STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of the 21st day of August, 2001, by
and among Entertainment International Ltd., a New York corporation ("ENTI"),
ENTI Acquisition I Corp., a New York corporation and a wholly-owned subsidiary
of ENTI (the "Buyer"), CSTI Hi-Tech Ltd., an Israeli limited liability company
("CSTI" or the "Company") and the shareholders of CSTI as set forth in Schedule
2.1(a),(collectively, the "Sellers," and individually each a "Seller"). ENTI,
CSTI and the Sellers are referred to collectively herein as the "Parties."
WHEREAS, the Sellers own beneficially and of record 1,202 ordinary
shares consisting of all of the issued and outstanding ordinary shares, par
value NIS 1.00 per share, of the Company (the "Company Stock") as set forth on
Schedule 2.1, hereto;
WHEREAS, subject to and on the terms and conditions contained herein,
the Sellers desires to sell to the Buyer, and the Buyer desires to purchase from
the Sellers, the Company Stock in exchange for an aggregate of newly issued
unregistered (under the Securities Act of 1933) shares of the common stock, par
value $.01 per share, of ENTI in a transaction intended to qualify under ss.351
of the Internal Revenue Code; and
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
ARTICLE 1
SALE AND PURCHASE; CLOSING
SECTION 1.1 Purchase and Sale of the Company Stock. Subject to the
terms and conditions set forth herein, at the Closing, the Sellers shall sell,
transfer and deliver to the Buyer, and the Buyer shall purchase, acquire and
accept from the Sellers, free and clear of all liens, encumbrances, charges,
claims, rights, interests, security interests and any other encumbrances
whatsoever, the Company Stock.
SECTION 1.2 Purchase Price.
(a) Issuance of ENTI Stock. Each share of Company Stock owned
by a Seller and all rights existing with respect thereto shall be exchanged for
newly issued unregistered shares of the common stock, par value $.01 per share,
of ENTI (the "ENTI Stock"), to be issued as set forth below.
(b) thirty one million fifty two thousand four hundred and
eighty three (31,052,483) shares of ENTI Stock shall be issued at the Closing
(as defined herein) to the Sellers in accordance with the allocation set forth
in Schedule 1.2(b) attached hereto;
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SECTION 1.3 Closing. Subject to the terms and conditions of this
Agreement, the sale and purchase of the Company Stock contemplated hereby (the
"Closing") shall take place at 2:00 p.m., local time, at the offices of Xxxx
Marks and Xxxxx LLP in New York on October 15, 2001, or if on such date the
conditions specified in Article 5 shall not have been satisfied or waived, a
date selected by Buyer not later than the fifth business day following such
satisfaction or waiver (the "Closing Date").
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
THE COMPANY SUBSIDIARIES AND THE CHIEF EXECUTIVE OFFICER OF THE COMPANY
(XX. XXXXX XXXXXXXXXX) ON BEHALF OF HIMSELF AND OTHER SELLERS
The Company, the Company Subsidiaries and the Chief Executive Officer
of the Company (Xx. Xxxxx Xxxxxxxxxx) on behalf of himself and other Sellers,
jointly and severally, represent and warrant to the Buyer as follows:
SECTION 2.1 Capitalization. (a) Schedule 2.1(a) sets forth a complete
list of the Sellers, in each case indicating the class and number of shares of
the Company's capital stock held by each such Seller. The authorized outstanding
capital stock of the Company consists of one thousand eight hundred and fourteen
(1,814) ordinary shares, par value NIS 1.00 per share, of which one thousand two
hundred and two (1,202) shares are issued and outstanding. No shares of the
Company Stock are held in the treasury of the Company. The Sellers are the
record and beneficial owners of all of the Company Stock and all of such stock
is duly authorized, validly issued, fully paid and non-assessable.
(b) Except as set forth in Schedule 2.1(b), There are no
shares of Company Stock or any other equity security of the Company or any
rights, options, warrants or convertible securities outstanding or other
agreements to acquire shares of (or convertible into) Company Stock, nor does
the Company have any contractual obligations to purchase, redeem or otherwise
acquire any of its outstanding shares. No shareholder of the Company is entitled
to any preemptive or similar rights to subscribe for shares of capital stock of
the Company except as provided in Schedule 2.3 below.
SECTION 2.2 Receipt of ENTI Stock. (a) Investment Representations. The
ENTI Stock being issued hereunder is being acquired, and will be acquired, by
the Sellers for investment for their own accounts and not with a view to or for
sale in connection with any distribution thereof within the meaning of the
Securities Act or the applicable state securities law; the Sellers acknowledge
that the ENTI Stock constitutes restricted securities under Rule 144 promulgated
by the Commission pursuant to the Securities Act, and the Sellers agree that no
shares of ENTI Stock may be sold, transferred, assigned, pledged or otherwise
disposed of except pursuant to an effective registration statement or an
exemption from registration under the Securities Act, the rules and regulations
thereunder, and under all applicable state securities laws. Each Seller is an
"accredited investor" as that term is defined in Rule 501 of Regulation D
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promulgated by the Commission under the Securities Act. The Sellers have the
knowledge and experience in financial and business matters, are capable of
evaluating the merits and risks of the investment, and are able to bear the
economic risk of such investment. The Sellers have had the opportunity to make
inquiries of and obtain from representatives and employees of Buyer and ENTI
such other information about Buyer and ENTI as it deems necessary in connection
with such investment.
(b) Legend. It is understood that, prior to sale of any shares
of ENTI Stock pursuant to an effective registration, the certificates evidencing
such shares of ENTI Stock shall bear the following (or a similar) legend (in
addition to any legends which may be required in the opinion of ENTI's counsel
by the applicable securities laws of any state), and upon sale of such shares
pursuant to such an effective registration, new certificates shall be issued for
the shares sold without such legends except as otherwise required by law:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR
AN OPINION OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
(c) Certain Transferees. Except in the case of any transfer of
any shares of ENTI Stock issued pursuant to this Agreement to a person in an
open market transaction subsequent to the effective date of, and pursuant to,
any registration statement covering such shares of ENTI Stock, no Seller shall
transfer any such shares of ENTI Stock to any person or entity unless such
transferee shall have agreed in a writing, in form and substance satisfactory to
ENTI, to be bound by the provisions applicable to the Sellers under this Section
2.2 and such transfer shall be made in accordance with all applicable Federal
and state securities laws.
SECTION 2.3 No Conflicts; Consents. The execution, delivery and
performance by the Company, the Company Subsidiaries and the Sellers of this
Agreement and each other Transaction Document to which it, he or she is a party,
the consummation of the Contemplated Transactions to which the Company and the
Sellers are a party or the contemplated change of control of the stock ownership
of the Company, will not (i) violate any provision of the articles of
association (or comparable instruments) of the Company, any Company Subsidiary
or any Seller; (ii) require the Sellers or the Company to obtain any consent,
approval or action of or waiver from, or make any filing with, or give any
notice to, any Governmental Body or any other person, except as set forth on
Schedule 2.3 (collectively, the "Seller Required Consents"); (iii) violate,
conflict with or result in a breach or default under (after the giving of notice
or the passage of time or both), or permit the termination of, any Contract of a
type required to be listed on Schedule 2.3 to which the Sellers, the Company
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Subsidiaries or the Company is a party or by which any of them or any of their
Assets may be bound or subject, or result in the creation of any Lien upon the
Company or any Company Subsidiary Stock or upon any of the Assets of the Company
or any Company Subsidiary pursuant to the terms of any such Contract; (iv)
violate any Law or Order of any Governmental Body, against, or binding upon, the
Sellers or the Company, or upon their respective Assets or the Business; or (v)
violate or result in the revocation or suspension of any Permit.
SECTION 2.4 Corporate Existence and Power. (a) The Company and the
Company's Subsidiaries are a, duly organized, validly existing and in good
standing as corporations under the laws of Israel or its relevant jurisdiction
of incorporation, and have all requisite powers and all material Permits
required to carry on the Business as it is presently conducted. The Company and
Company Subsidiaries are duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary.
(b) Schedule 2.4 (b) sets forth the name of each wholly owned
Subsidiary of the Company (collectively, the "Company Subsidiaries and each, a
"Company Subsidiary"), its jurisdiction of incorporation or other organization,
each jurisdiction in which it is duly qualified to do business as a foreign
entity, the authorized capital stock or other ownership interests of, and the
securities issued by, such Company Subsidiary. In addition to the Company is a
shareholder in two additional subsidiaries which are not wholly owned and are
set forth in Schedule 2.4 (b-1) (the "Additional Subsidiaries").
SECTION 2.5 Charter Documents and Corporate Records. The Company have
heretofore delivered to the Buyer true and complete copies of the articles of
association, by-laws and minute books, or comparable instruments, of the Company
and each Company Subsidiary, as in effect on the date hereof. The stock transfer
books (or comparable instruments) of the Company and each Company Subsidiary
have been made available to the Buyer for its inspection and are true and
complete.
SECTION 2.6 Financial Information; Books and Records. (a) The Company
has previously furnished to the Buyer, in U.S. dollars, true and complete copies
of (i) the audited financial statements at and for the twelve-month period ended
December 31, 2000 of the Company, (ii) and the unaudited financial statements
for the six months ended June 30, 2001 (collectively the "Annual Statements" or
the "Company Financial Statements"). The Annual Statements have been prepared by
Xxxxxxxx, Xxxx & Co. Certified Public Accountants in accordance with the Israeli
generally accepted accounting principles consistently applied as set forth in
the notes thereto (without qualification in the report thereof). The Annual
Statements have been furnished to Buyer, copies of which are attached hereto as
Schedule 2.6.
(b) All financial, business and accounting books, ledgers,
accounts and official and other records relating to the Company and each Company
Subsidiaries have been properly and accurately kept and completed in all
material respects, and there are no material inaccuracies or discrepancies
contained or reflected therein.
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SECTION 2.7 Liabilities. Except as set forth in the Annual Statements,
the Company has no indebtedness, duties, responsibilities, claims or obligations
of any nature, whether absolute, accrued, contingent or otherwise (collectively,
"Liabilities"), whether as principal, agent, partner, co-venturer, guarantor or
in any capacity whatsoever, other than (i) Liabilities which are set forth on
and reflected or reserved against in the Company Financial Statements and which
remain outstanding and undischarged as of the date hereof, or (ii) Liabilities
arising in the ordinary course of business of the Company since June 30 , 2001
and as set forth in the Annual Statements.
SECTION 2.8 Absence of Certain Changes. (a) Since the Financial
Statement, except as set forth in this Agreement or its Schedules the Company
and each Company Subsidiary has conducted its Business in the ordinary course
consistent with past practices and there has not been:
(i) Any material adverse change in the Condition of
the Business or any event, occurrence or circumstance that could reasonably be
expected to cause such a material adverse change;
(ii) Any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital stock of
the Company;
(iii) Any damage, destruction or other casualty loss
(whether or not covered by insurance), condemnation or other taking affecting
the Assets of the Company or any Company Subsidiary to the extent material;
(iv) Any material change in any method of accounting
or accounting practice by the Company;
(v) Any material increase in the compensation payable
or to become payable to any officer, stockholder, director, partner, consultant,
agent or full-time employee of the Company or any Company Subsidiary, or any
alteration in the benefits payable to any thereof;
(vi) there has not been any (i) incurrence,
assumption or guarantee by the Company or any Company Subsidiary of any
Liability other than in the ordinary course of business in amounts and on terms
consistent with past practices, (ii) issuance or sale of any securities
convertible into or exchangeable for debt securities of the Company, or (iii)
issuance or sale of options or other rights to acquire from the Company,
directly or indirectly, debt securities of the Company or any securities
convertible into or exchangeable for any such debt securities; or
(vii) Except in the ordinary course of the Business,
consistent with past practice, any payment, directly or indirectly, of any
Liability before the same became due in accordance with its terms.
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(b) Except as set forth on Schedule 2.8(b) , the Company does
not have any Liability that is past due, outside the ordinary course of
business.
SECTION 2.9 Intellectual Property. (a) The Company or a Subsidiary, if
applicable owns or has legal right to use, sell or license all trade names and
logos including applications therefor, domain names, inventions, formulas,
methods and processes (all such items being hereinafter referred to as "CSTI
IP") presently used or required by the Company or its Subsidiaries for the
conduct of their respective businesses, without any infringement upon the
proprietary rights of others.
(b) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not constitute
a material breach of any instrument or agreement governing any CSTI IP, will not
cause the forfeiture or termination or give rise to a right of forfeiture or
termination of any CSTI IP or materially impair the right of the Company to use,
sell or license any CSTI IP or portion thereof.
(c) Except as set forth on Schedule 2.9 (c) and the Company
Subsidiaries, with respect to each item of CSTI IP required to be identified
herein:
(i) such CSTI IP is not subject to any outstanding
injunction, judgement, order, decree, ruling or charge;
(ii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to the
knowledge of the Company or Sellers, is threatened which challenges the
legality, validity, enforceability, use or ownership of such piece of CSTI IP;
and
(iii) the Company has not licensed or permitted any
third party to use such piece of CSTI IP.
SECTION 2.10 Claims and Proceedings. Except as set forth on Schedule
2.10 there are no actions, suits, claims or counterclaims or legal,
administrative or arbitral proceedings or investigations (collectively,
"Claims") (whether or not the defense thereof or Liabilities in respect thereof
are covered by insurance), pending or threatened on the date hereof, against or
involving the Company, any Company Subsidiary or their respective assets or
businesses. Except as set forth on Schedule 2.10, there are no outstanding
Orders of any Governmental body against or involving the Company, any Company
Subsidiary or the business.
SECTION 2.11 Taxes.
(i) the Company and each Company Subsidiary has
timely filed or, if not yet due, will timely file all Tax Returns required to be
filed by it for all taxable periods ending on or before the Closing Date and all
such Tax Returns are true, correct and complete;
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(ii) the Company and each Company Subsidiary has paid
or, if payment is not yet due, will, on or before the Closing Date, pay to the
appropriate Tax Authority or have established, in accordance with Israeli GAAP
and consistent with past practice, accruals that are reflected on the Interim
Statements for the payment of all Taxes of the Company and each Company
Subsidiary for all taxable periods ending on or before the Closing Date;
SECTION 2.12 Employee-Related Matters. (a) Schedule 2.12 contains a
true and correct list of all directors, officers, partners, full-time employees,
consultants or agents of the Company and each Company Subsidiary. CSTI will
furnish Buyer, prior to the Closing Date a list of all material agreements with
directors, officers, partners, full-time employees, consultants and agents.
SECTION 2.13 Compliance with Laws. Neither the Company nor any Company
Subsidiary is in violation in any material respect of any order, judgment,
injunction, award, citation, decree, consent decree or writ (collectively,
"Orders"), or any law, statute, code, ordinance, rule, regulation or other
requirement (collectively, "Laws"), of any government or political subdivision
thereof, whether federal, state, local or foreign, or any agency or
instrumentality of any such government or political subdivision, or any court or
arbitrator (collectively, "Governmental Bodies") affecting or relating to their
respective Assets, or the Business or to the employees conducting the Business.
SECTION 2.14 Ability to Conduct Business. As of the Closing, the assets
of the Company will be sufficient and adequate to permit the continued conduct
of the business of the company and the Company Subsidiaries substantially as it
has been conducted since January 1, 2001 and, assuming all Seller Required
Consents are obtained, the consummation of the transactions contemplated by the
terms of this Agreement will enable the Buyer to conduct the business
substantially as it has been conducted since that date.
SECTION 2.15 Disclosure. All documents, Exhibits and Schedules
delivered or to be delivered by or on behalf of the Company or the Sellers to
the Buyer in connection with this Agreement and the transactions contemplated
under this Agreement are true and complete in all material respects. No
representation or warranty of the Sellers contained in this Agreement contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements made, in context in which made, not materially
false or misleading. Prior to the Closing Date, CSTI will furnish Buyer with a
list of all material agreements of the Company and the Company Subsidiaries.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ENTI AND BUYER
ENTI and Buyer hereby jointly and severally represent and warrant to
CSTI and Sellers as follows:
SECTION 3.1 (a) Organization and Standing. ENTI and Buyer are a
corporation duly organized, validly existing and in good standing under the laws
of the state in which it was incorporated.
(b) Other than the Buyer which is wholly owned by ENTI, ENTI
does not have any other subsidiaries.
SECTION 3.2 Authority. ENTI and Buyer have the full legal power and
authority to make, execute, deliver and perform this Agreement and the
Transaction Documents. Such execution, delivery, performance and consummation
have been duly authorized by all necessary action, corporate or otherwise, on
the part of such Seller, and any necessary consents of holders of indebtedness
of such Seller have been obtained.
SECTION 3.3 Binding Effect. This Agreement and all Transaction
Documents executed by ENTI constitute the valid and binding obligations of such
party, enforceable against such Seller in accordance with their respective
terms.
SECTION 3.4 Absence of Conflicting Agreements. Neither the execution or
delivery of this Agreement or any of the Transaction Documents by ENTI and Buyer
nor the performance by ENTI and Buyer of the transactions contemplated hereby
and thereby conflicts with, or constitutes a breach of or a default under (i)
the charter or formation documents of such Seller, or (ii) any law, rule,
judgment, order, writ, injunction, or decree of any court currently in effect
applicable to such Seller, or (iii) any rule or regulation of any administrative
agency or other governmental authority currently in effect applicable to ENTI
and the ENTI Subsidiaries, or (iv) any agreement, indenture, contract or
instrument to which such party is now a party or by which any of the assets of
ENTI is bound.
SECTION 3.5 Claims and Proceedings. There are no actions, suits, claims
or counterclaims or legal, administrative or arbitral proceedings or
investigations (collectively, "Claims") (whether or not the defense thereof or
Liabilities in respect thereof are covered by insurance), pending or threatened
on the date hereof, against or involving ENTI and the ENTI Subsidiaries, any
ENTI and Buyer or its respective assets or businesses. There are no outstanding
Orders of any Governmental body against or involving ENTI and the ENTI
Subsidiaries.
SECTION 3.6 Capitalization. (a) Schedule 3.6 sets forth a complete list
of ENTI share capital as of the date of the Closing, computed on a post reverse
split basis of 20:1. The authorized capital stock of ENTI consists of one
hundred and ten million (110,000,000) common shares, par value $0.01 per share,
of which as of the date of the Closing, on a post
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reverse split basis of 20:1 five million four hundred seventy nine thousand
eight hundred and fifty (5,479,850) shares are issued and outstanding. No shares
of ENTI are held in the treasury of the Company. The Sellers are the record
beneficial owners of all of the Company Stock and all of such stock is duly
authorized, validly issued, fully paid and non-assessable.
(b) There are no shares of ENTI Stock or any other equity
security of the Enti or any rights, options, warrants or convertible securities
outstanding or other agreements to acquire shares of ENTI Stock, nor does ENTI
have any contractual obligations to purchase, redeem or otherwise acquire any of
its outstanding shares. No shareholder of ENTI is entitled to any preemptive or
similar rights to subscribe for shares of capital stock of ENTI.
SECTION 3.7 Financial Information; Books and Records. (a) Until the
Closing Date, ENTI shall furnished CSTI, in U.S. dollars, true and complete
copies of ENTI's audited consolidated financial statements for the years ended
on December 31, 1999, December 31, 2000 and June 30, 2001.
(b) All financial, business and accounting books, ledgers,
accounts and official and other records relating to ENTI have been properly and
accurately kept and completed in all material respects, and there are no
material inaccuracies or discrepancies contained or reflected therein.
SECTION 3.8 Consents. No authorization, consent, approval, license,
exemption by, filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, is or
will be necessary in connection with the execution, delivery and performance of
this Agreement or any of the Transaction Documents by such Seller.
SECTION 3.9 Liabilities. Except as set forth in Schedule 3.9, ENTI and
Buyer shall have no indebtedness, charges, encumbers, pledges, duties,
responsibilities, claims or obligations of any nature, whether absolute,
accrued, contingent or otherwise (collectively, "Liabilities"), whether as
principal, agent, partner, co-venturer, guarantor or in any capacity whatsoever
exceeding an aggregate of $5,000 U.S. Dollars. At the Closing Date all
Liabilities, including any and all liabilities to Trans-Continental and Xx.
Xxxxx Xxxxxxxx shall be waived, canceled and written off, and Trans-Continental
and Xx. Xxxxx Xxxxxxxx shall deliver to Company an irrevocable written waivers
and cancellation of Liabilities owed to them.
SECTION 3.10 SEC and NASD Compliance. ENTI has timely filed or, if not
yet due, will timely file all required SEC and NASD filing requirements or
filings required to be filed by it on or before the Closing Date and all such
filings are true, correct and complete; To the best of ENTI's knowledge ENTI
should be eligible to have its shares traded on the NASDAQ small cap market,
provided that such listing requirements are meet.
SECTION 3.11 ENTI is not in violation in any material respect of any
material order , judgment, injunction, award, citation, decree, consent decree
or writ (collectively,
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"Orders"), or any material law, statute, code, ordinance, rule, regulation or
other requirement (collectively, "Laws"), of any government or political
subdivision thereof, whether federal, state, local or foreign, or any agency or
instrumentality of any such government or political subdivision, or any court or
arbitrator (collectively, "Governmental Bodies") affecting or relating to their
respective Assets, or the Business or to the employees conducting the Business.
SECTION 3.12 Except as set forth in Schedule 3.12, ENTI does not have
any material future obligations (exceeding an aggregate of $2,000) of whatever
content and nature.
SECTION 3.13 (a) The ENTI Stock to be issued on a 20:1 reverse split
basis as part of the Purchase Price is validly authorized stock and, when issued
and delivered in accordance with this Agreement, will be validly issued, fully
paid and non-assessable and will not be issued in violation of any preemptive
rights, rights of first refusal or other contractual restrictions of any kind of
the shareholders of ENTI, and Sellers will receive good title to the ENTI Stock
free and clear of all Liens.
(b) ENTI will reserve a sufficient number of shares of its
unissued common stock and take any other necessary action to ensure that such
shares are available for issuance to the Sellers in accordance with this
Section.
SECTION 3.14 No Conflicts; Consents. The execution, delivery and
performance by each of ENTI and Buyer of this Agreement and each other
Transaction Document to which it is or, at the Closing, will be a party and the
consummation of the Contemplated Transactions to which it is or, at the Closing,
will be a party do not and will not (i) require each of ENTI and Buyer to obtain
any consent, approval or action of or waiver from, or make any filing with, or
give any notice to, any Governmental Body or any other person, except as set
forth in Schedule 3.15 (collectively, the "Buyer Required Consents"); (ii) if
the Buyer Required Consents are obtained prior to the Closing, violate, conflict
with or result in the breach or default under (after the giving of notice or the
passage of time); or permit the termination of, any material Contract to which
each of ENTI and Buyer is a party or by which each of ENTI and Buyer or its
respective assets may be bound or subject; or (iii) if the Buyer Required
Consents are obtained prior to the Closing, violate any Law or Order of any
Governmental Body, against, or binding upon, the Buyer.
Article 4
COVENANTS AND AGREEMENTS
SECTION 4.1 Conduct of Business of the Company. (a) From the date
hereof through the Closing Date, the Company agrees:
(i) To conduct its operations according to the
ordinary and usual course of the Business consistent with past practice, to
preserve intact its present business organization and structure, to use
reasonable efforts to keep available the services of its present
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officers, agents and full-time employees, to use reasonable efforts to preserve
and maintain its Assets and the good will of the Business and to use reasonable
efforts to preserve its relationships with customers and suppliers, and others
having business dealings with it.
(ii) Not to sell pledge or otherwise encumber in any
manner any of the CSTI IP.
(iii) To maintain in the ordinary course of the
Business, consistent with past practice and in accordance with all Contracts,
the Real Property and all its material Assets in their present repair, order and
condition, subject to ordinary wear and tear.
(iv) Not to incur any Liability (other than
Liabilities incurred in the ordinary course of the Business, consistent with
past practice, which are not in the aggregate material thereto), nor enter into
any Contract of a type required to be included in any Schedule hereto.
(v) Not to incur any Company Debt.
(vi) To conduct its operations according to the
ordinary and usual course of the Business, not to pay, discharge or satisfy any
Claim or Liability, other than the payment, discharge or satisfaction when due
and in the ordinary course of the Business of Claims or Liabilities incurred in
the ordinary course of Business, consistent with past practice.
(vii) To conduct its operations according to the
ordinary and usual course of the Business, not to increase the compensation
payable or to become payable to any officer, stockholder, director, partner,
consultant, agent or full-time employee of the Company, or make any alteration
in the benefits payable to any thereof or, without the prior consent of the
Buyer, hire any new employees, consultants, agents or representatives.
(b) From the date hereof through the Closing Date, the Company
and the Sellers agree that the affairs of the Company will be conducted in such
a manner so that the representations and warranties of the Company and the
Sellers contained herein shall continue to be true and correct on and as of the
Closing Date as if made on and as of the Closing Date.
SECTION 4.2 Corporate Examinations and Investigations. Prior to the
Closing Date, the Company and the Sellers, on the one hand, and ENTI and the
Buyer, on the other hand, agree that the other shall be entitled, through their
respective directors, officers, Affiliates, employees, attorneys, accountants,
representatives, lenders, consultants and other agents (collectively,
"Representatives") to make such investigation of the Assets, the CSTI IP, the
Business and operations of the Company or ENTI, as the case may be, and such
examination of the books, records and financial condition of the Company or
ENTI, as the case may be, as such party reasonably deems necessary. Any such
investigation and examination shall be conducted at reasonable times, under
reasonable circumstances and upon reasonable notice, and the Company and the
Sellers, on the one hand, and ENTI, on the other hand, shall cooperate fully
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therein. In that connection, the Company and the Sellers, on the one hand, and
the Buyer, on the other hand, shall make available to the Representatives of the
other party during such period, without however causing any unreasonable
interruption in the operations of such party, all such information and copies of
such documents and records concerning the affairs of the Company, on the one
hand, or ENTI, on the other hand, as such Representatives may reasonably
request, shall permit the Representatives of the other party access to their
respective Assets, and all parts thereof and to their respective employees,
customers, suppliers and others, and shall cause such Representatives to
cooperate fully in connection with such review and examination. No investigation
by any party hereto shall diminish or obviate any of the representations,
warranties, covenants or agreements of the other parties hereto contained in
this Agreement.
SECTION 4.3 Additional Financial Statements. Prior to November 15,
2001, as soon as available and in any event within forty five (45) calendar days
after the end of each monthly accounting period of the Company ending after the
date of the most recent Interim Statement, the Company and the Sellers shall
furnish ENTI and the Buyer with an unaudited consolidated (if applicable)
financial statement of the Company for such month in form and substance
comparable to the Interim Statements and with such other financial or other
information routinely prepared by the Company.
SECTION 4.4 Filings and Authorizations. The Company and the Sellers, on
the one hand, and ENTI and the Buyer, on the other, promptly after the execution
and delivery of this Agreement, shall file or supply, or cause to be filed or
supplied, all notifications, reports and other information required to be filed
or supplied and to obtain all Permits, consents, approvals and authorizations of
third parties and Governmental Bodies necessary, pursuant to the rules and
regulations of the Governmental Bodies in connection with the Contemplated
Transactions and which are required by such Law or rules to effectuate the
consummation of the Contemplated Transactions. The Company and the Sellers, on
the one hand, and ENTI and the Buyer, on the other, shall cooperate with each
other in connection with such filings and furnish each other with copies of such
filings and any correspondence received from any third party or Governmental
Body in connection therewith. The Company and the Sellers, on the one hand, and
ENTI and the Buyer, on the other, as promptly as practicable, shall make, or
cause to be made, all filings and submissions under such Laws or rules as are
applicable to them, and their Affiliates, as may be required for them to
consummate the Contemplated Transactions in accordance with the terms of this
Agreement and shall furnish copies thereof to each other party, and to the
extent possible each will consult with the other, subject to applicable law
relating to the exchange of information, with respect to all material written
information submitted to any third party or Governmental Body, prior to such
filing and shall not make any such filing or submission to which the Buyer or
the Sellers, as the case may be, reasonably objects in writing. All such filings
shall comply in form and content in all material respects with applicable Law.
Each party will keep the other appraised of the status of material matters
relating to completion of the transactions contemplated hereby. Each party
agrees, upon request, to furnish the other party with all information concerning
itself, directors, officers and stockholders, and such other matters as may be
reasonably necessary or advisable in connection with any filing, notice or
application made by or on behalf of such other party to any third party or
Governmental Body.
13
SECTION 4.5 Efforts to Consummate. Subject to the terms and conditions
herein, each party hereto, without payment or further consideration, shall use
its good faith 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 soon as reasonably practicable, the Contemplated
Transactions, including, but not limited to, the obtaining of all Seller
Required Consents and Buyer Required Consents and Permits or consents of any
third party, whether private or governmental, required in connection with such
party's performance of such transactions and each party hereto shall cooperate
with the other in all of the foregoing.
SECTION 4.6 Public Announcements. Prior to the Closing Date, the
Company and the Sellers, on the one hand, and ENTI, on the other, will consult
with each other before issuing any press release or otherwise making any public
statement with respect to the Contemplated Transactions, and will not issue any
such press release or make any such public statement without the prior approval
of the Buyer or the Sellers, as the case may be, except as may be required by
applicable Law, in which event the other party shall have the right to review
and comment upon (but not approve) any such press release or public statement
prior to its issuance.
SECTION 4.7 Expenses. Except as otherwise specifically provided in this
Agreement, the Buyer and the Sellers shall bear their respective expenses, and
the Sellers will bear the expenses of the Company, in each case, incurred in
connection with the preparation, execution and performance of this Agreement and
the Contemplated Transaction, including, without limitation, all fees and
expenses of their respective Representatives.
SECTION 4.8 Confidentiality. (a) Prior to the Closing Date, the Company
and the Sellers, on the one hand, and ENTI and the Buyer, on the other hand,
shall hold in strict confidence, and shall use their best efforts to cause all
their respective Representatives to hold in strict confidence, unless compelled
to disclose by judicial or administrative process, or by other requirements of
Law, all information concerning the other party which such party has obtained
from the other party and their respective Representatives prior to, on or after
the date hereof in connection with the Contemplated Transactions, and, prior
thereto, the no party shall use or disclose to others, or permit the use or
disclosure of, any such information so obtained, and will not release or
disclose such information to any other person, except its respective
Representatives who need to know such information in connection with this
Agreement and who shall be advised of the provisions of this Section 4.8. The
foregoing provision shall not apply to any such information to the extent (i)
known by such party prior to the date such information was provided to such
party in connection with the Contemplated Transactions, (ii) made known to such
party from a third party not known by such party to be in breach of any
confidentiality requirement or (iii) made public through no fault of such party
or any of its respective Representatives.
(b) If the Contemplated Transactions are not consummated and
if requested by the other party hereto, the party shall return to the other all
tangible evidence of such information regarding such party.
14
Article 5
CONDITIONS TO CLOSING
SECTION 5.1 Conditions to the Obligations of the Parties. The
obligations of the Company and the Sellers, on the one hand, and ENTI , on the
other, to consummate the Contemplated Transactions are subject to the
satisfaction of the following conditions:
(a) No Injunction. No provision of any applicable Law and no
Order shall prohibit the consummation of the Contemplated Transactions.
(b) No Proceeding or Litigation. No claim instituted by any
person shall have been commenced or pending against the Company, the Sellers,
the Buyer or any of their respective Affiliates, officers or directors, which
claim seeks to restrain, prevent, change or delay in any respect the
Contemplated Transactions or seeks to challenge any of the terms or provisions
of this Agreement or seeks damages in connection with any such transactions.
SECTION 5.2 Conditions to the Obligations of the Company and the
Sellers. The obligations of the Company and the Sellers hereunder to consummate
the Contemplated Transactions are subject, at the option of the Sellers, to the
fulfillment prior to or at the Closing of each of the following further
conditions:
(a) Performance. ENTI shall have performed and complied with
all agreements, obligations and covenants required by this Agreement to be
performed or complied with by them at or prior to the Closing Date.
(b) Representations and Warranties. The representations and
warranties of ENTI contained in this Agreement and in any certificate or other
writing delivered by ENTI pursuant hereto shall be true at and as of the Closing
Date as if made at and as of such time.
(c) Buyer Required Consents. All Buyer Required Consents shall
have been obtained.
(d) Reverse Stock Split ENTI's Certificate of Incorporation
shall be amended in order to evidence a 20:1 reverse split of all of the issued
and outstanding common stock of ENTI,
(e) Board of Directors. All members of the Board of Directors
of ENTI and ENTI Subsidiaries shall resign from office and shall nominate
alternate directors to replace them. The identity of such alternate directors
shall be in the sole discretion of the Company.
15
(f) Deliveries. There shall have been delivered to the Sellers
the following:
(i) a certificate, dated as of the Closing Date, of
the Secretary or Assistant Secretary of each of
(ii) ENTI and the Buyer, certifying, among other
things, that attached or appended to such certificate (A) is a true and correct
copy of the certificate of incorporation and by-laws of ENTI and the Buyer and
all amendments, if any, thereto as of the date thereof; (B) is a true copy of
all corporate actions taken by the board of directors of ENTI and the Buyer
authorizing the execution, delivery and performance of this Agreement and each
other Transaction Document to be delivered by each of them pursuant hereto; and
(C) are the names and signatures of its duly elected or appointed officers who
are authorized to execute and deliver this Agreement and any certificate,
document or other instrument in connection herewith.
(iii) a signed opinion by ENTI's legal counsel, Xxxx,
Marks and Xxxxx LLP, addressed to the Sellers and CSTI, dated as of the Closing
Date, in a form satisfactory to Sellers..
(iv) certificates representing the ENTI Stock;
(g) The resignation letters of all members of the Board of
Directors of ENTI and proper documentation of the appointment of alternate
directors to ENTI's board of directors, the identity of which shall be in the
sole discretion of CSTI.
SECTION 5.3 Conditions to the Obligations of the Buyer. All obligations
of the Buyer to consummate the Contemplated Transactions hereunder are subject,
at the option of the Buyer, to the fulfillment prior to or at the Closing of
each of the following further conditions:
(a) Due Diligence. For a period of thirty (30) days following
the execution of this Agreement, the Buyer and its officers, directors,
employees, affiliates, attorneys, accountants, financial advisers, consultants,
representatives and agents (collectively, the "Buyer's Agents") shall be
provided reasonable access to undertake a complete investigation of the value,
patentability and marketability of the CSTI IP, and the business, affairs,
operations, properties, assets and liabilities of the Company including, but not
limited to, a complete examination of all books and records, contractual
commitments, obligations and assets, and the obligation of the Buyer to complete
the Contemplated Transactions shall be subject to a determination by the Company
after such investigation that it wishes to consummate the Contemplated
Transactions.
(b) Performance. The Company and the Sellers shall have
performed and complied with all agreements, obligations and covenants required
by this Agreement to be performed or complied with by it at or prior to the
Closing Date.
16
(c) Representations and Warranties. The representations and
warranties of the Company and the Sellers contained in this Agreement and in any
certificate or other writing delivered by the Company or Sellers pursuant hereto
shall be true at and as of the Closing Date as if made at and as of such time.
(d) Seller Required Consents. All Seller Required Consents
shall have been obtained.
(e) Company Stock. The Buyer shall have received certificates
representing the Company Stock duly endorsed in blank or accompanied by stock
transfer powers duly executed in blank and in suitable form for transfer by
delivery.
(f) No Proceeding or Litigation. No Claim instituted by any
person (other than the Buyer or its Affiliates), shall have been commenced or be
pending against the Seller, the Company or the Buyer or any of their Affiliates,
partners, officers or directors, which Claim (i) seeks to restrain, prevent,
change or delay in any material respect the transactions Contemplated under the
terms of this Agreement or seeks to challenge any of the material terms or
provisions of this Agreement or seeks material damages in connection with any of
the Contemplated Transactions and (ii) could, in the reasonable opinion of the
Buyer, (x) result in a material adverse effect in the Condition of the business
or (y) delay or otherwise affect, in a manner adverse to Buyer, the transactions
Contemplated under the terms of this Agreement.
(g) Deliveries. There shall have been delivered to the Buyer
the following:
(i) A "Cold Comfort Letter" signed by the Company's
accountants, Xxxxxxxx, Xxxx & Co..
(ii) A certificate, dated as of the Closing Date, of
the Secretary or Assistant Secretary of the Company, certifying, among other
things, that attached or appended to such certificate (A) is a true and correct
copy of the articles of association (or comparable instruments) of the Company
and all amendments, if any, thereto as of the date thereof; (B) is a true copy
of all corporate actions taken by the board of directors of the Company
authorizing the execution, delivery and performance of this Agreement and each
other Transaction Document to be delivered by the Company pursuant hereto; and
(C) are the names and signatures of its duly elected or appointed officers who
are authorized to execute and deliver this Agreement and any certificate,
document or other instrument in connection herewith.
(iii) Stock certificates representing the Company
Stock accompanied by stock powers duly executed in favor of Buyer, in proper
form for transfer, together with any other documents that are necessary to
transfer to Buyer good and marketable title to the Company Stock;
17
(iv) A suitable business plan describing the
activities and business of the Company in a form and quality customary for
presentation by companies seeking financing from financial institutions
including three year projections, P&L and balance sheets..
(v) Dully executed Minutes of a shareholders meeting
of the Company authorizing this Agreement and the transactions contemplated
hereunder.
(vi) A signed opinion of the Company's counsel, dated
the Closing Date, addressed to the Buyer, in the form satisfactory to Buyer.
SECTION 5.4 Copies of all Seller Required Consents and material
Permits.
Article 6
TERMINATION
SECTION 6.1 Termination. This Agreement may be terminated and the
Contemplated Transactions may be abandoned at any time prior to the Closing:
(a) By mutual written consent of the of the Parties;
(b) By the Sellers if (i) there has been a material
misrepresentation or breach of warranty on the part of the Buyer in the
representations and warranties contained herein and such material
misrepresentation or breach of warranty, if curable, is not cured within 30 days
after written notice thereof from the Sellers; (ii) the Buyer has committed a
material breach of any covenant imposed upon it hereunder and fails to cure such
breach within 30 days after written notice thereof from the Sellers;
(c) By the Buyer, if (i) there has been a material
misrepresentation or breach of warranty on the part of the Company or the
Sellers in the representations and warranties contained herein and such material
misrepresentation or breach of warranty, if curable, is not cured within 30 days
after written notice thereof from the Buyer; (ii) the Company or Sellers have
committed a material breach of any covenant imposed upon it hereunder and fails
to cure such breach within 30 days after written notice thereof from the Buyer;
(d) By the Sellers or by the Buyer, if there shall be any Law
that makes consummation of the Contemplated Transactions illegal or otherwise
prohibited, or if any Order enjoining the Company, the Sellers or the Buyer from
consummating the Contemplated Transactions is entered and such Order shall have
become final and nonappealable;
(e) By the Sellers or by the Buyer, in the event that the
Closing Date does not take place and occur prior to January 31, 2002.
18
Article 7
MISCELLANEOUS
SECTION 7.1 Notices. (a) Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally by
hand or by recognized overnight courier, telecopied or mailed (by registered or
certified mail, postage prepaid) as follows:
(i) If to the Buyer, one copy to:
Entertainment International Ltd.
0000 Xxxx Xxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, President
(ii) If to the Company, one copy to:
4 Hashlagan Stret
XX Xxx 0000
Xxxxxx Xxx
00000, Xxxxxx
Attention: Xxxxx Xxxxxxxxxx, President
(iii) If to the Sellers, one copy to:
Xxxx, Xxxxx, Xxxxxx & Co., Law Offices
and Notary
00 Xxxxxxxxxx xx.
Xxxxx Xxx, 00000, Xxxxxx
Attention: Xxxx Xxxxxx, Adv.
(iv) Each such notice or other communication shall be
effective (i) if given by telecopier, when such telecopy is transmitted to the
telecopier number specified in Section 7.1(a) (with confirmation of
transmission); or (ii) if given by any other means, when delivered at the
address specified in Section 7.1(a). Any party by notice given in accordance
with this Section 7.1 to the other party may designate another address (or
telecopier number) or person for receipt of notices hereunder. Notices by a
party may be given by counsel to such party.
SECTION 7.2 Entire Agreement. This Agreement (including the Schedules
and Exhibits hereto) and the other Transaction Documents executed in connection
with the consummation of the Contemplated Transactions contain the entire
agreement among the parties with respect to the subject matter hereof and the
Contemplated Transactions and supersede all prior agreements, written or oral,
with respect thereto.
19
SECTION 7.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies. This Agreement may be amended, superseded, cancelled,
renewed or extended only by a written instrument signed by the Sellers and the
Buyer. The provisions hereof may be waived in writing by the Sellers and the
Buyer. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
Except as otherwise provided herein, the rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity.
SECTION 7.4 Governing Law; Jurisdiction. This Agreement shall be
governed and construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within such State,
without regard to the conflict of laws rules thereof.
SECTION 7.5 Binding Effect; No Assignment. This Agreement and all of
its provisions, rights and obligations shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors, heirs and
legal representatives. This Agreement may not be assigned (including by
operation of Law) by the Sellers or the Company without the express written
consent of the Buyer and any purported assignment, unless so consented to, shall
be void and without effect. Nothing herein express or implied is intended or
shall be construed to confer upon or to give anyone other than the parties
hereto and their respective heirs, legal representatives and successors any
rights or benefits under or by reason of this Agreement and no other party shall
have any right to enforce any of the provisions of this Agreement.
SECTION 7.6 Exhibits. All Exhibits and Schedules attached hereto are
hereby incorporated by reference into, and made a part of, this Agreement.
SECTION 7.7 Severability. If any provision of this Agreement for any
reason shall be held to be illegal, invalid or unenforceable, such illegality
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such illegal, invalid or unenforceable provision had never
been included herein.
SECTION 7.8 Counterparts. The Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
SECTION 7.9 Third Parties. Except as specifically set forth or referred
to herein, nothing herein express or implied is intended or shall be construed
to confer upon or give to any person other than the parties hereto and their
permitted successors or assigns, any rights or remedies under or by reason of
this Agreement or the Contemplated Transactions.
20
SECTION 7.10 Further Assurances. At any time and from time to time
after the Closing Date, upon the request of the Buyer, the Sellers will do,
execute, acknowledge and deliver, or cause to be done, executed, acknowledged or
delivered, all such further documents, instruments or assurances, as may be
necessary, the desirable or proper to carry out the intent and accomplish the
purposes of this Agreement. The Sellers and the Buyer will each, respectively,
bear their or its own costs and expenses incurred in compliance with the first
sentence of this Section 7.10.
[Remainder of page intentionally left blank]
21
IN WITNESS WHEREOF, the undersigned have executed this Stock Purchase
Agreement as of the date set forth above.
BUYER:
ENTI ACQUISITION I CORP.
By: /s/ Xxxxx X. Xxxxxxxx
---------------------------------------
Xxxxx X. Xxxxxxxx, President
ENTI:
ENTERTAINMENT INTERNATIONAL, LTD.
By: /s/ Xxxxx X. Xxxxxxxx
---------------------------------------
Xxxxx X. Xxxxxxxx, President
THE COMPANY:
CSTI HI-TEC LTD.
By:
---------------------------------------
Xxxxx Xxxxxxxxxx, President
SELLERS:
22
IN WITNESS WHEREOF, the undersigned have executed this Stock Purchase
Agreement as of the date set forth above.
BUYER:
ENTI ACQUISITION I CORP.
By:
---------------------------------------
Xxxxx X. Xxxxxxxx, President
ENTI:
ENTERTAINMENT INTERNATIONAL, LTD.
By:
---------------------------------------
Xxxxx X. Xxxxxxxx, President
THE COMPANY:
CSTI HI-TEC LTD.
By: /s/ Xxxxx Xxxxxxxxxx
---------------------------------------
Xxxxx Xxxxxxxxxx, President
SELLERS:
23
Burntwood Limited Cedarwood Trading and
Investments Ltd.
--------------------- -------------------------
Saffray Limited Outlets Ltd.
--------------------- -------------------------
Mullinger Limited Link Business Solutions
--------------------- -------------------------
Outlets Ltd. Lial Hi-Tec Ltd.
s/s
--------------------- -------------------------
Link Business Solutions Cedarwood Trading and
Investments Ltd.
--------------------- -------------------------
24
Burntwood Limited Cedarwood Trading and
s/s Investments Ltd.
--------------------- -------------------------
Saffray Limited Outlets Ltd.
--------------------- -------------------------
Mullinger Limited Link Business Solutions
--------------------- -------------------------
Outlets Ltd. Lial Hi-Tec Ltd.
--------------------- -------------------------
Link Business Solutions Cedarwood Trading and
Investments Ltd.
--------------------- -------------------------
25
Burntwood Limited Cedarwood Trading and
Investments Ltd.
--------------------- -------------------------
Saffray Limited Outlets Ltd.
For Xxxxxx Secretaries
Limited, Secretary
--------------------- -------------------------
Mullinger Limited Link Business Solutions
--------------------- -------------------------
Outlets Ltd. Lial Hi-Tec Ltd.
--------------------- -------------------------
Link Business Solutions Cedarwood Trading and
Investments Ltd.
--------------------- -------------------------
26
Burntwood Limited Cedarwood Trading and
Investments Ltd.
--------------------- -------------------------
Saffray Limited Outlets Ltd.
--------------------- -------------------------
Mullinger Limited Link Business Solutions
s/s
--------------------- -------------------------
Outlets Ltd. Lial Hi-Tec Ltd.
--------------------- -------------------------
Link Business Solutions Cedarwood Trading and
Investments Ltd.
--------------------- -------------------------
27
Burntwood Limited Cedarwood Trading and
Investments Ltd.
--------------------- -------------------------
Saffray Limited Outlets Ltd.
--------------------- -------------------------
Mullinger Limited Link Business Solutions
--------------------- -------------------------
Outlets Ltd. Lial Hi-Tec Ltd.
/s/ Xxxx Saisnford
--------------------- -------------------------
Link Business Solutions Cedarwood Trading and
Investments Ltd.
--------------------- -------------------------
28
Burntwood Limited Cedarwood Trading and
Investments Ltd.
--------------------- -------------------------
Saffray Limited Outlets Ltd.
--------------------- -------------------------
Mullinger Limited Link Business Solutions
--------------------- -------------------------
Outlets Ltd. Lial Hi-Tec Ltd.
--------------------- -------------------------
Link Business Solutions Cedarwood Trading and
2.10.2001 Investments Ltd.
/s/ Xxxxxx Xxxx
--------------------- -------------------------
29
Burntwood Limited Cedarwood Trading and
Investments Ltd.
--------------------- -------------------------
Saffray Limited Outlets Ltd.
--------------------- -------------------------
Mullinger Limited Link Business Solutions
--------------------- -------------------------
Outlets Ltd. Lial Hi-Tec Ltd.
--------------------- -------------------------
Link Business Solutions Cedarwood Trading and
Investments Ltd.
s/s
--------------------- -------------------------
Schedule 1.2(b)
----------------------------------------------------------
Shareholder's Name Number of
ENTI shares to
be issued
----------------------------------------------------------
Burntwood Limited 490,846
----------------------------------------------------------
Saffray Limited 490,846
----------------------------------------------------------
Mullinger Limited 645,850
----------------------------------------------------------
Cedarwood Trading and 335,842
Investments Ltd.
----------------------------------------------------------
Outlets Ltd. 3,255,085
----------------------------------------------------------
Link Business Solutions 12,917,007
----------------------------------------------------------
Lial Hi-Tec Ltd. 12,917,007
----------------------------------------------------------
Schedule 2.1
1. A certain Agreement by and among the Company and certain investors dated
as of January 19, 1997.
2. Warrant agreement dated as of March 28, 1999 between the Company and the
Industrial Development Bank Ltd.
3. Warrant Agreement between the Company and Xxxxxxxx, Xxxx & Co. Certified
Public Accountants.
Schedule 2.1(b)
1. A certain Agreement by and among the Company and certain investors dated as
of January 19, 1997.
2. An Agreement dated as of March 28, 1999 between the Company and the
Industrial Development Bank Ltd.
3. An Agreement between the Company and Xxxxxxxx, Xxxx & Co. Certified Public
Accountants.
Schedule 2.3
1. A certain Agreement by and among the Company and certain investors dated as
of January 19, 1997.
2. The Articles of Association of the Company.
Schedule 2.4 (b)
--------------------------------------------------------------------------------
List Of Fully owned Subsidiaries
--------------------------------------------------------------------------------
Name of Company Address
--------------------------------------------------------------------------------
CSTI Hi-Tech (projects 1998) Ltd. 0 Xxxxxxxx Xx., Xxxxxx Gat
--------------------------------------------------------------------------------
CSTI Italy S.R.L Xxx X. Xxxxxx 00, Xxxxxx, Xxxxx
--------------------------------------------------------------------------------
Schedule 2.4 (b-1)
-------------------------------------------------------------------------------------------------------
List Of Fully owned Subsidiaries
-------------------------------------------------------------------------------------------------------
Name of Company Address Holdings
-------------------------------------------------------------------------------------------------------
XXXX XxxX Xxxxxxx 00000 Xxxxxx Xxxxxxxxxx 33.3%
Strabe 39
-------------------------------------------------------------------------------------------------------
Scandivian Gas Technology Xxxxxxxx Xxxxx 0, X-000 01
CST AB VARBY Sweden 25%
-------------------------------------------------------------------------------------------------------
Schedule 2.6
The Financial Statements attached hereto.
CSTI HI-TEC LTD.
Balance Sheets
(In thousands)
AT 31 DECEMBER
-------------------------
Note 2000 2000
---- ------ ------
N.I.S U.S $
----- ----
CURRENT ASSETS
Cash and cash equivalents 245 61
Trade receivables 3 4,826 1,194
Other receivables 4 3,952 978
Inventory 2,597 643
------ ------
11,620 2,876
------ ------
INVESTMENT
Investment in a subsidiary 5 40 10
------ ------
FIXED ASSETS 6
Cost 5,898 1,460
Accumulated depreciation 2,279 564
------ ------
3,619 896
====== ======
15,279 3,782
====== ======
1
CSTI HI-TEC LTD.
Balance Sheets
(In thousands)
AT 31 DECEMBER
---------------------------
Note 2000 2000
---- ------- --------
N.I.S U.S $
----- -----
CURRENT LIABILITIES
Short-term credit 7 7,553 1,869
Trade payable 8 5,110 1,264
Advance payments for on-going work, net 9 3,516 870
Other payables and credits 10 1,633 404
------- ------
17,812 4,407
------- ------
LONG-TERM LIABILITIES
Shareholders' loans 11 314 78
Loan-term bank loans 12 - -
Liability for employee rights upon retirement, net of
amount funded 13 202 50
------- ------
516 128
------- ------
CONTINGENCIES AND COLLATERALS 14
CAPITAL DEFICIENCY
Share capital 15a 1 1
Premium shares 1,708 423
Receipts of account of shares 15b 707 175
Deficit (5,465) (1,352)
------- ------
(3,049) (753)
======= ======
15,279 3,782
======= ======
2
CSTI HI-TEC LTD.
Statements Of Profit & Loss
(In thousands)
FOR THE YEAR ENDED
31 DECEMBER
-----------------------------
Note 2000 2000
---- ----- -----
N.I.S U.S $
----- -----
Sales 16 20,427 5,055
Cost of sales 17 14,486 3,585
------ -----
Gross profit 5,941 1,470
Administrative and general expenses 18 4,725 1,169
----- -----
Operating profit (loss), before financing expenses
1,216 301
----- -----
Financing expenses, net 483 120
----- -----
Operating profit (loss), after financing expenses
733 181
Other expenses 19 (393) (97)
----- -----
Profit 340 84
===== =====
3
CSTI HI-TEC LTD.
Statements Of Changes In Shareholders' Equity
(In thousands)
Receipts on account Retained Total shareholders'
Share capital Premium shares of shares earnings (deficit) equity (deficit)
-------------- -------------- ------------------- ----------------- ---------------
N.I.S U.S $ N.I.S U.S $ N.I.S U.S $ N.I.S U.S $ N.I.S U.S $
----- ----- ----- ----- ----- ----- ----- ----- ----- ------
Balance, January 1, 2000 1 1 1,708 423 707 175 (5,805) (1,436) (3,389) (837)
Profit - - - - - - 340 84 340 84
--- --- ----- --- --- --- ------ ------ ------ ----
Balance, December 31, 2000 1 1 1,708 423 707 175 (5,465) (1,352) (3,049) (753)
=== === ===== === === === ====== ====== ====== ====
4
CSTI HI-TEC LTD.
Statements of Cash Flow
(In thousands)
FOR THE YEAR ENDED
31 DECEMBER
------------------------
2000 2000
------- ------
N.I.S U.S $
----- -----
CASH USED IN OPERATING ACTIVITIES
Profit (Loss) 340 84
Adjustments required to reconcile (loss) profit to
net cash basis used in operating activities (Appendix A) (1,154) (286)
------ ------
Net cash used in operating activities (814) (202)
------ ------
CASH USED IN INVESTING ACTIVITIES
Purchase of fixed assets (1,282) (317)
Proceeds from sale of fixed assets 24 6
------ ------
Net cash used in investing activities (1,258) (311)
------ ------
CASH PROVIDED BY FINANCING ACTIVITIES
Changes in short-term credit, net 2,263 560
Repayment of short-term loans (392) (97)
Proceeds from short-term loans 612 151
Repayment of long-term loans (503) (124)
Repayment of shareholders loan (50) (12)
------ ------
Net cash provided by financing activities 1,930 478
====== ======
(DECREASE) IN CASH AND CASH EQUIVALENTS (142) (35)
CASH AND CASH EQUIVALENTS BEGINNING OF THE YEAR 387 96
------ ------
CASH AND CASH EQUIVALENTS - END OF THE YEAR 245 61
====== ======
5
CSTI HI-TEC LTD.
Appendix To The Statements Of Cash Flow
(In thousands)
Adjustments Required To Reconcile Profit (Loss) To Net Cash Basis Used In
Operating Activities
FOR THE YEAR ENDED
31 DECEMBER
------------------------
2000 2000
---- ----
N.I.S U.S $
----- -----
Items not affecting cash flow:
Depreciation 963 238
Profit on sale of fixed assets (3) (1)
(Decrease) Increase in liability for employee rights upon
retirement, net of amount funded (175) (43)
Interest and linkage on long-term loans (7) (2)
------ ------
778 192
------ ------
Changes in working capital:
(Increase) in trade receivables (3,513) (869)
(Increase) in other receivables (2,078) (514)
(Increase) in inventory (2,356) (583)
Increase in advance payments deduction for on-going work 3,352 830
Increase in trade payable 2,584 639
Increase in other payables and credits 79 19
------ ------
(1,932) (478)
====== ======
Total adjustments required to reconcile (loss) profit to net
cash basis used in operating activities (1,154) (286)
====== ======
6
CSTI HI-TEC LTD.
Notes To The Financial Statements
Note 1 - General
CSTI (Clean Systems Technology Israel) Hi-Tec Ltd. ("the company") is an Israeli
Company engaged in design, manufacture, installation and maintenance of
ultra-high purity systems for gases and liquids for the processing industry. The
company commenced its operations in March 1995.
Note 2 - Significant accounting policies
The significant accounting policies, that were used in the preparation of the
financial statements, in accordance with prior year, include the following:
A. Revenue recognition
Revenues from on-going contractor projects are recognized according to the
stage of completing of the contract activity, after performing at least 25%
of each contract activity.
B. Cash equivalents
Cash equivalents includes short-term deposits original maturity of not more
than three months.
C. Inventory and on-going work
1. Inventory is valued at the lower of cost and net realizable value.
Cost is determined by the "first in first out" (FIFO) method.
2. On-going work is valued at direct cost of work and material and
overhead expenses.
D. Fixed assets
Fixed assets are recorded at cost and are depreciated over their estimated
useful lives, on the straight- Line method.
Depreciation rates:
Annual depreciation rates are as follow: %
---
Leasehold improvement 10
Machinery and equipment 6-20
Clean room 10
Office furniture and equipment 6-33
Vehicles 15
E. Investment
Investment in a subsidiary is included as cost and not consolidated.
7
CSTI HI-TEC LTD.
Notes To The Financial Statements
(In thousands)
Note 2 - Significant accounting policies (continued)
F. Adjusted financial statements
The financial statements have been prepared in accordance with generally
accepted accounting principles, on the historical cost basis, without
giving expression to the effect of the changes in the general purchasing
power of the Israeli currency during the year, as indicated by the Israeli
Consumer Price Index.
G. Convenience translation
The adjusted financial statements as of December 31, 2000 have been
translated into U.S. dollars using the representative exchange rate as of
that date (U.S. $ = NIS 4.040). The translation was made solely for the
convenience of the reader. The dollar amounts so presented in these
financial statements should not be construed as representing amounts
receivable or payable in dollars or convertible into dollars, unless
otherwise indicated.
H. Significant estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amount of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
I. Fair value of derivative instruments
The accountant number of cash and cash equivalents, short-term investments,
trade receivables, debtors, bank credit and others, trade payables,
creditors are at their fair value.
Note 3 - Trade receivables
AT 31 DECEMBER
--------------
2000
--------------
Open accounts domestic 843
Open accounts abroad 4,068
Collectable cheques 8
-----
4,919
Less, allowance for doubtful accounts 93
-----
4,826
=====
8
CSTI HI-TEC LTD.
Notes To The Financial Statements
(In thousands)
Note 4 - Other receivables
AT 31 DECEMBER
--------------
2000
--------------
Income receivable 2,856
Other debits 895
Sundry and prepaid expenses 201
-----
3,952
=====
Note 5 - Investment in a subsidiary
In 1997 the Company started a fully owned subsidiary in Italy named C.S.T.
ITALY. The subsidiary is responsible for all of the Company's activities in
Italy.
Note 6 - Fixed assets
A. The fixed assets consist of the following:
Office
Machinery Furniture
Leasehold And Clean And
Land Improvements Equipment Room Equipment Vehicles Total
---- ------------ --------- ---- --------- -------- -----
Cost
At January 1,2000 436 321 2,442 716 370 353 4,638
Additions during the year - 233 343 328 250 128 1,282
Deductions during the year - - - - - (22) (22)
--- --- ----- --- --- --- -----
As at December 31, 2000 436 554 2,785 1,044 620 459 5,898
--- --- ----- --- --- --- -----
Accumulated depreciation
At 1 January, 2000 - 190 684 209 169 65 1,317
Additions during the year - 20 298 507 71 66 962
Deductions during the year - - - - - - -
--- --- ----- --- --- --- -----
As at December 31, 2000 - 210 982 716 240 131 2,279
--- --- ----- --- --- --- -----
Depreciated cost
As at December 31, 2000 436 344 1,803 328 380 328 3,619
=== === ===== === === === =====
B. Collaterals - See note 14.
9
CSTI HI-TEC LTD.
Notes To The Financial Statements
(In thousands)
Note 7 - Short - term credit
AT 31 DECEMBER
--------------
2000
--------------
Short-term credit from banks 6,918
Short-term loans 354
Current maturities of long-term liabilities 281
-----
7,553
=====
Note 8 - Trade payable
AT 31 DECEMBER
--------------
2000
--------------
Open accounts domestic 2,375
Open accounts abroad 990
Post - dated cheques 1,745
-----
5,110
=====
Note 9 - Advance payments for on-going work
AT 31 DECEMBER
--------------
2000
--------------
Advance payments 6,867
Less, cost of on-going work 3,351
-----
3,516
=====
Note 10 - Other payables and credits
AT 31 DECEMBER
--------------
2000
--------------
Institutions 215
Wages payable 793
Accrued liabilities 625
-----
1,633
=====
10
CSTI HI-TEC LTD.
Notes To The Financial Statements
(In thousands)
Note 11 - Shareholders' loans
Loans from shareholders are not linked and are non-interest bearing. Maturity
dates have not been determined yet.
Note 12 - Long-term bank loan
Annual rate of interest AT 31 DECEMBER
----------------------- --------------
2000
--------------
Non linked loans from banks 12.7% 281
Less - current maturities 281
---
-
===
Note 13 - Liability for employee rights upon retirement, net of amount funded
A. The reserve for severance pay consist of the following:
AT 31 DECEMBER
--------------
2000
--------------
Accrued severance pay 330
Less, amounts in funds 128
---
202
===
B. The company's reserve for severance pay is pursuant to the Israeli law. The
accrued severance pay reflects the Company's liability to its employees.
The deposit in approved funds include and linkage increments thereon.
11
CSTI HI-TEC LTD.
Notes to the Financial Statements
(In thousands)
Note 14 - Contingencies and collaterals
A. In order to secure its debts to the banks, the company placed collaterals
at unlimited amounts, on all its assets, shares, goodwill and insurance
privileges.
B. In 2000 there were two claims from suppliers against the Company, in the
amount of 18,000 NIS and 5,000 NIS.
In the financial statements the disclosure is on the amount of 10,000 NIS.
Note 15 - Share capital
A. The balances as at December 31, 2000:
Authorized Issued And Paid
---------- ---------------
Common shares at 1 N.I.S Par value each 1,814 1,151
----- -----
1,814 1,151
===== =====
B. In January 1997, an agreement to invest in the Company was reached between
the Company and foreign investors. The agreement specifies a number of
terms for issuance of Company shares. 51 shares will be issued in 2001.
Note 16 - Sales
Years Ended December 31
-----------------------
2000
-----------------------
Domestic sales 13,742
Sales abroad 6,685
------
20,427
======
12
CSTI HI-TEC LTD.
Notes to the Financial Statements
(In thousands)
Note 17 - Cost of sales
Years Ended December 31
-----------------------
2000
-----------------------
Materials
Inventory at January 1 241
Materials purchase 10,752
Inventory at December 31 (2,597)
------
8,396
------
Salaries and related expenses 4,742
Subcontractors 1,012
Cost of service abroad 1,326
Rent and taxes 307
Vehicles and transportation 902
Equipment maintenance and insurance 280
Sundry 151
Depreciation 356
Changes in on - going work (2,986)
-------
14,486
======
Note 18 - Administrative and general expenses
Years Ended December 31
-----------------------
2000
-----------------------
Salaries and related expenses 1,914
Vehicles and transportation 67
Professional fees 881
Telephone 368
Office and office maintenance 167
Foreign travel 622
Advertising 61
Depreciation 99
Doubtful accounts 54
Sundry 492
-----
4,725
=====
13
CSTI HI-TEC LTD.
Notes to the Financial Statements
(In thousands)
Note 19 - Other expenses
Years Ended December 31
-----------------------
2000
-----------------------
Depreciation of old clean room and leasehold improvement (507)
Capital gain 3
Other income 111
----
(393)
====
14
CSTI HI-TEC LTD.
Balance Sheets
(In thousands)
AT 30 JUNE
Note 2001
---- --------------------
N.I.S U.S $
----- -----
CURRENT ASSETS
Cash and cash equivalents 336 81
Trade receivables 3 9,325 2,239
Other receivables 4 838 201
Inventory 3,025 726
------ -----
13,524 3,247
------ -----
INVESTMENTS
Investment in a subsidiary 5 40 10
------ -----
FIXED ASSETS 6
Cost 7,087 1,702
Accumulated depreciation 2,586 621
------ -----
4,501 1,081
------ -----
18,065 4,338
====== =====
1
CSTI HI-TEC LTD.
Balance Sheets
(In thousands)
AT 30 JUNE
Note 2001
---- ----------------------
N.I.S U.S $
----- -----
CURRENT LIABILITIES
Short-term credit 7 5,020 1,205
Trade payable 8 7,057 1,694
Advance payments for on-going work, net 9 537 129
Other payables and credits 10 2,016 484
------ ------
14,630 3,512
------ ------
LONG-TERM LIABILITIES
Shareholders' loans 11 62 15
Long-term bank loans 12 11 3
Liability for employee rights upon retirement, net of amount
funded 13 245 59
------ ------
318 77
------ ------
CONTINGENCIES AND COLLATERALS 14
SHAREHOLDERS' EQUITY
Share capital 15a 1 1
Premium shares 1,708 410
Receipts of account of shares 15b 707 170
Retained earning 701 168
------ ------
3,117 749
------ ------
18,065 4,338
====== ======
2
CSTI HI-TEC LTD.
Statements Of Income
(In thousands)
FOR THE PERIOD ENDED
30 JUNE
--------------------
Note 2001
---- --------------------
N.I.S U.S $
----- -----
Sales 16 30,947 7,430
Cost of sales 17 21,373 5,131
------ -----
Gross profit 9,574 2,299
Administrative and general expenses 18 2,872 690
----- ------
Operating profit, before financing expenses
6,702 1,609
Financing expenses, net 472 113
----- ------
Operating profit, after financing expenses 6,230 1,496
Other expenses (2) (1)
----- ------
Income before income taxes 6,228 1,495
Income taxes 19 62 15
----- ------
Profit 6,166 1,480
===== =====
3
CSTI HI-TEC LTD.
Statements Of Changes In Shareholders' Equity
(In thousands)
Receipts on account Retained Earnings Total shareholders'
Share capital Premium shares of shares (deficit) equity (deficit)
------------- --------------- ------------------- ----------------- -------------------
N.I.S U.S $ N.I.S U.S $ N.I.S U.S $ N.I.S U.S $ N.I.S U.S $
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Balance, December 31, 2000 1 1 1,708 410 70 1 (5,465) (1,312) (3,049) (731)
Profit - - - - - - 6,166 1,480 6,166 1,480
--- --- ----- --- -- --- ----- ----- ----- -----
Balance, June 30, 2001 1 1 1,708 410 70 1 701 3,117 749
=== === ===== === == === ===== ===== ===== =====
4
CSTI HI-TEC LTD.
Statements of Cash Flow
(In thousands)
FOR THE PERIOD ENDED
30 JUNE
--------------------
2001
--------------------
N.I.S U.S $
----- -----
CASH PROVIDED BY OPERATING ACTIVITIES
Profit 6,166 1,480
Adjustments required to reconcile loss profit to net cash basis used in
operating activities (Appendix A) (2,098) (503)
------ ----
Net cash provided by operating activities 4,068 977
------ ----
CASH USED IN INVESTING ACTIVITIES
Purchase of fixed assets (1,272) (305)
Proceeds from sale of fixed assets 69 16
------ ----
Net cash used in investing activities (1,203) (289)
------ ----
CASH USED IN FINANCING ACTIVITIES
Changes in short-term credit, net (2,162) (519)
Repayment of short-term loans (302) (73)
Proceeds from long-term loans 100 24
Repayment of long-term loans (158) (38)
Repayment of shareholders loan (252) (60)
------ ----
Net cash (used in) financing activities (2,774) (666)
------ ----
INCREASE IN CASH AND CASH EQUIVALENTS 91 22
CASH AND CASH EQUIVALENTS - BEGINNING OF THE PERIOD 245 59
------ ----
CASH AND CASH EQUIVALENTS - END OF THE PERIOD 336 81
====== ====
5
CSTI HI-TEC LTD.
Appendix To The Statements Of Cash Flow
(In thousands)
Adjustments required to reconcile loss to net cash basis
used in operating activities
FOR THE PERIOD ENDED
30 JUNE
--------------------
2001
--------------------
N.I.S U.S $
----- -----
Items not affecting cash flow:
Depreciation 319 77
Loss on sale of fixed assets 2 1
Increase in liability for employee rights upon retirement, net of amount
funded 43 10
------ -----
364 88
------ -----
Changes in working capital:
Increase in trade receivables (4,499) (1,080)
Decrease in other receivables 3,114 748
Increase in inventory (428) (103)
Decrease in advance payments deduction for on-going work (2,979) (715)
Increase in trade payable 1,947 467
Increase in other payables and credits 383 92
------ -----
(2,462) (591)
------ -----
Total adjustments required to reconcile loss to net cash basis used in
operating activities (2,098) (503)
====== =====
6
CSTI HI-TEC LTD.
Notes To The Financial Statements
Note 1 - General
CSTI (Clean Systems Technology Israel) Hi-Tec Ltd. ("the company") is an Israeli
Company engaged in design, manufacture, installation and maintenance of
ultra-high purity systems for gases and liquids for the processing industry. The
company commenced its operations in March 1995.
Note 2 - Significant accounting policies
The significant accounting policies, that were used in the preparation of the
financial statements, in accordance with prior period, include the following:
A. Adjusted financial statements
The financial statements have been prepared in accordance with generally
accepted accounting principles, on the historical cost basis, without giving
expression to the effect of the changes in the general purchasing power of
the Israeli currency during the year, as indicated by the Israeli Consumer
Price Index.
B. Convenience translation
The adjusted financial statements as of June 30, 2001 have been translated
into U.S. dollars using the representative exchange rate as of that date
(U.S. $ = NIS 4.165). The translation was made solely for the convenience of
the reader. The dollar amounts so presented in these financial statements
should not be construed as representing amounts receivable or payable in
dollars or convertible into dollars, unless otherwise indicated.
C. Inventory and on-going work
1. Inventory is valued at the lower of cost and net realizable value. Cost
is determined by the "first in first out" (FIFO) method.
2. On-going work is valued at direct cost of work and material and overhead
expenses.
D. Investment
Investment in the subsidiary is included in the financial statements as cost.
7
CSTI HI-TEC LTD.
Notes To The Financial Statements
(In thousands)
Note 2 - Significant accounting policies (continued)
E. Fixed assets
Fixed assets are recorded at cost and are depreciated over their estimated
useful lives, on the straight-line method.
Depreciation rates:
Annual depreciation rates are as follow: %
---
Leasehold improvement 10
Machinery and equipment 6-20
Clean room 10
Office furniture and equipment 6-33
Vehicles 15
F. Revenue recognition
Revenues from on-going contractor projects are recognized according to the
stage of completing of the contract activity, after performing at least a
certain rate of each contract activity.
G. Allowance for doubtful accounts
The allowance is determined for specific debts doubtful of collection.
H. Significant estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial statements
and the reported amount of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
I. Fair value of derivative instruments
The accountant number of cash and cash equivalents, short-term investments,
trade receivables, debtors, bank credit and others, trade payables, creditors
are at their fair value.
J. Cash equivalents
Cash equivalents includes short-term deposits original maturity of not more
than three months.
8
CSTI HI-TEC LTD.
Notes To The Financial Statements
(In thousands)
Note 3 - Trade receivables AT 30 JUNE
2001
--------------
N.I.S
-----
Open accounts domestic 291
Open accounts abroad 3,378
Subsidiary company 5,749
-----
9,418
Less, allowance for doubtful accounts 93
-----
9,325
=====
Note 4 - Other receivables AT 30 JUNE
2001
--------------
N.I.S
-----
Income receivable 150
Institutions 266
Employees 276
Sundry and prepaid expenses 146
---
838
===
Note 5 - Investment in a subsidiary
In 1997 the Company started a fully owned subsidiary in Italy named C.S.T. ITALY
S.R.L.
9
CSTI HI-TEC LTD.
Notes To The Financial Statements
(In thousands)
Note 6 - Fixed assets
A. The fixed assets consist of the following: Office
Machinery Furniture
Leasehold And Clean And
Land Improvements Equipment Room Equipment Vehicles Total
---- ------------ --------- ---- --------- -------- -----
Cost
At January 1, 2001 436 554 2,785 1,044 620 459 5,898
Additions during the period - 30 711 29 186 316 1,272
Deductions during the period - - - - - (83) (83)
--- --- ----- ------ --- --- -----
As at June 30, 2001 436 584 3,496 1,073 806 692 7,087
--- --- ----- ------ --- --- -----
Accumulated depreciation
At January 1, 2001 - 210 982 716 240 131 2,279
Additions during the period - 20 183 18 50 48 319
Deductions during the period - - - - - (12) (12)
--- --- ----- ------ --- --- -----
As at June 30, 2001 - 230 1,165 734 290 167 2,586
--- --- ----- ------ --- --- -----
Depreciated cost
As at June 30, 2001 436 354 2,331 339 516 525 4,501
=== === ===== ====== === --- =====
B. Collaterals - See note 14.
Note 7 - Short - term credit AT 30 JUNE
2001
----------
Short-term credit from banks 4,756
Short-term loans from banks 52
Current maturities of long-term liabilities 212
-----
5,020
=====
Note 8 - Trade payable AT 30 JUNE
2001
----------
Open accounts domestic 3,389
Open accounts abroad 2,884
Postdated cheques 784
-----
7,057
=====
10
CSTI HI-TEC LTD.
Notes To The Financial Statements
(In thousands)
Note 9 - Advance payments for on-going work AT 30 JUNE
2001
----------
N.I.S
-----
Advance payments 2,630
Less, cost of on-going work 2,093
-----
537
=====
Note 10 - Other payables and credits AT 30 JUNE
----------
2001
----------
N.I.S
-----
Institutions 10
Salaries and wages 1,142
Accrued liabilities 864
-----
2,016
=====
Note 11 - Shareholders' loans
Loans from shareholders are not linked and are non-interest bearing.
Note 12 - Long-term bank loans
Annual rate of AT 30 JUNE
interest 2001
-------------------- ----------
N.I.S
-----
Non linked loans from 12.7% 145
banks
Non linked and non interest bearing
loans from banks 78
Less - current maturities (212)
----
11
====
11
CSTI HI-TEC LTD.
Notes to the Financial Statements
In N.I.S. (thousands)
Note 13 - Liability for employee rights upon retirement, net of amount funded
AT 30 JUNE
A. The reserve for severance pay consist of the following: 2001
----------
N.I.S
-----
Accrued severance pay 373
Less, amounts in funds 128
---
245
===
B. The company's reserve for severance pay is pursuant to the Israeli law. The
accrued severance pay reflects the Company's liability to its employees. The
deposit in approved funds include and linkage increments thereon.
Note 14 - Contingencies and collaterals
A. In order to secure its debts to the banks, the company placed collaterals at
unlimited amounts, on all its assets, shares, goodwill and insurance
privileges.
B. In 2000 there were two claims from suppliers against the Company, in the
amount of 18,000 NIS and 5,000 NIS. In the financial statements the
disclosure is on the amount of 10,000 NIS.
Note 15 - Share capital
A. The balance as at June 30, 2001 is:
Authorized Issued And Paid
---------- ---------------
Common shares at 1 N.I.S Par value each 1,814 1,151
----- -----
1,814 1,151
===== =====
B. In January 1997, an agreement to invest in the Company was reached between
the Company and foreign investors. The agreement specifies a number of terms
for issuance of Company shares. 51 Company shares will be issued in 2001.
12
CSTI HI-TEC LTD.
Notes to the Financial Statements
(In thousands)
Note 16 - Sales FOR THE
PERIOD ENDED
30 JUNE
------------
2001
------------
N.I.S
-----
Domestic sales 599
Sales abroad 30,348
------
30,947
======
Note 17 - Cost of sales FOR THE
PERIOD ENDED
30 JUNE
------------
2001
------------
N.I.S
-----
Materials
Inventory at January 1 2,597
Materials purchase 12,693
Inventory at 30 June, 2001 (3,024)
------
12,266
------
Salaries and related expenses 3,574
Subcontractors 733
Cost of service abroad 2,329
Rent and taxes 210
Vehicles and transportation 436
Equipment maintenance and insurance 209
Depreciation 245
Changes in on-going work 1,258
Sundry 113
------
21,373
======
13
CSTI HI-TEC LTD.
Notes to the Financial Statements
(In thousands)
Note 18 - Administrative and general expenses
FOR THE
PERIOD ENDED
30 JUNE
------------
2001
------------
N.I.S
-----
Salaries and related expenses 1,262
Vehicles and transportation 35
Professional fees 469
Telephone 249
Office and office maintenance 66
Foreign travel 220
Advertising 93
Depreciation 73
Sundry 405
-----
2,872
=====
Note 19 - Taxes on income
A. Tax benefits under the law for the Encouragement of Capital Investments, 1959
(hereinafter - the law).
At August 1, 2001 the company granted a status of "approved enterprise", the
company will be entitled to various tax benefits.
Under the law, by virtue of the "approved enterprise" status, the company
will be entitled to various tax benefits, as follow:
(1) Tax exemption on income from its approved enterprise for a period of 10
years since the company has elected the "alternative benefits" (involving
waiver of investment grants). In the event of distribution of cash
dividends out of income which was tax exempt as above, the company would
have to pay corporate tax at the rate 25% of the amount distributed.
(2) The company is entitled to claim accelerated depreciation for five tax
years commencing in the first year of operation of each asset, in respect
of property and equipment used by the approved enterprise.
The entitlement to the above benefits is conditional upon the company's
fulfilling the conditions stipulated by the law, regulations published
thereunder and the instruments of approval for the specific investments in
the approved enterprise. In the event of failure to comply with these
conditions, the benefits may be cancelled and the company may be required to
refund the amount of the benefits, in whole or in part, with the addition of
interest.
14
CSTI HI-TEC LTD.
Notes to the Financial Statements
(In thousands)
Note 19 - Taxes on income (continued)
B. Measurement of results for tax purposes under the Income Tax (Inflationary
Adjustments) Law, 1985 (hereinafter - the inflationary adjustments law).
Under the inflationary adjustments law, results for the tax purposes are
measured in real terms having regard to the changes in the consumer price
index. The company will be taxed under this law.
C. The law for the Encouragement of Industry (Taxation), 1969
The company will be an "industrial company" as defined by this law. As such,
the company will be entitled to claim depreciation at increased rates for
equipment used in industrial activity, as stipulated by regulations published
under the inflationary adjustments law.
15
Schedule 2.9
A Settlement Agreement dated as of November 20th, 2000 between the Company
and Clean Systems Technology Inc.
Schedule 2.9 (c)
Not Applicable
To whom it may concern 8/9/2001
----------------------
Re: Clean Systems Technology Hi-Tech Ltd.
(hereinafter: "CSTI")
Our client, CSTI, is involved in the following legal procedures:
A lawsuit, that was submitted at the "Shalom Court" in Haifa (hereinafter: "the
Court"), in which the company named Unirent Ltd. claimed from CSTI a sum of
approximately NIS 11,000.
In a compromise agreement, authorized by the Court, accordingly, CSTI was
supposed to pay Unirent Ltd. a sum of NIS 6,000, there is an open dispute
concerning the issue whether a deposit cheque that CSTI submitted the plaintiff
regarding a different transaction, of NIS 5,000, that was withdrawn by the
plaintiff would be regarded as a part of the authorized Compromise Agreement's
payment.
An additional lawsuit, that was submitted as well at the "Shalom Court" in
Haifa, in which the company named Yakir Fried Michun Misradi Ltd. (translation:
Yakir Fried Office Mechanism Ltd.) claimed from CSTI a sum of approximately NIS
18,000.
The suit was submitted according to contracts signed between the parties and
accordingly, we estimate that a decision in favor of the plaintiff might be
given, although the defendant has some claims that might reduce the sum claimed
in this lawsuit.
Sincerely,
Xxxx Xxxxxx, Adv.
Schedule 2.12
--------------------------------------------------------------
Name Profession
--------------------------------------------------------------
Xxxxxxx Xxxxx Fitter
--------------------------------------------------------------
Afsai Maayan Assistant fitter
--------------------------------------------------------------
Xxxxxxx Xxxxxx Autocad technician
--------------------------------------------------------------
Xxxx Xxxxx Project Manager
--------------------------------------------------------------
Xxxxxxx Xxxxxx Purchasing
--------------------------------------------------------------
Atar Marco QC
--------------------------------------------------------------
Xxxxx Xxxxxxx Assistant fitter
--------------------------------------------------------------
Bstiker Xxxxx Xxxxxxxxxx
--------------------------------------------------------------
Bashenski Konstantin Locksmith
--------------------------------------------------------------
Bhasteker Xxxxxx Fitter
--------------------------------------------------------------
Xxxxxx Xxxxx Manager
--------------------------------------------------------------
Xxxxxxxx Xxxx Fitter
--------------------------------------------------------------
Xxxxxxxxx Xxxxxxx Project Manager
--------------------------------------------------------------
Blaywais haim QC
--------------------------------------------------------------
Xxxxxxx Xxxxxx Storekeeper
--------------------------------------------------------------
Xxxxx Xxxx Fitter
--------------------------------------------------------------
Xxxxx Xxxxx - Director Director
--------------------------------------------------------------
Cureolapnik Xxxxxxx Xxxxxx
--------------------------------------------------------------
Xxxxx Xxxxx Assistant fitter
--------------------------------------------------------------
Dagon Gal Assistant fitter
--------------------------------------------------------------
Xxxxxxxxxx Xxxx QC
--------------------------------------------------------------
Diazdelcanto Victorherman Fitter
--------------------------------------------------------------
Xxxxxxx Xxxxxxx Fitter
--------------------------------------------------------------
Donchou Xxxxxxxxxx Xxxxxx
--------------------------------------------------------------
Donchou Xxxxx Assistant fitter
--------------------------------------------------------------
Dumbrava Xxxxxx Xxxxxx / Fitter
--------------------------------------------------------------
Xxxxxx Xxxxx Budget control
--------------------------------------------------------------
Xxxxx Xxxx QC
--------------------------------------------------------------
Xxxxx Xxxxx Secretary
--------------------------------------------------------------
Elimalic Dekel Assistant welder
--------------------------------------------------------------
Eranshtain Xxxxx Clerk
--------------------------------------------------------------
Feingold Akivakirill Welder
--------------------------------------------------------------
Xxxxx Xxxxxxx Secretary
--------------------------------------------------------------
Girafi Avishai Fitter
--------------------------------------------------------------
Xxxxxxxxx Xxxxxx Welder / Fitter
--------------------------------------------------------------
Gorlik Puter Locksmith
--------------------------------------------------------------
Gueta Golan QC
--------------------------------------------------------------
Xxxxxxxx Xxxxxxx Engineer
--------------------------------------------------------------
Xxxxxx Xxx Assistant fitter
--------------------------------------------------------------
Haimov Viatzislav Locksmith
--------------------------------------------------------------
Xxxxxxxx Xxxxx Engineer
--------------------------------------------------------------
Illous Xxxxx Fitter
--------------------------------------------------------------
Itzhakpour Oded Fitter
--------------------------------------------------------------
Kabush Xxxxxxxxxx Xxxxxx
--------------------------------------------------------------
Khaut Xxxx Xxxxxx
--------------------------------------------------------------
Xxxxxxx Xxxxxx Welder
--------------------------------------------------------------
Xxxxxxx Xxxxxx QC
--------------------------------------------------------------
Xxxxxxxxx Xxxx Finance manager
--------------------------------------------------------------
Xxxxxxx Xxxxxxxxx Welder
--------------------------------------------------------------
Xxxxxx Xxxx Bookeeper
--------------------------------------------------------------
Xxxxxxxxxx Xxxxx President
--------------------------------------------------------------
Xxxxxxxxxx Xxxxx QC engineer
--------------------------------------------------------------
Xxxxxxx Xxxxxxxxx Engineer
--------------------------------------------------------------
Maman Xxxxxx Xxxxxx
--------------------------------------------------------------
Mazaltrim Inbal Secretary
--------------------------------------------------------------
Xxxxxx Xxxxx Fitter
--------------------------------------------------------------
Xxxxxxx Xxxx Xxxxxx QC
--------------------------------------------------------------
Nagauker Xxxx Assistant fitter
--------------------------------------------------------------
Xxxxx Xxxxxx Fitter / Welder
--------------------------------------------------------------
Xxxxx Xxxxx Locksmith
--------------------------------------------------------------
Xxxxxx Xxxxx Welder
--------------------------------------------------------------
Ponimansky Xxxxxx Xxxxxx
--------------------------------------------------------------
Xxxxx Xxxxxx Asssistant welder
--------------------------------------------------------------
Postriganev Xxxxxxxxx Xxxxxx assistant
--------------------------------------------------------------
Xxxxx Xxxxxxxxxx Assistant fitter
--------------------------------------------------------------
Xxxxxx Xxxxxxx Project Manager
--------------------------------------------------------------
Xxxxxxx Xxxx Storekeeper
--------------------------------------------------------------
Sarid Gabi Operation manager
--------------------------------------------------------------
Strets Xxxxx Assistant welder
--------------------------------------------------------------
Shariker Xxx Xxxxx Project Manager
--------------------------------------------------------------
Shvab Roman Fitter
--------------------------------------------------------------
Tabachnic Xxxxx Xxxxxx
--------------------------------------------------------------
Tafra Avi Assistant welder
--------------------------------------------------------------
Tzuria Beni Welder
--------------------------------------------------------------
Xxxxxx Xxxxx Gas system manager
--------------------------------------------------------------
Xxxx Xxxxxx Tecnician
--------------------------------------------------------------
Vaizgal Ranpinhas Assistant Fitter
--------------------------------------------------------------
Vescer Arcadi Welder
--------------------------------------------------------------
Yarden Avi Fitter
--------------------------------------------------------------
Yitshak Lior Engineer
--------------------------------------------------------------
Xxxxx Xxxx Assistant Fitter
--------------------------------------------------------------
Schedule 3.9
Not Applicable
Schedule 3.12
Not Applicable
Schedule 3.15
Not Applicable
CSTI HI-TECH LTD.
Registration Number 00-000000-0
MINUTES
Of the Meeting of the Board of Directors of the
Company held at
Kiryat-Gat, Israel
On September 10th, 2001
PRESENT: A Legal Quorum
CHAIRMAN: Xxxxx Xxxxxxxxxx
AGENDA: The ratification and approval of the agreement dated as of
August 21, 2001 between CSTI Hi-Tech Ltd. (hereinafter: "the
Company"), the shareholders of the Company,
Entertainment
International LTD and ENTI Acquisition I CORP and the
transactions contemplated thereunder.
After due deliberation, it was unanimously resolved -
RESOLUTIONS:
To ratify and approve the agreement dated as of August 21, 2001 between the
Company, the shareholders of the Company,
Entertainment International LTD
and ENTI Acquisition I CORP and the transactions contemplated thereunder.
There being no other businesses, the Meeting was concluded.
/s/ Xxxxx Xxxxxxxxxx
______________________________
Xxxxx Xxxxxxxxxx, Chairman
CSTI HI-TECH LTD.
Registration Number 00-000000-0
MINUTES
Of the Meeting of the Shareholders of the
Company held at
Kiryat-Gat, Israel
On October 7th, 2001
PRESENT: A Legal Quorum
CHAIRMAN: Xxxxx Xxxxxxxxxx
AGENDA: The ratification and approval of the agreement dated as of
August 21, 2001 between CSTI Hi-Tech Ltd. (hereinafter: "the
Company"), the shareholders of the Company,
Entertainment
International LTD and ENTI Acquisition I CORP and the
transactions contemplated thereunder.
After due deliberation, it was unanimously resolved -
RESOLUTIONS:
To ratify and approve the agreement dated as of August 21, 2001 between the
Company, the shareholders of the Company,
Entertainment International LTD
and ENTI Acquisition I CORP and the transactions contemplated thereunder.
There being no other businesses, the Meeting was concluded.
/s/ Xxxxx Xxxxxxxxxx
__________________________________
Xxxxx Xxxxxxxxxx, Chairman
October 12, 2001
Ramat - Gan
Our No:17262
COMFORT CERTIFICATE
We refer to a certain
Stock Purchase Agreement dated as of the 21st day
of August 2001, by and among
Entertainment International Ltd., ENTI Acquisition
I Corp., CSTI Hi-Tech Ltd. ("CSTI"), and the shareholders of CSTI (the
"Agreement").
The undersigned hereby certifies that to the best of his knowledge from
the time of the signing of the Agreement and until the date of the Closing (as
defined in the Agreement) CSTI did not undergo any material adverse changes with
respect to its financial status.
Sincerely
Itzchaky Lion & Co.
Certified Public Accountants (Isr)
Schedule "B"
WAIVER
CSTI HI-TECH LTD ("CSTI" or the "Company")
The undersigned hereby irrevocably waives and any and all preemptive rights,
rights of first refusal and all similar rights which it may have or was entitled
to have pursuant a certain investment agreement dated as of January 19, 1997
between the Company and the undersigned, the Article of Association of the
Company or any other instrument or document, in connection with the Agreement
(as defined in a letter sent to the undersigned by the Company dated as of
September 11, 2001) and all the transactions contemplated thereunder.
Shareholder: Mullingar Limited
Date: Liel Hi-Tech Systems Ltd.
_________________________
Signature: s/s
_____________________
Schedule "B"
WAIVER
CSTI HI-TECH LTD ("CSTI" or the "Company")
The undersigned hereby irrevocably waives and any and all preemptive rights,
rights of first refusal and all similar rights which it may have or was entitled
to have pursuant a certain investment agreement dated as of January 19, 1997
between the Company and the undersigned, the Article of Association of the
Company or any other instrument or document, in connection with the Agreement
(as defined in a letter sent to the undersigned by the Company dated as of
September 11, 2001) and all the transactions contemplated thereunder.
Shareholder: Saffray Limited
Date: 3rd October 2001
_______________________
Signature: s/s
_____________________
Schedule "B"
WAIVER
CSTI HI-TECH LTD ("CSTI" or the "Company")
The undersigned hereby irrevocably waives and any and all preemptive rights,
rights of first refusal and all similar rights which it may have or was entitled
to have pursuant a certain investment agreement dated as of January 19, 1997
between the Company and the undersigned, the Article of Association of the
Company or any other instrument or document, in connection with the Agreement
(as defined in a letter sent to the undersigned by the Company dated as of
September 11, 2001) and all the transactions contemplated thereunder.
Shareholder: Burntwood Limited
Date: 3-10-01
_______________________
Signature: s/s
_____________________
Schedule "B"
WAIVER
CSTI HI-TECH LTD ("CSTI" or the "Company")
The undersigned hereby irrevocably waives and any and all preemptive rights,
rights of first refusal and all similar rights which it may have or was entitled
to have pursuant a certain investment agreement dated as of January 19, 1997
between the Company and the undersigned, the Article of Association of the
Company or any other instrument or document, in connection with the Agreement
(as defined in a letter sent to the undersigned by the Company dated as of
September 11, 2001) and all the transactions contemplated thereunder.
Shareholder: Liel Hi-Tech Systems Ltd.
Date:
_______________________
Signature:
_____________________
Schedule "B"
WAIVER
CSTI HI-TECH LTD ("CSTI" or the "Company")
The undersigned hereby irrevocably waives and any and all preemptive rights,
rights of first refusal and all similar rights which it may have or was entitled
to have pursuant a certain investment agreement dated as of January 19, 1997
between the Company and the undersigned, the Article of Association of the
Company or any other instrument or document, in connection with the Agreement
(as defined in a letter sent to the undersigned by the Company dated as of
September 11, 2001) and all the transactions contemplated thereunder.
Shareholder: Link Business Solutions
Date: 2/10/2001
_______________________
Signature: s/s
_____________________
Schedule "B"
WAIVER
CSTI HI-TECH LTD ("CSTI" or the "Company")
The undersigned hereby irrevocably waives and any and all preemptive rights,
rights of first refusal and all similar rights which it may have or was entitled
to have pursuant a certain investment agreement dated as of January 19, 1997
between the Company and the undersigned, the Article of Association of the
Company or any other instrument or document, in connection with the Agreement
(as defined in a letter sent to the undersigned by the Company dated as of
September 11, 2001) and all the transactions contemplated thereunder.
Shareholder: Outlets Ltd.
Date: 1/10/2001
_______________________
Signature: s/s
_____________________
Schedule "B"
WAIVER
CSTI HI-TECH LTD ("CSTI" or the "Company")
The undersigned hereby irrevocably waives and any and all preemptive rights,
rights of first refusal and all similar rights which it may have or was entitled
to have pursuant a certain investment agreement dated as of January 19, 1997
between the Company and the undersigned, the Article of Association of the
Company or any other instrument or document, in connection with the Agreement
(as defined in a letter sent to the undersigned by the Company dated as of
September 11, 2001) and all the transactions contemplated thereunder.
Shareholder: Pelican Consulting Inc.
Date:_______________________
Signature: __________________
Schedule "B"
WAIVER
CSTI HI-TECH LTD ("CSTI" or the "Company")
The undersigned hereby irrevocably waives and any and all preemptive rights,
rights of first refusal and all similar rights which it may have or was entitled
to have pursuant a certain investment agreement dated as of January 19, 1997
between the Company and the undersigned, the Article of Association of the
Company or any other instrument or document, in connection with the Agreement
(as defined in a letter sent to the undersigned by the Company dated as of
September 11, 2001) and all the transactions contemplated thereunder.
Shareholder: Cedarwood Trading and Investment Ltd.
Date: October 5, 2001
_______________________
Signature: s/s
_____________________
