivered by Purchaser and, when so executed and delivered, will constitute
the legal, valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms, except as such enforceability may
be limited by laws governing bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws, without
limitation, relating to or affecting creditors' rights generally.
3.03 NON-CONTRAVENTION. The execution, delivery and performance by
Purchaser of this Agreement and the Related Documents do not and will not, with
or without the giving of notice or the lapse of time or both:
a) contravene, violate or conflict with the incorporation documents of
Purchaser;
b) assuming compliance with the matters referred to in Section 3.02(a)
contravene, violate or conflict with, or constitute a violation of, any
provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to Purchaser; or
c) conflict with, result in a breach or violation of, or constitute a
default under, or result in a contractual right to cause the termination or
cancellation of or loss of a benefit under, or right to accelerate, any
agreement, contract or other instrument binding upon Purchaser.
3.04 GOVERNMENTAL APPROVALS; CERTAIN CONSENTS. Other than as listed in
Schedule 3.04, no notices, reports or other filings are required to be made by
Purchaser with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by Purchaser from, any Governmental
Authority in connection with the execution, delivery and performance of this
Agreement or the Related Documents by Purchaser.
3.05 LIENS ON THE CLOSING SHARES PAYMENT. All shares to be delivered by the
Purchaser pursuant to this Agreement shall be duly and validly issued, fully
paid, free and clear of all Encumbrances or any other third party rights, and on
the Closing the Purchaser shall irrevocably instruct its transfer agent to
register such shares in the name of the Seller in the Company's register of
shareholders.
3.06 REPORTS. Since January 2008, Purchaser has filed in a timely manner
all reports, schedules, forms, statements and other documents required to be
filed by it with the United States Securities and Exchange Commission (the
"SEC") pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), and the rules and regulations promulgated
thereunder and to the extent applicable to the Purchaser (the "SEC DOCUMENTS").
Each of the SEC Documents, as of the respective dates thereof (or, if amended or
superseded by a filing or submission, as the case may be, prior to the Closing
Date, then on the date of such filing or submission, as the case may be), did
not contain any untrue statement of a material fact nor omit to state a material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Each SEC Document, as
it may have been subsequently amended by filings or submissions, as the case may
be, filed or submitted by Purchaser with the SEC prior to the date hereof,
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder applicable to such SEC
Document.
ARTICLE IV.
COVENANTS OF SELLER
4.01 CONDUCT OF THE BUSINESS.
a) From the date hereof until the end of the notice period for each of
the Hired Employees (as hereinafter defined), the Seller shall not, without
the prior written consent of the Purchaser, and except for changes made in
the ordinary course of business consistent with past practices or as
required pursuant to any existing agreement or applicable law, (i) grant
any severance, termination or change of control pay or benefits to any of
the employees or consultants of the Seller listed in Schedule 4.01(a) (such
employees and consultants who shall accept or have accepted Purchaser's
employment offer shall be referred to as the "HIRED EMPLOYEES"), (ii)
increase in or accelerate vesting or benefits payable under any existing
severance or termination pay policies or employment agreements to any
employee listed on Schedule 4.01(a), (iii) increase the salary or other
compensation (including, without limitation, bonuses, profit sharing,
deferred compensation or other employee benefits) payable or to become
payable to any employee of the Seller listed on Schedule 4.01(a), or (iv)
agree or commit to do any of the foregoing;
4.02 DELIVERY OF ASSETS. Throughout the Closing Date and one day following
the Closing Date, Seller shall use reasonable efforts to facilitate the transfer
of the Assets to the Purchaser.
4.03 COVENANT NOT TO COMPETE.
a) In consideration of the Purchaser's consummation of the
transactions contemplated by this Agreement and for other good and valuable
consideration, for a period of three (3) years from and after the Closing
Date, each of the Seller and its Major Shareholder, will not, directly or
indirectly (whether as an owner, proprietor, partner, shareholder, officer,
employee, independent contractor, director, joint venturer, consultant,
lender or investor), solicit or engage in the Prohibited Business. For
purposes of this Section 4.03, the "PROHIBITED BUSINESS" means offering to
provide or providing any product or service competitive with the Business,
anywhere in the world. The parties agree that this Section 4.03 shall not
prohibit the ownership by the Seller or its Major Shareholder, solely as an
investment, of securities of a person engaged in the Prohibited Business if
(i) the Seller or its Major Shareholder is not an "affiliate" (as such term
is defined in Rule 405 promulgated under the Securities Act of 1933) of the
issuer of such securities, (ii) such securities are publicly traded on a
national securities exchange and (iii) the Seller or its Major Shareholder
does not, directly or indirectly, beneficially own more than 5% of the
class of which such securities are a part. Each of the Seller and its Major
Shareholder acknowledges and agrees that the limitations imposed by this
Section 4.03 (a) are necessary to protect legitimate business interests of
the Purchaser and the Purchaser's rights to use and benefit from the
goodwill, Intellectual Property and Confidential Information that has been
acquired by the Purchaser pursuant hereto and that the limitations as to
time, geographic area, and scope of activity being restrained are
reasonable and do not impose a greater restraint than is necessary to
protect the aforementioned goodwill, Intellectual Property, Confidential
Information and other business interests of the Purchaser acquired herein.
b) For a period of three (3) years from and after the Closing Date,
each of the Seller and its Major Shareholder shall not, directly or
indirectly, (i) discourage any person from accepting employment with the
Purchaser or any Affiliate of the Purchaser or (ii) hire or solicit the
employment or services of, or cause or attempt to cause to leave the
employment or service of the Purchaser or any Affiliate of the Purchaser,
any Person who or which is employed by, or otherwise engaged to perform
services for, the Purchaser or any affiliate of the Purchaser (whether in
the capacity of employee, consultant, independent contractor or otherwise)
or who is offered a position by the Purchaser in connection with the
transactions contemplated hereby.
c) The parties hereby agree that if either the Seller or its Major
Shareholder violates this Section 4.03, it would be difficult to determine
the entire cost, damage or injury, which the Purchaser and its Affiliates
would sustain. Each of the Seller and its Major Shareholder acknowledges
that if it violates this Section 4.03, the Purchaser will have no adequate
remedy at law and in that event, in addition to Purchaser's rights under
Section 9.07, Purchaser may obtain a monetary judgment against the Seller
or its Major Shareholder, as applicable, for any damage caused to the
Purchaser or its Affiliates that may result from any breach by such party
of this Section 4.03. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 4.03 is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to
reduce the scope, duration or geographic area of the term or provision, to
delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Section 4.03 shall be
enforceable as so modified after the expiration of the time within which
the judgment may be appealed.
4.04 CHANGE OF NAME. Within 30 days after the Closing Date, the Seller
shall provide evidence to the Purchaser of the change of the Seller's name, or
any trademarks, trade names or logos of the Seller which are not part of the
Assets, in each case by removing the word "Outsmart". Seller shall further cease
any use of the name "Outsmart" immediately following such change of name.
4.05 ASSIGNMENT LETTERS. Within 3 days after the Closing Date, the Seller
shall provide to Purchaser copies of all (i) requests for consents required for
the assignment of the Assets, and (ii) notices related to the assignment of the
Assets, all in forms ready to be sent to Seller's customers and vendors
notifying such third parties about the assignment of the Assets, or requesting
such third parties' consent for the assignment of the Assets, as relevant to
each such third party. The letters indicated in items (i) and (ii) shall be sent
by Seller as soon as practicable after such letters are counter-signed by
Purchaser.
ARTICLE V.
COVENANTS OF SELLER AND PURCHASER
The Seller and the Purchaser hereto agree that:
5.01 BEST EFFORTS; FURTHER ASSURANCES. Subject to the terms and conditions
of this Agreement, the Seller and the Purchaser will use their best efforts to
take, or cause to be taken, all reasonable actions and to do, or cause to be
done, all reasonable things necessary or desirable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement
promptly after the date hereof. The Seller and the Purchaser each agrees to
execute and deliver such other documents, certificates, agreements, corporate
and shareholder approvals, and other writings and to take such other reasonable
actions as may be reasonably necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement promptly
after the date hereof, including, without limitation, with respect to the bonds
set forth in Schedule 5.01 hereto which were required in connection with any
purchase order accepted by the Seller following the date of the Letter of Intent
(which purchase order has been approved by Purchaser) which bonds shall be
placed by the Purchaser, but without expanding the obligations and
responsibilities of any party hereunder.
5.02 CERTAIN FILINGS. The Seller and the Purchaser shall cooperate with one
another (a) in determining whether any action by or in respect of, or filing
with, any Governmental Authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions contemplated
by this Agreement, and (b) in taking such actions or making any such filings,
furnishing information required in connection therewith and seeking timely to
obtain any such actions, consents, approvals or waivers, including each notice,
report or other document required to be delivered by either party to, or filed
by either party with, any Governmental Authority with respect to the
consummation of the transactions contemplated hereunder. Seller and Purchaser
shall use all reasonable efforts to obtain, as promptly as practicable after the
date of this Agreement, the approvals of the OCS, CIIRDF and any other consents
and approvals that may be required pursuant to Israeli or foreign legal
requirements in connection with the consummation of the transactions
contemplated hereunder.
5.03 REGISTRATION OF SHARES. The Purchaser shall use its best reasonable
efforts to include the Ordinary Shares underlying the Closing Shares Payment in
any registration statement that it files with the SEC during the six (6) months
following the issuance of such Ordinary Shares to Seller, provided that if such
registration statement is filed pursuant to an underwritten offering, either for
the account of the Purchaser or for the account of other selling shareholders,
the inclusion of such Ordinary Shares in such registration statement shall be
subject to customary underwriter's cut backs. The Seller will indemnify
Purchaser and each of its officers and directors, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement and provided by Seller, or any
omission (or alleged omission) by Seller to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Purchaser and each of its officers and
directors, or the underwriters, for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, in reliance upon and in
conformity with written information furnished to the Purchaser by the Seller;
provided, however, that this undertaking of the Seller shall not apply to
amounts paid in settlement of any loss if such settlement is effected without
the consent of the Seller (which consent shall not be unreasonably withheld,
delayed or conditioned), and provided, further, that the obligations of the
Seller hereunder shall be limited to an amount equal to the proceeds received by
the Seller from its sale of shares pursuant to such registration. The Purchaser
will indemnify Seller and each of its shareholders, officers and directors,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement, or
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Seller and each of its shareholders, officers and
directors, for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, unless such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement, in reliance upon
and in conformity with written information furnished to the Purchaser by the
Seller; provided, however, that this undertaking of the Purchaser shall not
apply to amounts paid in settlement of any loss if such settlement is effected
without the consent of the Purchaser (which consent shall not be unreasonably
withheld, delayed or conditioned). Prior to effecting such registration
statement, Seller will enter into and deliver any other agreement or undertaking
which is customary and which the Purchaser, or an underwriter in an underwritten
offering, reasonably requests.
5.04 PUBLIC ANNOUNCEMENTS. The parties shall not issue any press release or
otherwise announce this transaction without mutual agreement to the terms of the
press release, or make any public statement with respect to this Agreement or
the transactions contemplated hereby, except as may be required by applicable
law or the regulations of any stock exchange or other trading market, in which
case the disclosing party shall provide the other party with reasonable notice
and reasonable opportunity to comment upon such disclosure.
5.05 EMPLOYMENT MATTERS. For any Hired Employee whose notice period
continues after the Closing, such Hired Employee shall continue to remain an
employee of Seller but take assignments only as directed or approved by the
Purchaser and Purchaser shall be responsible to pay in full all salary, benefits
and rights to the Seller for such Hired Employees whose notice period continues
after the Closing, as of December 1, 2009, in accordance with the provisions
below. The notice periods of each of Xxxxx Xxxxx, Xxxxx Bros and Xxxxxxx Xxxxxx,
were extended by 1 month, 2 months and 3 months, respectively, as of December 1,
2009. Purchaser shall indemnify the Seller for all salary, benefits and rights
payable by Seller to such Hired Employees (the "HIRED EMPLOYEES COMPENSATION")
payable at the last Business Day of each of the months indicated above. For the
avoidance of doubt, applicable VAT shall be added to any payment to the Seller
of the Hired Employees Compensation, against the issuance and delivery to
Purchaser of an invoice for such amount. In addition, as promptly as possible
following the Closing, the Purchaser shall indemnify the Seller and Jacob Bros
for the expenses incurred by the Seller and Jacob Bros in connection with the
two flights of Jacob Bros together with the Purchaser's CEO during November and
December 2009, against written evidence reasonably satisfactory to Purchaser
with respect to such expenses.
ARTICLE VI.
CLOSING
6.01 CLOSING.
a) The closing of the transactions contemplated by this Agreement (the
"CLOSING") is taking place at the offices of Meitar Liquornik Geva & Leshem
Xxxxxxxxx, Law Offices, 16 Abba Hillel Road, Ramat Gan on the date hereof
(the "CLOSING DATE"). The Closing may take place by delivery and exchange
of documents by facsimile or electronic mail with originals to follow by
overnight courier.
b) At the Closing, the transactions listed in this Article VI shall
occur, which transactions shall be deemed to take place simultaneously and
no transaction shall be deemed to have been completed or any document
delivered until all such transactions have been completed and all required
documents delivered.
c) At the Closing, Seller shall issue and deliver to Purchaser an
invoice for the amount of the Purchase Price plus the applicable VAT
amount.
6.02 DELIVERIES AND ACTIONS BY THE SELLER. At the Closing, the Seller shall
deliver, or cause to be delivered, to Purchaser:
a) the Assets;
b) the Patent Assignment Agreement, substantially in the Form of
Exhibit 6.02(b) attached hereto (the "PATENT ASSIGNMENT AGREEMENT"), duly
executed by the Seller;
c) a Xxxx of Sale, transferring the Assets to the Purchaser,
substantially in the form of Exhibit 6.02(c) attached hereto (the "XXXX OF
SALE"), duly executed by the Seller;
d) all files and documents in its possession relating to the Assets,
including all operating statistics, warranties and maintenance records,
registrations, permits and certifications, operating manuals, customer and
prospects database, in any form or media, whether documentary, written,
magnetic, and including all information saved on Seller's servers which is
related to the sales and marketing of Seller and/or to the Assets;
e) copies of all consents and approvals required in connection with
the execution, delivery and performance of this Agreement;
f) a certificate of the Chief Executive Officer of the Seller,
certifying as to (i) the incumbency of all officers of the Seller executing
this Agreement and agreements executed in connection herewith, and (ii) the
resolutions of the Board of Directors of the Seller authorizing the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby;
g) an Assignment of Contracts substantially in the form of Exhibit
6.02(g) attached hereto (the "ASSIGNMENT OF CONTRACTS") , duly executed by
the Seller, together with all consents required to be obtained under the
terms of any Contract prior to the transfer of such Contract pursuant to
this Agreement;
h) an Indemnification Escrow Agreement in substantially the form of
Exhibit 6.02(h) attached hereto, duly executed by the Seller;
i) audited financial statements of the Seller for and as of the year
ended December 31, 2007, accompanied by an opinion of certified auditors,
and reviewed financial statements of the Seller for and as of the six
months ended on June 30, 2009 and June 30, 2008. Within 30 days following
the Closing, the Seller shall deliver to the Purchaser the audited
financial statements of the Seller for and as of the year ended December
31, 2008, accompanied by an opinion of certified auditors (final drafts of
which have been provided to Purchaser);
j) the power of attorney referred to in Section 1.04;
k) the Certificate of Assignment of Obligations and Rights as required
by the OCS, duly executed by the Seller;
l) written confirmation of payment by Seller of the pre Closing
royalty payment obligations to each of the OCS and CIIRDF; and
m) such other separate instruments of sale, assignment or transfer
reasonably required by the Purchaser for the consummation of the
transactions contemplated hereby.
6.03 DELIVERIES AND ACTIONS BY THE PURCHASER. At the Closing, the Purchaser
shall deliver, or cause to be delivered, to the Seller:
a) (i) the Cash Payment less the Down Payment, and (ii) a cash amount
equal to the VAT payable in respect of the Purchase Price in immediately
available funds to an account designated by Seller in writing prior to the
Closing;
b) irrevocable written instructions from the Purchaser to its transfer
agent, instructing the transfer agent to issue to the Seller the shares
constituting the Closing Shares Payment in two certificates, the first
representing all such shares less the Escrow Shares (which certificate
shall be instructed to be delivered to the Seller), and the second
representing the Escrow Shares (which certificate shall be instructed to be
delivered to the Escrow Agent); and
c) a certificate of the Chief Executive Officer of the Purchaser
certifying as to (i) the incumbency of all officers of Purchaser executing
this Agreement and any Related Documents and (ii) the resolutions of the
Board of Directors of Purchaser authorizing the execution, delivery and
performance by Purchaser of this Agreement and the transactions
contemplated hereby;
d) an Indemnification Escrow Agreement in substantially the form of
Exhibit 6.02(i) attached hereto, duly executed by the Purchaser; and
e) the Certificate of Assignment of Obligations and Rights as
required by the OCS, duly executed by the Purchaser.
6.04 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of the
Purchaser and the Seller to consummate the Closing are subject to the
satisfaction, or waiver by the parties, of the following conditions:
a) No provision of any applicable Law or Order shall (i) prohibit the
consummation of the Closing or (ii) restrain, prohibit or otherwise
interfere with the transactions contemplated by this Agreement.
b) All actions by or in respect of or filings with any Governmental
Authority required to permit the consummation of the Closing, and all third
party consents necessary in connection with the consummation of the
Closing, shall have been obtained.
c) No proceeding challenging this Agreement or the transactions
contemplated hereby or seeking to prohibit, alter, prevent or materially
delay the Closing shall have been instituted by any person before any
court, arbitrator or governmental body, agency or official nor shall they
be pending.
d) Purchaser, Seller and the Escrow Agent shall have executed and
delivered the Indemnification Escrow Agreement.
6.05 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The obligation of the
Purchaser to consummate the Closing is subject to the satisfaction (or waiver in
writing by the Purchaser) of the following conditions:
a) (i) The Seller shall have performed in all material respects all of
its covenants and obligations hereunder required to be performed by it at
or prior to the Closing Date, (ii) the representations and warranties of
the Seller contained in this Agreement and in any certificate or other
writing delivered by the Seller pursuant hereto, shall be true and correct
in all material respects at and as of the Closing Date as if made as of
that date (except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties shall be true and correct on and as of such earlier date)); and
(iii) the Purchaser shall have received a certificate signed by the Chief
Executive Officer of the Seller confirming the matters set forth in clauses
(i) and (ii).
b) There shall have not occurred any event or development,
individually or in the aggregate, resulting in a Material Adverse Effect
with respect to the Assets.
6.06 CONDITIONS TO OBLIGATIONS OF SELLER. The obligation of the Seller to
consummate the Closing is subject to the satisfaction (or waiver in writing by
the Seller) of the following conditions:
a) (i) The Purchaser shall have performed in all material respects all
of its covenants and obligations hereunder required to be performed by it
at or prior to the Closing Date, (ii) the representations and warranties of
the Purchaser contained in this Agreement and in any certificate or other
writing delivered by the Purchaser pursuant hereto shall be true and
correct in all material respects at and as of the Closing Date, as if made
at and as of such date (except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties shall be true and correct on and as of such
earlier date); and (iii) the Seller shall have received a certificate
signed by an officer of the Purchaser, confirming the matters set forth in
clauses (i) and (ii).
ARTICLE VII.
INDEMNIFICATION
7.01 INDEMNIFICATION BY THE SELLER. The Seller hereby agrees to indemnify,
defend and hold harmless the Purchaser and each of its Representatives
(collectively, "PURCHASER INDEMNIFIED PERSONS") from and against any losses,
liabilities, claims, obligations, damages (including diminution in value), costs
and expenses (including reasonable attorneys' fees and all other reasonable
expenses incurred in investigating, preparing, or defending any litigation or
proceeding, commenced or threatened) (collectively, "PURCHASER DAMAGES") arising
out of or resulting from:
a) any breach of any representation or warranty of the Seller in this
Agreement or in any other certificate or document the Seller has delivered
pursuant to this Agreement or any claim by a third party which if true
would be such a breach;
b) any breach by the Seller of any of its covenants or obligations in
this Agreement or in any agreement or other document executed or delivered
pursuant to this Agreement; or
c) any liabilities relating to the Assets with respect to the period
ending on the Closing Date, except for the Assumed Liabilities;
7.02 INDEMNIFICATION PROCEDURE FOR THIRD-PARTY CLAIMS. Promptly after
receipt by Purchaser Indemnified Persons entitled to indemnification hereunder
(the "INDEMNIFIED PARTY") of written notice of the institution of any legal
proceeding, or of any claim or demand, asserted by a third party (a "THIRD PARTY
CLAIM") against the Indemnified Party with respect to which a claim for
indemnification is to be made pursuant to Section 7.01 herein, the Indemnified
Party shall give written notice to the Seller (the "INDEMNIFYING PARTY") of such
Third Party Claim. The Indemnifying Party shall be entitled to participate in
and to assume the defense of such Third Party Claim with counsel reasonably
satisfactory to the Indemnified Party, and after notice from the Indemnifying
Party to such Indemnified Party of such assumption of defense, and provided that
the Indemnifying Party continues to diligently pursue such defense, the
Indemnifying Party shall not be liable to such Indemnified Party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof. Notwithstanding the foregoing, an Indemnified Party shall in
all cases be entitled to control its defense, including the selection of
separate counsel (at the cost and expense of the Indemnifying Party), of any
Third Party Claim if such claim: (i) may result in injunctions or other
equitable remedies in respect of the Indemnified Party which would affect its
business or operations in any materially adverse manner; (ii) may result in
material liabilities which may not be fully indemnified hereunder; (iii) may
have a material adverse effect on the business or the financial condition of the
Indemnified Party (including a Material Adverse Effect on the earnings or
ongoing business relationships of the Indemnified Party) even if the
Indemnifying Party pays all indemnification amounts in full; or (iv) the
anticipated defendants in any such situation, proceeding or action include both
the Indemnified Party and the Indemnifying Party, and the Indemnified Party
shall have reasonably concluded that there may be legal defenses available to it
which are different from, additional to or inconsistent with those available to
the Indemnifying Party. The Indemnifying Party will not enter into any
settlement with respect to such Third Party Claim without the prior written
consent of the Indemnified Party unless such settlement (a) requires solely the
payment of reasonable money damages by the Indemnifying Party and (b) includes
as an unconditional term thereof the release by the claimant or the plaintiff of
the Indemnified Party and the persons for whom the Indemnified Party is acting
or who are acting on behalf of the Indemnified Party from all liability in
respect of the proceeding giving rise to the Third Party Claim.
7.03 LIMITATIONS ON INDEMNIFICATION.
a) Seller's total aggregate liability under Section 7.01 shall be
limited to the Escrow Shares and/or any and all cash proceeds from the sale
of any or all of the Escrow Shares (the "PROCEEDS") during the Escrow
Period as defined in the Indemnification Escrow Agreement, and the Escrow
Shares and/or Proceeds shall be the Indemnified Parties' sole recourse and
exclusive remedy. Such indemnification shall be made first out of any
Proceeds held by the Escrow Agent (if any) and, to the extent that the
indemnification amount exceeds such cash amounts, out of the Escrow Shares
held by the Escrow Agent, with the value of such Escrow Shares based on a
price per share equal to the Ordinary Shares Price.
b) Except in the case of fraud or willful misconduct by Seller, Seller
shall not be liable under this Agreement for special, punitive, exemplary,
consequential, or indirect damages, or lost profits, whether based on
contract, tort, strict liability, other Laws or otherwise.
7.04 EXCLUSIVE REMEDY. Except for Purchaser Damages incurred in connection
with, arising out of or resulting from fraud or willful misconduct, the
indemnification set forth in this Article VII shall be Purchaser's sole remedy
with respect to any breach by Seller of any term of this Agreement; provided
that in respect of any claims based on fraud or willful misconduct by the
Seller, the aggregate maximum liability of the Seller shall in no event exceed
the aggregate Purchase Price actually received by it.
7.05 NO RIGHT TO OFFSET. For the avoidance of doubt and notwithstanding
anything herein to the contrary, the Purchaser shall not be entitled to offset
any amount due to it under this Agreement from any amount payable to the Seller
following the Closing (including without limitation from the First Excess
Amount, Second Excess Amount or Hired Employees Compensation).
ARTICLE VIII.
MISCELLANEOUS
8.01 SURVIVAL. The representations and warranties of the Purchaser and the
Seller contained in this Agreement shall survive the Closing for a period of six
(6) months after the Closing Date.
8.02 NOTICES. All notices, requests and other communications to either
party hereunder shall be in writing (including facsimile, telecopy or similar
writing) and shall be deemed given when delivered:
If to Purchaser, to:
Ido Gur, CEO
VocalTec Communications Ltd.
60 Medinat Ha Xxxxxxx Xxxxxx, Xxxxxxxx Xxxxxxx 00000,
Xxxxxx
Telephone: (000) 0-000-0000
Facsimile: (000) 0-0000000
with a copy (which shall not constitute notice) to:
Meitar Liquornik Geva & Leshem Xxxxxxxxx, Law Offices
00 Xxxx Xxxxxx Xxxx, Xxxxx Xxx 00000, Israel
Attention: Xxxx Xxxxx, Adv.
Telephone: (000) 0-000-0000
Facsimile: (000) 0-000-0000
If to Seller, to: Jacob Bros, CEO
Outsmart Ltd.
0 Xxxxxxxx Xxxxxx, Xxxxxxx Xxxx, XXX 000, Xxx 00000,
Xxxxxx
Telephone: (000)0-0000000
Facsimile: (000)0-0000000
with a copy (which shall not constitute notice) to:
Naschitz, Xxxxxxx & Co., Advocates
0 Xxxxx Xxxxxx, Xxx-Xxxx 00000, Xxxxxx
Attention: Xxx Xxxxxxx, Adv.
Telephone: (000)0-0000000
Facsimile: (000) 0-0000000
Each of the above persons may change their address or facsimile number or
telephone number by notice to the other persons in the manner set forth above.
8.03 AMENDMENTS; NO WAIVERS.
a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of
an amendment, by the Purchaser and the Seller, or in the case of a waiver,
by the party against whom the waiver is to be effective.
b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise thereof
or the existence of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
8.04 EXPENSES. All costs and expenses incurred in connection with this
Agreement shall be paid by the party incurring such cost or expense.
8.05 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. No party to this Agreement may
assign, delegate or otherwise transfer any of its rights or obligations under
this Agreement without the consent of the other party hereto, provided that
following the Closing the Seller may assign only its rights under this Agreement
to the Major Shareholder or the Major Shareholder's limited and general partners
(or any of their trustees) and provided further that Purchaser may assign its
rights and obligations under this Agreement to any of its subsidiaries or
Affiliates, but no such assignment shall relieve Seller or Purchaser of their
respective obligations hereunder which shall thereafter be joint and several as
between Seller or Purchaser and their respective assignee. Neither this
Agreement nor any provision hereof is intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
8.06 GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Israel without regard to
the conflict of laws provisions thereof. Any dispute arising under or in
relation to this Agreement shall be resolved exclusively in the competent court
in Tel Aviv-Jaffa, and each of the parties hereby irrevocably submits to the
exclusive jurisdiction of such court.
8.07 SPECIFIC PERFORMANCE. Each of the parties acknowledges and agrees that
the other party would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the parties agrees that the other
party shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof, in addition to any other remedy to which it may
be entitled, at law or in equity.
8.08 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. Facsimile
copies of signature pages shall have the same legal effect as signed originals.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other party hereto.
8.09 ENTIRE AGREEMENT. This Agreement, the Schedules and Exhibits hereto,
and any other documents referred to herein constitute the entire agreement
between the parties with respect to the subject matter hereof and supersede all
prior agreements, understandings and negotiations, both written and oral,
between the parties with respect thereto. No representation, inducement,
promise, understanding, condition or warranty not set forth herein has been made
or relied upon by either party hereto.
8.10 CONSTRUCTION. The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. The following rules of construction shall apply to
this Agreement:
(a) Any reference to any local or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise.
(b) The headings and titles herein are for convenience only and shall
have no significance in the interpretation hereof.
8.11 SEVERABILITY. Any part of this Agreement, which is found to be void,
invalid, illegal or unenforceable, shall be severed from this Agreement and
ineffective to the extent of that voidness, invalidity, illegality or
unenforceability. Such voidness, invalidity, illegality or unenforceability will
not invalidate, affect or impair the remaining provisions of this Agreement. If
a court of competent jurisdiction determines that the terms in respect of which
covenants in this Agreement are to be entered are unreasonable or unenforceable
for any reason, then this Agreement shall be reread and construed with such
terms, as may be applicable, as determined to be reasonable by a court of
competent jurisdiction and the Agreement shall be amended and construed
accordingly hereby.
8.12 CERTAIN DEFINITIONS.
"ACCOUNTS RECEIVABLE" shall mean (a) all trade accounts receivable and
other rights to payment from customers of Seller and the full benefit of all
security for such accounts or rights to payment, including all trade accounts
receivable representing amounts receivable in respect of goods shipped or
products sold or services rendered to customers of Seller, (b) all other
accounts or notes receivable of Seller and the full benefit of all security for
such accounts or notes and (c) any claim, remedy or other right related to any
of the foregoing.
"AFFILIATE" shall mean, with respect to a Person, another Person that,
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such first Person. For this
definition, "CONTROL" (and its derivatives) means the possession, directly or
indirectly, or as trustee or executor, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting equity interests, as trustee or executor, by Contract or credit
arrangements or otherwise.
"BUSINESS DAY" means a day other than Saturday, Sunday or any day on which
banks located in Israel are authorized or obligated to close.
"ENCUMBRANCES" means any mortgages, pledges, liens, encumbrances, charges
or other security interests.
"GOVERNMENTAL AUTHORITY" means any state, county, municipality or any other
political subdivision of any of the foregoing, including (A) any court,
governmental department, tribunal, arbitrator or panel of arbitrators,
authority, agency, body, board, bureau, commission, official or other
instrumentality of the State of Israel, the United States of America or any
nation, state, province, county, city or other political subdivision or similar
governing entity, (B) any person or entity exercising executive, legislative,
regulatory, judicial or administrative functions and (C) any governmental,
quasi-governmental or non-governmental body (whether executive, legislative,
judicial or administrative) administering, regulating or having general
oversight over the Business.
"INTELLECTUAL PROPERTY" or "INTELLECTUAL PROPERTY ASSETS" means all
software, inventions, art works, patents, patent applications, processes, shop
rights, formulas, brand names, trade secrets, know-how, service marks, trade
names, trademarks, trademark applications, copyrights, source and object codes,
customer lists, drawings, ideas, algorithms, processes, computer software
programs or applications (in code and object code form), tangible or intangible
proprietary information and any other intellectual property and similar items
and related rights owned by or licensed to the Seller or used in the Business,
together with any goodwill associated therewith and all rights of action on
account of past, present and future unauthorized use or infringement thereof.
"KNOWLEDGE" or "AWARE OF" (or a similar phrase) of the Seller means the
actual knowledge or awareness, as applicable, of either of the Company's CEO or
the Company's CFO or the knowledge or awareness, as applicable, that the
Company's CEO or the Company's CFO would be reasonably expected to have of such
fact, circumstance, event or other matter after reasonable inquiry.
"LEASE" shall mean any lease or rental agreement pertaining to the
occupancy by the Seller or the use by the Business of any improved space on any
Real Property.
"LIABILITIES" shall mean with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or un-accrued, disputed or
undisputed, liquidated or un-liquidated, secured or unsecured, joint or several,
due or to become due, vested or unvested, executory, determined, determinable or
otherwise, and whether or not the same is required to be accrued on the
financial statements of such Person.
"MAJOR SHAREHOLDER" means Thales Technologies L.P., a limited partnership
organized under the laws of the state of Israel. For the avoidance of doubt, the
partners and officers of Thales Technologies L.P. shall not be deemed Major
Shareholders under this Agreement.
"MATERIAL ADVERSE EFFECT" with respect to the Assets shall mean any change
or event (or any that, insofar as is reasonably foreseen, is reasonably expected
to result in any change or event) that is adversely affecting or is reasonably
expected to adversely affect in a material manner the Assets.
"PERSON" means an individual or a corporation, company, limited liability
company, sole proprietorship, joint venture, partnership, trust, estate,
unincorporated organization, association, or other entity.
"REPRESENTATIVES" shall mean, with respect to any Person, such Person's
Affiliates, directors, officers, employees, agents, consultants, advisors and
other representatives, including legal counsel, accountants and financial
advisors.
-SIGNATURE PAGE FOLLOWS-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers effective as of the day
and year first above written but executed on the dates set forth below.
PURCHASER:
VOCALTEC COMMUNICATIONS LTD.
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
SELLER:
OUTSMART LTD.
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
AGREED AND ACKNOWLEDGED SOLELY FOR THE PURPOSE OF SECTION 4.03:
MAJOR SHAREHOLDER:
THALES TECHNOLOGIES L.P
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
