EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
VERITAS SOFTWARE CORPORATION
ARGON MERGER SUB LTD.
AND
PRECISE SOFTWARE SOLUTIONS LTD.
DATED AS OF DECEMBER 19, 2002
TABLE OF CONTENTS
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ARTICLE I THE MERGER..................................................................................................2
1.1 The Merger..........................................................................................2
1.2 Closing Date........................................................................................2
1.3 Effective Time......................................................................................2
1.4 Effect on Capital Stock.............................................................................2
1.5 Surrender of Certificates...........................................................................6
1.6 Company's Transfer Books Closed; No Further Ownership Rights in Company Shares......................8
1.7 Lost, Stolen, Destroyed or Unissued Certificates....................................................8
1.8 Taking of Necessary Action; Further Action..........................................................9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY..................................................................9
2.1 Organization and Qualification; Subsidiaries........................................................9
2.2 Memorandum of Association; Articles of Association..................................................9
2.3 Capitalization.....................................................................................10
2.4 Authority Relative to this Agreement...............................................................12
2.5 No Conflict; Required Filings and Consents.........................................................12
2.6 Compliance with Laws; Environmental Matters; Permits...............................................14
2.7 SEC Filings; Financial Statements..................................................................15
2.8 No Undisclosed Liabilities.........................................................................16
2.9 Absence of Certain Changes or Events...............................................................16
2.10 Absence of Litigation..............................................................................17
2.11 Employee Matters and Benefit Plans.................................................................17
2.12 Registration Statement; Prospectus/Proxy Statement.................................................23
2.13 Restrictions on Business Activities................................................................24
2.14 Property...........................................................................................24
2.15 Taxes..............................................................................................24
2.16 Brokers............................................................................................27
2.17 Intellectual Property..............................................................................27
2.18 Contracts..........................................................................................34
2.19 Opinion of Financial Advisor.......................................................................36
2.20 Insurance..........................................................................................36
2.21 Board Approval.....................................................................................36
2.22 Inapplicability of Certain Statutes................................................................36
2.23 Grants, Incentives and Subsidies...................................................................36
2.24 Encryption and Other Restricted Technology.........................................................37
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..................................................37
3.1 Organization and Qualification.....................................................................37
3.2 Certificate of Incorporation and Bylaws; Articles of Association...................................38
3.3 Capitalization.....................................................................................38
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TABLE OF CONTENTS
(continued)
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3.4 Authority Relative to this Agreement...............................................................38
3.5 No Conflict; Required Filings and Consents.........................................................38
3.6 Financing..........................................................................................39
3.7 Issuance of Parent Common Stock....................................................................39
3.8 SEC Filings; Financial Statements..................................................................39
3.9 Registration Statement; Prospectus/Proxy Statement.................................................40
3.10 Absence of Certain Changes or Events...............................................................41
3.11 Company Share Ownership............................................................................41
3.12 Brokers............................................................................................41
3.13 Merger Sub Board Approval..........................................................................41
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.......................................................................41
4.1 Conduct of Business by Company.....................................................................41
ARTICLE V ADDITIONAL AGREEMENTS......................................................................................45
5.1 Prospectus/Proxy Statement; Registration Statement.................................................45
5.2 Merger Proposal....................................................................................46
5.3 Company General Meeting............................................................................47
5.4 Merger Sub General Meeting.........................................................................49
5.5 Israeli Approvals..................................................................................49
5.6 Confidentiality; Access to Information.............................................................52
5.7 No Solicitation....................................................................................52
5.8 Public Disclosure..................................................................................54
5.9 Commercially Reasonable Efforts; Regulatory Filings................................................54
5.10 Third Party Consents...............................................................................56
5.11 Stock Options and Employee Benefits................................................................56
5.12 Form S-8...........................................................................................58
5.13 Notification.......................................................................................58
5.14 Indemnification and Insurance......................................................................58
5.15 Company Warrants...................................................................................59
5.16 Listing of Parent Common Stock.....................................................................60
5.17 Company Affiliates; Restrictive Legend.............................................................60
5.18 Parent Guaranty of Merger Sub Obligations..........................................................60
5.19 Alternative Structure..............................................................................60
ARTICLE VI CONDITIONS TO THE MERGER..................................................................................61
6.1 Conditions to Obligations of Each Party to Effect the Merger.......................................61
6.2 Additional Conditions to Obligations of Company....................................................62
6.3 Additional Conditions to the Obligations of Parent and Merger Sub..................................62
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER........................................................................63
7.1 Termination........................................................................................63
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TABLE OF CONTENTS
(continued)
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7.2 Notice of Termination; Effect of Termination.......................................................66
7.3 Fees and Expenses..................................................................................66
7.4 Amendment..........................................................................................67
7.5 Extension; Waiver..................................................................................67
ARTICLE VIII GENERAL PROVISIONS......................................................................................68
8.1 Non-Survival of Representations and Warranties.....................................................68
8.2 Notices............................................................................................68
8.3 Interpretation; Knowledge..........................................................................70
8.4 Counterparts.......................................................................................71
8.5 Entire Agreement; Third Party Beneficiaries........................................................71
8.6 Severability.......................................................................................71
8.7 Other Remedies; Specific Performance...............................................................72
8.8 Applicable Law.....................................................................................72
8.9 Rules of Construction..............................................................................72
8.10 Assignment.........................................................................................72
8.11 Waiver of Jury Trial...............................................................................72
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INDEX OF EXHIBITS
Exhibit A Form of Voting Undertaking
Exhibit B Form of Employment and Noncompetition Agreement
Exhibit C Form of Company Affiliate Agreement
Exhibit D Form of Director Resignation
Exhibit E Form of Merger Proposal
Exhibit F Form of Amendment to Company Articles of Association
Exhibit G Form of New Indemnification Letter
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") is made and entered
into as of December 19, 2002, among VERITAS Software Corporation, a Delaware
corporation ("PARENT"), Argon Merger Sub Ltd., an Israeli company and an
indirect wholly-owned subsidiary of Parent ("MERGER SUB"), and Precise Software
Solutions Ltd., an Israeli company ("COMPANY").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Israeli Companies Law-5759-1999 (the "ISRAELI COMPANIES
LAW"), Parent, Merger Sub and Company intend to effect the merger of Merger Sub
with and into Company, pursuant to which Merger Sub will cease to exist and
Company will become an indirect wholly-owned subsidiary of Parent.
B. The Board of Directors of Company has unanimously: (i) determined that
this Agreement, the Merger (as defined in Section 1.1) and the other
transactions contemplated by this Agreement are fair to, and in the best
interests of, Company and its shareholders, and that, considering the financial
position of the merging companies, no reasonable concern exists that the
Surviving Corporation (as defined in Section 1.1) will be unable to fulfill the
obligations of Company to its creditors; (ii) approved this Agreement, the
Merger and the other transactions contemplated by this Agreement; and (iii)
determined to recommend that the shareholders of Company approve this Agreement,
the Merger and the other transactions contemplated by this Agreement.
C. The Board of Directors of each of Parent and Merger Sub has approved
this Agreement, the Merger and the other transactions contemplated by this
Agreement, and the Board of Directors of Merger Sub has determined that,
considering the financial position of the merging companies, no reasonable
concern exists that the Surviving Corporation will be unable to fulfill the
obligations of Merger Sub to its creditors.
D. Concurrently with the execution of this Agreement and as a condition
and inducement to Parent's willingness to enter into this Agreement: (i) all
directors and officers and certain principal shareholders of Company are
entering into voting undertakings in substantially the form attached hereto as
Exhibit A (the "VOTING UNDERTAKINGS"); (ii) certain individuals are entering
into employment and noncompetition agreements in substantially the form attached
hereto as Exhibit B (the "EMPLOYMENT AND NONCOMPETITION AGREEMENTS"); (iii) all
directors, executive officers and certain shareholders of Company who may be
deemed to be affiliates of Company within the meaning of Rule 145 promulgated
under the Securities Act (as defined below) are entering into Company affiliate
agreements in substantially the form attached hereto as Exhibit C (the "COMPANY
AFFILIATE AGREEMENTS"); and (iv) all directors of Company and Precise Software
Solutions, Inc. are executing resignation letters in substantially the form
attached hereto as Exhibit D (the "DIRECTOR RESIGNATIONS").
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants, promises and representations set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and accepted, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.3) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Israeli Companies Law, Merger Sub (as the target
company (Chevrat Yaad) in the Merger) shall be merged with and into Company (as
the absorbing company (Chevra Koletet) in the Merger) in accordance with
Sections 314 through 327 of the Israeli Companies Law (the "MERGER"), the
separate corporate existence of Merger Sub shall cease and Company: (i) shall
continue as the surviving corporation (sometimes referred to herein as the
"SURVIVING CORPORATION"); and (ii) shall succeed to and assume all of the
rights, properties and obligations of Merger Sub in accordance with the
aforesaid sections of the Israeli Companies Law.
1.2 Closing Date. Subject to the terms and conditions of this Agreement,
the closing of the Merger and the other transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, Professional Corporation, 650 Page Mill Road, Palo Alto,
California, USA, at a time AND on a date to be designated by the parties (the
time and date upon which the Closing actually occurs being referred to herein as
the "CLOSING DATE"), which shall be no later than the second business day after
the later to occur of: (i) the satisfaction or waiver of the conditions set
forth in Article VI hereof (other than those conditions which by their terms are
to be satisfied or waived as of the Closing) or (ii) the 71st day after the
delivery of the Merger Proposal (as defined in Section 5.2) to the office of the
Registrar of Companies of the State of Israel (the "COMPANIES REGISTRAR"), or at
such other time, date and location as the parties hereto shall mutually agree.
1.3 Effective Time. As soon as practicable on or after the Closing, Merger
Sub shall, in coordination with Company, deliver (and Parent shall cause Merger
Sub to deliver) to the Companies Registrar a notice (the "MERGER NOTICE")
informing the Companies Registrar that the Merger was approved by the general
shareholders meeting of Merger Sub. The Merger shall become effective
("EFFECTIVE TIME") upon the issuance by the Companies Registrar of a certificate
evidencing the completion of the Merger in accordance with Section 323(5) of the
Israeli Companies Law.
1.4 Effect on Capital Stock. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Parent, Merger Sub, Company or the holders of any of the
following securities, the following shall occur:
(a) Conversion of Company Shares. Each Ordinary Share, NIS 0.03 par
value per share, of Company (the "COMPANY SHARES") issued and outstanding
immediately prior to the Effective Time, other than any Company Shares owned by
any direct or indirect wholly-owned subsidiary of Company or any dormant shares
of Company, shall automatically be converted into
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and represent solely the right to receive, at the election of the holder
thereof, one of the following (the "PER SHARE MERGER CONSIDERATION"): (i) for
each Company Share with respect to which an election to receive cash has been
effectively made, and not revoked, pursuant to Section 1.4(b) (a "CASH
ELECTION"), and for each Company Share with respect to which a Cash Election is
deemed to have been made pursuant to Section 1.4(b), $16.50 in cash, subject to
the provisions of Section 1.4(e) (the "PER SHARE CASH CONSIDERATION"); and (ii)
for each Company Share with respect to which an election to receive a
combination of cash and shares of common stock, $.001 par value per share, of
Parent ("PARENT COMMON STOCK") has been effectively made, and not revoked,
pursuant to Section 1.4(b) (a "MIXED ELECTION"), 0.2365 of a share of Parent
Common Stock, subject to the provisions of Sections 1.4(e), 1.4(f) and 1.4(g),
plus $12.375 in cash, subject to the provisions of Section 1.4(e) (the "PER
SHARE MIXED CONSIDERATION"), in each case payable without interest to the holder
of such Company Share upon surrender of the certificate representing such
Company Share in the manner provided in Section 1.5 (or in the case of a lost,
stolen, destroyed or unissued certificate, upon delivery of an affidavit (and
bond, if required) in the manner provided in Section 1.7). Upon the issuance of
any Parent Common Stock hereunder, and consistent with, pursuant to and subject
to Parent's existing Rights Agreement, dated as of June 16, 1999 (as the same
may be amended from time to time, the "RIGHTS AGREEMENT"), between Parent and
Mellon Investor Services, L.L.C., as rights agent, one right issuable pursuant
to the Rights Agreement or any other right issued in substitution therefor (a
"RIGHT") shall be issued together with and shall attach to each share of Parent
Common Stock issued pursuant to the terms and conditions of this Agreement,
unless the Rights shall have expired or been redeemed prior to the Effective
Time. As of the Effective Time, subject to Section 1.4(c) below, all of the
Company Shares shall automatically be owned by Parent, and will be registered in
its name in the shareholders registry of the Surviving Corporation.
(b) Election of Per Share Merger Consideration.
(i) Each person who, on or prior to 5:00 p.m., New York City
time, on the business day immediately preceding the Election Date (as defined
below) is a record holder of Company Shares shall be entitled, with respect to
all such holder's Company Shares, to make an unconditional Cash Election or an
unconditional Mixed Election on the basis hereinafter set forth.
(ii) Parent shall prepare a form of election, which form shall
include a letter of transmittal, declaration and instructions, each in
substantially the form contemplated by Section 1.5(c), and shall be subject to
the reasonable approval of Company (the "FORM OF ELECTION"). The Form of
Election shall be mailed with the Prospectus/Proxy Statement (as defined in
Section 2.12) to the record holders of Company Shares, as of the record date for
the Company General Meeting (as defined in Section 5.3(a)), which Form of
Election shall be used by each record holder of Company Shares who wishes to
elect to receive the Per Share Cash Consideration or the Per Share Mixed
Consideration for each of the Company Shares held by such holder. Company shall
use reasonable efforts to make the Form of Election and the Prospectus/Proxy
Statement available to all persons who become record holders of Company Shares
during the period between such record date and 5:00 p.m., New York City time, on
the business day immediately preceding the Election Date. Any such holder's
election to receive the Per Share Cash Consideration or the Per Share
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Mixed Consideration, as applicable, for each of the Company Shares held by such
holder shall have been properly made only if the Paying Agent (as defined in
Section 1.5(a)) shall have received at its designated office, by 5:00 p.m., New
York City time, on the business day immediately preceding the date of the
Company General Meeting (the "ELECTION DATE"), a Form of Election properly
completed and signed and accompanied by Certificates (as defined in Section
1.5(c)) for the Company Shares to which such Form of Election relates, duly
endorsed in blank or otherwise in a form acceptable for transfer on the books of
Company (or accompanied by an appropriate guarantee of delivery of such
Certificates as set forth in such Form of Election signed by a bank, broker,
dealer, credit union, savings association or other entity that is a member in
good standing of the Securities Transfer Agent's Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program), provided such Certificates are in fact delivered to the
Paying Agent within five Nasdaq (as defined in Section 1.4(f)) trading days
after the Election Date. If the Company General Meeting is delayed to a
subsequent date, the Election Date shall be similarly delayed and Parent will
promptly announce such rescheduled Election Date. All Certificates so
surrendered shall be subject to the payment and exchange procedures set forth in
Section 1.5 hereof. A holder of record of Company Shares who holds such Company
Shares as a nominee, trustee or in another representative capacity (a "HOLDER
REPRESENTATIVE") may submit multiple Forms of Election, provided that such
Holder Representative certifies that each such Form of Election covers all the
Company Shares held by such Holder Representative for a particular beneficial
owner.
(iii) Any Form of Election may be revoked, by the holder who
submitted such Form of Election to the Paying Agent, only by written notice
received by the Paying Agent (i) prior to 5:00 p.m., New York City time, on the
Election Date, or (ii) after such time, if and only to the extent that the
Paying Agent is legally required to permit revocations and only if the Effective
Time shall not have occurred prior to such date. In addition, all Forms of
Election shall be automatically revoked after termination of this Agreement if
the Paying Agent is notified in writing by Parent that this Agreement has been
so terminated. If a Form of Election is revoked, unless the holder properly
submits a new Form of Election prior to 5:00 p.m., New York City time, on the
Election Date, the Certificate or Certificates (or guarantees of delivery, as
appropriate) for the Company Shares to which such Form of Election relates shall
be promptly returned without charge to the holder that submitted the same to the
Paying Agent.
(iv) The determination of Parent in its sole discretion, which it
may delegate in whole or in part to the Paying Agent, shall be conclusive and
binding as to whether or not elections to receive the Per Share Cash
Consideration or the Per Share Mixed Consideration have been properly made or
revoked pursuant to this Section 1.4(b) with respect to Company Shares and when
elections and revocations were received by the Paying Agent. Parent shall have
the discretion, which it may delegate in whole or in part to the Paying Agent,
to disregard immaterial defects in Forms of Election. The decision of Parent (or
the Paying Agent) in such matters, absent manifest error, shall be conclusive
and binding so long as Parent has acted in good faith. Neither Parent nor the
Paying Agent shall be under any obligation to notify any person of any defect in
any Form of Election submitted to the Paying Agent. If (x) no Form of Election
is received with respect to Company Shares, or (y) Parent determines in its sole
discretion and acting in good faith, which it
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may delegate in whole or in part to the Paying Agent, that any election to
receive the Per Share Mixed Consideration was not properly made with respect to
Company Shares, the holder of such Company Shares shall be treated by the Paying
Agent as having submitted a Cash Election with respect to such Company Shares,
and each of such Company Shares shall be converted at the Effective Time into
the right to receive the Per Share Cash Consideration.
(v) The Paying Agent may, with the mutual agreement of Parent
and Company, make such rules as are consistent with this Section 1.4 for the
implementation of the elections provided for herein as shall be necessary or
desirable to effect such elections fully.
(c) Dormant Shares; Subsidiary-Owned Stock. At the Effective Time,
each Company Share that is a dormant share or owned by any direct or indirect
wholly-owned subsidiary of Company immediately prior to the Effective Time shall
remain outstanding, shall not be converted under Section 1.4(a) and no Per Share
Merger Consideration shall be delivered with respect thereto.
(d) Stock Options; Warrants; Employee Stock Purchase Plan. At the
Effective Time, all options to purchase Company Shares then outstanding under
Company's 1995 Share Option and Incentive Plan, Amended and Restated 1998 Share
Option and Incentive Plan, and Stock Option Plan (f/k/a the Savant Corporation
Stock Option Plan) (in the case of each such plan, both in their original form
and as they may have been amended and/or restated prior to the date hereof)
(collectively, the "COMPANY OPTION PLANS"), and under any agreement with Company
described in Section 2.3 of the Company Disclosure Schedule, in each case,
whether vested or unvested, and the Company Option Plans themselves, shall be
assumed by Parent in accordance with Section 5.11. At the Effective Time, all
warrants to purchase Company Shares then outstanding shall be assumed by Parent
in accordance with Section 5.15. Purchase rights outstanding under Company's
2000 Employee Share Purchase Plan (the "ESPP") shall be treated as set forth in
Section 5.11.
(e) Adjustments to Per Share Merger Consideration. The Per Share
Merger Consideration shall be adjusted to reflect appropriately the effect of
any forward or reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock or Company
Shares), extraordinary cash dividends, reorganization, recapitalization,
reclassification, combination, exchange of shares or other like change with
respect to Parent Common Stock or Company Shares occurring on or after the date
hereof and prior to the Effective Time.
(f) No Fractional Shares. No fraction of a share of Parent Common
Stock will be issued by virtue of the Merger, but in lieu thereof each holder of
Company Shares who would otherwise be entitled to a fraction of a share of
Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock that would otherwise be received by such holder) shall, upon surrender of
such holder's Certificates receive from Parent an amount of cash (rounded to the
nearest whole cent), without interest, equal to the product of (i) such
fraction, multiplied by (ii) the average closing price of one share of Parent
Common Stock for the five (5) most recent trading days that Parent Common Stock
has traded ending on the trading day ending immediately prior to the Effective
Time, as reported on The Nasdaq Stock Market ("NASDAQ").
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(g) Israeli Holders. Unless the Israeli Securities Election
Exemption (as defined in Section 5.5(d)) is obtained prior to the date that the
Prospectus/Proxy Statement is mailed to holders of Company Shares, each Israeli
Holder who has effectively made and not revoked a Mixed Election with respect to
Company Shares shall not be entitled to receive the Parent Common Stock included
in the Per Share Mixed Consideration, and at the Effective Time each of such
Company Shares shall be converted into and represent solely the right to
receive, an amount in cash equal to the sum of (x) $12.375, plus (y) the amount
obtained by multiplying 0.2365 by the closing sale price of one share of Parent
Common Stock on the trading day immediately prior to the Effective Time as
reported on Nasdaq. For purposes of this Agreement, the term "ISRAELI HOLDER"
shall mean a holder of Company Shares: (i) who has provided the Company or the
broker through which such holder holds its Company Shares with an address in the
State of Israel for the purpose of sending notices; or (ii) whose center of
vital interests (as evidenced by family, economic and social ties) is in Israel.
1.5 Surrender of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall select a
bank or trust company reasonably acceptable to Company to act as the paying and
exchange agent (the "PAYING AGENT") in the Merger to receive the funds and
shares of Parent Common Stock, if any, to which holders of such Company Shares
shall become entitled pursuant to Section 1.4.
(b) Parent to Provide Per Share Merger Consideration. Promptly
following the Effective Time, (i) Parent shall deposit with the Paying Agent,
for exchange in accordance with this Article I, the shares of Parent Common
Stock, if any, issuable pursuant to Section 1.4 in exchange for outstanding
Company Shares, and (ii) Parent shall deliver or shall cause a U.S. bank or U.S.
company to deliver such immediately available funds to the Paying Agent, as
directed by the Paying Agent, to enable the Paying Agent to make prompt payment
after the Effective Time pursuant to Section 1.5(c) of the funds payable and
Parent Common Stock issuable to the holders of Company Shares who have properly
delivered their Certificates to the Paying Agent prior to 5:00 p.m., New York
City time on the Election Date or who have properly surrendered their
Certificates after the Effective Time. In addition, Parent shall make available
or shall cause a U.S. bank or U.S. company to make available from time to time,
if and as necessary after the Effective Time, cash in an amount sufficient for
payment in lieu of fractional shares pursuant to Section 1.4(f) and for payment
of any dividends or distributions to which holders of Company Shares may be
entitled pursuant to Section 1.5(d). Such funds and shares of Parent Common
Stock shall be held in trust by the Paying Agent for the benefit of the holders
of Company Shares.
(c) Payment and Exchange Procedures. As soon as reasonably
practicable after the Effective Time, Parent shall cause the Paying Agent to
mail to each holder of record (as of the Effective Time) of a certificate or
certificates (each, a "CERTIFICATE" and collectively, the "CERTIFICATES"), which
immediately prior to the Effective Time represented outstanding Company Shares,
whose shares were converted into the right to receive the applicable Per Share
Merger Consideration pursuant to Section 1.4 (other than those holders who had
previously properly delivered their Certificates to the Paying Agent along with
their Forms of Election): (i) a letter of transmittal in customary form (which
shall specify that delivery shall be effected, and risk of loss
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and title to the Certificates shall pass, only upon delivery of the Certificates
to the Paying Agent), (ii) a declaration form in which the holder of record
states whether the holder is a resident of Israel as defined in the Income Tax
Ordinance of Israel [New Version], 1961, as amended (the "ORDINANCE") and
whether the Company Shares held by such holder were held by such holder before
the initial public offering of the Company and (iii) instructions for use in
effecting the surrender of the Certificates in exchange for the applicable Per
Share Merger Consideration. In the case of holders who prior to the Election
Date properly delivered their Certificates to the Paying Agent along with their
Forms of Election, such holders shall be entitled to receive in exchange
therefor promptly after the Effective Time the applicable Per Share Merger
consideration into which their Company Shares were converted at the Effective
Time (rounded to the nearest whole cent after aggregating all Company Shares
held by such holder). With respect to holders who did not so deliver their
Certificates and Forms of Election, such holders shall be entitled to receive,
upon surrender of Certificates for cancellation to the Paying Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal and such declaration form, duly completed and validly executed in
accordance with the instructions thereto, the applicable Per Share Merger
Consideration into which their Company Shares were converted at the Effective
Time (rounded to the nearest whole cent after aggregating all Company Shares
held by such holder), and the Certificates so surrendered shall forthwith be
canceled. No interest shall accrue or be paid on the amounts payable pursuant to
Section 1.4 upon the surrender of any Certificate for the benefit of the holder
of such Certificate. Until so surrendered, outstanding Certificates will be
deemed from and after the Effective Time for all corporate purposes to evidence
only the ownership of the right to receive the applicable Per Share Merger
Consideration into which such Company Shares shall have been so converted and,
if applicable, an amount of cash in lieu of the issuance of any fractional
shares in accordance with Section 1.4(f) and any dividends or distributions
payable pursuant to Section 1.5(d).
(d) Distributions With Respect to Unexchanged Shares. No dividends
or other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificates with respect to any
shares of Parent Common Stock represented thereby until the holders of record of
such Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Paying Agent shall deliver to
the record holders thereof, without interest, certificates representing whole
shares of Parent Common Stock issued in exchange therefor along with payment in
lieu of fractional shares pursuant to Section 1.4(f) hereof and the amount of
any such dividends or other distributions with a record date after the Effective
Time payable with respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If the payment of the amounts payable
pursuant to Section 1.4 is to be made to, or if shares of Parent Common Stock
issuable pursuant to Section 1.4 are to be issued in the name of, a person other
than the person in whose name the Certificates surrendered in exchange therefor
are registered, it will be a condition of the payment or issuance thereof that
the Certificates so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the persons requesting such payment or
issuance will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the payment of the amount
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specified in Section 1.4 to, or the issuance of the shares of Parent Common
Stock specified in Section 1.4 in the name of, a person other than the
registered holder of the Certificates surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.
(f) Withholding. Each of the Paying Agent, Parent and the Surviving
Corporation shall be entitled to deduct and withhold from any consideration
payable or otherwise deliverable pursuant to this Agreement, including pursuant
to Section 1.4(d) above, to any holder or former holder of Company Shares or
Company Stock Options, such amounts as may be required to be deducted or
withheld therefrom under the Code (as defined in Section 2.11(a)), the
Ordinance, or under any provision of state, local, Israeli or other foreign law
or any other applicable requirement, provided, however, that (i) in the event
the Israeli Withholding Tax Ruling (as defined in Section 5.5(c)) is obtained,
deduction and withholding of any amounts under the Ordinance or any other
provision of Israeli law or requirement, if any, shall be made only in
accordance with the provisions of the Israeli Withholding Tax Ruling; and (ii)
in the event a Withholding Tax Extension (as defined in Section 5.5(c)) is
obtained, the parties shall fully comply with the provisions of any such
Withholding Tax Extension. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the person to whom such amounts would otherwise have been
paid.
(g) No Liability. Notwithstanding anything to the contrary in this
Section 1.5, neither the Paying Agent nor any party hereto shall be liable to a
holder of Company Shares for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.6 Company's Transfer Books Closed; No Further Ownership Rights in
Company Shares. At the Effective Time: (i) the share transfer books of Company
shall be deemed closed, and no transfer of any Company Shares or any
Certificates in respect thereof shall thereafter be made or consummated; and
(ii) all holders of Company Shares that were outstanding immediately prior to
the Effective Time shall cease to have any rights as shareholders of Company,
other than the right to receive the Per Share Merger Consideration. No further
transfer of any such Company Shares shall be made on such share transfer books
after the Effective Time. If, after the Effective Time, a valid Certificate is
presented to the Paying Agent or to the Surviving Corporation or Parent, such
Certificate shall be canceled and shall be exchanged as provided in this Article
I. The applicable Per Share Merger Consideration issued in accordance with the
terms hereof shall be deemed to have been issued in full satisfaction of all
rights pertaining to such Company Shares.
1.7 Lost, Stolen, Destroyed or Unissued Certificates. In the event that
any Certificates shall have been lost, stolen or destroyed, or were never
issued, the Paying Agent shall pay such amounts and, if applicable, issue such
shares of Parent Common Stock, if any, specified in Section 1.4, in exchange for
such lost, stolen, destroyed, or unissued Certificates, upon the making of an
affidavit of that fact by the holder thereof; provided, however, that Parent and
the Paying Agent may, in their sole discretion and as a condition precedent to
such payment or issuance, require the owner of such lost, stolen, destroyed or
unissued Certificates to deliver a bond in such sum as it may direct as
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indemnity against any claim that may be made against Parent, the Surviving
Corporation or the Paying Agent with respect to the Certificates alleged to have
been lost, stolen, destroyed or unissued.
1.8 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company and Merger Sub, the officers and directors of the
Surviving Corporation will take all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Parent and Merger Sub, as of the
date hereof, subject to such exceptions as are specifically disclosed in writing
in the disclosure schedule supplied by Company to Parent, dated as of the date
hereof and certified by a duly authorized officer of Company (the "COMPANY
DISCLOSURE SCHEDULE"), as follows:
2.1 Organization and Qualification; Subsidiaries.
(a) Each of Company and its subsidiaries is a corporation duly
organized and validly existing and, where applicable, in good standing, under
the laws of the jurisdiction of its incorporation and has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Each of
Company and its subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and, where applicable is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Company.
(b) Section 2.1(b) of the Company Disclosure Schedule lists each of
Company's subsidiaries as of the date hereof, the jurisdiction of incorporation
of each such subsidiary, and Company's equity interest therein. Except as set
forth in Section 2.1(b) of the Company Disclosure Schedule, neither Company nor
any of its subsidiaries has agreed, is obligated to make, or is bound by any
written or oral agreement, contract, subcontract, lease, binding understanding,
instrument, note, bond, mortgage, indenture, option, warranty, purchase order,
license, sublicense, benefit plan, obligation, commitment or undertaking of any
nature (a "CONTRACT") under which it may become obligated to make any future
investment in, or capital contribution to, any other entity. Except as set forth
in Section 2.1(b) of the Company Disclosure Schedule, neither Company nor any of
its subsidiaries directly or indirectly owns any equity or similar interest in
or any interest convertible, exchangeable or exercisable for, any equity or
similar interest in, any person.
2.2 Memorandum of Association; Articles of Association. Company has
previously furnished to Parent a complete and correct copy of its Memorandum of
Association and Articles of Association as amended to the date of this Agreement
(together, the "COMPANY CHARTER
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DOCUMENTS") and a complete and correct copy of the equivalent organizational
documents of Precise Software Solutions, Inc. Such Company Charter Documents and
equivalent organizational documents of each of Company's subsidiaries are in
full force and effect. Company is not in violation of any of the provisions of
Company Charter Documents, and no subsidiary of Company is in violation of its
equivalent organizational documents.
2.3 Capitalization.
(a) The registered (authorized) share capital of Company consists of
70,000,000 Ordinary Shares, NIS 0.03 par value per share. The Company has no
class of share capital authorized other than Company Shares. As of the close of
business on December 18, 2002, (i) 29,819,727 Company Shares were issued and
outstanding, all of which were validly issued, fully paid and nonassessable;
(ii) except as set forth in Section 2.3 of the Company Disclosure Schedule, no
Company Shares were dormant shares and no shares were held in treasury by
Company or by subsidiaries of Company; provided, that if Section 2.3 of the
Company Disclosure Schedule sets forth any shares as being held by a subsidiary
of Company, such shares are held by Precise Software Solutions, Inc.; (iii)
520,989 Company Shares were available for future issuance pursuant to Company's
ESPP; (iv) 539,832 Company Shares were reserved for issuance under Company's
1995 Share Option and Incentive Plan, of which 57,406 were subject to
outstanding options to purchase Company Shares and no Company Shares were
available for future options grants; (v) 10,993,168 Company Shares were reserved
for issuance under Company's Amended and Restated 1998 Share Option and
Incentive Plan, of which 7,884,670 were subject to outstanding options to
purchase Company Shares and 593,504 were available for future options grants;
(vi) 16,882 Company Shares were reserved for issuance upon the exercise of
outstanding options to purchase Company Shares under the Stock Option Plan
(f/k/a the Savant Corporation Stock Option Plan); (vii) no Company Shares were
reserved for issuance upon the exercise of certain stock options not issued
under Company Option Plans as set forth in Section 2.3 of the Company Disclosure
Schedule; and (viii) 15,965 Company Shares were reserved for issuance upon the
exercise of certain warrants to purchase Company Shares as set forth in Section
2.3 of the Company Disclosure Schedule ("COMPANY WARRANTS"). Other than as
described in the preceding sentence and except as set forth in Section 2.3 of
the Company Disclosure Schedule, as of the close of business on December 18,
2002, Company had no other securities authorized, reserved for issuance, issued
or outstanding. Except as set forth in Section 2.3 of the Company Disclosure
Schedule, there are no commitments, agreements or understandings of any
character to which Company is bound obligating Company to accelerate the vesting
of any Company Stock Option (as defined in Section 5.11) as a result of the
Merger.
(b) Section 2.3 of the Company Disclosure Schedule sets forth the
following information with respect to each Company Stock Option outstanding as
of the close of business on December 18, 2002: (i) the name and address of the
optionee; (ii) the particular plan, if applicable, pursuant to which such
Company Stock Option was granted, (iii) the number of Company Shares subject to
such Company Stock Option; (iv) the exercise price of such Company Stock Option;
(v) the date on which such Company Stock Option was granted; (vi) the applicable
vesting schedule, including the vesting commencement date; (vii) the date on
which such Company Stock Option
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expires; (viii) whether the vesting or exercisability of such Company Stock
Option will be accelerated in any way by the transactions contemplated by this
Agreement (whether alone or upon the occurrence of any additional or subsequent
events), and the extent of any such acceleration; and (ix) whether, as of the
close of business on December 18, 2002, the optionee was employed by Company,
and if not so employed, the date of termination and expiration of such Company
Stock Option. Company has made available to Parent accurate and complete copies
of all stock option plans pursuant to which Company has granted such Company
Stock Options that are currently outstanding and the form of all stock option
agreements evidencing such Company Stock Options. All Company Shares subject to
issuance as aforesaid have been duly authorized and, upon issuance on the terms
and conditions specified in the instrument pursuant to which they are issuable,
will be validly issued, fully paid and nonassessable. Company has not issued any
Company Shares which are unvested or subject to any repurchase option in favor
of Company. All outstanding Company Shares, all outstanding Company Stock
Options, and all outstanding shares of capital stock of each subsidiary of
Company have been issued and granted (i) in compliance with all applicable
securities laws and other applicable Legal Requirements (as defined below) and
(ii) in material compliance with all applicable requirements set forth in
Contracts. For the purposes of this Agreement, "LEGAL REQUIREMENTS" means any
Israeli or U.S. federal or state law, or material local or municipal law, or
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 Entity (as defined in
Section 2.5(b)).
(c) Except for (i) securities that Company owns, directly or
indirectly through one or more subsidiaries, free and clear of all liens,
pledges, hypothecations, charges, mortgages, security interests, encumbrances,
claims, infringements, interferences, options, right of first refusals,
preemptive rights, community property interests or restrictions of any nature
(including any restriction on the voting of any security, any restriction on the
transfer of any security or other asset, any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset),
("LIENS"), other than Liens for Taxes not yet due and payable, and (ii) shares
of capital stock or other similar ownership interests of subsidiaries of Company
that are owned by certain nominee equity holders as required by the applicable
law of the jurisdiction of organization of such subsidiaries (which shares or
other interests do not materially affect Company's control of such
subsidiaries), as of the date of this Agreement, there are no equity securities,
partnership interests or similar ownership interests of any class of equity
security of any subsidiary of Company, or any security exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except as set forth in this Section 2.3 or Section 2.3 of the
Company Disclosure Schedule, there are no subscriptions, options, warrants,
equity securities, partnership interests or similar ownership interests, calls,
rights (including preemptive rights), commitments or agreements of any character
to which Company or any of its subsidiaries is a party or by which it is bound
obligating Company or any of its subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition of, any shares of
capital stock, partnership interests or similar ownership interests of Company
or any of its subsidiaries or obligating Company or any of its subsidiaries to
grant, extend, accelerate the vesting
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of or enter into any such subscription, option, warrant, equity security, call,
right, commitment or agreement. Except as contemplated by this Agreement or as
set forth in Section 2.3 of the Company Disclosure Schedule, there are no
registration rights and there is, except for the Voting Undertakings, no voting
trust, proxy, rights plan, antitakeover plan or other similar agreement or
understanding to which Company or any of its subsidiaries is a party or by which
they are bound with respect to any equity security of any class of Company or
with respect to any equity security, partnership interest or similar ownership
interest of any class of any of its subsidiaries. Shareholders of Company will
not be entitled to statutory dissenters' rights in connection with the Merger.
(d) Company's shares are not listed for trading on the Tel Aviv
Stock Exchange, or on any other foreign or domestic stock exchange other than
Nasdaq, nor has Company applied to list its shares on any such stock exchange.
2.4 Authority Relative to this Agreement. Company has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and, subject to obtaining the approval of the
shareholders of Company to this Agreement, the Merger and the other transactions
contemplated by this Agreement, to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement by Company and
the consummation by Company of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
Company and no other corporate proceedings on the part of Company are necessary
to authorize this Agreement or to consummate the transactions so contemplated
(other than the approval of this Agreement, the Merger and the other
transactions contemplated by this Agreement by the Required Company Shareholder
Vote (as hereinafter defined)). This Agreement has been duly and validly
executed and delivered by Company and, assuming the due authorization, execution
and delivery by Parent and Merger Sub, constitutes a legal and binding
obligation of Company, enforceable against Company in accordance with its terms,
except as the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting creditors' rights generally and laws relating to the availability of
specific performance, injunctive relief or other equitable remedies. Subject to
the provisions of Section 320(c) of the Israeli Companies Law, the affirmative
vote of 75% (seventy-five percent) of the voting shares of Company present and
voting at the Company General Meeting (as defined below) at which a quorum is
present is a sufficient vote of the holders of any Company Shares necessary to
approve the Merger (the "REQUIRED COMPANY SHAREHOLDER VOTE"). The quorum
required for the Company General Meeting is shareholders holding collectively at
least one-third of the issued share capital of Company (present in person or by
proxy). No statutory vote of: (i) any creditor of Company, (ii) any holder of
any option or warrant granted by Company; or (iii) any shareholder of any of
Company's subsidiaries is necessary in order to approve this Agreement, or to
approve or permit the consummation of the Merger and the other transactions
contemplated by this Agreement.
2.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Company do not,
and the performance of this Agreement by Company will not: (i) conflict with or
violate Company Charter
-12-
Documents or the equivalent organizational documents of any of Company's
subsidiaries; (ii) subject to obtaining the Required Company Shareholder Vote
and compliance with the requirements set forth in Section 2.5(b), conflict with
or violate any law, rule, regulation, order, judgment or decree applicable to
Company or any of its subsidiaries or by which its or any of their respective
properties is bound or affected; or (iii) except for those Contracts set forth
in Section 2.5(a) of the Company Disclosure Schedule, result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or materially impair Company's or any of its
subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien on any of the properties or
assets of Company or any of its subsidiaries pursuant to, any material Contract
to which Company or any of its subsidiaries is a party or by which Company or
any of its subsidiaries or its or any of their respective properties are bound
or affected, except to the extent such conflict, violation, breach, default,
impairment or other effect would not in the case of clauses (ii) or (iii),
individually or in the aggregate: (A) reasonably be expected to have a Material
Adverse Effect on Company or (B) prevent or materially delay consummation of the
Merger or otherwise prevent the parties hereto from performing their obligations
under this Agreement.
(b) Other than with respect to procedures under the Israeli
Companies Law, the execution and delivery of this Agreement by Company do not,
and the performance of this Agreement by Company will not require any consent,
approval, authorization or permit of, or filing with or notification to, any
court, administrative agency, commission, governmental or regulatory authority,
domestic or foreign (a "GOVERNMENTAL ENTITY") with respect to the Company or its
subsidiaries, except: (i) for: (A) compliance with applicable requirements of
the Securities Act of 1933, as amended (the "SECURITIES ACT"), the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and state securities laws
("BLUE SKY LAWS"); (B) compliance with the pre-merger notification requirements
of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR ACT") and under the comparable competition foreign laws that the parties
reasonably determine to apply; (C) consent of the Office of the Chief Scientist
of the Israeli Ministry of Trade & Industry ("OCS") to the change in ownership
of Company to be effected by the Merger (the "OCS APPROVAL"); (D) approval of
the Israeli Commissioner of Restrictive Trade Practices pursuant to the
Restrictive Trade Practices Act, 1988 (the "RTPA"); (E) filings with, and
approval by, the Investment Center of the Israeli Ministry of Trade & Industry
(the "INVESTMENT CENTER") of the change in ownership of Company to be effected
by the Merger (the "INVESTMENT CENTER APPROVAL"); (F) compliance with the rules
and regulations of Nasdaq; (G) obtaining the Israeli Income Tax Ruling and the
Israeli Withholding Tax Ruling (each as defined in Section 5.5(c)) (which shall
not be a condition precedent to its obligation to effect the Merger); (H)
obtaining the Israeli Securities Exemptions (as defined in Section 5.5(d))
(which, in the case of the Israeli Securities Election Exemption (as defined in
Section 5.5(d)), shall not be a condition precedent to its obligation to effect
the Merger); and (I) other filings and recordation as required by Governmental
Entities other than those in the United States or Israel; and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications: (A) would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Company
or, after the Effective Time, Parent, or (B) would not prevent or materially
delay
-13-
consummation of the Merger or otherwise prevent the parties hereto from
performing their obligations under this Agreement.
2.6 Compliance with Laws; Environmental Matters; Permits.
(a) Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "HAZARDOUS MATERIAL" is any material or substance that is
prohibited or regulated by any Environmental Law or that has been designated by
any Governmental Entity to be radioactive, toxic, hazardous or otherwise a
danger to health, reproduction or the environment.
(ii) "ENVIRONMENTAL LAWS" are all applicable laws, rules,
regulations, orders, treaties, statutes, and codes promulgated by any
Governmental Entity which prohibit, regulate or control any Hazardous Material
or any Hazardous Material activity, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
the Resource Recovery and Conservation Act of 1976, the Federal Water Pollution
Control Act, the Clean Air Act, the Hazardous Materials Transportation Act, the
Clean Water Act, comparable laws, rules, regulations, ordinances, orders,
treaties, statutes, and codes of other Governmental Entities, the regulations
promulgated pursuant to any of the foregoing, and all amendments and
modifications of any of the foregoing, all as amended to date.
(b) Compliance with Laws. Neither Company nor any of its
subsidiaries is in conflict with, or in default or violation of, any law
(including Environmental Laws and the Foreign Corrupt Practices Act of 1977, as
amended), rule, regulation, order, judgment or decree applicable to Company or
any of its subsidiaries or by which its or any of their respective properties is
bound or affected, except for any conflicts, defaults or violations that
(individually or in the aggregate) would not cause Company to lose any material
benefit or incur any material liability. No investigation or review by any
Governmental Entity is pending or, to the knowledge of Company, threatened
against Company or its subsidiaries, nor has any Governmental Entity indicated
to Company an intention to conduct the same, other than, in each such case,
those the outcome of which could not, individually or in the aggregate,
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of Company or any of its subsidiaries, any acquisition of
material property by Company or any of its subsidiaries or the conduct of
business by Company or any of its subsidiaries.
(c) Environmental Matters. Company has not disposed of, released,
discharged or emitted any Hazardous Materials into the soil or groundwater at
any properties owned or leased at any time by Company, or at any other property,
or exposed any employee or other individual to any Hazardous Materials or any
workplace or environmental condition in such a manner as would result in any
liability or clean-up obligation of any kind or nature to Company except for
such liability or clean-up obligation as would not be reasonably expected to
have a Material Adverse Effect. To the knowledge of Company, (i) no Hazardous
Materials are present in, on, or under any properties owned, leased or used at
any time by Company, and (ii) no reasonable likelihood exists that any Hazardous
Materials will come to be present in, on, or under any properties owned, leased
or used at any time by Company, in each case so as to give rise to any liability
or clean-up obligation under any
-14-
Environmental Laws except for such liability or clean-up obligation as would not
be reasonably expected to have a Material Adverse Effect.
(d) Approvals. Company and its subsidiaries hold all franchises,
grants, permits, licenses, variances, easements, consents, certificates,
exemptions, orders and approvals and other authorizations from Governmental
Entities ("APPROVALS") which are (i) material to the operation of the business
of Company and its subsidiaries taken as a whole and (ii) necessary to own,
lease and operate the properties Company and its subsidiaries purport to own,
operate or lease except in the case of clause (ii) where the failure to have
such Approvals would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Company. Company and its
subsidiaries have been and are in compliance in all material respects with the
terms of such Approvals and any conditions placed thereon.
2.7 SEC Filings; Financial Statements.
(a) Company has made and will make available to Parent a correct and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by Company with the Securities and Exchange Commission
("SEC") since the filing of Company's Registration Statement on Form F-1 (the
"COMPANY SEC REPORTS"), which are all the forms, reports and documents required
to be filed by Company with the SEC since such time. The Company SEC Reports:
(i) were and will be prepared in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder; and (ii) did not and will not at
the time of filing thereof (and if any Company SEC Report filed prior to the
date of this Agreement was amended or superseded by a filing prior to the date
of this Agreement then also on the date of filing of such amendment or
superseded filing) contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of Company's subsidiaries is required to file any
reports or other documents with the SEC.
(b) Each set of consolidated financial statements (including, in
each case, any related notes thereto) contained in Company SEC Reports
(including any Company SEC Report filed after the date of this Agreement): (i)
complied and will comply as to form in all material respects with the published
rules and regulations of the SEC with respect thereto in effect at the time of
such filing; (ii) was and will be prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes thereto
or, in the case of unaudited statements, may not contain footnotes as permitted
by Form 10-Q of the Exchange Act) and each fairly presents the consolidated
financial position of Company and its consolidated subsidiaries at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated (subject, in the case of unaudited statements,
to normal adjustments which were not or are not expected to be material in
amount); and (iii) fairly presents in all material respects Company's revenue
recognition policies.
(c) Company has previously furnished to Parent a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to
-15-
be filed, to agreements, documents or other instruments which previously had
been filed by Company with the SEC pursuant to the Securities Act or the
Exchange Act.
(d) Company has furnished to Parent monthly unaudited consolidated
balance sheets, income statements and statements of cash flows for the two-month
period ended November 30, 2002, and such monthly financial statements have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved and fairly present in all material respects the financial
position of Company as of and for the two-month period then ended.
(e) Company recognizes revenue in accordance with Statement of
Position (SOP) 97-2, "Software Revenue Recognition," as amended, and SOP 98-9,
"Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain
Transactions." Company's revenue recognition is and has been in compliance with
all rules, regulations and statements of the SEC with respect thereto.
2.8 No Undisclosed Liabilities. Neither Company nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise) of
a nature required to be disclosed in a Company SEC Report or on a consolidated
balance sheet or in the related notes to consolidated financial statements
prepared in accordance with GAAP and the Exchange Act and the rules and
regulations of the SEC promulgated thereunder which are, individually or in the
aggregate, material to the business, results of operations, assets or financial
condition of Company and its subsidiaries taken as a whole, except: (i)
liabilities provided for in Company's balance sheet as of September 30, 2002 set
forth in Company SEC Reports (or in the notes thereto) as of the date hereof;
(ii) liabilities incurred since September 30, 2002 in the ordinary course of
business that the Company would have been permitted to incur under Section 4.1,
none of which is material to the business, results of operations or financial
condition of Company and its subsidiaries, taken as a whole; and (iii)
liabilities permitted to be incurred under this Agreement in accordance with
Section 4.1.
2.9 Absence of Certain Changes or Events. Since December 31, 2001 to the
date hereof, there has not been: (i) any Material Adverse Effect on Company;
(ii) any declaration, setting aside or payment of any dividend on, or other
distribution (whether in cash, stock or property) in respect of, any of
Company's or any of its subsidiaries' capital stock, or any purchase, redemption
or other acquisition by Company of any of Company's capital stock or any other
securities of Company or its subsidiaries or any options, warrants, calls or
rights to acquire any such shares or other securities except for repurchases
from employees following their termination pursuant to the terms of their
pre-existing stock option or purchase agreements; (iii) any split, combination
or reclassification of any of Company's or any of its subsidiaries' capital
stock; (iv) any granting by Company or any of its subsidiaries of any increase
in compensation or benefits, except for normal increases of cash compensation in
the ordinary course of business consistent with past practice, or any payment by
Company or any of its subsidiaries of any bonus, except for bonuses made in the
ordinary course of business consistent with past practice, or any granting by
Company or any of its subsidiaries of any increase in severance or termination
pay or any entry by Company or any of its subsidiaries into any currently
effective employment, severance, termination or indemnification agreement or any
agreement the benefits of which are contingent or the terms of which are
materially altered upon the
-16-
occurrence of a transaction involving Company of the nature contemplated
hereby; (v) entry by Company or any of its subsidiaries into any licensing or
other agreement with regard to the acquisition or disposition of any
Intellectual Property (as defined in Section 2.17) other than licenses in the
ordinary course of business with terms and conditions consistent with past
practice; or (vi) entry by Company or any of its subsidiaries into any amendment
or consent with respect to any licensing agreement which has been filed or is
required to be filed by Company with the SEC; (vii) any material change by
Company in its accounting methods, principles or practices, except as required
by concurrent changes in GAAP; (viii) any revaluation by Company of any of its
assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable; (ix) any sale of assets
of Company other than in the ordinary course of business consistent with past
practice; or (x) any Tax election or accounting method change inconsistent with
past practice, agreement to pay, settlement or compromise of any material Tax
liability or extension or waiver of any limitation period with respect to Taxes,
or request or negotiation for or receipt of any Tax rulings.
2.10 Absence of Litigation. Except as specifically disclosed in
Company SEC Reports as of the date hereof or in Section 2.10 of the Company
Disclosure Schedule, there are no claims, actions, suits or proceedings pending
or, to the knowledge of Company, threatened (or, to the knowledge of Company,
any governmental or regulatory investigation pending or threatened) against
Company or any of its subsidiaries or any properties or rights of Company or any
of its subsidiaries, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign except for
such claims, actions, suits or proceedings arising in the ordinary course of
business that are not material to the Company and its subsidiaries, taken as a
whole.
2.11 Employee Matters and Benefit Plans.
(a) Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
(i) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended and as codified in Section 4980B of the
Code and Sections 601 through 608 of ERISA;
(ii) "CODE" shall mean the Internal Revenue Code of
1986, as amended;
(iii) "COMPANY EMPLOYEE PLAN" shall mean any plan,
program, policy, practice, contract, agreement or other arrangement, other than
an Employment Agreement, providing for compensation, severance, termination pay,
deferred compensation, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits or remuneration of any kind, whether written
or unwritten, funded or unfunded, including without limitation, each "employee
benefit plan," within the meaning of Section 3(3) of ERISA which is or has been
maintained, contributed to, or required to be contributed to, by Company or any
ERISA Affiliate for the benefit of any Employee, or with respect to which
Company or any ERISA Affiliate has or may have any liability or obligation
including each International Employee Plan;
-17-
(iv) "DOL" shall mean the Department of Labor;
(v) "EMPLOYEE" shall mean any current or former or
retired employee, consultant or director of Company or any ERISA Affiliate;
(vi) "EMPLOYMENT AGREEMENT" shall mean each
management, employment, severance, consulting, relocation, repatriation,
expatriation, visa, work permit or other Contract between Company or any ERISA
Affiliate and any Employee;
(vii) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
(viii) "ERISA AFFILIATE" shall mean any subsidiary of
Company or other person or entity under common control with Company or any
subsidiary of Company within the meaning of Section 414(b), (c), (m) or (o) of
the Code and the regulations issued thereunder;
(ix) "FMLA" shall mean the Family Medical Leave Act of
1993, as amended;
(x) "INTERNATIONAL EMPLOYEE PLAN" shall mean each
Company Employee Plan and each government-mandated plan or program that has been
adopted or maintained by Company or any ERISA Affiliate, whether informally or
formally, or with respect to which Company or any ERISA Affiliate will or may
have any liability, for the benefit of Employees who perform services outside
the United States. For the avoidance of doubt, this shall include, in Israel,
manager's insurance or other provident or pension funds which are not
government-mandated but were set up to provide for Company's legal obligation to
pay statutory severance pay (Pitzuay Piturim) under the Severance Pay Law
5723-1963;
(xi) "IRS" shall mean the Internal Revenue Service;
(xii) "MULTIEMPLOYER PLAN" shall mean any "Pension
Plan" (as defined below) which is a "multiemployer plan," as defined in Section
3(37) of ERISA;
(xiii) "PENSION PLAN" shall mean each Company Employee
Plan which is an "employee pension benefit plan," within the meaning of Section
3(2) of ERISA.
(b) Schedule. Section 2.11(b) of the Company Disclosure Schedule
contains an accurate and complete list, as of the date hereof, of each Company
Employee Plan other than legally-mandated plans, programs and arrangements, and
each Employment Agreement. Company does not have any plan or commitment to
establish any new Company Employee Plan or Employment Agreement, to modify any
Company Employee Plan or Employment Agreement (except to the extent required by
law or to conform any such Company Employee Plan or Employment Agreement to the
requirements of any applicable law, in each case as previously disclosed to
Parent in writing or as required by this Agreement), or to adopt or enter into
any Company Employee Plan or Employment Agreement. Except as set forth on
Section 2.11(b) of the Company Disclosure
-18-
Schedule, neither the Company nor any ERISA Affiliate is obligated to provide an
Employee with any compensation or benefits pursuant to an agreement (for
example, an acquisition agreement) with a former employer of such Employee.
(c) Documents. Company has provided or made available to Parent
correct and complete copies of: (i) all documents embodying each Company
Employee Plan, other than legally-mandated plans, programs and arrangements and
each Employment Agreement including (without limitation) all amendments thereto
and all related trust documents, administrative service agreements, group
annuity contracts, group insurance contracts, and policies pertaining to
fiduciary liability insurance covering the fiduciaries for each Plan; (ii) the
most recent annual actuarial valuations, if any, prepared for each Company
Employee Plan or any International Employee Plan; (iii) the three (3) most
recent annual reports (Form Series 5500 and all schedules and financial
statements attached thereto), if any, required under ERISA or the Code in
connection with each Company Employee Plan; (iv) if Company Employee Plan is
funded, the most recent annual and periodic accounting of Company Employee Plan
assets; (v) the most recent summary plan description together with the
summary(ies) of material modifications thereto, if any, required under ERISA
with respect to each Company Employee Plan; (vi) all IRS determination, opinion,
notification and advisory letters, and all applications and correspondence to or
from the IRS or the DOL with respect to any such application or letter; (vii)
all written communications material to any Employee or Employees relating to any
Company Employee Plan and any proposed Company Employee Plans, in each case,
relating to any amendments, terminations, establishments, increases or decreases
in benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to Company; (viii) all correspondence to
or from any Governmental Entity relating to any Company Employee Plan; (ix) all
COBRA forms and related notices (or such forms and notices as required under
comparable law); (x) the three (3) most recent plan years' discrimination tests
for each Company Employee Plan; (xi) all registration statements, annual reports
(Form 11-K and all attachments thereto) and prospectuses prepared in connection
with each Company Employee Plan; (xii) any licenses or permits held by Company
which enable it to employ foreign employees or employees from "territories"
currently administered by Israel; and (xiii) any pamphlet, booklet or other
employee manual distributed to employees of Company which discuss Company
Employee Plans.
(d) Employee Plan Compliance. Except as set forth on Section 2.11(d)
of the Company Disclosure Schedule, (i) Company has performed in all material
respects all obligations required to be performed by it under, is not in default
or violation of, and has no knowledge of any default or violation by any other
party to each Company Employee Plan and Employment Agreement, and each Company
Employee Plan and Employment Agreement has been established and maintained in
all material respects in accordance with its terms and in material compliance
with all applicable laws, statutes, orders, rules and regulations, including but
not limited to ERISA or the Code; (ii) no "prohibited transaction," within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not
otherwise exempt under Section 4975 of the Code or Section 408 of ERISA (or any
administrative class exemption issued thereunder), has occurred with respect to
any Company Employee Plan; (iii) there are no actions, suits or claims pending,
or, to the knowledge of Company, threatened or reasonably anticipated against
any Company Employee Plan
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or Employment Agreement or against the assets of any Company Employee Plan,
except for claims for benefits in the ordinary course; (iv) each Company
Employee Plan and Employment Agreement can be amended, terminated or otherwise
discontinued after the Effective Time, without material liability to Parent,
Company or any of its ERISA Affiliates (other than ordinary administration
expenses); (v) there are no audits, inquiries or proceedings pending or, to the
knowledge of Company or any ERISA Affiliates, threatened by the IRS, DOL or any
other Governmental Entity with respect to any Company Employee Plan; and (vi)
neither Company nor any ERISA Affiliate is subject to any penalty or tax with
respect to any Company Employee Plan under Section 502(i) of ERISA or Sections
4975 through 4980 of the Code.
(e) Retirement Plans and Welfare Plans. Neither Company nor any ERISA
Affiliate has ever maintained, established, sponsored, participated in,
contributed to, or is obligated to contribute to, or otherwise incurred any
obligation or liability (including, without limitation, any contingent
liability) under any Multiemployer Plan, any Pension Plan subject to Title IV of
ERISA or Section 412 of the Code, any multiple employer plan (as defined in
ERISA or the Code), or any "funded welfare plan" within the meaning of Section
419 of the Code. Any Company Employee Plan intended to be qualified under
Section 401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code (i) has either applied for or obtained a favorable
determination, notification, advisory and/or opinion letter, as applicable, as
to its qualified status from the IRS or still has a remaining period of time
under applicable Treasury Regulations or IRS pronouncements in which to apply
for such letter and to make any amendments necessary to obtain a favorable
determination, and (ii) incorporates or has been amended to incorporate all
provisions required to comply with the Tax Reform Act of 1986 and subsequent
legislation, except to the extent that there is still a remaining period of time
under applicable Treasury Regulations or IRS pronouncements in which to
incorporate such provisions. For each Company Employee Plan that is intended to
be qualified under Section 401(a) of the Code, to the knowledge of the Company,
there has been no event, condition or circumstance that has adversely affected
or is likely to adversely affect such qualified status. Except as set forth on
Section 2.11(e) of the Company Disclosure Schedule, no Company Employee Plan
provides health benefits that are not fully insured through an insurance
contract.
(f) No Post-Employment Obligations. Except as set forth in Section
2.11(f) of the Company Disclosure Schedule, no Company Employee Plan provides,
or reflects or represents any liability to provide post-termination life, health
or other welfare benefits to any person for any reason, except as may be
required by COBRA or other applicable statute, and, to the knowledge of the
Company, Company has never represented, promised or contracted (whether in oral
or written form) to any Employee (either individually or to Employees as a
group) or any other person that such Employee(s) or other person would be
provided with post-termination life, health or other welfare benefits, except to
the extent required by statute.
(g) Effect of Transaction.
(i) Except as set forth on Section 2.11(g) of the Company
Disclosure Schedule, the execution of this Agreement and the consummation of the
transactions contemplated
-20-
hereby will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any Company Employee Plan,
Employment Agreement, trust, loan or other agreement or arrangement that will or
might result in any payment (whether of severance pay, "gross-up," or indemnity
with respect to any "parachute payment" (as defined in subclause (ii) below) or
similar payment or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits with
respect to any Employee.
(ii) Except as set forth on Section 2.11(g) of Company Disclosure
Schedule, no payment or benefit which will or may be made by Company or its
ERISA Affiliates with respect to any Employee will be characterized as a
"parachute payment," within the meaning of Section 280G(b)(2) of the Code.
(h) Employment Matters. Except as set forth in Section 2.11(h) of the
Company Disclosure Schedule, Company: (i) is in material compliance in all
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii) is
not liable for any arrears of wages or penalties with respect thereto; and (iii)
is not liable for any payment to any trust or other fund governed by or
maintained by or on behalf of any Governmental Entity, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the normal
course of business and consistent with past practice). Except as set forth in
Section 2.11(h) of the Company Disclosure Schedule, as of the date hereof, to
the Company's knowledge, there are no pending, threatened or reasonably
anticipated claims or actions against Company under any worker's compensation
policy or long-term disability policy. Except as set forth in Section 2.11(h) of
the Company Disclosure Schedule, each current Employee who resides in the United
States of America is an "at-will" employee whose employment can be terminated by
the Company or an ERISA Affiliate at any time, with or without cause.
(i) Labor. No work stoppage or labor strike against Company is pending,
threatened or reasonably anticipated. Company does not know of any activities or
proceedings of any labor union to organize any Employees. Except as set forth in
Section 2.11(i) of the Company Disclosure Schedule, there are no actions, suits,
claims, labor disputes or grievances pending, or, to the knowledge of Company,
threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate, result in any
material liability to Company. Neither Company nor any of its subsidiaries has
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act. Except as set forth in Section 2.11(i) of Company Disclosure
Schedule, Company is not presently, nor has it been in the past, a party to, or
bound by, any collective bargaining agreement or union contract with respect to
Employees and no collective bargaining agreement is being negotiated by Company.
(j) International Employee Plan. Each International Employee Plan has
been established, maintained and administered in material compliance with its
terms and conditions and
-21-
with the requirements prescribed by any and all statutory or regulatory laws
that are applicable to such International Employee Plan. Furthermore, no
International Employee Plan has unfunded liabilities, that as of the Effective
Time, will not be offset by insurance or fully accrued. Except as required by
law, no condition exists that would prevent Company or Parent from terminating
or amending any International Employee Plan at any time for any reason without
liability to Company or its ERISA Affiliates (other than ordinary administration
expenses or routine claims for benefits).
(k) Israeli Employees. Solely with respect to Employees who reside or
work in Israel ("ISRAELI EMPLOYEES"), except as set forth in Section 2.11(k) of
the Company Disclosure Schedule: (i) Company is not a party to any collective
bargaining contract, collective labor agreement or other contract or arrangement
with a labor union, trade union or other organization or body involving any of
its Israeli Employees, or is otherwise required (under any legal requirement,
under any contract or otherwise) to provide benefits or working conditions
beyond the minimum benefits and working conditions required by law to be
provided pursuant to rules and regulation of the Histadrut (General Federation
of Labor), the Coordinating Bureau of Economic Organization and the
Industrialists' Association. Company has not recognized or received a demand for
recognition from any collective bargaining representative with respect to any of
its Israeli Employees. Company does not have and is not subject to, and no
Israeli Employee of Company benefits from, any extension order (tzavei harchava)
or any contract or arrangement with respect to employment or termination
thereof; (ii) all of the Israeli Employees are "at will" employees subject to
the termination notice provisions included in employment agreements or
applicable law; (iii) there is no Contract between Company and any of its
Israeli Employees or directors that cannot be terminated by Company upon less
than three months notice without giving rise to a claim for damages or
compensation (except for statutory severance pay); (iv) Company's obligations to
provide statutory severance pay to its Israeli Employees pursuant to the
Severance Pay Law (5723-1963) are fully funded or accrued on the Company's
financial statements and Company does not use the provisions of Section 14 of
the Severance Pay Law with respect to such statutory severance pay; (v) except
as set forth in Section 2.11(k) of the Company Disclosure Schedule, Company has
no knowledge of any circumstance that could give rise to any valid claim by a
current or former Israeli Employee for compensation on termination of employment
(beyond the statutory severance pay to which employees are entitled); (vi) all
amounts that Company is legally or contractually required either (x) to deduct
from its Israeli Employees' salaries or to transfer to such Israeli Employees'
pension or provident, life insurance, incapacity insurance, continuing education
fund or other similar funds or (y) to withhold from their Israeli Employees'
salaries and benefits and to pay to any Governmental Entity as required by the
Ordinance and National Insurance Law or otherwise have, in each case, been duly
deducted, transferred, withheld and paid, and Company does not have any
outstanding obligation to make any such deduction, transfer, withholding or
payment; and (vii) Company is in compliance in all material respects with all
applicable legal requirements and contracts relating to employment, employment
practices, wages, bonuses and other compensation matters and terms and
conditions of employment related to its Israeli Employees, including but not
limited to The Prior Notice to the Employee Law 2002, The Notice to Employee
(Terms of Employment) Law 2002, the Prevention of Sexual Harassment Law
(5758-1998), and The Employment by Human Resource Contractors Law 1996. All
obligations of Company with respect to statutorily required severance payments
to Israeli Employees have been fully satisfied or have been fully funded by
contributions
-22-
to appropriate insurance funds pursuant to the Severance Pay Law (5723-1963).
Other than as set forth in Section 2.11(k) of the Company Disclosure Schedule:
(i) as of the date hereof, Company has not engaged any Israeli employees whose
employment would require special licenses or permits, and (ii) there are no
unwritten Company policies or customs which, by extension, could entitle Israeli
Employees to benefits in addition to what they are entitled by law (including,
by way of example but without limitation, unwritten customs concerning the
payment of statutory severance pay when it is not legally required). Company has
not engaged any consultants, sub-contractors or freelancers who, according to
Israeli law, would be entitled to the rights of an employee vis a vis Company,
including rights to severance pay, vacation, recuperation pay (dmei havaraa) and
other employee-related statutory benefits. For purposes of this Agreement, the
term "Israeli Employee" shall be construed to include consultants, sales agents
and other independent contractors who spend (or spent) a majority of their
working time in Israel on the business of Company or a subsidiary (each of whom
shall be so identified in Section 2.11(k) of the Company Disclosure Schedule).
In addition, Company has provided to Parent: (i) a correct and complete summary
of the calculations concerning the components of the Israeli Employees'
salaries, including any components which are not included in the basis for
calculation of amounts set aside for purposes of statutory severance pay and
pension; (ii) any and all agreements with human resource contractors, or with
consultants, sub-contractors or freelancers; (iii) a summary of its policies,
procedures and customs regarding termination of Israeli Employees; and (iv) a
summary of any dues it pays to the Histadrut Labor Organization and whether
Company participates in the expenses of any worker's committee (Va'ad Ovdim).
2.12 Registration Statement; Prospectus/Proxy Statement. None of the
information supplied or to be supplied by Company for inclusion or incorporation
by reference in the registration statement on Form S-4 (or similar successor
form) to be filed with the SEC by Parent in connection with the issuance of
Parent Common Stock in the Merger (including amendments or supplements thereto)
(the "REGISTRATION STATEMENT") will, at the time the Registration Statement
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of circumstances
under which they are made, not misleading. None of the information supplied or
to be supplied by Company for inclusion in the Prospectus/Proxy Statement to be
filed by Parent and Company with the SEC as part of the Registration Statement
pursuant to Section 5.1(a) hereof (the "PROSPECTUS/PROXY STATEMENT") will, at
the date or dates mailed to the shareholders of Company, and at the time of
Company General Meeting in connection with the transactions contemplated hereby,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Prospectus/Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder, and the Israeli Companies Law and
the Israeli Securities Law, 1968, and the rules and regulations promulgated
thereunder. If at any time prior to Company General Meeting, any event relating
to Company or any of its affiliates, officers or directors should be discovered
by Company which should be set forth in an amendment to the Registration
Statement or a supplement to the Prospectus/Proxy Statement, Company shall
promptly inform Parent. Notwithstanding the foregoing, Company makes no
representation or warranty with
-23-
respect to any information supplied by Parent or Merger Sub which is contained
or incorporated by reference in the Registration Statement or Prospectus/Proxy
Statement.
2.13 Restrictions on Business Activities. There is no Contract,
judgment, injunction, order or decree binding upon Company or its subsidiaries
or to which Company or any of its subsidiaries is a party which has or could
reasonably be expected to have the effect of prohibiting or impairing any
material business practice of Company or any of its subsidiaries, any
acquisition of property by Company or any of its subsidiaries or the conduct of
business by Company or any of its subsidiaries as currently conducted.
2.14 Property. Neither Company nor any of its subsidiaries owns any
material real property. Company and each of its subsidiaries have good and
defensible title to, or in the case of leased properties and assets, valid
leasehold interests in, all of their material properties and assets, free and
clear of all Liens except: (a) Liens for Taxes not yet due and payable; and (b)
such Liens or other imperfections of title, if any, as do not materially detract
from the value of or materially interfere with the present use of the property
affected thereby. All leases pursuant to which Company or any of its
subsidiaries lease from others material real or personal property are valid and
effective in accordance with their respective terms, and there is not, under any
of such leases, any existing material default or event of default of Company or
any of its subsidiaries or, to Company's knowledge, any other party (or any
event which with notice or lapse of time, or both, would constitute a material
default and in respect of which Company or subsidiary has not taken adequate
steps to prevent such default from occurring). All of the equipment of Company
and its subsidiaries which is in regular use and which is material to the
business of Company and its subsidiaries has been maintained in good operating
condition and repair, reasonable wear and tear excepted, except for such
failures to be in good operating condition and repair that would not, either
individually or in the aggregate, reasonably be expected to materially impact
the operation of the business of the Company and its subsidiaries, taken as a
whole.
2.15 Taxes.
(a) Definition of Taxes. For purposes of this Agreement, "TAX"
or, collectively, "TAXES", means: (i) any and all United States, Israeli,
federal, provincial, state, local and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities, including taxes based
upon or measured by gross receipts, income, profits, sales, use and occupation,
and value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, together with all interest,
linkage for inflation, penalties and additions imposed with respect to such
amounts; (ii) any liability for the payment of any amounts of the type described
in clause (i) as a result of being or ceasing to be a member of an affiliated,
consolidated, combined or unitary group for any period (including, without
limitation, any liability under United States Treas. Reg. Section 1.1502-6 or
any comparable provision of Israeli, foreign, state or local law); and (iii) any
liability for the payment of any amounts of the type described in clause (i) or
(ii) as a result of any express or implied obligation to indemnify any other
Person or as a result of any obligations under any agreements or arrangements
with any other Person with respect to such amounts and including any liability
for taxes of a predecessor entity.
-24-
(b) Tax Returns and Audits. Except as provided on Section 2.15 of the
Company Disclosure Schedule:
(i) Company and each of its subsidiaries has timely filed, taking
into account properly obtained extensions of time to file, all United States,
Israeli, federal, state, local and foreign returns, estimates, declarations,
information statements and reports ("RETURNS") relating to Taxes required to be
filed by Company and each of its subsidiaries with any Tax authority, and such
Returns are true and correct in all material respects and have been completed in
material accordance with applicable law. Company and each of its subsidiaries
have paid all Taxes shown to be due on such Returns.
(ii) Company and each of its subsidiaries (A) has paid or accrued
all Taxes it is required to pay or accrue and (B) has withheld from each payment
or deemed payment made to its past or present employees, officers, directors and
independent contractors, suppliers, creditors, stockholders or other third
parties all material Taxes and other deductions required to be withheld and has,
within the time and in the manner required by law, paid such withheld amounts to
the proper governmental authorities.
(iii) Neither Company nor any of its subsidiaries has been
delinquent in the payment of any material Tax nor is there any material Tax
deficiency outstanding, proposed or assessed against Company, nor has Company
nor any of its subsidiaries executed any waiver of any statute of limitations on
or extensions of the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of Company or
any of its subsidiaries is currently in progress, nor has Company or any of its
subsidiaries been notified of any request for such an audit or other
examination, nor is any taxing authority (including the Investment Center with
respect to Company's status as an "Approved Enterprise" under Israel's Law for
the Encouragement of Capital Investment, 1959) asserting, or to Company's
knowledge, threatening to assert, against Company or any of its subsidiaries any
claim for Taxes. There are no matters relating to material Taxes under
discussion between any taxing authority and Company or any of its subsidiaries.
(v) No material adjustment relating to any Returns filed by
Company or any of its subsidiaries (and no claim by a taxing authority in a
jurisdiction in which Company does not file Returns that Company or any of its
subsidiaries may be subject to taxation by such jurisdiction) has been proposed,
formally or, to Company's knowledge, informally, by any Tax authority to Company
or any of its subsidiaries or, to Company's knowledge, any Company accountant,
attorney or other advisor or representative thereof.
(vi) Neither Company nor any of its subsidiaries has any
liability for unpaid Taxes in excess of $100,000 (or the equivalent in other
currencies) (whether or not shown to be due on any Return) which has not been
accrued for or reserved on the most recent Company balance sheet in accordance
with gaap, whether asserted or unasserted, contingent or otherwise, other than
any liability for unpaid Taxes that may have accrued since the date of Company's
most
-25-
recent balance sheet in connection with the operation of the business of
Company and its subsidiaries in the ordinary course.
(vii) There is not any Contract, including but not limited to the
provisions of this Agreement, covering any employee or former employee of
Company or any of its subsidiaries that, individually or in the aggregate, could
give rise to the payment of any amount that would not be deductible as an
expense pursuant to Section 162(m) of the Code, nor has Company made any payment
of any amount that would not be deductible as an expense pursuant to Section 404
of the Code.
(viii) Neither Company nor any of its subsidiaries: (A) has ever
been a member of an affiliated group filing a consolidated Return, except for
the affiliated group, the parent of which is Precise Software Solutions, Inc.;
(B) has ever been a party to any Tax sharing or Tax allocation agreement,
arrangement or understanding and does not owe any amount under any such
agreement, other than this Agreement; (C) is liable for the Taxes of any other
person under United States Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise, except for liability created as a result of being a
member of the affiliated group, the parent of which is Precise Software
Solutions, Inc.; and (D) is currently a party to any joint venture, partnership
or other arrangement that could be treated as a partnership for income Tax
purposes.
(ix) There are no Liens on the assets of Company or any of its
subsidiaries relating to or attributable to Taxes except for Liens for Taxes not
yet due and payable.
(x) Except as otherwise contemplated in this Agreement, neither
Company nor any of its subsidiaries has requested or received a ruling from any
taxing authority or signed a closing or other agreement with any taxing
authority which would reasonably be expected to have an adverse effect on
Company.
(xi) Neither Company nor any of its subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section 355 of the
Code: (A) in the two years prior to the date of this Agreement or; (B) in a
distribution which could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
(xii) To the knowledge of Company, it should qualify as an
Industrial Company according to the meaning of that term in the Law for the
Encouragement of Industry (Taxes), 1969, and the Company believes that after any
applicable Tax holiday, Section 47(A1) of the Law Encouragement of Capital
Investment, 1959 applies to the Company, considering its level of foreign
investment. The Company also believes that as of the date hereof 90% or more of
its shares are owned by non-Israeli residents. To the knowledge of Company, the
consummation of the Merger will not have any adverse effect on such
qualification as an Industrial Company.
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(xiii) Company and each of its subsidiaries are in compliance in
all material respects with all terms and conditions of any Tax exemptions, Tax
holiday or other Tax reduction agreement, approval or order of any government
and, to the knowledge of Company, subject to receipt of the Investment Center
Approvals and the other Approvals required herein, the consummation of the
Merger will not have any adverse effect on the validity and effectiveness of any
such Tax exemptions, Tax holiday or other Tax reduction agreement or order.
(xiv) The Company Disclosure Schedule lists each material tax
incentive granted to or enjoyed by Company and its subsidiaries under the laws
of the State of Israel, the period for which such tax incentive applies, and the
nature of such tax incentive. Company and its subsidiaries have complied with
all material requirements of Israeli law to be entitled to claim all such
incentives. To the knowledge of Company, subject to receipt of the Investment
Center Approval and other Approvals required herein, consummation of the Merger
will not adversely affect the continued qualification for the incentives or the
terms or duration thereof or require any recapture of any previously claimed
incentive, and no consent or approval of any Governmental Entity is required,
other than as contemplated by the Disclosure Schedule, prior to the consummation
of the Merger in order to preserve the entitlement of the Surviving Corporation
or its subsidiaries to any such incentive.
(xv) To Company's knowledge, there has been no indication from
any Tax authority that the consummation of the Merger would adversely affect the
Surviving Corporation's ability to set off for tax purposes in the future any
and all losses accumulated by Company as of the Closing Date.
2.16 Brokers. Except for fees and expenses payable to Xxxxxxx, Xxxxx &
Co. ("XXXXXXX SACHS") pursuant to an Engagement Letter dated September 5, 2002,
a true, correct and complete copy of which has been provided to Parent and which
has not been amended or modified in any respect, Company has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders
fees or agent's commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby, including the Merger.
2.17 Intellectual Property.
(a) For the purposes of this Agreement, the following terms have
the meanings set forth below:
"INTELLECTUAL PROPERTY" shall mean any or all of the
following: (i) works of authorship including, without limitation, computer
programs, source code and executable code, whether embodied in software,
firmware or otherwise, documentation, designs, files, records, data and mask
works; (ii) inventions (whether or not patentable), improvements, and
technology; (iii) proprietary and confidential information, trade secrets and
know how; (iv) databases, data compilations and collections and technical data;
(v) logos, trade names, trade dress, trademarks and service marks; (vi) domain
names, web addresses and sites; (vii) tools, methods and processes and (viii)
all instantiations of the foregoing in any form and embodied in any media.
-27-
"INTELLECTUAL PROPERTY RIGHTS" shall mean any and all
worldwide, common law and/or statutory rights in, arising out of, or associated
therewith: (i) all United States and foreign patents and utility models and
applications therefor and all reissues, divisions, re-examinations, renewals,
extensions, provisionals, continuations and continuations-in-part thereof, and
equivalent or similar rights anywhere in the world in inventions and discoveries
including without limitation invention disclosures ("PATENTS"); (ii) all trade
secrets and other rights in know how and confidential or proprietary
information; (iii) all copyrights, copyrights registrations and applications
therefor, and mask works and mask work registrations and applications therefor,
and all other rights corresponding thereto ("COPYRIGHTS"); (iv) all uniform
resource locators, e-mail and other internet addresses and domain names and
applications and registrations therefore ("URLs"); all trade names, logos,
common law trademarks and service marks, trademark and service xxxx
registrations and applications therefor and all goodwill associated therewith
("TRADEMARKS"); (v) all "moral" or economic rights of authors and inventors,
however denominated throughout the world, and (vi) any similar, corresponding or
equivalent rights to any of the foregoing.
"COMPANY INTELLECTUAL PROPERTY" shall mean any
Intellectual Property and Intellectual Property Rights, including Registered
Intellectual Property Rights that are owned by or exclusively licensed to
Company or any of its subsidiaries.
"REGISTERED INTELLECTUAL PROPERTY RIGHTS" shall mean all
United States, international and foreign: (i) Patents, including applications
therefor; (ii) registered Trademarks, applications to register Trademarks,
including intent-to-use applications, or other registrations or applications
related to Trademarks; (iii) Copyright registrations and applications to
register Copyrights; and (iv) any other Intellectual Property Right that is the
subject of an application, certificate, filing, registration or other document
issued by, filed with, or recorded by, any state, government or other public
legal authority at any time.
"COMPANY PRODUCT" means any product or service offering
of the Company or any of its subsidiaries being marketed, sold or licensed by
Company or any of its subsidiaries.
(b) Section 2.17(b) of the Company Disclosure Schedule lists all
Registered Intellectual Property Rights owned or exclusively licensed by, or
filed in the name of, or applied for by Company or any of its subsidiaries as of
the date hereof (the "COMPANY REGISTERED INTELLECTUAL PROPERTY RIGHTS") and
lists any proceedings or actions before any court, tribunal (including the
United States Patent and Trademark Office (the "PTO") or equivalent authority
anywhere in the world) related to any of Company Registered Intellectual
Property Rights or Company Intellectual Property.
(c) Company has no knowledge of any facts or circumstances that would
render any Company Intellectual Property which are Intellectual Property Rights
or Registered Intellectual Property Rights invalid or unenforceable or would
adversely affect any pending application for any Company Registered Intellectual
Property Right and neither Company nor any of its subsidiaries has not
misrepresented, or failed to disclose, any facts or circumstances in any
application for any Company Registered Intellectual Property Right that would
constitute fraud or a misrepresentation
-28-
with respect to such application or that would otherwise affect the validity or
enforceability of any Company Registered Intellectual Property Right.
(d) Each material item of Company Registered Intellectual Property
Rights is valid and subsisting, and all necessary registration, maintenance and
renewal fees currently due in connection with such Company Registered
Intellectual Property Rights have been paid and all necessary documents and
certificates in connection with such Company Registered Intellectual Property
Rights have been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may be,
for the purposes of maintaining such Company Registered Intellectual Property
Rights. There are no actions that must be taken by Company or any of its
subsidiaries within sixty (60) days of the Closing Date, including the payment
of any registration, maintenance or renewal fees or the filing of any responses
to the PTO office actions, documents, applications or certificates for the
purposes of prosecuting, maintaining, perfecting or preserving or renewing any
Company Registered Intellectual Property Rights. In each case in which Company
or any of its subsidiaries has acquired ownership of any Intellectual Property
from any person, Company or such subsidiary has obtained a valid and enforceable
assignment sufficient to irrevocably transfer all rights in such Intellectual
Property and the associated Intellectual Property Rights (including the right to
seek past and future damages with respect thereto) to Company or such subsidiary
and, to the maximum extent provided for by, and in accordance with, applicable
laws and regulations with respect to Registered Intellectual Property Rights
acquired by Company or any of its subsidiaries, Company or such subsidiary has
recorded each such assignment with the relevant Governmental Entities, including
the PTO, the U.S. Copyright Office, or their respective equivalents in any
relevant foreign jurisdiction, as the case may be. Neither Company nor any of
its subsidiaries has claimed a particular status, including "Small Business
Status," in the application for any Intellectual Property Rights, which claim of
status was at the time made inaccurate in any material respect.
(e) All Company Intellectual Property will be fully transferable,
alienable or licensable by Surviving Corporation and/or Parent without
restriction and without payment of any kind to any third party.
(f) Each material item of Company Intellectual Property, including all
Company Registered Intellectual Property Rights listed in Section 2.17(b) of the
Company Disclosure Schedule and all Intellectual Property licensed to Company or
any of its subsidiaries on a non-exclusive basis, is free and clear of any
Liens. Except as set forth in the Company Disclosure Schedule, Company or one or
more of its subsidiaries is the exclusive owner, or has acquired the necessary
licenses to use, of all material Trademarks used in connection with the
operation or conduct of the business of Company, including the sale,
distribution or provision of any Company Products by Company or any of its
subsidiaries. Company or one or more of its subsidiaries is the exclusive owner
of, or has acquired the appropriate licenses to use, all Copyrighted works that
are included or incorporated into Company Products or which Company or any of
its subsidiaries otherwise purports to own.
-29-
(g) Company has not transferred ownership of or granted any exclusive
license of or right to use or authorized the exclusive retention of any rights
to use or joint ownership of any Intellectual Property or Intellectual Property
Rights that is or was Company Intellectual Property, to any other person.
(h) All Company Intellectual Property was created solely by either (i)
employees of Company or one or more of its subsidiaries acting within the scope
of their employment or (ii) by third parties who have validly and irrevocably
assigned all of their rights, including Intellectual Property Rights therein, to
Company or one of its subsidiaries.
(i) To the extent that any Company Intellectual Property has been
developed or created independently or jointly by any person other than Company
or any of its subsidiaries for which Company or such subsidiary has paid any
consideration of any kind, Company or one or more of its subsidiaries has a
written Contract with such person with respect thereto, and Company or one or
more of its subsidiaries thereby has obtained ownership of, and is the exclusive
owner of, all such Company Intellectual Property and associated Intellectual
Property Rights by operation of law or by valid assignment.
(j) Other than (i) inbound "shrink-wrap" and similar generally
available commercial binary code end-user licenses and (ii) software licensed
from third parties identified in Section 2.17(k) of the Company Disclosure
Schedule, Company Intellectual Property constitutes all the material items of
Intellectual Property and Intellectual Property Rights which, as of the date
hereof, are used in and necessary to the conduct of the business of Company as
it currently is conducted, including, without limitation, the design,
development, manufacture, use, import and sale of products, technology and
services (including products, technology or services currently under
development).
(k) Other than: (i) inbound "shrink-wrap" and similar generally
available commercial binary code end-user licenses and (ii) customer agreements
entered into in the ordinary course of Company business, the Contracts listed in
Section 2.17(k) of the Company Disclosure Schedule include all Contracts to
which Company or any of its subsidiaries is a party as of the date hereof with
respect to any Intellectual Property and Intellectual Property Rights. Except as
set forth in the Company Disclosure Schedule, all such Contracts are in full
force and effect and the consummation of the transactions contemplated by this
Agreement will not violate, trigger any right of any third party to obtain any
source code from any escrow under, or result in the breach, modification,
cancellation, termination or suspension of such Contracts. Company is not in
breach of nor has Company failed to perform under, any of the foregoing
contracts, licenses or agreements and, to Company's knowledge, no other party to
any such contract, license or agreement is in breach thereof or has failed to
perform thereunder. Except as set forth in the Company Disclosure Schedule,
following the Closing Date, the Surviving Corporation will be permitted to
exercise all of Company's rights under such Contracts to the same extent Company
would have been able to had the Merger not occurred and without the payment of
any additional amounts or consideration other than ongoing fees, royalties or
payments which Company would otherwise be required to pay.
-30-
(l) Except for inbound "shrink-wrap" and generally available
commercial binary code end-user or enterprise licenses and except for technology
in the public domain and as set forth in the Company Disclosure Schedule, all
Intellectual Property used in and necessary to the conduct of Company's business
as presently conducted (including, without limitation, the design, development,
use, import, branding, advertising, promotion, marketing, manufacture and sale
of Company Products and any products, technology or services currently under
development by Company or any of its subsidiaries) was created solely by: (i)
employees of Company or one or more of its subsidiaries acting within the scope
of their employment; (ii) third parties who have validly and irrevocably
assigned all of their rights, including Intellectual Property Rights therein, to
Company or one or more of its subsidiaries or (iii) third parties who have
granted to Company or one or more of its subsidiaries a perpetual license
(sufficient for the conduct of Company's business as presently conducted and
currently contemplated to be conducted by Company) to all such third party's
Intellectual Property Rights in such Intellectual Property, and no third party
owns or has any rights to any of Company Intellectual Property (other than
non-exclusive license rights therein in connection with licensing Company
Products in the ordinary course of Company business consistent with past
practice).
(m) Other than customer agreements entered into in the ordinary course
of Company business consistent with past practice, Section 2.17(m) of the
Company Disclosure Schedule lists all Contracts to which Company and any of its
subsidiaries is a party as of the date hereof wherein or whereby Company or any
of its subsidiaries has assumed any obligation or duty to warrant, indemnify,
reimburse, hold harmless, guaranty or otherwise assume or incur any obligation
or liability or provide a right of rescission with respect to the infringement
or misappropriation by Company or any of its subsidiaries or such other person
of the Intellectual Property Rights of any person other than Company or any of
its subsidiaries.
(n) There are no Contracts between Company or any of its subsidiaries
and any other person with respect to Company Intellectual Property under which
there is any material dispute as of the date hereof regarding the rights and
obligations specified in such Contracts, or performance under such Contracts
including with respect to any payments to be made or received by Company or any
of its subsidiaries thereunder.
(o) Company or one or more of its subsidiaries have the right to use,
pursuant to valid licenses, all software development tools, library functions,
compilers and all other third-party software that are material to the operation
of the business of Company or that are required to create, modify, compile,
operate or support any software that is Company Intellectual Property or is
incorporated into any Company Product.
(p) Except as set forth in the Company Disclosure Schedule, no
government funding, facilities of a university, college, other educational
institution or research center or funding from third parties was used in the
development of any Company Intellectual Property. To the knowledge of Company,
no current or former employee, consultant or independent contractor of Company,
who was involved in, or who contributed to, the creation or development of any
Company Intellectual Property, has performed services for the government,
university, college, or other educational
-31-
institution or research center during a period of time during which such
employee, consultant or independent contractor was also performing services for
Company.
(q) Section 2.17(q) of the Company Disclosure Schedule lists all items
of Company Intellectual Property as of the date hereof which were developed with
funding provided by or are subject to restriction, constraint, control,
supervision, or limitation imposed by the OCS or any other Governmental Entity
or quasi-Governmental Entity. Except as set forth in Section 2.17(q) of the
Company Disclosure Schedule, (i) all Company Intellectual Property is freely
transferable, conveyable, and/or assignable by Company and/or Parent or
Surviving Corporation to any entity located in any jurisdiction in the world
without any restriction, constraint, control, supervision, or limitation
whatsoever that could be imposed by the Israeli Office of the Chief Scientist
(or any other similar governmental entity or quasi-governmental entity) and (ii)
no restriction, constraint, control, supervision, or limitation whatsoever can
be, or will be, imposed by the Israeli Office of the Chief Scientist (or any
other Governmental Entity or quasi-Governmental Entity) on the place, method and
scope of exploitation of any Company Intellectual Property (including the
operation of the business of Company as it is currently conducted, including,
without limitation, the design, development, use, import, branding, advertising,
promotion, marketing, manufacture and sale of Company Products and any products,
technology a services currently under development by Company or any of its
subsidiaries).
(r) The operation of the business of Company as it currently is
conducted (including, without limitation, the design, development, use, import,
branding, advertising, promotion, marketing, manufacture and sale of Company
Products and any products, technology or services currently under development by
Company or any of its subsidiaries), including but not limited to the design,
development, use, import, manufacture and sale of the products, technology or
services (including products, technology or services currently under
development) of Company does not, and will not when conducted by Parent and/or
Surviving Corporation in substantially the same manner following the Closing,
infringe or misappropriate any Intellectual Property Right of any person,
violate any right of any person (including any right to privacy or publicity) or
constitute unfair competition or trade practices under the laws of any
jurisdiction. Company has not received notice from any person directing Company
to review or consider the applicability of such person's Intellectual Property
Rights to Company's business and/or Intellectual Property Rights (other than the
person specified on Schedule 7.1(g)) or claiming that such operation or any act,
product, technology or service (including products, technology or services
currently under development) of Company infringes or misappropriates any
Intellectual Property Right of any person or constitutes unfair competition or
trade practices under the laws of any jurisdiction (nor does Company have
knowledge of any basis therefor).
(s) To the knowledge of Company, no person is infringing or
misappropriating any Company Intellectual Property.
(t) Except as set forth in Section 2.17(t) of the Company Disclosure
Schedule, no Company Intellectual Property Right is subject to any proceeding or
outstanding decree, order, judgment, Contract or stipulation that restricts in
any manner the use, transfer or licensing thereof by
-32-
Company or which would reasonably be expected to adversely affect the validity,
use or enforceability of such Company Intellectual Property.
(u) Company and its subsidiaries have taken commercially reasonable
steps to protect Company's and its subsidiaries' rights in confidential
information and trade secrets of Company and its subsidiaries or of other
persons, to the extent required in connection with the disclosure of such
confidential information or trade secrets to Company or any of its subsidiaries.
Without limiting the foregoing, Company has, and enforces, a policy requiring
each employee, consultant and contractor to execute proprietary information,
confidentiality and assignment Contracts substantially in one of the forms made
available to Parent and all current and former employees, consultants and
contractors of Company and its subsidiaries have executed such Contract. All
employees of Company and its subsidiaries have entered into one or more valid
and binding written Contracts with Company or one of its subsidiaries sufficient
to vest title in Company or such subsidiary of all Intellectual Property,
including all accompanying Intellectual Property Rights, created by such
employee in the scope of his or her employment with Company or such subsidiary.
(v) Neither this Agreement nor the Merger will result in: (i) Parent's
or the Surviving Corporation's granting to any third party any right to or with
respect to any Intellectual Property or Intellectual Property Right owned by, or
licensed to, either of them; (ii) either Parent's or the Surviving Corporation's
being bound by, or subject to, any non-compete or other restriction on the
operation or scope of their respective businesses; or (iii) either Parent's or
the Surviving Corporation's being contractually obligated to pay any royalties
or other amounts to any third party in excess of those payable by Parent or
Surviving Corporation, respectively, prior to the Closing Date.
(w) The information that was provided by the Company or any of its
subsidiaries to Parent prior to the date of this Agreement with respect to the
obligations or liabilities of the Company or any of its subsidiaries arising or
resulting from the use of the material Intellectual Property or Intellectual
Property Rights of any third party in any of the products of the Company or any
of its subsidiaries currently marketed by, commercially available from, or under
development by the Company or any of its subsidiaries, includes all material
information as to the scope, terms and extent of all such obligations and
liabilities and is true and complete in all material respects and neither the
Company nor any of its subsidiaries has, prior to the date of this Agreement,
omitted to state any material fact necessary in order to make such information
not misleading.
(x) Except as set forth in Section 2.17(x) of the Company Disclosure
Schedule, neither Company nor any of its subsidiaries has disclosed or delivered
to any party, or permitted the disclosure or delivery to any party of, any
Company Source Code (as defined below). No event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time)
will, or would reasonably be expected to, result in the disclosure or delivery
by Company or any of its subsidiaries or any other party acting on Company's or
any of its subsidiaries' behalf to any third party of any Company Source Code,
except disclosure to escrow agents pursuant to escrow agent agreements described
in Section 2.17(x) of the Company Disclosure Schedule. Section 2.17(x) of the
Company Disclosure Schedule identifies each contract, agreement and instrument
by and
-33-
between Company, or any of its subsidiaries, and any escrow agents pursuant to
which Company or any of its subsidiaries has deposited, or is or may be required
to deposit, with an escrow holder or any other party, any Company Source Code
and further describes whether the execution of this Agreement or the
consummation of the Merger or any of the other transactions contemplated by this
Agreement, in and of itself, would reasonably be expected to result in the
release from escrow of any Company Source Code. As used in this Section 2.17(x),
"COMPANY SOURCE CODE" means, collectively, any software or any material portion
or aspect of the software source code, or any material proprietary information
or algorithm contained in or relating to any software source code, of any
Company Product or any product or technology currently under development by
Company or any of its subsidiaries.
(y) Except as set forth in Section 2.17(y) of the Company Disclosure
Schedule, no Public Software (as defined below): (i) forms part of the Company
Intellectual Property; (ii) was or is used in connection with the development of
any Company Intellectual Property; or (iii) was or is incorporated in whole or
in part, or has been distributed, in whole or in part, in conjunction with any
Company Intellectual Property or Company Product. With regard to any Public
Software identified in Section 2.17(y) of the Company Disclosure Schedule, no
such Public Software is software that is licensed pursuant to terms that: (a)
require that other software used with or distributed with such software (the
"LICENSEE'S SOFTWARE") or modifications a derivative works of the Public
Software (i) be disclosed or distributed in source code form; (ii) be licensed
for the purpose of making derivative works; or (iii) be redistributable at no
charge or (b) grant, or purport to grant, to any third party any rights or
immunities under the Licensee's intellectual property or proprietary rights in
the Licensee Software any derivative work thereof. As used in this Section
2.17(y), "PUBLIC SOFTWARE" means any software that contains, or is derived in
any manner (in whole or in part) from, any software that is distributed as free
software, open source software (e.g., Linux) or similar licensing or
distribution models, including, but not limited to software licensed or
distributed under any of the following licenses or distribution models, or
licenses or distribution models similar to any of the following: (i) GNU's
General Public License (GPL) or Lesser/Library GPL (LGPL), (ii) The Artistic
License (e.g., PERL), (iii) the Mozilla Public License, (iv) the Netscape Public
License, (v) the Sun Community Source License (SCSL), (vi) the Sun Industry
Standards License (SISL), (vii) the BSD License, (viii) the Apache License, (ix)
the XML Soap Library, (x) MIT/X or (xi) the Thai Open License.
2.18 Contracts. Except as set forth in Section 2.17 or 2.18 of the
Company Disclosure Schedule, as of the date hereof neither Company nor any of
its subsidiaries is a party to or is bound by any of the following Contracts
(other than any such Contract which is no longer of any force or effect):
(a) (i) any employment or consulting Contract with any Employee,
or (ii) any service, operating or management Contract with respect to any of its
facilities (whether leased or owned) other than, in the case of this clause
(ii), (A) those that are terminable by Company or any of its subsidiaries on no
more than ninety (90) days' notice without liability or financial obligation to
Company and (B) those that do not involve in excess of $100,000 being paid by
the Company over the term thereof;
-34-
(b) any Contract of indemnification or any guaranty other than
any Contract of indemnification entered into in connection with the sale or
license of products or services in the ordinary course of business;
(c) any Contract containing any covenant limiting in any respect
the right of Company or any of its subsidiaries to engage in any line of
business or to compete with any person or granting any exclusive distribution
rights;
(d) any Contract relating to the disposition or acquisition by
Company or any of its subsidiaries after the date of this Agreement of a
material amount of assets not in the ordinary course of business or pursuant to
which Company or any of its subsidiaries has any material ownership interest in
any corporation, partnership, joint venture or other business enterprise other
than Company's subsidiaries;
(e) any dealer, distributor, joint marketing or development
Contract under which Company or any of its subsidiaries have continuing material
obligations to jointly market any Company Product and which may not be canceled
without penalty upon notice of ninety (90) days or less, or pursuant to which
Company or any of its subsidiaries have continuing material obligations to
jointly develop any Intellectual Property that will not be owned, in whole or in
part, by Company or any of its subsidiaries and which may not be canceled
without penalty upon notice of ninety (90) days or less;
(f) any Contract to license any third party to manufacture,
reproduce, sell or distribute any Company Products, except Contracts with
distributors or sales representative in the normal course of business cancelable
without penalty upon notice of ninety (90) days or less and substantially in the
form previously provided to Parent;
(g) any Contract to provide source code to any third party for
any product or technology that is material to Company and its subsidiaries taken
as a whole;
(h) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other Contracts relating to the borrowing of
money or extension of credit, other than trade payables incurred in the ordinary
course of business;
(i) any material settlement agreement under which Company has
ongoing obligations; or
(j) any other Contract involving in excess of $100,000
being paid by or to Company over the term thereof.
Neither Company nor any of its subsidiaries, nor to Company's knowledge
any other party to any Contract required to be disclosed in Section 2.17 or 2.18
of the Company Disclosure Schedule (any such contract, a "COMPANY CONTRACT"), is
in material breach, violation or default under, and neither Company nor any of
its subsidiaries has received written notice that it has breached, violated or
defaulted under, any of the material terms or conditions of any Company Contract
in such a
-35-
manner as would permit any other party to cancel or terminate any such Company
Contract, or would permit any other party to seek material damages or other
remedies (for any or all of such breaches, violations or defaults, in the
aggregate). Company has made available to Parent true and correct copies of any
Contracts between Company and its top ten customers (based on revenues for the
twelve months ended September 30, 2002).
2.19 Opinion of Financial Advisor. The Company's financial advisor,
Xxxxxxx Xxxxx, has delivered to the Board of Directors of Company an oral
opinion, to be confirmed in writing, to the effect that, as of the date of such
opinion, the aggregate merger consideration (as defined in such opinion) to be
received by Company's shareholders is fair from a financial point of view to
such shareholders.
2.20 Insurance. Company maintains insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of Company and its subsidiaries (collectively,
the "INSURANCE POLICIES") which are of the type and in amounts customarily
carried by persons conducting businesses similar to those of Company and its
subsidiaries. There is no material claim by Company or any of its subsidiaries
pending under any of the material Insurance Policies as to which coverage has
been denied or disputed by the underwriters of such policies or bonds.
2.21 Board Approval. The Board of Directors of Company has duly and
unanimously: (a) determined that this Agreement, the Merger and the other
transactions contemplated by this Agreement are fair to, and in the best
interests of, Company and its shareholders, and that, considering the financial
position of the merging companies, no reasonable concern exists that the
Surviving Corporation will be unable to fulfill the obligations of Company to
its creditors; (b) approved this Agreement, the Merger and the other
transactions contemplated by this Agreement; and (c) determined to recommend
that the shareholders of Company approve this Agreement, the Merger and the
other transactions contemplated by this Agreement.
2.22 Inapplicability of Certain Statutes. Other than the Israeli
Companies Law and other than competition statutes, Company is not subject to any
business combination, control share acquisition, fair price or similar statute
that applies to the Merger or any other transaction contemplated by this
Agreement.
2.23 Grants, Incentives and Subsidies. Section 2.23 of the Company
Disclosure Schedule provides a complete list, as of the date hereof, of all
pending and outstanding grants, incentives, exemptions and subsidies
(collectively, "GRANTS") from the Government of the State of Israel or any
agency thereof, or from any foreign governmental or administrative agency,
granted to Company, including, without limitation, (i) grant of Approved
Enterprise Status from the Investment Center and grants from OCS. Company has
made available to Parent, prior to the date hereof, correct copies of all
documents evidencing Grants submitted by Company and of all letters of approval,
certificates of completion, and supplements and amendments thereto, granted to
Company, and all material correspondence related thereto. Section 2.23 of the
Company Disclosure Schedule lists, as of the date hereof: (a) all material
undertakings of Company given in connection with the Grants; (b) the aggregate
amount of each Grant; (c) the aggregate outstanding obligations of Company under
-36-
each Grant with respect to royalties; (d) the outstanding amounts to be paid by
OCS to Company and (e) the composition of such obligations or amount by the
product or product family to which it relates. Company is in compliance, in all
material respects, with the terms and conditions of all Grants and, except as
disclosed in Section 2.23 of the Company Disclosure Schedule, has duly
fulfilled, in all material respects, all the undertakings required thereby.
Company is not aware of any event or other set of circumstances which would
reasonably be expected to lead to the revocation or material modification of any
of the Grants.
2.24 Encryption and Other Restricted Technology. Company's business as
currently conducted does not involve the use or development of, or engagement
in, encryption technology, or other technology whose development,
commercialization or export is restricted under Israeli law, and Company's
business as currently conducted does not require Company to obtain a license
from the Israeli Ministry of Defense or an authorized body thereof pursuant to
Section 2(a) of the Control of Products and Services Declaration (Engagement in
Encryption), 1974, as amended, or other legislation regulating the development,
commercialization or export of technology.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to
Company, as of the date hereof, subject to such exceptions as are specifically
disclosed in writing in the disclosure schedule supplied by Parent to Company,
dated as of the date hereof and certified by a duly authorized officer of Parent
(the "PARENT DISCLOSURE SCHEDULE"), as follows:
3.1 Organization and Qualification. Each of Parent and its
subsidiaries is a corporation duly organized, validly existing and, where
applicable, in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority to own, lease
and operate its assets and properties and to carry on its business as it is now
being conducted, except where the failure to do so would not, individually or in
the aggregate, have a Material Adverse Effect on Parent. Each of Parent and its
subsidiaries is in possession of all Approvals necessary to own, lease and
operate the properties it purports to own, operate or lease and to carry on its
business as it is now being conducted, except where the failure to have such
Approvals would not, individually or in the aggregate, have a Material Adverse
Effect on Parent. Each of Parent and its subsidiaries is duly qualified or
licensed as a foreign corporation to do business, and, where applicable, is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not, either individually
or in the aggregate, have a Material Adverse Effect on Parent. Merger Sub is a
newly incorporated Israeli corporation. Except in connection with this
Agreement, Merger Sub has not conducted any operations nor entered into any
agreements, nor will it do either prior to the Effective Time. Merger Sub has no
obligations or liabilities, either accrued, absolute, contingent or otherwise,
nor will it have any such obligations or liabilities prior to the Effective Time
or the earlier termination of this Agreement.
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3.2 Certificate of Incorporation and Bylaws; Articles of Association.
Parent has previously furnished to Company complete and correct copies of its
Certificate of Incorporation and Bylaws as amended to date (together, the
"PARENT CHARTER DOCUMENTS") and the Articles of Association of Merger Sub (the
"MERGER SUB CHARTER DOCUMENTS"). Such Parent Charter Documents and Merger Sub
Charter Documents are in full force and effect. Parent is not in violation of
any of the provisions of the Parent Charter Documents, and Merger Sub is not in
violation of any of the provisions of the Merger Sub Charter Documents.
3.3 Capitalization. As of the date of this Agreement, the authorized
capital stock of Parent consists of 2,000,000,000 shares of Parent Common Stock
and 10,000,000 shares of preferred stock, par value $.001 per share ("PARENT
PREFERRED STOCK"). As of the close of business on December 17, 2002, 411,735,484
shares of Parent Common Stock were issued and outstanding and no shares of
Parent Preferred Stock were issued and outstanding. All of the issued and
outstanding shares of Parent Common Stock are duly authorized, validly issued,
fully paid and nonassessable.
3.4 Authority Relative to this Agreement. Each of Parent and Merger
Sub has all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement by Parent and by Merger Sub and the performance by each of
Parent and Merger Sub of its obligations hereunder have been duly and validly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, and no other corporate proceedings on the part of Parent or Merger Sub and
no vote by Parent's stockholders are necessary to authorize this Agreement or
for each of Parent and Merger Sub to perform its obligations hereunder,
including the issuance of Parent Common Stock in connection with the Merger.
This Agreement has been duly and validly executed and delivered by Parent and by
Merger Sub and, assuming the due authorization, execution and delivery by
Company, constitutes a legal and binding obligation of Parent and of Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms, except
as the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting creditors' rights generally and laws relating to the availability of
specific performance, injunctive relief or other equitable remedies.
3.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent and
Merger Sub do not, and the performance of this Agreement by Parent and Merger
Sub will not: (i) conflict with or violate the Parent Charter Documents, Merger
Sub Charter Documents or equivalent organizational documents of any of Parent's
subsidiaries; (ii) subject to compliance with the requirements set forth in
Section 3.5(b) (or the Parent Disclosure Schedule) conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Parent or any of
its subsidiaries or by which it or their respective properties are bound or
affected; or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
materially impair Parent's or any of its subsidiary's rights or alter the rights
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of Parent or any of its
subsidiaries
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pursuant to, any material Contract to which Parent or any of its subsidiaries is
a party or by which Parent or any of its subsidiaries or its or any of their
respective properties are bound or affected, except to the extent such conflict,
violation, breach, default, impairment or other effect would not in the case of
clauses (ii) or (iii), individually or in the aggregate: (A) reasonably be
expected to have a Material Adverse Effect on Parent or (B) prevent or
materially delay consummation of the Merger or otherwise prevent the parties
hereto from performing their obligations under this Agreement.
(b) Other than with respect to procedures under the Israeli
Companies Law, the execution and delivery of this Agreement by Parent and Merger
Sub do not, and the performance of this Agreement by Parent and Merger Sub will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any Governmental Entity with respect to Parent and Merger
Sub except: (i) for: (A) compliance with applicable requirements of the
Securities Act, the Exchange Act and Blue Sky Laws; (B) compliance with the
pre-merger notification requirements of the HSR Act and under the comparable
competition foreign laws that the parties reasonably determine to apply; (C) the
OCS Approval; (D) approval of the Israeli Commissioner of Restrictive Trade
Practices pursuant to the RTPA; (E) obtaining the Investment Center Approval;
(F) compliance with the rules and regulations of Nasdaq; (G) obtaining the
Israeli Income Tax Ruling and the Israeli Withholding Tax Ruling (which shall
not be a condition precedent to its obligation to effect the Merger); (H)
obtaining the Israeli Securities Exemptions (which, in the case of the Israeli
Securities Election Exemption, shall not be a condition precedent to its
obligation to effect the Merger); and (i) other filings and recordation as
required by Governmental Entities other than those in the United States or
Israel; and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications: (A) would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent, or (B) would not prevent or materially delay
consummation of the Merger or otherwise prevent the parties hereto from
performing their respective obligations under this Agreement.
3.6 Financing. Parent has, or will have at the Closing, sufficient
cash or cash-equivalent funds to pay the aggregate amount of Per Share Cash
Consideration and the aggregate amount of cash included in the aggregate Per
Share Mixed Consideration payable to the holders of Company Shares hereunder.
3.7 Issuance of Parent Common Stock. When issued in accordance with
the terms of this Agreement, the shares of Parent Common Stock to be issued
pursuant to the Merger to the holders of Company Shares hereunder will be duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights.
3.8 SEC Filings; Financial Statements.
(a) Parent has made available to Company a correct and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by Parent with the SEC since December 31, 2001 (the "PARENT SEC
REPORTS") and prior to the date of this Agreement, which are all the forms,
reports and documents required to be filed by Parent with the SEC since such
time. The Parent SEC Reports: (i) were and will be prepared in accordance with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and
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regulations of the SEC promulgated thereunder; and (ii) did not and will not at
the time of filing thereof (and if any Parent SEC Report filed prior to the date
of this Agreement was amended or superseded by a filing prior to the date of
this Agreement then also on the date of filing of such amendment or superseded
filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of Parent's subsidiaries is required to file any reports or
other documents with the SEC.
(b) Each set of consolidated financial statements (including, in
each case, any related notes thereto) contained in the Parent SEC Reports: (i)
complied and will comply as to form in all material respects with the published
rules and regulations of the SEC with respect thereto in effect at the time of
such filing; (ii) was and will be prepared in accordance with United States GAAP
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited statements, may not
contain footnotes as permitted by Form 10-Q of the Exchange Act) and each fairly
presents the consolidated financial position of Parent and its consolidated
subsidiaries at the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated (subject, in the case of
unaudited statements, to normal adjustments which were not or are not expected
to be material in amount); and (iii) fairly presents in all material respects
Parent's revenue recognition policies.
(c) Parent has previously furnished to Company a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Parent with the SEC
pursuant to the Securities Act or the Exchange Act.
3.9 Registration Statement; Prospectus/Proxy Statement. None of the
information supplied or to be supplied by Parent for inclusion or incorporation
by reference in the Registration Statement will, at the time the Registration
Statement becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. None of the
information supplied or to be supplied by Parent for inclusion or incorporation
by reference in the Prospectus/Proxy Statement will, at the date or dates mailed
to the shareholders of Company and at the time of Company General Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement and the Prospectus/Proxy Statement will
comply as to form in all material respects with the provisions of the Securities
Act and the rules and regulations of the SEC thereunder. If at any time prior to
the Company General Meeting, any event relating to Parent or Merger Sub should
be discovered by Parent which should be set forth in an amendment to the
Registration Statement or a supplement to the Prospectus/Proxy Statement, Parent
shall promptly inform Company. Notwithstanding the foregoing, neither Parent nor
Merger Sub makes any representation or warranty with respect to any information
supplied by Company which is contained or incorporated by reference in the
Registration Statement or Prospectus/Proxy Statement.
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3.10 Absence of Certain Changes or Events. Since December 31, 2001 to the
date hereof, there has not been any Material Adverse Effect on Parent.
3.11 Company Share Ownership. As of the date of this Agreement, neither
Parent nor any person or entity referred to in Section 320(c) of the Israeli
Companies Law with respect to Parent owns any Company Shares.
3.12 Brokers. Parent has not incurred nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby, except for any such fees and expenses payable solely by
Parent.
3.13 Merger Sub Board Approval. The Board of Directors of Merger Sub has
unanimously: (a) determined that the Merger is fair to, and in the best
interests of, Merger Sub and its shareholders, and that, considering the
financial position of the merging companies, no reasonable concern exists that
the Surviving Corporation will be unable to fulfill the obligations of Merger
Sub to its creditors; (b) approved this Agreement, the Merger and the other
transactions contemplated by this Agreement; and (c) determined to recommend
that the shareholder of Merger Sub approve this Agreement, the Merger and the
other transactions contemplated by this Agreement.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Company. Except as required or permitted by the
terms of this Agreement, as set forth in Section 4.1 of the Company Disclosure
Schedule or approved by Parent in writing, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, each of Company and its
subsidiaries shall carry on its business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations, pay its debts and Taxes
when due (subject to good faith disputes over such debts or Taxes), pay or
perform other material obligations when due, and use its commercially reasonable
efforts consistent with past practices and policies to: (a) preserve intact its
present business organization; (b) keep available the services of its present
officers and employees; and (c) preserve its relationships with customers,
suppliers, distributors, licensors, licensees and others with which it has
significant business dealings; provided, however, that in the event Company
shall be required to take or refrain from taking any action pursuant to this
Section 4.1 that would cause any representation or warranty of Company set forth
in this Agreement to be or become inaccurate, Company shall so notify Parent in
writing, and as soon as practicable, and in no event more than three (3)
business days, after Parent's receipt of such notice Parent shall advise Company
in writing as to whether Company should (x) comply with this Section 4.1, in
which event such action or inaction shall not be deemed to constitute a breach
of, or inaccuracy in, such representations or warranties, or (y) cause such
representation or warranty to remain accurate, in which such action or inaction
shall not be deemed to constitute a breach of this Section 4.1).
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In addition, except as required or permitted by the terms of this
Agreement, as set forth in Section 4.1 of the Company Disclosure Schedule or
approved by Parent in writing, during the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement pursuant
to its terms or the Effective Time, Company shall not do any of the following
and shall not permit its subsidiaries to do any of the following (it being
understood and agreed that any action taken or omitted to be taken by Company
after the execution and delivery of this Agreement that is either permitted by
the terms of this Section 4.1 or approved by Parent in writing pursuant to this
Section 4.1 shall not be deemed to constitute a breach of, or inaccuracy in, any
of the representations or warranties of Company set forth in this Agreement):
(a) Waive any stock repurchase rights, accelerate (other than in
accordance with written agreements outstanding on the date hereof and disclosed
on Section 2.3 or 2.11(g) of the Company Disclosure Schedule), amend or change
the period of exercisability of any Company Stock Option, or reprice any Company
Stock Option or authorize cash payments in exchange for any Company Stock
Option, or allow any new enrollments in the ESPP or allow any participant in the
ESPP to increase his or her participation rate in the ESPP;
(b) Grant any severance or termination pay to any officer or
employee except pursuant to written agreements outstanding, or written policies
existing, on the date hereof and included in the Company Disclosure Schedule, or
as required by applicable law or adopt any new severance plan, or amend or
modify or alter in any manner any severance plan, agreement, custom, policy or
arrangement existing on the date hereof, or grant any equity-based compensation,
whether payable in cash or stock, except for grants of Company Stock Options to
purchase not more than 150,000 Company Shares in the aggregate under a Company
Option Plan to new hires in the ordinary course consistent with past practice,
which Company Stock Options shall not accelerate as a result of the occurrence
of any of the transactions contemplated by this Agreement (whether alone or upon
the occurrence or nonoccurrence of any additional or subsequent events);
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify any rights to Company Intellectual Property, or enter into any
agreements or make other commitments or arrangements to grant, transfer or
license to any person future patent rights, other than non-exclusive licenses
granted to end users in the ordinary course of business consistent with past
practices; provided that in no event shall Company: (i) license on an exclusive
basis or sell any Company Intellectual Property; or (ii) enter into any
agreement (A) containing pricing or discounting terms or provisions other than
in the ordinary course of business consistent with past practices, (B) granting
any site license, or (C) limiting the right of Company to engage in any line of
business or to compete with any person;
(d) Enter into, renew or modify any Contracts relating to the
distribution, sale, license or marketing by third parties of Company Products;
(e) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
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(f) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of Company or its subsidiaries or any options,
warrants, calls or rights to acquire any such shares, or permit the transfer of
any Company Shares by Precise Software Solutions, Inc. to any other subsidiary
of the Company, except repurchases of unvested shares at cost in connection with
the termination of the employment relationship with any Employee pursuant to
stock option or purchase agreements in effect on the date hereof (or any such
agreements entered into in the ordinary course consistent with past practice
with Employees hired after the date hereof);
(g) Issue, deliver, sell, authorize, pledge or otherwise encumber
(or propose any of the foregoing with respect to) any shares of capital stock or
any securities convertible into or exercisable or exchangeable for shares of
capital stock, or subscriptions, rights, warrants or options to acquire any
shares of such capital stock or any securities convertible into shares of such
capital stock, or enter into other Contracts of any character obligating it to
issue any such shares or convertible securities, other than the issuance,
delivery and sale of: (i) Company Shares pursuant to the exercise of stock
options, warrants and other agreements set forth in Section 2.3 of the Company
Disclosure Schedule, in each case outstanding as of the date of this Agreement;
(ii) Company Shares issuable to participants in the ESPP consistent with the
terms thereof; and (iii) grants of Company Stock Options to purchase not more
than 150,000 Company Shares in the aggregate under a Company Option Plan to new
hires in the ordinary course consistent with past practice, which Company Stock
Options shall not accelerate as a result of the occurrence of any of the
transactions contemplated by this Agreement (whether alone or upon the
occurrence or nonoccurrence of any additional or subsequent events);
(h) Cause, permit or propose any amendments to Company Charter
Documents (or similar governing instruments of any of its subsidiaries);
(i) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any person or division thereof, or otherwise
acquire or agree to acquire all or substantially all of the assets of any of the
foregoing, enter into any joint ventures, strategic partnerships or alliances or
form or agree to form any subsidiaries;
(j) Sell, lease, license, encumber, convey, assign, sublicense or
otherwise dispose of or transfer any properties or assets or any interest
therein other than: (i) sales and licenses in the ordinary course of business
consistent with past practice; and (ii) the sale, lease or disposition (other
than through licensing permitted by clause (c)) of property or assets which are
not material, individually or in the aggregate, to the business of Company and
its subsidiaries taken as a whole in the ordinary course of business consistent
with past practice; or grant or otherwise create or consent to the creation of
any Lien affecting any owned or leased real property or any part thereof;
(k) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of Company, enter
into any "keep well" or other agreement to maintain any financial statement
condition or enter into any arrangement having the economic effect of any of
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the foregoing other than in connection with the financing of ordinary course
trade payables consistent with past practice;
(l) Adopt or amend any Employment Agreement or Company Employee
Plan, except as may be required by law or this Agreement; or enter into any
employment Contract or collective bargaining agreement (other than offer letters
and letter agreements entered into in the ordinary course of business consistent
with past practice with employees who are terminable "at will," except as may be
required by Legal Requirements, and who are not officers of Company); agree to
pay or pay any special bonus or special remuneration to any director or
employee; or increase the salaries or wage rates or benefits (including rights
to severance or indemnification) of its directors, officers, employees or
consultants except, in each case, as may be required by law or by any existing
employee benefit plan, policy, arrangement, program or Contract disclosed on
Section 2.11 of the Company Disclosure Schedule, or break with past customs or
unwritten policies of Company with respect to benefits not required by law with
respect to its employees, including by way of example only and without
limitation, payment of severance pay in Israel under circumstances in which it
is not legally required;
(m) (i) Pay, discharge, or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise) or settle any litigation (whether or not commenced prior to the date
of this Agreement), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms in existence as of the date hereof, or (ii)
waive the benefits of, agree to modify in any manner, terminate, release any
person from or knowingly fail to enforce any confidentiality or similar Contract
to which Company or any of its subsidiaries is a party or of which Company or
any of its subsidiaries is a beneficiary;
(n) Modify, amend or terminate any Contract set forth or required to
be set forth in Section 2.17 or 2.18 of the Company Disclosure Schedule or
waive, delay the exercise of, release or assign any material rights or claims
thereunder;
(o) Except as required by GAAP, revalue any of its assets
(including, without limitation, writing down the value of capitalized inventory
or writing off notes or accounts receivable) or make any change in accounting
methods, principles or practices;
(p) Hire any employee with an annual compensation level in excess of
$150,000;
(q) Other than (i) fees and expenses payable to Xxxxxxx Xxxxx
pursuant to the engagement letter referred to in Section 2.16 and (ii) fees and
expenses payable to legal, accounting and other professional service advisors as
disclosed in Section 4.1(q) of the Company Disclosure Schedule, make any
individual or series of related payments outside of the ordinary course of
business (including payments to legal, accounting or other professional service
advisors) in excess of $1,500,000 in the aggregate;
(r) Enter into any Contract or series of related Contracts requiring
Company or any of its subsidiaries to pay in excess of $500,000 over the term of
such Contract or series of Contracts;
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(s) Make any Tax election inconsistent with past practice, agree to
pay, settle or compromise any material Tax liability or consent to any extension
or waiver of any limitation period with respect to Taxes, or request, negotiate
or agree to any Tax rulings; or
(t) Agree in writing or otherwise to take any of the actions
described in Section 4.1(a) through (s) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Prospectus/Proxy Statement; Registration Statement.
(a) As promptly as practicable after the execution and delivery of
this Agreement, Company and Parent shall prepare and file with the SEC the
Prospectus/Proxy Statement, and Parent shall prepare and file with the SEC the
Registration Statement, in which the Prospectus/Proxy Statement will be included
as a prospectus. Each of Company and Parent shall promptly provide to the other
all such information as reasonably may be required or appropriate for inclusion
in the Registration Statement and/or the Prospectus/Proxy Statement, or in any
amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other party's counsel and auditors in the preparation of the
Registration Statement and the Prospectus/Proxy Statement. Each of Company and
Parent shall respond to any comments of the SEC and shall use its respective
commercially reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filing,
and Company shall cause the Prospectus/Proxy Statement to be mailed to Company's
shareholders at the earliest practicable time after the Registration Statement
is declared effective by the SEC. As promptly as practicable after the date of
this Agreement, each of Company and Parent shall prepare and file any other
filings required to be filed by it under the Exchange Act or any other Federal,
foreign or related laws relating to the Merger and the transactions contemplated
by this Agreement (the "OTHER FILINGS"). Each of Company and Parent shall notify
the other promptly upon the receipt of any comments or other communication from
the SEC or its staff or any other government officials and of any request by the
SEC or its staff or any other government officials for amendments or supplements
to the Registration Statement, the Prospectus/Proxy Statement, or any Other
Filing, or for additional information and shall supply the other with copies of
all correspondence between such party or any of its representatives, on the one
hand, and the SEC or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Prospectus/Proxy
Statement, the Merger or any Other Filing. Company may include in the
Prospectus/Proxy Statement separate proposals submitting to its shareholders for
approval: (i) the Articles Amendment (as defined in Section 5.14), and (ii) the
modification of the terms of all outstanding Company Stock Options held by
Company directors to provide (A) that such Company Stock Options shall become
fully vested and exercisable upon a change of control of Company, including
consummation of the Merger, and (B) that each such Company Stock Option shall
remain exercisable following the Effective Time for the balance of its ten year
term irrespective of the director's termination of service with Company (the
"OPTION PROPOSAL"); provided that obtaining such approval of the Articles
Amendment and the Option Proposal shall not be a condition precedent to the
obligation of the Parties to effect the
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Merger. All filings by Company with the SEC in connection with the transactions
contemplated hereby, including the Prospectus/Proxy Statement and any amendment
or supplement thereto, and all Other Filings, shall be subject to the prior
review of Parent. Each of Company and Parent shall cause all documents that it
is responsible for filing with the SEC or other regulatory authorities under
this Section 5.1(a) to comply as to form and substance in all material respects
with the applicable requirements of law and the rules and regulations
promulgated thereunder, including (i) the Exchange Act, (ii) the Securities Act,
(iii) the rules and regulations of Nasdaq and (iv) the requirements of the
Israeli Companies Law and the Israeli Securities Law, 1968, and regulations
thereunder. Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Registration Statement, the Prospectus/Proxy
Statement or any Other Filing, Company or Parent, as the case may be, shall
promptly inform the other of such occurrence and cooperate in filing with the
SEC or its staff or any other government officials, and/or mailing to the
shareholders of Company, such amendment or supplement.
(b) The Prospectus/Proxy Statement shall include, inter alia: (i)
the recommendation of the Board of Directors of Company to Company's
shareholders that they vote in favor of approval of this Agreement, the Merger
and the other transactions contemplated by this Agreement, subject to the right
of the Board of Directors of Company to withhold, withdraw, amend, modify or
change its recommendation in favor of this Agreement and the Merger in
compliance with Section 5.7; and (ii) the opinion of Xxxxxxx Sachs referred to
in Section 2.19. Company shall deliver to Parent a copy of the written opinion
of Xxxxxxx Xxxxx referred to in Section 2.19 promptly following Company's
receipt thereof.
5.2 Merger Proposal. As promptly as practicable after the execution and
delivery of this Agreement: (a) Company and Merger Sub shall cause a merger
proposal (in the Hebrew language) in the form of Exhibit E (the "MERGER
PROPOSAL") to be executed in accordance with Section 316 of the Israeli
Companies Law; (b) Company and Merger Sub shall call Company General Meeting and
a general meeting of Merger Sub's shareholders, respectively, and (c) each of
Company and Merger Sub shall deliver the Merger Proposal to the Companies
Registrar within three (3) days from the calling of such shareholders meetings.
Company and Merger Sub shall cause a copy of the Merger Proposal to be delivered
to each of their respective secured creditors, if any, no later than three (3)
days after the date on which the Merger Proposal is delivered to the Companies
Registrar and shall promptly inform their respective non-secured creditors of
the Merger Proposal and its contents in accordance with Section 318 of the
Israeli Companies Law and the regulations promulgated thereunder. Promptly after
Company and Merger Sub shall have complied with the preceding sentence and with
subsections (i) and (ii) below, but in any event no more than three (3) business
days following the date on which such notice was sent to the creditors, Company
and Merger Sub shall inform the Companies Registrar, in accordance with Section
317(b) of the Companies Law, that notice was given to their respective creditors
under Section 318 of the Israeli Companies Law and the regulations promulgated
thereunder. In addition to the above, each of Company and, if applicable, Merger
Sub, shall:
(i) Publish a notice to its creditors, stating that a Merger
Proposal was submitted to the Companies Registrar and that the creditors may
review the Merger Proposal at the
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office of the Companies Registrar, Company's registered offices or Merger Sub's
registered offices, as applicable, and at such other locations as Company or
Merger Sub, as applicable, may determine, in (A) two (2) daily Hebrew
newspapers, on the day that the Merger Proposal is submitted to the Companies
Registrar, (B) a popular newspaper in the United States, no later than three (3)
business days following the day on which the Merger Proposal was submitted to
the Companies Registrar, and (C) if required, in such other manner as may be
required by applicable law and regulations;
(ii) Within four (4) business days from the date of submitting
the Merger Proposal to the Companies Registrar, send a notice by registered mail
to all of the "Substantial Creditors" (as such term is defined in the
regulations promulgated under the Israeli Companies Law) that Company or Merger
Sub, as applicable, is aware of, in which it shall state that a Merger Proposal
was submitted to the Companies Registrar and that the creditors may review the
Merger Proposal at such additional locations, if such locations were determined
in the notice referred to in subsection (i) above; and
(iii) If it employs 50 or more persons, send to the "workers
committee" or display in a prominent place at Company's premises, a copy of the
notice published in a daily Hebrew newspaper (as referred to in subsection
(i)(A) above), no later than three business days following the day on which the
Merger Proposal was submitted to the Companies Registrar.
5.3 Company General Meeting.
(a) Company shall take all action necessary under all applicable
Legal Requirements (promptly after the Registration Statement is declared
effective by the SEC) to send the Prospectus/Proxy Statement and hold a
shareholders' meeting to vote on the proposal to approve this Agreement, the
Merger and the other transactions contemplated by this Agreement (the "COMPANY
GENERAL MEETING"), the Articles Amendment and the Option Proposal whether or not
at any time subsequent to the date hereof the Board of Directors of the Company
determines in compliance with Section 5.7 that it can no longer recommend to
Company's shareholders that they vote in favor of approval of this Agreement and
the Merger, unless Company shall have terminated this Agreement pursuant to and
in accordance with Section 7.1(j) hereof and entered into an Alternative
Agreement (as defined in Section 7.1(j)). Subject to the notice requirements of
the Israeli Companies Law and the rules and regulations promulgated thereunder
and the Articles of Association of Company, Company General Meeting shall be
held (on a date selected by Company and consented to by Parent, which consent
shall not be unreasonably withheld) as promptly as practicable after the date
hereof but no earlier than 68 days from the filing of the Merger Proposal.
Subject to the terms of Section 5.3(c) hereof, Company shall use commercially
reasonable efforts to solicit from its shareholders proxies in favor of the
approval of this Agreement, the Merger and the other transactions contemplated
by this Agreement. Company shall call, notice, convene, hold, conduct and
solicit all proxies in connection with, Company General Meeting in compliance
with all applicable Legal Requirements, including the Israeli Companies Law, the
Articles of Association of Company, and the rules of Nasdaq. In the event that
Parent, or any person or entity referred to in Section 320(c) of the Israeli
Companies Law in connection with Parent, shall cast any votes in respect of this
Agreement, the Merger or the other transactions contemplated by this Agreement,
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Parent shall, prior to such vote, disclose to Company the respective interests
of Parent or such person or entity in such shares so voted. At the Company
General Meeting, Parent and Merger Sub shall cause any Company Shares then owned
by them and their subsidiaries to be voted in favor of the approval of this
Agreement, the Merger and the other transactions contemplated by this Agreement.
Company may adjourn or postpone Company General Meeting: (i) if and to the
extent necessary to provide any necessary supplement or amendment to the
Prospectus/Proxy Statement to Company's shareholders in advance of a vote on
this Agreement, the Merger and the other transactions contemplated by this
Agreement; or (ii) if, as of the time for which Company General Meeting is
originally scheduled (as set forth in the Prospectus/Proxy Statement), there are
insufficient Company Shares represented (either in person or by proxy) to
constitute a quorum necessary to conduct the business of Company General
Meeting. Company's obligation to call, give notice of, convene and hold Company
General Meeting in accordance with this Section 5.3(a) shall not be limited to
or otherwise affected by the commencement, disclosure, announcement or
submission to Company of any Acquisition Proposal (as defined in Section
5.7(a)).
(b) Unless the Board of Directors of Company shall have withheld,
withdrawn, amended, modified or changed its recommendation of this Agreement and
the Merger in compliance with Section 5.3(c) hereof: (i) the Board of Directors
of Company shall recommend that Company's shareholders vote in favor of and
approve this Agreement, the Merger and the other transactions contemplated by
this Agreement at Company General Meeting; (ii) the Prospectus/Proxy Statement
shall include a statement to the effect that the Board of Directors of Company
has recommended that Company's shareholders vote in favor of and approve this
Agreement, the Merger and the other transactions contemplated by this Agreement
at the Company General Meeting; and (iii) neither the Board of Directors of
Company nor any committee thereof shall withhold, withdraw, amend, modify,
change or propose or resolve to withhold, withdraw, amend, modify or change, in
each case in a manner adverse to Parent, the recommendation of the Board of
Directors of Company that Company's shareholders vote in favor of and approve
this Agreement, the Merger and the other transactions contemplated by this
Agreement.
(c) Nothing in this Agreement shall prevent the Board of Directors
of Company from withholding, withdrawing, amending, modifying or changing its
recommendation in favor of the approval of this Agreement and the Merger if: (i)
a Superior Proposal (as defined below) is made to Company and is not withdrawn;
(ii) neither Company nor any of its representatives shall have violated the
terms of Section 5.7 hereof; (iii) the Board of Directors of Company concludes
in good faith, after consultation with its outside counsel, that, in light of
such Superior Proposal, the withholding, withdrawal, amendment, modification or
changing of such recommendation is required in order for the Board of Directors
of Company to comply with its fiduciary obligations to Company's shareholders
with respect to such Superior Proposal; (iv) this Agreement and the Merger have
not yet been approved by Company's shareholders at Company General Meeting; and
(v) concurrently with any such withholding, withdrawal, amendment, modification
or changing of such recommendation, Company shall have terminated this Agreement
pursuant to and in accordance with Section 7.1(j) hereof and entered into an
Alternative Agreement. For the purposes of making the conclusion required by
clause (iii) of this paragraph, the parties agree that the Board
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of Directors and its outside counsel shall determine such fiduciary obligations
in accordance with Delaware law as if Company were a Delaware corporation.
(d) No later than three days after the approval of the Merger by
Company's shareholders at Company General Meeting, Company shall (in accordance
with Section 317(b) of the Companies Law) inform the Companies Registrar of the
decision of Company General Meeting with respect to the Merger.
5.4 Merger Sub General Meeting. Promptly after the occurrence or waiver of
all other conditions for Closing but no earlier than the 68th day after delivery
of the Merger Proposal to the Companies Registrar and no later than the Closing
Date, Merger Sub shall hold its general meeting, and Parent (as the sole
stockholder of Merger Sub) shall approve this Agreement, the Merger and the
other transactions contemplated by this Agreement at such general meeting. No
later than three days after the approval of this Agreement, the Merger and the
other transactions contemplated by this Agreement by Parent, as the sole
shareholder of Merger Sub at the Merger Sub general meeting, Merger Sub shall
(in accordance with Section 317(b) of the Companies Law and the regulations
thereunder) inform the Companies Registrar of the decision of Merger Sub's
general meeting with respect to the Merger.
5.5 Israeli Approvals.
(a) Government Filings. Each party to this Agreement shall use all
reasonable efforts to deliver and file, as promptly as practicable after the
date of this Agreement, each notice, report or other document required to be
delivered by such party to, or filed by such party with, any Israeli
Governmental Entity with respect to the Merger. Without limiting the generality
of the foregoing:
(i) as promptly as practicable after the date of this
Agreement, Company and Parent shall prepare and file any notifications required
under the Israeli Restrictive Trade Practices Law in connection with the Merger;
(ii) Company and Parent shall respond as promptly as
practicable to any inquiries or requests received from the Commissioner of
Israeli Restrictive Trade Practices for additional information or documentation;
and
(iii) Company and Parent shall use all reasonable efforts to
obtain, as promptly as practicable after the date of this Agreement, the
following consents and Approvals, and any other consents and Approvals that may
be required pursuant to Israeli Legal Requirements in connection with the
Merger: (i) the OCS Approval; and (ii) the Investment Center Approval. In this
connection Parent shall provide to the OCS and the Investment Center any
information, and shall execute any undertakings, customarily requested by such
authorities as a condition to the OCS Approval or Investment Center Approval
(including, without limitation, if requested, the standard undertaking with
respect to the observance by Parent, as shareholder of Company or the Surviving
Corporation, of the requirements of The Encouragement of Research and
Development in Industry Law, 5744 1984 of the State of Israel, as amended from
time to time (the "R&D LAW") as well as the regulations issued pursuant to the
R&D Law, including in respect of the transfer outside Israel of
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know how or production rights developed with financing from the OCS, or any
other standard undertaking that may be required pursuant to any amendment of the
R&D Law).
(b) Legal Proceedings. Each party to this Agreement shall: (i) give
the other parties prompt notice of the commencement of any legal proceeding by
or before any Israeli Governmental Entity with respect to the Merger; (ii) keep
the other parties informed as to the status of any such legal proceeding; and
(iii) promptly inform the other parties of any communication to the Commissioner
of Israeli Restrictive Trade Practices, the OCS, the Investment Center, the
Israeli Securities Authority, the Israeli Income Tax Commission, the Companies
Registrar or any other Israeli Governmental Entity regarding the Merger. The
parties to this Agreement will consult and cooperate with one another, and will
consider in good faith the views of one another, in connection with any
analysis, appearance, presentation, memorandum, brief, argument, opinion or
proposal made or submitted in connection with any Israeli legal proceeding
relating to the Merger pursuant to a joint defense agreement separately agreed
to. In addition, except as may be prohibited by any Israeli Governmental Entity
or by any Israeli Legal Requirement, in connection with any such legal
proceeding under or relating to the Israeli Restrictive Trade Practices Law or
any other Israeli antitrust or fair trade law, each party hereto will permit
authorized representatives of the other party to be present at each meeting or
conference relating to any such legal proceeding and to have access to and be
consulted in connection with any document, opinion or proposal made or submitted
to any Israeli Governmental Entity in connection with any such legal proceeding.
(c) Israeli Tax Rulings.
(i) As soon as reasonably practicable after the execution of
this Agreement, Company shall instruct its Israeli counsel, advisors and
accountants to prepare and file with the Israeli Income Tax Commissioner an
application for a ruling confirming that the conversion or assumption by Parent
of Company Stock Options into options (the "ASSUMED OPTIONS") to purchase shares
of Parent Common Stock will not result in a taxable event with respect to such
Company Stock Options pursuant to Section 3(i) or Section 102 of the Ordinance,
and with respect to such Company Stock Options subject to Section 102, that the
requisite holding period will be deemed to have begun at the time of the
issuance of the Company Stock Options (which ruling may be subject to customary
conditions regularly associated with such a ruling) (the "ISRAELI INCOME TAX
RULING"). Each of Company and Parent shall cause their respective Israeli
counsel, advisors and accountants to coordinate all activities, and to cooperate
with each other, with respect to the preparation and filing of such application
and in the preparation of any written or oral submissions that may be necessary,
proper or advisable to obtain the Israeli Income Tax Ruling. Subject to the
terms and conditions hereof, Company shall use reasonable best efforts to
promptly take, or cause to be taken, all action and to do, or cause to be done,
all things necessary, proper or advisable under applicable Law to obtain the
Israeli Income Tax Ruling, as promptly as practicable. The Israeli Income Tax
Ruling shall not be a condition precedent to the obligation of the parties to
effect the Merger.
(ii) As soon as reasonably practicable after the execution of
this Agreement, Company shall instruct its Israeli counsel, advisors and
accountants to prepare and file
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with the Israeli Income Tax Commissioner an application for a ruling either (x)
exempting Parent, Paying Agent and Surviving Corporation from any obligation to
withhold Israeli tax at source from any consideration payable or otherwise
deliverable pursuant to this Agreement including, without limitation, the Per
Share Merger Consideration, or clarifying that no such obligation exists; or (y)
clearly instructing Parent, Paying Agent or Surviving Corporation how such
withholding at source is to be executed, and in particular, with respect to the
classes or categories of holders or former holders of Company Shares or Company
Options from which tax is to be withheld (if any), the rate or rates of
withholding to be applied (the "ISRAELI WITHHOLDING TAX RULING"). Each of
Company and Parent shall cause their respective Israeli counsel, advisors and
accountants to coordinate all activities, and to cooperate with each other, with
respect to the preparation and filing of such application and in the preparation
of any written or oral submissions that may be necessary, proper or advisable to
obtain the Israeli Withholding Tax Ruling. Subject to the terms and conditions
hereof, Company shall use reasonable best efforts to promptly take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable Law to obtain the Israeli Withholding Tax
Ruling, as promptly as practicable. In the event that the Israeli Withholding
Tax Ruling is not obtained until the Closing Date, Company shall instruct its
Israeli counsel, advisors and accountants to promptly apply to the relevant tax
authorities for an extension of time with respect to the obligation to deduct or
withhold Israeli tax at source from any consideration payable or otherwise
deliverable pursuant to this Agreement (such extension, if granted by the
Israeli tax authorities, will be defined in this Agreement as a "WITHHOLDING TAX
EXTENSION"). The Israeli Withholding Tax Ruling shall not be a condition
precedent to the obligation of the parties to effect the Merger.
(d) Israeli Securities Law Exemptions. As soon as reasonably
practicable after the execution of this Agreement, Parent shall (i) prepare and
file with the Israeli Securities Authority an application for an exemption from
the requirements of the Israeli Securities Law, 1968 concerning the publication
of a prospectus in respect of the conversion or assumption by Parent of Company
Stock Options as provided in Section 5.11, pursuant to Section 15D of the
Israeli Securities Law, 1968 (the "ISRAELI SECURITIES OPTIONS EXEMPTION") and
(ii) in the event that Parent and Company mutually agree to do so, prepare and
file with the Israeli Securities Authority an application seeking confirmation
that the exchange of Company Shares for Parent Common Stock included in the Per
Share Mixed Consideration does not necessitate the publication of a prospectus
under the Israeli Securities Law, 1968 (the "ISRAELI SECURITIES ELECTION
EXEMPTION" and, together with the Israeli Securities Options Exemption, the
"ISRAELI SECURITIES EXEMPTIONS"). Each of Parent and Company shall reasonably
cooperate with each other, with respect to the preparation and filing of such
application and in the preparation of any written or oral submission that may be
necessary, proper or advisable to obtain the Israeli Securities Exemptions.
Subject to the terms and conditions hereof, Parent shall use its reasonable best
efforts to promptly take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable law to
obtain the Israeli Securities Exemptions as promptly as practicable, and in the
case of the Israeli Securities Election Exemption, no later than two (2) days
prior to the date that the Prospectus/Proxy Statement is mailed to the holders
of Company Shares. The Israeli Securities Election Exemption shall not be a
condition precedent to the obligation of the parties to effect the Merger.
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(e) Regulatory Filings. Each of Company and Parent shall cause all
documents that it is responsible for filing with any Governmental Entity under
this Section 5.5 to comply as to form and substance in all material respects
with the applicable Legal Requirements. Whenever any event occurs which is
required to be set forth in an amendment or supplement to any such document or
filing, Company or Parent, as the case may be, shall promptly inform the other
of such occurrence and cooperate in filing with the applicable Government
Entity, such amendment or supplement.
5.6 Confidentiality; Access to Information. The parties acknowledge that
Company and Parent have previously executed a Confidentiality Agreement, dated
as of June 13, 2002 (the "CONFIDENTIALITY AGREEMENT"), which Confidentiality
Agreement will continue in full force and effect in accordance with its terms.
Company will afford Parent and its accountants, counsel and other
representatives reasonable access during normal business hours, upon reasonable
notice, to the properties, books, records and personnel of Company during the
period prior to the Effective Time to obtain all information concerning the
business, including, without limitation, the status of product development
efforts, properties, results of operations and personnel of Company, as Parent
may reasonably request. No information or knowledge obtained by Parent in any
investigation pursuant to this Section 5.6 will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.7 No Solicitation.
(a) From and after the date of this Agreement until the earlier to
occur of the Effective Time or termination of this Agreement pursuant to Article
VII, Company and its subsidiaries will not, nor will they authorize or permit
any of their respective officers, directors, controlled affiliates or employees
or any of their respective investment bankers, attorneys or other advisors or
representatives to, directly or indirectly: (i) solicit, initiate, or take an
action intended to encourage or induce the making, submission or announcement of
any Acquisition Proposal (as defined below); (ii) engage or participate in any
discussions or negotiations with any person (other than any officer, director,
controlled affiliate or employee of Company or any of its subsidiaries or any
investment banker, attorney or other advisor or representative of Company or any
of its subsidiaries) regarding, or furnish to any person any information with
respect to, or take any other action intended to facilitate any inquiries or the
making of any proposal that constitutes or may reasonably be expected to lead
to, any Acquisition Proposal; (iii) approve, endorse or recommend any
Acquisition Proposal; or (iv) enter into any letter of intent or similar
document or any contract, agreement or commitment contemplating or otherwise
relating to any Acquisition Transaction (as defined below); provided, however,
that prior to the approval of this Agreement and the Merger by the Required
Company Shareholder Vote, nothing contained in this Agreement (including,
without limitation, this Section 5.7) shall prohibit the Board of Directors of
Company from: (i) complying with Rule 14d-9 or 14e-2(a) promulgated under the
Exchange Act or Section 329 or any other applicable section of the Israeli
Companies Law with regard to a tender or exchange offer (unless such tender or
exchange offer was made in violation of this Section 5.7); or (ii) in response
to an unsolicited Acquisition Proposal that is not withdrawn and that Company's
Board of Directors reasonably concludes constitutes a Superior Proposal (as
defined below) (or that is reasonably likely to constitute, taking into account
all of the relevant facts and circumstances, a Superior Proposal),
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engaging or participating in discussions or negotiations with and furnishing
information to the party making such Acquisition Proposal if: (A) the Board of
Directors of Company determines in good faith after consultation with its
outside legal counsel that such action is required in order for the Board of
Directors of Company to comply with its fiduciary obligations to Company's
shareholders; (B) (x) concurrently with furnishing any such information to, or
entering into discussions or negotiations with, such party, Company gives Parent
written notice of the identity of such person or group and of Company's
intention to furnish information to, or enter into discussions or negotiations
with, such party and (y) Company receives from such party an executed
confidentiality agreement at least as restrictive as the Confidentiality
Agreement; and (C) contemporaneously with furnishing any such information to
such party, Company furnishes such information to Parent (to the extent such
information has not been previously furnished by Company to Parent). For the
purposes of making the determination required by clause (A) of this paragraph,
the parties agree that the Board of Directors and its outside counsel shall
determine such fiduciary obligations in accordance with Delaware law as if
Company were a Delaware corporation. Company and its subsidiaries will
immediately cease any and all existing discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. Without
limiting the foregoing, it is understood that any violation of the restrictions
set forth in this Section 5.7 by any officer, director, controlled affiliate or
employee of Company or any of its subsidiaries or any investment banker,
attorney or other advisor or representative of Company or any of its
subsidiaries or any other person who shall have entered into a Voting
Undertaking shall be deemed to be a breach of this Section 5.7 by Company.
For purposes of this Agreement: (i) "ACQUISITION PROPOSAL" shall mean any
offer or proposal (other than an offer or proposal by Parent or Merger Sub)
relating to any Acquisition Transaction. For the purposes of this Agreement;
(ii) "ACQUISITION TRANSACTION" shall mean any transaction or series of related
transactions other than the transactions contemplated by this Agreement
involving: (A) any acquisition or purchase from Company by any person or "group"
(as defined in Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a 15% interest in the total outstanding voting
securities of Company or any of its subsidiaries or any tender offer or exchange
offer that if consummated would result in any person or "group" (as defined in
Section 13(d) of the Exchange Act and the rules and regulations thereunder)
beneficially owning 15% or more of the total outstanding voting securities of
Company or any of its subsidiaries or any merger, consolidation, business
combination or similar transaction involving Company pursuant to which the
shareholders of Company immediately preceding such transaction hold less than
85% of the equity interests in the surviving or resulting entity of such
transaction; (B) any sale, lease (other than in the ordinary course of
business), exchange, transfer, license (other than in the ordinary course of
business), acquisition or disposition of more than 15% of the assets of Company;
or (C) any liquidation, dissolution, recapitalization or other significant
corporate reorganization of Company; and (iii) "SUPERIOR PROPOSAL" shall mean
any bona fide, unsolicited written Acquisition Proposal received or made in
compliance with Section 5.7(a) which: (A) if any cash consideration is involved,
is not subject to any financing contingency, and with respect to which Company's
Board of Directors shall have determined (taking into account the advice of
Company's financial advisors) that the acquiring party is capable of
consummating the proposed Acquisition Transaction on the terms proposed and that
receipt of all governmental and regulatory approvals required to
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consummate the proposed Acquisition Transaction is likely in a reasonable time
period; and (B) Company's Board of Directors shall have reasonably and in good
faith determined that the proposed Acquisition Transaction is more favorable to
the shareholders of Company, from a financial point of view, than the Merger
(taking into account the advice of Company's financial advisors).
(b) In addition to the obligations of Company set forth in Section
5.7(a), Company as promptly as practicable, and in any event within 24 hours,
shall advise Parent orally and in writing of: (i) any request for information in
connection with, or which Company reasonably concludes would lead to, any
Acquisition Proposal; (ii) the receipt of any Acquisition Proposal, or any
inquiry with respect to or which Company reasonably concludes would lead to any
Acquisition Proposal; (iii) the material terms and conditions of such request,
Acquisition Proposal or inquiry; and (iv) the identity of the person or group
making any such request, Acquisition Proposal or inquiry. Company shall keep
Parent informed in all material respects of the status and details (including
material amendments or proposed amendments) of any such request, Acquisition
Proposal or inquiry. In addition to the foregoing, Company shall: (i) provide
Parent with at least 48 hours prior written notice (or such lesser prior notice
as provided to the members of Company's Board of Directors) of any meeting of
Company's Board of Directors at which Company's Board of Directors expects to
consider an Acquisition Proposal; and (ii) provide Parent with at least three
(3) business days prior written notice (or such lesser prior notice as provided
to the members of Company's Board of Directors) of any meeting of Company's
Board of Directors at which Company's Board of Directors expects to recommend a
Superior Proposal to its shareholders and together with such notice a copy of
the definitive documentation relating to such Superior Proposal.
5.8 Public Disclosure. Parent and Company will consult with each other,
and to the extent practicable, agree, before issuing any press release or
otherwise making any public statement with respect to the Merger or this
Agreement and will not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or any
listing agreement with a national securities exchange or Nasdaq, in which case
reasonable efforts to consult with the other party will be made prior to any
such release or public statement. The parties have agreed to the text of the
joint press release announcing the signing of this Agreement.
5.9 Commercially Reasonable Efforts; Regulatory Filings.
(a) Subject to the terms and conditions set forth in this Agreement,
each of the parties shall use all commercially reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including using commercially reasonable efforts to accomplish the
following: (i) causing the conditions precedent set forth in Article VI to be
satisfied; (ii) the obtaining of all necessary actions or nonactions, waivers,
consents, approvals, rulings, exemptions, orders and authorizations from
Governmental Entities and the making of all necessary registrations,
declarations and filings (including registrations, declarations and filings with
Governmental Entities, if any) and the taking of all commercially
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reasonable steps as may be necessary to avoid any suit, claim, action,
investigation or proceeding by any Governmental Entity; and (iii) the execution
or delivery of any additional instruments reasonably necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement. In connection with and without limiting the foregoing, Company,
Parent and their respective Boards of Directors shall, subject to the provisions
of Section 329 of the Israeli Companies Law, if any state takeover statute or
similar statute or regulation is or becomes applicable to the Merger, this
Agreement or any of the transactions contemplated by this Agreement, use all
commercially reasonable efforts to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger, this Agreement
and the transactions contemplated hereby. Notwithstanding anything to the
contrary contained in this Agreement (except as otherwise set forth in this
sentence), neither Parent nor Company shall have any obligation under this
Agreement: (i) to dispose or transfer or cause any of its subsidiaries to
dispose of or transfer any assets, or to commit to cause Company to dispose of
any assets; (ii) to discontinue or cause any of its subsidiaries to discontinue
offering any product or service, or to commit to cause Company to discontinue
offering any product or service; (iii) to license or otherwise make available,
or cause any of its subsidiaries to license or otherwise make available, to any
person, any technology, software or other proprietary asset, or to commit to
cause Company to license or otherwise make available to any Person any
technology, software or other proprietary asset; (iv) to hold separate or cause
any of its subsidiaries to hold separate any assets or operations (either before
or after the Closing Date), or to commit to cause Company to hold separate any
assets or operations; (v) subject to the undertakings required by Section
5.5(a)(iii) hereof, to make or cause any of its subsidiaries to make any
commitment (to any Governmental Entity or otherwise) regarding its future
operations or the future operations of Company or that would affect its
discretion in determining the terms of any Contract or relationship with any
person or entity; or (vi) to contest or defend against any suits, claims,
actions, investigations or proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby except, in the case of any action described in clauses (i) through (vi)
of this sentence, where such action would not, in Parent's sole good faith
judgment, be reasonably expected to be materially burdensome to Parent, Company
and their subsidiaries taken as a whole, or, in the case of any action described
in clause (vi) of this sentence, if Company determines in good faith that
contesting such legal proceeding might not be advisable.
(b) As soon as may be reasonably practicable, Company and Parent
each shall file with the United States Federal Trade Commission (the "FTC") and
the Antitrust Division of the United States Department of Justice ("DOJ")
Notification and Report Forms relating to the transactions contemplated herein
as required by the HSR Act, as well as comparable pre-merger notification forms
required by the merger notification or control laws and regulations of any
applicable jurisdiction, as reasonably agreed by the parties to be required.
Company and Parent each shall promptly: (i) supply the other with any
information which may be required in order to effectuate such filings; and (ii)
supply any additional information which reasonably may be required by the FTC,
the DOJ or the competition or merger control authorities of any other
jurisdiction and which the parties may reasonably deem appropriate; provided,
however, that neither Parent nor Company shall be required to agree to any
divestiture by itself or any of its subsidiaries or affiliates of shares of
capital stock or
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of any business, assets or property, or the imposition of any limitation on the
ability of any of them to conduct their businesses or to own or exercise control
of such assets, properties and stock.
5.10 Third Party Consents. As soon as practicable following the date
hereof and subject to Section 5.10 of the Company Disclosure Schedule, Parent
and Company will jointly use their commercially reasonable efforts to obtain any
consents, waivers and approvals under any of its or its subsidiaries' respective
Contracts required to be obtained in connection with the consummation of the
transactions contemplated hereby, including those Contracts set forth or
required to be set forth on Section 2.5(a) of the Company Disclosure Schedule.
5.11 Stock Options and Employee Benefits.
(a) Stock Options. At the Effective Time, each outstanding option to
purchase Company Shares (each, a "COMPANY STOCK OPTION") under Company Option
Plans or under any agreement which Company disclosed in Section 2.3 of the
Company Disclosure Schedule, whether or not vested, shall by virtue of the
Merger be assumed by Parent. Each Company Stock Option so assumed by Parent
under this Agreement will continue to have, and be subject to, the same terms
and conditions of such options immediately prior to the Effective Time
(including, without limitation, any repurchase rights or vesting provisions and
provisions regarding the acceleration of vesting on certain transactions),
except that: (i) each Company Stock Option will be solely exercisable (or will
become exercisable in accordance with its terms) for that number of whole shares
of Parent Common Stock equal to the product of the number of Company Shares that
were issuable upon exercise of such Company Stock Option immediately prior to
the Effective Time multiplied by the Option Exchange Ratio (as defined below),
rounded down to the nearest whole number of shares of Parent Common Stock and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed Company Stock Option will be equal to the quotient
determined by dividing the exercise price per Company Share at which such
Company Stock Option was exercisable immediately prior to the Effective Time by
the Option Exchange Ratio, rounded up to the nearest whole cent. Parent shall
comply with the terms of all such Company Stock Options and use its best efforts
to ensure, to the extent required by, and subject to the provisions of, Company
Option Plans and permitted under the Code or other relevant laws and regulations
that any Company Stock Options that qualified for tax treatment under Section
422 of the Code prior to the Effective Time and that any Company Stock Options
that qualified for tax treatment under Section 102 of the Ordinance prior to the
Effective Time continue to so qualify, with the same rights, after the Effective
Time. Parent shall take all corporate actions necessary to reserve for issuance
a sufficient number of shares of Parent Common Stock for delivery upon exercise
of all Company Stock Options pursuant to the terms set forth in this Section
5.11(a). Prior to the Effective Time, the Company shall take all actions
necessary to effect the transactions contemplated by this Section 5.11(a);
provided, however, Company shall not be required to obtain consents from
optionees with respect to the option assumption formula set forth herein: The
"OPTION EXCHANGE RATIO" shall be equal to the greater of (i) the quotient
obtained by dividing the Per Share Cash Consideration by the average closing
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sale price of one share of Parent Common Stock as reported on Nasdaq for the
five (5) consecutive trading days ending immediately prior to the Effective Time
and (ii) the sum of (A) 0.2365, and (B) the quotient obtained by dividing
$12.375 by the average closing sale price of one share of Parent Common Stock as
reported on Nasdaq for the five (5) consecutive trading days ending immediately
prior to the Effective Time.
(b) ESPP.
(i) If the current offering period under the ESPP ends prior
to the Effective Time, Company agrees that it shall not commence a new offering
period prior to the Effective Time.
(ii) If the current offering period under the ESPP would not
otherwise end prior to the Effective Time, then, at the Effective Time,
outstanding purchase rights under the ESPP shall be, in the sole discretion of
Parent, assumed or cashed out in accordance with the terms of the ESPP as
described in Article 12 of the ESPP.
(c) 401(k) Plan. Company shall terminate, effective as of the day
immediately preceding the Effective Time, any and all Company Employee Plans
intended to include a Code Section 401(k) arrangement (the "401(k) PLANS")
unless Parent provides notice to Company that such 401(k) Plan(s) shall not be
terminated. Prior to the Closing Date, Parent shall receive from Company
evidence that the 401(k) Plans have been terminated pursuant to resolutions of
each such entity's Board of Directors (the form and substance of such
resolutions shall be subject to review and approval of Parent), effective as of
the day immediately preceding the Effective Time. Company shall amend and
restate its 401(k) Plan(s) to incorporate all applicable GUST and EGTRRA
amendments no later than December 31, 2002 or such later date as may be
permitted by applicable law, Treasury Regulations or IRS pronouncements.
(d) U.S. Employee Benefit Plan Participation. On and for one year
after the Effective Time, Parent and/or any of Parent's subsidiaries shall
arrange for each employee who resides in the United States of America and was
participating in any of the Company Employee Plans immediately before the
Effective Time, to participate in any counterpart benefit plans in the United
States of America in which employees of Parent participate (the "U.S.
COUNTERPART PLANS"), in accordance with the eligibility criteria thereof,
provided that: (i) such participants shall receive full credit for years of
service with any one or more of Company, any Company subsidiary and prior
employers to the extent such service is taken into account under such Company
Employee Plans and to the extent such service credit does not result in the
duplication of benefits and (ii) such participants shall participate in the U.S.
Counterpart Plans on terms no less favorable than those offered by the Parent to
its similarly situated employees. Provided that the Company or the applicable
employee timely provides Parent and/or its subsidiaries with the information
necessary to comply with this provision, Parent and/or its subsidiaries shall
give credit under those of its U.S. Counterpart Plans that are welfare benefit
plans for all amounts credited toward deductibles and out-of-pocket maximums,
and time accrued against applicable waiting periods, by employees (in each case
including their eligible dependents) of Company and its subsidiaries, in respect
of the applicable plan year in which the Effective Time occurs. With respect to
its medical plans, Parent and/or its subsidiaries shall waive all requirements
for evidence of insurability and pre-existing conditions otherwise applicable to
employees of Company or any of its subsidiaries under the U.S. Counterpart Plans
in which employees of Company and its subsidiaries become eligible to
participate on or following the
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Effective Time (to the extent that such conditions were covered under the
Company Employee Plans immediately prior to the Effective Time). Notwithstanding
the forgoing, Parent or any of its subsidiaries may continue one or more of the
Company Employee Plans, in which case Parent and its subsidiaries shall have
satisfied their obligations hereunder with respect to the benefits so provided.
Nothing in this Section 5.11(d) shall be construed to entitle any employee to
continue his or her employment for any period of time or prevent Parent from
amending any of the U.S. Counterpart Plans or Company employee benefit plans at
any time; provided, however, that no such amendment shall be made or given
effect within one year after the Effective Time to the extent that such
amendment would result in persons employed with Company or any of its
subsidiaries immediately before the Effective Time having benefits, in the
aggregate, that are less favorable than the benefits provided to
similarly-situated employees of Parent.
5.12 Form S-8. Parent agrees to file a registration statement on Form S-8
(if available for use by Parent) for the shares of Parent Common Stock issuable
with respect to Assumed Options as soon as is reasonably practicable after the
Effective Time and to the extent the shares issuable under such assumed Company
Stock Options qualify for registration on Form S-8.
5.13 Notification.
(a) Company shall give prompt notice to Parent upon becoming aware
that any representation or warranty made by it contained in this Agreement has
become untrue or inaccurate, or of any failure of Company to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement, in each case, such that
the conditions set forth in Section 6.3(a) or 6.3(b) would not be satisfied;
provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
(b) Parent shall give prompt notice to Company upon becoming aware
that any representation or warranty made by it or Merger Sub contained in this
Agreement has become untrue or inaccurate, or of any failure of Parent or Merger
Sub to comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement, in each
case, such that the conditions set forth in Section 6.2(a) or 6.2(b) would not
be satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
5.14 Indemnification and Insurance.
(a) From and after the Effective Time, Parent will cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
Company pursuant to any indemnification and exemption agreements existing
immediately prior to the Effective Time between Company and its current and
former directors and officers (the "INDEMNIFIED PARTIES").
(b) Subject to the approval of the amendment of Article 74 of
Company's Articles of Association in the form of Exhibit F (the "ARTICLES
AMENDMENT") by Company's shareholders in
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the Company General Meeting, Parent shall, promptly following the Effective
Time, cause the Surviving Corporation to (i) undertake the indemnification
obligations contained in new indemnification obligations substantially in the
form attached hereto as Exhibit G (the "NEW INDEMNIFICATION LETTERS") and (ii)
execute and deliver the New Indemnification Letters to all of Company's current
and former directors and to Company's officers listed on Schedule 5.14 of the
Company Disclosure Schedule. Parent, from and after the Effective Time,
undertakes to cause the Surviving Company to fulfill and honor in all respects
such undertakings of Company pursuant to the New Indemnification Letters.
(c) If the Articles Amendment has not been approved by Company's
shareholders at the Company General Meeting as contemplated by this Agreement,
then promptly following the Effective Time, Parent shall cause the Surviving
Corporation to (i) effect the Articles Amendment and (ii) carry out the
obligations set forth in Section 5.14(b) above. The Articles of Association of
the Surviving Corporation will contain provisions with regard to indemnification
that are at least as favorable to the Indemnified Parties as those contained in
the Company Charter Documents, as amended by the Articles Amendment. The said
provisions will not be amended, repealed or otherwise modified after the
adoption of the Articles Amendment, for a period of seven (7) years from the
Effective Time, in any manner that would adversely affect the rights thereunder
of individuals who are or were directors, officers, employees or agents of
Company, unless such modification is required by law.
(d) Prior to the Effective Time, Company shall be entitled to
purchase a runoff policy under its existing officers' and directors' liability
insurance covering a period of seven years after the Effective Time; provided
that the aggregate premium for such coverage shall not exceed $2,000,000.
(e) The provisions of this Section 5.14 shall survive the
consummation of the Merger at the Effective Time and continue for the periods
specified in this Section 5.14 and are: (i) intended to be for the benefit of,
and will be enforceable by, each of the Indemnified Parties and their respective
heirs and representatives; and (ii) in addition to, and not in substitution for,
any other rights to indemnification or contribution that any such person may
have by contract or otherwise. In the event Parent or the Surviving Corporation
or any of their respective successors or assigns consolidates with or merges
into any other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger, or transfers all or substantially all
of its assets to any person in a single transaction or series of related
transactions, then, and in each such case, Parent shall either guaranty the
indemnification obligations set forth in this Section 5.14 (in the event that
the changes affect the Surviving Corporation) or shall make or cause to be made
proper provision so that the successors and assigns of Parent or the Surviving
Corporation, as the case may be, shall assume the indemnification obligations
set forth in this Section 5.14 for the benefit of the Indemnified Parties.
5.15 Company Warrants. At the Effective Time, each outstanding Company
Warrant, whether or not exercisable, will be assumed by Parent. Each Company
Warrant so assumed by Parent under this Agreement will continue to have, and be
subject to, the same terms and conditions
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set forth in the applicable Company Warrant immediately prior to the Effective
Time, except that each Company Warrant will be exercisable (or will become
exercisable in accordance with its terms) for that number of whole shares of
Parent Common Stock equal to the product of the number of Company Shares that
were issuable upon exercise of such Company Warrant immediately prior to the
Effective Time multiplied by the Option Exchange Ratio, rounded to the nearest
whole number of shares of Parent Common Stock and (ii) the per exercise price
for the shares of Parent Common Stock issuable upon exercise of such assumed
Company Warrant will be equal to the quotient determined by dividing the
exercise price per Company Share at which such Company Warrant was exercisable
immediately prior to the Effective Time by the Option Exchange Ratio, rounded to
the nearest whole cent. As soon as reasonably practicable after the Effective
Time, Parent will issue to each holder of an outstanding Company Warrant a
notice describing the foregoing assumptions of such Company Warrant by Parent.
Parent shall take all corporate actions necessary to reserve for issuance a
sufficient number of shares of Parent Common Stock for delivery upon exercise of
all Company Warrants pursuant to the terms set forth in this Section 5.15.
5.16 Listing of Parent Common Stock. Parent shall use reasonable efforts
to cause the shares of Parent Common Stock to be issued in the Merger to be
approved for listing on Nasdaq, subject to official notice of issuance, prior to
the Effective Time.
5.17 Company Affiliates; Restrictive Legend. Set forth in Section 5.17 of
the Company Disclosure Schedule is a list of those persons who may be deemed to
be, in Company's reasonable judgment, affiliates of Company within the meaning
of Rule 145 promulgated under the Securities Act (each, a "COMPANY AFFILIATE").
Company will provide Parent with such information and documents as Parent
reasonably requests for purposes of reviewing such list. Company shall use its
commercially reasonable efforts to deliver or cause to be delivered to Parent,
as promptly as practicable on or following the date hereof, from each Company
Affiliate who has not delivered a Company Affiliate Agreement on or prior to the
date hereof, an executed Company Affiliate Agreement. Parent will give stop
transfer instructions to its transfer agent with respect to any shares of Parent
Common Stock received pursuant to the Merger by any Company Affiliate, and there
will be placed on the certificates representing such shares of Parent Common
Stock, or any substitutions therefor, a legend stating in substance that the
shares were issued in a transaction to which Rule 145 promulgated under
Securities Act applies and may only be transferred (i) in conformity with Rule
145 or (ii) in accordance with a written opinion of counsel, reasonably
acceptable to Parent, in form and substance that such transfer is exempt from
registration under Securities Act.
5.18 Parent Guaranty of Merger Sub Obligations. Parent shall cause Merger
Sub to comply with all of its obligations under this Agreement and hereby
guarantees such performance.
5.19 Alternative Structure. If Parent reasonably believes in good faith,
after consultation with Company, that it is necessary to restructure the
business combination of Company and Parent contemplated by this Agreement in
order to be able to effect a business combination in compliance with Israeli
legal requirements, Company, Parent and Merger Sub shall as soon as practicable
restructure the Merger as a court approved merger or arrangement, or such other
mutually acceptable structure, and enter into a mutually agreeable amendment to
this Agreement to give effect to such
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restructured Merger and reflecting in all other respects the commercial
arrangements, representations, warranties, covenants, tax treatment and
agreements set forth herein, and shall also amend the Exhibits and Schedules
hereto and the other agreements among the parties hereto entered into in
connection herewith to reflect such restructuring.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions, any of which may be waived, in writing, by mutual
agreement of Parent and Company:
(a) Shareholder Approval. This Agreement, the Merger and the other
transactions contemplated by this Agreement shall have been duly approved by the
Required Company Shareholder Vote.
(b) Registration Statement Effective; Prospectus/Proxy Statement.
The SEC shall have declared the Registration Statement effective. No stop order
suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose, and no similar
proceeding in respect of the Prospectus/Proxy Statement, shall have been
initiated or threatened in writing by the SEC.
(c) Listing of Parent Common Stock. The shares of Parent Common
Stock to be issued in the Merger shall have been authorized for listing on
Nasdaq, subject to official notice of issuance.
(d) No Order; Competition Laws. No Governmental Entity shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) or issued any written or other formal interpretation
of any of the foregoing, after the date hereof which is in effect and which has
the effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger. All waiting periods under the HSR Act shall have expired or
terminated. Any notification, waiting period, or approval requirements under the
comparable competition laws of other applicable foreign jurisdictions as
reasonably determined by the parties to apply shall have been satisfied.
(e) Israeli Governmental Entity Approvals. All Israeli Governmental
Entity approvals required pursuant to Israeli legal requirements for the
consummation of the Merger and the other transactions contemplated by this
Agreement shall have been obtained, including, without limitation, the OCS
Approval, the Investment Center Approval and the Israeli Securities Options
Exemption. Notwithstanding the foregoing, the Israeli Income Tax Ruling, the
Israeli Withholding Tax Ruling and the Israeli Securities Election Exemption
shall not be a condition precedent of the obligations of the parties to effect
the Merger pursuant to this Section 6.1(e).
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6.2 Additional Conditions to Obligations of Company. The obligation of
Company to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Company:
(a) Representations and Warranties. Each representation and warranty
of Parent and Merger Sub contained in this Agreement shall have been true and
correct as of the date of this Agreement and shall be true and correct on and as
of the Closing Date with the same force and effect as if made on the Closing
Date (other than those representations and warranties which address matters only
as of a particular date, including without limitation "as of the date hereof,"
which representations and warranties shall have been true and correct as of such
particular date) except in each case, or in the aggregate, as would not
reasonably be expected to constitute a Material Adverse Effect on Parent. For
purposes of determining the accuracy of such representations and warranties: (A)
all "Material Adverse Effect" qualifications and other qualifications based on
the word "material" or similar phrases (other than dollar thresholds) contained
in such representations and warranties shall be disregarded; and (B) any update
of or modification to the Parent Disclosure Schedule made or purported to have
been made after the date of this Agreement shall be disregarded. Company shall
have received a certificate with respect to the foregoing signed on behalf of
Parent by an authorized officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date, and Company shall have received a certificate to such
effect signed on behalf of Parent by an authorized officer of Parent.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. Each representation and warranty
of Company contained in this Agreement shall have been true and correct as of
the date of this Agreement and shall be true and correct on and as of the
Closing Date with the same force and effect as if made on and as of the Closing
Date (other than those representations and warranties which address matters only
as of a particular date, including without limitation "as of the date hereof,"
which representations and warranties shall have been true and correct as of such
particular date) except in each case, or in the aggregate, as would not
reasonably be expected to constitute a Material Adverse Effect on Company
(provided, however, that such Material Adverse Effect qualification shall be
inapplicable with respect to the representations and warranties contained in
Sections 2.3(a), 2.5, 2.7, 2.16, 2.19, 2.21 and 2.22, which representations and
warranties shall be true and correct in all material respects as of the
applicable date). For purposes of determining the accuracy of such
representations and warranties: (A) all "Material Adverse Effect" qualifications
and other qualifications based on the word "material" or similar phrases (other
than specified Dollar thresholds) contained in such representations and
warranties shall be disregarded; and (B) any
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update of or modification to the Company Disclosure Schedule made or purported
to have been made after the date of this Agreement shall be disregarded. Parent
shall have received a certificate with respect to the foregoing signed on behalf
of Company by the Chief Executive Officer and Chief Financial Officer of
Company.
(b) Agreements and Covenants. Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to such effect (only with
respect to Company) signed on behalf of Company by the Chief Executive Officer
and the Chief Financial Officer of Company.
(c) Israeli Tax Status. Neither Parent nor Company shall have
received any written or oral indication from the Investment Center or the
Israeli income tax authorities to the effect that the consummation of the Merger
will jeopardize or adversely affect the tax status and benefits of Company,
including its Approved Enterprise tax status and its status as an industrial
company, and Parent shall have received a certificate to such effect (only with
respect to Company) signed on behalf of Company by the Chief Executive Officer
and the Chief Financial Officer of Company.
(d) RTPA Approval. Approval of the Israeli Commissioner of
Restrictive Trade Practices shall have been obtained without any conditions
(other than a response with standard conditions) or, alternatively, the waiting
period prescribed under the RTPA, including any extensions thereof, shall have
expired without receipt of a response from the Israeli Commissioner of
Restrictive Trade Practices.
(e) Director Resignations. The Director Resignations shall be in
full force and effect at the Closing Date.
(f) Corporate Authority. Each officer of the Company shall have
surrendered his authority over all Company finances, including without
limitation, all Company bank accounts, and evidence of the foregoing (in form
and substance satisfactory to Parent) shall have been delivered to Parent.
Company also shall have delivered to Parent such documents as are necessary or
advisable (in form and substance satisfactory to Parent) to transfer authority
over Company's finances, including without limitation, all Company bank
accounts, to Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the requisite approval of the
shareholders of Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and Company;
(b) by either Company or Parent if the Merger shall not have been
consummated by June 30, 2003 for any reason; provided, however, that the right
to terminate this Agreement under
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this Section 7.1(b) shall not be available to any party whose action or failure
to act has been a principal cause of or resulted in the failure of the Merger to
occur on or before such date and such action or failure to act constitutes a
breach of this Agreement;
(c) by either Company or Parent if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree, ruling or other action shall have become final and
nonappealable;
(d) by either Company or Parent if the required approval of the
shareholders of Company of the Merger contemplated by this Agreement shall not
have been obtained by reason of the failure to obtain the required vote at
Company General Meeting or at any adjournment or postponement thereof; provided,
however, that the right to terminate this Agreement under this Section 7.1(d)
shall not be available to Company or Parent where the failure to obtain such
Company shareholder approval shall have been caused by the action or failure to
act of Company or Parent, respectively, and such action or failure to act
constitutes a breach by Company or Parent, respectively, of this Agreement;
(e) by Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent or Merger Sub set forth in this
Agreement, or if any representation or warranty of Parent or Merger Sub shall
have become untrue, in either case such that the conditions set forth in Section
6.2(a) or Section 6.2(b) would not be satisfied as of the time of such breach or
as of the time such representation or warranty shall have become untrue,
provided, that if such inaccuracy in Parent's or Merger Sub's representations
and warranties or breach by Parent or Merger Sub is curable by Parent or Merger
Sub through the exercise of its commercially reasonable efforts, then Company
may not terminate this Agreement under this Section 7.1(e) for thirty (30) days
after delivery of written notice from Company to Parent and Merger Sub of such
breach, provided Parent or Merger Sub, as applicable, continues to exercise
commercially reasonable efforts to cure such breach or inaccuracy (it being
understood that Company may not terminate this Agreement pursuant to this
paragraph (e) if such breach or inaccuracy by Parent or Merger Sub is cured
during such thirty (30)-day period);
(f) By Company, if a Material Adverse Effect has occurred with
respect to Parent; provided, that if such Material Adverse Effect is curable by
Parent through the exercise of its commercially reasonable efforts, then Company
may not terminate this Agreement under this Section 7.1(f) for thirty (30) days
after delivery of written notice from Company to Parent of such Material Adverse
Effect, provided Parent continues to exercise commercially reasonable efforts to
cure such Material Adverse Effect (it being understood that Company may not
terminate this Agreement pursuant to this paragraph (f) if such Material Adverse
Effect is cured during such thirty (30)-day period);
(g) by Parent, (i) upon a breach of any representation, warranty,
covenant or agreement on the part of Company set forth in this Agreement, or if
any representation or warranty of Company shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as of the time of such breach or as of the time
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such representation or warranty shall have become untrue, provided, that if such
inaccuracy in Company's representations and warranties or breach by Company is
curable by Company through the exercise of its commercially reasonable efforts,
then Parent may not terminate this Agreement under this Section 7.1(g)(i) for
thirty (30) days after delivery of written notice from Parent to Company of such
breach, provided Company continues to exercise commercially reasonable efforts
to cure such breach or inaccuracy (it being understood that Parent may not
terminate this Agreement pursuant to this paragraph (g)(i) if such breach or
inaccuracy by Company is cured during such thirty (30)-day period), or (ii) if
Parent shall have determined, in its reasonable judgment, based on advice of
patent counsel, that Company and/or its Intellectual Property is infringing one
or more of the patents described on Schedule 7.1(g) hereto in a manner that
could lead to any injunction regarding one or more of Company's products or
services, material damages or material royalties or similar payments; provided,
however, that any notice of termination given by Parent pursuant to this Section
7.1(g)(ii) shall not be effective until five (5) days after delivery to Company.
For the purposes of this Section 7.1(g)(ii), material damages means damages in
excess of $2,500,000 and material royalties means royalties in excess of
$2,500,000;
(h) by Parent, if a Material Adverse Effect has occurred with
respect to Company; provided, that if such Material Adverse Effect is curable by
Company through the exercise of its commercially reasonable efforts, then Parent
may not terminate this Agreement under this Section 7.1(h) for thirty (30) days
after delivery of written notice from Parent to Company of such Material Adverse
Effect, provided Company continues to exercise commercially reasonable efforts
to cure such Material Adverse Effect (it being understood that Parent may not
terminate this Agreement pursuant to this paragraph (h) if such Material Adverse
Effect is cured during such thirty (30)-day period);
(i) by Parent if a Triggering Event (as defined below) shall have
occurred; or
(j) by Company in order to enter into a binding definitive agreement
providing for a Superior Proposal (an "ALTERNATIVE AGREEMENT") if: (i) the Board
of Directors of Company shall have determined in good faith after consultation
with its outside legal counsel that entering into such Alternative Agreement is
required in order for the Board of Directors of Company to comply with its
fiduciary obligations to Company's shareholders; (ii) immediately prior to such
termination, Company shall have paid Parent the Termination Fee; (iii) Company
shall have given Parent at least three (3) business days prior written notice of
its intention to enter into an Alternative Agreement, which notice shall be
accompanied by a correct and complete copy of such Alternative Agreement (and
Company shall thereafter promptly provide Parent with correct and complete
copies of any amendments or proposed amendments thereto); and (iv) concurrently
with such termination Company enters into such Alternative Agreement. For the
purposes of making the determination required by clause (i) of this paragraph,
the parties agree that the Board of Directors and its outside counsel shall
determine such fiduciary obligations in accordance with Delaware law as if
Company were a Delaware corporation.
For the purposes of this Agreement, a "TRIGGERING EVENT" shall be deemed
to have occurred if: (i) the Board of Directors of Company or any committee
thereof shall for any reason have
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withdrawn or shall have amended or modified in a manner adverse to Parent its
recommendation in favor of, the approval of this Agreement, the Merger or the
other transactions contemplated by this Agreement; (ii) Company shall have
failed to include in the Prospectus/Proxy Statement the recommendation of the
Board of Directors of Company in favor of the approval of this Agreement, the
Merger or the other transactions contemplated by this Agreement; (iii) the Board
of Directors of Company or any committee thereof shall have approved or
recommended any Acquisition Proposal; (iv) the provisions of Section 5.7 of this
Agreement shall have been materially breached; (v) Company shall have entered
into any letter of intent or similar document or any agreement, contract or
commitment accepting any Acquisition Proposal; or (vi) a tender or exchange
offer relating to securities of Company shall have been commenced by a person
unaffiliated with Parent and Company shall not have sent to its security holders
pursuant to Rule 14d-9 or 14e-2 promulgated under the Exchange Act or Section
329 of the Israeli Companies Law, within ten (10) business days after such
tender or exchange offer is first published sent or given, a statement
disclosing that Company recommends rejection of such tender or exchange offer.
7.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon (or, if the
termination is pursuant to Section 7.1(e) or Section 7.1(g)(i) and the proviso
therein is applicable, thirty (30) days after) (or, if the termination is
pursuant to Section 7.1(g)(ii), five (5) days after) the delivery of written
notice of the terminating party to the other parties hereto. In the event of the
termination of this Agreement as provided in Section 7.1, this Agreement shall
be of no further force or effect, except (i) as set forth in this Section 7.2,
Section 7.3 and Article VIII (General Provisions), each of which shall survive
the termination of this Agreement, and (ii) nothing herein shall relieve any
party from liability for any intentional or willful breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, that Parent and Company
shall share equally all fees and expenses, other than attorneys' and accountants
fees and expenses, incurred in relation to the printing and filing (with the
SEC) of the Prospectus/ Proxy Statement (including any preliminary materials
related thereto) and the Registration Statement (including financial statements
and exhibits) and any amendments or supplements thereto and any fees paid under
the HSR Act.
(b) Company Payments.
(i) Company shall pay to Parent in immediately available funds
an amount equal to $16,200,000 (the "TERMINATION FEE"): (i) within one (1)
business day after demand by Parent, if this Agreement is terminated by Parent
pursuant to Section 7.1(i); and (ii) prior to and as a condition to any
termination of this Agreement by Company pursuant to Section 7.1(j).
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(ii) If: (A) this Agreement is terminated by Parent or
Company, as applicable, pursuant to Sections 7.1(b) or (d); (B) prior to such
termination, (x) there shall exist, or have been publicly proposed and not
publicly definitively withdrawn at least five (5) business days prior to such
termination, an Acquisition Proposal, or (y) one or more board members shall
have changed their recommendation that Company's shareholders vote in favor of
and approve this Agreement, the Merger or the other transactions contemplated by
this Agreement and such change was publicly known; and (C) within twelve (12)
months following the termination of this Agreement a Company Acquisition (as
defined below) is consummated or Company enters into a definitive agreement
providing for a Company Acquisition, then Company shall pay Parent in
immediately available funds at or prior to consummating, or entering into a
definitive agreement providing for, such Company Acquisition, respectively, an
amount equal to the Termination Fee.
(iii) Company acknowledges that the agreements contained in
this Section 7.3(b) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Parent would not enter into
this Agreement; accordingly, if Company fails to pay in a timely manner the
amounts due pursuant to this Section 7.3(b) and, in order to obtain such
payment, Parent makes a claim that results in a judgment against Company for the
amounts set forth in this Section 7.3(b), Company shall pay to Parent its
reasonable costs and expenses (including reasonable attorneys' fees and
expenses) in connection with such suit, together with interest on the amounts
set forth in this Section 7.3(b) at the prime rate of Bank of America N.T. &
S.A. in effect on the date such payment was required to be made. Payment of the
fees described in this Section 7.3(b) shall not be in lieu of damages incurred
in the event of breach of this Agreement. For the purposes of this Agreement,
"COMPANY ACQUISITION" shall mean any of the following transactions (other than
the transactions contemplated by this Agreement): (i) a merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Company pursuant to which the shareholders of Company
immediately preceding such transaction hold less than 50% of the aggregate
equity interests in the surviving or resulting entity of such transaction, (ii)
a sale or other disposition by Company of assets representing in excess of 50%
of the aggregate fair market value of Company's business immediately prior to
such sale or (iii) the acquisition by any person or group (including by way of a
tender offer or an exchange offer or issuance by Company), directly or
indirectly, of beneficial ownership or a right to acquire beneficial ownership
of shares representing in excess of 50% of the voting power of the then
outstanding shares of capital stock of Company.
7.4 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of Parent and Company.
7.5 Extension; Waiver. At any time prior to the Effective Time, any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
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ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations
and warranties of Company, Parent and Merger Sub contained in this Agreement
shall terminate at the Effective Time. The covenants contained in this Agreement
that by their terms survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
VERITAS Software Corporation
000 Xxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Telecopy No.: (000) 000-0000
with a copy to:
VERITAS Software Corporation
000 Xxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Vice President, General Counsel
Telecopy No.: (000) 000-0000
and to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
One Market, Xxxxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxxx X. Xxxx, Esq.
Xxxxxxxx X. Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
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and to:
Xxxxx Xxxxx & Xx.
00 Xxxxxx Xxxxxx
Xxxxxxxxx 00000, Xxxxxx
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Telecopy No.: (000-0) 000-0000
(b) if to Company, to:
Precise Software Solutions Ltd.
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx Xxxx, Chief Executive Officer
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxx Xxxxxxx LLP
0000 Xxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
and to:
Xxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxxx Xxxxx Xxxxx, Esq.
Telecopy No: (000) 000-0000
and to:
Volovelsky, Xxxxxxxx, Xxxx & Co.
00 Xxxxxxx Xxxxxx
Xxxxxxxx Xxxxxxx 00000 Xxxxxx
Attention: Xx. Xxxx Dinstein, Adv.
Telecopy No.: (000-0) 000-0000
and to:
Goldfarb, Levy, Eran & Co.
2 Xxx Xxxxxx Xxxxxx
Xxx-Xxxx 00000 Xxxxxx
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000-0) 000-0000
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8.3 Interpretation; Knowledge. (a) When a reference is made in this
Agreement to Exhibits, such reference shall be to an Exhibit to this Agreement
unless otherwise indicated. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement. Unless
otherwise indicated the words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When reference is made herein to "the business
of" an entity, such reference shall be deemed to include the business of all
direct and indirect subsidiaries of such entity. Reference to the subsidiaries
of an entity shall be deemed to include all direct and indirect subsidiaries of
such entity.
(b) The word "AGREEMENT" when used herein shall be deemed in each
case to mean any contract, commitment or other agreement, whether oral or
written, that is legally binding.
(c) For purposes of this Agreement, (i) the term "PERSON" shall mean
any individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity and (ii) the term "subsidiary" means, with respect to any
person, any corporation or other legal entity of which such person owns,
directly or indirectly, more than fifty percent (50%) of the outstanding stock
or other equity interests.
(d) When used in connection with Parent, or Company, as the case may
be, the term "MATERIAL ADVERSE EFFECT" means any change, event, violation,
inaccuracy, circumstance or effect that, individually or when taken together
with all other such changes, events, violations, inaccuracies, circumstances or
effects that have occurred prior to the date of determination of the occurrence
of the Material Adverse Effect, is or is reasonably likely to be materially
adverse to the business, assets (including intangible assets), financial
condition or results of operations of such entity and its subsidiaries, taken as
a whole, including any restatement or required restatement of any Company SEC
Report, and taking into account both the short term and long term aspects of any
such change, event, violation, inaccuracy, circumstance or effect; provided,
however, that in no event shall any of the following, alone or in combination,
be deemed to constitute, nor shall any of the following be taken into account in
determining whether there has been or will be, a Material Adverse Effect on any
entity: (i) any change in such entity's stock price or trading volume in and of
itself; (ii) any change, event, violation, inaccuracy, circumstance or effect
that primarily and directly results from changes, events or circumstances
affecting (A) any of the industries in which such entity operates generally, or
(B) the United States or global economy generally (which changes, events or
circumstances in the case of (A) and (B) do not disproportionately affect such
entity); (iii) any change, event, violation, inaccuracy, circumstance or effect
resulting from the loss, diminution or disruption, whether actual or threatened,
of existing or prospective customer, distributor or supplier relationships that
primarily and directly results from the public announcement or pendency of the
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Merger; (iv) any change, event, violation, inaccuracy, circumstance or effect in
any way relating to the Company's contractual or other relationships with XXX
Xxxxxxxxxxx, other than any such change, event, violation, inaccuracy,
circumstance or effect resulting from or attributable to any breach of any such
contractual relationship arising prior to the date hereof and not expressly
disclosed in Section 2.18 of the Company Disclosure Schedule; (v) any failure of
the Company to meet any internal projections or forecasts or published revenue
or earnings predictions for any period ending (or for which revenues or earnings
are released) on or after the date of this Agreement in and of itself; (vi) any
change, event, violation, inaccuracy, circumstance or effect resulting from acts
of war or terrorism in and of itself (but not excluding any change or effect on
or with respect to Company resulting from any such act pursuant to this clause
(vi)); (vii) any change, event, violation, inaccuracy, circumstance or effect
that primarily and directly results from any action taken by Parent (other than
any exercise by Parent of any of its rights hereunder); or (viii) the
institution of litigation against the Company or any of its officers or
directors alleging breach of their fiduciary duties in connection with the entry
into this Agreement.
(e) The words "FOREIGN" and "DOMESTIC" when used herein shall be
deemed a reference to a country outside the United States and the United States,
respectively.
(f) "KNOWLEDGE" of a party with respect to any fact or other matter
in question means (i) the actual knowledge of any of the following persons:
Xxxxxx Xxxx, Xxx Xxx, Xxx Xxxxxx, Xxxx Xxxxxxxx, Xxxx Xxxxxxx, Xxx Xxxxxx,
Xxxxxxxx Xxxxx and Mo Garad and each of their successors or (ii) the knowledge
that any of such persons would be reasonably expected to have after making due
and diligent inquiry of those persons employed by such party who would be
reasonably be expected to have actual knowledge of the fact or other matter in
question.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts (including counterparts executed and delivered by facsimile, which
shall be as counterparts executed and delivered manually), all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party, it being understood and agreed that all parties need not sign the
same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Confidentiality Agreement,
the Company Disclosure Schedule and the Parent Disclosure Schedule (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
it being understood that the Confidentiality Agreement shall continue in full
force and effect until the Closing and shall survive any termination of this
Agreement; and (b) are not intended to confer upon any other person any rights
or remedies hereunder, except as specifically provided in Section 5.14.
8.6 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
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to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies and rights herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy or right
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy or right will not preclude the exercise of any other
remedy or right. The parties hereto agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy or right to
which they are entitled at law or in equity.
8.8 Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York; provided,
however, that (a) any matter involving the internal corporate affairs of Company
or any party hereto shall be governed by the provisions of the jurisdictions of
its incorporation and (b) the form and content of the Merger and the
consequences of the filing thereof shall be governed by the Israeli Companies
Law. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction and venue of any court within the State of New York, in connection
with any matter based upon or arising out of this Agreement or the matters
contemplated herein, agrees that process may be served upon them in any manner
authorized by the laws of the State of New York for such persons and waives and
covenants not to assert or plead any objection which they might otherwise have
to such jurisdiction, venue and such process.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
8.11 Waiver of Jury Trial. EACH OF PARENT, COMPANY AND MERGER SUB HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, COMPANY OR MERGER SUB IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
VERITAS SOFTWARE CORPORATION
By: /s/ Xxxx X. Xxxxx
--------------------------------------
Name: Xxxx X. Xxxxx
Title: President & Chief Executive Officer
ARGON MERGER SUB LTD.
By: /s/ Xxx X. Xxxxx
--------------------------------------
Name: Xxx X. Xxxxx
Title: Director
PRECISE SOFTWARE SOLUTIONS LTD.
By: /s/ Xxxxxx Xxxx
--------------------------------------
Name: Xxxxxx Xxxx
Title: CEO
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
