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STOCK PURCHASE AGREEMENT
AMONG
PIVOTAL CORPORATION
AND
INDUSTRIAL & FINANCIAL SYSTEMS AB
AND
XXX XXXXX, ALON HOD AND XXXX TOPAZ
CONCERNING ALL OF THE SHARES OF
EXACTIUM LTD.
APRIL 11, 2000
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made and entered into
on as of April 11, 2000, by and among Pivotal Corporation, a British Columbia
corporation (the "Buyer"), Industrial & Financial Systems AB, a Swedish
corporation ("IFS"), Xxx Xxxxx, Alon Hod and Xxxx Topaz (collectively with IFS,
the "Sellers"). The Buyer and the Sellers are referred to collectively herein as
the "Parties".
RECITALS
A. The Sellers together own over 95 percent of the outstanding capital
stock of Exactium Ltd., an Israeli company with registration number 00-000000-0
(the "Target"), which in turn owns all of the outstanding capital stock of
Exactium, Inc., a Delaware corporation.
B. This Agreement contemplates a transaction in which the Buyer will
purchase from the Shareholders (as defined below)all of the outstanding capital
stock of the Target.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
1. Definitions.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the Person specified.
"Aggregate Option Value" means the Closing Value of each underlying share
of Buyer Stock subject to the Buyer Options to be issued at the Closing further
to Section 7(a)(xvi) below minus the exercise price related thereto.
"Applicable Law" means any and all U.S. and in the case of the Sellers and
the Target and the Subsidiary, any Israeli and Swedish, and in the case of the
Buyer, any Canadian, law, principle of common law, regulation, rule, code,
statute, treaty, ordinance, similar provisions having the force or effect of law
thereunder, and judicial and administrative orders, injunctions, judgments,
decrees, rulings and determinations, of any federal, state, provincial, local or
municipal government or sub-division of any such country.
"Buyer Options" means options to purchase Buyer Stock.
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"Buyer Stock" means the common shares, without par value, of the Buyer.
"Chief Scientist" means the Office of the Chief Scientist of Israel.
"Closing" has the meaning set forth in Section 2(f) below.
"Closing Cash" has the meaning set forth in Section 2(b) below.
"Closing Date" has the meaning set forth in Section 2(f) below.
"Closing Stock" has the meaning set forth in Section 2(b) below.
"Closing Value" has the meaning set forth in Section 2(b) below.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of ERISA
and Code Section 4980B.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Target and the Subsidiary that is not already generally
available to the public.
"Disclosure Schedule" has the meaning set forth in Section 4 below.
"Employee Benefit Plan" means any plan, fund or program (whether written
or not) which is maintained or contributed to by Target, a Subsidiary, or an
ERISA Affiliate for the benefit of current or former US employees, including,
but not limited to, any (a) nonqualified deferred compensation or retirement
plan or arrangement, (b) qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) qualified defined
benefit retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), (d) Employee Welfare Benefit Plan, or (e)
material fringe benefit or other retirement, bonus, or incentive plan or
program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1).
"Environmental, Health, and Safety Requirements" shall mean all Applicable
Laws concerning public health and safety, worker health and safety, and
pollution or protection of the environment, including without limitation all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic
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chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation (collectively, "Hazardous Materials").
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each entity which is treated as a single employer
with Seller for purposes of Code Section 414.
"eSelling 2000" means the Intellectual Property described on Schedule 2
hereto.
"Escrow Agent" means the Person named as escrow agent under the Escrow
Agreement.
"Escrow Agreement" means an agreement in the form attached hereto as
Exhibit A.
"Escrowed Shares" has the meaning set forth in Section 2(e).
"Financial Statement" has the meaning set forth in Section 4(g) below.
"Foreign Plan" means every plan, fund, contract, program and arrangement
(whether written or not) which is maintained or contributed to by Target or an
ERISA Affiliate for the benefit of present or former employees working outside
of the United States or with respect to which Target or an ERISA Affiliate
otherwise has current or potential liability for such current or former
employees. Foreign Plan may include plans that also benefit United States
employees and include any arrangement intended to provide: (i) medical,
surgical, health care, hospitalization, dental, vision, workers compensation,
life insurance, death, disability, legal services, severance, sickness, or
accident benefits; (ii) pension, profit sharing, retirement, supplemental
retirement or deferred compensation benefits; (iii) bonus, incentive
compensation, stock option, stock appreciation rights, phantom stock or stock
purchase benefits, change in control benefits; or (iv) salary continuation,
unemployment, supplemental unemployment, termination pay, vacation or holiday
benefits.
"GAAP" means Israeli generally accepted accounting principles as in effect
from time to time.
"IFS Funding Amount" has the meaning set forth in Section 5(d) below.
"Indemnified Party" has the meaning set forth in Section 8(d) below.
"Indemnifying Party" has the meaning set forth in Section 8(d) below.
"Indemnity Share" means as to each of the Sellers a proportion equal to
the ratio of: their Proportionate Share to the aggregate of all of the Sellers'
Proportionate Shares.
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"Intellectual Property" means (a) all inventions and discoveries (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
Confidential Information (including ideas, research and development, know-how,
formulas, compositions, processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (f) all software
(including data and related documentation), (g) all other proprietary
information and rights, and (h) all copies and tangible embodiments thereof (in
whatever form or medium).
"Key Employees" means Xxx Xxxxx, Alon Hod, Xxxx Topaz and Xxxx Small.
"Knowledge" means actual knowledge after diligent investigation or
knowledge a prudent person could be expected to discover or otherwise become
aware of in the course of conducting a reasonably comprehensive investigation of
such matter. When used in relation of IFS, "Knowledge" means actual knowledge
after diligent investigation of Xxxxxxx Xxxxxx and Xxxxxxx Xxxxxx or knowledge
that Xx. Xxxxxx or Xx. Xxxxxx could be expected to have discovered or otherwise
become aware of in the course of conducting a reasonably comprehensive
investigation of such matter.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section
4(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section 4(g)
below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(g)
below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Net Indebtedness" means the amount, as of the Closing Date, of
Shareholder Indebtedness minus the amount of any trade payable and other amounts
owed by IFS or any of its Affiliates (other than the Target and the Subsidiary)
to the Target and the Subsidiary.
"Option Plan" means the Target's 1999 Stock Option Plan.
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"Ordinary Course of Business" means the ordinary course of normal
day-to-day business consistent with past custom and practice (including with
respect to quantity and frequency).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or association , or a governmental
entity (or any department, agency, or political subdivision thereof).
"Proportionate Share" means as to each of the Shareholders a proportion
equal to their percentage ownership interests in the Target based on their
respective holdings of Target Shares as set forth in Section 4(b) of the
Disclosure Schedule.
"Purchase Price" has the meaning set forth in Section 2(b) below.
"Purchase Price Balance" means the Purchase Price minus the Closing Cash.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Saratoga" means Saratoga Systems Inc.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than in the case of the Target and the
Subsidiary (but expressly not in the case of Target Shares and Section 3(a)(vi)
hereof) (a) mechanic's, materialmen's, and similar liens, (b) liens for Taxes
not yet due and payable, (c) purchase money liens and liens securing rental
payments under capital lease arrangements, and (d) other liens arising in the
Ordinary Course of Business and not incurred in connection with the borrowing of
money.
"Shareholder Indebtedness" means US$6,030,457.60 as at March 31, 2000 owed
by the Subsidiary to IFS for borrowed money as evidenced by a Promissory Note
dated March 31, 2000 plus US$150,000 to be advanced on April 12, 2000 further to
Section 5(d) below.
"Shareholders" means the Sellers and all of the other shareholders of the
Target on the Closing Date.
"Stay Bonus" means obligations owed to certain employees by the
Subsidiary, which for purposes of this Agreement shall be deemed to be
US$100,000.
"Subsidiary" means Exactium, Inc., a Delaware corporation.
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"Target Options" means options to purchase Target Shares granted under the
terms of the Option Plan.
"Target Share" means any share of the Ordinary Shares, Preferred A Shares,
Preferred B. Shares or Preferred C Shares of the Target, each with a nominal
value of NIS 0.01 per share.
"Tax" means any income, gross receipts, license, payroll employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental,
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not, arising under Applicable Law or
any other law.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8(d) below.
2. Purchase and Sale of Target Shares.
(a) Basic Transaction. On and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase from each of the Sellers, and each of
the Sellers agrees to sell to the Buyer, all of his, hers or its Target Shares
for the consideration specified below in this Section 2.
(b) Purchase Price. The purchase price (the "Purchase Price") is
US$48,000,000 minus:
(i) the Net Indebtedness;
(ii) the Aggregate Option Value; and
(iii) the Stay Bonus.
Subject to the balance of this Article 2, the Buyer shall pay the
Purchase Price to the Sellers at the Closing by delivery of:
(i) cash payable by wire transfer or delivery of other immediately
available funds in the amount of US$11,300,000 minus the Net
Indebtedness, and the Stay Bonus (the "Closing Cash"); and
(ii) Buyer Stock with a value equal to the Purchase Price Balance
(the "Closing Stock").
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The number of shares of Buyer Stock equivalent to the Purchase Price
Balance shall be determined by dividing the Purchase Price Balance by the
weighted average of the closing prices per share of Buyer Stock as reported by
the Nasdaq National Market for the twenty (20) consecutive trading day period
ending on the business day prior to the Closing Date; provided that, if such
weighted average price per share as so calculated, is greater than US$50 per
share, such price shall be deemed to be US$50 per share, and if such weighted
average price per share, as so calculated, is less than US$30 per share, such
price shall be deemed to be US$30 per share (the weighted average price per
share as determined pursuant to this sentence being referred to herein as the
"Closing Value"). The Buyer shall not be required to issue fractional shares of
Buyer Stock, including as shares of Buyer Stock are released to the Sellers
under the Escrow Agreement, and any resulting fractional shares shall be
ignored.
(c) Allocations of Closing Cash. The Closing Cash shall be paid at the
Closing and allocated among the Shareholders according to their Proportionate
Shares.
(d) Allocations of Closing Stock. The Closing Stock shall be delivered to
and allocated among the Shareholders as follows:
(i) first, Closing Stock having a Closing Value equal to
US$8,500,000 of the Purchase Price shall be delivered into
escrow by the Sellers further to Section 2(e) below;
(ii) second, Closing Stock shall be delivered at the Closing to
the Shareholders who are not Sellers according to their
Proportionate Shares; and
(iii) then the balance shall be delivered to the Sellers according
to their respective Indemnity Shares.
(e) Escrowed Shares. Shares of Buyer Stock with a Closing Value of US
$8,500,000 shall be held in escrow (the "Escrowed Shares") and under the terms
of the Escrow Agreement hereto until one year after the Closing Date (or if an
indemnity claim by the Buyer remains unsatisfied on such one year anniversary
date, then until such claim is satisfied). All Escrowed Shares shall be valued
at the Closing Value for purposes of determining the extent to which an
indemnity obligation is satisfied, irrespective of the market price of the
Escrowed Shares at the time of the indemnity payment. To the extent there are
Escrowed Shares available, and so long as the Sellers have not exercised the
right to pay an indemnity claim in cash further to the Escrow Agreement, they
shall be released back to the Buyer in satisfaction (or partial satisfaction) of
any indemnity payment under Article 8 below, as more particularly set forth in
and subject to the Escrow Agreement and drawn from the Escrowed Shares in
proportion to each Seller's Indemnity Share.
(f) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxx & Xxxxxxx
LLP in Seattle, Washington, commencing at 9:00 a.m. local time on the fifth
business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated
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hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself) or such other date as the Buyer and the Sellers
may mutually determine (the "Closing Date"); provided, however, that the Closing
Date shall be no later than June 30, 2000.
(g) Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 7(a) below, (ii) the Buyer will deliver to the IFS the
various certificates, instruments, and documents referred to in Section 7(b)
below, (iii) the Sellers will deliver to the Buyer stock certificates
representing all of the Shareholders' Target Shares, endorsed in blank or
accompanied by duly executed assignment documents with signatures guaranteed by
a commercial bank or verified by a lawyer or notary public, and releases of any
option, warrant, purchase right, or other contract or commitment concerning the
Target and any capital stock of the Target (other than under the Option Plan),
and the transfer of the Target Shares and the name of the Buyer shall be entered
into the Target's Share Registry, and (iv) the Buyer will deliver to each of the
Shareholders the consideration specified in Section 2(b) above.
(h) Press Releases and Public Announcements. The Sellers shall agree not
to issue any press release or make any public announcement relating to the
subject matter of this Agreement prior to the Closing without the prior written
approval of the Buyer; provided, however, that IFS may make any public
disclosure that is required by Applicable Law or any listing or trading
agreement concerning its publicly-traded securities (in which case IFS will
consult with the Buyer prior to making the disclosure). In addition, the Sellers
agree to allow the Buyer to dictate the market positioning, whether verbal or
written, of all public announcements related to this transaction.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Sellers. Each of the Sellers
represents and warrants to the Buyer that the statements contained in this
Section 3(a) are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(a)) with respect to himself, herself or itself.
(i) Organization of Certain Sellers. IFS is a corporation duly
organized, validly existing, and in good standing under the laws of
Sweden.
(ii) Authorization of Transaction. The Seller has full power and
authority (including, as to IFS, full corporate power and authority) to
execute and deliver this Agreement and to perform his, her or its
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance with its terms
and conditions. The Seller need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions
contemplated by this Agreement.
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(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Seller is
subject or, as to IFS, any provision of its constitutional documents or
(B) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to
which the Seller is a party or by which he or it is bound or to which any
of his or its assets is subject.
(iv) Brokers' Fees. The Seller has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could
become liable or obligated.
(v) Target Shares. The Seller holds of record and owns beneficially
the number of Target Shares set forth next to his, her or its name in
Section 4(b) of the Disclosure Schedule, free and clear of any
restrictions on transfer (other than any restrictions under the Securities
Act and state securities laws), Taxes, Security Interests, spousal or
community property rights options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. The Seller is not a party to
any option, warrant, purchase right, or other contract or commitment that
could require the Seller to sell, transfer, or otherwise dispose of any
capital stock of the Target, (other than this Agreement). The Seller is
not a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of the
Target.
(vi) Options. The number of Target Shares set forth next to his, her
or its name in Section 4(b) of the Disclosure Schedule includes all of the
Seller's options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that
could require the Target to issue, sell, or otherwise cause to become
outstanding any of its capital stock.
(b) Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Sellers that the statements contained in this Section 3(b) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
3(b)).
(i) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
Province of British Columbia.
(ii) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally
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binding obligation of the Buyer, enforceable in accordance with its terms
and conditions. The Buyer need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is
subject or any provision of its Articles of Association or (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which the Buyer is a
party or by which it is bound or to which any of its assets is subject.
(iv) Brokers' Fees. The Buyer has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which any Seller could
become liable or obligated.
(v) Investment. The Buyer is not acquiring the Target Shares with a
view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act or the equivalent thereof under any
Applicable Law.
(vi) SEC Filings. The Buyer has delivered or made available to the
Sellers (i) the Buyer's prospectus dated August 4, 1999; (ii) and the
Buyer's Quarterly Reports on Form 10-Q for the fiscal quarters ended
September 30, 1999 and December 31, 1999 and (iii) Current Report on Form
8-K filed on January 25, 2000 (collectively referred to therein as the
"Securities Act and Exchange Act Filings"). None of the Securities Act and
Exchange Act Filings, as of their respective filing dates, contained any
untrue statement of a material fact or omitted to state any material fact
necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. Except as
disclosed to the Sellers in writing, in materials filed by the Buyer
pursuant to the Securities Act or the Exchange Act, or set forth in press
releases that have been made public by the Buyer (including, but not
limited to, those from time to time posted at or available through
Nasdaq's website at xxxx://xxx.xxxxxx.xxx), there has been no material
adverse change in the financial condition of the Buyer since January 1,
2000.
(vii) Buyer Stock. All of the Buyer Stock issued to the Sellers at
the Closing and the Escrowed Shares shall have been duly authorized,
validly issued, fully paid, and nonassessable.
4. Representations and Warranties Concerning the Target and the
Subsidiary. The Sellers severally represent and warrant to the Buyer that the
statements contained in this Section 4 are
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correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 4),
except as set forth in the disclosure schedule attached hereto as Schedule 1
(the "Disclosure Schedule"). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 4.
(a) Organization, Qualification, and Corporate Power. Each of the Target
and the Subsidiary is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation. Each of
the Target and the Subsidiary is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a material
adverse effect on the business, financial condition, operations, results of
operations, or future prospects of the Target and the Subsidiary. Each of the
Target and the Subsidiary has full corporate power and authority and all
licenses, permits and authorizations necessary to carry on the businesses in
which it is engaged and to own and use the properties owned and used by it.
Section 4(a) of the Disclosure Schedule lists the directors and officers of each
of the Target and the Subsidiary. The Sellers have delivered to the Buyer
correct and complete copies of the charter and bylaws of each of the Target and
the Subsidiary (as amended to date). The minute books (containing the records of
meetings of the stockholders, the board of directors, and any committees of the
board of directors), the stock certificate books, and the stock record books of
each of the Target and the Subsidiary are correct and complete. None of the
Target and the Subsidiary is in default under or in violation of any provision
of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the Target
consists of 4,240,000 Target Shares comprised of 2,519,491 Ordinary Shares with
a nominal value of NIS 0.01 per share, 1,000,000 Preferred A shares, 58,000
Preferred B Shares, and 662,509 Preferred C Shares, of which there are
outstanding 642,398 Ordinary Shares, 384,581 Preferred A Shares, 58,000
Preferred B Shares, and 592,680 Preferred C Shares. On the Closing Date, all of
the Preferred A, B and C Shares will be legally and validly converted into
Ordinary Shares and all of the issued and outstanding Target Shares will be
comprised of 1,677,659 Ordinary Shares, and -0- Target Shares will be held in
treasury. All of the issued and outstanding Target Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and were issued
in compliance with all applicable securities laws, and are held of record by the
respective Sellers as set forth in Section 4(b) of the Disclosure Schedule. The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of the Target Shares are as set forth in the articles of
incorporation of the Target and such preferences, rights, qualifications,
limitations and restrictions are valid, binding and enforceable and in
accordance with Applicable Law. None of the outstanding Target Shares has been
issued in violation of any pre-emptive rights, rights of first refusal or
similar rights. Apart from the options outstanding under the Option Plan, all of
which are included on Section 4(b) of the Disclosure Schedule, there are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Target to issue, sell, or otherwise cause to become
outstanding any of its capital stock. The Option Plan permits an automatic
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vesting acceleration of all options granted thereunder upon the Closing. There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Target. There are no voting
trusts, proxies (except in relation to the Option Plan), or other agreements or
understandings with respect to the voting of the capital stock of the Target.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of the Target and the Subsidiary is
subject or any provision of the charter or bylaws of any of the Target and the
Subsidiary or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
any of the Target and the Subsidiary is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets), except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice, or Security Interest would not have a material adverse effect on the
business, financial condition, operations, results of operations, or future
prospects of the Target and the Subsidiary or on the ability of the Parties to
consummate the transactions contemplated by this Agreement. Except in relation
to the Chief Scientist, none of the Target and the Subsidiary needs to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement, except where the
failure to give notice, to file, or to obtain any authorization, consent, or
approval would not have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of the Target
and the Subsidiary or on the ability of the Parties to consummate the
transactions contemplated by this Agreement.
(d) Brokers' Fees. None of the Target and the Subsidiary has any
liability or obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this Agreement.
(e) Title to Assets. The Target and the Subsidiary have good and
marketable title to, or a valid leasehold interest in, the properties and assets
used by them, located on their premises, or shown on the Most Recent Balance
Sheet or acquired after the date thereof, free and clear of all Security
Interests, except for properties and assets disposed of in the Ordinary Course
of Business since the date of the Most Recent Balance Sheet.
(f) Subsidiaries. The Subsidiary is the only Person with respect to which
the Target (or a subsidiary of the Target) owns a majority of the common shares
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors. Section 4(f) of the Disclosure Schedule sets forth
for the Subsidiary (i) its name and jurisdiction of incorporation, (ii) the
number of shares of authorized capital stock of each class of its capital stock,
(iii) the
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number of issued and outstanding shares of each class of its capital stock, the
names of the holders thereof, and the number of shares held by each such holder,
and (iv) the number of shares of its capital stock held in treasury. All of the
issued and outstanding shares of capital stock of the Subsidiary have been duly
authorized and are validly issued, fully paid, and nonassessable. Target holds
of record and owns beneficially all of the outstanding shares of the Subsidiary,
free and clear of any restrictions on transfer (other than restrictions under
the Securities Act and state securities laws), Taxes, Security Interests,
options, warrants, purchase rights, contracts, commitments, equities, claims,
and demands. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Target to sell, transfer, or
otherwise dispose of any capital stock of the Subsidiary or that could require
the Subsidiary to issue, sell, or otherwise cause to become outstanding any of
its own capital stock. There are no outstanding stock appreciation, phantom
stock, profit participation, or similar rights with respect to the Subsidiary.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of the Subsidiary. None of the Target
and the Subsidiary controls directly or indirectly or has any direct or indirect
equity participation in any corporation, partnership, trust, or other business
association with respect to which they do not own a majority of the common
shares or have the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
(g) Financial Statements. Attached hereto as Schedule 3 are the following
financial statements (collectively, together with the financial statements to be
delivered further to Section 7(a)(xix) below, the "Financial Statements"): (i)
audited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
December 31, 1997, December 31, 1998, and unaudited balance sheets and
statements of income, changes in stockholders' equity, and cash flow (without
notes) as of and for the fiscal year ended December 31, 1999, (the "Most Recent
Fiscal Year End") for the Target and the Subsidiary; and (ii) unaudited
consolidated balance sheets and statements of income (the "Most Recent Financial
Statements") as of and for the three months ended March 31, 2000 (the "Most
Recent Fiscal Month End") for the Target and the Subsidiary. The Financial
Statements (including the notes thereto) have been prepared in accordance with
GAAP (and the Most Recent Financial Statements has been prepared in accordance
with U.S. generally accepted accounting principles) applied on a consistent
basis throughout the periods covered thereby and present fairly the financial
condition of the Target and the Subsidiary as of such dates and the results of
operations of the Target and the Subsidiary for such periods, and correct and
complete except for any amounts not disclosed therein but which are disclosed in
Section 4(i) of the Disclosure Schedule, and are consistent with the books and
records of the Target and the Subsidiary (which books and records are correct
and complete); provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (which will not be material individually
or in the aggregate) and lack footnotes and other presentation items.
(h) Events Subsequent to Most Recent Fiscal Year End. Except as set forth
in the respective paragraphs of Section 4(h) of the Disclosure Schedule
(corresponding with the following paragraphs) since the Most Recent Fiscal Year
End, there has not been any material
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adverse change in the business, financial condition, operations, results of
operations, or future prospects of the Target and the Subsidiary taken as a
whole. Without limiting the generality of the foregoing, since that date:
(i) neither of the Target and the Subsidiary has sold, leased,
transferred, or assigned any of its assets, tangible or intangible,
outside the Ordinary Course of Business;
(ii) neither of the Target and the Subsidiary has entered into any
agreement, contract, lease, or license outside the Ordinary Course of
Business;
(iii) no party (including either of the Target and the Subsidiary)
has accelerated, terminated, made material modifications to, or canceled
any material agreement, contract, lease, or license to which any of the
Target and the Subsidiary is a party or by which any of them is bound;
(iv) neither of the Target and the Subsidiary has granted or
imposed any, and there are no, Security Interest on any of its assets,
tangible or intangible;
(v) neither of the Target and the Subsidiary has made any capital
expenditures outside the Ordinary Course of Business;
(vi) neither of the Target and the Subsidiary has made any capital
investment in, or any loan to, any other Person, other than the extension
of trade credit in the Ordinary Course of Business;
(vii) the Target and the Subsidiary have not created, incurred,
assumed, or guaranteed more than $25,000 in aggregate indebtedness for
borrowed money and capitalized lease obligations;
(viii) neither of the Target and the Subsidiary has granted any
license or sublicense of any rights under or with respect to any
Intellectual Property outside the Ordinary Course of Business;
(ix) there has been no change made or authorized in the
constitutional documents of either of the Target and the Subsidiary;
(x) neither of the Target and the Subsidiary has issued, sold, or
otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital stock except under
the Option Plan (all of which are set forth in Section 4(b) of the
Disclosure Schedule);
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(xi) neither of the Target and the Subsidiary has declared, set
aside, or paid any dividend or made any distribution with respect to its
capital stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(xii) neither of the Target and the Subsidiary has experienced
any damage, destruction, or loss (whether or not covered by insurance)
to its property or assets;
(xiii) neither of the Target and the Subsidiary has made any loan
to, or entered into any other transaction with, any of its directors,
officers, and employees;
(xiv) neither of the Target and the Subsidiary has entered into any
employment contract or collective bargaining agreement, written or oral,
or modified the terms of any existing such contract or agreement;
(xv) neither of the Target and the Subsidiary has granted any
increase in the base compensation of any of its directors, officers, and
employees outside the Ordinary Course of Business;
(xvi) neither of the Target and the Subsidiary has adopted, amended,
modified, or terminated any bonus, profit-sharing, incentive, severance,
or other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect
to any other Employee Benefit Plan);
(xvii) neither of the Target and the Subsidiary has made any other
change in employment terms for any of its directors, officers, and
employees outside the Ordinary Course of Business;
(xviii) neither of the Target and the Subsidiary has delayed or
postponed the payment of accounts payable and other Liabilities outside
the Ordinary Course of Business;
(xix) neither of the Target and the Subsidiary has committed to
any of the foregoing; and
(xx) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving any of the Target and the Subsidiary.
(i) Undisclosed Liabilities. Except as set forth in Section 4(i) of the
Disclosure Schedule, none of the Target and the Subsidiary has any material
liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due, including any liability for
Taxes or breach of any Environmental, Health and Safety Requirements), except
for (i) liabilities set forth or reflected on the face of the Most Recent
Balance Sheet and (ii) liabilities which have
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arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business
(none of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, material breach of warranty, tort,
infringements, or violation of Applicable Law).
(j) Legal Compliance. Each of the Target and the Subsidiary, and their
respective predecessors and Affiliates, has complied with all Applicable Law and
other laws applicable to them, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against any of them alleging any failure so to comply, except where
the failure to comply would not have a material adverse effect on the business,
financial condition, operations, results of operations, or future prospects of
the Target and the Subsidiary.
(k) Tax Matters.
(i) Each of the Target and the Subsidiary has filed all Tax Returns
that it was required to file, except that, further to timely, and properly
and validly filed extensions, neither of the Target and Subsidiary has
filed its Tax Return for 1999. All such Tax Returns were correct and
complete in all respects. All Taxes owed by any of the Target and the
Subsidiary (whether or not shown on any Tax Return) have been paid. Except
as aforesaid, none of the Target and the Subsidiary currently is the
beneficiary of any extension of time within which to file any Tax Return.
No claim has ever been made by an authority in a jurisdiction where any of
the Target and the Subsidiary does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of any of the Target and the Subsidiary
that arose in connection with any failure (or alleged failure) to pay any
Tax.
(ii) Each of the Target and the Subsidiary has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts
paid or owing to, or transactions or contracts with, each other or any
Affiliate, employee, independent contractor, creditor, stockholder,
customer or other third party.
(iii) There is no dispute or claim concerning any Tax Liability of
any of the Target and the Subsidiary either (A) claimed or raised by any
authority in writing or (B) as to which any of the Sellers and the
directors and officers (and employees responsible for Tax matters) of the
Target and the Subsidiary has Knowledge based upon personal contact with
any agent of such authority. Section 4(k) of the Disclosure Schedule lists
all income Tax Returns of or for any country or jurisdiction (federal,
state or local) filed with respect to any of the Target and the Subsidiary
for taxable periods ended on or after December 31, 1998, indicates those
Tax Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. The Sellers have delivered to the
Buyer correct and complete copies of all federal income Tax Returns
(except for the 1999 tax year), examination reports, and statements of
deficiencies assessed against or agreed to by any of the Target and the
Subsidiary since January 1, 1998.
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(iv) None of the Target and the Subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(v) None of the Target and the Subsidiary has filed a consent under
Code Section 341(f) concerning collapsible corporations. None of the
Target and the Subsidiary has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under
Code Section 280G. None of the Target and the Subsidiary has been a United
States real property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). To the Knowledge of the Sellers and the directors and
officers of the Target and the Subsidiary, neither the Target nor the
Subsidiary has failed to disclose on its federal income Tax Returns a
position which, if not disclosed, could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section
6662. None of the Target and the Subsidiary is a party to any Tax
allocation or sharing agreement. None of the Target and the Subsidiary (A)
has been a member of an affiliated group within the meaning of Code
Section 504(a) or any similar group defined under a similar provision of
Applicable Law filing a consolidated federal income Tax Return (other than
a group the common parent of which was the Target) or (B) has any
Liability for the Taxes of any Person (other than any of the Target and
the Subsidiary) under Reg. Section 1.1502-6 (or any similar provision of
Applicable Law), as a transferee or successor, by contract, or otherwise.
(vi) The unpaid Taxes of the Target and the Subsidiary (A) did not,
as of the Most Recent Fiscal Month End, exceed the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the
face of the Most Recent Balance Sheet (rather than in any notes thereto)
and (B) do not exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice
of the Target and the Subsidiary in filing their Tax Returns.
(l) Real Property. None of the Target and the Subsidiary, nor their
respective predecessors and Affiliates, owns or has owned any real property.
Section 4(l) of the Disclosure Schedule lists and describes briefly all real
property leased or subleased to any of the Target and the Subsidiary. True,
correct and complete copies of the lease, and all amendments thereto, listed in
Section 4(l) of the Disclosure Schedule (as amended to date), attached to this
Agreement as Schedule 4. With respect to the lease listed in Section 4(l) of the
Disclosure Schedule (but as to any of the following as they relate to any party
other than the Target or the Subsidiary, only to the knowledge of Sellers and
the directors and officers of the Target and the Subsidiary):
(i) the lease is legal, valid, binding, enforceable, and in full
force and effect;
(ii) the lease will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions
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contemplated hereby and any and all necessary consents to the transactions
contemplated in this Agreement have been, or by the Closing shall have
been obtained;
(iii) no party to the lease is in breach or default, and no event
has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(iv) no party to the lease has repudiated any provision thereof;
(v) there are no material disputes, oral agreements, or
forbearance programs in effect as to the lease;
(vi) neither of the Target and the Subsidiary has assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold; and
(vii) all facilities leased or subleased thereunder have received
all approvals of governmental authorities (including material licenses and
permits) required in connection with the operation thereof, and have been
operated and maintained in accordance with applicable laws, rules, and
regulations in all material respects.
(m) Intellectual Property.
(i) The Target and the Subsidiary own or have the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation of the businesses of the Target and
the Subsidiary as presently conducted. Each item of Intellectual Property
owned or used by any of the Target and the Subsidiary immediately prior to
the Closing hereunder will be owned or available for use by the Target or
the Subsidiary on identical terms and conditions immediately subsequent to
the Closing hereunder. Each of the Target and the Subsidiary has taken all
necessary action to maintain and protect each item of Intellectual
Property that it owns or uses. The Target owns ESS 7.x and eSelling 2000
and the only Persons (including current or prior customers of the Target
and the Subsidiary), other than the Target and the Subsidiary, with any
rights concerning such Intellectual Property are identified on Section
4(m)(i) of the Disclosure Schedule. The description of eSelling 2000 set
forth in Schedule 2, including the functional specifications thereof, is
true, accurate and complete in all material respects.
(ii) None of the Target and the Subsidiary has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
patented rights of third parties, and none of the Sellers and the
directors and officers (and employees with responsibility for Intellectual
Property matters) of the Target and the Subsidiary (A) has any Knowledge
that the Target and the Subsidiary has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, or that the Intellectual Property owned
by the Target and the Subsidiary will so interfere,
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infringe, misappropriate or conflict, or (B) has ever received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that any
of the Target and the Subsidiary must license or refrain from using any
Intellectual Property rights of any third party). To the knowledge of the
Sellers and the directors and officers (and employees with responsibility
for Intellectual Property matters of the Target and the Subsidiary, no
third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of any
of the Target and the Subsidiary.
(iii) Section 4(m)(iii) of the Disclosure Schedule identifies each
patent or trademark registration which has been issued to any of the
Target and the Subsidiary with respect to any of its Intellectual
Property, identifies each pending patent application or application for
registration which any of the Target and the Subsidiary has made with
respect to any of its Intellectual Property, and identifies each license,
agreement, or other permission which any of the Target and the Subsidiary
has granted (other than in the Ordinary Course of Business) to any third
party with respect to any of its Intellectual Property (together with any
exceptions). The Sellers have delivered to the Buyer correct and complete
copies of all such patents, registrations, applications, licenses,
agreements, and permissions (as amended to date) and have made available
to the Buyer correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of each
such item. Section 4(m)(iii) of the Disclosure Schedule also identifies
each trade name or unregistered trademark used by any of the Target and
the Subsidiary in connection with any of its businesses. With respect to
each item of Intellectual Property required to be identified in Section
4(m)(iii) of the Disclosure Schedule:
(A) the Target and the Subsidiary possess all right, title, and
interest in and to the item, free and clear of any Security Interest,
license, or other restriction;
(B) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the Knowledge of any of the
Sellers and the directors and officers (and employees with responsibility
for Intellectual Property matters) of the Target and the Subsidiary, is
threatened which challenges the legality, validity, enforceability, use,
or ownership of the item; and
(D) none of the Target and the Subsidiary has ever agreed to
indemnify any Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
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(iv) There are no items of Intellectual Property that any third
party owns and that any of the Target and the Subsidiary uses pursuant to
license, sublicense, agreement, or permission.
(v) None of the Target and the Subsidiary will interfere with,
infringe upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of third parties as a result of their
continued Ordinary Course of Business.
(vi) All employees of the Target and the Subsidiary who have
contributed to or anticipated in the conception and/or development of all
or any part of the Target's or its Subsidiary's Intellectual Property
(which is not licensed from a third party) either (i) have been party to a
"work-for-hire" arrangement or agreement with the Target or its
Subsidiary, in accordance with Applicable Law, that has accorded the
Target or its Subsidiary full, effective, exclusive, and original
ownership of all tangible and intangible property thereby arising, or (ii)
have executed appropriate instruments of assignment in favor of the Target
or its Subsidiary as assignee that have conveyed full, effective and
exclusive ownership of all tangible and intangible property thereby
arising.
(n) Tangible Assets. The buildings, machinery, equipment, leasehold
improvements and other tangible assets that the Target and the Subsidiary own
and lease are free from material defects (patent and latent), have been
maintained in accordance with normal industry practice, and are in good
operating condition and repair (subject to normal wear and tear) and are
recorded on the Most Recent Balance Sheet in accordance with GAAP (that is, at
historic costs).
(o) No Illegal or Improper Transactions. Neither the Target nor the
Subsidiary, any Seller nor any of the directors, officers or employees of the
Target or the Subsidiary has, directly or indirectly, used funds or other assets
of the Target or the Subsidiary, or made any promise or undertaking in such
regard, for (a) illegal contributions, gifts, entertainment or other expenses
relating to political activity; (b) illegal payments to or for the benefit of
governmental officials or employees, whether domestic or foreign; (c) illegal
payments to or for the benefit of any person, firm, corporation or other entity,
or any director, officer, employee, agent or representative thereof; or (d) the
establishment or maintenance of a secret or unrecorded fund; and there have been
no false or fictitious entries made in the books or records of the Company. For
purposes of the foregoing, "illegal" includes payments that would be illegal
under the U.S. Foreign Corrupt Practices Act were they made or to be made by a
Person subject to that Act.
(p) Contracts. Section 4(p) of the Disclosure Schedule lists the following
contracts and other agreements to which either of the Target and the Subsidiary
is a party:
(i) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $25,000 per annum;
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(ii) except for customer contracts in the Ordinary Course of
Business, any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year,
result in a material loss to either of the Target and the Subsidiary, or
involve consideration in excess of $25,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) other than the Shareholder Indebtedness and the IFS Funding
Amount, any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $25,000 or under
which it has imposed a Security Interest on any of its assets, tangible or
intangible;
(v) any agreement concerning confidentiality or noncompetition
(other than agreements in the Ordinary Course of Business);
(vi) any agreement with any of the Sellers and their Affiliates
(other than the Target and the Subsidiary);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, "golden parachute" or
other plan or arrangement for the benefit of its current or former
directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $25,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xi) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of the Target and the Subsidiary;
(xii) any agreement with independent sales representatives or sales
agents;
(xiii) any licensing or other material agreement, understanding or
letter of intent with customers or prospects (other than in the Ordinary
Course of Business);
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(xiv) any agreement giving the Target or the Subsidiary any rights
to Intellectual Property, including OEM agreements; and
(xv) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000.
A true, correct and complete copy of each agreement listed in Section 4(p) of
the Disclosure Schedule (as amended to date) has been delivered, or will be
delivered as soon as practicable after the date of this Agreement, to the Buyer.
With respect to each such agreement (but as to any of the following as they
relate to any party other than the Target or the Subsidiary, only to the
Knowledge of the Sellers and the directors and officers of the Target and the
Subsidiary): (A) the agreement is legal, valid, binding, enforceable, and in
full force and effect in all material respects; (B) the agreement will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transaction contemplated
hereby; (C) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and (D) no
party has repudiated any provision of the agreement.
(q) Notes, Accounts Receivable and Prepayments. All notes in favor and
accounts receivable of the Target and the Subsidiary are reflected properly on
their books and records, are valid and bona fide arm's length receivables
subject to no setoffs or counterclaims, are current and collectible, and will be
collected in accordance with their terms at their recorded amounts, subject only
to the reserve for bad debts set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for operations and
transactions through the Closing Date in accordance with the past custom and
practice of the Target and the Subsidiary, except that no such representation is
made as to whether and if such accounts receivable arising in relation to any
project involving Saratoga will be collected or when. The Target has not billed
and will not xxxx, and the Target has not received any payments (in the form of
retainers or otherwise) from, any of its customers or potential customers for
services to be rendered or for expenses to be incurred subsequent to the Closing
Date. To the extent that accounts receivable include pre-billed amounts, the
corresponding liabilities have been accrued to the extent actual invoices
representing such liabilities have not been recorded on the Company's books.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of any of the Target and the Subsidiary.
(s) Insurance. Section 4(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) with respect to which any of the Target and the
Subsidiary is a party, a named insured, or otherwise the beneficiary of
coverage:
(i) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
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(ii) the policy number and the period of coverage;
(iii) the scope (including an indication of whether the coverage is
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(iv) a description of any retroactive premium adjustments or other
material loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect in all respects; (B) the
policy will continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the transactions
contemplated hereby; (C) neither any of the Target and the Subsidiary nor any
other party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy; and (D) no
party to the policy has repudiated any provision thereof. Section 4(s) of the
Disclosure Schedule describes any material self-insurance arrangements affecting
any of the Target and the Subsidiary.
(t) Litigation. None of the Target and the Subsidiary (i) is subject to
any outstanding injunction, judgment, order, decree, ruling, or charge or (ii)
is a party or, to the Knowledge of any of the Sellers and the directors and
officers of the Target and the Subsidiary, is threatened to be made a party to
any action, suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any country or jurisdiction
(federal, state or local) or before any arbitrator.
(u) Product and Service Warranties. Each of the products, property and
items manufactured, sold, licensed, or delivered, or services rendered, provided
or delivered, by any of the Target and the Subsidiary have conformed in all
material respects with all applicable contractual commitments and all express
and implied warranties, and none of the Target and the Subsidiary has any
material liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due) for replacement or repair
thereof or other damages in connection therewith, subject only to the reserve
for product warranty claims set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for operations and
transactions through the Closing Date in accordance with the past custom and
practice of the Target and the Subsidiary. No product, property or item
manufactured, sold, licensed, leased, or delivered, or service rendered,
provided or delivered, by the Target and the Subsidiary is subject to any
guaranty, warranty, service life, repair or support contract, upgrade
undertaking or other indemnity beyond the Target's or the Subsidiary' applicable
standard terms and conditions concerning such types of sale, lease, license or
service. Section 4(u) of the Disclosure Schedule includes copies of the standard
terms and conditions of sale, license or
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service for each of the Target and the Subsidiary (containing applicable
guaranty, warranty, support, and indemnity provisions).
(v) Product Liability. None of the Target and the Subsidiary has any
material liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, leased, or delivered by any of the Target and the
Subsidiary.
(w) Employees. To the Knowledge of any of the Sellers and the directors
and officers of the Target and the Subsidiary, no executive, key employee or
significant group of employees plans to terminate employment with any of the
Target and the Subsidiary during the next 12 months. None of the Target and the
Subsidiary is a party to or bound by any collective bargaining agreement, nor
has any of them experienced any strike or grievance, claim of unfair labor
practices, or other collective bargaining dispute within the past three years.
None of the Target and the Subsidiary has committed any unfair labor practice.
None of the Sellers and the directors and officers of the Target and the
Subsidiary has any Knowledge of any organizational effort presently being made
or threatened by or on behalf of any labor union with respect to employees of
any of the Target and the Subsidiary. Section 4(w) of the Disclosure Schedule
contains a true, complete and correct list setting forth (i) the names, job
descriptions/titles, current compensation rate and any promised increased
thereof (including, but not limited to, salary, commission and bonus
compensation), date of hire, vacation accrual rate and accrued vacation time of
all employees of the Target and the Subsidiary, and (ii) the names and total
annual compensation for all independent contractors who render services on a
regular basis to the Target and the Subsidiary whose current annual compensation
is or is expected to be in excess of $20,000. The Target and the Subsidiary have
not made any prepayments of salaries, bonuses or any other amounts due to any of
its employees, except advances against sales commission s made in the Ordinary
Course of Business. Target and the Subsidiary has a written policy prohibiting
unlawful employment discrimination and harassment. This policy includes a
reasonable complaint procedure and is distributed to all employees.
(x) Employee Benefits.
(i) Section 4(x) of the Disclosure Schedule lists each Employee
Benefit Plan.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in
all material respects with the applicable requirements of ERISA, the
Code, and other applicable laws. Each Employee Benefit Plan that is
intended to qualify under Code Section 401(a) has received a
favorable determination letter from the Internal Revenue Service
ruling that the plan does so qualify, and nothing has occurred since
the issuance of each such letter that could reasonably be expected
to cause the loss of the tax-qualified status of any such plan. All
Employee Benefit Plans have been administered in accordance with
their
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terms.
(B) All required reports and descriptions (including Form 5500
Annual Reports, summary annual reports, and summary plan
descriptions) have been timely filed and distributed appropriately
with respect to each such Employee Benefit Plan.
(C) With respect to each Employee Benefit Plan that is an
Employee Welfare Benefit Plan to which COBRA applies, the
requirements of COBRA have been met in all material respects.
(D) No such Employee Benefit Plan (which for purposes of this
sentence includes any such plan maintained, sponsored, adopted,
contributed to or obligated to by Target or an ERISA Affiliate
within the last six years) is subject to Title IV of ERISA or
Section 412 of the Code, or is a Multiemployer Plan.
(E) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been
paid to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan and all contributions for any period ending on or
before the Closing Date which are not yet due have been paid to each
such Employee Pension Benefit Plan or accrued in accordance with the
past custom and practice of the Target and the Subsidiary.
(F) All premiums or other payments for all periods ending on
or before the Closing Date have been paid with respect to each such
Employee Benefit Plan that is an Employee Welfare Benefit Plan.
(G) The Sellers have made available to the Buyer correct and
complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other funding
agreements relating to each such Employee Benefit Plan.
(H) There have been no "Prohibited Transactions" (as that term
is defined in ERISA Section 406 and Code Section 4975) with respect
to any such Employee Benefit Plan. Neither Target nor any Subsidiary
has any liability as a result of a material breach of fiduciary duty
or any other material failure to act or comply in connection with
the administration or investment of the assets of any such Employee
Benefit Plan. No action, suit, proceeding, hearing, or investigation
with respect to the administration or the investment of the assets
of any such Employee Benefit Plan (other than routine claims for
benefits) is pending or, to the Knowledge of any of the Sellers and
the directors and officers of the Target and the Subsidiary,
threatened.
(iv) No facts or circumstances exist, no actions have been taken or
omitted to be taken, nothing has occurred, and nothing will occur as a
result of the execution of this
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Agreement or the consummation of the transactions contemplated herein,
such that Target or any Subsidiary could be, or is, subject (directly or
indirectly, such as through an indemnification, guarantee or similar
agreement or obligation) to any liability for any claims, judgments,
damages, penalties, taxes (including excise taxes), assessments or similar
items (including, without limitation, any claim by a plan, or by the
Pension Benefit Guaranty Corporation, under Section 412 of the Code or
under Title IV of ERISA, or by any other governmental authority) with
respect to (i) any plan currently or formerly maintained by Target or any
Subsidiary or (ii) any plan to which Target or any Subsidiary has
contributed or has been obligated to contribute (other than liability for
benefit payments incurred in the normal operations of any such plan for
periods preceding and through the Closing Date).
(v) None of the Target and the Subsidiary maintains or ever has
maintained or contributes, ever has contributed, or ever has been required
to contribute to any Employee Welfare Benefit Plan providing medical,
health, or life insurance or other welfare-type benefits for current or
future retired or terminated employees, their spouses, or their dependents
(other than in accordance with COBRA).
(vi) Section 4(x) of the Disclosure Schedule sets forth all Foreign
Plans by name and provides a brief description for each plan. None of the
benefits under a Foreign Plan have been materially augmented nor will the
Target and the Subsidiary make any commitments to augment materially any
such benefits. Except as described in Section 4(x) of the Disclosure
Schedule, no condition, agreement or plan provision limits the right of
Target or the Subsidiary to amend, cut back or terminate any Foreign Plan,
nor will the transaction contemplated by this Agreement limit the right of
the Target or the Subsidiary or the Parent to amend, cut back or terminate
any Foreign Plan. Either as a matter of law or to obtain the intended tax
treatment and tax benefits, the Foreign Plans have at all times complied
with and been duly administered in accordance with all applicable laws and
regulations and requirements having force of law and in accordance with
their terms. There are not in respect of any Foreign Plan or the benefits
thereunder any actions, suits or claims pending or threatened other than
routine claims for benefits. Neither the Target or the Subsidiary have
received any notice or directive that it has not complied with all
material provisions of the Foreign Plans applicable to it and has no
knowledge of any reason why the tax exempt (or favored) status, if any of
the Foreign Plans might be withdrawn.
(vii) Except as disclosed in Section 4(x) of the Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in
any payment (including severance, unemployment compensation, golden
parachute or otherwise) becoming due to any director or any employee of
Target or any Subsidiary under any Employee Benefit Plan or otherwise,
(ii) increase any benefits otherwise payable under any Employee Benefit
Plan or (iii) result in any acceleration of the time of payment or vesting
of any such benefit. No payment (or acceleration of benefits) required to
be made to any employee as a result of the transactions contemplated by
this Agreement, under any Employee Benefit Plan or otherwise, will, if
made, constitute a payment that would not be deductible under Section 280G
of the Code.
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(viii) No person who currently performs or previously performed
services for the Target or the Subsidiary and who has not been treated as
a common law employee by Target or any Subsidiary is eligible for or
otherwise entitled to any benefit under any Employee Benefit Plan.
(ix) The deficiency in funding the Target's manager's insurance plan
in Israel is reflected in the Most Recent Financial Statements.
(y) Guaranties. Neither of the Target and the Subsidiary is a guarantor or
otherwise is responsible for any liability or obligation (including
indebtedness) of any other Person.
(z) Environment, Health, and Safety Matters.
(i) Each of the Target, the Subsidiary, and their respective
predecessors and Affiliates has complied and is in compliance, in each
case in all material respects, with all Environmental, Health, and Safety
Requirements.
(ii) Without limiting the generality of the foregoing, each of the
Target, the Subsidiary, and their respective Affiliates, has obtained, has
complied, and is in compliance with, in each case in all material
respects, all material permits, licenses and other authorizations that are
required pursuant to Environmental, Health, and Safety Requirements for
the occupation of its facilities and the operation of its business.
(iii) None of the Target, the Subsidiary, or their respective
Affiliates has received any written notice, report or other written
information regarding any actual or alleged material violation of
Environmental, Health, and Safety Requirements, or any material
liabilities or potential material liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), including any material
investigatory, remedial or corrective obligations, relating to any of them
or its facilities arising under Environmental, Health, and Safety
Requirements.
(iv) The Target, the Subsidiary and their respective Affiliates,
have not, and have no knowledge of any other Person who has caused any
release, threatened release, or disposal of any Hazardous Material on, in,
at, under, or from any real property or leased property associated with
the business and none of such property is adversely affected by any
release, threatened release, or disposal of a Hazardous Material. Neither
the Target, the Subsidiary or their respective Affiliates have transported
or arranged for the transportation for storage, treatment or disposal of
any Hazardous Materials to any location, nor is the Target, the Subsidiary
or their respective Affiliates liable for any response or corrective
action, natural resource damage or other harm pursuant to Environmental,
Health and Safety Requirements and there are no conditions or
circumstances at any lease property associated with the business which
poses a risk to the environment or to the health or safety of Persons.
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(aa) Customers. Section 4(aa) of the Disclosure Schedule is a complete
list by dollar volume of xxxxxxxx (within the fiscal year ended December 31,
1999) of the Target's and the Subsidiary' top ten customers. None of such
customers has canceled or otherwise terminated or, to the knowledge of the
Sellers and the directors and officers of the Target and the Subsidiary
threatened to cancel or otherwise terminate, its relationship with the Target
and the Subsidiary or materially reduced or threatened to materially reduce, its
business with the Target and the Subsidiary. To the Knowledge of any of the
Sellers and the directors and officers of the Target and the Subsidiary, with
the exception of Saratoga and projects involving Saratoga, no customer intends
to cancel or otherwise modify its relationship with the Target and the
Subsidiary on account of the transactions contemplated hereby or otherwise, and
none of the Sellers and the directors and officers of the Target and the
Subsidiary has any reason to so believe. All customers of the Target and the
Subsidiary are subject to licensing agreements with the Target or the Subsidiary
substantially in the form of Target's Standard Software Licensing and Support
Agreement, a copy of which is attached hereto as Section 4(u) of the Disclosure
Schedule. The Target and its Subsidiary are not subject to any undertaking or
obligation to support ESS 7.x or any earlier product of theirs beyond June 30,
2001, and they are not subject to any undertaking or obligation to upgrade any
such products and, in particular, eSelling 2000 will not constitute or be deemed
to be an upgrade or new version of ESS 7.x under any contract or agreement with
any of their customers.
(bb) Interest in Customers, etc. None of the Target and the Subsidiary,
any Seller nor any of their respective Affiliates has any direct or indirect
interest in any competitor, supplier or customer of the Target and the
Subsidiary or in any other person with whom the Target and the Subsidiary have
any business relationship.
(cc) Certain Business Relationships With the Target and the Subsidiary.
Except for IFS, none of the Sellers and their Affiliates has been involved in
any material business arrangement or relationship with either of the Target and
the Subsidiary within the past 12 months, and none of the Sellers and their
Affiliates owns any material asset, tangible or intangible, which is used in the
business of either of the Target and the Subsidiary.
(dd) Year 2000. The Target and the Subsidiary have not experienced any
material problems or difficulties with their computer systems or their
Intellectual Property relating to or resulting from the "Year 2000" concern and
none of their customers have notified the Target or the Subsidiary that they
have experienced any such problems with any items or services provided to them
by the Target or the Subsidiary.
(ee) Bank Accounts. Section 4(ee) of the Disclosure Schedule lists all of
the Target's and its Subsidiary's bank accounts, including bank and address,
bank routing number, account number, and individuals with signature authority.
(ff) State of Residency. All of the U.S. citizen or resident Shareholders
are residents of the State of Georgia.
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(gg) Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a material fact.
5. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his, her or its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Section 7 below).
(b) Notices and Consents. The Sellers will cause each of the Target and
the Subsidiary to give any notices to third parties, and will cause each of the
Target and the Subsidiary to use its reasonable best efforts to obtain any third
party consents, that the Buyer reasonably may request in connection with the
matters referred to in Section 4(c) above. Each of the Parties will (and the
Sellers will cause each of the Target and the Subsidiary to) give any notices
to, make any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Section 3(a)(ii), Section
3(b)(ii), and Section 4(c) above. Without limiting the generality of the
foregoing, each of the Parties will file (and the Sellers will cause each of the
Target and the Subsidiary to file) any notification and report forms and related
material that he, she or it may be required to file with the Chief Scientist,
will use his, her or its reasonable best efforts to obtain (and the Sellers will
cause each of the Target and the Subsidiary to use its reasonable best efforts
to obtain) a waiver from the applicable waiting period or approval or consent,
as the case may be, and will make (and the Sellers will cause each of the Target
and the Subsidiary to make) any further filings pursuant thereto that may be
necessary, proper, or advisable in connection therewith.
(c) Operation of Business. The Sellers will not cause or permit any of the
Target and the Subsidiary to engage in any practice, take any action, or enter
into any transaction outside the Ordinary Course of Business. Without limiting
the generality of the foregoing, the Sellers will not cause or permit any of the
Target and the Subsidiary to (i) declare, set aside, or pay any dividend or make
any distribution with respect to its capital stock or redeem, purchase, or
otherwise acquire any of its capital stock, or (ii) otherwise engage in any
practice, take any action, or enter into any transaction of the sort described
in Section 4(h) above. Moreover, the Sellers will cause the Target and the
Subsidiary to work closely with the Buyer in anticipation of being fully
integrated with the Buyer after the Closing, including projecting to customers
and prospective customers a unified image of the Target and the Subsidiary and
the Buyer (to the extent legal, practical and reasonable).
(d) Preservation of Business. The Sellers will use their reasonable best
efforts to cause each of the Target and the Subsidiary to keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, and relationships with
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lessors, licensors, suppliers, customers, and employees. IFS will provide
US$150,000 of funding to the Subsidiary on April 12, 2000. Thereafter, until the
Closing Date, IFS will continue to fund the Subsidiary consistent with their
Ordinary Course of Business (the "IFS Funding Amount").
(e) Full Access. Each of the Sellers will permit, and the Sellers will
cause each of the Target and the Subsidiary to permit, representatives of the
Buyer to have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Target and the Subsidiary,
to all premises, properties, personnel, books, records (including Tax records),
contracts, and documents of or pertaining to each of the Target and the
Subsidiary. The Buyer will treat and hold as such any Confidential Information
it receives from any of the Sellers, the Target, and the Subsidiary in the
course of the reviews contemplated by this Section 5(e), will not use any of the
Confidential Information except in connection with this Agreement, and, if this
Agreement is terminated for any reason whatsoever, will return to the Sellers,
the Target, and the Subsidiary all tangible embodiments (and all copies) of the
Confidential Information which are in its possession.
(f) Notice of Developments. The Sellers will give prompt written notice to
the Buyer of any material adverse development causing a breach of any of the
representations and warranties in Section 4 above. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of his or its own representations and warranties in Section 3
above. No disclosure by any Party pursuant to this Section 5(f), however, shall
be deemed to amend or supplement the Disclosure Schedule or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.
(g) Exclusivity. None of the Sellers will (and the Sellers will not cause
or permit any of the Target and the Subsidiary to) (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets, of any of the Target and the Subsidiary
(including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any Person to do or seek any of the
foregoing. None of the Sellers will vote their Target Shares in favor of any
such acquisition structured as a merger, consolidation, or share exchange. The
Sellers will notify the Buyer immediately if any Person makes any proposal
offer, inquiry, or contact with respect to any of the foregoing.
(h) Trading Prohibition. Each Seller hereby acknowledges that the
transactions contemplated hereby and information disclosed and to be disclosed
to the Sellers and their representatives may, from time to time, constitute or
include material non-public information concerning the Buyer. Each Seller
acknowledges that they are aware, and that they have advised and will continue
to advise all employees and representatives of the Target and the Subsidiary or
such Sellers to whom the existence of this transaction or any such information
has been or may be disclosed that (i) the federal securities laws may prohibit a
person who has material, non-public information from purchasing or selling
securities of any company to which such
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information relates and (ii) material non-public information shall not be
communicated to any other person except as expressly permitted by this
Agreement.
(i) Buyer Trading. Between the date of this Agreement and the Closing
Date, the Buyer will not directly or indirectly purchase any of its shares in
the open market.
(ii) Tax Covenant. Prior to Closing, Sellers and Buyer agree to use their
reasonable best effort to restructure the form of the transaction covered by
this Agreement as a merger or other reorganization under the Code or other
method, provided any such restructuring does not materially impact the
organization or tax plans of Buyer (which Buyer shall determine in its sole
discretion in good faith) or delay the Closing. All of the Buyer's incremental
costs in excess of US$25,000 for legal and accounting services in connection
with any such restructuring shall be borne by the individual Sellers.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement, each of the Parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Section 8 below). The Sellers
acknowledge and agree that from and after the Closing the Buyer will be entitled
to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the Target and the
Subsidiary.
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving any of the Target and the Subsidiary, each of the other Parties will
cooperate with him or it and his or its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Section 8 below).
(c) Transition. None of the Sellers will take any action that is designed
or intended to have the effect of discouraging any lessor, licensor, customer,
licenses, supplier, or other business associate of any of the Target and the
Subsidiary from maintaining the same business relationships with the Target and
the Subsidiary after the Closing as it maintained with the Target and the
Subsidiary prior to the Closing. Each of the Sellers will refer all customer
inquiries relating to the businesses of the Target and the Subsidiary to the
Buyer from and after the Closing.
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(d) Confidentiality. Each of the Sellers will treat and hold as such all
of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
the Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in his or
its possession. In the event that any of the Sellers is requested or required
(by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, that Seller will notify the
Buyer promptly of the request or requirement so that the Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
Section 6(d). If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the Sellers is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, that Seller may disclose the Confidential Information to the tribunal;
provided, however, that the disclosing Seller shall use his or its reasonable
best efforts to obtain, at the reasonable request of the Buyer, an order or
other assurance that confidential treatment will be accorded to such portion of
the Confidential Information required to be disclosed as the Buyer shall
designate.
(e) Covenant Not to Compete. For a period of three years from and after
the Closing Date, none of the Sellers will engage directly or indirectly in any
business anywhere in the world that any of the Target and the Subsidiary
conducts or has made substantial plans to engage in as of the Closing Date;
provided, however, that no owner of less than 5% of the outstanding stock of any
publicly-traded corporation shall be deemed to engage solely by reason thereof
in any of its businesses. If an arbitrator declares that any term or provision
of this Section 6(e) is invalid or unenforceable, the Parties agree that the
arbitrator shall have the power to reduce the scope, duration, or area of the
term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified.
(f) Non-solicitation. For a period of three years from and after the
Closing Date as to IFS, or, as to the other Sellers, a period of one year from
and after they resign as an employee of the Target, the Subsidiary or the Buyer
after the Closing Date, such Seller will not, directly or indirectly, either for
itself, himself or herself, or any other Person, (A) induce or attempt to induce
any employee of the Target or the Subsidiary or the Buyer to leave the employ of
such companies, (B) in any way interfere with the relationship between the
Target and the Subsidiary or the Buyer and any employee of such companies, (C)
employ, or otherwise engage as an employee, independent contractor, or
otherwise, any employee of the Target or the Subsidiary or the Buyer, or (D)
induce or attempt to induce any customer, supplier, licensee, or business
relation of the Target and the Subsidiary or the Buyer to cease doing business
with such companies, or in any way interfere with the relationship between any
customer, supplier, licensee, or business relation of the Target or the
Subsidiary.
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(g) Buyer Stock. Each certificate of Buyer Stock delivered at the Closing
will be imprinted with a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES,
AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE
UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 144A
UNDER THE SECURITIES ACT OR RULE 144 UNDER THE SECURITIES ACT, IF
APPLICABLE, OR (D) IN A TRANSACTION THAT IS OTHERWISE EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS, PROVIDED THAT PRIOR TO SUCH SALE THE COMPANY SHALL HAVE RECEIVED AN
OPINION OF COUNSEL OF RECOGNIZED STANDING, IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO IT, AS TO THE AVAILABILITY OF AN EXEMPTION.
DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN
SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. PROVIDED THAT THE
COMPANY IS A "FOREIGN ISSUER" WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT AT THE TIME OF SALE, A NEW CERTIFICATE, BEARING NO LEGEND,
DELIVERY OF WHICH WILL CONSTITUTE "GOOD DELIVERY," MAY BE OBTAINED FROM
AMERICAN STOCK TRANSFER & TRUST COMPANY UPON DELIVERY OF THIS CERTIFICATE
AND A DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO AMERICAN STOCK
TRANSFER & TRUST COMPANY AND THE COMPANY, TO THE EFFECT THAT THE SALE OF
THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT.
(h) Full Listing. Within 90 days after the Closing, IFS shall provide the
Buyer with a listing of all their customers using products of the Target or the
Subsidiary, and represent and warrant such list as true and accurate and that
all such customers are party to a licensing agreement effective to protect the
rights of the Target and the Subsidiary in their Intellectual Property;
(i) S-8 Registration. As promptly as is reasonably practicable following
the Closing, the Buyer will use its reasonable best efforts to register on Form
S-8 all the shares of Buyer Stock underlying the employee-held Target Options,
which were converted into Buyer Options.
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7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3(a) and
Section 4 above shall be true and correct in all material respects at and
as of the Closing Date;
(ii) the Sellers shall have performed and complied with all of their
covenants hereunder in all material respects through the Closing;
(iii) the Target and the Subsidiary shall have procured all of the
material third party consents specified in Section 5(b) above;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any country
or jurisdiction (federal, state or local) or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated by
this Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (C) affect adversely the
right of the Buyer to own the Target Shares and to control the Target and
the Subsidiary, or (D) affect materially and adversely the right of any of
the Target and the Subsidiary to own its assets and to operate its
businesses (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(v) the Sellers shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in Section
7(a)(i)-(iv) is satisfied in all respects;
(vi) the Target, and the Subsidiary shall have received all
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 3(a)(ii), Section 3(b)(ii), and Section
4(c) above;
(vii) the Key Employees shall have entered into, and delivered to
the Buyer, employee offer letters in form and substance as set forth in
Exhibit B attached hereto and the same shall be in full force and effect;
(viii) the Buyer shall have received, from Israeli, Swedish and U.S.
counsel to Sellers (or Target and the Subsidiary), opinions in form and
substance reasonably acceptable to the Buyer, addressed to the Buyer, and
dated as of the Closing Date;
(ix) the Buyer shall have received the resignations, effective as of
the Closing, of each director and officer of the Target and the
Subsidiary;
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(x) the Buyer shall have received satisfactory evidence that all
existing employment contracts undertakings and employment-related
arrangements (including severance agreements) by the Target and the
Subsidiary in favor of the Sellers have been cancelled and all existing
obligations between the Target and the Subsidiary and such Sellers for
borrowed money, advances, and other non-salary, non-wage and
non-commission arrangements have been settled and discharged.
(xi) the Buyer shall have received Target's and all Subsidiaries'
minutes books, stock books, stock registries, and bank signature cards;
(xii) an Escrow Agreement substantially in the form of Exhibit A
hereto shall have been validly entered into by all parties thereto;
(xiii) IFS shall have entered into, and delivered to the Buyer, a
release in form and substance as set forth in Exhibit C attached hereto
and the same shall be in full force and effect;
(xiv) all actions to be taken by the Sellers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance, and as relevant delivered, to the Buyer;
(xv) the Buyer shall have received a satisfactory title report
concerning all of the real property listed in Section 4(l) of the
Disclosure Schedule;
(xvi) all Target Options held by Persons who are not employees of
the Target or the Subsidiary shall have been exercised, Shareholders
holding 100 percent of the outstanding Target Shares as at the Closing
shall have tendered delivery of their Target Shares, and the holders of
all of the outstanding employee-held Target Options shall have elected, in
form and substance satisfactory to the Buyer, to have the Buyer substitute
Buyer Options for Target Options;
(xvii) the Buyer shall have received satisfactory evidence that the
Preferred A Shares, Preferred B Shares and Preferred C Shares of Target
Shares have been converted into Ordinary Shares of Target Shares and that
the issued and outstanding Target Shares as at the Closing Date are as set
forth in Section 4(b) of the Disclosure Schedule;
(xviii) all Shareholders shall have entered into and delivered to
the Buyer an investment representation letter in the form of Exhibit D
hereto;
(xix) the Buyer shall have received audited consolidated balance
sheets and statements of income, changes in stockholders' equity and cash
flow as of and for the
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fiscal year ended December 31, 1999 and they shall not be materially
different from the unaudited financial statements for such year-end
referenced to in Section 4(g) above;
(xx) the Buyer shall have received satisfactory evidence that all
options of the Shareholders to put Target Shares to IFS further to the
Founders Stock Purchase Agreement dated February 3, 1999 have been
cancelled;
(xxi) the accounts payable and other such amounts owed by IFS or any
of its Affiliates and comprised in Net Indebtedness shall have been paid;
and
(xxii) the Sellers shall not have done anything after the date of
this Agreement which may have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of the Target and the Subsidiary.
The Buyer may waive any condition specified in this Section 7(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of the Sellers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3(b)
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any country
or jurisdiction (federal, state or local) or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated by
this Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Sellers a certificate to
the effect that each of the conditions specified above in Section
7(b)(i)-(iii) is satisfied in all respects;
(v) the Target, and the Subsidiary shall have received all material
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 3(a)(ii), Section 3(b)(ii), and Section
4(c) above;
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(vi) the relevant parties shall have entered into an Escrow
Agreement in form and substance as set forth in Exhibit A and a
Registration Rights Agreement in the form of Exhibit E hereto;
(vii) the Sellers shall have received from counsel to the Buyer an
opinion in form and substance reasonably acceptable to IFS, addressed to
the Sellers, and dated as of the Closing Date;
(viii) the Escrow Agreement shall have been validly entered into by
all parties thereto and the Escrow Shares shall have been deposited with
the Escrow Agent;
(ix) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Sellers;
(x) the Buyer shall have substituted Buyer Options for all of the
outstanding employee-held Target Options in form and substance reasonably
satisfactory to the Sellers;
(xi) the Shareholder Indebtedness, the IFS Funding Amount and the
Stay Bonus as at the Closing Date shall have been paid;
(xii) the Sellers who are employees shall have received employee
offer letters in form and substance set forth in Exhibit B attached hereto
with the compensation arrangements set forth in the Addendum to such
Exhibit;
(xiii) the Buyer shall not have done anything after the date of this
Agreement which may have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of the Buyer.
The Sellers may waive any condition specified in this Section 7(b) if they
execute a writing so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties.
All of the representations and warranties of the Sellers contained in
Section 4 above shall survive the Closing hereunder (even if the Buyer knew or
had reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for a period of three years
thereafter. All of the other representations and warranties of the Parties
contained in this Agreement shall survive the Closing (even if the damaged Party
knew or had reason to know of any misrepresentation or breach of warranty at the
time of Closing) and
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continue in full force and effect forever thereafter (subject to any applicable
statutes of limitations).
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event any of the Sellers breaches any of their
representations, warranties, and covenants contained herein (other than
the representations and warranties in Section 3(a) above) or any
certificate, document or agreement delivered or entered into at the
Closing and, if there is an applicable survival period pursuant to Section
8(a) above, provided that the Buyer makes a written claim for
indemnification against any of the Sellers pursuant to Section 11(g) below
within such survival period, then each of the Sellers, proportionate to
each Seller's Indemnity Share, agrees to indemnify the Buyer, the Target,
their Affiliates, officers, directors, employees and agents, from and
against the entirety of any Adverse Consequences they may suffer through
and after the date of the claim for indemnification (including any Adverse
Consequences they may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of, or
caused by the breach; provided, however, that the Sellers shall not have
any obligation to indemnify the Buyer from and against any Adverse
Consequences resulting from, arising out of, relating to, in the nature
of, or caused by the breach of any representation, warranty or covenant of
the Sellers contained in this Agreement until the Buyer has suffered
Adverse Consequences by reason of all such breaches in excess of US$50,000
("Buyer's Deductible") whereupon the Buyer shall be entitled to claim
indemnification for the amount in excess of $50,000, provided that in no
event shall the aggregate indemnification obligations of Sellers exceed US
$8,500,000.
(ii) In the event any of the Sellers breaches any of his or its
representations and warranties in Section 3(a) above, and, if there is an
applicable survival period pursuant to Section 8(a) above, provided that
the Buyer makes a written claim for indemnification against the Seller
pursuant to Section 11(g) below within such survival period, then the
Seller agrees to indemnify the Buyer from and against the entirety of any
Adverse Consequences the Buyer may suffer through and after the date of
the claim for indemnification (including any Adverse Consequences the
Buyer may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or caused
by the breach (or the alleged breach).
(c) Indemnification Provisions for Benefit of the Sellers. In the event
the Buyer breaches any of its representations, warranties, and covenants
contained herein or any certificate, document or agreement delivered or entered
into at the Closing, and, if there is an applicable survival period pursuant to
Section 8(a) above, provided that any of the Sellers makes a written claim for
indemnification against the Buyer pursuant to Section 11(g) below within such
survival period, then the Buyer agrees to indemnify each of the Sellers, their
affiliates, officers, directors, employees and agents from and against the
entirety of any Adverse Consequences the Seller may suffer through and after the
date of the claim for indemnification (including any Adverse Consequences the
Seller may suffer after the end of any applicable survival period) resulting
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from, arising out of, relating to, in the nature of, or caused by the breach.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 8, then the Indemnified Party
shall give reasonably prompt written notice and the details thereof,
including copies of all relevant pleadings, documents and information and,
if then known, the amount or the method of computation of the amount of
such claim to the Indemnifying Party, provided, however, that the failure
by the Indemnified Party to give prompt written notice shall not impair
the Indemnified Party's rights hereunder except to the extent that the
Indemnifying Party demonstrates that the Indemnifying Party's ability to
defend has been materially prejudiced by such failure of the Indemnifying
Party.
(ii) The Indemnifying Party will notify the Indemnified Party within
a period of fifteen (15) days after receipt of the written notice provided
for above: (A) that the Indemnifying Party disputes its liability (or the
amount thereof), to the Indemnified Party with respect to such Third Party
Claim; or (B) that the Indemnifying Party does not dispute and accepts its
liability to the Indemnified Party under this Section 8 with respect to
such Third Party Claim, and in either case (x) that the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party
against such Third Party Claim (the "Defense Notice") or (y) that the
Indemnifying Party does not desire to undertake such defense (the
"Non-Defense Notice").
(iii) If the Indemnifying Party provides the Indemnified Party with
a Defense Notice, then the Indemnifying Party at its sole cost and expense
shall defend, with counsel reasonably satisfactory to the Indemnified
Party, such Third Party Claim by all appropriate proceedings, which
proceedings will be prosecuted in a reasonably diligent manner and in good
faith to a final conclusion or will be settled at the discretion and sole
expense of the Indemnifying Party (with the consent of the Indemnified
Party which, in the case of a monetary settlement only, shall not be
unreasonably withheld or delayed and, in the case of all other
settlements, may be withheld in the discretion of the Indemnified Party).
The Indemnified Party shall cooperate in such defense at the request of
and at the sole cost and expense of the Indemnifying Party and shall
furnish records, information and testimony and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be reasonably
requested by the Indemnifying Party in connection therewith. The
Indemnified Party may, at its sole cost and expense, at any time prior to
the Indemnifying Party's delivery of a Defense Notice, file any pleadings
or take any other action that the Indemnified Party reasonably believes to
be necessary or appropriate to protect its interests. The Indemnified
Party, at its expense, may at any time participate in, but not control,
any defense or settlement of any Third Party Claim conducted by the
Indemnifying Party pursuant to this Section 8.
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(iv) If the Indemnifying Party does not provide the Defense Notice
to the Indemnified Party within the required period, gives such notice but
fails to prosecute in a reasonably diligent manner and in good faith or
settle the Third Party Claim, or provides a Non-Defense Notice, then the
Indemnified Party may defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate proceedings,
which proceedings will be prosecuted by the Indemnified Party in a
reasonable manner and in good faith or will be settled at the discretion
of the Indemnified Party. The Indemnifying Party shall, at its sole cost
and expense, cooperate in such defense and shall furnish records,
information and testimony and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested
by the Indemnified Party in connection therewith. Notwithstanding the
foregoing provisions of this paragraph, if the Indemnifying Party is
determined not to be required to indemnify for such Third Party Claim
pursuant to paragraph (v) of this Section 8(b), the Indemnifying Party
will not be required to bear the costs and expenses of the Indemnified
Party's defense or the Indemnifying Party's participation therein pursuant
to this paragraph, and the Indemnified Party will reimburse the
Indemnifying Party in full for all reasonable costs and expenses incurred
by the Indemnifying Party in connection with such defense.
(v) If the Indemnifying Party provides the Defense Notice or the
Non-Defense Notice to the Indemnified Party within the required notice
period or if the Indemnifying Party fails to provide the notice required
by paragraph (ii) (A) or (B) of this Section 8(b) within the required
notice period, the Adverse Consequences to the Indemnified Party as
finally determined will be conclusively deemed a liability of the
Indemnifying Party under this Section 8. If the Indemnifying Party
provides the notice described in paragraph (ii)(A) of this Section 8(b) to
the Indemnified Party within the required notice period, then the
Indemnifying Party and the Indemnified Party will proceed in good faith to
resolve such dispute as quickly as possible.
(e) Treatment of Payments. All indemnification payments under this Section
8 shall be deemed adjustments to the Purchase Price.
(f) Exclusive Remedy. Without prejudice to Sections 10(c) and 11(n), the
Parties hereto acknowledge and agree that the foregoing indemnification
provisions in this Section 8 shall be the exclusive remedy of the Buyer and the
Seller with respect to the Target, the Subsidiary, and the transactions
contemplated by this Agreement. Each of the Sellers hereby releases each, and
agrees that he, she or it will not make any claim for indemnification against
any, of the Target and the Subsidiary by reason of the fact that he or it was a
director, officer, employee, or agent of any such entity or was serving at the
request of any such entity as a partner, trustee, director, officer, employee,
or agent of another entity (whether such claim is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses, or
otherwise and whether such claim is pursuant to any statute, charter document,
bylaw, agreement, or otherwise), and, without limiting the generality of the
foregoing, including with respect to any action, suit, proceeding, complaint,
claim, or demand brought by the Buyer against such Seller (whether such
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action, suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, Applicable Law, or otherwise).
(g) Indemnification Calculations. The amount of any Adverse Consequences
for which indemnification is provided under this Section 8 shall be computed net
of any insurance proceeds received by the Indemnified Party in connection with
such Adverse Consequences.
9. Tax Matters.
The following provisions shall govern the allocation of responsibility as
between Buyer and Sellers for certain Tax matters following the Closing Date:
(a) Tax Returns. Buyer shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns for the Target and the Subsidiary for all
periods ending on or prior to the Closing Date which are filed after the Closing
Date other than income Tax Returns with respect to periods for which a
consolidated, unitary or combined income Tax Return of Seller will include the
operations of the Target and the Subsidiary.
(b) Cooperation on Tax Matters.
(i) The Buyer and the Sellers shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Section and any audit, litigation
or other proceeding with respect to Taxes. Such cooperation shall include
the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Buyer and the Sellers
agree, or shall cause the Target and the Subsidiary, (A) to retain all
books and records with respect to Tax matters pertinent to the Target and
the Subsidiary relating to any taxable period beginning before the Closing
Date until the expiration of the statute of limitations (and, to the
extent notified by Buyer or Sellers, any extensions thereof) of the
respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the
other party reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other party so requests,
the Target and the Subsidiary or Sellers, as the case may be, shall allow
the other party to take possession of such books and records.
(ii) Buyer and Seller further agree, upon request, to use their best
efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to,
with respect to the transactions contemplated hereby).
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(iii) Buyer and Seller further agree, upon request, to provide the
other party with all information that either party may be required to
report pursuant to Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
(c) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Target and the Subsidiary shall be
terminated as of the Closing Date and, after the Closing Date, the Target and
the Subsidiary shall not be bound thereby or have any liability thereunder.
(d) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by Sellers
when due, and Sellers will, at their own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
Applicable Law, Buyer will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
10. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written notice
to the Sellers at any time prior to the Closing (A) in the event any of
the Sellers has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the Buyer
has notified the Sellers of the breach, and the breach has continued
without cure for a period of 30 days after the notice of breach or (B) if
the Closing shall not have occurred on or before June 30, 2000, by reason
of the failure of any condition precedent under Section 7(a) hereof
(unless the failure results primarily from the Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement); and
(iii) the Sellers may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (A) in the event the
Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, any of the Sellers
has notified the Buyer of the breach, and the breach has continued without
cure for a period of 30 days after the notice of breach or (B) if the
Closing shall not have occurred on or before June 30, 2000, by reason of
the failure of any condition precedent under Section 7(b) hereof (unless
the failure results primarily
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from any of the Sellers themselves breaching any representation, warranty, or
covenant contained in this Agreement);
(b) Effect of Termination. Subject to Section 10(c) below, if any Party
terminates this Agreement pursuant to Section 10(a) above, all rights and
obligations of all the Parties hereunder shall terminate without any liability
of any Party to any other Party; provided, however, that the confidentiality
provisions contained in Section 5(e) above shall survive termination.
(c) Breakup Fee. As the sole and exclusive remedy to the terminating
Party:
(i) if the Buyer terminates this Agreement under Section 10(a)(ii)
above for any reason other than the failure of any condition precedent
under Section 7(a)(vi) hereof, and the Sellers could not themselves
terminate this Agreement under Section 10(a)(iii) above, the Sellers in
proportion to their Indemnity Share shall pay the Buyer US$1,000,000; or
(ii) If the Sellers terminate this Agreement under Section
10(a)(iii) above for any reason other than the failure of any condition
precedent under Section 7(b)(v) hereof, and the Buyer could not itself
terminate this Agreement under Section 10(a)(ii) above, the Buyer shall
pay the Sellers in proportion to their Indemnity Share US$1,000,000.
Any payment required to be made pursuant to this Section 10(c) shall be
made to not later than two business days after delivery to the of the
relevant termination notice, and shall be made by wire transfer of
immediately available funds to an account designated by terminating Party.
11. Miscellaneous.
(a) Nature of Certain Obligations.
(i) The covenants of each of the Sellers in Section 2(a) above
concerning the sale of his, her or its Target Shares to the Buyer and the
representations, warranties and covenants of each of the Sellers in
Section 3(a) above concerning the transaction are individual obligations.
This means that the particular Seller making the representation, warranty,
or covenant will be solely responsible to the extent provided in Section 8
above for any Adverse Consequences the Buyer may suffer as a result of any
breach thereof.
(ii) For the avoidance of doubt, the other of the representations,
warranties, and covenants in this Agreement are several obligations. This
means that each Seller will be responsible to the extent provided in
Section 8 above to the extent of each Seller's Indemnity Share of such
Adverse Consequences the Buyer may suffer as a result of any breach
thereof.
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(b) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns and, for purposes of Section 8(b) above, the
Target, Affiliates of the Buyer and the Target, and their officers, directors,
employees and agents.
(c) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(d) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Sellers; provided, however, that the Buyer may (i)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
(e) Counterparts. This Agreement may be executed in one or more
counterparts (including separate signature pages by fax), each of which shall be
deemed an original but all of which together will constitute one and the same
instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
IF TO THE SELLERS: IF TO THE BUYER:
Xxxxxxx Xxxxxxxx Xxxxxxx Xxxxxx
CFO CFO and VP - Operations
Telnikringen 5 Pivotal Corporation
XX-000 00 Xxxxxxxxx, Xxxxxx 000-000 Xxxx Xxxxxxxxx
Xxxxx Xxxxxxxxx, XX
COPIES TO: Canada V7M 3M6
Xxxxxxx X. Xxxxxx COPY TO:
IFS North America, Inc.
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Industrial & Financial Systems AB Xxxxxxx X. Xxxxxxxx
00000 Xxxx Xxxx Xxxxx Xxxxxx & Xxxxxxx XXX
Xxxxxxxxx, XX 00000 1300 - 000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX
XXX Xxxxxx X0X 0X0
Xxx Xxxxx, President
Exactium, Inc.
0000 X. Xxxxxxxxx Xx.,
Xxxxx 000
Xxxxxxx, XX 00000
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Washington without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Washington or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Washington.
(i) Dispute Resolution. Any dispute, controversy or claim arising out of
or relating to this Agreement, or the breach, termination or invalidity of it
shall be settled by arbitration in accordance with the UNCITRAL Arbitration
Rules in effect on the date of this Agreement. The appointing authority shall be
the British Columbia International Commercial Arbitration Centre. The place of
arbitration shall be Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx. The number of
arbitrators shall be one. The arbitrator shall be fully fluent in English. The
arbitrator will issue findings of fact and conclusions of law to support his or
her opinion. Judgment upon the award rendered by the arbitrator may be entered
by any court having jurisdiction thereof and enforced as any other judgment. The
arbitrator shall have the power, but not the obligation, to hire an accounting
firm or other professional within the financial services industry as an expert
in order to assist the arbitrator in issuing findings of fact. The arbitration
proceedings and all discovery shall be confidential and neither party shall
release any decision rendered by the arbitrator to any third party. Discovery
shall be limited to that which is directly relevant to the claim or controversy
and to key documents and witnesses that are substantive and reasonably necessary
to establish a party's claim or defense. Notwithstanding any of the foregoing,
the Parties recognize that certain business relationships could give rise to the
need for one or more of the Parties to seek emergency, provisional or summary
injunctive relief. Immediately following the issuance of any such relief, the
Parties agree to the stay of any judicial proceedings pending arbitration of all
underlying claims between the parties.
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(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Sellers. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Parties, the Target, and the Subsidiary will
bear his or its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. The Sellers agree that none of the Target and the Subsidiary has borne
or will bear any of the Sellers' costs and expenses (including any of their
legal fees and expenses) in connection with this Agreement or any of the
transactions contemplated hereby.
(m) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction will be applied. Any reference to any law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word "including" shall mean including
without limitation. Singular words, terms and usage shall be construed to
include the plural, and vice versa, as the context permits. The phrase "the
Target and the Subsidiary" or variations of it shall be construed to mean any of
such Persons and not merely the Target and the Subsidiary taken as a whole
(unless expressly so stated). References and citations to statutes and acts are
to U.S. statutes and acts, unless otherwise expressly stated. The word "foreign"
means non-U.S. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
(n) Specific Performance. Each of the Parties acknowledges and agrees that
the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly,
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each of the Parties agrees that the other Parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof, in addition to any other remedy to which they may be
entitled, at law or in equity.
(o) Time of Essence. With regard to all dates and time periods set forth
in the Agreement, time is of the essence.
(p) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(q) English Language Version. Only the English language of this Agreement
shall be considered the official agreement of the parties notwithstanding any
translation thereof made by any party to this Agreement. In the event of
conflict between this English language version of the Agreement and any
translation, the English language version shall control, it being understood
that the intention of the parties will be interpreted on the basis of the
English version.
*****
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
PIVOTAL CORPORATION
By: /s/ Xxxx Xxxxxxx /s/ Xxxxx Xxxxxx
---------------- -----------------
Title: President & CEO CFO/VP Operations
---------------- -----------------
INDUSTRIAL & FINANCIAL SYSTEMS AB
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Title: Authorized Signatory
-------------------------------------
/s/ Xxx Xxxxx
--------------------------------------------
Xxx Xxxxx
/s/ Alon Hod
--------------------------------------------
Alon Hod
/s/ Xxxx Topaz
--------------------------------------------
Xxxx Topaz
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SCHEDULES AND EXHIBITS
Schedule 1* Disclosure Schedule
Schedule 2* Functional Description of eSelling 2000
Schedule 3* Financial Statements
Schedule 4* Lease
Exhibit A* Form of Escrow Agreement
Exhibit B* Form of Employment Offer Letter
Exhibit C* Form of IFS Release
Exhibit D* Form of Investment Letter
Exhibit E Form of Registration Rights Agreement
----------
* These schedules and exhibits have been omitted from this report pursuant to
Item 601(b)(2) of Regulation S-K under the Securities Act of 1933. The
registrant agrees to supplementally furnish a copy of the omitted
schedule(s) to the Commission upon request.
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EXHIBIT E
FORM OF REGISTRATION RIGHTS AGREEMENT
AGREEMENT, dated _________, 2000, is made and entered into by and
between Pivotal Corporation, a British Columbia company ("Pivotal"), and each of
Industrial & Financial Systems AB, a Swedish corporation, Xxx Xxxxx, Alon Hod,
Xxxx Topaz, Xxxx Small, Xxxx Xxxxxx, Xxxx Xxxxxxx, Xxxxx Tal, Xxx Xxxxxxxxxx,
Xxxxxx Xxxxxx, Xxxx Xxxxxxxxxx and Xxxxxx Xxxx (individually, a "Holder", and
collectively, the "Holders"). Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to them in the Stock Purchase Agreement
(as defined in the recitals below).
WITNESSETH:
WHEREAS, Pivotal has agreed to issue to the Holders common shares of
Pivotal, without par value (the "Pivotal Shares"), in exchange for all of the
issued and outstanding Ordinary Shares, par value NIS 0.01 per share (the
"Company Shares"), of Exactium Ltd., an Israeli corporation (the "Company"),
pursuant to that certain Stock Purchase Agreement, dated as of April 11, 2000
(the "Stock Purchase Agreement") by and among Pivotal and the Holders; and
WHEREAS, the Pivotal Shares will be issued to the Holders without
registration under the U.S. Securities Act of 1933, as amended (the "Securities
Act"), and Pivotal and the Holders desire to provide for compliance with the
Securities Act and for the registration of the sale by the Holders of the
Pivotal Shares upon the terms and subject to conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
Section 1. Certain Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Commission" means the United States Securities and Exchange
Commission and any successor federal agency having similar powers.
The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing with the Commission a
registration statement in compliance with the Securities Act, and the
declaration or ordering by the Commission of the effectiveness of such
registration statement.
"Registrable Securities" means (i) any and all of the Pivotal
Shares issued in exchange for the Company Shares and (ii) any other
securities issued or issuable with respect to any of the Pivotal Shares
described in clause (i) above by way of a stock dividend or stock split
or in connection with a combination, exchange, reorganization,
recapitalization or reclassification of Pivotal's securities or pursuant
to a merger, consolidation or other similar business combination
transaction involving Pivotal.
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"Registration Expenses" means all expenses incurred by Pivotal in
connection with the registration of the Registrable Securities,
including, without limitation, all registration and filing fees
(including fees and expenses associated with filings required to be made
with the Nasdaq National Market), printing expenses (including expenses
of printing certificates for the Pivotal Shares being registered in a
form eligible for deposit with the Depository Trust Company and of
printing prospectuses), fees and disbursements of counsel for Pivotal
and fees and expenses of compliance with state securities or "Blue Sky"
laws, Pivotal's accountants' fees and expenses, fees of transfer agents
and registrars, but specifically excluding any and all fees, commission,
discounts or similar payments made to any brokers or dealers in
connection with the selling of any Registrable Securities and any and
all fees of professional advisors of Holders.
"Shelf Registration Statement" is defined in Section 3(a).
Section 2. Restrictions on Transfer.
(a) Restrictions. Each Holder agrees that such Holder will not sell,
assign, transfer or otherwise dispose of (each, a "Transfer") any of the Pivotal
Shares (or any interest therein) except upon the terms and conditions specified
herein, and such Holder will cause any subsequent holder of such Holder's
Pivotal Shares to agree to take and hold the Pivotal Shares subject to the terms
and conditions of this Agreement if such Pivotal Shares are required to include
a legend pursuant to Section 2(b) hereof.
(b) Legend. Each certificate representing Pivotal Shares issued to the
Holders or to any subsequent holder of such shares shall include a legend in
substantially the following form; provided, however, that such legend shall not
be required if (i) a Transfer is being made (a) in connection with a sale of
Pivotal Shares registered under the Securities Act, (b) in connection with a
sale of Pivotal Shares in compliance with Rule 144 under the Securities Act or
(c) in connection with a sale of Pivotal Shares in compliance with Rule 904 of
Regulation S under the Securities Act (each, a "Public Sale"), or (ii) the
opinion of counsel referred to in Section 2(d) hereof is to the further effect
that neither such legend nor the restrictions on transfer in this Section 2 are
required in order to ensure compliance with the Securities Act:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH
SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES
MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY,
(B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION
S UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES IN ACCORDANCE
WITH RULE 144A UNDER THE SECURITIES ACT OR RULE 144 UNDER THE SECURITIES
ACT, IF APPLICABLE, OR (D) IN A TRANSACTION THAT IS OTHERWISE EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, PROVIDED THAT PRIOR TO SUCH SALE THE COMPANY SHALL HAVE
RECEIVED AN OPINION OF COUNSEL OF RECOGNIZED STANDING, IN FORM AND
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SUBSTANCE REASONABLY SATISFACTORY TO IT, AS TO THE AVAILABILITY OF AN
EXEMPTION. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD
DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.
PROVIDED THAT THE COMPANY IS A "FOREIGN ISSUER" WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT AT THE TIME OF SALE, A NEW
CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE "GOOD
DELIVERY," MAY BE OBTAINED FROM AMERICAN STOCK TRANSFER & TRUST COMPANY
UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A
FORM SATISFACTORY TO AMERICAN STOCK TRANSFER & TRUST COMPANY AND THE
COMPANY, TO THE EFFECT THAT THE SALE OF THE SECURITIES REPRESENTED
HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER
THE SECURITIES ACT.
(c) Notices of Transfer. Prior to any proposed Transfer of any Pivotal
Shares other than pursuant to an offering registered under the Securities Act,
the Holder proposing to make such Transfer shall give written notice to Pivotal
of such Holder's intention to effect such Transfer, which notice shall set forth
the date of such proposed Transfer. Such Holder also shall furnish to Pivotal
(i) a written agreement by the proposed Transferee that it is taking and holding
the same subject to the terms and conditions specified in this Agreement, except
with respect to any Pivotal Shares which are being sold in a Public Sale and
(ii) except with respect to any Pivotal Shares which have been registered under
the Securities Act or are being resold in reliance upon Rule 144, a written
opinion of such Holder's counsel, in form reasonably satisfactory to Pivotal, to
the effect that the proposed Transfer may be effected without registration under
the Securities Act.
(d) Termination of Restrictions. The restrictions set forth in this
Section 2 shall terminate and cease to be effective with respect to any of the
Pivotal Shares (i) upon the sale of any such Pivotal Shares, if the Pivotal
Shares in respect of which such sale occurs have been registered under the
Securities Act and the sale is made pursuant to the Registration Statement, (ii)
upon receipt by Pivotal of an opinion of counsel (in form and substance
reasonably satisfactory to Pivotal) to the effect that compliance with such
restrictions is not necessary in order to comply with the Securities Act with
respect to the Transfer of such Pivotal Shares, or (iii) upon the expiration of
the two-year period referred to in Rule 144(k) under the Securities Act (as such
Rule may be amended from time to time), if, pursuant to Rule 144(k), such Holder
was not an "Affiliate" of Pivotal (as such term is defined in Rule 144(a) under
the Securities Act) at the time of the sale of the Pivotal Shares and has not
been an Affiliate of Pivotal during the preceding three months.
Section 3. Registration under Securities Act; Indemnification.
(a) Shelf-Registration.
(i) If at any time after Pivotal becomes eligible to file a
short-form resale registration statement on Form F-3 or Form S-3,
Pivotal shall receive a written request therefor from the record holder
or holders of an aggregate of greater than 5% of the
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Registrable Securities, Pivotal shall use commercially reasonable
efforts to prepare and file as soon as practicable with the Commission
(the date of such filing being hereinafter referred to as the "Filing
Date"), a "shelf" registration statement on Form F-3 or Form S-3, in
Pivotal's sole discretion, (or, in Pivotal's sole discretion, on any
appropriate form under the Securities Act as may then be available to
Pivotal which shall provide substantially similar rights) relating to
the resale of the Pivotal Shares by the Holders in accordance with the
methods of distribution set forth in such registration statement (which
shall not include, without the consent of Pivotal (which may be granted
or withheld in Pivotal's sole discretion) an underwritten offering) and
Rule 415 under the Securities Act (hereafter, the "Shelf Registration
Statement"), and shall use commercially reasonable efforts to cause the
Shelf Registration Statement to be declared effective by the Commission
as soon as reasonably practicable thereafter. Pivotal shall give written
notice to all Holders of the request by the holders of greater than 5%
of the Registrable Securities pursuant to this Section 3(a)(i) within
ten (10) business days of receipt of such request and shall include all
Registrable Securities in the Shelf Registration Statement, which the
Holders describe in a writing delivered to Pivotal within thirty (30)
days after the mailing of the notice by Pivotal, subject to the terms
and conditions specified in this Section 3.
(ii) Pivotal shall be obligated to prepare, file and cause to be
effective only two (2) Shelf Registration Statements, one (1) in any six
(6) month period, pursuant to Section 3(a)(i).
(iii) Effective Period. Pivotal agrees to use commercially
reasonable efforts to keep the Shelf Registration Statement continuously
effective for at least one hundred eighty (180) days or until the
distribution described in the registration statement has been completed,
whichever is shorter, provided that the period for which the Shelf
Registration Statement must be kept effective shall be extended by one
day for every day sales of securities pursuant to the Shelf Registration
Statement are suspended pursuant to Section 3(a)(iv) hereof (the
"Effective Period").
(iv) Black-out Period. Without limiting the provisions of
Section 3(a)(ii), each holder of Registrable Securities agrees not to
effect any offer or sale of Pivotal Shares pursuant to the Shelf
Registration Statement, if so requested by Pivotal in connection with
any proposal or plan by Pivotal to engage in any material financing or
material acquisition or disposition by Pivotal or any subsidiary thereof
of the capital stock or substantially all the assets of any other person
(other than in the ordinary course of business), any tender offer or any
merger, consolidation, corporate reorganization, strategic partnership
arrangement or restructuring or other similar transaction (each, a
"Business Combination") material to Pivotal and its subsidiaries taken
as a whole, and each holder of greater than 5% of the Registrable
Securities agrees, if so requested by Pivotal, not to effect any offer
or sale of Pivotal Shares in any transaction for any period deemed
reasonably necessary by Pivotal or any underwriter in connection with
the offering of Pivotal common shares by Pivotal for its own account.
Any period within the Effective Period during which Pivotal fails to
keep the Shelf Registration Statement effective and usable for resales
of Pivotal Shares, or requires pursuant to this Section 3(a)(iv) that
the Holders not effect sales of Pivotal Shares pursuant to the Shelf
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Registration Statement, or otherwise, is hereafter referred to as a
"Suspension Period." The Suspension Period shall not exceed sixty (60)
days in any twelve (12) month period. A Suspension Period shall commence
on the date set forth in a written notice by Pivotal to the Holders that
the Shelf Registration Statement is no longer effective or that the
prospectus included in the Shelf Registration Statement is no longer
usable for resales of Pivotal Shares or, in the case of a suspension
pursuant to this Section 3(a)(iv) the date specified in the notice
delivered by Pivotal pursuant to this Section 3(a)(iv), and shall end on
the date when each Holder of Pivotal Shares covered by the Shelf
Registration Statement either receives the copies of the supplemented or
amended prospectus contemplated by Section 3(b)(v) or is advised in
writing by Pivotal that use of the prospectus or sales may be resumed.
Each Holder also agrees that at any time such Holder is an employee of
Pivotal, such Holder will be subject to and comply with the policies of
Pivotal regarding purchases and sales of Pivotal common shares. The
Holders acknowledge that such policy may be changed by Pivotal from time
to time.
(b) Piggyback Registration.
(i) Each time Pivotal shall determine to proceed with the actual
preparation and filing of a registration statement under the Securities
Act in connection with the proposed offer and sale for money of any of
its securities by it or any of its security holders (other than a
registration statement on Form X-0, Xxxx X-0 or other limited purpose
form), Pivotal will give written notice of its determination to all
record holders of Registrable Securities. Upon the written request of a
record holder of any shares of Registrable Securities given within 30
days after the date of mailing of any such notice from Pivotal, Pivotal
will, except as herein provided, cause all the Registrable Securities,
the registration of which is requested to be included in such
registration statement, all to the extent requisite to permit the sale
or other disposition by the prospective seller or sellers of the
Registrable Securities to be so registered; provided, however, that
nothing herein shall prevent Pivotal from, at any time, abandoning or
delaying any registration; and provided further that Pivotal's
obligation under this Section 3(b) shall be subject to Pivotal's
obligations to any holder of securities which shall have registration
rights which limit or forbid the inclusion of the Registrable Securities
in any Registration Statement.
(ii) If any registration pursuant to this Section 3(b) is
underwritten in whole or in part, Pivotal may require that the
Registrable Securities included in the registration be included in the
underwriting on the same terms and conditions as the securities
otherwise being sold through the underwriters. If, in the good faith
judgment of the managing underwriter of the Public Offering evidenced by
a writing, the inclusion of all of the Registrable Securities originally
covered by requests for registration would reduce the number of shares
to be offered by Pivotal or interfere with the successful marketing of
the shares offered by Pivotal, and the writing indicates the reduction
in the total number of shares to be offered other than by Pivotal, the
number of Registrable Securities to be included in the Offering may be
reduced pro rata among the holders of all securities proposed to be
included in this registration, in the proportion that the number of
common shares of Pivotal held by each holder proposing to include common
shares in the registration statement bears to the total number of common
shares held by all such holders.
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(c) Registration Procedures. If and whenever Pivotal is required by the
provisions of Sections 3(a) and 3(b) to effect the registration of shares of
Registrable Securities under the Securities Act, Pivotal will use commercially
reasonable efforts to effect the registration and sale of such Registrable
Securities in accordance with the intended methods of disposition specified by
the holders participating therein. Without limiting the foregoing, Pivotal in
each such case will, as expeditiously as is commercially reasonable:
(i) cause the registration statement and the related prospectus
and any amendment or supplement thereto, as of the effective date of the
registration statement, or such amendment or supplement, (A) to comply
in all material respects with the applicable requirements of the
Securities Act and the rules and regulations of the Commission
promulgated under the Securities Act and (B) not to contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading;
(ii) promptly prepare and file with the Commission such
amendments and supplements to the registration statement and the
prospectus used in connection with the registration statement as may be
necessary to keep the registration statement effective and to comply
with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by the registration
statement until the earlier of such time as all such Registrable
Securities have been disposed of in accordance with the intended methods
of disposition by the Holder or Holders thereof set forth in the
registration statement (which shall not include, without the consent of
Pivotal (which may be granted or withheld in Pivotal's sole discretion)
an underwritten offering) or a date calculated as described in Section
3(a)(iii) hereof;
(iii) furnish to each Holder of such Registrable Securities one
conformed copy of the registration statement and of each such amendment
and supplement thereto (in each case including all exhibits) and one of
each document incorporated by reference therein and such number of
copies of the prospectus included in the registration statement
(including any summary prospectus) as such Holder may reasonably
request;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by the registration statement
under such securities or Blue Sky laws of the states of the United
States as each Holder of such Registrable Securities shall reasonably
request, to keep such registration or qualification in effect for so
long as the registration statement remains in effect (subject to the
limitations in Section 3(a)), except that Pivotal shall not for any such
purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction in which it is not and would not, but
for the requirements of this Section 3(c)(iv), be obligated to be so
qualified, or to subject itself to taxation in any such jurisdiction, or
to consent to general service of process in any such jurisdiction;
(v) immediately notify each Holder of Registrable Securities
covered by the registration statement, at any time when a prospectus or
prospectus supplement relating thereto is required to be delivered under
the Securities Act, upon discovery that, or upon
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the happening of any event as a result of which, the prospectus included
in the registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing
which untrue statement or omission requires amendment of the
registration statement or supplementation of the prospectus, and
(subject to Section 3(a)(iv) and Section 3(c)(ii) hereof) promptly
thereafter prepare and furnish to such Holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
Registrable Securities such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing; provided,
however, that each Holder of Registrable Securities registered pursuant
to the registration statement agrees that such Holder will not sell any
Registrable Securities pursuant to the registration statement during the
time that Pivotal is preparing and filing with the Commission a
supplement to or an amendment of such prospectus or registration
statement;
(vi) otherwise use commercially reasonable efforts to comply
with all applicable rules and regulations of the Commission;
(vii) otherwise use commercially reasonable efforts to timely
file all periodic reports with the U.S. Securities and Exchange
Commission under the U.S. Securities Exchange Act of 1934, as amended
(the "Exchange Act"); and
(viii) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by the registration
statement from and after a date not later than the effective date of the
registration statement.
Each Holder of Registrable Securities as to which any registration is being
effected shall furnish to Pivotal such information regarding such Holder and the
distribution of such Registrable Securities as Pivotal may from time to time
reasonably request in connection therewith, and if any holder fails to do so
within a reasonable time after Pivotal requests such information, Pivotal may
exclude such Holder's Registrable Securities from such registration.
(d) Indemnification.
(i) Indemnification by Pivotal. Pivotal shall indemnify and hold
harmless each Holder (including the trustee(s) of any such Holder or any
person who controls such Holder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) of Registrable
Securities whose securities are covered by the registration statement
from and against any demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, interest and penalties, costs
and expenses (including, without limitation, reasonable legal fees and
disbursements incurred in connection therewith and in seeking
indemnification therefor, and any amounts or expenses required to be
paid or incurred in connection with any action, suit, proceeding, claim,
appeal, demand, assessment or judgment) (individually, a "Loss" and,
collectively "Losses"), joint or several, to which such Holder may
become subject under the
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Securities Act or otherwise insofar as such Losses (or related actions
or proceedings) arise out of or are based upon (A) any untrue statement
or alleged untrue statement of any material fact contained in the
registration statement, final prospectus or summary prospectus contained
in the registration statement, or any amendment or supplement to the
registration statement, or any document incorporated by reference in the
registration statement or (B) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that
Pivotal shall not be liable in any such case to the extent that any such
Losses (or actions or proceedings in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the registration statement, or any
such final prospectus, summary prospectus, amendment or supplement, as
the case may be, in reliance upon and in conformity with written
information furnished to Pivotal by a Holder specifically for use in the
preparation of such registration statement; and provided further, that
Pivotal shall not be liable in any such case to the extent that any such
Losses arise out of or are based upon an untrue statement or alleged
untrue statement or omission or alleged omission in the final
prospectus, if such untrue statement or alleged untrue statement or
omission or alleged omission is corrected in an amendment or supplement
to the final prospectus and such Holder thereafter fails to deliver such
final prospectus as so amended or supplemented prior to or concurrently
with the sale of the Registrable Securities covered by the registration
statement to the person asserting such Losses after Pivotal had
furnished such Holder with a sufficient number of copies thereof in a
manner and at a time sufficient to permit delivery of the same by such
Holder.
(ii) Indemnification by the Holders. As a condition to including
any Registrable Securities in the registration statement, Pivotal shall
have received an undertaking reasonably satisfactory to it from each
prospective Holder of such Registrable Securities, severally and not
jointly, to indemnify and hold harmless (in the same manner and to the
same extent as set forth in Section 3(d)(i) hereof) Pivotal, each
director of Pivotal, each officer of Pivotal who shall sign the
registration statement and each other person, if any, who controls
Pivotal within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, with respect to any untrue statement in
or omission from such registration statement, final prospectus or
summary prospectus included in the registration statement, or any
amendment or supplement to the registration statement, as the case may
be, of a material fact if such statement or omission was made in
reliance upon and in conformity with information furnished in writing to
Pivotal by such Holder specifically for use in the preparation of the
registration statement, final prospectus, summary prospectus, amendment
or supplement, as the case may be.
(iii) Notice of Claims, etc. In the event that any of the
indemnified parties under Sections 3(d)(i) or 3(d)(ii) (each, an
"Indemnified Party") is made a defendant in or party to any action or
proceeding, judicial or administrative, instituted by any third party
for the liability or the costs or expenses of which are Losses (any such
third party action or proceeding being referred to as a "Claim"), the
Indemnified Party shall give the party hereto obligated to indemnify
such Indemnified Party (the "Indemnifying Party") prompt notice thereof.
The failure to give such notice shall not affect any Indemnified Party's
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ability to seek reimbursement unless such failure has materially and
adversely affected the Indemnifying Party's ability to defend
successfully a Claim. The Indemnifying Party shall be entitled to
contest and defend such Claim. Notice of the intention so to contest and
defend shall be given by the Indemnifying Party to the Indemnified Party
within 20 business days after the Indemnified Party's notice of such
Claim (but, in all events, at least five business days prior to the date
that an answer to such Claim is due to be filed). Such contest and
defense shall be conducted by reputable attorneys employed by the
Indemnifying Party and reasonably acceptable to the Indemnified Parties.
The Indemnified Party shall be entitled at any time, at its own cost and
expense (which expense shall not constitute a Loss unless the
Indemnified Party reasonably determines that the Indemnifying Party,
because of a conflict of interest, may not adequately represent, any
interests of the Indemnified Parties), to participate in such contest
and defense and to be represented by attorneys of its or their own
choosing, provided that the Indemnifying Party shall not be required to
bear the fees and expenses of counsel to all Indemnified Parties in any
one action or any action arising out of the same registration statement.
If the Indemnified Party elects to participate in such defense, the
Indemnified Party will cooperate with the Indemnifying Party in the
conduct of such defense. Neither the Indemnified Party nor the
Indemnifying Party may concede, settle or compromise any Claim without
the consent of the other party, which consents will not be unreasonably
withheld; provided, however, that no Indemnified Party need so consent
unless it receives a complete and full release of any liability relating
to said Claim.
(iv) Contribution. If the indemnification provided for in this
Section 3(d) is unavailable or insufficient to hold harmless an
Indemnified Party in respect of any Losses, then each Indemnifying Party
shall, in lieu of indemnifying such Indemnified Party, contribute to the
amount paid or payable by such Indemnified Party as a result of such
Losses in such proportion as appropriate to reflect the relative fault
of Pivotal, on the one hand, and such Holder of Registrable Securities,
on the other hand, and to the parties' relative intent, knowledge,
access to information and opportunity to correct or mitigate the damage
in respect of or prevent any untrue statement or omission giving rise to
such indemnification obligation. Pivotal and the Holders of Registrable
Securities agree that it would not be just and equitable if
contributions pursuant to this Section 3(d)(v) were determined by pro
rata allocation (even if the Holders of Registrable Securities were
treated as one entity for such purpose) or by any other method of
allocation which did not take account of the equitable considerations
referred to above in this Section 3(d)(v). No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation.
(e) Registration Expenses. Pivotal shall bear all Registration
Expenses.
Section 4. Termination. The rights and obligations under this Agreement
(other than under Sections 3(d) and 3(e) hereof) shall automatically terminate
upon the earlier to occur of (a) the sale of all Registrable Securities by the
Holders and (b) the date on which the Registrable Securities shall have been
outstanding for two years. No holder shall have the right to request to include
Registrable Securities in any registration statement if (a) the Registrable
Securities are eligible for sale pursuant to Rule 144(k), or (b) the Registrable
Securities are eligible for sale
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pursuant to Rule 144 and the Holder owns Registrable Securities in the amount of
less than 1% of Pivotal's outstanding common shares.
Section 5. Amendments and Waivers. This Agreement may be amended or
modified and Pivotal may take any action herein prohibited, or omit to perform
any act herein required to be performed by it, only if Pivotal shall have
obtained the written consent to such amendment, modification, action or omission
to act, of the holder or holders (at such time) of a majority of the shares of
Registrable Securities (and, in the case of any amendment, modification, action
or omission to act which adversely affects any specific holder of Registrable
Securities or a specific group of holders of Registrable Securities, the written
consent of each such holder or holders of a majority of the Registrable
Securities held by such group). Each holder of any Registrable Securities at the
time shall be bound by any consent authorized by this Section 5, whether or not
such Registrable Securities shall have been marked to indicate such consent.
Section 7. Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered or
three days after being mailed by first class mail, return receipt requested, or
when receipt is acknowledged, if sent by facsimile, telecopy or other electronic
transmission device. Notices, demands and communications to Pivotal and the
Holders will, unless another address is specified in writing, be sent to the
address indicated below:
Notices to Pivotal: with a copy to:
Pivotal Corporation Xxxxxx & Xxxxxxx LLP
300 - 000 Xxxx Xxxxxxxxx 0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx Xxxxxxxxx, Xxxxxxx Xxxxxxxx Seattle, Xxxxxxxxxx 00000
Xxxxxx X0X 0X0 Attention: Xxxxxxxxxxx X. Xxxxx
Attention: Xxxxx Xxxxxx Fax: (000) 000-0000
Fax: (000) 000-0000
Notices to the Holders: with a copy to:
To the addresses set Xxxxxxx X. Xxxxxxxx
forth on the signature Xxxxx & Xxxxxxx
page hereof 000 X. Xxxxxxxxx Xxx.
Xxxxxxxxx, Xxxxxxxxx 00000
If notice is given pursuant to this Section 7 of any assignment to a permitted
successor or assignee of a party hereto, the notice shall be given as set forth
above to such successor or the assignee of such party.
Section 8. Entire Agreement. This Agreement represents the entire
agreement and understanding between Pivotal and the other parties to this
Agreement in respect of the subject matter contained herein. There are no
restrictions, promises, warranties, or undertakings, other than those set forth
or referred to herein or in the Stock Purchase Agreement or required by
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applicable law, with respect to the registration rights granted by the Company
with respect to the Registrable Securities. This Agreement and the Stock
Purchase Agreement supersede all prior agreements and understandings between the
parties with respect to the subject matter of this Agreement.
Section 9. Governing Law. This Agreement has been negotiated and
executed in the State of Washington and shall be governed by and construed in
accordance with the internal laws of the State of Washington (other than its
rules of conflicts of laws to the extent the application of the laws of another
jurisdiction would be required thereby).
Section 10. Severability. If any provision of this Agreement or the
application thereof to any person or circumstances is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination, the parties shall negotiate in
good faith in an effort to agree upon a suitable and equitable substitute
provision to effect the original intent of the parties.
Section 11. Miscellaneous. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
of this Agreement. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which, when taken
together, shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PIVOTAL CORPORATION
By:
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Name:
-------------------------------------
Title:
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THE HOLDERS:
INDUSTRIAL & FINANCIAL SYSTEMS AB
By:
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Name:
-------------------------------------
Title:
-------------------------------------
Address:
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Xxx Xxxxx
Address:
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Alon Hod
Address:
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Xxxx Topaz
Address:
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Xxxx Small
Address:
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Xxxx Xxxxxx
Address:
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Xxxx Xxxxxxx
Address:
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Avron Tal
Address:
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Nir Mashkowski
Address:
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Xxxxxx Xxxxxx
Address:
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Xxxx Xxxxxxxxxx
Address:
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Xxxxxx Xxxx
Address:
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