EXHIBIT 2.4
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (this "Agreement") is made and entered into
as of March 26, 2000, by and among: Terayon Communication Systems, Inc., a
Delaware corporation ("Terayon"); Ultracom Communications Holdings (1995) Ltd.,
a company organized under the laws of the State of Israel (the "Company"); and
the persons whose names are set forth on the signature page attached hereto
(each, individually, a "Seller" and, collectively, the "Sellers" or the
"Shareholders"). Certain other capitalized terms used in this Agreement are
defined in Exhibit A.
Recitals
A. The Company is engaged principally in the development of chips for
data communications over the TV cable infrastructure for Custom Premises
Equipment, and its principal place of business is at 00 Xxxxxxx Xxxxxxxxx
Xxxxxx, Xxx Xxxx, Xxxxxx.
B. The Sellers, collectively, own all the issued and outstanding shares
of the Company (the "Shares").
C. Terayon desires to acquire all of the Sellers' Shares and the Sellers
desire to sell such Shares to Terayon.
D. The Sellers and Terayon desire to make certain representations and
warranties and other agreements in connection with the transactions contemplated
hereby.
E. For accounting purposes, it is intended that the transaction
contemplated by this Agreement be treated as a "purchase."
F. This Agreement has been approved by the respective boards of directors
of Terayon and the Company.
Agreement
The parties to this Agreement agree as follows:
Section 1. Description of Transaction.
1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, on the Closing Date (as defined below), the Sellers shall sell,
transfer, assign, convey and deliver to Terayon, and Terayon shall purchase from
the Sellers all such Sellers' Shares, in each case, free and clear of all Liens.
The closing of the purchase and sale (the "Closing") shall take place at the
offices of Naschitz Xxxxxxx & Co., 0 Xxxxx Xxxxxx, Xxx Xxxx, Xxxxxx at 10:00
a.m., on March [15], 2000 or on such later date (which is no later than 40
business days after the date hereof) on which all the conditions set forth in
Sections 6 and 7 have been satisfied or waived, or on such other date, time and
place as the parties may mutually agree
(the "Closing Date"). At the Closing, the Sellers shall cause the Company to
deliver to Terayon one or more instruments representing the Sellers' Shares, and
Terayon shall (i) issue the Share Consideration (as defined below) to the
Sellers' Representative for distribution to the Sellers in accordance with the
column in Schedule A captioned "Share Consideration", (ii) pay the cash payment
to the Sellers' representative for distribution to the Sellers in accordance
with the column in Schedule A captioned "Cash Payment", and (iii) deposit the
Escrow Shares (as defined below) with the Escrow Agent, which amounts together
represent the aggregate portion of the Purchase Consideration (as defined below)
payable to the Sellers hereunder.
1.2 Further Assurances. If, at any time after the Closing Date, Terayon
shall consider or be advised that any deeds, bills of sale, assignments or
assurances or any other acts or things are reasonably necessary, desirable or
proper (a) to vest, perfect or confirm, of record or otherwise, in Terayon, its
right to, and title or interest in, the Sellers' Shares or (b) otherwise to
carry out the purposes of this Agreement, Terayon shall so advise the Sellers'
Representative in writing, and the Sellers thereupon shall execute and deliver
all such deeds, bills of sale, assignments and assurances and do all such other
acts and things reasonably necessary, desirable or proper to vest, perfect or
confirm its right, title or interest in, to or under the Sellers' Shares, and
otherwise to carry out the purposes of this Agreement.
1.3 Purchase Consideration. The consideration for the Sellers' Shares
and Vested Options (the "Purchase Consideration"), shall be as follows: Terayon
shall deliver to the Sellers' Representative for distribution to the Sellers,
the number of shares of Common Stock of Terayon (the "Terayon Shares" or the
"Share Consideration") having a value of (i) US$30,000,000 plus (ii)
US$2,270,000, which represents the Company's Net Cash as of March 1, 2000, plus
(iii) the aggregate exercise price which will have been paid upon exercise of
the Vested Options. Such number of Terayon Shares shall be calculated using the
closing price of Terayon Common Stock at the fifth business day prior to the
Closing. The Share Consideration may be increased pursuant to Section 5.6 below.
Of the Share Consideration, shares of Common Stock of Terayon with a value equal
to three million US dollars ($3,000,000) shall be deposited with the Escrow
Agent to be held in the Escrow Fund and shall be available to satisfy the
indemnification obligations as provided in Section 9 (the "Escrow Shares"). As
set forth in Section 1.4 below, Terayon shall be entitled to pay the Sellers
cash in an amount of up to two hundred and fifty thousand US Dollars ($250,000)
(the "Cash Payment") in lieu of such equal portion of the Share Consideration
set forth above. The Share Consideration (which includes the shares to be
delivered to the Sellers, the Escrow Shares and the shares to be delivered to
all holders of Vested Options as specified in Section 1.6 below) and the Cash
Payment shall constitute, collectively, the Purchase Consideration.
1.4 Method of Share Transfer. The Transfer of the Terayon Shares as set
forth in Section 1.3 above shall be made by Terayon to the Sellers'
Representative on the Closing Date. The Cash Payment made by Terayon to the
Sellers' Representative on the Closing Date shall be made by wire transfer of
immediately available funds to the account specified by the Sellers'
Representative in writing to Terayon at least two (2) business days prior to the
Closing Date (the "Account"). The Cash Payment shall reduce the Share
Consideration by such number of Terayon Shares, the value of which (calculated
in the manner set forth in Section 1.3 above with respect to the Share
Consideration) shall be equal to the Cash Payment.
1.5 Accounting Treatment. For accounting purposes, the transaction
contemplated by this Agreement is intended to be treated as a "purchase."
1.6 Employee Options.
(a) There are currently outstanding and unexercised options to
acquire Ordinary Shares (the "Options") issued by the Company to employees,
directors and consultants listed in Schedule A (the "Option Holders"). The names
of the Option Holders and the number of Ordinary Shares covered by each Option
are set forth on Schedule A.
(b) At Closing, all Options that are vested as of the Closing Date
(the "Vested Options"), shall be exercised or canceled , and thereafter Terayon
shall grant to each Holder of Vested Options such number of options to purchase
Common Stock of Terayon ("Terayon Options"), fully vested, indicated opposite
such Option Holder's name on Schedule A. All Such Terayon Options shall have an
exercise price equal to the par value of the underlying Common Stock ($0.01),
and shall be exercisable at any time during the five (5) year period following
the Closing Date. Prior to the Closing, no Option Holder shall exercise or
transfer any Options.
(c) All Options that are not vested as of the Closing Date (the
"Unvested Options") shall be canceled and replaced with Terayon Options
provided, however, that the material terms (including the vesting schedule and
the exercise price with respect to such Terayon Options) shall be
substantially identical to the terms and conditions of the canceled and replaced
Unvested Options. If necessary, the Company shall cause any trustee holding such
Options to take appropriate action to facilitate and effect the above.
Notwithstanding the foregoing, in the event that the vesting of any Terayon
Option is accelerated upon the termination of any employment of holder of such
Terayon Option at any time prior to the first anniversary of the Closing in
accordance with the vesting schedule that would have applied to such holder's
Unvested Options, the Shares of Common Stock of Terayon underlying such Terayon
Options, less the exercise price thereof, shall be deducted from the Purchase
Consideration and Terayon shall be entitled to receive such shares from the
Escrow Shares.
(d) As soon as practicable following the date hereof and in any event
prior to the Closing, the Company shall secure the written agreement, in form
and substance reasonably acceptable to Terayon, of each Option Holder and
Warrant Holder to the terms and conditions of this Agreement (the "Option and
Warrant Holder Consent Letter and Counterpart Signature Page"). For the
avoidance of doubt, the total number of shares of Common Stock to be issued to
the Sellers and the Option and Warrant Holders hereunder shall be equal to the
Share Consideration.
Section 2. Representations and Warranties of the Company.
The Company represents and warrants, to and for the benefit of the
Indemnitees, as follows:
2.1 Due Organization; Subsidiaries; Etc.
(a) The Company is duly organized and validly existing under the laws
of the State of Israel. The Company has all requisite corporate power and
authority to conduct its business in the manner in which its business is
currently being conducted and to own and use its assets in the manner in which
its assets are currently owned and used.
(b) Except as set forth in Part 2.1 of the Disclosure Schedule, the
Company has not conducted any business under or otherwise used, for any purpose
or in any jurisdiction, any fictitious name, assumed name, trade name or other
name, other than the name "Ultracom Communications Holdings (1995) Ltd."
(c) The Company is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction, except where the failure to be so qualified, authorized,
registered or licensed has not had and will not have a Material Adverse Effect
on the Company.
(d) Part 2.1 of the Disclosure Schedule accurately sets forth (i) the
names of the members of the Company's board of directors, (ii) the names of the
members of each committee of the Company's board of directors, and (iii) the
names and titles of the Company's officers.
(e) The Company has two subsidiaries (the "Subsidiaries") both of
which are wholly owned by the Company: (i) Ultracom Communications (Israel) Ltd.
(the "Israeli Subsidiary"), a private Company duly incorporated and organized
and validly existing under the laws of the State of Israel, and (ii) Ultracom
Communications Inc. (the "Delaware Subsidiary"), a Delaware corporation duly
incorporated and organized and validly existing and in good standing under the
laws of Delaware.
(f) Ultracom Communications (Israel) Ltd. has not been active since
the end of fiscal year 1998, and all of its activities and rights and
obligations have been assigned to the Company.
(g) Except for the Subsidiaries, the Company does not own any
controlling interest in any Entity and the Company has never owned, beneficially
or otherwise, any shares or other securities of, or any direct or indirect
equity interest in, any Entity. The Company has not agreed and is not obligated
to make any future investment in or capital contribution to any Entity. The
Company has not guaranteed and is not responsible or liable for any obligation
of any of the Entities in which it owns or has owned any equity interest.
2.2 Articles of Association and Memorandum of Association; Records. The
Company has delivered to Terayon accurate and complete copies of: (1) the
Memorandum of Association and Articles of Association of the Company and each of
the Subsidiaries, including all amendments thereto; (2) the stock records of the
Company and the Subsidiaries; and (3) the minutes and other records of the
meetings and other proceedings (including any actions taken by written consent
without a meeting) of the stockholders of the Company, the board of directors of
the Company and all committees of the board of directors of each of the Company
and the Subsidiaries. There have been no formal meetings or other proceedings
of the stockholders of the Company, the board of directors of the Company or any
committee of
the board of directors of the Company or any of the Subsidiaries, that are not
fully reflected in such minutes or other records. Except as set forth in Part
2.2 of the Disclosure Schedule, there has not been any violation of any of the
provisions of the Company's Articles of Association or Memorandum of
Association, nor has the Company taken any action that is inconsistent with any
resolution adopted by the Company's stockholders, the Company's board of
directors or any committee of the Company's board of directors, which would have
a Material Adverse Effect on the Company. Except as set forth in Part 2.2 of the
Disclosure Schedule, the books of account, stock records, minute books and other
records of the Company are accurate, up-to-date and complete in all material
respects, and have been maintained in accordance with prudent business
practices.
2.3 Capitalization. The authorized share capital of the Company
immediately prior to the Closing is 415,500 New Israeli Shekels, consisting of
(i) 23,304,373 Ordinary Shares, NIS 0.01 nominal value per share, of which
15,387 shares are issued and outstanding, (ii) 400,000 Series A Preferred
Shares, NIS 0.01 nominal value per share, of which 400,000 shares are issued and
outstanding, (iii) 443,333 Series B Preferred Shares, NIS 0.01 nominal value per
share, of which 409,998 shares are issued and outstanding, (iv) 65,000 Series C
Preferred Shares, NIS 0.01 nominal value per share, none of which are issued,
(v) 15,250,000 Series D Preferred Shares, NIS 0.01 nominal value per share, of
which 14,608,061 shares are issued and outstanding and (vi) 2,087,294 Series D1
Preferred Shares, NIS 0.01 nominal value per share, of which 2,087,294 shares
are issued and outstanding. The issued and outstanding share capital of the
Company, on a fully diluted and as-converted basis taking into consideration all
convertible or exchangeable securities and other interests in the Company is set
forth in Part 2.3 of the Disclosure Schedule. Except as set forth in Part 2.3 of
the Disclosure Schedule, at the Closing Date, there will not be any outstanding
or authorized subscriptions, options, warrants, calls, rights, commitments,
convertible securities, or any other agreements of any character directly or
indirectly obligating the Company to issue any additional shares or any
securities convertible into, or exchangeable for, or evidencing the right to
subscribe for, any shares.
2.4 Financial Statements.
(a) The Company has delivered to Terayon the following financial
statements and notes (collectively, the "Company Financial Statements"):
(i) The audited balance sheets of the Company as of December 31,
1998, 1997 and 1996, and the related audited statements of operations,
statements of stockholders' equity and statements of cash flows of the Company
for the years then ended, together with the notes thereto and the unqualified
report and opinion of a recognized firm of independent certified accountants
relating thereto; and
(ii) The unaudited balance sheet of the Company as of December
31, 1999 (the "Unaudited Balance Sheet"), and the related unaudited statements
of operations, statements of stockholders' equity and statements of cash flows
of the Company for the year then ended.
(b) The Company Financial Statements are accurate and complete in all
material respects and present fairly the financial position of the Company as of
the respective
dates thereof and the results of operations and (in the case of the financial
statements referred to in Section 2.4(a)(i)) cash flows of the Company for the
periods covered thereby. The Company Financial State have been prepared in
accordance with generally accepted accounting principles consistently applied in
Israel throughout the periods covered (except that the financial statements
referred to in Section 2.4(a)(ii) do not contain footnotes and are subject to
normal and recurring year-end audit adjustments, which will not, individually or
in the aggregate, be material in magnitude) and comply with the requirements of
all applicable Israeli regulations.
(c) Except as set forth in Part 2.2 of the Disclosure Schedule, all
proper and necessary books of account, minute books, registers and records have
been maintained by the Company, are in its possession and contain accurate
information relating to all material transactions to which the Company has been
a party, except where the failure to maintain such books of account, minute
books, registers and records would not have a Material Adverse Effect on the
Company.
(d) A complete list of the Company's debts and loan facilities as of
December 31, 1999, is set forth in Part 2.4(d) of the Disclosure Schedule.
2.5 Absence of Changes. Except as set forth in Part 2.5 of the
Disclosure Schedule, since December 31, 1999:
(a) there has not been any material adverse change in the Company's
business, prospects, operations, assets, liabilities, debts, work force or its
condition (financial or otherwise) and no event has occurred that will, or could
reasonably be expected to, have a Material Adverse Effect on the Company;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the Company's assets (whether
or not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) the Company has not sold, issued or authorized the issuance of
(i) any capital stock or other security, (ii) any option or right to acquire any
capital stock or any other security or (iii) any instrument convertible into or
exchangeable for any capital stock or other security;
(e) the Company has not amended or waived any of its rights under, or
permitted the acceleration of vesting under (i) any provisions of employee
option plans (written or oral), (ii) any provision of any agreement evidencing
any outstanding Option or Warrant, or (ii) any restricted share purchase
agreement;
(f) there has been no amendment to the Company's Articles of
Association or Memorandum of Association, and the Company has not effected or
been a party to any Acquisition Transaction, recapitalization, reclassification
of shares, stock split, reverse stock split or similar transaction;
(g) the Company has not formed any subsidiary or acquired any equity
interest or other interest in any Entity other than the Subsidiaries;
(h) the Company has not made any capital expenditure which alone, or
as a part of a series of capital expenditures made on behalf of the Company
since December 31, 1999, exceeds $25,000.
(i) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Contract that is or would
constitute a Material Agreement (as defined in Section 2.10(a)), or (ii) amended
or prematurely terminated, or waived any material right or remedy under, any
such Contract;
(j) the Company has not (i) acquired, leased or licensed any right or
other asset from any other Person, (ii) sold or otherwise disposed of, or leased
or licensed, any right or other asset to any other Person, or (iii) waived or
relinquished any right, except for immaterial rights or other immaterial assets
acquired, leased, licensed or disposed of in the ordinary course of business and
consistent with the Company's past practices;
(k) the Company has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness;
(l) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with the Company's past practices;
(m) the Company has not (i) lent money to any Person, or (ii)
incurred or guaranteed any indebtedness for borrowed money.
(n) the Company has not (i) established or adopted any Employee
Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar payment
to, or increased the amount of the wages, salary, commissions, fringe benefits
or other compensation or remuneration payable to, any of its directors, officers
or employees, or (iii) hired any new employees;
(o) there has been no resignation or termination of employment of any
officer or key employee of the Company;
(p) the Company has not changed any of its methods of accounting or
accounting practices in any respect;
(q) the Company has not made any Tax election;
(r) the Company has not commenced or settled any Legal Proceeding;
(s) the Company has not entered into any transaction or taken any
other action outside the ordinary course of business or inconsistent with its
past practices; and
(t) the Company has not agreed or committed to take any of the
actions
referred to in clauses "(c)" through "(s)" above.
2.6 Properties and Assets. Full and accurate details of the Company's
material properties and assets are contained in Part 2.6 of the Disclosure
Schedule. Except as disclosed in Part 2.6 of the Disclosure Schedule or in the
notes to the Company Financial Statements, the Company has good and marketable
title to, or a license for the designated use of, its assets including without
limitation those reflected in the Company Financial Statements, free and clear
of any right, interest or equity of any individual or entity (including any
right to acquire, option, or right of preemption) or any mortgage, charge,
pledge, lien, or assignment, or any other encumbrance or security interest or
arrangement of whatsoever nature over or in the relevant property ("Security
Interests"). With respect to the assets that are leased, the Company is in
compliance with all material provisions of such leases, such leases are valid
and binding, and, to the best of its knowledge, the Company holds leasehold
interests in such assets free and clear of all Security Interests, except for
Security Interests that, both individually and in the aggregate with all other
exceptions to any of the representations in this Section 2 which are not
specified in the Disclosure Schedule, would not have a material adverse effect
on the Company.
2.7 Bank Accounts; Receivables.
(a) Part 2.7(a) of the Disclosure Schedule provides accurate
information with respect to each account maintained by or for the benefit of the
Company at any bank or other financial institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate and
complete breakdown and aging of all accounts receivable, notes receivable and
other receivables of the Company as of December 31, 1999. Except as set forth
in Part 2.7(b) of the Disclosure Schedule, all existing accounts receivable of
the Company (including those accounts receivable reflected on the Unaudited
Balance Sheet that have not yet been collected and those accounts receivable
that have arisen since December 31, 1999 and have not yet been collected) (i)
represent valid obligations of customers of the Company arising from bona fide
transactions entered into in the ordinary course of business, (ii) are current
and will be collected in full when due, without any counterclaim or set off (net
of an allowance for doubtful accounts not to exceed $25,000 in the aggregate).
2.8 Equipment; Leasehold.
(a) All material items of equipment and other tangible assets owned
by or leased to the Company are adequate for the uses to which they are being
put, are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of the Company's business in the manner in which such
business is currently being conducted.
(b) The Company does not own any real property or any interest in
real property, except for the leasehold created under the real property lease
identified in Part 2.10 of the Disclosure Schedule.
2.9 Intellectual Property and Other Intangible Assets.
(a) As used herein, the term "Intellectual Property" shall mean all
registered patents, designs and trademarks, all applications for registration
thereof, and all computer programs including, but not limited to, computer
programs embodied in semiconductor chips, and related flow-charts and updates,
and any data relating thereto, whether in object or source code form,
developed, or used in connection with the business of the Company, and all
hardware, algorithms, utilities flowcharts, documentation, processes,
formulations, experimental methods, or results, descriptions, business or
scientific plans, customer lists and any other written, printed or
electronically stored materials or information relating thereto, including
specifications, pricing plans, market research or data, potential marketing
strategies, prospective users and distribution channels, engineering drawings,
information concerning specialized suppliers, specifications for products and/
or processes and/or software, test protocols, and all other materials relating
thereto, and copies thereof in any storage media, and all other works of
authorship, inventions, concepts, ideas, and discoveries developed, discovered,
conceived, created, made, or reduced to practice by the Company and all
intellectual property rights therein, including, without limitation, all
copyrights in the United States, Israel and elsewhere, including all rights of
registration and publication, rights to create derivative works, and all other
rights incident to copyright ownership, for the residue now unexpired of the
present term of any and all such copyrights and any term thereafter granted
during which such information is entitled to copyright, and all inventions
(patentable or unpatentable), trade secrets, know-how, ideas and confidential
information embodied or reflected in such information, for the longest period of
protection accorded to such interests under applicable law.
(b) Except as specifically set forth in Part 2.9(b) of the Disclosure
Schedule, the Company (i) owns or has the right to use, free and clear of all
liens, claims and restrictions, the Intellectual Property used in the conduct of
its business, and (ii) to the best knowledge of the Company, such Intellectual
Property does not infringe upon or violate any right, lien, or claim of others,
including without limitation of its present or former employees or the former
employers of all such persons. Except as set forth in Part 2.9(b) of the
Disclosure Schedule, the Company is not currently obligated or under any
liability whatsoever to make any payments by way of royalties, fees or otherwise
to any owner or licensee of, or other claimant to, any patent, trademark,
service xxxx, trade name, copyright or other intangible asset, with respect to
the use thereof or in connection with the conduct of its business or otherwise.
(c) Except as specifically set forth in Part 2.9(c) of the Disclosure
Schedule, any and all Intellectual Property of any kind which has been developed
or, is currently being developed, by any of the Company or any employees of the
Company shall be the property solely of the Company. The Company has taken
security measures to protect the secrecy, confidentiality and value of all the
Intellectual Property, which measures are reasonable and customary in the
industry in which the Company operates. Each employee, consultant and
contractor of the Company who, either alone or in concert with others,
developed, invented, discovered, derived, programmed or designed the
Intellectual Property, or who has knowledge of or access to information about
the Intellectual Property, has entered into a written non-disclosure agreement
with the Company regarding ownership and confidentiality of the Intellectual
Property, in a form reasonably satisfactory to the Company.
(d) Except as specifically set forth in Part 2.9(d) of the Disclosure
Schedule, neither the Company nor, to the best knowledge of the Company, any of
its
directors, officers or employees has received any communications alleging that
the Company has violated or by conducting its business as currently conducted,
would violate, any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person or
entity. Except as set forth in Part 2.9(d) of the Disclosure Schedule, neither
the Company nor, to the best knowledge of the Company, any of its directors,
officers or employees has received notice nor is it otherwise aware of any
infringement of or conflict with asserted rights of others, with respect to any
of the Intellectual Property, or of any facts, or assertion of any facts, which
would render any of the Intellectual Property invalid or unenforceable.
(e) To the best knowledge of the Company, none of the Company's
employees, officers or directors are obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of such persons' best efforts to promote the
interests of the Company or that would conflict with the Company's business as
conducted and as proposed to be conducted. To the best knowledge of the Company,
neither the execution nor delivery of the Agreement, nor the carrying on of the
Company's business by employees of the Company, nor the conduct of the Company's
business as proposed to be conducted, will materially conflict with or result in
a material breach of the terms, conditions or provisions of, or constitute a
material default under, any contract, covenant or instrument under which any of
the Company's employees, officers or directors is now obligated. It is not, and
will not become, necessary to utilize any inventions, and specifically, patent
applications, of any of the Company's employees (or people the Company currently
intends to hire) made prior to their employment by the Company other than those
that have been assigned to the Company pursuant to valid and legally binding
instruments of assignment.
(f) To the best knowledge of the Company, the Intellectual Property
owned or licensed by the Company constitutes all of the Intellectual Property
reasonably necessary to enable the Company to conduct its business in the manner
in which such business has been and is being conducted. Except as set forth in
Part 2.9(f) of the Disclosure Schedule, the Company has not licensed any of the
Company Intellectual Property to any Person on an exclusive basis, nor has the
Company entered into any covenant not to compete or Contract limiting its
ability to exploit fully any of its Intellectual Property or to transact
business in any market or geographical area or with any Person.
(g) The Company's products (the "Products") have not and will not
experience fatal errors and/or invalid and/or incorrect results as a result of
the change of year from 1999 to 2000; provided, that the Products receive
correct and properly formatted date inputs from all software and hardware that
exchange data with or provide data to the Products.
2.10 Agreements and Trading.
(a) All agreements for the provision of goods or services in excess
of $50,000, or which are essential for the Company's conduct of its business, to
which the Company is a party (including instruments, leases, licenses,
arrangements, or undertakings of any nature, written or oral) (the "Material
Agreements") are listed in Part 2.10(a) of the
Disclosure Schedule.
(b) To the best of the Company's knowledge, and except as set forth
in Part 2.10(c) of the Disclosure Schedule, all the Material Agreements are in
full force and effect and the Company has no knowledge of the invalidity of or
grounds for rescission, avoidance or repudiation of any of the Material
Agreements and, except as set forth in Part 2.10(b) of the Disclosure Schedule,
the Company has not received any notice of any intention to terminate any such
agreement.
(c) To the best of the Company's knowledge and other than as set
forth in Part 2.10(c) of the Disclosure Schedule, the Company has performed in
all respects all of their material obligations under the Material Agreements,
except for such non performance that, both individually and in the aggregate
with all other exceptions to any of the representations in this Section 2 which
are not specified on schedules hereto, would not have a Material Adverse Effect
on the Company. To the best of the Company's knowledge, and except as set forth
in Part 2.10(c) of the Disclosure Schedule, no party to any of the Material
Agreements is in breach or in default in any respect of its material obligations
thereunder. Except as set forth in Part 2.10(c) of the Disclosure Schedule, no
party to any of the material Agreements has made a claim of which the Company is
aware to the effect that the Company has failed to perform a material obligation
thereunder.
(d) Except as set forth in Part 2.10(d) of the Disclosure Schedule,
there are no agreements, promises or understandings in force restricting the
competitive freedom of the Company to provide and take goods and services by
such means and from and to such individuals or entities as it may from time to
time think fit.
(e) The Company has delivered to Terayon accurate and complete copies
of all written Material Agreements identified in Part 2.10(a) of the Disclosure
Schedule, including all amendments thereto. Part 2.10(a) of the Disclosure
Schedule provides an accurate description of the terms of each Material
Agreement that is not in written form. Except as set forth in Parts 2.10(b) and
2.10(c) of the Disclosure Schedule, each Material Agreement identified in Part
2.10(a) of the Disclosure Schedule is valid and in full force and effect, and,
to the Company's best knowledge, is enforceable by the Company in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
(f) Except as set forth in Part 2.10(c) of the Disclosure Schedule:
(i) the Company has not violated or breached, or committed any
material default under, any Material Agreement, and, to the Company's best
knowledge, no other Person has violated or breached, or committed any material
default under, any Material Agreement;
(ii) no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or could reasonably
be expected to, (A) result in a material violation or breach of any of the
provisions of any Material Agreement, (B) give any Person the right to declare a
material default or exercise any remedy
under any Material Agreement, (C) give any Person the right to accelerate the
maturity or performance of any Material Agreement, or (D) give any Person the
right to cancel, terminate or modify any Material Agreement;
(iii) the Company has not received any notice or other
communication regarding any actual or possible material violation or breach of,
or material default under, any Material Agreement; and
(iv) the Company has not waived any of its material rights under
any Material Agreement.
(g) No Person is renegotiating, or has a right pursuant to the terms
of any Material Agreement to re-negotiate, any amount paid or payable to the
Company under any Material Agreement or any other material term or provision of
any Material Agreement.
(h) The Material Agreements identified in Part 2.10(a) of the
Disclosure Schedule collectively constitute all of the Contracts necessary to
enable the Company to conduct its business in the manner in which its business
is currently being conducted.
(i) Part 2.10(i) of the Disclosure Schedule identifies and provides a
brief description of each proposed Contract as to which any bid, offer, award,
written proposal, term sheet or similar document has been submitted or received
by the Company regarding the business of the Company since January 1, 1999, or
which is otherwise still pending.
(j) Part 2.10(j) of the Disclosure Schedule provides an accurate
description and breakdown of the Company's backlog under Material Agreements.
2.11 Capital Expenditure and Commitments. Except as disclosed in Part
2.11 of the Disclosure Schedule or in the Company Financial Statements:
(a) The Company has not undertaken to make any material capital
commitment, expenditure or purchase in excess of $50,000.
(b) The Company is not a party to any material hire, hire purchase,
credit sale or conditional sale agreement or any contract providing for payment
on deferred terms in respect of assets purchased by the Company.
(c) The Company is not in breach of any material obligation under any
material deed, agreement or transaction to which it is a party, and to the best
of its knowledge, no third party that has transacted business with the Company
is in breach of any of its material obligations under any material deed,
agreement, or transaction with the Company to which it is a party.
(d) The Company is not aware of any security interest on, over or
affecting the issued or unissued share capital of the Company and there is no
agreement or commitment to give or create any such Security Interest and no
claim has been made by any Person to be entitled to any such Security Interest.
(e) The Company has not given any guarantee, indemnity or security
for,
or otherwise agreed to become directly or contingently liable for, any
obligation of any other individual or entity, except in its ordinary course of
business, and to the best of its knowledge, no individual or entity has given
any guaranty of or security for any of the Company's obligations.
(f) There are in force no powers of attorney given by the Company
with respect to any asset or business of the Company, and no individual or
entity, as agent, representative, distributor or otherwise, is entitled or
authorized to bind or commit the Company to any obligation not in the ordinary
course of the Company's business.
(g) The Company has not applied for or received any grant or
allowance from any governmental authority.
2.12 Compliance with Legal Requirements.
(a) To the best of its knowledge, information and belief, and except
as set forth in Part 2.12(a) of the Disclosure Schedule, the Company has carried
on its business and affairs in all material respects in accordance with all
applicable laws and regulations, to the extent material to the Company's
business or assets, including, inter alia, in accordance with the provisions of
the Israel Companies Ordinance [New Version], 1983, and in accordance with the
Company's Memorandum of Association and Articles of Association, and, the
Company is not aware of any material violation or default with respect to any
statute, regulation, order, decree, or judgment of any court or any governmental
agency which could have a material adverse effect upon the Company's assets or
business, and the Company has been granted and there are now in force all
material approvals, consents, and licenses necessary for the carrying on of its
business in the places and in the manner in which it is now carried on, and,
except as set forth in Part 2.12(a) of the Disclosure Schedule, the Company is
not aware of any circumstances which evidence or indicate that any such
approvals, consents or licenses, to the extent material to the Company's
business or assets, are likely to be suspended, canceled, revoked or not
renewed.
(b) The copy of each of the Memorandum of Association and Articles of
Association of the Company provided to Terayon, is complete, true and accurate
and has not been amended or repealed.
(c) To the best of the Company's knowledge, and except as
specifically set forth in Part 2.12(c) of the Disclosure Schedule, all documents
required to be filed with or delivered to the Registrar of Companies in respect
of the Company have been properly delivered in a timely manner, except for such
non compliance that, both individually and in the aggregate with all other
exceptions to any of the representations in this Section 2 which are not
specified on schedules hereto, would not have a Material Adverse Effect on the
Company.
2.13 Governmental Authorizations. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by the Company, and the
Company has delivered to Terayon accurate and complete copies of all
Governmental Authorizations identified in Part 2.13 of the Disclosure Schedule.
The Governmental Authorizations identified in Part 2.13 of the Disclosure
Schedule are valid and in full force and effect, and
collectively constitute all Governmental Authorizations necessary to enable the
Company to conduct its business in the manner in which its business is currently
being conducted. Except as set forth in Part 2.13 of the Disclosure Schedule,
the Company is, and at all times since December 31, 1997 has been, in
substantial compliance with the terms and requirements of the respective
Governmental Authorizations identified in Part 2.13 of the Disclosure Schedule.
Since December 31, 1997, the Company has not received any notice or other
communication from any Governmental Body regarding (a) any actual or possible
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization.
2.14 Tax Matters.
(a) To the best of the Company's knowledge, except as specifically
set forth in Part 2.14(a) of the Disclosure Schedule, the Company Financial
Statements make full provisions for all Taxes for which the Company was then or
thereafter became or may hereafter become liable or accountable in respect of or
by reference to any income, profit, receipt, gain, transaction, agreement,
distribution or event which was earned, accrued, received, or realized, entered
into except as specifically set forth in Part 2.14(a) of the Disclosure
Schedule, paid, made or accrued on or before December 31, 1998, and the Company
promptly paid or fully provided in its books of account for all Taxes for which
it has or may hereafter become liable or accountable in the period from the date
of its incorporation to the Closing Date.
(b) To the best of the Company's knowledge, and except as set forth
in Part 2.14(b) of the Disclosure Schedule, the Company has at all times and
within the requisite time limits promptly, fully and accurately observed,
performed and complied with all material obligations or conditions imposed on
it, or to which any claim, deduction, allowance or relief made, claimed by or
afforded to it was made subject, under any legislation relating to Taxes, except
for such non compliance that, both individually and in the aggregate with all
other exceptions to any of the representations in this Section 2 which are not
specified in the Disclosure Schedule, would not have a Material Adverse Effect
on the Company.
(c) Except as specifically set forth in Part 2.14(c) of the
Disclosure Schedule, the Company is not aware of any circumstances which will or
may, whether by lapse of time or the issue of any notice of assessment or
otherwise, give rise to any dispute with any relevant Government Body in
relation to its liability or accountability for Taxes, any claim made by it, any
relief, deduction, or allowance afforded to it, or in relation to the status or
character of the Company or any of its enterprises under or for the purpose of
any provision of any legislation relating to Taxes, except for such dispute or
claim that, both individually and in the aggregate, would not have a Material
Adverse Effect on the Company.
2.15 Employees.
(a) Full particulars of all the officers, employees and consultants
of the Company (each, an "Employee"), including their present compensation
packages, are disclosed in Part 2.15(a) of the Disclosure Schedule, which
particulars show all material benefits including, without limitation, salaries,
directors' fees, social benefits, bonuses,
commissions, profit shares, automobile, reimbursement of expenses and benefits
in kind ("Benefits") payable or which the Company is bound to provide (whether
now or in the future) to each officer, employee and consultant of the Company
and are true, accurate and complete.
(b) Except as set forth in Part 2.15(b) of the Disclosure Schedule,
no key employee of the Company has been dismissed in the last six months or has
given notice of termination of his employment.
(c) Part 2.15(c) of the Disclosure Schedule includes the form of
contracts under which substantially all the Employees of the Company at the date
hereof are engaged.
(d) Subject to the provisions of any applicable Israeli law and
binding custom and except as set forth in Part 2.15(a) of the Disclosure
Schedule, there are no agreements or arrangements (whether legally enforceable
or not) for the payment of any pensions, allowances, lump sums, or other like
benefits on retirement or on death or termination or during periods of sickness
or disablement for the benefit of any officer or former officer or employee or
former employee of the Company or for the benefit of the dependents of any such
individual in operation at the date hereof.
(e) Except as set forth in Part 2.15(e) of the Disclosure Schedule,
all the Benefits to which any officer or former officer or employee or former
employee of the Company is or may be entitled including, inter alia, severance
pay, leave and health, have been paid or adequately provided for in the Company
Financial Statements.
(f) A complete list of all of the shares and options granted to or
purchased by employees, directors, officers or consultants of the Company, and
their respective vesting schedules, is set forth in Part 2.15(f) of the
Disclosure Schedule. Except as set forth therein, the Company does not operate
any share incentive scheme, share option scheme or profit sharing scheme for the
benefit of any of its directors, officers, employees or consultants.
(g) Neither the execution, delivery or performance of this Agreement,
nor the consummation of any of the other transactions contemplated by this
Agreement, will result in any payment (including any bonus, golden parachute or
severance payment) to any current or former Employee or director of the Company
(whether or not under any Plan), or materially increase the benefits payable
under any Plan, or result in any acceleration of the time of payment or vesting
of any such benefits, except as provided therein or by law.
(h) Part 2.15(a) of the Disclosure Schedule contains a list of all
salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions.
(i) Part 2.15(i) of the Disclosure Schedule identifies each Employee
who is not fully available to perform work because of disability or other leave
and sets forth the basis of such leave and the anticipated date of return to
full service.
(j) Except as set forth in Part 2.15(j) of the Disclosure Schedule,
the
Company is in compliance in all material respects with all applicable Legal
Requirements and Contracts relating to employment, employment practices, wages,
bonuses and terms and conditions of employment, including employee compensation
matters.
(k) Except as set forth in Part 2.15(k) of the Disclosure Schedule,
the Company is not aware of any organizational campaigns, petitions or other
unionization activities seeking recognition of a collective bargaining unit
which could affect the Company; nor is the Company aware of any controversies,
strikes, slowdowns or stoppages pending or threatened between the Company and
any of its employees. To the Company's best knowledge, the consummation of any
of the transactions contemplated by this Agreement will not have a material
adverse effect on the Company's labor relations, and none of the Company's key
employees has notified the Company of any intention to terminate his or her
employment with the Company.
2.16 Environmental Matters. The Company is in compliance in all material
respects with all applicable Environmental Laws, which compliance includes the
possession by the Company of all permits and other Governmental Authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof. The Company has not received any notice or other
communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that the Company is not in
compliance with any Environmental Law, and, to the Company's best knowledge,
there are no circumstances that may prevent or interfere with the Company's
compliance with any Environmental Law in the future. To the Company's best
knowledge, no current or prior owner of any property leased or controlled by the
Company has received any notice or other communication (in writing or
otherwise), whether from a Government Body, citizens group, employee or
otherwise, that alleges that such current or prior owner or the Company is not
in compliance with any Environmental Law with respect to such property. All
Governmental Authorizations currently held by the Company pursuant to
Environmental Laws are identified in Part 2.16 of the Disclosure Schedule. (For
purposes of this Section 2.16: (i) "Environmental Law" means any federal,
state, local or foreign Legal Requirement relating to pollution or protection of
human health or the environment (including ambient air, surface water, ground
water, land surface or subsurface strata), including any law or regulation
relating to emissions, discharges, releases or threatened releases of Materials
of Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern; and (ii) "Materials of Environmental
Concern" include chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products and any other substance that is now regulated
by any Environmental Law or that is otherwise a danger to health, reproduction
or the environment.).
2.17 Insurance.
(a) Full and accurate details of the Company's insurance policies are
contained in Part 2.17(a) of the Disclosure Schedule, including such policies as
are required under the Company's agreements with its customers.
(b) The Company has the benefit of customary insurance policies
against all risks and losses usually insured against by companies carrying on
the same or a similar
business, subject to customary exclusions, and (without prejudice to the
generality of the foregoing) for the full replacement or reinstatement value of
all its assets of an insurable nature and against accident, damage, injury,
third party loss (including product liability) and loss of profits with a well
established and reputable insurer.
(c) Except as specifically set forth in Part 2.17(c) of the
Disclosure Schedule, the Company has not done anything or suffered any damage
which has rendered or might render any policies of insurance taken out by it
void or voidable or which might result in an increase in premiums and the
Company has complied with all conditions attached to such policies.
(d) There is no claim outstanding under any of such policies nor, to
the best of the Company's knowledge, are there any circumstances likely to give
rise to such a claim.
2.18 Related Party Transactions. Except as set forth in Part 2.18 of the
Disclosure Schedule: (a) no Related Party has, and no Related Party has at any
time since December 31, 1997 had, any direct or indirect interest in any
material asset used in or otherwise relating to the business of the Company; (b)
no Related Party is, or has at any time since December 31, 1997 been, indebted
to the Company; (c) since December 31, 1997, no Related Party has entered into,
or has had any direct or indirect financial interest in, any Material Agreement,
transaction or business dealing involving the Company; (d) no Related Party is
competing, or has at any time since December 31, 1997 competed, directly or
indirectly, with the Company; and (e) no Related Party has any claim or right
against the Company (other than rights under Options and rights to receive
compensation for services performed as an employee of the Company). (For
purposes of this Section 2.18 each of the following shall be deemed to be a
"Related Party": (i) the Seller and any person who owns an aggregate of five
percent (5%) or more of the capital stock of the Seller; (ii) each individual
who is, or who has at any time since December 31, 1997 been, an officer of the
Company; (iii) each member of the immediate family of each of the individuals
referred to in clauses '(i)' and '(ii)' above; and (iv) any trust or other
Entity (other than the Company) in which any one of the individuals referred to
in clauses '(i)' '(ii)' and '(iii)' above holds (or in which more than one of
such individuals collectively hold), beneficially or otherwise, a material
voting, proprietary or equity interest.)
2.19 Legal Proceedings; Orders.
(a) As of three days prior to the date hereof and three days prior to
the Closing Date, except as set forth in Part 2.19 of the Disclosure Schedule
there is no, nor will there have been any pending Legal Proceeding, and, to the
Company's best knowledge, no Person has threatened to commence any Legal
Proceeding: (i) that involves the Company or any of the assets owned or used by
the Company or any Person whose liability the Company has or may have retained
or assumed, either contractually or by operation of law; or (ii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, any of the transactions contemplated by this
Agreement. To the Company's best knowledge, no event has occurred, and no claim,
dispute or other condition or circumstance exists, that will, or that could
reasonably be expected to, give rise to or serve as a basis for the commencement
of any such Legal Proceeding.
(b) Except as set forth in Part 2.19 of the Disclosure Schedule, no
Legal Proceeding has ever been commenced by or has ever been pending against the
Company.
(c) As of three days prior to the date hereof and three days prior to
the Closing Date, there is no order, writ, injunction, judgment or decree to
which the Company, or any of the assets owned or used by the Company, is
subject. To the Company's best knowledge, no officer or other employee of the
Company is subject to any order, writ, injunction, judgment or decree that
prohibits such officer or other employee from engaging in or continuing any
conduct, activity or practice relating to the Company's business.
2.20 Authority; Binding Nature of Agreement. Except as set forth in Part
2.21 of the Disclosure Schedule, the Company has the absolute and unrestricted
right, power and authority to enter into and to perform its obligations under
this Agreement; and the execution, delivery and performance by the Company of
this Agreement have been duly authorized by all necessary action on the part of
the Company and its board of directors. This Agreement constitutes the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other remedies.
2.21 Non-Contravention; Consents. Except as set forth in Part 2.21 of the
Disclosure Schedule, neither (1) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement, nor (2)
the consummation of any of the transactions contemplated by this Agreement, will
directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the Company's Articles of Association or Memorandum of
Association, or (ii) any resolution adopted by the Company's shareholders, the
Company's board of directors or any committee of the Company's board of
directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which the Company, or any of the assets owned or used by the
Company, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the Company's business
or to any of the assets owned or used by the Company;
(d) contravene, conflict with or result in a material violation or
breach of, or result in a material default under, any provision of any Material
Agreement that is or would constitute a Material Agreement, or give any Person
the right to (i) declare a default or exercise any remedy under any such
Material Agreement, (ii) accelerate the maturity or performance of any such
Material Agreement, or (iii) cancel, terminate or modify any such
Material Agreement; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company).
Except as set forth in Part 2.21 of the Disclosure Schedule, the Company is not
and will not be required to make any filing with or give any notice to, or to
obtain any Consent from, any Person in connection with (i) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (ii) the consummation of any of the
transactions contemplated by this Agreement.
2.22 No Conflicting Interest. Except as set forth in Part 2.22 of the
Disclosure Schedule, the Company is not aware that any director, officer, key
employee or Related Party of the Company has any interest in any corporation,
partnership, or other entity that is engaged in a business which is in
competition with that of the Company, is a supplier or customer of the Company,
or is a party to any contract which may have any effect on the business of the
Company.
2.23 Brokers. Except as set forth in Part 2.23 of the Disclosure Schedule,
no broker, finder or investment banker, for which the Company or the Seller may
be liable, is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Company or any of its directors, officers,
employees or agents.
2.24 Claims from Sellers. None of the Sellers has any claims or rights of
action against the Company as of the Closing, and none of the agreements between
the Company and any of the Sellers is in violation, or is contested by, any of
the Company's shareholders.
2.25 Experience; Receipt of Information. The Sellers have knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks relating to the Share Consideration paid to the Sellers in
accordance with the acquisition of the Company by Terayon, and have reviewed and
inspected all of the data and information provided to them by Terayon in
connection with this Agreement. The sellers have been furnished by Terayon with
all the documents and information regarding the Company which the Sellers have
requested, and have been afforded the opportunity to ask questions of and
receive answers from duly authorized officers or other representatives of
Terayon concerning Terayon's business, assets and financial position.
2.26 Full Disclosure. This Agreement (including the Disclosure Schedule)
does not, and the Company Closing Certificate will not, (i) contain any
representation, warranty or information that is false or misleading with respect
to any material fact, or (ii) omit to state any material fact necessary in
order to make the representations, warranties and information contained and to
be contained herein and therein (in the light of the circumstances under which
such representations, warranties and information were or will be made or
provided) not false or misleading.
Section 3. Representations and Warranties of Terayon
Terayon represents and warrants to the Company and the Sellers as follows:
3.1 Due Organization. Terayon is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Terayon
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its businesses as now conducted.
3.2 SEC Filings; Financial Statements.
(a) Terayon has timely filed all required forms, reports and
documents with the SEC since August 17, 1998, each of which has complied in all
material respects with all applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder, each as in
effect on the dates such forms, reports, and documents were filed. Terayon has
made available to the Company and the Seller accurate and complete copies
(excluding copies of exhibits) of each report, registration statement (on a form
other than Form S-8) and definitive proxy statement filed by Terayon with the
SEC between August 17, 1998 and the date of this Agreement (the "Terayon SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each of the Terayon SEC Documents, including, any financial
statements or schedules included or incorporated by reference therein, complied
in all material respects with the applicable requirements of the Securities Act
or the Exchange Act (as the case may be); and (ii) none of the Terayon SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) The consolidated financial statements contained in the Terayon
SEC Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered, except as may be indicated in
the notes to such financial statements and (in the case of unaudited statements)
as permitted by Form 10-Q of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to year-end audit
adjustments; and (iii) fairly present the consolidated financial position of
Terayon and its subsidiaries as of the respective dates thereof and the
consolidated results of operations of Terayon and its subsidiaries for the
periods covered thereby. Except as and to the extent disclosed in the Terayon
SEC Reports, since August 17, 1998, there has not been any event, occurrence or
development which does or could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Terayon.
3.3 Authority; Binding Nature of Agreement. Terayon has the absolute and
unrestricted right, power and authority to perform its obligations under this
Agreement; and the execution, delivery and performance by Terayon of this
Agreement (including the contemplated issuance of Common Stock in accordance
with this Agreement) have been duly authorized by all necessary action on the
part of Terayon and its board of directors. No vote of Terayon's stockholders
is needed to approve any of the transactions contemplated by this
Agreement. This Agreement constitutes the legal, valid and binding obligation of
Terayon, enforceable against it in accordance with its terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
3.4 Valid Issuance. The Common Stock to be issued in the transactions
contemplated by this Agreement will, when issued in accordance with the
provisions of this Agreement, be validly issued, fully paid and nonassessable.
3.5 Consents and Approvals. Except as set forth on Schedule 3.5 hereto,
no filing or registration with, no notice to and no permit, authorization,
consent or approval of any third party or any Governmental Body is necessary for
the consummation by Terayon of the transactions contemplated by this Agreement.
3.6 No Violation. Neither the execution and delivery of this Agreement
by Terayon, the performance by Terayon of its obligations hereunder nor the
consummation by Terayon of the transactions contemplated hereby will (a)
violate, conflict with or result in any breach of any provision of the
Certificate of Incorporation or Bylaws of Terayon, (b) violate, conflict with or
result in a violation or breach of, or constitute a default (with or without due
notice or lapse of time or both) under the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease or agreement
to which Terayon is a party or (c) violate any order, writ, judgment,
injunction, decree, statute, rule or regulation of any court or domestic or
foreign Governmental Body applicable to Terayon.
3.7 Legal Proceedings. Except as set forth in Schedule 3.7 hereto,
Terayon is not aware of any pending Legal Proceeding, and, to Terayon's best
knowledge, no Person has threatened to commence any Legal Proceeding: (i) that
involves Terayon or any of the assets owned or used by Terayon or any Person
whose liability Terayon has or may have retained or assumed, either
contractually or by operation of law; or (ii) that challenges, or that may have
the effect of preventing, delaying, making illegal or otherwise interfering
with, any of the transactions contemplated by this Agreement. To Terayon's best
knowledge, no event has occurred, and no claim, dispute or other condition or
circumstance exists, that will, or that could reasonably be expected to, give
rise to or serve as a basis for the commencement of any such Legal Proceeding.
3.8 Experience; Receipt of Information. Terayon has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks relating to the acquisition of the Company and has reviewed and
inspected all of the data and information provided to it by the Company in
connection with this Agreement. Terayon has been furnished by the Company with
all the documents and information regarding the Company which Terayon has
requested, and has been afforded the opportunity to ask questions of and receive
answers from duly authorized officers or other representatives of the Company
concerning the Company's business, assets and financial position.
3.9 Brokers. No broker, finder or investment banker, for which the
Company or the Sellers may be liable, is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Terayon or any of its
directors, officers, employees or agents.
3.10 Full Disclosure. This Agreement does not, and the Terayon Closing
Certificate will not, (i) contain any representation, warranty or information
that is false or misleading with respect to any material fact, or (ii) omit to
state any material fact necessary in order to make the representations,
warranties and information contained and to be contained herein and therein (in
the light of the circumstances under which such representations, warranties and
information were or will be made or provided) not false or misleading.
Section 4. Certain Covenants of the Company.
4.1 Access and Investigation. During the period from the date of this
Agreement through the Closing, or the earlier termination hereof in accordance
with Section 8 (the "Pre-Closing Period"), the Company shall, and shall cause
its Representatives to: (a) provide Terayon and Terayon's Representatives with
reasonable access to the Company's Representatives, personnel and assets and to
all existing books, records, Tax Returns, work papers and other documents and
information relating to the Company; and (b) provide Terayon and Terayon's
Representatives with copies of such existing books, records, Tax Returns, work
papers and other documents and information relating to the Company, and with
such additional financial, operating and other data and information regarding
the Company, as Terayon may reasonably request.
4.2 Operation of the Company's Business. Other than as contemplated
hereunder, or in the Disclosure Schedule, during the Pre-Closing Period:
(a) the Company shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement;
(b) the Company shall use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and maintain its relations and good will with all
suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with the Company;
(c) the Company shall keep in full force all insurance policies
referred to in Part 2.17 of the Disclosure Schedule;
(d) the Company shall cause its officers to report regularly (but in
no event less frequently than weekly) to Terayon concerning the status of the
Company's business;
(e) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and shall not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities.
(f) except as set forth in part 4.2(f) of the Disclosure Schedule,
the Company shall not sell, issue or authorize the issuance of (i) any capital
stock or other security, (ii) any option or right to acquire any capital stock
or other security, or (iii) any instrument convertible into or exchangeable for
any capital stock or other security;
(g) the Company shall not amend or waive any of its rights under, or
permit the acceleration of vesting under, (i) any provision of the Plan for
Issuance of Options to Directors Executives and Senior Employees of the Company,
(ii) any provision of any agreement evidencing any outstanding Option, or (iii)
any provision of any restricted stock purchase agreement;
(h) the Company shall not amend or permit the adoption of any
amendment to the Company's Articles of Association, except to the extent
necessary to effect or permit the Company to become a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction;
(i) the Company shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(j) the Company shall not make any capital expenditure, except
capital expenditures that do not exceed $25,000 per month;
(k) the Company shall not, other than in the ordinary course of
business, (i) enter into, or permit any of the assets owned or used by it to
become bound by, any Contract that is or would constitute a Material Agreement,
or (ii) amend or prematurely terminate, or waive any material right or remedy
under, any such Contract;
(l) the Company shall not (i) acquire, lease or license any right or
other asset from any other Person, except for rights or other assets acquired,
leased or licensed in the ordinary course of business, (ii) sell or otherwise
dispose of, or lease or license, any right or other asset to any other Person,
except for rights or other assets disposed of, leased or licensed in the
ordinary course of business, or (iii) waive or relinquish any right, except for
assets acquired, leased, licensed or disposed of by the Company pursuant to
Contracts that are not Material Agreements;
(m) the Company shall not (i) lend money to any Person, or (ii) incur
or guarantee any indebtedness for borrowed money other than in the ordinary
course of business and consistent with past practices;
(n) the Company shall not (i) establish, adopt or amend any employee
benefit plan, (ii) pay any bonus or make any profit-sharing payment, cash
incentive payment or similar payment to, or increase the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees, or (iii) hire any new
key employee;
(o) the Company shall not change any of its methods of accounting or
accounting practices in any material respect;
(p) the Company shall not make any Tax election;
(q) the Company shall not commence or settle any material Legal
Proceeding;
(r) the Company shall not agree or commit to take any of the actions
described in clauses "(e)" through "(q)" above.
Notwithstanding the foregoing, the Company may take any action described in
clauses "(e)" through "(r)" above if Terayon gives its prior written consent to
the taking of such action by the Company, which consent will not be unreasonably
withheld (it being understood that Terayon's withholding of consent to any
action will not be deemed unreasonable if Terayon determines in good faith that
the taking of such action would not be in the best interests of the Company,
currently and/or under the ownership of Terayon).
4.3 Notification; Updates to Disclosure Schedule.
(a) During the Pre-Closing Period, the Sellers and/or the Company
shall promptly notify Terayon in writing of:
(i) the discovery by the Sellers and/or the Company of any
event, condition, fact or circumstance that occurred or existed on or prior to
the date of this Agreement and that caused or constitutes an inaccuracy in or
breach of any representation or warranty made by the Company in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made by
the Company in this Agreement if (A) such representation or warranty had been
made as of the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(iii) any material breach of any material covenant or obligation
of the Sellers and/or the Company; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 4.3(a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then the Company shall promptly deliver to Terayon an update to
the Disclosure Schedule specifying such change. No such update shall be deemed
to supplement or amend the Disclosure Schedule for the purpose of (i)
determining the accuracy of any of the representations and warranties made by
the Company in this Agreement, or (ii) determining whether any of the conditions
set forth in Section 6 has been satisfied.
4.4 No Negotiation. During the Pre-Closing Period, neither the Sellers
nor the Company shall directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Terayon) relating to a possible Acquisition
Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other than
Terayon) relating to or in connection with a possible Acquisition Transaction;
or
(c) negotiate, entertain or accept any proposal or offer from any
Person (other than Terayon) relating to a possible Acquisition Transaction.
The Seller and/or the Company shall promptly notify Terayon in writing of any
material inquiry, proposal or offer relating to a possible Acquisition
Transaction that is received by the Company or any of its Representatives during
the Pre-Closing Period.
4.5 Name and Logo: Terayon and the Company may continue to use the name
"Ultracom Communications Holdings (1995) Ltd." and the logo and trade marks (if
any) perpetually and free of any charges whatsoever. The Sellers and its
Affiliates shall not use the "Ultracom" name after the Closing Date.
Section 5. Additional Covenants of the Parties.
5.1 Filings and Consents. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (a) shall make all
filings (if any) and give all notices (if any) required to be made and given by
such party in connection with the transactions contemplated by this Agreement,
and (b) shall use all commercially reasonable efforts to obtain all Consents (if
any) required to be obtained (pursuant to any applicable Legal Requirement or
Contract, or otherwise) by such party in connection with the transactions
contemplated by this Agreement. Each party to this Agreement shall (upon
request) promptly deliver to the other parties a copy of each such filing made,
each such notice given and each such Consent obtained by such party during the
Pre-Closing Period. Each party shall promptly provide the other parties with
copies of all filings made by the other party with the SEC or any other state,
federal or foreign Governmental Body in connection with this Agreement and the
transactions contemplated hereby.
5.2 Public Announcements. During the Pre-Closing Period, (a) the Company
and the Sellers shall not (and the Company shall not permit any of its
Representatives to) issue any press release or make any public statement
regarding this Agreement, or regarding any of the transactions contemplated by
this Agreement, without Terayon's prior written consent, and (b) Terayon shall
not (and Terayon shall not permit any of its Representatives to) issue any press
release or make any public statement regarding this Agreement, or regarding any
of the transactions contemplated by this Agreement, without Company's prior
written consent. Notwithstanding the provisions of the preceding sentence, each
party shall be permitted to issue any press release or make any public statement
as such party is advised by counsel is legally required to be issued or made
under any applicable laws; provided, however, that in such event the party
issuing such press release or making such public statement will provide the
other parties with prompt advance written notice of such requirement and a copy
of the press release to be issued or public statement to be made, and the
parties shall use reasonable commercial efforts to coordinate the content of
such press release or public statement.
5.3 Best Efforts. During the Pre-Closing Period, (a) the Company shall
use its best efforts to cause the conditions set forth in Section 6 to be
satisfied on a timely basis, and (b) Terayon shall use its best efforts to cause
the conditions set forth in Section 7 to be satisfied on a timely basis.
5.4 Employment and Non-Competition Agreements. The Company shall use all
commercially reasonable efforts to cause the individuals identified in Exhibit D
to execute and deliver to the Company and Terayon, at the Closing, an Employment
and Non-Competition Agreement in the form set forth as Exhibit E hereto.
5.5 Termination of Employee Plans. At the Closing, the Company shall
terminate its existing stock option plans, and shall ensure that no employee or
former employee of the Company has any rights under any of such plans and that
any liabilities of the Company under such plans (including any such liabilities
relating to services performed prior to the Closing) are fully extinguished at
no material cost to the Company.
5.6 Registration of Shares. Terayon will, as promptly as practicable but,
in any event, not later than sixty (60) days following the Closing Date, prepare
and file with the SEC a registration statement on Form S-3 under the Securities
Act with respect to the registration of the shares of Common Stock issuable to
the Sellers in connection with the transactions contemplated by this Agreement
(the "Registration Statement"). Terayon will, and will cause its accountants
and lawyers to, cause the Registration Statement to be declared effective as
promptly as practicable after filing with the SEC, and the Registration
Statement shall be kept effective continuously for a period of one year
following the date on which the Registration Statement is declared effective by
the SEC. Terayon shall make reasonable efforts to cause the Registration
Statement to become effective on the Closing Date; provided, however, that if
the Registration Statement is declared effective later than the Closing Date
(but, in any event, not later than sixty (60) days following the Closing Date),
the Share Consideration set forth in Section 1.3 above shall be increased by
such number of additional shares of Terayon Common Stock (the "Additional
Shares"), having a value equal to the difference between (i) the value of the
Share Consideration as determined on the Closing Date pursuant to Section 1.3
above, and (ii) the value of the Share Consideration as determined by
calculating the average closing price of the shares of Common Stock of Terayon
over the fifteen (15) trading days immediately preceding the fifth business day
prior to the date on which the Registration Statement becomes effective.
Notwithstanding the foregoing, in the event that the number of Additional Shares
is equal to or exceeds 35% of the number of Terayon Shares delivered at the
Closing, Terayon may, at its sole discretion, and provided that the Sellers have
not waived their right to receive an additional number of Terayon Shares in
excess of such additional 35%, annul the proposed Transaction and the entire
Purchase Consideration shall be returned to Terayon against the return of the
Shares of the Company to the Sellers' Representative (for distribution to the
Sellers), without liability to either party.
None of the information supplied or to be supplied by Terayon for inclusion
or incorporation by reference in the Registration Statement will, at the time
the Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. If at any time
prior to the date on which the Registration Statement is declared effective by
the SEC any event in respect of Terayon, its officers and directors, or any of
its subsidiaries should occur which is required to be described an amendment of,
or a supplement to, the Registration Statement, Terayon shall promptly so advise
the Sellers and such event shall be so described, and any such amendment or
supplement to the Registration Statement (which the Sellers' Representative
shall have a reasonable opportunity to review, and, to the extent such
amendments have a Material Adverse Effect on the value of the Share
Consideration, may rescind the transaction) shall be promptly filed with the
SEC. The Registration Statement will comply as to form in all material respects
with the provisions of the Securities Act and the rules and regulations
thereunder.
5.7 Employees. As soon as practicable after the Closing Date, Terayon
shall provide to all employees of the Company such employee benefits plans,
programs and arrangements as are generally made available to Israeli employees
of Terayon, provided, with respect to each employee, that such employee does not
voluntarily terminate his or her employment with the Company prior to the first
anniversary of the Closing Date.
5.8 Tax Liability. Each party shall be responsible for all its
respective tax obligations deriving from the transactions contemplated in this
Agreement. Notwithstanding the above, stamp duty with respect to the
transactions contemplated in this Agreement or to any actions under this
Agreement, if applicable, shall be paid half by the Sellers and half by Terayon.
Section 6. Conditions Precedent to Obligations of Terayon.
The obligations of Terayon to consummate the transactions contemplated by
this Agreement are subject to the satisfaction, at or prior to the Closing, of
each of the following conditions any or all of which may be waived in writing by
Terayon:
6.1 Accuracy of Representations. Each of the representations and
warranties made by the Seller in this Agreement and in each of the other
agreements and instruments delivered to Terayon in connection with the
transactions contemplated by this Agreement shall have been accurate in all
material respects as of the date of this Agreement, and shall be accurate in all
material respects as of the Closing Date as if made on the Closing Date.
6.2 Performance of Covenants. All of the covenants and obligations that
the Seller or the Company is required to comply with or to perform at or prior
to the Closing shall have been complied with and performed in all material
respects.
6.3 Consents. All Consents required to be obtained in connection with
the transactions contemplated by this Agreement (including the Consents
identified in Part 2.21 of the Disclosure Schedule) shall have been obtained and
shall be in full force and effect.
6.4 Agreements and Documents. Terayon and the Company shall have
received the following agreements and documents, each of which shall be in full
force and effect:
(a) fully executed Escrow Agreement (the "Escrow Agreement") in the
form and substance reasonably satisfactory to counsel for Terayon and counsel
for the
Sellers, which shall contain, without limitation, provisions regarding the
following: (i) the release of the Escrow Shares upon the termination of a one
(1) year period commencing on the Closing Date, (ii) provisions enabling the
Sellers' Representative to instruct the Escrow Agent as to the sale of the
Escrow Shares (with the proceeds of such sale(s) to be deposited in the Escrow
in lieu of the Escrow Shares), and (iii) such other terms and conditions as are
standard and customary in transactions of this nature ;
(b) employment and Non-Competition Agreements in the form of Exhibit
E, executed by the individuals identified on Exhibit D;
(c) confidential invention and assignment agreements, reasonably
satisfactory in form and content to Terayon, executed by all employees of the
Company and by all consultants and independent contractors to the Company who
have not already signed such agreements;
(d) a legal opinion of Xxxxxxxxxx Xxxxx & Co., Law Offices, in form
and substance reasonably satisfactory to counsel for Terayon, addressed to
Terayon and dated as of the Closing Date;
(e) a certificate executed by the President of the Company (but
without personal liability thereto) certifying that each of the representations
and warranties set forth in Section 2 is accurate in all material respects as of
the Closing Date as if made on the Closing Date and that the conditions set
forth in Sections 6.1, 6.2 and 6.3 have been duly satisfied (the "Company
Closing Certificate");
(f) written resignations of all directors of the Company, effective
as of the Closing Date;
(g) certificates representing the Shares accompanied by share
transfer deeds duly executed for transfer in blank; and
(h) Option Holder Consent Letter and Counterpart Signature Pages,
executed by all of the Option Holders.
6.5 Securities Law Requirements. All permits, licenses, consents and
approvals necessary under any laws relating to the sale of securities have been
issued or given, and all restrictions or registration statements filed under any
laws relating to the sale of securities for the issuance of Common Stock
issuable pursuant to this Agreement shall have become effective, and no such
permit, license, consent, approval, registration or registration statement shall
have been revoked, canceled, terminated, suspended or made the subject of any
stop order or proceeding thereof.
6.6 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the
transactions contemplated by this Agreement shall have been issued by any court
of competent jurisdiction and remain in effect, and there shall not be any Legal
Requirement enacted or deemed applicable to the transactions contemplated by
this Agreement that makes consummation of the transactions contemplated by this
Agreement illegal, which Legal Requirement shall not have been removed within
thirty (30) days of enactment.
6.7 No Legal Proceedings. No Person shall have commenced or taken
substantial steps towards any Legal Proceeding challenging or seeking the
recovery of a material amount of damages in connection with the transactions
contemplated by this Agreement or seeking to prohibit or limit the exercise by
Terayon of any material right pertaining to its ownership of stock of the
Company.
6.8 Termination of Employee Plans. The Company shall have provided
Terayon with evidence, reasonably satisfactory to Terayon, as to the termination
of the benefit plans referred to in Section 5.5.
6.9 ISA Exemption. Terayon shall have received from the Israel Securities
Authority an exemption from the obligation to publish a prospectus in the manner
required pursuant to the laws of the State of Israel in connection with the
issuance of the Common Stock to the Seller.
Section 7. Conditions Precedent to Obligations of the Sellers and the Company.
The obligations of the Sellers and the Company to consummate the
transactions contemplated by this Agreement are subject to the satisfaction, at
or prior to the Closing, of the following conditions any or all of which may be
waived in writing by the Sellers' representative:
7.1 Accuracy of Representations. Each of the representations and
warranties made by Terayon in this Agreement shall have been accurate in all
material respects as of the date of this Agreement, and shall be accurate in all
material respects as of the Closing Date as if made on the Closing Date.
7.2 Performance of Covenants. All of the covenants and obligations that
Terayon is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all respects.
7.3 Documents. The Sellers and the Company shall have received the
following agreements and documents, each of which shall be in full force and
effect:
(a) a letter executed by Boston Equiserve, L.P., as Transfer Agent,
Registrar and Exchange Agent (the "Transfer Agent") of the Terayon Common Stock,
stating that it has received irrevocable instructions from Terayon to issue the
Share Consideration in the names of the respective Sellers, and that it will
forward validly executed share certificates covering the Common Stock, in the
names of the Sellers;
(b) fully executed Escrow Agreement;
(c) a legal opinion of Xxxxxx Godward llp, in form and substance
reasonably satisfactory to counsel for the Sellers, addressed to the Sellers and
dated as of the Closing Date; and
(d) a certificate executed by an Officer of Terayon (but without
personal liability thereto) certifying that each of the representations and
warranties set forth in Section 3 is accurate in all material respects as of the
Closing Date as if made on the Closing Date and that the conditions set forth in
Sections 7.1, 7.2 and 7.5 have been duly satisfied (the "Terayon Closing
Certificate")and.
7.4 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the
transactions contemplated by this Agreement shall have been issued by any court
of competent jurisdiction and remain in effect, and there shall not be any Legal
Requirement enacted or deemed applicable to the transactions contemplated by
this Agreement that makes consummation of the transactions contemplated by this
Agreement illegal, which Legal Requirement shall not have been removed within
(30) days of enactment.
7.5 Consents. All Consents required to be obtained in connection with
the transactions contemplated by this Agreement (including the Consents
identified in Part 2.21 of the Disclosure Schedule) shall have been obtained and
shall be in full force and effect.
7.6 No Legal Proceedings. No Person shall have commenced any Legal
Proceeding challenging or seeking the recovery of a material amount of damages
in connection with the transactions contemplated by this Agreement or seeking to
prohibit or limit the exercise by Terayon of any material right pertaining to
its ownership of stock of the Company.
Section 8. Termination.
8.1 Termination Events. This Agreement may be terminated prior to the
Closing:
(a) By either the Company and the Sellers' Representatives or by
Terayon if a court of competent jurisdiction or Governmental Body shall have
issued an order, decree or ruling or taken any other action (which order, decree
or ruling the parties hereto shall use their best efforts to lift) and such was
not at the request of the party seeking termination of the Agreement, in each
case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling or
other action shall have not been rescinded within 45 days of the date of
issuance thereof; or
(b) By Terayon if the Closing has not taken place on or before April
10 2000 (other than as a result of any failure on the part of Terayon to comply
with or perform any covenant or obligation of Terayon set forth in this
Agreement);
(c) By the Sellers' Representative and the Company if the Closing has
not taken place on or before April 10, 2000 (other than as a result of the
failure on the part of Sellers holding more than 20% of the Shares, or by the
Company to comply with or perform any covenant or obligation set forth in this
Agreement or in any other agreement or instrument delivered to Terayon); or (d)
By the mutual consent of Terayon, the Sellers' Representative and the Company.
8.2 Termination Procedures. If Terayon wishes to terminate this
Agreement
pursuant to Section 8.1(a) or Section 8.1(b), Terayon shall deliver to the
Sellers' Representative and the Company (with a copy to the Company's counsel) a
written notice stating that Terayon is terminating this Agreement and setting
forth a brief description of the basis on which Terayon is terminating this
Agreement. If the Sellers' Representative and the Company wish to terminate this
Agreement pursuant to Section 8.1(a) or Section 8.1(c), the Sellers'
Representative and the Company shall deliver to Terayon (with a copy to
Terayon's counsel) a written notice stating that the Sellers and the Company are
terminating this Agreement and setting forth a brief description of the basis on
which the Sellers' Representative and the Company are terminating this
Agreement.
8.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) none of the Company, the Sellers or
Terayon shall be relieved of any obligation or liability arising from any prior
breach by such party of any provision of this Agreement; (b) the parties shall,
in all events, remain bound by and continue to be subject to the provisions set
forth in Section 10; and (c) the parties shall, in all events, remain bound by
and continue to be subject to Section 5.2.
Section 9. Indemnification, Etc.
9.1 Survival of Representations, Etc.
(a) The representations and warranties made by the Sellers (including
the representations and warranties set forth in Section 2 and the
representations and warranties set forth in the Company Closing Certificate)
shall survive the Closing until the end of one (1) year following the Closing
Date (the "Survival Period"); provided, however, that if, at any time prior to
the Survival Period, any Indemnitee (acting in good faith) delivers to the
Sellers' Representative a written notice alleging the existence of an inaccuracy
in or a breach of any of the representations and warranties made by the Company
(and setting forth in reasonable detail the basis for such Indemnitee's belief
that such an inaccuracy or breach may exist) and asserting a claim for recovery
under Section 9.2 based on such alleged inaccuracy or breach, then the claim
asserted in such notice shall survive the Survival Period until such time as
such claim is fully and finally resolved.
(b) The representations, warranties, covenants and obligations of the
Company, and the rights and remedies that may be exercised by the Indemnitees,
shall not be limited or otherwise affected by or as a result of any information
furnished to, or any investigation made by or knowledge of, any of the
Indemnitees or any of their Representatives, other than as specifically set
forth in the representations and the Disclosure Schedule.
(c) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made by
the Sellers in this Agreement.
(d) The representations and warranties made by Terayon (including the
representations and warranties set forth in Section 3 and the representations
and warranties set forth in Terayon Closing Certificate) shall survive the
Survival Period; provided, however,
that if, at any time prior to the Survival Period, the Sellers' Representative
(acting in good faith) shall deliver to Terayon a written notice alleging the
existence of an inaccuracy in or a breach of any of the representations and
warranties made by Terayon (and setting forth in reasonable detail the basis for
the Sellers' Representative belief that such an inaccuracy or breach may exist)
and asserting a claim for recovery under Section 9.2 based on such alleged
inaccuracy or breach, then the claim asserted in such notice shall survive the
Survival Period until such time as such claim is fully and finally resolved.
(e) The representations, warranties, covenants and obligations of
Terayon, and the rights and remedies that may be exercised by the Sellers, shall
not be limited or otherwise affected by or as a result of any information
furnished to, or any investigation made by or knowledge of, the Sellers.
9.2 Indemnification.
(a) From and after the Closing Date (but subject to Section 9.1(a)),
the Indemnitees may seek indemnification first from the Escrow Fund and only
thereafter from the Sellers, severally and not jointly, for any Damages that are
directly or indirectly suffered or incurred by any of the Indemnitees or to
which any of the Indemnitees may otherwise become subject (regardless of whether
or not such Damages relate to any third-party claim) and which are from or as a
result of, or are directly or indirectly arising out of : (i) any breach of any
representation or warranty set forth in Section 2 or in the Company Closing
Certificate; (ii) any breach of any representation or warranty set forth in
Section 2; (iii) any breach of any covenant or obligation of the Company
(including the covenants set forth in Sections 4 and 5).
(b) The Sellers and the Company acknowledge and agree that, if the
Company suffers, incurs or otherwise becomes subject to any Damages as a result
of or in connection with any inaccuracy in or breach of any representation,
warranty, covenant or obligation, then (without limiting any of its rights as an
Indemnitee) Terayon shall also be deemed, by virtue of its ownership of the
shares of the Company, to have incurred Damages as a result of and in connection
with such inaccuracy or breach.
(c) From and after the Closing Date (but subject to Section 9.1(d)),
any Seller may seek indemnification from Terayon for any Damages that are
directly or indirectly suffered or incurred by such Seller or to which such
Seller may otherwise become subject (regardless of whether or not such Damages
relate to any third-party claim) and which arise from or as a result of, or are
directly or indirectly connected with: (i) any inaccuracy in or breach of any
representation or warranty set forth in Section 3; (ii) any inaccuracy in or
breach of any representation or warranty set forth in Section 3 as if such
representation and warranty had been made on and as of the Closing Date; or
(iii) any Legal Proceeding relating to any inaccuracy or breach of the type
referred to in clause "(i)" or "(ii)" above (including any Legal Proceeding
commenced by any Seller for the purpose of enforcing any of its rights under
this Section 9); provided, however, that the amount of indemnification sought by
the Sellers shall not exceed the Purchase Consideration.
9.3 Notice of Claims; Defense of Third Party Claims.
(a) In the event of the assertion or commencement by any Person of
any claim, demand, notice or Legal Proceeding (whether against the Sellers,
against Terayon or against any other Person) with respect to which any of the
Indemnitees shall have the right to seek indemnification pursuant to this
Xxxxxxx 0, Xxxxxxx shall notify the Sellers' Representative and the Escrow Agent
with reasonable promptness of such action, claim or demand (the "Third Party
Claims"), specifying, to the extent known, the nature, circumstances and the
amount of such Third Party Claim (a "Third Party Claim Notice"). The Sellers'
Representative shall have thirty days from its receipt of a Third Party Claim
Notice (the "Third Party Claim Notice Period") to notify Terayon (i) whether the
Sellers' Representative disputes the Indemnitee's right of reimbursement from
the Escrow Fund with respect to such Third Party Claim, and (ii) if the Sellers'
Representative does not dispute such right of reimbursement, whether or not it
desires to defend the Indemnitee against such Third Party Claim.
(b) If the Sellers' Representative notifies Terayon within the Third
Party Claim Notice Period that (i) the Sellers' Representative does not dispute
the Indemnitee's right of reimbursement and (ii) the Sellers' Representative
desires to defend against such Third Party Claim, then the Sellers'
Representative shall have the right to assume and control the defense of such
Third Party Claim by appropriate proceedings with counsel reasonably acceptable
to Terayon, and the Seller's Representative shall be entitled to reimbursement
first out of the Escrow Fund for such Defense. The Indemnitee may participate
in, but not control, any such defense or settlement, at its sole cost and
expense; provided, however, that the Sellers' Representative and Terayon shall
jointly control the defense of any tax audit or proceeding which could
reasonably be expected to have a Material Adverse Effect on the business or
condition of the Company for any taxable period ending on or after the Closing.
(c) If the Sellers' Representative (i) disputes the Indemnitee's
right of reimbursement with respect to a Third Party Claim, or (ii) does not
dispute such right of reimbursement but fails to promptly assume and prosecute
the defense of such Third Party Claim, then Terayon or the Indemnitee shall be
entitled to assume and control the defense of such Third Party Claim. Unless the
Sellers' Representative has disputed the Indemnitee's right to reimbursement for
a Third Party Claim, Indemnitee shall be entitled to reimbursement first from
the Escrow Fund for such defense. If the Sellers' Representative does not assume
the defense of a Third Party Claim for any reason, it may still participate in,
but not control, the defense of such Third Party Claim at the Sellers'
Representative's sole cost and expense.
(d) The party responsible for the defense of any Third Party Claim
(the "Responsible Party") shall, to the extent reasonably requested by the other
party, keep such other party informed as to the status of any Third Party Claim
for which such party is not the Responsible Party, including, without
limitation, all settlement negotiations and offers. With respect to a Third
Party Claim for which the Sellers' Representative is the Responsible Party,
Terayon shall, and shall cause each Indemnitee to, make available to the
Sellers' Representative and its representatives all books and records of Terayon
and the Indemnitees relating to such Third Party Claim and shall render to the
Sellers' Representative such assistance and access to records and the
representatives of Terayon and the Indemnitees as
the Sellers' Representative and its representatives may reasonably request.
(e) In the event that an Indemnitee has a claim out of the Escrow
Fund for reimbursement which does not involve a Third Party Claim (a "Direct
Claim"), Terayon shall notify the Sellers' Representative of such Direct Claim
with reasonable promptness, specifying, to the extent known, the nature,
circumstances and amount of such Direct Claim (a "Direct Claim Notice" and
together with Third Party Claim Notices, the "Claim Notices"). If the Sellers'
Representative notifies Terayon that it disputes an Indemnitee's right of
reimbursement from the Escrow Fund with respect to a Claim set forth in a Claim
Notice, Terayon, the Indemnitee and the Sellers' Representative shall use
reasonable efforts to resolve such dispute and, in the event that such efforts
are unsuccessful, shall resolve such dispute by arbitration. The Arbitration
proceedings will be in English and will take place in Tel Aviv, Israel or such
other place, as the parties shall agree upon. The arbitrator(s) shall not be
bound by any judicial rules of evidence or procedure but shall be bound by the
substantive laws of the State of Israel. The parties will attempt to select an
arbitrator on which Terayon and the Sellers' Representative shall agree. In the
event of disagreement as to the identity of the arbitrator, each party shall
select an arbitrator and the two arbitrators shall select, by mutual agreement,
a third arbitrator.
(f) Neither the Sellers' Representative, on the one hand, nor Terayon
or any other Indemnitee, on the other hand, shall enter into any settlement of
any Third Party Claim without the prior written consent of the other party,
which consent shall not be unreasonably withheld. The Responsible Party shall
promptly notify the other party of each settlement offer (including whether or
not the Responsible Party is willing to accept the proposed settlement offer)
with respect to a Third Party Claim. Such other party agrees to notify the
Responsible Party with reasonable promptness whether or not such party is
willing to accept the proposed settlement offer. If an Indemnitee fails to
consent to any settlement offer of a Third Party Claim (whether or not Terayon
is the Responsible Party with respect to such Third Party Claim), Terayon or the
Indemnitee may continue to contest or defend such Third Party Claim and, in such
event, the maximum reimbursement from the Escrow Fund with respect to such Third
Party Claim (including the reasonable costs and expenses of contesting or
defending such Third Party Claim incurred after the Indemnitee fails to consent
to such settlement offer) shall not exceed the amount of such settlement offer.
If the Sellers' Representative fails to consent to any settlement offer of a
Third Party Claim (whether or not the Sellers' Representative is the Responsible
Party with respect to such Third Party Claim), the Sellers' Representative may
continue to contest or defend such Third Party Claim and, in such event, subject
to the limitations on indemnification set forth in Section 9.5, the Indemnitee
may make a Claim against the Escrow Fund for the excess, if any, of the (i)
amount of Damages ultimately recovered against an Indemnitee as a result of such
Third Party Claim minus (ii) the amount of such settlement offer, and the
portion of the Damages equal to the settlement offer plus the Damages of the
Indemnitees incurred in connection with the defense of such Third Party Claim
through the date on which the Sellers' Representative rejected the settlement
offer.
9.4 Exercise of Remedies by Indemnitees Other Than Terayon. No Indemnitee
(other than Terayon or any successor thereto or assign thereof) shall be
permitted to assert any indemnification claim or exercise any other remedy under
this Agreement unless Terayon (or any successor thereto or assign thereof) shall
have consented to the assertion of
such indemnification claim or the exercise of such other remedy.
9.5 Limitations on Indemnification.
(a) Except as specifically set forth herein, the maximum amount of
indemnifiable Damages that may be recovered from the Sellers arising out of or
resulting from Section 9.2(a) shall be an amount equal to the Purchase
Consideration; provided, however, that if the value of the claims made by
Terayon exceed 50% of the Share Consideration (valued in accordance with Section
1.3 above), the Sellers' Representative may, within 21 days following his
receipt of such claim(s), notify Terayon in writing of the Sellers' intention to
terminate this Agreement and purchase the Shares of the Company back from
Terayon for restitution of the Purchase Consideration. Terayon shall, within 14
days of its receipt of such written notice, either (i) amend the claim(s) so
that the aggregate amount of such claim(s) does not exceed 50% of the Share
Consideration; or (ii) deliver the shares of the Company to the Sellers'
Representative (for distribution to the Sellers) in exchange for the Purchase
Consideration or an amount equal thereto.
(b) Notwithstanding anything to the contrary contained in this
Agreement, no Indemnitee shall be entitled to seek indemnification from the
Sellers under this Agreement with respect to any Damages arising out of or
resulting from Section 9.2(a), until the aggregate amount of such Damages
exceeds one hundred and fifty thousand US dollars ($150,000), and where such
damages exceed one hundred and fifty thousand US dollars ($150,000), the
Indemnitees shall be entitled to indemnification in full (with no deduction of
the one hundred and fifty thousand US dollars ($150,000)), subject to the
provisions of Section 9.5(a). This $150,000 threshhold shall not apply to (i) a
shortfall in the amount of Net Cash which the Company shall have, as of March
1, 2000, as compared to the Net Cash as calculated pursuant to Section 1.3
hereof or (ii) the shares of Terayon which may be delivered to holders of
Unvested Options pursuant to Section 1.6(c) hereof.
(c) Notwithstanding anything to the contrary contained in this
Agreement, the maximum amount of indemnifiable Damages that may be recovered
from Terayon arising out of or resulting from Section 9.2(c) shall be an amount
equal to the Purchase Consideration.
(d) Notwithstanding anything to the contrary contained in this
Agreement, the Sellers shall not be entitled to seek indemnification from
Terayon under this Agreement with respect to any Damages arising out of or
resulting from Section 9.2(c), until the aggregate amount of such Damages
exceeds one hundred and fifty thousand US dollars ($150,000), and where such
damages exceed one hundred and fifty thousand US dollars ($150,000), the Sellers
shall be entitled to indemnification in full (with no deduction of the one
hundred and fifty thousand US dollars ($150,000)), subject to the provisions of
Section 9.5(c).
9.6 Exclusive Remedies. Terayon acknowledges and agrees that its sole
and exclusive remedy (except in the case of fraud, in which case Terayon
reserves all rights available to it under the law with respect to the party
committing such fraud) with respect to any and all claims relating to the
subject matter of this Agreement and the other agreements, documents and
certificates specifically contemplated by this Agreement shall be pursuant to
the indemnification provisions set forth in this Section 9 and specific
performance as contemplated by Section 10.11 below.
9.7 Prospectus Indemnification. Notwithstanding anything to the contrary
in this Agreement, in the event any shares of Common Stock are included in a
registration statement of Terayon:
(a) To the extent permitted by law, Terayon will indemnify and hold
harmless each of the Sellers, the officers, directors and legal counsel of each
of the Sellers, any underwriter (as defined in the Securities Act) for the
Sellers and each person, if any, who controls any of the Sellers or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by Terayon: (i) any untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission to state therein a material
fact required to be stated therein, or necessary to make the statements therein
not misleading, or (iii) any violation or alleged violation by Terayon of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law in connection with the offering covered by such registration
statement; and Terayon will reimburse such Seller, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided however, that the indemnity
agreement contained in this Section 9.7(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of Terayon, which consent shall not
be unreasonably withheld, nor shall Terayon be liable in any such case for any
such loss, claim, damage, liability or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon or in conformity
with written information furnished expressly for use in connection with such
registration by such Seller, partner, officer, director, underwriter or
controlling person of the Seller.
(b) To the extent permitted by law, the Seller will, if Common Stock
held by the Seller are included in the securities as to which such registration
qualifications or compliance is being effected, indemnify and hold harmless
Terayon, each of its directors, its officers, and legal counsel and each person,
if any, who controls Terayon within the meaning of the Securities Act and any
underwriter selling securities under such registration statement, against any
losses, claims, damages or liabilities (joint or several) to which Terayon or
any such director, officer, controlling person, or underwriter may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
or in conformity with written information furnished by the Seller specifically
for use in connection with such registration; and each such Seller will
reimburse any legal or other expenses reasonably incurred by Terayon or any such
director, officer, controlling person or underwriter in connection with
investigating or defending any such loss, claim,
damage, liability or action if it is judicial determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 9.7(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Seller, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section
9.7 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 9.7, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own c, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if materially prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified party
under this Section 9.7, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 9.7.
(d) If the indemnification provided for in this Section 9.7 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the indemnifying party
or by the indemnified party and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
(e) The obligations of Terayon and the Sellers under this Section 9.7
shall survive completion of any offering of Common Stock in a registration
statement and the termination of this Agreement. No indemnifying party, in the
defense of any such claim or litigation, shall, except with the consent of each
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
SECTION 10. MISCELLANEOUS PROVISIONS.
10.1 Sellers' Representative. JVP Properties Ltd. is hereby designated by
the Sellers as the representative of the Sellers for purposes of this Agreement
and the Escrow Agreement and as agent and attorney-in-fact of the Sellers with
respect hereto and thereto (the "Sellers' Representative"). The Sellers'
Representative shall have the authority to take such actions and exercise such
discretion on behalf of its respective principals as are required of the
Sellers' Representative pursuant to the terms of this Agreement and the Escrow
Agreement (and any such actions shall be binding on each of the Sellers
represented by such Sellers' Representative), including without limitation the
following:
(i) To execute, acknowledge, deliver, record and file all ancillary
agreements, waivers, consents, certificates and documents which the Sellers'
Representative deems necessary or appropriate in connection with the
consummation of the transactions contemplated by the terms and provisions of
this Agreement;
(iii) To receive and make any payments provided for under this
Agreement and acknowledge receipt and payment thereof;
(iv) To waive any breach or default under the Agreement, or to waive
any condition precedent to the Closing under Section 7 hereof;
(v) To amend or terminate this Agreement pursuant to its terms;
(vi) To receive service of process in connection with any claims
under this Agreement or the Escrow Agreement; and
(vii) To perform the obligations and exercise the rights under the
Escrow Agreement, including the settlement of any claims and disputes arising
thereunder.
The designation and appointment of the Sellers' Representative is
irrevocable and shall not be affected by the subsequent death, incapacity,
insolvency or dissolution of any Seller. The Sellers' Representative shall be
indemnified by the Sellers for any expense and liability which it will incur in
connection with his actions as a sellers' representative (including, but not
limited to, any liability towards any or all of the Sellers resulting from
negligent actions or omissions, and erroneous resolutions taken in his capacity
as a sellers' representative under this section), and all his actions and
resolution are hereby approved by the Sellers as long as, and until he has been
replaced or removed from his role as Shareholders' representative pursuant to
the terms hereof. Terayon shall have the right to rely upon all actions taken or
omitted by the Sellers' Representative pursuant to this Agreement, all of which
actions and omissions shall be binding on each of the Sellers. If the
Sellers' Representative shall be dissolved or otherwise be unable to fulfill his
responsibilities as agent of the Sellers, then the Sellers holding a majority in
interest of the capital stock of the Company (assuming the exercise of all
options and warrants and the exercise and conversion of all exercisable and
convertible securities) shall, within ten days after such circumstances, appoint
a successor agent and, promptly thereafter, shall notify Terayon of the identity
of such successor. Any such successor shall become the "Sellers' Representative"
for purposes of this Agreement. The Sellers hereby authorize the Sellers'
Representative to pay all reasonable and documented legal fees and expenses
incurred by the Company and the Sellers (as further described in Section 10.3
below) from the Purchase Consideration prior to the distribution of the Purchase
Consideration to the Sellers. The Sellers hereby agree to transfer to the
Sellers' Representative such additional cash amounts as shall be determined by
the Sellers' Representative are necessary to pay all legal fees and expenses
incurred by the Company and the Sellers (as further described in Section 10.3
below), and in connection with the performance of his duties as the Sellers'
Representative.
10.2 Further Assurances. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
10.3 Fees and Expenses. Each of the Company and Terayon shall bear and pay
all fees, costs and expenses (including legal fees, accounting fees and
brokerage fees) that have been incurred or that are incurred by such party,
including all fees, costs and expenses incurred by such party in connection with
or by virtue of (a) the investigation and review conducted by Terayon and its
Representatives with respect to the Company's business (and the furnishing of
information to Terayon and its Representatives in connection with such
investigation and review), (b) the negotiation, preparation and review of this
Agreement (including the Disclosure Schedule) and all agreements, certificates,
opinions and other instruments and documents delivered or to be delivered in
connection with the transactions contemplated by this Agreement, and (c) the
preparation and submission of any filing or notice required to be made or given
in connection with any of the transactions contemplated by this Agreement
(except with respect to stamp duty, as specified in Section 5.8 above) , and the
obtaining of any Consent required to be obtained in connection with any of such
transactions; provided however that all the Company's fees and expenses shall be
applied to reduce the Net Cash and, accordingly, the Purchase Consideration.
10.4 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 Notices. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed delivered, given and received when delivered (by hand, by registered
mail, by courier or express delivery service or by facsimile) to the address or
facsimile telephone number set forth beneath the name of such party below (or to
such other address or facsimile telephone number as such party shall have
specified in a written notice given to the other parties
hereto):
if to Terayon:
Terayon Communication Systems, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: Chief Executive Officer
with a copy to:
Xxxxxx Godward LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
and
Naschitz, Xxxxxxx & Co.
0 Xxxxx Xxxxxx
Xxx-Xxxx, Xxxxxx
Fax: 000 0 000 0000
Attention: Xxxxxx X. Amir, Adv.
if to the Company:
Ultracom Communications Holdings (1995) Ltd.
00 Xxxxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxx
Fax: 00 0000000
Attention: Chief Executive Officer
with a copy to:
Xxxxxxxxxx Xxxxx & Co., Law Offices
Xxxxx Xxxxxxxx Xxxx.
00 Xxxxxx Xxxxxxxx Xx.
Xxxxx Xxxxx, Xxxxxxxxx, Xxxxxx
Fax: 000-0-0000000
Attention: Xxxxx Xxxxx, Adv.
If to the Sellers' Representative:
[JVP Properties Ltd.]
Xxxx. 0, Xxxxxxxxxxxxx Xxxx
Xxxxx, Xxxxxxxxx, Xxxxxx
Tel: 000-0-0000000
Fax: 972-2- 0000000
with a copy to:
Xxxxxxxxxx - Xxxxx, Law Offices
Xxxxx Xxxxxxxx Xxxx.
00 Xxxxxx Xxxxxxxx Xx.
Xxxxx Xxxxx, Xxxxxxxxx, Xxxxxx
Fax: 000-0-0000000
Attention: Xxxxx Xxxxx, Adv.
10.5 Time of the Essence. Time is of the essence of this Agreement.
10.6 Headings. The boldface headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.7 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
10.8 Governing Law. This Agreement shall be construed in accordance
with, and governed in all respects by, the internal laws of the State of Israel
(without giving effect to principles of conflicts of laws). Each party to this
Agreement consents to the exclusive jurisdiction and venue of the courts of
District of Tel Aviv-Jaffa in the State of Israel.
10.9 Successors and Assigns. This Agreement shall be binding upon: the
Company, the Sellers and their respective successors and assigns (if any);
Terayon and its successors and assigns (if any). This Agreement shall inure to
the benefit of: the Company; the Sellers the other Indemnitees (subject to
Section 9.5); and the respective successors and assigns (if any) of the
foregoing. Neither party may assign any of its rights under this Agreement to
any other Person (other than to any Seller's affiliates, and, with respect to
Sellers which act as trustees, to their beneficiaries) without obtaining the
consent or approval of the other parties hereto, provided that following the
Closing any Seller may sell and assign Terayon Shares (subject to applicable
law) without obtaining such approval.
10.10 Specific Performance. The parties to this Agreement agree that, in
the event of any breach or threatened breach by any party to this Agreement of
any covenant, obligation or other provision set forth in this Agreement for the
benefit of any other party to this Agreement, such other party shall be entitled
to (a) a decree or order of specific performance or mandamus to enforce the
observance and performance of such covenant, obligation or other provision, and
(b) an injunction restraining such breach or threatened
breach.
10.11 Waiver.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
Person; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
10.12 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.13 Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.14 Parties in Interest. Except for the provisions of Section 9, none of
the provisions of this Agreement are intended to provide any rights or remedies
to any Person other than the parties hereto and their respective successors and
assigns (if any).
10.15 Entire Agreement. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof.
10.16 Construction.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections," "Schedules" and "Exhibits" are intended to refer to Sections of
this Agreement and Schedules and Exhibits to this Agreement.
[The Remainder of this Page Intentionally Left Blank]
The parties hereto have caused this Share Purchase Agreement to be executed
and delivered as of the date first above written.
TERAYON COMMUNICATION SYSTEMS, INC.,
a Delaware corporation
By: /s/ Xxxxxx Xxxxx
-----------------------------------------------------
Name: /s/ Xxxxxx Xxxxx
---------------------------------------------------
Title: President
--------------------------------------------------
ULTRACOM COMMUNICATIONS HOLDINGS (1995) LTD.,
a company organized under the laws of Israel
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------------------
Name: Xxxx Xxxxxxxx
---------------------------------------------------
Title: Director
--------------------------------------------------
SELLERS' REPRESENTATIVE
/s/ Xxxx Xxxxxxxx
--------------------------------------------------------
By: Xxxx Xxxxxxxx
----------------------------------------------------
SELLERS:
Jerusalem Venture Partners (Israel) LP
/s/ Xxxx Xxxxxxxx
--------------------------------------------------------
By: Xxxx Xxxxxxxx
----------------------------------------------------
Title: Managing Partner
-------------------------------------------------
Jerusalem Venture Partners LP
/s/ Xxxx Xxxxxxxx
--------------------------------------------------------
By: Xxxx Xxxxxxxx
----------------------------------------------------
Title: Managing Partner
--------------------------------------------------
Gemini Xxxxxx XX LP, by its General Partner
Gemini Capital Fund Management Ltd.
/s/ X. Xxxxx
--------------------------------------------------------
Gemini Xxxxxx XX Parallel Fund LP, by its General
Partner
Gemini Capital Associates LP, by its General Partner
Gemini Capital Fund Management LTD
/s/ X. Xxxxx
--------------------------------------------------------
Gemini Partner Investors L.P
/s/ X. Xxxxx
--------------------------------------------------------
Advent PGGM Gemini LP, by its General Partner
Gemini Capital Associates LP, by its General Partner
Gemini Capital Fund Management LTD
/s/ X. Xxxxx
--------------------------------------------------------
Jerusalem Pacific Ventures (1994) L.P.
/s/ Xxx Xxxxxxxx
--------------------------------------------------------
By: Xxx Xxxxxxxx
----------------------------------------------------
Title: Auth Signatory
-------------------------------------------------
STAR Management of Investments (1993) L.P.
/s/ Xxxx Xxxxx
--------------------------------------------------------
By:
----------------------------------------------------
Title:
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SVM STAR Ventures Enterprises No. V
/s/ Xxxx Xxxxx
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By: SVM STAR Ventures ManagementgeseLL
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Title: Xx. Xxxx Xxxxx
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SVM STAR Ventures Managementge a ellschaft mbH Nr. 3 &
Co. Beteiligungs KG
/s/ Xxxx Xxxxx
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By: SVM STAR Ventures ManagementgeseLL
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Title: Xx. Xxxx Xxxxx
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SVE STAR Ventures Enterprises No. III A
/s/ Xxxx Xxxxx
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By: SVM STAR Ventures ManagementgeseLL
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Title: Xx. Xxxx Xxxxx
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SVE STAR Ventures Enterprises No. III GbR
/s/ Xxxx Xxxxx
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By: SVM STAR Ventures ManagementgeseLL
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Title: Xx. Xxxx Xxxxx
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Unicycle Trading Co.
/s/ Xxxx Xxxxx
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By: Xxxx Xxxxx
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Title: President
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Champenios Innovacon
/s/ Champenois Innovacon
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By: Champenois Innovacon
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Title: Managing Director
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Mofet Israel Technology Fund
/s/ Mofet Israel Technology Fund
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By: Xxxxxx Xxxxx
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Title: Managing Partner
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Digital Media & Communications L.P.
By: Advent International Limited Partnership General
Partner
By: Advent International Corporation, General Partner
/s/ Xxxxx Xxxxxx
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By: Xxxxxx Xxxxxx
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Title: Senior Vice President
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Gildc IT Fund B.V.
/s/ A. Arts
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By: A. Arts
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Title: Partner
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One Liberty Fund III L.P.
/s/ A. Arts
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By: A. Arts
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Title: Partner
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Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
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Xxxxxx X. Xxxxxxxxxx Xx.
/s/ Xxxxxx X. Xxxxxxxxxx Xx.
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EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital stock
or other equity security of the Company (other than Ordinary Shares issued to
employees of the Company, upon exercise of Options or Warrants and, the
conversion of the Company's debt to the Seller into Ordinary Shares, (ii) any
option, call, warrant or right (whether or not immediately exercisable) to
acquire any capital stock or other equity security of the Company (other than
stock options granted to employees of the Company in routine transactions in
accordance with the Company's past practices), or (iii) any security, instrument
or obligation that is or may become convertible into or exchangeable for any
capital stock or other equity security of the Company; or
(c) any merger, consolidation, business combination, reorganization
or similar transaction involving the Company.
Agreement. "Agreement" shall mean the Agreement to which this Exhibit A is
attached (including the Disclosure Schedule), as it may be amended from time to
time.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
Damages. "Damages" shall include any loss, damage, injury, liability,
claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including
reasonable attorneys' fees), charge, cost (including costs of investigation) or
expense of any nature.
Disclosure Schedule. "Disclosure Schedule" shall mean the schedule (dated
as of the date of the Agreement) delivered to Terayon on behalf of the Sellers.
Encumbrance. "Encumbrance" shall mean any lien, pledge, charge, mortgage,
security interest, encumbrance, claim, option, right of first refusal,
preemptive right, community property interest or restriction of any nature
(including any restriction on the voting of any security, any restriction on the
transfer of any security or other asset, any restriction on the receipt of any
income derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
Exchange. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
Escrow Fund. "Escrow Fund" shall have the meaning ascribed to it in the
Escrow Agreement.
Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
Governmental Body. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
Indemnitees. "Indemnitees" shall mean the following Persons: (a) Terayon;
(b) the respective Representatives of the Person referred to in clause "(a)"
above; and (c) the respective successors and assigns of the Persons referred to
in clauses "(a)" and "(b)" above; provided, however, that the Sellers shall not
be deemed to be an "Indemnitee."
Liens. "Liens" shall mean all mortgages, pledges, liens, security
interests, conditional and installment sale agreements, encumbrances, charges or
other claims of third parties of any kind.
Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
Material Adverse Effect. A violation or other matter will be deemed to
have a "Material Adverse Effect" on the Company if such violation or other
matter (considered
together with all other matters that would constitute exceptions to the
representations and warranties set forth in the Agreement or in the Company
Closing Certificate but for the presence of "Material Adverse Effect" or other
materiality qualifications, or any similar qualifications, in such
representations and warranties) would have an effect on the Company's business,
condition, assets, liabilities, operations or financial performance or
prospects.
Net Cash. The sum of US$2,270,000, which is based on the Company's
representations regarding its cash and cash equivalents as of March 1, 2000,
such sum to be derived from the following calculation: the sum of US$3,480,000,
which consists of the Company's Cash as of March 1, 2000 and Tax refunds payable
to the Company, minus (i) The total amount owed by the Company to Orckit; (ii)
the Company's total transaction expenses; and (iii) an amount of US$170,000
which represents 50% of the compensation due to the Company's employees on March
1/st/, 2000 and 50% of the payment payable to Fujitsu Microelectronic GmbH on
March 1, 2000. .
Options. "Options" shall mean options to purchase Ordinary Shares under an
Option Plan.
Person. "Person" shall mean any individual, Entity or Governmental Body.
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax,
transfer tax, stamp tax, sales tax, use tax, property tax, business tax,
withholding tax or payroll tax), levy, assessment, tariff, duty (including any
customs duty), deficiency or fee, and any related charge or amount (including
any fine, penalty or interest), imposed, assessed or collected by or under the
authority of any Governmental Body.
Tax Returns. "Tax Returns" shall mean returns, reports and information
statements with respect to Tax required to be filed by or on behalf of the
Company with the Israel Income Tax Commission, the Israel Value Added Tax
Authority and any other taxing authority domestic or foreign.
Vested Options. "Vested Options" shall mean options to purchase Ordinary
Shares that vest prior to or at the Closing.
