1
EXHIBIT 3
AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of February 16,
1999, by and between Convergys Information Management Group Inc. ("Purchaser"),
an Ohio corporation, the beneficial owners of ordinary shares set forth on
Schedule 1 attached hereto (the "Shareholders") of Wiztec Solutions Ltd., a
company limited by shares duly registered under the laws of the State of Israel
(the "Company"), and Formula Systems (1985) Ltd. ("Formula"), which is the
parent corporation of Argotec Ltd., one of the Shareholders.
WHEREAS, in a Stock Purchase Agreement dated as of August 19, 1997
among the Company, the Shareholders, and the Purchaser (the "Stock Purchase
Agreement"), the Shareholders have previously granted to the Purchaser an option
(the "Option") to purchase such number of their shares as equals 51% of the
outstanding Ordinary Shares, each with New Israeli Shekel ("NIS") 1 Par Value
(the "Shares"), of the Company and also have granted a call option to the
Purchaser (and Purchaser has granted a put option to the Shareholders) allowing
it to purchase all of the remaining Shares that the Shareholders own within 30
days after the consummation of the Option exercise;
WHEREAS, the Shareholders wish to cause the Shareholder Entities (as
hereinafter defined) to sell all of the Shares that they own and the Purchaser
wishes to purchase all such Shares on terms and conditions different from those
set forth in the Stock Purchase Agreement, and this Agreement reflects such
modified terms and conditions; and
WHEREAS, Formula benefits from Argotec's sale of its Shares pursuant to
this Agreement and is entering into this Agreement in order to receive that
benefit.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises hereinafter set forth and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
2
1. PURCHASE AND SALE. Subject to the terms and conditions hereof, each
Shareholder hereby agrees to cause his or its Shareholder Entity to sell to
Purchaser, and Purchaser hereby agrees to purchase from each Shareholder Entity,
the number of Ordinary Shares set forth opposite each Shareholder's name on
Schedule 1 attached hereto in consideration of the payment of the amounts set
forth on Schedule 1 (individually, the "Shareholder Consideration" and
collectively, the "Shareholders' Consideration"). Payment of each Shareholder's
Consideration will be made at the Closing by wire transfer in immediately
available funds to such Shareholder Entity's account as indicated on Schedule 1.
2. CLOSING. Subject to the satisfaction of the conditions precedent set
forth below and the delivery of the agreements and documents to be delivered at
the Closing, as set forth in Section 3 below, the closing of the sale and
purchase of the Shares (the "Closing") shall occur on March 2, 1999 or such
other date mutually agreeable to the parties. In addition, the satisfaction of
the following items are conditions precedent to the Closing:
(i) the receipt by Purchaser of Employment Agreements, in form
satisfactory to the Purchaser, executed by the Company and each of Xxxxx
Xxxxx, Xxxxx Xxxxx, and Xxxxx Xxxxx;
(ii) the satisfaction of the conditions set forth in Annex A attached
hereto;
(iii) the delivery by Xxx Xxxxxxxxx, Xxx Xxxxxxxxx and Xxxx Xxxxxx of
their resignations as Company directors, such resignations to be
conditioned upon the Closing and to be effective upon the election or
appointment of their successors as directors of such persons as are
proposed by Purchaser, which resignations and appointments shall be
authorized or accepted by validly adopted Board of Directors resolutions.
(iv) the representations and warranties of Formula contained in this
Agreement and Annex B shall be true and correct in all material respects on
the date of Closing.
2
3
3. DELIVERIES AT CLOSING.
3.1 DELIVERY BY SHAREHOLDERS. At Closing, each Shareholder shall
deliver or cause to be delivered to Purchaser certificates representing the
Shareholder's Shares, duly endorsed, or accompanied by stock powers duly
executed in blank, and otherwise in form acceptable for transfer on the books of
the Company and any documents which are necessary for the transfer to the
Purchaser of good title to Shareholder's Shares, including, but not limited to,
duly-signed report forms, ready for submission to the Registrar of Companies,
reporting the transfer of the Shareholders' Shares to the Purchaser.
3.2 DELIVERY BY FORMULA. At Closing, Formula shall deliver or cause to
be delivered:
(i) the opinion of Goldfarb, Levy, Eran & Co., Counsel to Formula, in
form reasonably satisfactory to Purchaser, that Formula's signatures on
this Agreement and the certificates referred to herein were duly authorized
by Formula's Board of Directors and legally bind Formula and regarding such
other matters as were addressed at the consummation of the Stock Purchase
Agreement;
(ii) the Sub-Contractor Agreement, in the form of attached Exhibit A,
executed by Forsoft Ltd., a subsidiary of Formula;
(iii) the Services Agreement, in the form of attached Exhibit B,
executed by Formula and the Company;
(iv) a certificate signed by a Formula executive officer certifying
that the representations and warranties made herein shall be deemed to have
been made again on and as of the date of Closing and shall be true and
correct in all material respects as of the Closing; and
(v) Schedule 1.2 to Annex B, updated through the Closing, which update
shall not be deemed to be a breach of the representations contained in
Annex B.
3
4
3.3 DELIVERY BY PURCHASER. At Closing, Purchaser shall deliver or cause
to be delivered to Shareholders or the Shareholder Entities, as Shareholders may
designate:
(i) the Shareholders' Consideration;
(ii) the Sub-Contractor Agreement executed by the Purchaser; and
(iii) a certificate signed by a Purchaser executive officer certifying
that the representations and warranties of Purchaser shall be deemed to
have been made again on and as of the date of Closing and shall be true and
correct in all material respects as of the Closing.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to the Shareholders as follows:
4.1 Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio.
4.2 Purchaser has all necessary power and authority under all
applicable provisions of law to execute and deliver this Agreement. All action
on the part of Purchaser, its officers, directors and shareholders necessary for
the authorization of this Agreement and the performance of all obligations of
Purchaser hereunder has been taken. This Agreement has been duly executed and
delivered by Purchaser and (assuming the due authorization, execution and
delivery hereof by the Shareholders) constitutes a valid and binding obligation
of Purchaser enforceable against Purchaser in accordance with its terms, except
(i) as limited by general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing that restrict the
availability of equitable remedies and (ii) as rights to indemnity and
contribution hereunder may be limited by United States state and federal
securities laws or Israeli securities laws or principles of public policy.
4.3 Neither the execution and delivery of this Agreement nor the
performance by Purchaser of its obligations hereunder will conflict with, result
in a violation or breach of, or constitute a default (or an event that, with
notice or lapse of time or both, would result in a
4
5
default) or give rise to any right of termination, amendment, cancellation, or
acceleration under, (i) any contract, commitment, agreement, understanding,
arrangement or restriction of any kind to which Purchaser is a party or by which
it is bound or (ii) any injunction, judgment, writ, decree, order or ruling
applicable to Purchaser.
4.4 Neither the execution and delivery of this Agreement nor the
performance by Purchaser of its obligations hereunder will violate any law,
decree, statute, rule or regulation applicable to it or require any order,
consent, authorization or approval of, filing or registration with, or
declaration or notice to, any court, administrative agency or other governmental
body or authority, except such notifications or registrations as may be required
with any United States federal and state securities commissions or any Israeli
securities and antitrust authorities.
5. REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER. Each Shareholder
represents and warrants, as to himself or itself only, that:
5.1 He or it directly or indirectly beneficially owns the Shares set
forth opposite his or its name in Schedule 1 hereto and such Shares are held of
record by the company (the "Shareholder Entity") set forth in Schedule 1 hereto.
His or its Shareholder Entity is limited by shares duly registered under the
laws of the State of Israel. Except for Argotec's pledge of its shares pursuant
to the Stock Purchase Agreement, Shareholder possesses the sole voting power and
sole investment power with respect to the Shares. Shareholder beneficially owns
the Shares and the Shareholder Entity holds the Shares of record, free and clear
of all liens, claims, charges and encumbrances of any nature whatsoever, and,
upon the Closing, the Shares will be transferred to Purchaser, free and clear of
all liens, claims, charges and encumbrances of any nature whatsoever.
5.2 His or its Shareholder Entity has all necessary power and authority
under all applicable provisions of law to transfer the Shares to Purchaser. All
action on the part of the Shareholder Entity and its officers, directors and
shareholders necessary for the authorization of the transfer of the Shares to
Purchaser and the performance of all related obligations has been taken.
5
6
5.3 Shareholder has all necessary power and authority under all
applicable provisions of law to execute and deliver this Agreement and to cause
its respective Shareholder Entity to perform its obligations under this
Agreement. All actions on the part of Shareholder, and, if applicable, its
officers, directors and shareholders, necessary for the authorization of this
Agreement and the performance of all obligations of Shareholder and his or its
Shareholder Entity hereunder has been taken. This Agreement has been duly
executed and delivered by Shareholder and (assuming the due authorization,
execution and delivery hereof by the Purchaser) constitutes a valid and binding
obligation of Shareholder enforceable against Shareholder in accordance with its
terms, except (i) as limited by general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing that
restrict the availability of equitable remedies and (ii) as rights to indemnity
and contribution hereunder may be limited by United States state and federal
securities laws or Israeli securities laws or principles of public policy.
5.4 Except for the Shares and options granted pursuant to the Company's
option plans to acquire the Shares as indicated on Schedule 1.2 to Annex B, he
or it does not, directly or indirectly, beneficially own or have any option,
warrant or other right to acquire any securities of the Company that are or may
by their terms become entitled to vote or any securities that are convertible or
exchangeable into or exercisable for any securities of the Company that are or
may by their terms become entitled to vote, nor is he or it subject to any
contract, commitment, arrangement, understanding, restriction or relationship
(whether or not legally enforceable), other than this Agreement, that provides
for Shareholder to vote or acquire any securities of the Company. Except as set
forth on Schedule 1.2 to Annex B, Shareholder holds exclusive power to vote the
Shares and has not granted a proxy to any other person to vote the Shares,
subject to the limitations set forth in this Agreement.
5.5 Neither the execution and delivery of this Agreement nor the
performance by Shareholder of his or its obligations hereunder will conflict
with, result in a violation or breach of, or constitute a default (or an event
that, with notice or lapse of time or both, would result in a default) or give
rise to any right of termination, amendment, cancellation, or acceleration or
result in the creation of any lien on any Shares under (i) any material
contract, commitment, agreement, understanding, arrangement or restriction of
any kind to which Shareholder or his or its
6
7
Shareholder Entity is a party or by which he or it or his or its Shareholder
Entity is bound or (ii) any injunction, judgment, writ, decree, order or ruling
applicable to Shareholder or his or its Shareholder Entity.
5.6 Neither the execution and delivery of this Agreement nor the
performance by Shareholder or his or its Shareholder Entity of his or its
obligations hereunder will violate any law, decree, statute, rule or regulation
applicable to him or it or his or its Shareholder Entity or require any order,
consent, authorization or approval of, filing or registration with, or
declaration or notice to, any court, administrative agency or other governmental
body or authority, except such notifications or registrations as may be required
with any United States federal and state securities commissions or any Israeli
securities and antitrust authorities.
6. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF FORMULA.
6.1 Formula hereby represents and warrants that the representations and
warranties set forth in Annex B are true and correct in all material respects on
the date hereof and that its representations set forth in this Annex B shall
survive for twelve months from the date hereof.
6.2 Formula agrees to indemnify, defend and hold harmless Purchaser and
its directors, officers, agents and representatives from, against and with
respect to any and all claims, demands, actions or causes of action, damages,
losses, liabilities, obligations, assessments, costs, fees, penalties, interest,
fines and expenses (including reasonable attorneys' fees) which Purchaser may
suffer or incur as a result of an inaccuracy in, or a breach of, any of the
representations and warranties made in this Agreement and Annex B attached
hereto. No amount shall be payable by Formula under the indemnification
contained in this Section 6 for any individual claim of Purchaser unless the
aggregate amount of all such individual claims is or becomes an amount in excess
of $575,000 and then Formula shall be liable only for amounts in excess of
$575,000. Formula's aggregate liability under this Section 6 shall not exceed
$43,493,000.
6.3 Formula agrees that, for a period of three years from the date of
the Closing, neither it nor any of its wholly owned subsidiaries will, directly
or indirectly, in any
7
8
capacity including, without limitation, as a partner, shareholder, officer,
director, principal, agent or consultant, in the United States or any other
country, (i) start up, invest in or continue an investment in, provide customer
care and billing programming services to, or otherwise be involved in the
operation or management of, a business entity whose primary business is customer
care or billing in the cable or satellite industries or the creation or
marketing of software, the main application of which is customer care or billing
in cable or satellite industries and which conducts business in the United
States or any other country or (ii) compete against Purchaser or any of its
subsidiaries in the acquisition of companies in such businesses in the United
States or any other country or in the bid or request for proposal process or for
business for customer care and billing systems from Purchaser's customers who
operate in the cable or satellite industries in the United States or any other
country. In addition, in the event that an Affiliate acts in a manner which
would, if the Affiliate were subject to the preceding restrictive covenants,
breach or violate the immediately preceding restrictive covenants, Formula
agrees that it will sell all of its interests in such Affiliate as promptly as
commercially reasonable, but, in any event, within six months of the covenant
violation. The parties agree that: (y) the above restrictive covenants are not
intended to and shall not apply to customer care or billing software sales for
end-use in the Israeli market; and (z) nothing contained in such restrictive
covenants will prevent Formula, its wholly owned subsidiaries and its Affiliates
from owning, collectively, solely as a passive investment, up to 5% of any class
of securities of any company traded on any United States or other securities
exchange or quoted on any automated quotation system. An "Affiliate" is any
entity controlled by, controlling or under common control with Formula, directly
or indirectly.
In addition, Formula agrees that, for a period of two years after the
date of the Closing, (i) neither it nor any of its wholly owned subsidiaries
will solicit any current employees of the Company to work for Formula or its
wholly owned subsidiaries and (ii) neither it nor any of its wholly owned
subsidiaries or Affiliates will solicit any of the "selected employees", set
forth on Schedule II attached hereto, to work for Formula or its wholly owned
subsidiaries or Affiliates. For purposes of the immediately preceding subclause
(ii), if any selected employee is hired by, employed by or retained by Formula
or a wholly owned subsidiary or an Affiliate in any capacity during the
applicable two-year period, then Formula, such wholly owned subsidiary or such
8
9
Affiliate shall be deemed to have solicited such selected employee in violation
of subclause (ii), above.
If Formula or any of its subsidiaries or Affiliates breaches, or
threatens to commit a breach of, any of the restrictive covenants set forth in
the two paragraphs immediately above (the "Restrictive Covenants"), Purchaser
shall have the following rights and remedies, each of which rights and remedies
shall be independent of the others and severally enforceable, and each of which
is in addition to, and not in lieu of, any of the rights and remedies available
to the Purchaser under law or in equity:
(i) The right and remedy to have the Restrictive Covenants
specifically enforced by any court of competent jurisdiction, it being
agreed that any breach or threatened breach of the Restrictive Covenants
would cause irreparable injury to the Purchaser and that money damages
would not provide an adequate relief to Purchaser; provided that, if an
Affiliate acts in a manner which would, if the Affiliate were subject to
the restrictive covenants contained in the first paragraph of this Section
6.3, breach the restrictive covenants contained in the first paragraph of
this Section 6.3, Purchaser's right to specific performance is limited to a
court enforcing Formula's obligation to sell all of its interests in such
Affiliate.
(ii) The right and remedy to require Formula and its wholly owned
subsidiaries to account for and pay over to Purchaser all compensation,
profits, monies, accruals, increments or other benefits derived or received
by Formula or its subsidiaries or Affiliates as the result of any
transactions constituting a breach of the Restrictive Covenants.
Formula acknowledges and agrees that the Restrictive Covenants are
reasonable and valid in geographical and temporal scope and all other respects.
If any court determines that any of the Restrictive Covenants, or any part
thereof, is invalid or unenforceable, the remainder of the Restrictive Covenants
shall not thereby be affected and shall be given full effect without regard to
the invalid portions.
9
10
If any court determines that any of the Restrictive Covenants, or any
part thereof, is unenforceable because of the duration or geographic scope of
such provision, such court shall have the power to reduce the duration or scope
of such provision, as the case may be, and, in its reduced form, such provision
shall then be enforceable.
Formula and its subsidiaries and Purchaser intend to and hereby confer
jurisdiction to enforce the Restrictive Covenants upon the courts of any
jurisdiction within the geographical scope of such Restrictive Covenants. If the
courts of one or more of such jurisdictions hold the Restrictive Covenants
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of Formula and its subsidiaries and Purchaser that such determination
not bar or in any way affect Purchaser's rights to the relief provided above in
the courts of any other jurisdiction within the geographical scope of the
Restrictive Covenants, and as to breaches of the Restrictive Covenants in such
other respective jurisdictions, the Restrictive Covenants as they relate to each
jurisdiction being, for this purpose, severable into diverse and independent
covenants. Formula and its subsidiaries hereby waive trial by jury in any
judicial proceeding to which Formula and its subsidiaries are a party involving,
directly or indirectly, any matter in any way arising out of, related to or
connected with any of the Restrictive Covenants.
7. EXPENSES. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, except that corporate governance
matters regarding the Company shall be governed by the laws of the State of
Israel.
9. SECURITIES ACT OF 1933. Purchaser represents that it is an
Accredited Investor as defined in Regulation D as promulgated under the
Securities Act of 1933 and is purchasing such shares for investment only and not
with a view to any public distribution under the Securities Act of 1933.
10
11
10. PUBLICITY. Purchaser and the Shareholders shall consult with each
other as to the form, timing and substance of any public announcements related
to this Agreement or the transactions contemplated hereby.
11. WAIVER. Shareholders waive any and all rights, claims, demands,
actions or causes of actions, damages, losses, liabilities, costs, fees and
expenses which Shareholders have or may have or may suffer or incur arising out
of, in connection with or as a result of Purchaser or any of its subsidiaries or
affiliates purchasing or offering to purchase any Ordinary Shares of the Company
at any time at a purchase price in excess of the price paid to the Shareholders
under this Agreement.
12. NOTICES. All notices required or permitted under this Agreement
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified; (ii) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient, if not, then on
the next business day; or (iii) two days after deposit with a recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the parties at the addresses shown
below or to such other address as any party may designate by ten days advance
written notice to the other parties hereto;
If to Purchaser, to:
Convergys Information Management Group Inc.
000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxx X. Xxxxxxxx
Xx. Vice President & General Counsel
with a copy to:
Frost & Xxxxxx LLP
0000 XXX Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxx Xxxxxxx
If to the Shareholders, to:
Formula Systems (1985) Ltd.
39 Xxxxxxx Xxxxxxxxx
00
00
Xxxxxxx 00000, Xxxxxx
Attention: Xxx Xxxxxxxxx, Xxx Xxxxxxxxx, Xxxx Xxxxxx
Xxxxx Xxxxx and Argotec, Ltd.
with a copy to:
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx
13. ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement shall be settled by arbitration in accordance with
the rules of the International Arbitration Association as at present in force.
The appointing authority shall be the President of the London Court of
International Arbitration ("LCIA") and LCIA shall appoint three lawyers as
arbitrators. The arbitration shall take place in London, England. The language
of the arbitration shall be in English.
14. RELATIONSHIP TO THE STOCK PURCHASE AGREEMENT. This Agreement
supercedes all provisions of Sections 7.15 and 11 of the Stock Purchase
Agreement entitled the "Standstill and Related Covenants" and "Option to
Purchase Certain Shares Held by Argotec," respectively, all of which provisions
are null and void.
15. SPECIFIC PERFORMANCE. The parties recognize that if any party
hereto refuses to perform under the provisions of this Agreement or otherwise
breaches this Agreement such that the Closing does not occur, monetary damages
alone will not be adequate to compensate the parties for their injury. The
parties shall therefore be entitled to obtain specific performance of the terms
of this Agreement (including, but not limited to, the transfer of the Shares and
the payment therefor) in addition to any other remedies, including but not
limited to monetary damages that may be available to them. If any action is
brought by any party to enforce this Agreement, the other parties waive and
shall not assert any defense that there is an adequate remedy at law, that there
is no irreparable injury or that any other factor exists that would preclude
specific enforcement of this Agreement.
12
13
16. MANAGEMENT FEE. Upon Closing, the management fee being paid by the
Company to Formula, and all agreements and arrangements with respect to such
fees, will terminate and, after the Closing, the Company will have no
obligations to pay such fee.
17. BINDING EFFECT AND ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
personal representatives, successors and assigns. At any time prior to the
Closing, Purchaser may assign this Agreement and all of its obligations
hereunder to Convergys Corporation (its parent) or any of its subsidiaries,
provided, that should such assignee fail to perform its obligations under this
Agreement, Purchaser shall continue to be obligated to perform such obligations.
18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one agreement.
SIGNATURES ON NEXT PAGE
-12A-
14
IN WITNESS WHEREOF, Purchaser and each Shareholder have caused this
Agreement to be executed as of the day and the year first above written.
Convergys Information Management
Group Inc.
By:
--------------------------------
Xxxxxx X. Xxxxxx
President and CEO
-----------------------------------
Xxx Xxxxxxxxx, Shareholder
-----------------------------------
Xxx Xxxxxxxxx, Shareholder
-----------------------------------
Xxxx Xxxxxx, Shareholder
-----------------------------------
Xxxxx Xxxxx, Shareholder
Formula Systems (1985) Ltd.
By:
--------------------------------
Argotec Ltd.
By:
--------------------------------
13
15
SCHEDULE 1
------------------------------------------------------------------------------------------------------------- ---------------------
SHAREHOLDER SHAREHOLDER ENTITY RECORD OWNERSHIP OF NUMBER OF ORDINARY SHAREHOLDER SHAREHOLDER ENTITY
SHAREHOLDER ENTITY SHARES CONSIDERATION @ $15.25 ACCOUNT WIRE TRANSFER
PER SHARE INSTRUCTIONS
------------------------------------------------------------------------------------------------------------- ---------------------
Argotec Ltd. Shandol Ltd. 99.99% Argotec 2,852,000 $43,493,000
0.01% G.L.E. Trust
Asset Ltd.
------------------------------------------------------------------------------------------------------------- ---------------------
Xxx Xxxxxxxxx Staticall Ltd. 99.99% Xxx Xxxxxxxxx 320,000 $4,880,000
0.01% Xxx Xxxxxxxxx
------------------------------------------------------------------------------------------------------------- ---------------------
Xxx Xxxxxxxxx Droogies Ltd. 99.99% Xxx Xxxxxxxxx 120,000 $1,830,000
0.01% Xxx Xxxxxxxxx
------------------------------------------------------------------------------------------------------------- ---------------------
Xxxx Xxxxxx Shem Basum Ltd. 99.99% Xxxx Xxxxxx 100,200 $1,528,050
0.01% Xxxx Xxxxxx
------------------------------------------------------------------------------------------------------------- ---------------------
Xxxxx Xxxxx X.X. Xxxxx 99.99% Xxxxx Xxxxx 58,000 $884,500
Investments Ltd. 0.01% Xxxxxxx Xxxxx
------------------------------------------------------------------------------------------------------------- ---------------------
16
SCHEDULE 2
Selected Employees
As of the date of the Agreement, "selected employees" are those
employees who have service with Wiztec of at least one year and an annual base
salary in excess of $57,000 per year.
17
ANNEX A
-------
CONDITIONS TO THE CLOSING
-------------------------
The capitalized terms used in this Annex have the meanings set forth in
the attached Agreement.
Notwithstanding any other provision of the Agreement, unless the
Purchaser shall have otherwise waived the satisfaction of any of the following
events, the Purchaser shall not be required to accept for payment and pay for
any Shares under the Agreement, and may terminate or amend the Agreement and may
postpone the Closing until no later than March 31, 1999, if at any time prior to
the Closing, any of the following events shall occur:
(a) except for proceedings pursuant to ss.236 of the Companies
Ordinance relating to a plan or contract offered by the Purchaser, there shall
be instituted or pending any action or proceeding before any court, regulatory
or administrative agency or commission, domestic or foreign, initiated by a
governmental, regulatory or administrative body or authority, (i) challenging
the acquisition by the Purchaser of the Shares, seeking to restrain or prohibit
the consummation of the transactions contemplated by the Agreement, seeking to
obtain any material damages or otherwise directly or indirectly relating to the
consummation of the transactions contemplated by the Agreement, (ii) seeking to
prohibit or impose any material limitation on the ownership or operation by the
Purchaser or any of its subsidiaries of all or any portion of the business or
assets or properties of the Purchaser or any of its subsidiaries or the Company
or any of its subsidiaries or to compel the Purchaser or any of their
subsidiaries to dispose of or hold separate all of any portion of the business
or assets of the Purchaser or any of its subsidiaries or the Company or any of
its subsidiaries, (iii) imposing any material limitation upon the ability of the
Purchaser or any of its subsidiaries effectively to acquire or hold or to
exercise full rights of ownership of Shares, including without limitation the
right to vote Shares purchased by it on all matters properly presented to the
stockholders of the Company, (iv) making the acceptance for payment, or payment
for, some or all of the Shares illegal or (v) which otherwise, in the reasonable
judgment of the Purchaser, is reasonably likely to have a materially adverse
effect on the financial condition, results of the operations, business,
operations, properties, assets or prospects of the Company and its subsidiaries
taken as a whole or on the value of the Shares to the Purchaser; or
(b) there shall be in force an injunction or other order issued by any
court, regulatory or administrative agency or commission, domestic or foreign,
(i) restraining or prohibiting the consummation of the transactions contemplated
by the Agreement or awarding any material damages relating to the consummation
of the transactions contemplated by the Agreement, (ii) prohibiting or imposing
any material limitation on the ownership or operation by the Purchaser or any of
its subsidiaries of all or any portion of the business or assets or properties
of the Purchaser or any of its subsidiaries or the Company or any of its
subsidiaries or compelling the Purchaser or any of its subsidiaries to dispose
of or hold separate all or any portion of the business or assets of the
Purchaser or any of its subsidiaries or the Company or any of its subsidiaries,
(iii) imposing any material limitation upon the ability of the Purchaser
18
or any of its subsidiaries effectively to acquire or hold or to exercise full
rights of ownership of Shares including without limitation the right to vote
Shares purchased by it on all matters properly presented to the stockholders of
the Company, (iv) making the acceptance for payment, or payment for, some or all
of the Shares illegal or (v) which is otherwise, in the reasonable judgment of
the Purchaser, is reasonably likely to have a materially adverse effect on the
financial condition, results of operations, business, operations, properties,
assets or prospects of the Company and its subsidiaries taken as a whole or on
the value of the Shares to the Purchaser; or
(c) any statute, rule, regulation or order shall be enacted,
promulgated, entered, enforced or deemed applicable to the purchase of the
Shares or any other action shall have been taken by any government, governmental
authority or court, domestic or foreign, that, in the reasonable judgment of the
Purchaser is reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (iii) through (v) of paragraph (a) above; or
(d) any material adverse change shall have occurred in the financial
condition, results of operations or business of the Company or the Purchaser
shall have become aware of liabilities, contingent or otherwise, or any facts or
circumstances that reasonably could be expected to result in a claim for damages
which have not been disclosed to the Purchaser and which could materially and
adversely affect the business, assets, conditions (financial or otherwise) or
operations of the Company and its subsidiary taken as a whole; or
(e) there shall have occurred (i) any general suspension of, or
limitation on price for or trading in securities in the over-the-counter market,
(ii) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States or Israel, (iii) a commencement of a war,
armed hostilities or other national or international calamity involving the
United States or Israel, (iv) any limitation by any governmental authority on
the extension of credit by banks or other lending institutions, (v) civil riots,
acts of insurgence and related actions that threaten the normal conduct of
business and commerce in Israel, or (vi) in the case of any of the foregoing
existing at the time of the signature of this Agreement, in the reasonable
judgment of the Purchaser, a material acceleration or worsening thereof; or
(f) other than the Shareholders' present share ownership, it shall have
been publicly disclosed or the Purchaser shall have learned that (i) any person
(other than the Purchaser or any of its subsidiaries or third party transferee
thereof) or group (as defined in Section 13(d)(3) of the Exchange Act) not
including among its members the Purchaser or any of its subsidiaries or third
party transferee thereof ("Group") shall have acquired, or made an offer to
acquire or shall have been granted any option or right, conditional or otherwise
to acquire, Shares constituting, when aggregated with all Shares beneficially
owned by such person or Group and its affiliates and any other person or Group
which beneficially owns 10% or more of the outstanding Shares, at least a
majority of the outstanding Shares, or (ii) any new Group is formed which
beneficially owns at least a majority of the outstanding Shares; or
(g) Any of the representations and warranties in Annex B are inaccurate
in any material respect;
2
19
(h) Shareholders and the Purchaser shall have agreed to terminate the
Agreement or postpone the purchase of and payment for Shares thereunder or
(i) Conduct of Business prior to the Closing:
(i) the Company shall have conducted its business other than
in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted;
(ii) the Company shall have (i) amended its Articles of
Association or Memorandum of Association; (ii) split, combined or
reclassified the outstanding Shares or declared, set aside or paid any
dividend payable in cash, stock or property or made any other
distribution with respect to the Shares; or (iii) redeemed, purchased
or otherwise acquired, directly or indirectly, any Shares;
(iii) the Company shall have (i) issued or sold or agreed to
issue or sell any additional shares of, or options, warrants or rights
of any kind to acquire any shares of its capital stock or any class
(including grants of options to its employees or to the employees of
Wiztec Solutions, Inc. under existing authorized employee option plans)
other than Shares issuable pursuant to presently outstanding stock
options and warrants, (ii) entered into any agreement, contract or
commitment out of the ordinary course of its business, to dispose of or
acquire, or relating to the disposition or acquisition of, any material
assets of the Company; (iii) incurred any material amount of
indebtedness for borrowed money, or materially reduced the availability
of funds under any of their existing credit facilities, or entered into
any other material transaction other than in the ordinary course of
business; (iv) amended or modified any outstanding option to acquire
Shares or granted any stock appreciation rights or bonuses; or (v)
entered into any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(iv) the Company shall have failed to use its best efforts to
preserve intact the business organization of the Company, and shall
have failed to assist Purchaser in its efforts to keep available the
services of present officers and key employees of the Company, or to
preserve the good will of those having business relationships with it;
(v) the Company shall have entered into any new employment or
consulting agreement or amended or modified any employment or other
compensation contract or arrangement, or any bonus, deferred
compensation contract, retirement or profit-sharing plan or other
employee benefit plan to which the Company or its subsidiary is a
party, except to grant any increase in compensation in the ordinary
course of business and consistent with past practice;
(vi) the Company shall have failed to cooperate with Purchaser
in determining whether any other filings are required to be made or
consents, approvals, permits or authorizations are required to be
obtained under any other federal, state or foreign law or regulation or
whether any consents, approvals or waivers are required to be obtained
from other parties to loan agreements or other contracts material to
the business of the
3
20
Company in connection with the purchase of the Shares, to actively assist
Purchaser in obtaining any consents, permits, authorizations, approvals or
waivers which are required, and use all reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly
as practicable the transactions contemplated by this Agreement and to
cooperate with Purchaser in connection therewith;
which, in the reasonable judgment of the Purchaser, in any such case, and
regardless of the circumstances giving rise to any such condition, makes it
inadvisable to proceed with the Agreement and the purchase of the Shares
thereunder.
4
21
ANNEX B
-------
1. ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized and validly existing and has paid in full its annual
fees to the Registrar of Companies in Israel. The Company has all requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as presently conducted and as presently proposed to be
conducted. The Company is duly qualified and is authorized to do business and is
in good standing as a foreign corporation in all jurisdictions in which the
nature of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure to
do so would not have a material adverse effect on the financial condition,
business, operations or prospects of the Company and its subsidiaries as a whole
("Material Adverse Effect"). Except as set forth in Schedule 1.1, the Company
owns no equity securities of any other corporation, limited partnership or
similar entity. Except as set forth in Schedule 1.1, the Company is not a
participant in any joint venture, partnership or similar arrangement. Except as
set forth in Schedule 1.1, the Company has no right to become the owner of
equity securities in any other corporation nor is it the beneficial owner,
directly or indirectly, of any other corporation.
2. CAPITALIZATION. The authorized capital of the Company as of the date
of this Agreement consists of 10,000,000 Ordinary Shares each with NIS 1 Par
Value, 6,787,083 shares of which are issued and outstanding, 140,000
underwriters warrants, all of which are issued and outstanding, 400,000 options
authorized pursuant to Company's Incentive Plan, 207,000 of which are issued and
outstanding, 500,000 options authorized pursuant to Company's Subsidiary
Incentive Plan, 11,375 of which are issued and outstanding, 331,200 Series A
Warrants, 319,575 of which are issued and outstanding, and 690,000 options
authorized pursuant to Company's 1997 Option Plans, 332,300 of which are issued
and outstanding. All issued and outstanding Ordinary Shares (i) have been duly
authorized and validly issued, (ii) are fully paid and nonassessable, and (iii)
(a) to the extent issued and sold to United States residents, were issued in
compliance with all applicable United States state and federal securities laws
and (b) were issued in compliance with the laws of the State of Israel
concerning the issuance of securities. Other than as set forth in this Section 2
and Schedule 1.2 attached hereto, there are no outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first refusal),
proxy or shareholder agreements, or agreements of any kind for the purchase or
acquisition from the Company of any of its equity securities.
3. AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. The execution of the
Agreement and the consummation of the transactions contemplated thereby will not
(i) require the Company to obtain the consent, approval, notification, or
registration with any third party, including governmental authorities; (ii)
conflict with or result in any breach or violation of any of the terms and
conditions of, or constitute (or with notice or lapse of time or both would
constitute) a default, under any applicable law, statute, code, ordinance,
regulation, or other requirement or order of any governmental body applicable to
the Company, or any contract to which the Company is a party or by which or to
which the Company's assets are bound or subject, except
1
22
for such breaches, violations and defaults which will not have a Material
Adverse Effect; or (iii) result in the creation of any lien on any of the
Company's assets.
4. FINANCIAL STATEMENTS. The balance sheets of the Company as of
December 31, 1998 and the related statements of income, shareholders' equity and
cash flows for the year then ended, including the notes thereto, which have been
audited by Xxxxxxxxx & Xxxxxxxxx, independent certified public accountants, and
delivered to Purchaser, present fairly in all material respects the financial
position of the Company at such dates and the results of operations and cash
flows of the Company for the years then ended, in each case in accordance with
Israeli generally accepted accounting principles ("Israeli GAAP") consistently
applied for the periods covered thereby. (The foregoing financial statements of
the Company as of December 31, 1998 and for the year then ended are sometimes
herein called the "Annual Financials," the balance sheet included in the Annual
Financials is sometimes herein called the "Balance Sheet," and December 31, 1998
is sometimes herein called the "Balance Sheet Date").
5. ABSENCE OF CERTAIN LIABILITIES. As of the Balance Sheet Date, the
Company did not have any direct or indirect indebtedness, liability, claim,
loss, damage, deficiency, obligation or responsibility, known or unknown, fixed
or unfixed, xxxxxx or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, contingent or otherwise, of a kind required by
Israeli GAAP to be set forth on a financial statement or in the notes thereto
including without limitation any tax liabilities, which were not accurately and
fully reflected or reserved against in the Balance Sheet.
6. AGREEMENTS; ACTION.
(a) Except for the agreements between the Company and its
employees with respect to the sale of Company's Ordinary Shares under Company's
stock option plans and standard non-compete and proprietary information
agreements, and except for those agreements or understandings described in the
Company's Form 20-F for the fiscal year ended December 31, 1997, filed with the
SEC, there are no written, or to Formula's Knowledge, oral agreements or
understandings between the Company and any of its officers, directors,
affiliates or any affiliate thereof of the kind required to be disclosed in
Company's annual filings made with the SEC;
(b) There are no written, or to Formula's Knowledge, oral
agreements, understandings, instruments, contracts, judgments, orders, writs or
decrees to which the Company is a party or to which it is bound which could
reasonably be expected to involve (i) obligations (contingent or otherwise) of,
or payments to, the Company (other than payments of or to the Company arising
from purchase, sale or license agreements entered into in the ordinary course of
business), or (ii) the license of any patent, copyright, trade secret or other
proprietary right to or from the Company other than in connection with licenses
of Company products granted by the Company in the ordinary course of business,
or (iii) provisions materially restricting or affecting the development,
manufacture or distribution of the Company's products or services, or (iv)
indemnification by the Company with respect to infringements of proprietary
rights other than in connection with licenses of Company products granted by the
Company in the ordinary course of business; and
2
23
(c) Other than with Purchaser, the Company has not engaged in
the past three (3) months in any discussion (i) with any representative of any
corporation or corporations regarding the consolidation or merger of the Company
with or into any such corporation or corporations, (ii) with any corporation,
partnership, association or other business entity or any individual regarding
the sale, conveyance or disposition of all or substantially all of the assets of
the Company, or a transaction or series of related transactions in which more
than fifty percent (50%) of the voting power of the Company is disposed of, or
(iii) regarding any other form of acquisition, liquidation, dissolution or
winding up of the Company.
7. OBLIGATIONS TO RELATED PARTIES. Except as set forth in Schedule 1.7,
there are no obligations of the Company to any Company officer (noseh misrah),
director, beneficial holder of 5% or more of Shares or with respect to any
Company employee other than (i) for payment of salary (including bonus) and
commissions for services rendered and (ii) for other standard employee benefits
made generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of Directors of
the Company) except as set forth in the Company's Annual Report on Form 20-F for
the fiscal year ended December 31, 1997.
8. CHANGES. Since the Balance Sheet Date, there has not been:
(a) Any change in the assets, liabilities, financial condition
or operations of the Company, other than changes in the ordinary course of
business, none of which individually or in the aggregate has had or could
reasonably be expected to have a Material Adverse Effect;
(b) Any material increase, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(c) Any damage, destruction or loss, whether or not covered
by insurance, which has had or which could reasonably be expected to have a
Material Adverse Effect;
(d) Any waiver by the Company of a right or of a debt owed
to it, other than write-offs of bad debts in the ordinary course of business and
for which reserves exist;
(e) Any direct loans made by the Company or any direct or
indirect subsidiary of the Company in excess of $10,000 to any shareholder,
employee, officer or director of the Company;
(f) Any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder;
(g) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
3
24
(h) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(i) Any change in any material agreement to which the
Company is a party or by which it is bound which could reasonably be expected to
have a Material Adverse Effect;
(j) To Formula's Knowledge, any change in Israeli law or any
rules promulgated thereunder that has had a Material Adverse Effect;
(k) Any other event or condition of any character that, either
individually or cumulatively, has had a Material Adverse Effect; or
(l) Any agreements or commitments by the Company to do any of
the foregoing.
9. TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good and
marketable title to its properties and assets (other than properties and assets
leased from third parties), both real and personal, including the properties and
assets reflected in the Balance Sheet, and good title to its leasehold estates,
in each case, other than as set forth in Schedule 1.9, subject to no mortgage,
pledge, lien, lease, encumbrance or charge, except for liens on taxes not due
and payable.
10. PATENTS AND TRADEMARKS. As to each domestic and foreign patent,
patent application, trade name, trademark, unpatented invention, service xxxx,
trademark registration, trademark application, service xxxx registration,
service xxxx application, registered copyright, copyright registration applied
for and copyright in software (whether registered or not), owned by the Company
(collectively, the "Intellectual Property"), Schedule 1.10 contains a complete
list thereof specifying (i) the title of the work, if any; (ii) the application
or registration numbers, if any; and (iii) a brief description thereof. If any
domestic or foreign patent, patent application, trade name, trademark,
unpatented invention, service xxxx, trademark registration, trademark
application, service xxxx registration, service xxxx application, registered
copyright, copyright registration applied for and copyright in software (whether
registered or not) was acquired by licenses, including but not limited to patent
licenses, know-how licenses, and software licenses (other than licenses for
off-the-shelf software used in the office environment), such licenses are
likewise identified in the Schedule 1.10 (collectively, "Licensed Intellectual
Property"). Complete and correct copies of each application for or registration
of each such Intellectual Property and each such license have been made
available for inspection to Purchaser prior to execution of this Agreement. To
Formula's Knowledge, there is no claim of infringement or threat of claim of
infringement which in any material way affects Company's rights in or to any
Intellectual Property or Licensed Intellectual Property.
With respect to the Intellectual Property:
(a) the Company is the sole and exclusive owner of the entire
right, title and interest in and to the Intellectual Property used in the
operation of its business (including, but not
4
25
limited to, the exclusive right to use, enhance, modify and license the same)
except for such Intellectual Property as to which Purchaser has certain
ownership rights pursuant to the Joint Development Agreement dated October 6,
1997 between the Company and Cincinnati Xxxx Information Systems Inc.;
(b) the Intellectual Property and all rights appurtenant
thereto are free of any and all liens, claims, security interests and other
encumbrances of any nature or kind;
(c) no interests or rights in or to the source code of any
software have been pledged or hypothecated by the Company to any third party;
(d) all material registrations, filings and issuances relating
to the Intellectual Property remain in full force and effect;
(e) to Formula's Knowledge, the Company has not disclosed
trade secrets used in the operation of its business to any third party on a
non-confidential basis; and
(f) the Intellectual Property and trade secrets, together with
the Licensed Intellectual Property, constitute all intellectual property
necessary for the Company to carry on its business as presently conducted.
With respect to the Licensed Intellectual Property:
(g) to Formula's Knowledge, the parties granting licenses to
the Company under Licensed Intellectual Property had full authority to do so;
(h) to Formula's Knowledge, the Company has the right under
the licenses to practice the Licensed Intellectual Property;
(i) to Formula's Knowledge, the Licensed Intellectual Property
and all rights appurtenant thereto are free of any and all liens, claims,
security interests and other encumbrances of any nature or kind; and
(j) to Formula's Knowledge, all registrations, filings and
issuances relating to the Licensed Intellectual Property remain in full force
and effect.
There are no pending or, to the Knowledge of Formula,
threatened proceedings or litigation or other adverse claims against
the Company with respect to the Intellectual Property or trade secrets
of the Company, and, to Formula's Knowledge, there are no threatened
proceedings or litigation or other adverse claims with respect to the
Licensed Intellectual Property. During the past two years the Company
has not received any notices or claims which claim infringement by the
Company of any domestic or foreign patents, patent applications, patent
licenses, know-how licenses, trade marks, copyrights, copyright
registrations or applications, trade secrets or other confidential
proprietary information. Except as described in the Schedule 1.10,
Formula does not believe that there are any claims which may be
asserted against the Company for infringement of any
5
26
such third party intellectual property, trade secrets or other
proprietary information. To Formula's Knowledge, no person or entity
is infringing the Intellectual Property or trade secrets of the
Company.
To Formula's Knowledge, no person has claimed that any key
employee employed by the Company has, in respect of his or her
activities to date, violated any of the terms or conditions of his or
her prior employment contract with such third party, or disclosed or
utilized any trade secrets or proprietary information or documentation
of such third party, or interfered in the employment relationship
between such third party and any of its employees, except for such
violations, disclosures or interferences which would not have a
Material Adverse Effect.
To Formula's Knowledge, none of Company's key employees is
obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that
would interfere with his duties to the Company or that would conflict
with Company's business as proposed to be conducted. Neither the
execution nor delivery of this Agreement nor the carrying on of
Company's business by the employees of the Company, will, to Formula's
Knowledge, conflict with or result in a breach of the terms, conditions
or provisions of, or constitute a default under, any contract, covenant
or instrument under which any employee is now obligated. Formula does
not believe it is or will be necessary to utilize any inventions, trade
secrets or proprietary information of any of its employees made prior
to their employment by the Company, except for inventions, trade
secrets or proprietary information that have been assigned to the
Company.
Except in his or her capacity as shareholder of the Company,
no present officer or former officer, partner or affiliate of the
Company has or, to Formula's Knowledge, claims to have (i) any interest
in Company's assets, including without limitation, the Intellectual
Property and trade secrets used in the operation of its business, or
(ii) any contract, commitment, arrangement or understanding with the
Company with respect to the Intellectual Property. To Formula's
Knowledge, no present officer of the Company has any ownership or stock
interest, directly or indirectly, in any other enterprise, firm,
corporation, trust or any other entity which is engaged in any line or
lines of business which are the same as, or similar to, or competitive
with, Company's business. For purposes of this representation,
ownership of not more than five percent of the voting stock of any
publicly-held company whose stock is listed on any recognized
securities exchange or traded over the counter shall be disregarded.
11. COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation
or default of any term of its Articles of Association. In addition, the Company
is not in violation or default of any term of any provision of any mortgage,
indenture, contract, agreement, instrument or contract to which it is party or
by which it is bound or of any judgment, decree, order, writ or any statute,
rule or regulation applicable to the Company except for violations and defaults
which would not have a Material Adverse Effect. The execution, delivery, and
performance of and compliance with this Agreement will not result in a violation
or default of any term of any provision of any mortgage, indenture, contract,
agreement, instrument or contract to which it is a
6
27
party or by which it is bound or of any judgment, decree, order, writ or any
statute, rule or regulation applicable to the Company except for violations and
defaults which would not have a Material Adverse Effect or result in the
creation of any material Lien upon any of the properties or assets of the
Company or the suspension, revocation, impairment, forfeiture or nonrenewal of
any permit, license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties which suspension,
revocation, impairment, forfeiture or nonrenewal would have a Material Adverse
Effect.
12. LITIGATION. There is no action, suit, proceeding or, to Formula's
Knowledge, investigation pending against the Company. In addition, to Formula's
Knowledge, there is no action, suit, proceeding or investigation currently
threatened against the Company that questions the validity of this Agreement, or
the consummation of the transactions contemplated hereby, or which could
reasonably be expected to result, either individually or in the aggregate, in
any Material Adverse Change, or any change in the current equity ownership of
the Company. The foregoing includes, without limitation, actions pending or
threatened involving the prior employment of any of Company's employees, their
use in connection with Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality which has had or is reasonably
expected to have a Material Adverse Effect. There is no material action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
13. TAX MATTERS. "Tax" or "Taxes" shall mean any federal, state, local,
national, municipal or other tax (whether income, value added, sales, use,
franchise, transfer, withholding, excise, real or personal property, employment
or any other kind of tax), assessment, levy, fee, impost, withholding or other
governmental charge and shall include all interest and penalties thereon. "Tax
Return(s)" shall mean all returns, declarations, reports, statements and other
documents, including supporting documents, required to be filed with respect to
Taxes. The Company has timely filed in the appropriate place all material Tax
Returns that are required to be filed on or before the date of the Closing, and
all such Tax Returns are true, correct and complete in all material aspects. The
Company has made timely payment of all material Taxes required to be paid,
including all deficiencies and assessments, if any, heretofore levied or
assessed. The Company has duly withheld, collected and timely deposited, paid
over or held for payment to the proper governmental authorities all Taxes
required to be withheld or collected by the Company. The Company has not
received any claim, proposal or assessment in writing from any taxing authority
for any deficiencies for any Tax or governmental charge that could result in, or
that have resulted in, the imposition of a lien by any taxing authority on
property or rights to property owned by the Company except where such a claim,
proposal or assessment would not have a Material Adverse Effect. To Formula's
Knowledge, there are no examinations by any taxing authority of or relating to
the Company, except where such examination would not have a Material Adverse
Effect, and no material basis for any such examination exists. The Company has
received final tax assessments in Israel for the years ended 1993, 1994 and
1995.
7
28
14. EMPLOYEES. The Company has no collective bargaining agreements with
any of its employees. There is no labor union organizing activity pending or, to
Formula's Knowledge, threatened with respect to the Company. The Company has
supplied a sample of all its contracts with its current employees to Purchaser
prior to the date hereof. There is no current employee of the Company who has
not signed a contract with the Company. To Formula's Knowledge, no employee of
the Company, nor any consultant with whom the Company has contracted, is in
material violation of any term of any employment contract, proprietary
information and inventions/technology agreement, or any other agreement relating
to the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and to Formula's Knowledge the continued employment by the Company of its
present employees, and the performance of Company's contracts with its
independent contractors, will not result in any such violation. The Company has
not received any notice alleging that any such violation has occurred. No
employee has a right to any compensation following termination of employment
with the Company, except to severance pay (pitzuei piturin) which may be owed to
such employee under Israeli law. Formula has no Knowledge that any officer or
key employee, or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any officer, key employee or group of key employees
in the three-month period following the Closing.
15. ASSIGNMENT AND AGREEMENT CONCERNING NONDISCLOSURE OF PROPRIETARY
INFORMATION. Each independent contractor and consultant of the Company has
executed a proprietary information and inventions/technology agreement and the
Company has previously provided copies of such agreements to Purchaser.
16. OBLIGATIONS OF MANAGEMENT. To Formula's Knowledge, each officer,
except the Chairman of the Board, of the Company is currently devoting one
hundred percent (100%) of his or her business time to the conduct of the
business of the Company. Formula has no Knowledge of any officer or key employee
of the Company planning to work less than full time at the Company in the
three-month period following the Closing.
17. REGISTRATION RIGHTS. Other than pursuant to the Registration Rights
Agreement with Convergys Information Management Group Inc. (formerly known as
Cincinnati Xxxx Information Systems Inc.), and except as set forth in Schedule
1.17, the Company is presently not under any obligation, and has not granted any
rights, to effect a registration statement by preparing and filing a
registration statement or similar document in compliance with the Securities Act
of 1933, as amended (the "Securities Act"), for any of Company's presently
outstanding securities or any of its securities that may hereafter be issued.
18. COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation of
any applicable statute, rule, regulation, order or restriction of any domestic
or foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which violation would
have a Material Adverse Effect. The Company has all franchises, permits,
licenses and any similar authority necessary for the conduct of its business as
8
29
now being conducted by it, the lack of which could reasonably be expected to
have a Material Adverse Effect.
19. EMPLOYEE BENEFIT PLANS. Neither the Company nor any of the
"employee pension benefit plans" (the "Plans"), as such term is defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974 and the
rules and regulations thereunder (collectively, and as from time to time in
effect, "ERISA"), established or maintained or to which contributions have been
made by the Company, nor any trust created thereunder, nor, to the knowledge of
Formula, any other trustee or administrator thereof, has engaged in a
"prohibited transaction," as such term is defined in Section 406 of ERISA or
Section 4975 of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder (the "Code"), which could subject the Plans or any of
them, any such trust, or any trustee or administrator thereof, or any party
dealing with the Plans or any such trust, to a material tax or penalty on
prohibited transactions imposed by said Section 4975 or to any similar provision
under ERISA. Each Plan maintained by the Company intended to comply with
Sections 401 and 501 of the Code complies in form and operation with all
applicable requirements of the Code. Each Plan has been administered and
operated, at all times during its existence, in accordance with its terms and in
compliance with ERISA and the Age Discrimination in Employment Act and the
regulations promulgated thereunder. Neither the Company nor any of its
directors, officers, employees or any other fiduciary has committed any breach
of fiduciary responsibility imposed by ERISA or any other applicable law that
would subject the Company or any of its directors, officers or employees to
liability under ERISA or any other applicable law. There is no litigation,
arbitration, claim (other than routine benefit claims) or other proceeding or
investigation pending or, to the knowledge of the Company, threatened (or any
basis therefor) with respect to any Plan. None of the Plans or trusts has been
terminated in a manner with respect to which the Company has or may incur
liability, nor have there been any "reportable events," as that term is defined
in Section 4043 of ERISA, since the effective date of ERISA. No Plan which is
subject to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code
had an accumulated funding deficiency (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, as of the last day of the most
recent fiscal year of such Plan to which Part 3 of Subtitle B of Title I of
ERISA or Section 412 of the Code applied, nor would have had an accumulated
funding deficiency on such date if such year were the first year of such Plan to
which Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code
applied. No liability to the Pension Benefit Guaranty Corporation has been or is
expected by the Company to be incurred by the Company with respect to any Plan,
and there has been no event or condition which presents a risk of termination of
any Plan by the Pension Benefit Guaranty Corporation. The present value of all
benefits under each Plan subject to Title IV of ERISA, as determined in
accordance with Statement 87 of the Financial Accounting Standards Board, does
not exceed the current value of the assets of such Plan by an amount greater
than $25,000. The Company is not and has never been a party to any
multi-employer plan, as such term is defined in Section 4001(a)(3) of ERISA. The
execution, delivery and performance of the Agreement and the purchase by the
Purchaser of the Shares shall not involve any prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Code with respect to such
plans.
20. APPROVED ENTERPRISE STATUS. On November 19, 1995 and December 9,
1996, the Company received certification of expansions of its existing
enterprise as "Approved
9
30
Enterprises." The Company is in conformance in all material respects with the
conditions of the certifications (kitvei ishur) issued on such dates, including
reporting obligations and with the law governing Approved Enterprises, such
certifications remain in full force and effect and the Company remains fully
entitled to the benefits to which it is entitled as an Approved Enterprise under
such certifications. The Israeli taxing authorities have not challenged
Company's status as an approved enterprise.
21. OFFICE OF THE CHIEF SCIENTIST. On May 20, 1992, prior to Company's
incorporation, Company's predecessor, a division of Digital Equipment (DEC)
Ltd., received authorization to receive funding from the Office of the Chief
Scientist of the Ministry of Trade and Industry (the "Chief Scientist") with
regard to research and development of earlier versions of certain components of
its program and in fact received such funding. The Company assumed the
liabilities of Company's predecessor towards the office of the Chief Scientist
with regard to such funding. The Company is in conformance in all material
respects with the condition of its certifications from the Chief Scientist and
of the law governing companies which have received funding from the Chief
Scientist, including reporting obligations, and does not owe any royalties.
22. DIGITAL AGREEMENT. The Company has performed fully all of its
obligations, acquired by assignment from Digital Equipment (DEC) Ltd.
("Digital"), to the assignees of Business Systems, Inc. ("BSI") under the
agreement between Digital and "BSI", dated June 28, 1991 (the "BSI Agreement").
23. DIGITAL ROYALTY. The Company, Argotec and Formula have performed
fully in all material respects all their obligations under the Agreement of
January 29, 1997 between Digital Equipment Corporation, Digital Equipment (DEC)
Ltd., Argotec and Formula and have performed fully all their obligations under
Addendum No. 1 of the same date to that agreement (the agreement and the
addendum will be collectively referred to as "the Digital Agreement").
24. CONSULTANTS AND INDEPENDENT CONTRACTORS. Schedule 1.24 attached
hereto lists each full-time consultant and independent contractor that has been
retained by the Company since 1995 to aid in the development of Intellectual
Property.
25. INFORMATION. This Annex B and the Schedules attached hereto, and
all other documents delivered by Formula to Purchaser or their attorneys or
agents in connection herewith or with the transactions contemplated hereby, do
not contain any untrue statements of a material fact nor omit to state a
material fact necessary in order to make the statements contained herein not
misleading.
26. ASSETS; SALES. The Company holds assets located in the United
States having an aggregate book value of less than $15 million. In 1998, the
Company made aggregate sales in the United States of less than $25 million.
For purposes of this Annex B and the Agreement, the following terms
shall have the following meanings:
10
31
"Knowledge" shall mean, with respect to Formula, actual knowledge after
reasonable investigation, including the knowledge of such Formula officers and
employees with responsibility for the management and supervision of Wiztec and
the particular matters to which referred.
"Material Adverse Change" shall mean an occurrence, event or
development which has had or is reasonably likely to have a Material Adverse
Effect.
11
32
INDEX OF OMITTED EXHIBITS AND SCHEDULES
Schedule 1.1 Schedule Regarding Organization, Good Standing and
Qualification
Schedule 1.2 Schedule Regarding Capitalization
Schedule 1.7 Schedule Regarding Obligations to Related Parties
Schedule 1.10 Schedule Regarding Patents and Trademarks
Schedule 1.17 Schedule Regarding Compliance with Laws; Permits
Schedule 1.24 Schedule Regarding Consultants and Independent
Contractors
Exhibit A Sub-Contractor Agreement
Exhibit B Services Agreement
