EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SANDISK CORPORATION,
PROJECT DESERT, LTD.
AND
MSYSTEMS LTD.
DATED AS OF JULY 30, 2006
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ARTICLE 1 THE MERGER..............................................2
Section 1.1 The Merger........................................2
Section 1.2 Closing Date......................................2
Section 1.3 Effect on Capital Stock...........................2
Section 1.4 Surrender of Certificates.........................4
Section 1.5 The Company's Transfer Books Closed; No Further
Ownership Rights in the Company Shares............6
Section 1.6 Lost, Stolen, Destroyed or Unissued Certificates..6
Section 1.7 Taking of Necessary Action; Further Action........6
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........7
Section 2.1 Organization and Qualification; Subsidiaries......7
Section 2.2 Memorandum of Association; Articles of Association8
Section 2.3 Capitalization....................................8
Section 2.4 Authority........................................10
Section 2.5 No Conflict; Required Filings and Consents.......10
Section 2.6 Compliance with Laws; Environmental Matters;
Permits..........................................11
Section 2.7 SEC Filings; Financial Statements................12
Section 2.8 No Undisclosed Liabilities.......................15
Section 2.9 Absence of Certain Changes or Events.............15
Section 2.10 Litigation.......................................15
Section 2.11 Employee Matters and Benefit Plans...............16
Section 2.12 Information Supplied.............................19
Section 2.13 Property.........................................20
Section 2.14 Taxes............................................20
Section 2.15 Brokers..........................................23
Section 2.16 Intellectual Property............................23
Section 2.17 Contracts........................................28
Section 2.18 Opinion of Financial Advisor.....................30
Section 2.19 Board Approval...................................30
Section 2.20 Inapplicability of Certain Statutes..............30
Section 2.21 Grants, Incentives and Subsidies.................30
Section 2.22 Encryption and Other Restricted Technology.......31
Section 2.23 Tax Matters......................................31
Section 2.24 Insider Interests................................31
Section 2.25 Effect of Transaction............................31
ARTICLE 3 REPRESENTATIONS OF THE PARENT AND MERGER SUB...........31
Section 3.1 Organization and Qualification...................32
Section 3.2 Capitalization...................................32
Section 3.3 Authority........................................33
Section 3.4 No Conflict; Required Filings and Consents.......33
Section 3.5 Issuance of Parent Common Stock..................34
Section 3.6 Compliance with Laws.............................34
Section 3.7 SEC Filings; Financial Statements................34
Section 3.8 No Undisclosed Liabilities.......................36
Section 3.9 Absence of Certain Changes or Events.............36
Section 3.10 Litigation.......................................37
Section 3.11 Information Supplied.............................37
Section 3.12 Brokers..........................................37
Section 3.13 Merger Sub Board Approval........................37
Section 3.14 Tax Matters......................................37
Section 3.15 Merger Sub.......................................38
ARTICLE 4 CONDUCT PRIOR TO THE EFFECTIVE TIME....................38
Section 4.1 Conduct of Business by the Company...............38
Section 4.2 Specific Activities..............................38
Section 4.3 Parties' Cooperation.............................42
Section 4.4 Conduct of Business by the Parent................42
Section 4.5 No Control of Other Party's Business.............43
ARTICLE 5 ADDITIONAL AGREEMENTS..................................43
Section 5.1 Parent Common Stock; Disclosure Documents........43
Section 5.2 Court Approval...................................43
Section 5.3 Cooperation......................................47
Section 5.4 Israeli Approvals................................47
Section 5.5 Confidentiality; Access to Information...........49
Section 5.6 No Solicitation..................................50
Section 5.7 Public Disclosure................................52
Section 5.8 Reasonable Best Efforts; Regulatory Filings......52
Section 5.9 Third Party Consents.............................55
Section 5.10 Share Options, SARs and Employee Benefits........55
Section 5.11 Convertible Notes................................57
Section 5.12 Form S-8.........................................58
Section 5.13 Notification.....................................58
Section 5.14 Indemnification, Exculpation and Insurance.......58
Section 5.15 Listing of the Parent Common Stock...............60
Section 5.16 Company Affiliates; Restrictive Legend...........60
Section 5.17 Tax Treatment....................................60
ARTICLE 6 CONDITIONS PRECEDENT...................................61
Section 6.1 Conditions to Each Party's Obligation To Effect
the Merger.......................................61
Section 6.2 Conditions to Obligations of the Company.........62
Section 6.3 Conditions to Obligations of the Parent and Merger
Sub..............................................63
ARTICLE 7 TERMINATION............................................64
Section 7.1 Termination......................................64
Section 7.2 Notice of Termination; Effect of Termination.....69
ARTICLE 8 GENERAL PROVISIONS.....................................69
Section 8.1 Nonsurvival of Representations and Warranties....69
Section 8.2 Fees and Expenses................................69
Section 8.3 Amendment........................................69
Section 8.4 Extension; Waiver................................69
Section 8.5 Notices..........................................70
Section 8.6 Interpretation...................................71
Section 8.7 Definitions......................................71
Section 8.8 Counterparts.....................................74
Section 8.9 Entire Agreement; Third-Party Beneficiaries......74
Section 8.10 Severability.....................................74
Section 8.11 Other Remedies; Specific Performance.............74
Section 8.12 GOVERNING LAW....................................75
Section 8.13 Venue; Waiver of Jury Trial......................75
Section 8.14 Assignment.......................................76
ANNEXES, EXHIBITS AND SCHEDULES
Annex I Defined Terms Index.......................................I-1
Exhibit A Form of Voting Undertaking................................A-1
Exhibit B Form of Affiliate Agreement...............................B-1
Exhibit C Form of Lock-Up Agreement ................................C-1
Exhibit D Form of Director Resignation..............................D-1
Exhibit E Letter Agreement .........................................E-1
Exhibit F Form of Company Tax Certificate...........................F-1
Exhibit G Form of Parent Tax Certificate............................G-1
Exhibit H Form of Company Israeli Counsel Tax Opinion...............H-1
Exhibit I Form of Parent Israeli Counsel Tax Opinion................I-1
Schedule A List of Persons signing Voting Undertakings..............SA-1
Schedule B List of Persons signing Affiliates Agreements ...........SB-1
Schedule C Directors of the Company and its Subsidiaries ...........SC-1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 30, 2006 (this
"Agreement"), by and among SanDisk Corporation, a Delaware corporation (the
"Parent"), Project Desert Ltd., an Israeli company and a direct wholly owned
subsidiary of the Parent ("Merger Sub"), and msystems Ltd., an Israeli company
(the "Company").
RECITALS
A. The Parent and the Company intend to enter into a transaction
whereby Merger Sub will merge (the "Merger") with and into the Company by way of
a court approved arrangement between the Company and its shareholders and (if
applicable) creditors, in accordance with Sections 350 and 351 of the Companies
Law 5759-1999 of the State of Israel (the "Companies Law"), following which
Merger Sub will cease to exist and the Company will become a direct wholly owned
Subsidiary (as defined in Section 8.7(g)) of the Parent, and the Company Shares
(as defined in Section 1.3(b)) will be exchanged for shares of Parent Common
Stock (as defined in Section 1.3(b)), all in accordance with this Agreement and
the Companies Law.
B. The board of directors of the Company has: (i) determined that this
Agreement, the Merger and the other transactions contemplated by this Agreement
(collectively, the "Transactions") are fair to, and in the best interests of,
the Company and its shareholders, and that, considering the financial position
of the merging companies, no reasonable concern exists that the Surviving
Company will be unable to fulfill the obligations of the Company to its
creditors; (ii) approved this Agreement, the Merger and the other Transactions;
and (iii) determined to recommend to the shareholders of the Company the
approval of this Agreement, the Merger and the other Transactions.
C. The board of directors of each of the Parent and Merger Sub has
approved this Agreement, the Merger and the other Transactions, and the board of
directors of Merger Sub has determined that, considering the financial position
of the merging companies, no reasonable concern exists that the Surviving
Company will be unable to fulfill the obligations of Merger Sub to its
creditors.
D. Concurrently with the execution of this Agreement and as a condition
to and inducement of the Parent's willingness to enter into this Agreement: (i)
the directors, officers and shareholders of the Company set forth on Schedule A
are entering into voting undertakings in substantially the form attached as
Exhibit A (the "Voting Undertakings"); (ii) the Chief Executive Officer of the
Company is entering into a noncompetition agreement with the Parent (the
"Noncompetition Agreement"); (iii) all directors, executive officers and those
shareholders of the Company set forth on Schedule B who may be deemed to be
affiliates of the Company within the meaning of Rule 145 promulgated under the
United States Securities Act of 1933 (the "Securities Act") are entering into
affiliate agreements in substantially the form attached as Exhibit B (the
"Affiliate Agreements"); (iv) the Chief Executive Officer of the Company is
entering into a market stand-off agreement in substantially the form attached as
Exhibit C (the "Lock-Up Agreement"); and (v) the directors of the Company and
its Subsidiaries set forth on Schedule C hereto are executing resignation
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letters in substantially the form attached as Exhibit D (the "Director
Resignations").
E. For U.S. federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and this Agreement
constitutes and hereby is adopted as a plan of reorganization.
F. Concurrently with the execution of this Agreement, Xx. Xxx Xxxxx,
the Company's Chief Executive Officer, is entering into a letter agreement with
the Parent and the Company in the form attached as Exhibit E hereto.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein the parties, intending to be legally bound,
agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 The Merger. Subject to the satisfaction or waiver (where
permissible) of the conditions set forth in Article 6, at the Effective Time,
(a) Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation (sometimes referred to as the "Surviving Company") and
shall become a direct wholly owned Subsidiary of the Parent and shall succeed to
and assume all of the rights, properties and obligations of Merger Sub; and (b)
all Company Shares will be converted into the right to receive shares of Parent
Common Stock in accordance with Section 1.3, all in accordance with the
provisions of the Court Approval (as defined in Section 5.2(a)), the Companies
Law and this Agreement.
Section 1.2 Closing Date. Subject to the satisfaction or waiver (where
permissible) of the conditions set forth in Article 6, the closing of the
Transactions, including the Merger (the "Closing"), shall take place at the
offices of Naschitz, Xxxxxxx & Co., 0 Xxxxx Xxxxxx, Xxx Xxxx, Xxxxxx (or at such
other place as may be mutually designated by the parties), at a time and on a
date to be mutually designated by the parties (the date or time upon which the
Closing actually occurs is referred to as the "Closing Date" or the "Effective
Time," as applicable), which shall be no later than the second Business Day (as
defined in Section 8.7(b)) (or such other period of time mutually agreed to by
the parties) following the satisfaction or waiver of the conditions set forth in
Article 6 (other than those conditions which by their terms are to be satisfied
or waived as of the Closing, but subject to the satisfaction or waiver of such
conditions at such time), including the receipt of the Court Approval.
Section 1.3 Effect on Capital Stock. Subject to the satisfaction or waiver
(where permissible) of the conditions set forth in Article 6, at the Closing
Date, subject to the provisions of the Court Approval, the following shall
occur:
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(a) Merger Sub shall be merged with and into the Company, the
separate corporate existence of Merger Sub shall cease and the Company
shall continue as the Surviving Company.
(b) Each Ordinary Share, NIS 0.001 par value per share, of the
Company (the "Company Shares"), issued and outstanding immediately prior
to the Effective Time, other than any Company Shares owned by any direct
or indirect wholly-owned Subsidiary of Company or dormant shares of the
Company, shall automatically be converted into and represent solely the
right to receive (the "Per Share Consideration") 0.76368 (the "Exchange
Ratio") of a validly issued, fully paid and nonassessable share of the
Common Stock, $ 0.001 par value per share, of the Parent (together with
the related Parent Rights (as defined below), the "Parent Common Stock"),
subject to the provisions of Sections 1.3(e) and 1.3(f), payable to the
holder of such Company Share upon surrender of the certificate
representing such Company Share in the manner provided in Section 1.4 (or
in the case of a lost, stolen, destroyed or unissued certificate, upon
delivery of an affidavit and bond in the manner provided in Section 1.6).
As of the Effective Time, all of the Company Shares shall automatically be
owned by the Parent, and will be registered in its name in the
shareholders registry of the Company.
(c) Notwithstanding the provisions of Section 1.3(b), at the
Effective Time, each Company Share that is a dormant share or owned by any
direct or indirect wholly-owned Subsidiary of the Company immediately
prior to the Effective Time shall remain outstanding, shall not be
converted under Section 1.3(b) and no Per Share Consideration shall be
delivered with respect thereto.
(d) At the Effective Time:
(i) all options to purchase Company Shares ("Company Share Options") and
all stock appreciation rights with respect to Company Shares ("Company SARs")
then outstanding under the Company's Omnibus 2003 Stock Option and Restricted
Stock Incentive Plan and 1996 Section 102 Stock Option Plan (in their original
form and as they may have been amended and/or restated prior to the date hereof,
collectively, the "Company Option Plans"), and under any agreement with the
Company described in Section 2.3 of the Company Disclosure Letter (as defined in
Article 2), in each case, whether vested or unvested, and the Company Option
Plans itself, shall, except as otherwise provided in Section 5.10 hereof, be
assumed by the Parent in accordance with Section 5.10; and
(ii) all of the Company's Convertible Notes (as defined in Section
2.3(a)) shall be treated as set forth in Section 5.11.
(e) Without derogating from any other provision of this Agreement,
the Exchange Ratio shall be adjusted to reflect appropriately the effect
of any forward or reverse stock split, stock dividend (including any
dividend or distribution of securities convertible into shares of Parent
Common Stock or Company Shares), cash dividends, reorganization,
recapitalization, reclassification, combination, exchange of shares or
other like change with respect to shares of Parent Common Stock or Company
Shares occurring on or after the date hereof and prior to the Effective
Time.
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(f) No fraction of a share of Parent Common Stock will be issued by
virtue of the Merger, but in lieu thereof each holder of Company Shares
who would otherwise be entitled to a fraction of a share of Parent Common
Stock (after aggregating all fractional shares of Parent Common Stock that
would otherwise be received by such holder) shall, upon surrender of such
holder's Certificates (as defined in Section 1.4(c)), or affidavit and the
posting of a bond in the manner provided in Section 1.6, receive from the
Parent an amount of cash (rounded to the nearest whole cent), without
interest, equal to the product of (i) such fraction, multiplied by (ii)
the average closing price of one share of Parent Common Stock for the five
consecutive trading days that the Parent Common Stock has traded ending on
and including the second trading day immediately prior to the Effective
Time, as reported on The NASDAQ Stock Market ("Nasdaq").
Section 1.4 Surrender of Certificates.
(a) Prior to the Effective Time, the Parent shall select
ComputerShare Trust Company or another bank or trust company reasonably
acceptable to the Company to act as the exchange agent (the "Exchange
Agent") to receive the shares of Parent Common Stock issuable under
Section 1.3.
(b) At or as promptly as practicable following the Effective Time,
the Parent shall deposit with the Exchange Agent, for exchange in
accordance with this Article 1, the shares of Parent Common Stock,
issuable pursuant to Section 1.3 in exchange for outstanding Company
Shares. In addition, the Parent shall make available from time to time, if
and as necessary after the Effective Time, cash in an amount sufficient
for payment in lieu of fractional shares pursuant to Section 1.3(f) and
for payment of any dividends or distributions to which holders of Company
Shares may be entitled pursuant to Section 1.4(d). Such funds shall be
held in trust by the Exchange Agent for the benefit of the applicable
holders of Company Shares.
(c) As soon as reasonably practicable after the Effective Time, the
Parent shall cause the Exchange Agent to mail to each holder of record (as
of the Effective Time) of one or more certificates (the "Certificates")
which immediately prior to the Effective Time represented outstanding
Company Shares, whose shares were converted into the right to receive the
Per Share Consideration pursuant to Section 1.3 (or Company Shares held in
book-entry form): (i) a letter of transmittal in customary form (which
shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent and shall contain customary provisions with respect to
delivery of an "agent's message" with respect to Company Shares in
book-entry form), (ii) a declaration form in which the holder of record
states whether the holder is a resident of Israel as defined in the Income
Tax Ordinance of Israel [New Version], 1961 (the "Ordinance"), and (iii)
instructions in customary form for use in effecting the surrender of the
Certificates or Company Shares in book-entry form in exchange for the Per
Share Consideration. Upon surrender of Certificates for cancellation or
delivery of an "agent's message" to the Exchange Agent or to such other
agent or agents as may be appointed by the Parent, together with such
letter of transmittal and such declaration form, duly completed and
validly executed in accordance with the instructions thereto, the holders
of such Certificates or Company Shares in book-entry form shall be
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entitled to receive in exchange therefor the Per Share Consideration into
which their the Company Shares were converted at the Effective Time
(rounded to the nearest whole share after aggregating all Company Shares
held by such holder), and the Certificates or book-entry Company Shares so
surrendered shall forthwith be canceled. No interest shall accrue or be
paid on the amounts payable pursuant to Section 1.3 upon the surrender of
any Certificate for the benefit of the holder of such Certificate or upon
or delivery of an "agent's message" for the benefit of the holder of
book-entry shares. Until so surrendered, outstanding Certificates will be
deemed from and after the Effective Time for all corporate purposes to
evidence only the right to receive the Per Share Consideration into which
such Company Shares have been converted and, if applicable, an amount of
cash in lieu of the issuance of any fractional shares in accordance with
Section 1.3(f) and any dividends or distributions payable pursuant to
Section 1.4(d). Until an "agent's message" is delivered, book-entry
positions will be deemed from and after the Effective Time for all
corporate purposes to evidence only the right to receive the Per Share
Consideration into which such Company Shares have been converted and, if
applicable, an amount of cash in lieu of the issuance of any fractional
shares in accordance with Section 1.3(f) and any dividends or
distributions payable pursuant to Section 1.4(d).
(d) No dividends or other distributions declared or made after the
date of this Agreement (whether in cash, shares of Parent Common Stock or
any other form) with respect to the shares of Parent Common Stock with a
record date after the Effective Time will be paid to the holders of any
unsurrendered Certificates with respect to any shares of Parent Common
Stock represented thereby until the holders of record of such Certificates
shall surrender such Certificates, provided that in the event that such
holders comply with the provisions of Section 1.6, such holders shall be
entitled to any such dividends or distributions regardless of their having
failed to deliver such Certificates. Following surrender of any such
Certificates, the Exchange Agent shall deliver to the record holders
thereof, without interest, certificates representing whole shares of
Parent Common Stock issued in exchange therefor along with payment in lieu
of fractional shares pursuant to Section 1.3(f) and the amount of any such
dividends or other distributions with a record date after the Effective
Time payable with respect to such whole shares of Parent Common Stock.
(e) If shares of Parent Common Stock issuable pursuant to Section
1.3 are to be issued in the name of a Person (as defined in Section
8.7(h)) other than the Person in whose name the Certificates surrendered
in exchange therefor are registered, it will be a condition of the
issuance thereof that the Certificates so surrendered will be properly
endorsed and otherwise in proper form for transfer and that the Persons
requesting such issuance will have paid to the Parent or any agent
designated by it any transfer or other Taxes (as defined in Section
2.14(a)) required by reason of the issuance of the shares of Parent Common
Stock in the name of a Person other than the registered holder of the
Certificates surrendered, or established to the reasonable satisfaction of
the Parent or any agent designated by it that such tax has been paid or is
not payable.
(f) Each of the Exchange Agent, the Parent and the Surviving Company
shall be entitled to deduct and withhold from any consideration payable or
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otherwise deliverable pursuant to this Agreement, including pursuant to
Section 1.3(d), to any holder or former holder of Company Shares or
Company Options, such amounts as may be required to be deducted or
withheld therefrom under the Code, the Ordinance, or under any provision
of state, local, Israeli or other foreign law or any other applicable
Legal Requirement, subject to any specific exemption with respect to
Israeli Tax withholding from the Israeli Tax Authorities that provides
otherwise. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having
been paid to the Person to whom such amounts would otherwise have been
paid.
(g) Notwithstanding anything to the contrary in this Section 1.4,
neither the Exchange Agent nor any party hereto shall be liable to a
holder of Company Shares for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Section 1.5 The Company's Transfer Books Closed; No Further Ownership Rights
in the Company Shares. At the close of business on the day during which the
Effective Time occurs: (i) the share transfer books of the Company shall be
deemed closed, and no transfer of any Company Shares or any Certificates in
respect thereof shall thereafter be made or consummated; and (ii) all holders of
Company Shares that were outstanding immediately prior to the Effective Time
shall cease to have any rights as shareholders of the Company except as
otherwise provided for in this Agreement or by applicable Legal Requirements. No
further transfer of any such Company Shares shall be made on such share transfer
books after the Effective Time. If, after the Effective Time, a valid
Certificate is presented to the Exchange Agent or to the Surviving Company or
the Parent, such Certificate shall be canceled and shall be exchanged as
provided in this Article 1. The Per Share Consideration (together with payments
contemplated by Sections 1.3(f) and 1.4(d)) shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to such Company Shares.
Section 1.6 Lost, Stolen, Destroyed or Unissued Certificates. If any
Certificates shall have been lost, stolen or destroyed, or were never issued,
the Exchange Agent shall pay such amounts and, if applicable, issue such shares
of Parent Common Stock, if any, specified in this Article 1, in exchange for
such lost, stolen, destroyed, or unissued Certificates, upon the delivery by the
owner of such lost, stolen, destroyed or unissued Certificates of a bond in such
sum as the Parent or the Exchange Agent may reasonably direct as indemnity
against any claim that may be made against the Parent, the Surviving Company or
the Exchange Agent with respect to the Certificates alleged to have been lost,
stolen, destroyed or unissued.
Section 1.7 Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Company with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Surviving Company will take all such lawful and necessary action.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent and Merger Sub, as of
the date hereof, subject to such exceptions as are disclosed in writing in a
letter from the Company to the Parent delivered by a duly authorized officer of
the Company concurrently with the execution of this Agreement (the "Company
Disclosure Letter") (it being understood that any matter disclosed in the
Company Disclosure Letter shall be deemed disclosed with respect to any section
of this Article 2 to which the matter relates, to the extent the relevance of
such matter to such section is reasonably apparent), as follows:
Section 2.1 Organization and Qualification; Subsidiaries.
(a) Each of the Company and its Subsidiaries is a corporation,
limited liability company, partnership or other entity duly organized and
validly existing and, where applicable, in good standing, under the laws
of the jurisdiction of its organization and has the requisite corporate or
other power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Each
of the Company and its Subsidiaries is duly qualified or licensed as a
foreign corporation to do business, and, where applicable is in good
standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so
duly qualified or licensed and in good standing that would not,
individually or in the aggregate with similar failures, reasonably be
expected to have a Material Adverse Effect (as defined in Section 8.7(f))
on the Company.
(b) Section 2.1(b) of the Company Disclosure Letter sets forth a
true and complete list as of the date of this Agreement of each of the
Company's Subsidiaries, the jurisdiction of organization of each such
Subsidiary, and the Company's equity interest therein. Neither the Company
nor any of its Subsidiaries has agreed, is obligated to make, or is bound
by any Contract under which it may become obligated to make any future
investment in, or capital contribution or loan to, any entity other than
the Company or one of its Subsidiaries. All the outstanding shares of
capital stock of, or other equity interests in each Subsidiary of the
Company have been validly issued, are fully paid and nonassessable and are
owned, directly or indirectly, by the Company, free and clear of all Liens
(as defined in Section 2.3(c)), except restrictions on transfer arising
under applicable securities law. As of the date hereof, neither the
Company nor any of its Subsidiaries directly or indirectly owns any equity
or similar interest in or any interest convertible, exchangeable or
exercisable for, any equity or similar interest in, any Person (other than
a Subsidiary of the Company).
Section 2.2 Memorandum of Association; Articles of Association. The Company
has made available to the Parent a complete and correct copy of its Memorandum
of Association and Articles of Association as amended to the date of this
Agreement (together, the "Company Charter Documents"). Such Company Charter
Documents and equivalent organizational documents of each of the Company's
Subsidiaries are in full force and effect. The Company is not in violation of
any of the provisions of the Company Charter Documents, and no Subsidiary of the
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Company is in violation of its equivalent organizational documents. The Company
has made available to the Parent complete and correct copies of the
organizational documents of the all of the Subsidiaries of the Company.
Section 2.3 Capitalization.
(a) The registered (authorized) share capital of the Company
consists of 100,000,000 Ordinary Shares, NIS 0.001 par value per share.
The Company has no class of share capital authorized other than the
Company Shares. As of the close of business on July 27, 2006, (i)
38,078,902 Company Shares were issued and outstanding, all of which were
validly issued, fully paid and nonassessable; (ii) no Company Shares were
dormant shares and no Company Shares were held in treasury by the Company
or by Subsidiaries of the Company; (iii) 15,000,000 Company Shares were
reserved for issuance under the Company Option Plans, of which 5,623,453
were subject to outstanding options to purchase Company Shares, and
1,846,312 Company Shares were available for future options and Company SAR
grants; and (iv) 2,635,278 Company Shares are reserved for issuance upon
the exercise of $75 million aggregate principal amount of 1.0% Convertible
Notes due 2035 issued by msystems Finance Inc. (the "Convertible Notes").
(b) Section 2.3 of the Company Disclosure Letter sets forth the
following information with respect to each Company Share Option and
Company SAR outstanding as of the close of business on July 27, 2006: (i)
the name of the optionee or holder of the Company SAR; (ii) the particular
plan, if applicable, pursuant to which such Company Share Option or
Company SAR was granted, (iii) the number of Company Shares subject to
such Company Share Option or Company SAR; (iv) the exercise price of such
Company Share Option or Company SAR; (v) the date on which such the
Company Share Option or Company SAR was granted; (vi) the applicable
vesting schedule, including the vesting commencement date; and (vii) the
date on which such Company Share Option or Company SAR expires. All
Company Shares subject to issuance as aforesaid have been duly authorized
and, upon issuance on the terms and conditions specified in the instrument
pursuant to which they are issuable, will be validly issued, fully paid
and nonassessable. The Company has not issued any Company Shares which are
unvested or subject to any repurchase option in favor of the Company. All
outstanding Company Shares, including shares issued upon exercise of
Company Share Options and Company SARs, and all outstanding shares of
capital stock of each Subsidiary of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding
Company Share Options and Company SARs have been issued and granted (i)
pursuant to proper corporate action as of the applicable date, and (ii) in
compliance with all applicable securities laws and other applicable Legal
Requirements (as defined below). Except in accordance with Section 5.10(e)
of this Agreement, no Company Share Options or Company SARs will be
accelerated in any way by the Transactions (whether alone or upon the
occurrence of any additional or subsequent events).
(c) Except for (i) securities that the Company owns, directly or
indirectly through one or more Subsidiaries, free and clear of all liens,
pledges, hypothecations, charges, mortgages, security interests,
encumbrances, options, rights of first refusal or preemptive rights of any
nature (including any restriction on the voting of any security, any
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restriction on the transfer of any security or any restriction on the
possession, exercise or transfer of any other attribute of ownership of
any security, except restrictions arising under applicable securities
laws), (collectively, "Liens"), other than Liens for Taxes not yet due and
payable or the amount or validity of which is being contested in good
faith by appropriate proceedings, and (ii) shares of capital stock or
other similar ownership interests of Subsidiaries of the Company that are
owned by certain nominee equity holders as required by the applicable
Legal Requirements of the jurisdiction of organization of such
Subsidiaries (which shares or other interests do not materially affect the
Company's control of such Subsidiaries) or shares of capital stock or
other similar ownership interests of Subsidiaries of the Company owned by
other Persons as disclosed in the Company Disclosure Letter, there are no
equity securities, partnership interests or similar ownership interests of
any class of equity security of any Subsidiary of the Company, or any
security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding, other than the Convertible Notes.
Except (A) as set forth in this Section 2.3, or (B) pursuant to Company
Share Options or Convertible Notes outstanding as of the date of this
Agreement, as of the date hereof, there are no shares of capital stock or
other securities of the Company outstanding, and no subscriptions,
options, warrants, equity securities, partnership interests or similar
ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which the Company or any of
its Subsidiaries is a party or by which it is bound, obligating the
Company or any of its Subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, or repurchase, redeem or otherwise acquire,
or cause the repurchase, redemption or acquisition of, any shares of
capital stock, partnership interests or similar ownership interests of the
Company or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to grant, extend, accelerate the vesting of or enter into any
such subscription, option, warrant, equity security, call, right,
commitment or agreement. There are no registration rights and there is,
except for the Voting Undertakings, no voting agreement or voting trust,
proxy, rights plan, anti-takeover plan or other similar agreement or
understanding to which the Company or any of its Subsidiaries is a party
or by which they are bound with respect to any equity security of any
class of the Company or with respect to any equity security, partnership
interest or similar ownership interest of any class of any of its
Subsidiaries. Other than as contemplated in Section 350 of the Companies
Law, shareholders of the Company will not be entitled to statutory
dissenters' or similar rights in connection with the Merger.
(d) The Company Shares are not listed for trading on the Tel Aviv
Stock Exchange, or on any other foreign or domestic stock exchange (other
than Nasdaq), nor has the Company applied to list its shares on any such
stock exchange.
Section 2.4 Authority. The Company has all necessary corporate power and
authority to execute and deliver this Agreement and, subject to obtaining the
Section 350 Vote (as defined in Section 5.2(a)), to perform its obligations
hereunder. The execution and delivery of this Agreement by the Company and the
performance by the Company of its obligations hereunder have been duly and
validly authorized by the board of directors of the Company, and, other than
receipt of the Court Approval and an affirmative Section 350 Vote, no other
corporate proceedings on the part of the Company are necessary to authorize this
9
Agreement, for the Company to perform its obligations hereunder or for the
Company to consummate the Transactions. This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by the Parent and Merger Sub, constitutes a legal and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting creditors' rights generally and laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies (the "Bankruptcy and Equity Exception"). Except for the Section 350
Vote or as may be required by the Applicable Court, no vote or approval of any
class or series of capital stock or any other securities of the Company or the
Company's Subsidiaries is necessary in order to approve this Agreement, or to
approve or permit the consummation of the Merger and the other Transactions.
Section 2.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company do
not, the performance by the Company of its obligations under this
Agreement or the consummation by the Company of the Transactions will not:
(i) conflict with or violate the Company Charter Documents or the
equivalent organizational documents of any of the Company's Subsidiaries;
(ii) subject to compliance with the requirements set forth in Section
2.5(b) and obtaining the Section 350 Vote, conflict with or violate any
Legal Requirement applicable to the Company or any of its Subsidiaries or
by which its or any of their respective properties is bound or affected;
or (iii) result in any breach of or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or
materially impair the Company's or any of its Subsidiaries' rights or
alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, renegotiation, acceleration
or cancellation of, or result in the creation of a Lien pursuant to, any
Contract (as defined in Section 8.7(c)) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
or its or any of their respective properties are bound or affected, except
in the case of clauses (ii) and (iii), any such conflicts, violations,
defaults, impairments, rights, losses or Liens that, individually or in
the aggregate with similar conflicts, violations, defaults, impairments,
rights, losses or Liens, would not reasonably be expected to (x) be
material to the Company and its Subsidiaries taken as a whole, (y) impair
in any material respect the ability of the Company to perform its
obligations under this Agreement or (z) prevent or materially delay the
consummation of the Transactions.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not require
any franchises, grants, permits, licenses, variances, easements, consents,
certificates, exemptions, orders and approvals and other authorizations
for the Company or any of its Subsidiaries from, or filing with or
notification by the Company or any of its Subsidiaries to, any
Governmental Entity ("Approvals"), except: (i) for: (A) compliance with
applicable requirements of the Securities Act, the United States
Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx"), xxx Xxxxxx Xxxxxx
state securities laws ("Blue Sky Laws"); (B) compliance with the
10
pre-merger notification requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 0000 (xxx "XXX Xxx") and any applicable non-U.S. Legal
Requirements intended to prohibit, restrict or regulate actions or
transactions having the purpose or effect of monopolization, restraint of
trade, harm to competition or effectuating foreign investment
(collectively with the HSR Act, "Antitrust Laws"); (C) the consent of the
Office of the Chief Scientist of the Israeli Ministry of Trade & Industry
("OCS") to the change in ownership of the Company to be effected by the
Merger (the "OCS Approval"); (D) to the extent required, approval of the
Israeli Commissioner of Restrictive Trade Practices pursuant to the
Restrictive Trade Practices Act, 1988 (the "RTPA"); (E) filings with, and
approval by, the Investment Center of the Israeli Ministry of Trade &
Industry (the "Investment Center") of the change in ownership of the
Company to be effected by the Merger (the "Investment Center Approval");
(F) compliance with the rules and regulations of Nasdaq; (G) obtaining the
Israeli Income Tax Ruling (as defined in Section 5.4(c)) and (H) obtaining
the Court Approval, and, (ii) where the failure to obtain such Approvals,
or to make such filings or notifications, individually or in the aggregate
with similar failures, would not reasonably be expected to (x) be material
to the Company and its Subsidiaries taken as a whole, (y) impair in any
material respect the ability of the Company to perform its obligations
under this Agreement or (z) prevent or materially delay the consummation
of the Transactions.
Section 2.6 Compliance with Laws; Environmental Matters; Permits.
(a) The following terms shall have the meanings set forth below:
(i) "Hazardous Material" is any material or substance that is prohibited
or regulated by any Environmental Law or that has been designated by any
Governmental Entity to be radioactive, toxic, hazardous or otherwise a danger to
health, reproduction or the environment.
(ii) "Environmental Laws" are all applicable Legal Requirements
promulgated by any Governmental Entity which prohibit, regulate or control any
Hazardous Material or any Hazardous Material activity.
(b) Neither the Company nor any of its Subsidiaries is in conflict
with, or in default or violation of, any Legal Requirement (including
Environmental Laws and the Foreign Corrupt Practices Act of 1977)
applicable to the Company or any of its Subsidiaries or by which its or
any of their respective properties is bound or affected, except for any
conflicts, defaults or violations that (individually or in the aggregate
with similar conflicts, defaults or violations) would not cause the
Company or any of its Subsidiaries to lose any benefit or incur any
liability that is, in each case, material to the Company and its
Subsidiaries taken as a whole. No action, demand or investigation (formal
or informal) by any Governmental Entity with respect to the Company or any
of its Subsidiaries or any of their respective properties, is pending or,
to the Company's Knowledge (as defined in Section 8.7(d)), threatened,
other than, in each case, those which if adversely determined,
individually or in the aggregate with similar actions, demands or
investigations would not reasonably be expected to (i) be material to the
Company and its Subsidiaries taken as a whole, (ii) impair in any material
11
respect the ability of the Company to perform its obligations under this
Agreement, or (iii) prevent or materially delay the consummation of any of
the Transactions.
(c) Neither the Company nor any of its Subsidiaries has disposed of,
released, discharged or emitted any Hazardous Materials into the soil or
groundwater at any properties owned or leased at any time by the Company
or any of its Subsidiaries, or at any other property, or exposed any
employee or other individual to any Hazardous Materials or any workplace
or environmental condition, in each case in such a manner as would result
in any liability or clean-up obligation of any kind or nature to the
Company that is material to the Company and its Subsidiaries taken as a
whole. To the Company's Knowledge, (i) no Hazardous Materials are present
in, on, or under any properties owned, leased or used at any time by the
Company or any of its Subsidiaries, and (ii) no reasonable likelihood
exists that any Hazardous Materials will come to be present in, on, or
under any properties owned, leased or used at any time by the Company or
any of its Subsidiaries, in each case so as to give rise to any liability
or clean-up obligation under any Environmental Laws that is material to
the Company and its Subsidiaries taken as a whole. The first sentence of
Section 2.6(b) (to the extent it relates to compliance with Environmental
Laws) and Section 2.6(c) constitute the sole and exclusive representations
and warranties of the Company regarding environmental matters, or
liabilities or obligations, or compliance with Environmental Laws,
relating thereto.
(d) The Company and its Subsidiaries hold all material Approvals
that are required for them to own, lease or operate their assets and to
carry on their businesses and that are material to the Company and its
Subsidiaries taken as a whole. The Company and its Subsidiaries have been
since January 1, 2003 and are in compliance in all material respects with
the terms of such material Approvals.
Section 2.7 SEC Filings; Financial Statements.
(a) The Company has filed or furnished, as applicable, all forms,
statements, certifications, reports and documents required to be filed or
furnished by it with the United States Securities and Exchange Commission
(the "SEC") under the Exchange Act or the Securities Act since December
31, 2003 (the "Applicable Date") (the forms, statements, reports and
documents filed with or furnished to the SEC from the Applicable Date to
the date hereof, each as amended, the "Company Filed SEC Reports"). Each
Company Filed SEC Report, at its effective date (in the case of
registration statements filed pursuant to the requirements of the
Securities Act) or at the time of its filing or being furnished (in the
case of other Company Filed SEC Reports) complied, or after an amendment
was filed or furnished prior to the date of this Agreement complied, in
all material respects with the applicable requirements of the Securities
Act, the Exchange Act and the Xxxxxxxx-Xxxxx Act of 2002 (the
"Xxxxxxxx-Xxxxx Act"). As of such respective dates (or, if amended prior
to the date hereof, as of the date of such amendment) the Company Filed
SEC Reports did not 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 made therein, in light of the circumstances in
which they were made, not misleading.
12
(b) Neither the Company nor any of its Subsidiaries is or at any
time has been required to file or furnish any forms, statements,
certifications, reports and documents required to be filed with the
Israeli Securities Authority under the Israeli Securities Law 1968 or any
regulation promulgated thereunder.
(c) Except as permitted by the Exchange Act, including Sections
13(k)(2) and (3), since the applicable provisions of the Xxxxxxxx-Xxxxx
Act became applicable to the Company, the Company has not (directly or
indirectly through its Subsidiaries) made, arranged or modified (in any
material way) any extension of credit in the form of a personal loan to
any executive officer or director of the Company or any of its
Subsidiaries in violation of the Exchange Act.
(d) The Company maintains disclosure controls and procedures as
required by Rule 13a-15 or 15d-15 under the Exchange Act. Such disclosure
controls and procedures are designed to ensure that information required
to be disclosed by the Company is recorded, processed, summarized and
reported on a timely basis to the individuals responsible for the
preparation of the Company's filings with the SEC and other public
disclosure documents. The Company and its Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any material differences. The
Company's management has disclosed to the Company's auditors and the audit
committee of the board of directors of the Company (A) any significant
deficiencies in the design or operation of its internal controls over
financial reporting that are reasonably likely to adversely affect the
Company's and its Subsidiaries' ability to record, process, summarize and
report financial information and has identified for the Company's auditors
and audit committee of the board of directors of the Company any material
weaknesses in internal control over financial reporting and (B) any fraud,
whether or not material, that involves management or other employees who
have a significant role in the Company's internal control over financial
reporting. The Company has made available to the Parent (i) a summary of
any such disclosure made by management to the Company's auditors and audit
committee between December 31, 2004 and the date of this Agreement and
(ii) any material communication between December 31, 2004 and the date of
this Agreement made by management or the Company's auditors to the audit
committee required or contemplated by listing standards of Nasdaq, the
audit committee's charter or professional standards of the Public Company
Accounting Oversight Board. Between December 31, 2004 and the date of this
Agreement, no material complaints from any source regarding accounting,
internal accounting controls or auditing matters, and no material concerns
from Company or Subsidiary of the Company employees regarding questionable
accounting or auditing matters, have been received by the Company. The
Company has made available to the Parent a summary of all such material
complaints or concerns relating to other matters made between December 31,
2004 and the date of this Agreement through the Company's whistleblower
13
hot-line or equivalent system for receipt of employee or other Person's
concerns regarding possible violations of law by the Company or any of its
Subsidiaries or any of their respective employees. Between December 31,
2004 and the date of this Agreement, no attorney representing the Company
or any of its Subsidiaries, whether or not employed by the Company or any
of its Subsidiaries, has reported evidence of a violation of securities
laws, breach of fiduciary duty or similar violation by the Company, any
Subsidiary of the Company or any of its officers, directors, employees or
agents to the Company's chief legal officer, audit committee (or other
committee designated for the purpose) of the board of directors or the
board of directors of the Company pursuant to the rules adopted pursuant
to Section 307 of the Xxxxxxxx-Xxxxx Act or any Company policy
contemplating such reporting, including in instances not required by those
rules.
(e) The consolidated financial statements of the Company (including
any related notes and schedules thereto) included or incorporated by
reference in the Company Filed SEC Reports (as the same may have been
restated or otherwise amended in a subsequent Company Filed SEC Report)
comply as to form, as of their respective dates of filing with the SEC
(or, in the case of amended or restated filings, as of the date of the
latest amendment or restatement was filed with or furnished to the SEC),
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto (the
"Accounting Rules") have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") (except, in the case of
unaudited statements, for the absence of footnotes) applied on a
consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly present in all material
respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein including the
notes thereto).
Section 2.8 No Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any liabilities of any nature (whether accrued, absolute,
contingent or otherwise), which, if known, would be required to be reflected or
reserved against on a consolidated balance sheet of the Company prepared in
accordance with GAAP or the notes thereto, except for (i) liabilities reflected
in financial statements included in the Company Filed SEC Reports or in the
notes thereto, (ii) liabilities incurred in connection with this Agreement or
the Transactions, (iii) liabilities incurred in the ordinary course of business
since December 31, 2005, and (iv) liabilities as would not reasonably be
expected to be material to the Company and its Subsidiaries taken as a whole.
Section 2.9 Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement, between December 31, 2005 and the
date of this Agreement, (a) the Company and its Subsidiaries have conducted
their business only in the ordinary course of business consistent with past
practice; (b) there has not been any Material Adverse Effect on the Company; (c)
there has not been any change by the Company in its accounting methods,
principles or practices, except as required by changes in GAAP; (d) there has
not been any material revaluation by the Company of any of its assets, including
14
a material writing down of the value of capitalized inventory or a material
writing off of notes or accounts receivable; (e) to the Knowledge of the
Company, no customer which represented five percent or more of the Company's
consolidated product revenue for the year ended December 31, 2005 or the quarter
ended March 31, 2006 has materially reduced or communicated to the Company or
any of its Subsidiaries (orally, in writing or otherwise) an intent to
materially reduce the quantity of its purchases from or materially reduce price
or materially change other quantitative or qualitative terms of its business
relationship with the Company or its Subsidiaries; (f) to the Knowledge of the
Company, no supplier which provides goods or services to the Company or a
Subsidiary of the Company (which cannot be replaced within thirty days without
significant incremental cost) has materially reduced its supply to the Company
or communicated to the Company or any of its Subsidiaries (orally, in writing or
otherwise) an intent to materially increase the price, materially reduce supply
or materially change the quantitative or qualitative terms of its business
relationship with the Company or its Subsidiaries; (g) to the Knowledge of the
Company, no key employee of the Company or its Subsidiaries has communicated to
the Company or any of its Subsidiaries (orally, in writing or otherwise) an
intent to terminate or otherwise significantly decrease his or her contribution
to the Company or its Subsidiaries; and (h) there has not been any material
damage, destruction or other material casualty loss with respect to any tangible
asset or tangible property owned, leased or otherwise used by the Company or any
of its Subsidiaries having a value prior to such losses exceeding $25 million.
Section 2.10 Litigation. There is no suit, arbitration, action or proceeding
pending or, to the Company's Knowledge, threatened against or affecting the
Company or any of its Subsidiaries that, individually or in the aggregate with
similar suits, arbitrations, actions or proceedings, would reasonably be
expected to be material to the Company and its Subsidiaries taken as a whole,
nor is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against the Company or any of its Subsidiaries
that is, or which would reasonably be expected to be, individually or in the
aggregate with similar judgments, decrees, injunctions, rules or orders,
material to the Company and its Subsidiaries taken as a whole. Section 2.10 of
the Company Disclosure Letter sets forth, as of the date of this Agreement, a
complete list of all suits, arbitrations, actions or proceedings to which the
Company, or its Subsidiaries or any of their assets are a party or bound.
Section 2.11 Employee Matters and Benefit Plans.
(a) The following terms shall have the meanings set forth below:
(i) "Company Employee Plan" means any plan, program, policy, practice,
contract, agreement or other arrangement, other than an Employment Agreement,
providing for compensation, severance, termination pay, deferred compensation,
performance awards, stock or stock-related awards, fringe benefits or other
employee benefits or remuneration of any kind, funded or unfunded, including
each "employee benefit plan," within the meaning of Section 3(3) of ERISA which
is or has been maintained, contributed to, or required to be contributed to, by
the Company or any ERISA Affiliate for the benefit of any Employee, or with
respect to which the Company or any ERISA Affiliate has or may have any
liability or obligation including each International Employee Plan;
15
(ii) "Employee" means any current or former or retired employee,
consultant or director of the Company or any ERISA Affiliate;
(iii) "Employment Agreement" means each management, employment, severance,
consulting, relocation, repatriation, expatriation, visa, work permit or other
Contract between the Company or any ERISA Affiliate and any Employee;
(iv) "ERISA" means the Employee Retirement Income Security Act of 1974;
(v) "ERISA Affiliate" means any Subsidiary of the Company or other Person
or entity under common control with the Company or any Subsidiary of the Company
within the meaning of Section 414(b), (c), (m) or (o) of the Code; and
(vi) "International Employee Plan" shall mean each Company Employee Plan
and each government-mandated plan or program that has been adopted or maintained
by the Company or any ERISA Affiliate, whether informally or formally, or with
respect to which the Company or any ERISA Affiliate will or may have any
liability, for the benefit of Employees who perform services outside the United
States. This shall include, in Israel, manager's insurance or other provident or
pension funds which are not government-mandated but were set up to provide for
the Company's legal obligation to pay statutory severance pay (Pitzuay Piturim)
under the Severance Pay Law 5723-1963.
(b) Section 2.11(b)(i) of the Company Disclosure Letter contains an
accurate and complete list, as of the date hereof, of each Company
Employee Plan other than legally-mandated plans, programs and
arrangements, and Section 2.11(b)(ii) of the Company Disclosure Letter
contains an accurate and complete list, as of the date hereof, of each
Employment Agreement. The Company does not have any plan or commitment to
establish any new Company Employee Plan or Employment Agreement, to modify
any Company Employee Plan or Employment Agreement (except to the extent
required by Legal Requirement or to conform any such Company Employee Plan
or Employment Agreement to the requirements of any applicable Legal
Requirement, in each case as previously disclosed to the Parent in writing
or as required by this Agreement), or to adopt or enter into any Company
Employee Plan or Employment Agreement. Except as set forth in Section
2.11(b) of the Company Disclosure Letter, neither the Company nor any
ERISA Affiliate is obligated to provide an Employee with any compensation
or benefits pursuant to an agreement (for example, an acquisition
agreement) with a former employer of such Employee.
(c) The Company has provided or made available to the Parent correct
and complete copies of: (i) all documents embodying each Company Employee
Plan and each Employment Agreement including all amendments thereto and
all related documents (including, in the case of share option plans, the
form of all share option agreements evidencing any outstanding Company
Share Options and Company SARs); (ii) the most recent annual actuarial
valuations, if any, prepared for each Company Employee Plan or any
International Employee Plan; (iii) the most recent annual report (Form
Series 5500 and all schedules and financial statements attached thereto),
if any, required under ERISA or the Code in connection with each Company
Employee Plan; (iv) the most recent summary plan description together with
the summary(ies) of material modifications thereto, if any, with respect
to each Company Employee Plan; (v) all determination, opinion,
notification and advisory letters from the United States Internal Revenue
Service (the "IRS"); (vi) all written communications material to any
Employee or Employees relating to any Company Employee Plan and any
16
proposed Company Employee Plans; (vii) all correspondence to or from any
Governmental Entity relating to any Company Employee Plan; (viii) all
prospectuses prepared in connection with each Company Employee Plan; and
(ix) any Approvals held by the Company or any ERISA Affiliate which enable
it to employ foreign employees or employees from "territories" currently
administered by Israel. Neither the Company nor any ERISA Affiliate (x)
has ever sponsored or contributed to a plan intended to be governed by
Section 401(k) of the Code, or (y) within the six years preceding the date
of this Agreement, sponsored or contributed to a plan intended to be
qualified under Section 401 of the Code.
(d) The Company or the applicable ERISA Affiliate has performed in
all material respects all obligations required to be performed by it
under, is not in default or violation of, and has no Knowledge of any
default or violation by any other party to each Company Employee Plan and
Employment Agreement, and each Company Employee Plan and Employment
Agreement has been established and maintained in all material respects in
accordance with its terms and in material compliance with all applicable
Legal Requirements, including ERISA and the Code. There are no actions,
suits or claims pending, or, to the Company's Knowledge, threatened or
reasonably anticipated against any Company Employee Plan or Employment
Agreement or against the assets of any Company Employee Plan, except for
claims for benefits in the ordinary course of business consistent with
past practice. There are no audits, inquiries or proceedings pending or,
to the Company's Knowledge, threatened by the IRS, United States
Department of Labor or any other Governmental Entity with respect to any
Company Employee Plan.
(e) Neither the Company nor any ERISA Affiliate has ever maintained,
established, sponsored, participated in, contributed to, or is obligated
to contribute to, or otherwise incurred any obligation or liability
(including any contingent liability) under any "multiemployer plan," as
defined in Section 3(37) of ERISA, any plan subject to Title IV of ERISA
or Section 412 of the Code, any multiple employer plan (as defined in
ERISA or the Code), or any "funded welfare plan" within the meaning of
Section 419 of the Code. Any Company Employee Plan intended to be
qualified under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code (i) has either timely applied for
or obtained a favorable determination, notification, advisory and/or
opinion letter, as applicable, as to its qualified status from the IRS.
For each Company Employee Plan that is intended to be qualified under
Section 401(a) of the Code, to the Company's Knowledge, there has been no
event, condition or circumstance that has adversely affected or is likely
to adversely affect such qualified status, except such events, conditions
or circumstances which could be corrected without the Company incurring a
material liability. No Company Employee Plan provides health benefits that
are not fully insured through an insurance contract.
(f) No Company Employee Plan provides, or reflects or represents any
liability material to the Company and its Subsidiaries taken as a whole to
provide post-termination life, health or other welfare benefits to any
person for any reason, except as may be required by Section 601 through
608 of ERISA or other applicable statute.
17
(g) The Company and each ERISA Affiliate: (i) is not liable for any
arrears of wages or penalties with respect thereto; and (ii) is not liable
for any payment to any trust or other fund governed by or maintained by or
on behalf of any Governmental Entity, with respect to unemployment
compensation benefits, social security or other benefits or obligations
for Employees (other than routine payments to be made in the ordinary
course of business and consistent with past practice). Each current
Employee who resides in the United States of America is an "at-will"
employee.
(h) No work stoppage or labor strike against the Company or any
Subsidiary of the Company is pending, threatened or reasonably
anticipated. The Company does not know of any activities or proceedings of
any labor union to organize any Employees. Neither the Company nor any of
its Subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act. Neither the Company nor any
Subsidiary of the Company is presently, nor has it been in the past, a
party to, or bound by, any collective bargaining agreement or union
contract with respect to Employees and no collective bargaining agreement
is being negotiated by the Company or any Subsidiary of the Company.
(i) Each International Employee Plan has been established,
maintained and administered in material compliance with its terms and
conditions and with the requirements prescribed by any and all Legal
Requirements that are applicable to such International Employee Plan.
Furthermore, no International Employee Plan has unfunded liabilities, that
as of the Effective Time, will not be offset by insurance or fully
accrued. Except as required by Legal Requirement, no condition exists that
would prevent the Surviving Company, its Subsidiaries or the Parent from
terminating or amending any International Employee Plan at any time for
any reason without liability to the Surviving Company or its ERISA
Affiliates (other than ordinary administration expenses or routine claims
for benefits).
(j) Solely with respect to Employees who reside or work in Israel
("Israeli Employees"): (i) neither the Company nor any Subsidiary of the
Company is a party to any collective bargaining contract, collective labor
agreement or other contract or arrangement with a labor union, trade union
or other organization or body involving any of its Israeli Employees.
Neither the Company nor any Subsidiary of the Company has recognized or
received a demand for recognition from any collective bargaining
representative with respect to any of its Israeli Employees. Neither the
Company nor any Subsidiary of the Company has or is subject to, and no
Israeli Employee of the Company or any Subsidiary of the Company benefits
from, any extension order (tzavei harchava) or any contract or arrangement
with respect to employment or termination thereof; (ii) all of the Israeli
Employees are "at will" employees subject to the termination notice
provisions included in Employment Agreements or applicable Legal
Requirements; (iii) the Company's or the applicable Subsidiary of the
Company's obligations to provide statutory severance pay to its Israeli
Employees pursuant to the Severance Pay Law (5723-1963) (the "Severance
Pay Law") have been satisfied or have fully funded by contributions to
appropriate insurance funds or accrued on the Company's financial
statements; and (iv) the Company and the Subsidiaries of the Company are
in compliance in all material respects with all applicable legal
requirements and contracts relating to employment, employment practices,
18
wages, bonuses and other compensation matters and terms and conditions of
employment related to its Israeli Employees, including The Prior Notice to
the Employee Law 2002, The Notice to Employee (Terms of Employment) Law
2002, the Prevention of Sexual Harassment Law (5758-1998), and The
Employment by Human Resource Contractors Law 1996. The Company and the
Subsidiaries of the Company have not engaged any employees whose
employment would require special Approvals, and there are no unwritten
Company policies or customs which, by extension, could entitle Israeli
Employees to benefits in addition to what they are entitled by law.
"Israeli Employee" shall be construed to include consultants, sales agents
and other independent contractors who would be deemed to be employees for
purposes of Israeli labor laws. All of the Israeli Employees are
terminable by the Company on 30 days notice or less.
Section 2.12 Information Supplied. None of the information supplied by the
Company for inclusion or incorporation by reference in any document submitted to
the Applicable Court or the Company's shareholders or (if applicable) creditors
in connection with obtaining the Court Approval, including the Information
Statement (as defined in Section 5.2(a)) (a "Company Disclosure Document"), at
the time filed (as amended or supplemented), at the time provided to such
shareholders or creditors or at the time of the general meeting of the
shareholders of the Company in connection with the Transactions (the "Company
General Meeting") or (if applicable) any meeting of the creditors of the Company
in connection with the Transactions will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading. To the extent applicable, none of the
information supplied by the Company for inclusion or incorporation by reference
in any Registration Statement, at the time filed (as amended or supplemented),
at the effective time of the Registration Statement or at the Effective Time
will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Company Disclosure Documents will comply as to form in all
material respects with any applicable requirements of the Companies Law.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by the Parent or Merger Sub which is
contained or incorporated by reference in the Company Disclosure Documents or
any Registration Statement.
Section 2.13 Property. Neither the Company nor any of its Subsidiaries owns
any real property. The Company and each of its Subsidiaries has good and
defensible title to, or in the case of leased properties and assets, valid
leasehold interests in, all of their properties and assets that are material to
the Company and its Subsidiaries taken as a whole, free and clear of all Liens
except: (a) such Liens or other imperfections of title, if any, as do not
materially detract from the value of or materially interfere with the present
use of the property affected thereby, and (b) Permitted Liens. This Section 2.13
does not cover intellectual property assets or rights. All leases pursuant to
which the Company or any of its Subsidiaries lease from others material real or
personal property are valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing default or event
of default of the Company or any of its Subsidiaries or, to the Company's
Knowledge, any other party (or any event which with notice or lapse of time, or
19
both, would constitute a default and in respect of which the Company or any of
its Subsidiaries has not taken adequate steps to prevent such default from
occurring) that, in each case would be material to the Company and its
Subsidiaries taken as a whole.
Section 2.14 Taxes.
(a) For purposes of this Agreement, "Tax" or, collectively, "Taxes",
means: (i) any and all United States, federal, provincial, state, local,
Israeli and other foreign taxes, assessments and other governmental
charges, duties, impositions and liabilities, including taxes based upon
or measured by gross receipts, income, profits, sales, use and occupation,
and value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, together with all
interest, linkage for inflation, penalties and additions imposed with
respect to such amounts; and (ii) any liability for the payment of any
amounts of the type described in clause (i) as a result of being or
ceasing to be a member of an affiliated, consolidated, combined or unitary
group for any period (including any liability under United States Treas.
Reg. Section 1.1502-6 or any comparable provision of Israeli or other
foreign, state or local Legal Requirements).
(b) The Company and each of its Subsidiaries has timely filed, or
has caused to be timely filed on its behalf, taking into account properly
obtained extensions of time to file, all material U.S. federal, state,
local, Israeli and other foreign returns, estimates, declarations,
information statements and reports relating to Taxes ("Returns") required
to be filed by the Company and each of its Subsidiaries with any Tax
authority, and such Returns are true and correct in all material respects.
The Company and each of its Subsidiaries have paid all Taxes shown on such
Returns that are due.
(c) The Company and each of its Subsidiaries (A) has paid or accrued
all material Taxes it is required to pay or accrue and (B) has withheld
from each payment or deemed payment made to its past or present employees,
officers, directors and independent contractors, suppliers, creditors,
shareholders or other third parties all material Taxes and other material
deductions required to be withheld and has, within the time and in the
manner required by Legal Requirements, paid such withheld amounts to the
proper governmental authorities.
(d) No material Tax deficiency is outstanding, proposed or assessed
against the Company, nor has the Company nor any of its Subsidiaries
executed any waiver of any statute of limitations on or extensions of the
period for the assessment or collection of any material Tax.
(e) No audit or other examination of any material Return of the
Company or any of its Subsidiaries is currently in progress, nor has the
Company or any of its Subsidiaries been notified in writing of any request
for such an audit or other examination, nor is any taxing authority
(including for these purposes the Investment Center with respect to the
Company's status as an "Approved Enterprise" under Israel's Law for the
Encouragement of Capital Investment, 1959) asserting in writing, or to the
Company's Knowledge, threatening to assert, against the Company or any of
its Subsidiaries any claim for material Taxes. There are no matters
20
relating to material Taxes under discussion between any taxing authority
and the Company or any of its Subsidiaries.
(f) No material adjustment that is still pending relating to any
Returns filed by the Company or any of its Subsidiaries has been proposed
in writing by any Tax authority. No written claim that could give rise to
material Taxes has been made within the last five years in a jurisdiction
in which the Company or any of its Subsidiaries does not file Returns,
that the Company or any of its Subsidiaries may be subject to taxation in
that jurisdiction.
(g) There is no provision of any Contract (as defined in Section
8.7(c)), including any provision of this Agreement that, individually or
in the aggregate with similar provisions, could give rise to the payment
of any material amount that would not be deductible as an expense pursuant
to Section 162(m) of the Code, nor has the Company made any material
payment of any amount that would not be deductible as an expense pursuant
to Section 404 of the Code.
(h) Neither the Company nor any of its Subsidiaries: (A) has ever
been a member of an affiliated group filing a consolidated Return, except
for the affiliated group, the parent of which is the Company; (B) is a
party to any Tax sharing or Tax allocation agreement, arrangement or
understanding (other than customary tax indemnifications contained in
credit or other commercial agreements the primary purpose of which
agreements does not relate to Taxes); or (C) is liable for the Taxes of
any other Person under United States Treasury Regulation Section 1.1502-6
(or any similar provision of state, local, Israeli or other foreign Legal
Requirements), as a transferee or successor, by contract or otherwise,
except for liability created as a result of being a member of the
affiliated group, the parent of which is the Company.
(i) There are no Liens on the assets of the Company or any of its
Subsidiaries relating to or attributable to Taxes, except for Liens for
Taxes not yet due and payable or the amount or validity of which is being
contested in good faith by appropriate proceedings.
(j) Neither the Company nor any of its Subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section 355
of the Code: (A) in the two years prior to the date of this Agreement or;
(B) in a distribution which could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of Section 355(e) of
the Code) in conjunction with the Merger.
(k) To the Company's Knowledge, it qualifies as an Industrial
company according to the meaning of that term in the Law for the
Encouragement of Industry (Taxes), 1969, and, to the Company's Knowledge,
the consummation of the Merger will not have any adverse effect on such
qualification as an Industrial company.
(l) (A) The Company has been granted "approved enterprises" status
under the Israeli Law for the Encouragement of Capital Investment, 1959 in
the "alternative tax benefits" route. To the Company's Knowledge it is in
compliance in all material respects with all terms and conditions
stipulated by such law, regulations published thereunder and the
instruments of approval for the specific investments in the "approved
21
enterprise". (B) Each of the Company and the Subsidiaries is in compliance
in all material respects with all terms and conditions of any ruling of
any Tax authority that applies to the Company, the Surviving Company or
any Subsidiary for any taxable period (or portion thereof) ending after
the Closing Date.
(m) Section 2.15(m) of the Company Disclosure Letter lists each
material Tax incentive, subsidy or benefit granted to or enjoyed by the
Company and its Subsidiaries under the Legal Requirements of the State of
Israel, the period for which such Tax incentive, subsidy or benefit
applies, and the nature of such Tax incentive. The Company and its
Subsidiaries have complied with all material requirements of Israeli Legal
Requirements to be entitled to claim such incentives, subsidies or
benefits. To the Company's Knowledge, subject to receipt of the Investment
Center Approval and other Approvals required as explicitly set forth
herein, consummation of the Merger will not adversely affect the continued
qualification for the incentives, subsidies or benefits or the terms or
duration thereof or require any recapture of any previously claimed
incentive, subsidy or benefit and no consent or approval of any
Governmental Entity is required prior to the consummation of the Merger in
order to preserve the entitlement of the Surviving Company or its
Subsidiaries to any such incentive, subsidy or benefit.
Section 2.15 Brokers. No broker, investment banker, financial advisor or
other Person, other than Citigroup Global Markets Inc. ("Citigroup"), the fees
and expenses of which will be paid by the Company pursuant to the engagement
letter dated July 3, 2006 (a true and correct copy of which has been made
available to the Parent), is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the Transactions
based upon arrangements made by or on behalf of the Company or any of its
Subsidiaries.
Section 2.16 Intellectual Property.
(a) The following terms have the meanings set forth below:
(i) "Intellectual Property" means any or all of the following: (A) works
of authorship including computer programs, source code and executable code,
whether embodied in software, firmware or otherwise, documentation, designs,
files, records, schematics, layouts, data and mask works; (B) inventions
(whether or not patentable), improvements, and technology; (C) proprietary and
confidential information, trade secrets and know how; (D) databases, data
compilations and collections and technical data; (E) logos, trade names, trade
dress, trademarks and service marks; (F) domain names, web addresses and sites;
(vii) tools, methods and processes and (G) all instantiations of the foregoing
in any form and embodied in any media.
(ii) "Intellectual Property Rights" means any and all worldwide, common
law and/or statutory rights in or arising out of: (A) all United States and
foreign patents and utility models and applications therefor and all reissues,
divisions, re-examinations, renewals, extensions, provisionals, continuations
and continuations-in-part thereof, and equivalent rights anywhere in the world
in inventions and discoveries including invention disclosures ("Patents"); (B)
all trade secrets and other rights in know -how and confidential or proprietary
information, in each case excluding any rights in respect of any of the
22
foregoing that are protected by Patents; (C) all copyrights, copyrights
registrations and applications therefor, and mask works and mask work
registrations and applications therefor ("Copyrights"); (D) all uniform resource
locators, e-mail and other internet addresses and domain names and applications
and registrations therefor ("URLs"); all trade names, logos, common law
trademarks and service marks, trademark and service xxxx registrations and
applications therefor and all goodwill associated therewith ("Trademarks"); (E)
all "moral" rights of authors and inventors, however denominated throughout the
world, and (F) any corresponding or equivalent rights to any of the foregoing.
(iii) "Company Intellectual Property" means any Intellectual Property and
Intellectual Property Rights, including Registered Intellectual Property Rights,
that are owned by or exclusively licensed to the Company or any of its
Subsidiaries.
(iv) "Registered Intellectual Property Rights" means all United States,
international and foreign: (A) issued Patents, including pending applications
therefor; (B) registered Trademarks and pending applications to register
Trademarks, including intent-to-use applications; (C) Copyright registrations
and pending applications to register Copyrights; and (D) URL registrations and
pending applications to register URLs.
(v) "Company Product" means any product or service offering of the Company
or any of its Subsidiaries currently being marketed, sold or licensed by the
Company or any of its Subsidiaries.
(b) Section 2.16(b) of the Company Disclosure Letter lists all
Registered Intellectual Property Rights owned or exclusively licensed by
or filed in the name of the Company or any of its Subsidiaries as of the
date hereof (the "Company Registered Intellectual Property Rights").
(c) The Company has no Knowledge of any facts or circumstances that
would render any of the Company Intellectual Property invalid or
unenforceable except as would not reasonably be expected to be material to
the Company and its Subsidiaries taken as a whole. Without limiting the
foregoing, to the Knowledge of the Company, except as would not reasonably
be expected to be material to the Company and its Subsidiaries taken as a
whole, neither the Company nor any of its Subsidiaries has misrepresented,
or failed to disclose, any facts or circumstances in any application for
any Company Registered Intellectual Property Right that would constitute
fraud or a misrepresentation with respect to such application or that
would otherwise affect the validity or enforceability of any Company
Registered Intellectual Property Right.
(d) To the Knowledge of the Company, each item of material Company
Registered Intellectual Property Rights is valid and subsisting, and all
necessary registration, maintenance and renewal fees having a final due
date prior to the date hereof in connection with such Company Registered
Intellectual Property Rights have been paid and all necessary documents
and certificates required to be filed in connection with such Company
Registered Intellectual Property Rights and having a final due date prior
to the date hereof have been filed with the relevant patent, copyright,
23
trademark or other relevant authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
Company Registered Intellectual Property Rights. With respect to such
Company Registered Intellectual Property Rights the Company or any of its
Subsidiaries has so decided not to maintain, Section 2.16(d) of the
Company Disclosure Letter lists all (i) abandoned Patent applications
(excluding provisional applications) owned and abandoned by the Company
within the two year period prior to the date hereof and (ii) issued
Patents owned and abandoned by the Company. In each case in which the
Company or any of its Subsidiaries has acquired ownership of any
Intellectual Property from any third Person, the Company or such
Subsidiary has obtained an assignment sufficient to irrevocably transfer
all rights in such Intellectual Property and the associated Intellectual
Property Rights to the Company or such Subsidiary and Company or such
Subsidiary has recorded each such assignment with the relevant
Governmental Entities, including the U.S. Patent and Trademark Office, the
U.S. Copyright Office, or their respective equivalents in any relevant
foreign jurisdiction, as the case may be. To the Knowledge of the Company,
neither the Company nor any of its Subsidiaries has claimed a particular
status, including "Small Business Status," in the application for any
Intellectual Property Rights, which claim of status was at the time made
inaccurate in any material respect and was not corrected prior to the date
hereof.
(e) Subject to any required third party consents with respect to
Company Intellectual Property exclusively licensed to the Company or any
of its Subsidiaries, all Company Intellectual Property will be
transferable, alienable or licensable by the Surviving Company and/or the
Parent to the same extent transferable, alienable or licensable by the
Company as of the date hereof without payment of any kind to any third
party.
(f) To the Knowledge of the Company, each item of Company
Intellectual Property owned by the Company or any of its Subsidiaries,
including all Company Registered Intellectual Property Rights listed in
Section 2.16(b) of the Company Disclosure Letter, is free and clear of any
Liens. The Company is the exclusive owner or, to the Knowledge of the
Company, exclusive licensee of all Company Intellectual Property. To the
Knowledge of the Company, the Company or one or more of its Subsidiaries
is the exclusive owner of, or has acquired the necessary licenses to use,
all material Trademarks used in connection with the operation or conduct
of the business of the Company and its Subsidiaries as currently
conducted, including the sale, distribution or provision of any Company
Products by the Company or any of its Subsidiaries. To the Knowledge of
the Company, the Company or one or more of its Subsidiaries is the
exclusive owner of, or has acquired the appropriate licenses to use, all
Copyrighted works that are included or incorporated into Company Products.
(g) The Company has not transferred ownership of or granted any
exclusive retention of or joint ownership of any Intellectual Property or
Intellectual Property Rights that is or, in the twelve month period prior
to the date hereof, was Company Intellectual Property to any other Person.
(h) All Company Intellectual Property owned by the Company or any of
its Subsidiaries was created solely by either (i) employees of the Company
or one or more of its Subsidiaries acting within the scope of their
employment or (ii) by third parties who have irrevocably assigned all of
24
their rights, including Intellectual Property Rights therein, to the
Company or one of its Subsidiaries.
(i) To the extent that any Company Intellectual Property owned by
the Company or any of its Subsidiaries has been developed or created
independently or jointly by any Person other than the Company or any of
its Subsidiaries for which the Company or such Subsidiary has paid any
consideration of any kind, the Company or one or more of its Subsidiaries
has a written Contract with such Person with respect thereto, and the
Company or one or more of its Subsidiaries thereby has obtained ownership
of, and is the exclusive owner of, all such Company Intellectual Property
and associated Intellectual Property Rights by operation of law or by
assignment.
(j) To the Knowledge of the Company, the Company Intellectual
Property and the Intellectual Property and Intellectual Property Rights
licensed by the Company or any of its Subsidiaries from third Persons
constitute all the material items of Intellectual Property and material
Intellectual Property Rights which, as of the date hereof, are used in and
necessary to the conduct of the business of the Company and its
Subsidiaries as it currently is conducted, including the development,
manufacture, use, import and sale of products, technology and services of
the Company or any of its Subsidiaries. With respect to such Intellectual
Property and Intellectual Property Rights licensed by the Company or any
of its Subsidiaries from third Persons, Section 2.16(j) of the Company
Disclosure Letter lists all cross license agreements and inbound global
license agreements to which the Company or any of its Subsidiaries is a
party.
(k) Other than: (i) "shrink-wrap" and similar generally available
commercial binary code end user licenses and (ii) agreements with
customers entered into in the ordinary course of business of the Company
or any of its Subsidiaries, to the Knowledge of the Company, the Contracts
listed in Section 2.16(k) of the Company Disclosure Letter include all
Contracts to which the Company or any of its Subsidiaries is a party as of
the date hereof that grant any rights to any third Person with respect to
any Company Intellectual Property. To the Knowledge of the Company,
consummation of the Transactions will not trigger any right of any third
party to obtain any source code owned by the Company or any of its
Subsidiaries from any escrow under any Contracts to which Company or any
of its Subsidiaries is a party.
(l) To the Knowledge of the Company, no third party owns or has any
rights to any of the Company Intellectual Property owned by the Company or
any of its Subsidiaries (other than non-exclusive license rights therein
in connection with licensing, selling or otherwise exploiting Company
Products in the ordinary course of the Company business).
(m) To the Knowledge of the Company, the Company or one or more of
its Subsidiaries has the right to use, pursuant to valid licenses, all
software development tools, library functions, compilers and all other
third-party software that are material to the operation of the business of
the Company or such Subsidiary or that are required to create, modify,
compile, operate or support any software that is Company Intellectual
Property or is incorporated into any Company Product. Without limiting the
25
foregoing no open source or public library software, including any version
of any software licensed pursuant to any GNU public license, was used in
the development or modification of any software that is incorporated into
any Company Product.
(n) No government funding, facilities of a university, college or
other educational institution or research center was used in the
development of any Company Intellectual Property.
(o) To the Knowledge of the Company, all material Company
Intellectual Property is freely transferable, conveyable, and/or
assignable by the Company and/or Surviving Company to any entity located
in any jurisdiction in the world without any restriction, constraint,
control, supervision, or limitation whatsoever that could be imposed by
the OCS (or any other similar Governmental Entity) provided that the
Company obtains any required consents by the OCS (or any other similar
Governmental Entity).
(p) As of the date hereof, to the Knowledge of the Company, the
operation of the business of the Company as it currently is conducted,
including the development, use, import, manufacture and sale of the
products, technology or services of the Company does not, and will not
when conducted by the Surviving Company in the same manner immediately
following the Closing, infringe or misappropriate any Intellectual
Property Right of any Person that the Company reasonably believes to be
valid, violate any other right of any Person (including any right to
privacy or publicity) or otherwise constitute unfair competition or trade
practices under the Legal Requirements of any jurisdiction, except to the
extent any of the foregoing would not reasonably be expected to be
material to the Company and its Subsidiaries taken as a whole. As of the
date hereof, to the Knowledge of the Company, neither the Company nor any
Subsidiary of the Company has received written notice from any Person
claiming that such operation of the business of the Company or any such
act, product, technology or service of the Company or any Subsidiary of
the Company infringes or misappropriates any Intellectual Property Right
of any Person or constitutes unfair competition or trade practices under
the Legal Requirements of any jurisdiction.
(q) As of the date hereof, to the Knowledge of the Company, no
Person is infringing or misappropriating any material Company Intellectual
Property.
(r) As of the date hereof, no material Company Intellectual Property
is subject to any pending proceeding or outstanding decree, order,
judgment, Contract (excluding any Contract for the sale or distribution of
any Company Product) or stipulation to which the Company or any of its
Subsidiaries is a party that restricts in any manner the use, transfer or
licensing thereof by the Company or a Subsidiary of the Company or which
would reasonably be expected to adversely affect the validity, use or
enforceability of such Company Intellectual Property.
(s) The Company and its Subsidiaries have taken commercially
reasonable steps to protect the Company's and its Subsidiaries' rights in
confidential information and trade secrets of the Company and its
Subsidiaries and also that of other Persons to whom the Company or any of
its Subsidiaries has confidentiality obligations. Without limiting the
foregoing, the Company currently has, and enforces, a policy requiring all
employees, consultants and contractors of the Company or any of its
26
Subsidiaries to execute Contracts containing confidentiality obligations,
and all employees and contractors involved in the creation or development
of any Intellectual Property for or on behalf of the Company or any of its
Subsidiaries to execute Contracts containing obligations relating to
proprietary information, confidentiality and assignment, substantially in
one of the forms made available to the Parent. To the Knowledge of the
Company, all current employees, consultants and contractors of the Company
and its Subsidiaries have executed such Contracts.
(t) To the Knowledge of the Company, as a result of any Contract to
which the Company or any of its Subsidiaries is a party as of the date
hereof, neither this Agreement nor the Merger, in and of itself, will
result in: (i) the Parent's or the Surviving Company's granting to any
third party any right to any Intellectual Property or Intellectual
Property Right owned by, or licensed to, either of them; (ii) either the
Parent or the Surviving Company being bound by, or subject to, any
non-compete or other restriction on the operation or scope of their
respective businesses; or (iii) either the Parent or the Surviving Company
being contractually obligated to pay any royalties or other amounts to any
third party in excess of those payable by the Surviving Company, prior to
the Closing Date.
(u) Other than inbound "shrink-wrap" and similar generally available
commercial binary code end user licenses, to the Knowledge of the Company,
neither the Company nor any of its Subsidiaries is obligated to make any
payments by way of royalties, fees or otherwise to any owner or licensor
of, or other claimant to, any Intellectual Property or Intellectual
Property Rights with respect to the use thereof or in connection with the
conduct of the businesses of the Company and its Subsidiaries as currently
conducted.
Section 2.17 Contracts.
(a) As of the date of this Agreement, neither the Company nor any of
its Subsidiaries is a party to or is bound by any of the following
Contracts:
(i) any employment or consulting Contract with any Employee or consultant
that is not terminable by the Company upon 30 days notice of less or that
provides for an annual salary in excess of $125,000;
(ii) any Contract whereby the Company or any of its Subsidiaries has
assumed any obligation of, or duty to warrant, indemnify, reimburse, hold
harmless, guaranty or otherwise assume any obligation or liability of, any other
Person (including with respect to the infringement or misappropriation by the
Company or any of its Subsidiaries or such other Person of the Intellectual
Property Rights of any Person other than the Company or any of its
Subsidiaries), other than any Contract entered into in connection with the sale
or license of products or services in the ordinary course of business consistent
with past practice;
(iii) any Contract containing any covenant limiting in any respect the
right of the Company or any of its Subsidiaries to engage in any line of
business or to compete with any Person or granting any exclusive rights
(including any exclusive license or right to use any Intellectual Property or
Intellectual Property Rights) or "most favored nation" status or limiting the
Company's ability to acquire assets or securities of any third parties;
27
(iv) any Contract relating to the disposition or acquisition by the
Company or any of its Subsidiaries after the date of this Agreement of assets
not in the ordinary course of business or pursuant to which the Company or any
of its Subsidiaries has any ownership interest in any corporation, partnership,
joint venture or other business enterprise other than the Company's
Subsidiaries;
(v) any material joint marketing or development Contract;
(vi) any Contract with any third party to manufacture, reproduce, sell or
distribute any Company Products, except (A) Contracts with contract
manufacturers, distributors, customers or sales representatives in the ordinary
course of business cancelable by the Company or the applicable Subsidiary
without penalty upon notice of 90 days or less and (B) purchase orders entered
into in the ordinary course of business consistent with past practice;
(vii) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other Contracts relating to the borrowing of money or
extension of credit, other than trade payables incurred in the ordinary course
of business, or any Contract under which the Company or any of its Subsidiaries
acts as guarantor, surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of the obligation for borrowed money or other indebtedness
of any Person (other than the Company or its Subsidiaries);
(viii) any Contract that contains any put, call or similar right pursuant
to which the Company or any of its Subsidiaries could be required to purchase or
sell, as applicable, any equity interests of any Person or assets;
(ix) any material settlement agreement under which the Company or any of
its Subsidiaries has ongoing obligations;
(x) any Contract under which the Company or any of its Subsidiaries has
any liability for the payment of any amounts of the type described in clause (i)
or (ii) of Section 2.14(a) as a result of any express or implied obligation to
indemnify any other Person or as a result of any obligations under any
agreements or arrangements with any other Person with respect to such amounts
and including any liability for Taxes of a predecessor entity;
(xi) each real property lease and each lease for personal property in each
case involving payments by the Company or any of its Subsidiaries in excess of
$60,000 annually (including capitalized leases); and
(xii) any other Contract pursuant to which the Company and its
Subsidiaries have aggregate remaining payment obligations in excess of
$1,000,000 over the term thereof, other than purchase orders entered into in the
ordinary course of business consistent with past practice.
(b) Neither the Company nor any of its Subsidiaries, nor to the
Company's Knowledge any other party to, any Contract required to be
disclosed in Section 2.16 or 2.17 of the Company Disclosure Letter (any
such contract, a "Company Contract"), is in material breach, violation or
28
default under, and neither the Company nor any of its Subsidiaries has
received written notice that it has materially breached, violated or
defaulted under, any Company Contract. Each Company Contract is a legal,
valid and binding obligation of the Company or the Subsidiary that is a
party thereto, enforceable against the Company and such Subsidiary, and to
the Company's Knowledge, the other parties thereto in accordance with its
terms (subject to the Bankruptcy and Equity Exception), except for such
failures to be legal, valid and binding or to be enforceable as would not,
individually or in the aggregate with similar failures, would not
reasonably be expected to be material to the Company and its Subsidiaries
taken as a whole. The Company has made available to the Parent true and
correct copies of all Company Contracts in existence as of the date of
this Agreement.
Section 2.18 Opinion of Financial Advisor. The Company has received the
written opinion of Citigroup, dated the date of this Agreement, to the effect
that, as of such date, and subject to the various assumptions and qualifications
set forth therein, the Per Share Merger Consideration to be received by the
Company's shareholders is fair, from a financial point of view, to such
shareholders, a signed copy of which opinion will be made available to the
Parent promptly following its receipt.
Section 2.19 Board Approval. The board of directors of the Company has
unanimously: (a) determined that this Agreement, the Merger and the other
Transactions are fair to, and in the best interests of, the Company and its
shareholders, and that, considering the financial position of the merging
companies, no reasonable concern exists that the Surviving Company will be
unable to fulfill the obligations of the Company to its creditors; (b) approved
this Agreement, the Merger and the other Transactions; and (c) subject to the
provisions of this Agreement, determined to recommend that the shareholders of
the Company approve this Agreement, the Merger and the other Transactions.
Section 2.20 Inapplicability of Certain Statutes. Other than as set forth in
the Companies Law, the Company is not subject to any business combination,
control share acquisition, fair price or similar statute that applies to the
Merger or any other Transaction.
Section 2.21 Grants, Incentives and Subsidies. The Company has made available
to the Parent, prior to the date hereof, correct copies of all documents
evidencing all pending, outstanding and granted grants, incentives, exemptions
and subsidies from the Government of the State of Israel or any agency thereof,
or from any other Governmental Entity, granted to the Company or any of its
Subsidiaries, including the grant of Approved Enterprise Status from the
Investment Center and grants from the OCS (collectively, "Grants") and of all
letters of approval, certificates of completion, and supplements and amendments
thereto, granted to the Company, and all material correspondence related
thereto. The Company and the applicable Subsidiary is in compliance, in all
material respects, with the terms and conditions of all Grants which have been
approved and has duly fulfilled, in all material respects, all the undertakings
required thereby. Assuming compliance by the Parent with any undertakings it may
give with respect to the Grants that have been approved, the Company is not
aware of any event or other set of circumstances which would reasonably be
expected to lead to the revocation or material modification of any of the Grants
that have been approved.
29
Section 2.22 Encryption and Other Restricted Technology. The Company's and
its Subsidiaries' business as currently conducted does not involve the use or
development of, or engagement in, encryption technology, or other technology
whose development, commercialization or export is restricted under Israeli Legal
Requirements, and the Company's and its Subsidiaries' business as currently
conducted does not require the Company or any of its Subsidiaries to obtain a
license from the Israeli Ministry of Defense or an authorized body thereof
pursuant to section 2(a) of the Control of Products and Services Declaration
(Engagement in Encryption), 1974 or other legislation regulating the
development, commercialization or export of technology.
Section 2.23 Tax Matters. Neither the Company nor any of its Subsidiaries has
taken any action or has failed to take any action or knows of any fact,
agreement, plan or other circumstance that would prevent the Merger from
qualifying as a tax free exchange under section 104(h) of the Ordinance or as a
reorganization under Section 368 of the Code.
Section 2.24 Insider Interests. To the Company's Knowledge, no officer or
director of the Company or any of its Subsidiaries has any material interest in
any material property, real or personal, tangible or intangible, including
inventions, patents, trademarks or trade names, used in or pertaining to the
business of the Company or any of its Subsidiaries.
Section 2.25 Effect of Transaction.
(a) Except as set forth in Section 5.10 hereof, the execution of
this Agreement and the consummation of the Transactions will not (either
alone or upon the occurrence of any additional or subsequent events) (i)
constitute an event under any Company Employee Plan, Employment Agreement,
trust, loan or other agreement or arrangement that will or might result in
any payment (whether of severance pay, "gross-up," or indemnity with
respect to any "parachute payment" (as defined in subclause (b) below) or
similar payment or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits
with respect to any Employee (including with respect to any Company Share
Option or Company SAR), or (ii) result in any payment, acceleration or
vesting with respect to any other security issued by the Company or any of
its Subsidiaries.
(b) No payment or benefit which will or may be made by the Company
or its ERISA Affiliates with respect to any Employee will be characterized
as a "parachute payment," within the meaning of Section 280G(b)(2) of the
Code.
ARTICLE 3
REPRESENTATIONS OF THE PARENT AND MERGER SUB
The Parent and Merger Sub represent and warrant to the Company, as of the
date hereof, subject to such exceptions as are disclosed in writing in a letter
from the Parent to the Company delivered by a duly authorized officer of the
Parent concurrently with the execution of this Agreement (the "Parent Disclosure
Letter") (it being understood that any matter disclosed in the Parent Disclosure
Letter shall be deemed disclosed with respect to any section of this Article 3
to which the matter relates, to the extent the relevance of such matter to such
section is reasonably apparent), as follows:
30
Section 3.1 Organization and Qualification. Each of the Parent and Merger Sub
is a corporation duly organized and validly existing and, where applicable, in
good standing, under the laws of the jurisdiction of its incorporation and has
the requisite corporate power and authority to own, lease and operate its assets
and properties and to carry on its business as it is now being conducted. Each
of the Parent and Merger Sub is duly qualified or licensed as a foreign
corporation to do business, and, where applicable is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, individually or in the aggregate with similar
failures, reasonably be expected to have a Material Adverse Effect on the
Parent.
Section 3.2 Capitalization. The authorized capital stock of the Parent
consists of 800,000,000 shares of Parent Common Stock and 4,000,000 shares of
preferred stock, par value $0.001 per share, of the Parent (the "Parent
Authorized Preferred Stock"), of which 400,000 shares have been designated
Series A Junior Participating Preferred Stock (the "Parent Junior Preferred
Stock"). As of July 27, 2006, (i) 196,528,748 shares of Parent Common Stock,
were issued and outstanding, (ii) no shares of Parent Junior Preferred Stock
were issued and outstanding, (iii) other than designation of Parent Junior
Preferred Stock, no other shares of the Parent Authorized Preferred Stock have
been designated or issued, (iv) 12,142,600 shares of Parent Common Stock have
been reserved for issuance upon conversion of the Parent's 1% Convertible Senior
Notes due 2013 (the "Parent Notes"), and (v) 41,294,864 shares of Parent Common
Stock are reserved for issuance under the Parent's 1995 Stock Option Plan, the
Parent's 1995 Non-employee Directors Stock Option Plan, the Parent's 2005 Stock
Incentive Plan, the Rhombus, Inc. 1998 Long Term Equity Incentive Plan, the
Matrix Semiconductor, Inc. 1999 Stock Plan, the Matrix Semiconductor, Inc. 2005
Stock Incentive Plan, the Parent's 1995 Employee Stock Purchase Plan and the
Parent's 2005 Employee Stock Purchase Plan (of which there were 21,531,208
outstanding options or rights as of July 27, 2006 to acquire shares of Parent
Common Stock ("Parent Share Options")). Other than the Parent Notes, no bonds,
debentures, notes or other indebtedness of the Parent having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Parent may vote are issued or
outstanding or subject to issuance. All Parent shares subject to issuance as
aforesaid have been duly authorized and, upon issuance on the terms and
conditions specified in the instrument pursuant to which they are issuable, will
be validly issued, fully paid and nonassessable. All outstanding shares of
capital stock of the Parent have been duly authorized and are validly issued and
fully paid and nonassessable and not subject to preemptive rights. The Parent
has made available to the Company a complete and correct copy of the Rights
Agreement, dated as of September 13, 2003, as amended (the "Parent Rights
Agreement"), between the Parent and Computershare Trust Company, Inc., as Rights
Agent, relating to rights (the "Parent Rights") to purchase shares of Parent
Junior Preferred Stock. Except (A) as set forth in this Section 3.2 or (B)
pursuant to Parent Rights, Parent Share Options or Parent Notes outstanding as
of the date of this Agreement, as of the date hereof, there are no shares of
capital stock or other securities of Parent outstanding, and no subscriptions,
options, warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
31
agreements of any character to which Parent or any of its Subsidiaries is a
party or by which it is bound, obligating Parent to issue, deliver or sell, or
cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition of, any shares of
capital stock, partnership interests or similar ownership interests of Parent or
obligating Parent or any of its Subsidiaries to grant, extend, accelerate the
vesting of or enter into any such subscription, option, warrant, equity
security, call, right, commitment or agreement.
Section 3.3 Authority. Each of the Parent and Merger Sub has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by the Parent and by Merger Sub and the performance by each of the Parent and
Merger Sub of its obligations hereunder have been duly and validly authorized by
all necessary corporate action on the part of the Parent and Merger Sub, and no
other corporate proceedings on the part of the Parent or Merger Sub and no vote
by the Parent's stockholders are necessary to authorize this Agreement or for
each of the Parent and Merger Sub to perform its obligations hereunder or to
consummate the Transactions, including the issuance of the Parent Common Stock
in the Merger. This Agreement has been duly and validly executed and delivered
by the Parent and by Merger Sub and, assuming the due authorization, execution
and delivery by the Company, constitutes a legal and binding obligation of the
Parent and of Merger Sub, enforceable against the Parent and Merger Sub in
accordance with its terms, subject to the Bankruptcy and Equity Exception.
Parent (as the sole shareholder of Merger Sub) has approved this Agreement, the
Merger and the other Transactions.
Section 3.4 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Parent and
Merger Sub do not, and the performance of this Agreement by the Parent and
Merger Sub will not: (i) conflict with or violate the Parent's certificate
of incorporation or bylaws or Merger Sub's Articles of Association; (ii)
subject to compliance with the requirements set forth in Section 3.4(b),
conflict with or violate any Legal Requirement applicable to the Parent or
any of its Subsidiaries or by which any of their respective properties is
bound or affected; or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would
become a default) under, or materially impair the Parent's or any of its
Subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on
any of the properties or assets of the Parent or any of its Subsidiaries
pursuant to, any Contract to which the Parent or any of its Subsidiaries
is a party or by which the Parent or any of its Subsidiaries or any of
their respective properties are bound or affected, except in the case of
clause (ii) or (iii), any such conflicts, violations, defaults,
impairments, rights, losses or Liens that, individually or in the
aggregate with similar conflicts, violations, defaults, impairments,
rights, losses or Liens, would not reasonably be expected to (x) be
material to the Parent and its Subsidiaries taken as a whole, (y) impair
in any material respect the ability of the Parent or Merger Sub to perform
its obligations under this Agreement or (z) prevent or materially delay
the consummation of the Transactions.
32
(b) The execution and delivery of this Agreement by the Parent and
Merger Sub do not, and the performance of this Agreement by the Parent and
Merger Sub will not, require any Approval for or by the Parent and Merger
Sub except: (i) for: (A) compliance with applicable requirements of the
Securities Act, the Exchange Act and Blue Sky Laws; (B) compliance with
the pre-merger notification requirements of the Antitrust Laws; and (C)
compliance with the rules and regulations of Nasdaq; and (ii) where the
failure to obtain such consents, Approvals, or to make such filings or
notifications, individually or in the aggregate with similar consents,
Approvals, filings or notifications, would not reasonably be expected to
(x) be material to the Parent and its Subsidiaries taken as a whole, (y)
impair the ability of the Parent or Merger Sub to perform its obligations
under this Agreement or (z) prevent or materially delay the consummation
of the Transactions.
Section 3.5 Issuance of Parent Common Stock. The shares of the Parent Common
Stock to be issued pursuant to this Agreement to the holders of the Company
Shares have been duly authorized, and when issued, will be validly issued, fully
paid and nonassessable and not subject to preemptive rights.
Section 3.6 Compliance with Laws. Neither Parent nor any of its Subsidiaries
is in conflict with, or in default or violation of, any Legal Requirement
(including Environmental Laws and the Foreign Corrupt Practices Act of 1977)
applicable to Parent or any of its Subsidiaries or by which its or any of their
respective properties is bound or affected, except for any conflicts, defaults
or violations that (individually or in the aggregate with similar conflicts,
defaults or violations) would not cause Parent or any of its Subsidiaries to
lose any benefit or incur any liability that is material to Parent and its
Subsidiaries taken as a whole. No action, demand or investigation (formal or
informal) by any Governmental Entity and no suit, action or proceeding by any
Person, in each case with respect to Parent or any of its Subsidiaries or any of
their respective properties, is pending or, to Parent's Knowledge, threatened,
other than, in each case, those which if adversely determined, individually or
in the aggregate with similar actions, demands, investigations, suits or
proceedings would not reasonably be expected to (i) be material to Parent and
its Subsidiaries taken as a whole, (ii) impair in any material respect the
ability of Parent or Merger Sub to perform its obligations under this Agreement,
or (iii) prevent or materially delay the consummation of any of the
Transactions.
Section 3.7 SEC Filings; Financial Statements.
(a) The Parent has filed or furnished, as applicable, all forms,
statements, certifications, reports and documents required to be filed or
furnished by it with the SEC under the Exchange Act or the Securities Act
since December 31, 2003 (the forms, statements, reports and documents
filed with or furnished to the SEC since such date and through the date
hereof, the "Parent Filed SEC Reports"). Each of the Parent Filed SEC
Reports, at its effective date (in the case of registration statements
filed pursuant to the requirements of the Securities Act) or at the time
of its filing or being furnished (in the case of other Parent Filed SEC
Reports) complied, or after an amendment was filed complied in all
material respects with the applicable requirements of the Securities Act,
the Exchange Act and the Xxxxxxxx-Xxxxx Act. As of such respective dates
(or, if amended prior to the date hereof, as of the date of such
amendment) the Parent Filed SEC Reports did not contain any untrue
33
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in
light of the circumstances in which they were made, not misleading.
(b) Except as permitted by the Exchange Act, including Sections
13(k)(2) and (3), since the provisions of the Xxxxxxxx-Xxxxx Act became
applicable to the Parent, the Parent has not (directly or indirectly
through its Subsidiaries) made, arranged or modified (in any material way)
any extension of credit in the form of a personal loan to any executive
officer or director of the Parent or any of its Subsidiaries in violation
of the Exchange Act.
(c) The Parent maintains disclosure controls and procedures as
required by Rule 13a-15 or 15d-15 under the Exchange Act. Such disclosure
controls and procedures are designed to ensure that information required
to be disclosed by the Parent is recorded, processed, summarized and
reported on a timely basis to the individuals responsible for the
preparation of the Parent's filings with the SEC and other public
disclosure documents. The Parent and its Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any material differences. The
Parent's management has disclosed to the Parent's auditors and the audit
committee of the Parent's board of directors (A) any significant
deficiencies in the design or operation of its internal controls over
financial reporting that are reasonably likely to adversely affect the
Parent's and its Subsidiaries' ability to record, process, summarize and
report financial information and has identified for the Parent's auditors
and audit committee of the Parent's board of directors any material
weaknesses in internal control over financial reporting and (B) any fraud,
whether or not material, that involves management or other employees who
have a significant role in the Parent's internal control over financial
reporting. The Parent has made available to the Company (i) a summary of
any such disclosure made by management to the Parent's auditors and audit
committee since December 31, 2004 and (ii) any material communication
between December 31, 2004 and the date of this Agreement made by
management or the Parent's auditors to the audit committee required or
contemplated by listing standards of the Nasdaq, the audit committee's
charter or professional standards of the Public Company Accounting
Oversight Board. Between December 31, 2004 and the date of this Agreement,
no material complaints from any source regarding accounting, internal
accounting controls or auditing matters, and no material concerns from
Parent or Subsidiary of Parent employees regarding questionable accounting
or auditing matters, have been received by the Parent. The Parent has made
available to the Company a summary of all such material complaints or
concerns relating to other matters made between December 31, 2004 and the
date of this Agreement through the Parent's whistleblower hot-line or
equivalent system for receipt of employee concerns regarding possible
violations of law by the Parent or any of its
34
Subsidiaries or any of their respective employees. Between December 31,
2004 and the date of this Agreement, no attorney representing the Parent
or any of its Subsidiaries, whether or not employed by the Parent or any
of its Subsidiaries, has reported evidence of a violation of securities
laws, breach of fiduciary duty or similar violation by the Parent, any
Subsidiary of Parent or any of their respective officers, directors,
employees or agents to the Parent's chief legal officer, audit committee
(or other committee designated for the purpose) of the board of directors
or the board of directors pursuant to the rules adopted pursuant to
Section 307 of the Xxxxxxxx-Xxxxx Act or any the Parent policy
contemplating such reporting, including in instances not required by those
rules.
(d) The consolidated financial statements of the Parent (including
any related notes and schedules thereto) included or incorporated by
reference in the Parent Filed SEC Reports (as the same may have been
restated or otherwise amended in a subsequent Parent Filed SEC Report)
comply as to form, as of their respective dates of filing with the SEC
(or, in the case of amended or restated filings, as of the date of the
latest amendment or restatement was filed with the SEC), in all material
respects with the Accounting Rules, have been prepared in accordance with
GAAP (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and fairly
present in all material respects the consolidated financial position of
the Parent and its consolidated Subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to
normal recurring non-material year-end audit adjustments and to any other
adjustments described therein or in the notes thereto).
Section 3.8 No Undisclosed Liabilities. Neither Parent nor any of its
Subsidiaries has any liabilities of any nature (whether accrued, absolute,
contingent or otherwise), which, if known, would be required to be reflected or
reserved against on a consolidated balance sheet of Parent prepared in
accordance with GAAP or the notes thereto, except for (i) liabilities reflected
in financial statements included in the Parent Filed SEC Reports or in the notes
thereto, (ii) liabilities incurred in connection with this Agreement or the
Transactions, (iii) liabilities incurred in the ordinary course of business
since December 31, 2005, and (iv) liabilities as would not reasonably be
expected to be material to Parent and its Subsidiaries taken as a whole.
Section 3.9 Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement, since December 31, 2005 and until
the date of this Agreement, (a) the Parent and its Subsidiaries have conducted
their business only in the ordinary course of business consistent with past
practice, and (b) there has not been any Material Adverse Effect on the Parent.
Section 3.10 Litigation. There is no suit, action or proceeding pending, or
to the Parent's Knowledge, threatened against or affecting the Parent or any of
its Subsidiaries that, individually or in the aggregate with similar suits,
actions or proceedings, would reasonably be expected to be material to the
Parent and its Subsidiaries taken as a whole nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against the Parent or any of its Subsidiaries that is, or which would reasonably
35
be expected to be, individually or in the aggregate with any similar judgments,
decrees, injunctions, rules or orders, material to the Parent and its
Subsidiaries taken as a whole.
Section 3.11 Information Supplied. None of the information supplied or to be
supplied by the Parent for inclusion or incorporation by reference in any
Company Disclosure Document, at the time filed (as amended or supplemented), at
the time provided to the Company's shareholders or (if applicable) creditors or
at the time of the Company General Meeting or (if applicable) any meeting of the
Company's creditors in connection with the Transactions, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading. To the extent
applicable, none of the information supplied by the Parent or Merger Sub for
inclusion or incorporation by reference in any Registration Statement, at the
time filed (as amended or supplemented), at the effective time of the
Registration Statement or at the Effective Time will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Registration
Statement will comply as to form with the applicable requirements of the
Securities Act. Notwithstanding the foregoing, neither the Parent nor Merger Sub
makes any representation or warranty with respect to any information supplied by
the Company which is contained or incorporated by reference in the Company
Disclosure Documents.
Section 3.12 Brokers. No broker, investment banker, financial advisor or
other Person, other than Xxxxxx Xxxxxxx & Co. Incorporated, the fees and
expenses of which will be paid by the Parent, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of the
Parent.
Section 3.13 Merger Sub Board Approval. The Merger Sub board of directors has
unanimously: (a) determined that the Merger is fair to, and in the best
interests of, Merger Sub and its shareholders, and that, considering the
financial position of the merging companies, no reasonable concern exists that
the Surviving Company will be unable to fulfill the obligations of Merger Sub to
its creditors; (b) approved this Agreement, the Merger and the other
Transactions; and (c) recommended and recommends that the shareholder of Merger
Sub approve this Agreement, the Merger and the other Transactions.
Section 3.14 Tax Matters. Neither the Parent nor any of its Subsidiaries has
taken any action or has failed to take any action or knows of any fact,
agreement, plan or other circumstance that would prevent the Merger from
qualifying as a tax free exchange under Section 104(h) of the Ordinance or as a
reorganization under Section 368 of the Code.
Section 3.15 Merger Sub.
(a) Merger Sub was formed solely for the purpose of engaging in the
Transactions, has engaged in no other business activities and has
36
conducted its operations only as contemplated hereby. Parent owns,
beneficially and of record, all of the issued and outstanding shares of
Merger Sub.
(b) Merger Sub is and has been treated, since its inception, as a
corporation for U.S. Tax purposes and neither Merger Sub nor the Parent or
any Person on behalf of Merger Sub has made any election to have Merger
Sub treated other than as a corporation for U.S. Tax purposes or has taken
a position inconsistent with such treatment.
ARTICLE 4
CONDUCT PRIOR TO THE EFFECTIVE TIME
Section 4.1 Conduct of Business by the Company. Except as otherwise
expressly contemplated by this Agreement, as required by applicable Legal
Requirements, as set forth in Section 4.1 of the Company Disclosure Letter or as
consented to in writing by the Parent (which consent shall not be unreasonably
withheld, conditioned or delayed), during the period from the date of this
Agreement to the earlier to occur of the Effective Time or termination of this
Agreement pursuant to Article 7, the Company shall, and shall cause its
Subsidiaries to, carry on their respective businesses in all material respects
in the ordinary course consistent with past practice, pay its material Taxes
when due (subject to good faith disputes over Taxes) and, to the extent
consistent therewith, use commercially reasonable efforts to (x) preserve intact
their current business organizations, (y) keep available the services of their
current officers and key employees and (z) preserve their relationships with
those Persons having business dealings with them, in each case to the end that
their goodwill and ongoing businesses shall not be impaired in any material
respect.
Section 4.2 Specific Activities. Without limiting the generality of Section
4.1, during the period from the date of this Agreement to the earlier to occur
of the Effective Time or termination of this Agreement pursuant to Article 7,
except as otherwise expressly contemplated by this Agreement, as set forth on
Section 4.2 of the Company Disclosure Letter, as required by applicable Legal
Requirements, or as consented to in writing by the Parent (which consent shall
not be unreasonably withheld, conditioned or delayed), the Company shall not,
and shall not permit any of its Subsidiaries to:
(a) Waive any stock repurchase rights, accelerate, (other than in
accordance with written agreements outstanding on the date hereof and
disclosed on Section 2.3 or 2.11(b) of the Company Disclosure Letter),
amend or change the period of exercisability of any Company Share Option
or Company SAR, or reprice any Company Share Option or authorize cash
payments in exchange for any Company Share Option;
(b) (i) Grant any severance or termination pay to any officer,
employee or consultant, except pursuant to written Employment Agreements
existing, custom or written policies existing, on the date hereof and
included in Section 2.11(b)(i) of the Company Disclosure Letter, or as
required by applicable Legal Requirements; or (ii) adopt any new severance
plan, agreement, custom, policy or arrangement or amend or modify or alter
in any manner any severance plan, agreement, custom, policy or arrangement
existing on the date hereof, or (iii) grant any equity-based compensation,
whether payable in cash or shares, including any Company Share Option or
37
Company SAR, except (A) pursuant to written Employment Agreements
existing, or written policies existing, on the date hereof and included in
Section 2.11(b)(ii) of the Company Disclosure Letter, (B) the issuance of
Company Shares upon exercise of vested Company Share Options or Company
SARs and (C) as permitted pursuant to Section 4.2(f);
(c) Transfer or license to any Person or otherwise extend, amend or
modify in any material respect any rights of such other Person or entity
to Company Intellectual Property, or enter into any agreements or make
other commitments or arrangements to grant, transfer or license to any
Person future patent right, in each case other than non-exclusive licenses
the granting of which are necessary in connection with or to the sale or
distribution of any product offering of the Company or any of its
Subsidiaries being marketed or sold by the Company or any of its
Subsidiaries and other agreements with customers, in each case in the
ordinary course of business consistent with past practices; provided that
in no event shall the Company or any Subsidiary of the Company: (i)
license on an exclusive basis or sell any Company Intellectual Property;
or (ii) enter into any agreement limiting the right of the Surviving
Company or any of its Subsidiaries to engage in any line of business or to
compete with any Person;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, shares of the Company, equity securities
or property) in respect of any shares of capital stock of the Company or
split, combine or reclassify any shares of capital stock of the Company or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for any shares of capital stock of the Company;
(e) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of the Company or its Subsidiaries or any
options, warrants, calls or rights to acquire any such shares, except in
connection with withholding to satisfy tax obligations with respect to
options, acquisitions in connection with the forfeiture of equity awards
or acquisitions in connection with the net exercise of options;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber
(or propose any of the foregoing with respect to) any shares of capital
stock or any securities convertible into or exercisable or exchangeable
for shares of capital stock, or subscriptions, rights, warrants or options
to acquire any shares of such capital stock or any securities convertible
into shares of such capital stock, or enter into other Contracts of any
character obligating it to issue any such shares or convertible
securities, other than the issuance, delivery and sale of: (i) Company
Shares pursuant to the exercise of Company Share Options or Company SARs
and other agreements set forth in Section 2.3 of the Company Disclosure
Letter, in each case outstanding as of the date of this Agreement; (ii)
Company Shares issuable upon exercise of the Convertible Notes; and (iii)
grants of Company Share Options to employees and new hires, in each such
case in the ordinary course of business consistent with past practice with
an exercise price not greater than the closing price per Company Share on
the date of grant, which Company Share Options shall not accelerate as a
result of the occurrence of any of the Transactions (whether alone or upon
the occurrence or nonoccurrence of any additional or subsequent events),
subject to Section 5.10(e);
38
(g) Cause, permit or propose any amendments to the Company Charter
Documents (or similar governing instruments of any of its Subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any Person or division
thereof, or otherwise acquire or agree to acquire all or substantially all
of the assets of any of the foregoing, enter into any joint ventures,
strategic partnerships or similar alliances or form or agree to form any
Subsidiaries;
(i) (i) Other than through licensing permitted by clause (c) or
sales of inventory in the ordinary course of business consistent with past
practice, sell, lease, license, encumber, convey, assign, sublicense or
otherwise dispose of or transfer any properties or assets or any interest
therein, other than the sale, lease or disposition of property or assets
with a purchase price not in excess of $5 million; or (ii) grant or
otherwise create or consent to the creation of any material Lien affecting
any owned or leased real property or any part thereof;
(j) (i) Incur any indebtedness for borrowed money or guarantee any
such indebtedness of another Person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
the Company or any of its Subsidiaries, enter into any "keep well" or
other agreement to maintain any financial statement condition or enter
into any arrangement having the economic effect of any of the foregoing
other than in connection with the financing of ordinary course trade
payables consistent with past practice; or (ii) make any loans, advances
or capital contributions to any Person (other than the Company or any of
its Subsidiaries), except loans or advances to employees made in the
ordinary course of business consistent with past practice;
(k) (i) Adopt or amend any Employment Agreement or Company Employee
Plan, except as may be required by applicable Legal Requirements; or enter
into any employment Contract or collective bargaining agreement (other
than offer letters and letter agreements entered into in the ordinary
course of business consistent with past practice with employees who are
terminable "at will," except as may be required by Legal Requirements, and
who are not officers of the Company or any Subsidiary of the Company);
(ii) commit or offer to or agree to pay or pay any special bonus or
special remuneration to any director or employee, except, in each case, as
may be required by applicable Legal Requirements or by any existing
employee benefit plan, policy, arrangement, program or Contract disclosed
in Section 2.11(b) of the Company Disclosure Letter or as permitted in
clause (iii)(y); (iii) (x)commit or offer to increase or increase the
salaries or wage rates or benefits (including rights to severance or
indemnification) of its directors, officers, employees or consultants
except, in each case, as may be required by applicable Legal Requirements
or by any existing employee benefit plan, policy, arrangement, program or
Contract disclosed on Section 2.11(b) of the Company Disclosure Letter, or
(y) pay, grant or increase, or change any past customs or unwritten
policies of the Company with respect to, benefits not required by Legal
Requirements with respect to its employees, except that the Company may
pay annual bonuses to employees for the Company's 2006 fiscal year in
accordance with the Company's 2006 bonus plan attached to Section 4.2(k)
39
of the Company's Disclosure Letter if such bonuses are allocated in
consultation with Parent and the Company may change severance pay as
expressly permitted by Section 4.2(b); (iv) take any action to accelerate
the vesting or payment, or fund or any other way secure payment of
compensation or benefits under any Company Employee Plans, to the extent
not already provided in such plans disclosed on Section 2.11(b) of the
Company Disclosure Letter; (v) change any actuarial or other assumptions
used to calculate funding obligations with respect to any Company Employee
Plan or change the manner in which contributions to such plans are made or
the basis on which such contributions are determined, except as may be
required by GAAP; or (vi) forgive any loans to any of its directors,
officers or employees;
(l) (i) Pay, discharge, or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance
with their terms in existence as of the date hereof; (ii) waive the
benefits of, or agree to modify in any material manner, terminate or
release any Person from, any confidentiality, standstill or similar
Contract to which the Company or any of its Subsidiaries is a party or of
which the Company or any of its Subsidiaries is a beneficiary; or (iii) or
settle any litigation (whether or not commenced prior to the date of this
Agreement) other than a settlement reimbursable from insurance or calling
solely for a cash payment in an aggregate amount less than $500,000 and in
any case including a full release of the Company and its Subsidiaries, as
applicable, or any settlement permitted by Section 5.3 or as previously
reserved for in the most recent balance sheet of the Company filed with or
furnished to the SEC prior to the date hereof;
(m) Materially modify or amend in a manner adverse to the Company or
its Subsidiaries or terminate any Company Contract, or waive, delay the
exercise of, release or assign any material rights or claims thereunder;
(n) Revalue any of its assets (including writing down the value of
capitalized inventory or writing off notes or accounts receivable) or make
any change in accounting methods, principles or practices, except (i) as
required by GAAP, Regulation S-X of the Exchange Act or as required by any
Governmental Entity or the Financial Accounting Standards Board (or
similar organization), (ii) as required by change in applicable Legal
Requirements, or (iii) in connection with the Restated Financials with
respect to historical financial statements and historical accounting
methods, principles or practices or arising out of investigations
conducted in connection therewith;
(o) (i) Hire any employee with an annual (base and incentive)
compensation level in excess of $125,000; or (ii) increase the net number
of employees of the Company and its Subsidiaries taken as a whole;
(p) Enter into any Contract or series of related Contracts that
would be a Company Contract if it were in existence on the date hereof
(except as expressly permitted under other provisions hereof or
contemplated by Section 5.3 of the Company Disclosure Letter);
40
(q) Make any material Tax election inconsistent with past practice,
agree to pay, settle or compromise any material Tax liability or consent
to any extension or waiver of any limitation period with respect to Taxes
(which will bind the Company for a period following the Closing Date), or
request, negotiate or agree to any Tax rulings, other than rulings
requested to cause the Merger to qualify as a tax free exchange under
Section 104(h) of the Ordinance or in connection with the Israeli Income
Tax Ruling;
(r) make any capital expenditures in excess of $500,000 in any
individual case or $5,000,000 in the aggregate; or
(s) Commit or agree in writing or otherwise to take any of the
actions described in Section 4.2(a) through (r).
Section 4.3 Parties' Cooperation. Subject to applicable Legal Requirements,
it is the Parties' mutual intention that the Company shall fully cooperate with
Parent to permit effective integration of the Company's and its Subsidiaries'
business, go-to-market, strategy and manufacturing platform with the business of
the Parent and its Subsidiaries after the Effective Time.
Section 4.4 Conduct of Business by the Parent.
(a) During the period from the date of this Agreement to the
Effective Time, except as otherwise expressly contemplated by this
Agreement, as set forth on Section 4.4 of the Parent Disclosure Letter or
as consented to in writing by the Company (which consent shall not be
unreasonably delayed), the Parent shall not, and shall not permit any of
its Subsidiaries to:
(i) Cause, permit or propose any amendments to the Parent Charter
Documents to the extent any such amendment would adversely affect the rights of
the Parent Common Stock;
(ii) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, shares, equity securities or property) in
respect of any shares of Parent Capital Stock;
(iii) Be party to any (or adopt a plan or agreement of) complete or
partial liquidation, dissolution or similar transaction involving the Parent;
(iv) Acquire or agree to acquire, by merging, purchasing a substantial
portion of the assets of or equity in, or by any other manner, any Person or
portion thereof, or otherwise acquire or agree to acquire any assets, licenses
or rights (other than the acquisition of inventory in the ordinary course of
business), if the entering into of a definitive agreement relating to or the
consummation of such acquisition, merger or consolidation would reasonably be
expected to (x) impose any material delay in the obtaining of, or significantly
increase the risk of not obtaining, any authorizations, consents, orders,
declarations or approvals of any Governmental Entity necessary to consummate the
Transactions or the expiration or termination of any applicable waiting period,
(y) significantly increase the risk of any Governmental Entity entering an order
41
or Restraint prohibiting the consummation of the Transactions or (z) otherwise
materially delay the consummation of the Transactions; or
(v) Commit or agree in writing or otherwise to take any of the actions
described in Section 4.4(a)(i) through (a)(iv).
(b) During the period from the date of this Agreement to the
Effective Time except as expressly provided in this Agreement, Merger Sub
shall not, and Parent shall not permit Merger Sub to, conduct any business
or undertake any activities except as required to perform its obligations
hereunder.
Section 4.5 No Control of Other Party's Business. Nothing contained in this
Agreement is intended to give Parent, directly or indirectly, the right to
control or direct the Company's or its Subsidiaries' operations prior to the
Effective Time, and nothing contained in this Agreement is intended to give the
Company, directly or indirectly, the right to control or direct Parent's or its
Subsidiaries' operations. Prior to the Effective Time, each of Parent and the
Company shall exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision over its and its Subsidiaries
respective operations.
ARTICLE 5
ADDITIONAL AGREEMENTS
Section 5.1 Parent Common Stock; Disclosure Documents.
(a) Except as set forth in Section 5.2(f), the Parent and the
Company intend that the Parent Common Stock to be issued pursuant to this
Agreement in connection with the Merger will be securities exempt from
registration under the Securities Act by reason of Section 3(a)(10)
thereof. The effect of such issuance is that (i) shares of the Parent
Common Stock issued to Persons who are not affiliates of the Parent or the
Company are not subject to restrictions on resale arising under U.S.
Securities laws and (ii) shares of the Parent Common Stock issued to
Persons who are affiliates of the Parent or the Company may be resold
pursuant to Rule 145 under the Securities Act.
(b) The Company Disclosure Documents shall include: (i) the
recommendation of the board of directors of the Company to the Company's
shareholders that they vote in favor of approval of this Agreement, the
Merger and the other Transactions, subject to the right of the board of
directors of the Company to withhold, withdraw, amend, modify or change
its recommendation in favor of this Agreement and the Merger in compliance
with Section 5.2; (ii) the opinion of Citigroup referred to in Section
2.18; and (iii) the Restated Financials, which shall not be so included
until any then outstanding comments of the SEC thereon shall have been
resolved.
Section 5.2 Court Approval.
(a) As promptly as practicable after the execution and delivery of
this Agreement and in accordance with Sections 350 and 351 of the Israeli
Companies Law, the Company shall submit to the district court of Tel
Aviv-Jaffa (the "Applicable Court") a first motion to (i) approve an
arrangement between the Company and its shareholders and/or (if
applicable) creditors in accordance with the terms of this Agreement (the
"Merger Proposal"); and (ii) convene, in the manner set forth in the
42
Israeli Companies Law and the regulations promulgated pursuant to Sections
350 and 351 of the Israeli Companies Law (the "Arrangement Regulations")
and as shall be ordered by the Applicable Court, shareholders and (if
applicable) creditors' meetings for the approval of the terms and
conditions of the Merger Proposal by a majority in number representing at
least 75% of the votes cast in those meetings, without taking into account
the abstaining participants (the "Section 350 Vote"). In such motion the
Company will inform the Applicable Court that upon the approval of the
Merger Proposal by the requisite majority at the shareholders and (if
applicable) creditors meetings, and subsequently by the Applicable Court,
such court approval would be relied upon by Parent as an approval of the
Merger Proposal for the purpose of qualifying the issuance of Parent
Common Stock hereunder for the Section 3(a)(10) exemption from the
registration requirements of the Securities Act. As part of the notice to
convene the shareholders and (if applicable) creditors meetings, the
Company will deliver to each of its shareholders and (if applicable)
creditors a notice of the respective meetings, the order of the court to
convene the meetings, the application for the approval of the proposed
Merger Proposal submitted to the court, a power of attorney to attend the
meetings in accordance with the Companies Law and a proxy card for the
vote (the "Information Statement"). The Information Statement will include
a description of the rights of a shareholder or a creditor, as applicable,
to object to the Merger Proposal, information on the hearing scheduled
before the Applicable Court and any position of the Company's board of
directors with respect to the advisability of the Merger. Subject to
Section 5.1(b)(iii), the Company agrees to include in the Information
Statement information with respect to itself and its Subsidiaries
consistent in scope and detail as would be required to be contained in the
Registration Statement (as defined in Section 5.2(f)). Parent agrees to
provide the Company for inclusion in the Information Statement information
with respect to itself and its Subsidiaries consistent in scope and detail
as would be required to be contained in the Registration Statement.
Following the approval of the Merger Proposal by the shareholders and (if
applicable) the creditors as set forth above, the Company will move for
(i) the approval of the arrangement and the Merger Proposal by the
Applicable Court and the order of all actions to be taken in accordance
with the Merger Proposal; and (ii) the court to hold a hearing regardless
of whether or not any objections to the Merger Proposal are raised (such
approval when obtained, the "Court Approval").
(b) Each of the Company and the Parent shall cause their respective
Israeli counsel, advisors and accountants to coordinate all activities,
and to cooperate with each other, with respect to the preparation and
filing of the Merger Proposal and all documents filed with respect to the
Court Approval. In addition, each of the Company and the Parent shall at
all times comply with all the procedures detailed in the Israeli Companies
Law and the Arrangement Regulations and shall make all necessary actions
in order to minimize the term of such procedures.
(c) Subject to the terms of Section 5.2(e) and Section 5.6, the
Company shall use commercially reasonable efforts to solicit from its
shareholders and (if applicable) creditors proxies in favor of the
approval of the Merger Proposal and the other Transactions. The Company
shall call, notice, convene, hold, conduct and solicit all proxies in
connection with the Company General Meeting and (if applicable) creditors'
43
meetings in compliance with all applicable Legal Requirements, including
the Israeli Companies Law, the Company Charter Documents, and the rules of
Nasdaq. The Company may adjourn or postpone the Company General Meeting:
(i) if and to the extent necessary to provide any necessary supplement or
amendment to the Company Disclosure Documents to the Company's
shareholders and/or (if applicable) creditors in advance of a vote on this
Agreement, the Merger, the Merger Proposal and the other Transactions;
(ii) if, as of the time for which the Company General Meeting is
originally scheduled (as set forth in the Company Disclosure Documents),
there are insufficient Company Shares represented (either in person or by
proxy) to constitute a quorum necessary to conduct the business of the
Company General Meeting; or (iii) pursuant to the order or stipulation of
the Applicable Court or as a result of an order or stipulation of the
Applicable Court that requires a vote of a class of shareholders other
than the holders of Company Shares or a class of (if applicable) creditors
other than the classes contemplated by the Company in the Merger Proposal.
Subject to Section 7.1(i), the Company's obligation to call, give notice
of, convene and hold the Company General Meeting in accordance with this
Section 5.2(c) shall not be limited or otherwise affected by the
commencement, disclosure, announcement or submission to the Company of any
Acquisition Proposal (as defined in Section 5.6(a)).
(d) Unless the board of directors of the Company shall have
withheld, withdrawn, amended, modified or changed its recommendation of
this Agreement and the Merger in compliance with Section 5.2(e): (i) the
board of directors of the Company shall recommend that the Company's
shareholders vote in favor of and approve this Agreement, the Merger and
the other Transactions at the Company General Meeting; (ii) the Company
Disclosure Documents shall include a statement to the effect that the
board of directors of the Company has recommended that the Company's
shareholders vote in favor of and approve this Agreement, the Merger and
the other Transactions at the Company General Meeting; and (iii) neither
the board of directors of the Company nor any committee thereof shall
publicly withhold, withdraw, amend, modify, change or propose or publicly
resolve to withhold, withdraw, amend, modify or change, in each case in a
manner adverse to the Parent, the recommendation of the board of directors
of the Company that the Company's shareholders vote in favor of and
approve this Agreement, the Merger and the other Transactions.
(e) Notwithstanding anything to the contrary in this Agreement, (x)
the board of directors of the Company or any committee thereof may
withhold, withdraw, amend, modify or change in a manner adverse to Parent
its recommendation in favor of the approval of this Agreement, the Merger
and the other Transactions or recommend an Acquisition Proposal if: (i) a
Superior Proposal (as defined in Section 5.6(a)) is made to the Company
and is not withdrawn; (ii) neither the Company nor any of its
representatives shall have violated the terms of Section 5.6 other than
immaterial violations that did not result in the relevant Acquisition
Proposal and the Company is not then in material breach of this Agreement;
(iii) the board of directors of the Company concludes in good faith, after
consultation with its outside counsel, that, in light of such Superior
Proposal, the withholding, withdrawal, amendment, modification or changing
of such recommendation is required in order for the board of directors of
the Company to comply with its fiduciary obligations to the Company's
44
shareholders under applicable Legal Requirements; (iv) the Company shall
have given the Parent at least five Business Days prior written notice of
the initial public disclosure by it of its conclusion pursuant to clause
(iii), which notice shall be accompanied by a correct and complete copy of
such Superior Proposal and all documents related thereto (and the Company
shall thereafter promptly provide the Parent with correct and complete
copies of any amendments or proposed amendments thereto) and during such
period shall give the Parent the opportunity to meet with the Company to
suggest such modifications to the terms hereof that the Parent may deem
advisable, and (v) this Agreement and the Merger have not yet been
approved by the Company's shareholders at the Company General Meeting and
(if applicable) by the Company's creditors at the creditors meetings.
(f) If the Parent does not receive no-action or exemptive relief
from the staff of the SEC within 60 days after the date hereof with
respect to the submission by Parent of the related no-action letter
request confirming that the Staff of the SEC will not recommend any
enforcement action if Parent securities are issued pursuant to the terms
hereof without registration under the Securities Act by virtue of Section
3(a)(10) thereof or if the SEC rejects Parent's application for such
relief within such 60-day period (the earlier of the expiration of such
60-day period and notification of such rejection is referred to below as
the "Registration Date"), then:
(i) Each of the Parent and Merger Sub shall use commercially reasonable
efforts to cause the shares of Parent Common Stock to be issued in the Merger to
be registered on a registration statement on Form S-4 filed with the SEC (the
"Registration Statement");
(ii) the Parent shall prepare and the Company shall reasonably cooperate
in such preparation and the Parent shall file with the SEC, as soon as
practicable after the Registration Date, the Registration Statement, which shall
include the Information Statement/prospectus to be sent to the stockholders of
the Company in connection with the Company General Meeting, and the Parent shall
use commercially reasonable efforts to cause the Registration Statement to
become effective as soon thereafter as practicable;
(iii) Each of the Parent (for itself and Merger Sub) and the Company shall
provide promptly to the other such information concerning its business and
financial statements and affairs as, in the reasonable judgment of the providing
party or its counsel, may be required or appropriate for inclusion in the
Registration Statement, the Information Statement, or in any amendments or
supplements thereto, and to cause its counsel and auditors to cooperate with the
other's counsel and auditors in the preparation of the Registration Statement
and the Information Statement;
(iv) Each of the Parent (for itself and Merger Sub) and the Company shall
notify the other promptly of the receipt of any written or verbal comments from
the SEC or its staff and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the Registration Statement
or the Information Statement or any other filing related thereto or for
additional information and shall provide the other with copies of all
correspondence, and the opportunity to participate in any meeting or other
conversation, between such party or any of its representatives, on the one hand,
45
and the SEC, or its staff or any other government officials, on the other hand,
with respect to the Registration Statement or the Information Statement or other
filing related thereto;
(v) The Parent shall provide the Company with a reasonable opportunity to
review and comment on the Registration Statement and any amendment or supplement
to the Registration Statement prior to filing such with the SEC;
(vi) The Company shall promptly advise the Parent, and the Parent shall
promptly advise the Company, in writing if at any time prior to the Effective
Time either the Company or the Parent shall obtain knowledge of any facts that
might make it necessary or appropriate to amend or supplement the Registration
Statement or the Information Statement, in order to make the statements
contained or incorporated by reference therein not misleading or to comply with
applicable Legal Requirements, and the Company and the Parent shall cooperate in
delivering any such amendment or supplement to all the holders of Company Shares
and/or filing any such amendment or supplement with the SEC or its staff and/or
any other government officials; and
(vii) As soon as practicable after the Registration Statement is declared
effective by the SEC, the Company shall deliver the Information Statement to all
holders of Company Shares.
Section 5.3 Cooperation. The Company and Parent shall cooperate, for the
purpose of minimizing the liability of the Company and its affiliates (as
defined in Rule 405 of the Securities Act), in the defense and settlement or
other resolution of (a) any security holder suit or action against the Company
and/or its affiliates relating to the transactions contemplated hereby or the
Options Matters (as defined in Section 8.7(f)) or the Restated Financials and
(b) any suit, action, proceeding or investigation against the Company and/or its
affiliates by any Governmental Entity with respect to the Options Matters or the
Restated Financials, and no such suit, action, proceeding or investigation shall
be settled or otherwise resolved by the Company (on its own behalf or on behalf
of its affiliates) without Parent's prior written consent, which consent shall
not be unreasonably withheld, conditioned or delayed (it being understood and
agreed by Parent and the Company that the reasonableness of such determination
will be evaluated (i) based solely on the merits of the applicable suit, action,
proceeding or investigation and the terms of the proposed related settlement or
resolution, and (ii) subject to Section 5.3 of the Company Disclosure Schedule).
Section 5.4 Israeli Approvals.
(a) Each party to this Agreement shall use its reasonable best
efforts to deliver and file, as promptly as practicable after the date of
this Agreement, each notice, report or other document required to be
delivered by such party to, or filed by such party with, any Israeli
Governmental Entity with respect to the Merger. Without limiting the
generality of the foregoing:
(i) as promptly as practicable after the date of this Agreement, the
Company and the Parent shall prepare and file any notifications required under
the Israeli Restrictive Trade Practices Law in connection with the Merger;
46
(ii) the Company and the Parent shall respond as promptly as practicable
to any inquiries or requests received from the Commissioner of Israeli
Restrictive Trade Practices for additional information or documentation; and
(iii) the Company and the Parent shall use their reasonable best efforts
to obtain, as promptly as practicable after the date of this Agreement, the
following consents and Approvals, and (subject to Section 5.2(e)) any other
consents and Approvals that may be required pursuant to Israeli Legal
Requirements in connection with the Merger: (A) the OCS Approval; and (B) the
Investment Center Approval. In this connection the Parent shall provide to the
OCS and the Investment Center any information, and shall execute any
undertakings, customarily requested by such authorities as a condition to the
OCS Approval or Investment Center Approval (including if requested, the standard
undertaking with respect to the observance by the Parent, as shareholder of the
Company or the Surviving Company, of the requirements of The Encouragement of
Research and Development in Industry Law, 5744 1984 of the State of Israel (the
"R&D Law").
(b) Each party to this Agreement shall: (i) give the other parties
prompt notice of the commencement of any legal proceeding by or before any
Israeli Governmental Entity with respect to the Transactions; (ii) keep
the other parties informed as to the status of any such legal proceeding;
and (iii) promptly inform the other parties of any communication to the
Commissioner of Israeli Restrictive Trade Practices, the OCS, the
Investment Center, the Israeli Securities Authority, the Israeli Income
Tax Commission, the Companies Registrar or any other Israeli Governmental
Entity regarding the Transactions. The parties to this Agreement will
consult and cooperate with one another, and will consider in good faith
the views of one another, in connection with any analysis, appearance,
presentation, memorandum, brief, argument, opinion or proposal made or
submitted in connection with any Israeli legal proceeding relating to the
Merger pursuant to a joint defense agreement separately agreed to. In
addition, except as may be prohibited by any Israeli Governmental Entity
or by any Israeli Legal Requirement, in connection with any such legal
proceeding under or relating to the Israeli Restrictive Trade Practices
Law or any other Israeli antitrust or fair trade law, each party hereto
will permit authorized representatives of the other party to be present at
each meeting or conference relating to any such legal proceeding and to
have access to and be consulted in connection with any document, opinion
or proposal made or submitted to any Israeli Governmental Entity in
connection with any such legal proceeding.
(c) As soon as reasonably practicable after the execution of this
Agreement, the Company shall instruct its Israeli counsel, advisors and
accountants to prepare and file with the Israeli Income Tax Commissioner
an application for a ruling confirming that (i) the obligation to pay
capital gains tax on the exchange of the Company Shares for Parent Common
Stock will be deferred in accordance with the provisions of Section 104(h)
of the Ordinance, and (ii) the conversion or assumption by the Parent of
Company Share Options into options (the "Assumed Options") and SARs to
purchase shares of Parent Common Stock will not result in a taxable event
with respect to such Company Share Options pursuant to Section 3(i) or
Section 102 of the Ordinance, and with respect to such Company Share
Options subject to Section 102, that the requisite holding period will be
deemed to have begun at the time of the issuance of the Company Share
Options (which ruling may be subject to customary conditions regularly
47
associated with such a ruling) (the "Israeli Income Tax Ruling"). Each of
the Company and the Parent shall cause their respective Israeli counsel,
advisors and accountants to coordinate all activities, and to cooperate
with each other, with respect to the preparation and filing of such
application for the Israeli Income Tax Ruling and in the preparation of
any written or oral submissions that may be necessary, proper or advisable
to obtain the Israeli Income Tax Ruling. Subject to the terms and
conditions hereof, the Company shall use reasonable best efforts to
promptly take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable Legal
Requirements to obtain the Israeli Income Tax Ruling, as promptly as
practicable.
(d) Each of the Company and the Parent shall cause all documents
that it is responsible for filing with any Governmental Entity under this
Section 5.4 to comply as to form and substance in all material respects
with the applicable Legal Requirements. Whenever any event occurs which is
required to be set forth in an amendment or supplement to any such
document or filing, the Company or the Parent, as the case may be, shall
promptly inform the other of such occurrence and cooperate in filing with
the applicable Government Entity, such amendment or supplement.
(e) As soon as reasonably practicable after the execution of this
Agreement, the Parent shall cause its Israeli counsel to prepare and file
with the Israeli Securities Authority an application for an exemption from
the requirements of the Israeli Securities Law (1968) concerning the
publication of a prospectus in respect of the exchange of the Company
Options for the Assumed Options, pursuant to Section 15D of the Securities
Law of Israel. The Company shall cooperate with the Parent in connection
with the preparation and filing of such application and in the preparation
of any written or oral submissions that may be necessary, proper or
advisable to obtain such exemption.
Section 5.5 Confidentiality; Access to Information.
(a) Upon reasonable notice, except (i) as the Company reasonably
determines (after consultation with Parent and receiving and considering
the advice of the Company's outside counsel), is required by applicable
Legal Requirements, or (ii) as would be reasonably expected to violate or
result in a loss or impairment of any attorney-client or work-product
privilege (it being understood that the parties shall use reasonable best
efforts to cause such information to be provided in a manner that does not
result in such violation, loss or impairment, which reasonable best
efforts shall include entering into one or more joint defense or community
of interest agreements on customary terms if counsels to the parties
reasonably conclude that such agreements are likely to preserve the
privilege (the "Privilege Exception")), the Company shall, and shall cause
each of its Subsidiaries to, afford to the Parent and to its officers,
employees, accountants, counsel, financial advisors and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to all its properties, books,
contracts, commitments, personnel and records so that the Parent may
obtain all information concerning the business as its may reasonably
request (including the status of product development efforts and, to the
extent available to the Company after reasonable inquiry, summaries of
fees and expenses incurred or paid or reasonably expected to be incurred
48
or paid by the Company or its Subsidiaries to legal, accounting and other
professional service advisors in connection with the Transactions
(including the Restated Financials and the Options Matters)) (provided
that Parent and its representatives shall conduct any such activities in
such a manner as not to interfere unreasonably with the business or
operations of the Company), and during such period, the Company shall, and
shall cause each of its Subsidiaries to, furnish promptly to the Parent
(i) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of
U.S. or Israeli federal or state securities laws and (ii) all other
information concerning its business, properties and personnel as the
Parent may reasonably request (including the Company's outside accountants
work papers).
(b) Any information obtained by either party pursuant to this
Section 5.5 shall be subject to the Confidentiality Agreement dated June
29, 2006, between the Parent and the Company (the "Confidentiality
Agreement"). Without limiting the generality of the foregoing, Parent,
Merger Sub and the Company shall not, and shall each use their respective
reasonable best efforts to cause its representatives not to, use
information obtained pursuant to this Section 5.5 for any purpose
unrelated to consummation of the Transactions. No review or information
obtained pursuant to this Section 5.5 shall limit the Parent's or Merger
Sub's reliance on or the enforceability of any representation or warranty
made by the Company herein.
Section 5.6 No Solicitation.
(a) From and after the date of this Agreement until the earlier to
occur of the Effective Time or termination of this Agreement pursuant to
Article 7, and except as otherwise provided for in this Agreement, the
Company and its Subsidiaries will not, nor will they authorize or
knowingly permit any of their respective officers, directors, controlled
affiliates or employees or any of their respective investment bankers,
attorneys or other advisors or representatives to, directly or indirectly:
(i) solicit, initiate, or take an action intended to encourage or induce
the making, submission or announcement of any Acquisition Proposal; (ii)
engage or participate in any discussions or negotiations with any Person
(other than any officer, director, controlled affiliate or employee of the
Parent or any of its Subsidiaries or any investment banker, attorney or
other advisor or representative of the Parent or any of its Subsidiaries)
regarding, or furnish to any Person any information with respect to, or
take any other action intended to facilitate any inquiries or the making
of, any proposal that constitutes or may reasonably be expected to lead
to, any Acquisition Proposal; (iii) approve, endorse or recommend any
Acquisition Proposal; or (iv) enter into any letter of intent or similar
document or any contract, agreement or commitment contemplating or
otherwise relating to any Acquisition Transaction. Notwithstanding the
above, prior to the approval of this Agreement and the Merger by the
Company's shareholders at the Company General Meeting and (if applicable)
by the Company's creditors at the creditors meetings, nothing contained in
this Agreement (including this Section 5.6) shall prohibit the board of
directors of the Company, in response to an unsolicited Acquisition
Proposal that is not withdrawn, from engaging or participating in
discussions or negotiations with and furnishing information to the party
making such Acquisition Proposal, provided that the board of directors of
the Company: (A) in good faith after consultation with the Company's
49
financial advisors, concludes that the offer constitutes or could
reasonably be expected to result in or lead to a Superior Proposal, and
(B) determines in good faith after consultation with its outside legal
counsel that such action is required in order for the board of directors
of the Company to comply with its fiduciary obligations to the Company's
shareholders under applicable Legal Requirements; and provided further
that (x) concurrently with furnishing any such information to, or entering
into discussions or negotiations with, such party, the Company gives the
Parent written notice of the identity of such Person or group and of the
Company's intention to furnish information to, or enter into discussions
or negotiations with, such party and (y) the Company receives from such
party an executed confidentiality agreement at least as restrictive as the
Confidentiality Agreement; and (z) prior to or contemporaneously with
furnishing any such information to such party, the Company furnishes such
non-public information to the Parent (to the extent such information has
not been previously furnished by the Company to the Parent). The Company
and its Subsidiaries will immediately cease any and all existing
discussions or negotiations with any parties conducted heretofore with
respect to any Acquisition Proposal.
For purposes of this Agreement: (i) "Acquisition Proposal" means any offer
or proposal (other than an offer or proposal by the Parent or Merger Sub)
relating to an Acquisition Transaction; (ii) "Acquisition Transaction" shall
mean any transaction or series of related transactions other than the
Transactions involving: (A) any acquisition or purchase from the Company by any
Person or "group" (as defined in Section 13(d) of the Exchange Act and the rules
and regulations thereunder) of more than a 15% interest in the total outstanding
voting securities of the Company or any of its Subsidiaries or any tender offer
or exchange offer that if consummated would result in any Person or "group" (as
defined in Section 13(d) of the Exchange Act) beneficially owning 15% or more of
the total outstanding voting securities of the Company or any of its
Subsidiaries or any merger, consolidation, business combination, arrangement or
similar transaction involving the Company pursuant to which the shareholders of
the Company immediately preceding such transaction hold less than 85% of the
equity interests in the surviving or resulting entity of such transaction; (B)
any sale, lease, exchange, transfer, license or disposition (other than in the
ordinary course of business consistent with past practice) of more than 15% of
the consolidated assets of the Company and its Subsidiaries taken as a whole or
of the consolidated assets of the Company and its Subsidiaries to which 15% or
more of the Company's and its Subsidiaries' revenues or earnings on a
consolidated basis are attributable; or (C) any liquidation, dissolution,
recapitalization or other significant corporate reorganization of the Company;
and (iii) "Superior Proposal" shall mean any bona fide, unsolicited written
Acquisition Proposal to acquire at least 75% of the outstanding voting
securities of the Company or all or substantially all of the assets of the
Company: (A) with respect to which the board of directors of the Company shall
have in good faith determined (taking into account the advice of the Company's
financial advisors) that the acquiring party is capable of consummating such
proposed Acquisition Transaction on the terms proposed; and (B) the board of
directors of the Company shall have in good faith determined (taking into
account the advice of the Company's financial advisors) that the proposed
Acquisition Transaction, taking into account all the terms and conditions of
50
such Acquisition Proposal including the reasonably expected time for the
consummation of such Acquisition Transaction, is more favorable to the
shareholders of the Company, from a financial point of view, than the
Transactions (taking into account any proposed modifications by the Parent in
response thereto).
(b) In addition to the obligations of the Company set forth in
Section 5.6(a), the Company as promptly as practicable, and in any event
within 48 hours, shall notify the Parent of: (i) any request for
information in connection with, or which the Company reasonably concludes
would lead to, any Acquisition Proposal; (ii) the receipt of any
Acquisition Proposal, or any inquiry with respect to or which the Company
reasonably concludes would lead to any Acquisition Proposal; (iii) the
material terms and conditions of such request, Acquisition Proposal or
inquiry; and (iv) the identity of the Person or group making any such
request, Acquisition Proposal or inquiry. The Company shall keep the
Parent informed in all material respects of the status and details
(including material amendments or proposed amendments) of any such
request, Acquisition Proposal or inquiry. In addition to the foregoing,
the Company shall: (i) provide the Parent with at least 48 hours prior
written notice (or such lesser prior notice as provided to the members of
the board of directors of the Company) of any meeting of the board of
directors of the Company at which the board of directors of the Company is
reasonably expected to consider an Acquisition Proposal; and (ii) provide
the Parent with at least three Business Days prior written notice (or such
lesser prior notice as provided to the members of the board of directors
of the Company) of any meeting of the board of directors of the Company at
which the board of directors of the Company is reasonably expected to
recommend a Superior Proposal to its shareholders and together with such
notice a copy of drafts of definitive documentation relating to such
Superior Proposal.
(c) Nothing contained in this Agreement shall prohibit the board of
directors of the Company from taking and disclosing to the Company's
shareholders a position contemplated by Rule 14e-2(a), Rule 14d-9 or Item
1012(a) of Regulation M-A promulgated under the Exchange Act or Section
329 of the Companies Law or any other applicable Legal Requirements;
provided, however, that, except as contemplated by Section 5.2(e), neither
the board of directors of the Company nor any committee thereof shall
withdraw or modify, or propose to withdraw or modify, in a manner adverse
to the Parent, its recommendation in favor of the approval of this
Agreement, the Merger or the other Transactions or recommend an
Acquisition Proposal. In addition, it is understood and agreed that, for
all purposes of this Agreement, a factually accurate public statement by
the Company that describes the Company's receipt of an Acquisition
Proposal and the operation of this Agreement with respect thereto, or any
"stop, look and listen" communication by the Board of Directors of the
Company pursuant to Rule 14d-9(f) of the Exchange Act or any other
applicable Legal Requirements, or any similar communication to the
shareholders of the Company, shall not constitute a Triggering Event or a
withdrawal or modification or supplement, or proposal by the board of
directors of the Company to withdraw or modify or supplement, such board's
recommendation of this Agreement or the Transactions, or an approval or
recommendation with respect to any Acquisition Proposal.
51
Section 5.7 Public Disclosure. The Parent and the Company will use
commercially reasonable efforts to consult with each other before issuing, and
provide each other the opportunity to review any press release or other public
statements with respect to the Merger and the other Transactions, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as either party may determine is required by applicable
Legal Requirements, the SEC or by obligations pursuant to any listing agreement
with any national securities exchange or national trading system (in which case
reasonable efforts to consult with the other party will be made prior to any
such release or public statement). Each of Parent and the Company may make any
public statement in response to specific questions by the press, analysts,
investors or those attending industry conferences or financial analyst
conference calls, so long as such statements are substantially similar to
previous press releases, public disclosures or public statements made by the
Parent or the Company in accordance with this Section 5.7. The parties agree
that the initial press release to be issued with respect to the Transactions
shall be a joint release in the form heretofore agreed to by the parties.
Section 5.8 Reasonable Best Efforts; Regulatory Filings.
(a) Subject to Section 5.2(e), Section 5.6, Section 5.9 and the last
sentence of this Section 5.8, the parties hereto will use their respective
reasonable best efforts to consummate and make effective the transactions
contemplated hereby and to cause the conditions to the Merger set forth in
Article 6 to be satisfied, including using their respective reasonable
best efforts to accomplish the following: (i) the obtaining of all
necessary actions or non-actions, consents and approvals from Governmental
Entities necessary in connection with the consummation of the transactions
contemplated by this Agreement and the making of all necessary
registrations and filings (including filings with Governmental Entities)
and the taking of all reasonable steps as may be necessary to obtain an
approval from, or to avoid an action or proceeding by, any Governmental
Entity necessary in connection with the consummation of the transactions
contemplated by this Agreement, (ii) the defending of any lawsuits or
other legal proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions to be performed or
consummated by such party in accordance with the terms of this Agreement,
including seeking to have any stay or temporary restraining order entered
by any court or other Governmental Entity vacated or reversed and (iii)
the execution and delivery of any additional instruments necessary to
consummate the Merger and other transactions to be performed or
consummated by such party in accordance with the terms of this Agreement
and to fully carry out the purposes of this Agreement. Each of the parties
hereto shall promptly make its respective filings, and thereafter make any
other required submissions under the HSR Act with respect to the
transactions contemplated hereby.
(b) Each of the parties hereto will furnish to the other such
necessary information and reasonable assistance as the other may request
in connection with the preparation of any required governmental filings or
submissions and will cooperate in responding to any inquiry from a
Governmental Entity, including as promptly as practicable informing the
other party of such inquiry and consulting with the other party in advance
52
before making any presentations or submissions to a Governmental Entity.
Each of the Company and the Parent shall notify the other promptly upon
the receipt of any comments or other communication from any government
officials and of any request by any government officials for amendments or
supplements to any filing with any applicable Governmental Entity, or for
additional information and shall supply the other with copies of all
correspondence between such party or any of its representatives, on the
one hand, and any government officials, on the other hand, with respect to
any such filing. Each of the Parent and the Company shall provide the
other with a reasonable opportunity to review and provide comments on any
such filings, correspondence or communications. Whenever any event occurs
which is required to be set forth in an amendment or supplement to any
such filing pursuant hereto, the Company or the Parent, as the case may
be, shall promptly inform the other of such occurrence and cooperate in
filing with any government officials, and/or mailing to the shareholders
or (if applicable) creditors of the Company, such amendment or supplement
(and shall provide the other with a reasonable opportunity to review and
provide comments on any such amendment or supplement). For the avoidance
of doubt, subject to the Privilege Exception, the filings, correspondence
and communications referenced in this Section 5.8(b) shall include all
filings, correspondence and communications by the Company with the SEC or
any other Governmental Entity with respect to the Restated Financials and
the Options Matters.
(c) Parent, Merger Sub and the Company agree to use their reasonable
best efforts (which shall include vigorous litigation on the merits) to
(i) avoid or eliminate each and every impediment and obtain all consents
under any applicable Antitrust Law that may be required by any U.S. or
foreign federal, state or local antitrust or competition Governmental
Entity, in each case with competent jurisdiction, so as to enable the
parties to close the Transactions as promptly as practicable or to avoid
the entry of, or to effect the dissolution of or vacate or lift, any
decree, order, ruling, judgment, injunction, temporary restraining order
or other similar order that would otherwise have the effect of preventing
or materially delaying the consummation of the Merger and the other
transactions contemplated by this Agreement, and (ii) ensure that (A) no
requirement for any non-action, consent or approval of the United States
Federal Trade Commission, the Antitrust Division of the United States
Department of Justice, any authority enforcing applicable Antitrust Law,
any State Attorney General or other Governmental Entity, (B) no decree,
judgment, injunction, temporary restraining order or any other order in
any suit or proceeding, and (C) no other matter relating to any antitrust
or competition Law would, in each case under this clause (ii), preclude
consummation of the Merger by the End Date (without giving effect to
Section 7.1(b)(y) hereof), including (in the case of Parent under clauses
(i) and (ii)) by agreeing (by consent decree or otherwise) to a reasonable
and non-discriminatory licensing policy with respect to its and its
Subsidiaries' (and the Surviving Company's) patents (a "Licensing
Policy"). To the extent practicable and permitted by regulatory officials,
Parent shall provide the Company and its counsel with reasonable
opportunity to attend meetings with regulatory officials relating to the
matters set forth in this Section 5.8. For the avoidance of doubt, the
Parent shall have the right to direct and control any litigation,
negotiation or other action relating to the antitrust matters set forth in
this Section 5.8(c) with counsel of its own choosing. Notwithstanding
53
anything in this Agreement to the contrary, nothing in this Agreement
shall require the Parent, Merger Sub or the Company (and the Company shall
not, without the prior written consent of Parent, agree) to: (i) to
dispose of or transfer or cause any of its Subsidiaries to dispose of or
transfer any assets, or to commit to cause the Company or any of its
Subsidiaries to dispose of or transfer any assets; (ii) to discontinue or
cause any of its Subsidiaries to discontinue offering any product or
service, or to commit to cause the Company or any of its Subsidiaries to
discontinue offering any product or service; (iii) subject to any
Licensing Policy, to license or otherwise make available, or cause any of
its Subsidiaries to license or otherwise make available, to any Person,
any technology, software or other proprietary asset, or to commit to cause
the Company or any of its Subsidiaries to license or otherwise make
available to any Person any technology, software or other proprietary
asset; (iv) to hold separate or cause any of its Subsidiaries to hold
separate any assets or operations (either before or after the Closing
Date), or to commit to cause the Surviving Company or any of its
Subsidiaries to hold separate any assets or operations; or (v) subject to
the undertakings required by Section 5.4 and the commitments herein
regarding a Licensing Policy, to make or cause any of its Subsidiaries to
make any commitment (to any Governmental Entity or otherwise) regarding
its future operations or the future operations of the Surviving Company or
any of its Subsidiaries or that would affect its discretion in determining
the terms of any Contract or relationship with any Person.
Section 5.9 Third Party Consents. As soon as practicable following the date
hereof, the Company will use commercially reasonable efforts to obtain any
consents, waivers and approvals under any of its or its Subsidiaries' respective
Contracts (including those Contracts set forth or required to be set forth in
Section 2.5(a) of the Company Disclosure Letter) required to be obtained in
connection with the consummation of the Transactions; provided that the Company
shall not be required to (i) make any material financial accommodation or (ii)
pay or commit to pay to any such Person whose consent is being solicited any
material amount of cash or other consideration, or make any commitment to incur
any other material liability or other obligation due to such Person.
Section 5.10 Share Options, SARs and Employee Benefits.
(a) At the Effective Time, each outstanding Company Share Option and
Company SAR under the Company Option Plans or under any agreement
disclosed in Section 2.3 of the Company Disclosure Letter, whether or not
vested, shall by virtue of the Transaction be assumed by the Parent.
Except as set forth in Section 5.10(e), each Company Share Option and
Company SAR so assumed by the Parent under this Agreement will continue to
have, and be subject to, the same terms and conditions of such options
immediately prior to the Effective Time (including any repurchase rights
or vesting provisions and provisions regarding the acceleration of vesting
on certain transactions), except that: (i) each Company Share Option will
be solely exercisable (or will become exercisable in accordance with its
terms) for that number of whole shares of Parent Common Stock equal to the
product of the number of Company Shares that were issuable upon exercise
of such Company Share Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounded down to the nearest whole number
of shares of Parent Common Stock; (ii) the per share exercise price for
54
the shares of Parent Common Stock issuable upon exercise of such assumed
Company Share Option will be equal to the quotient determined by dividing
the exercise price per Company Share at which such Company Share Option
was exercisable immediately prior to the Effective Time by the Exchange
Ratio, rounded up to the nearest whole cent; (iii) each Company SAR will
be solely exercisable (or will become exercisable in accordance with its
terms) with respect to that number of whole shares of Parent Common Stock
equal to the product of the number of Company Shares that were subject to
such Company SAR immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares of
Parent Common Stock; and (iv) the per share exercise price with respect to
such assumed Company SAR will be equal to the quotient determined by
dividing the exercise price per Company Share at which such Company SAR
was exercisable immediately prior to the Effective Time by the Exchange
Ratio, rounded up to the nearest whole cent. The Parent shall comply with
the terms of all such Company Share Options and Company SARs and use its
reasonable best efforts to ensure, to the extent required by, and subject
to the provisions of, the Company Option Plans and permitted under the
Code or other relevant Legal Requirements that any Company Share Options
that qualified for tax treatment under Section 422 of the Code prior to
the Effective Time and that any Company Share Options that qualified for
tax treatment under Section 102 of the Ordinance prior to the Effective
Time continue to so qualify, with the same rights, after the Effective
Time. The Parent shall take all corporate actions necessary to reserve for
issuance a sufficient number of shares of the Parent Common Stock for
delivery upon exercise of all Company Share Options and Company SARs
pursuant to the terms set forth in this Section 5.10(a). Prior to the
Effective Time, the Company shall take all actions necessary to effect the
transactions contemplated by this Section 5.10(a).
(b) The Company shall terminate, effective as of the day immediately
preceding the Effective Time, any and all Company Employee Plans intended
to include a Code Section 401(k) arrangement (the "401(k) Plans") unless
the Parent provides notice to the Company that such 401(k) Plan(s) shall
not be terminated. Prior to the Closing Date, the Parent shall receive
from the Company evidence that the 401(k) Plans have been terminated
pursuant to resolutions of the relevant entity's board of directors (the
form and substance of such resolutions shall be subject to review and
approval of the Parent), effective as of the day immediately preceding the
Effective Time.
(c) On and for one year after the Effective Time, the Parent and/or
any of the Parent's Subsidiaries shall arrange for each employee who
resides in the United States of America and was participating in any of
the Company Employee Plans immediately before the Effective Time, to
participate in any counterpart benefit plans in the United States of
America in which employees of the Parent participate (the "U.S.
Counterpart Plans"), in accordance with the eligibility criteria thereof,
provided that: (i) such participants shall receive full credit for years
of service with any one or more of the Company, any the Company Subsidiary
and prior employers to the extent such service is taken into account under
such the Company Employee Plans and to the extent such service credit does
not result in the duplication of benefits and (ii) such participants shall
participate in the U.S. Counterpart Plans on terms no less favorable than
55
those offered by the Parent to its similarly situated employees. Provided
that the Company or the applicable employee timely provides the Parent
and/or its Subsidiaries with the information necessary to comply with this
provision, the Parent and/or its Subsidiaries shall give credit under
those of its U.S. Counterpart Plans that are welfare benefit plans for all
amounts credited toward deductibles and out-of-pocket maximums, and time
accrued against applicable waiting periods, by employees (in each case
including their eligible dependents) of the Company and its Subsidiaries,
in respect of the applicable plan year in which the Effective Time occurs.
With respect to its medical plans, the Parent and/or its Subsidiaries
shall waive all requirements for evidence of insurability and pre-existing
conditions otherwise applicable to employees of the Company or any of its
Subsidiaries under the U.S. Counterpart Plans in which employees of the
Company and its Subsidiaries become eligible to participate on or
following the Effective Time (to the extent that such conditions were
covered under the Company Employee Plans immediately prior to the
Effective Time). Notwithstanding the forgoing, the Parent or any of its
Subsidiaries may continue one or more of the Company Employee Plans, in
which case the Parent and its Subsidiaries shall have satisfied their
obligations hereunder with respect to the benefits so provided. Nothing in
this Section 5.10(d) shall be construed to entitle any employee to
continue his or her employment for any period of time or prevent the
Parent from amending any of the U.S. Counterpart Plans or the Company
employee benefit plans at any time; provided, however, that no such
amendment shall be made or given effect within one year after the
Effective Time to the extent that such amendment would result in persons
employed with the Company or any of its Subsidiaries immediately before
the Effective Time having benefits, in the aggregate, that are less
favorable than the benefits provided to similarly-situated employees of
the Parent.
(d) Without limiting the generality of Section 8.9(b), nothing in
this Agreement is intended to confer any rights or remedies on any
employee, former employee, dependent or beneficiary.
(e) (i) Effective on the Closing Date, the Company Share Options and
Company SARs granted to individuals who are employees of the Company as of
the Closing Date ("Employee Holders") shall be amended to provide that
during the two year period beginning on the Closing Date, the vesting of
any and all such options shall accelerate to the extent set forth below
upon (x) the involuntary termination of the employment of the Employee
Holder, other than for Cause, by the Parent or (y) upon the voluntary
termination of the employment of the Employee Holder due to Good Reason.
"Cause" shall mean, as reasonably determined by the Parent based on the
information available to it after due inquiry, (1) "Misconduct," as
defined in the Parent's Amended and Restated 2005 Incentive Plan as in
effect on the date hereof, or (2) the material failure of the Employee
Holder to carry out the duties of his or her employment position, as
determined pursuant to the performance standards generally applicable to,
and in a manner not more stringent than generally applied to, employees of
the Parent; provided that Cause shall not exist under clause (2) of this
definition if the action(s) and/or omission(s) of the Employee Holder that
would otherwise constitute Cause are curable in all material respects,
unless the Employee Holder fails to cure such action(s) and omission(s) in
all material respects within 30 days of receiving written notice from the
Parent of its intent to terminate the employment of the Employee Holder
56
for Cause absent such cure and specifying in reasonable detail the
failures to comply deemed by Parent to constitute Cause. If requested by
the Employee Holder, Parent will meet with the Employee Holder to discuss
the failures to comply and curative actions. "Good Reason" shall mean, as
reasonably determined by the Parent, the Employee's demotion, without the
Employee's consent, to a job classification materially below the
Employee's job classification prior to the Effective Time; provided,
however, that (i) Good Reason shall not be deemed to exist merely as a
result of any changes to the Employee's title, authorities, or
responsibilities occurring as a result of the Company becoming a business
unit of Parent in the Merger, or (ii) any change to the Employee's title,
authorities, or responsibilities that does not constitute a demotion
according to the job classifications generally applicable to employees of
Parent. The vested percentage of the Company Share Options and Company
SARs of an Employee Holder who becomes entitled to such accelerated
vesting shall be determined by (x) crediting such Employee Holder with two
years of additional service if the termination of employment occurs during
the period commencing on the Closing Date and ending on the first
anniversary of the Closing Date, or (y) crediting such Employee Holder
with one year of additional service if the termination of employment
occurs during the period commencing on the day after the first anniversary
of the Closing Date and ending on the second anniversary of the Closing
Date.
(ii) Notwithstanding Section 5.10(e)(i), effective on the Closing
Date, the vesting of any and all Company Share Options and Company SARs held by
the individuals listed on Section 5.10(e)(ii) of the Company Disclosure Letter
will vest in accordance with the provisions set forth on such Section
5.10(e)(ii) of the Company Disclosure Letter.
Section 5.11 Convertible Notes. The Parent shall take all such action as may
be necessary so that from and after the Effective Time, the Parent and the
Surviving Company shall comply with the terms of the Senior Indenture, dated as
of March 23, 2005 by and among msystems Finance Inc., the Company, as guarantor,
and The Bank of New York Trust Company, N.A., as trustee (the "Indenture"),
including execution of a supplemental indenture as provided in Section 6.01 of
the Indenture. The Parent shall take all corporate actions necessary to reserve
for issuance a sufficient number of shares of the Parent Common Stock for
delivery upon conversion of Convertible Notes in accordance with the terms of
this Section 5.11 and the Indenture.
Section 5.12 Form S-8. Within ten Business Days following the Effective Time,
the Parent shall, if no registration statement is in effect covering such shares
of the Parent Common Stock, file a registration statement on Form S-8 (or any
successor form) with respect to the shares of the Parent Common Stock subject to
any Company Share Options and Company SARs held by current employees to the
extent registrable on Form S-8 (or any successor form) and shall use all
reasonable efforts to maintain the effectiveness of such registration statement
or registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options or stock
appreciation rights remain outstanding.
Section 5.13 Notification. Each of the Parent and the Company shall promptly
notify the other of: (a) the occurrence, after the date of this Agreement and
57
prior to the earlier of the Closing Date and the termination of this Agreement,
of any change with respect to such party or its Subsidiaries which, individually
or in the aggregate, would reasonably be expected to cause the condition set
forth in Section 6.2(c) hereof (with respect to changes relating to the Parent)
or Section 6.3(c) hereof (with respect to changes relating to the Company), as
applicable, to be incapable of being satisfied as of the Closing Date and (b)
the breach by such party of any covenant or agreement set forth in this
Agreement to be performed by it prior to the Effective Time which, individually
or in the aggregate, would reasonably be expected to cause the condition set
forth in Section 6.2(b) hereof (in the case of breaches by the Parent) or
Section 6.3(b) hereof (in the case of breaches by the Company), as applicable,
to be incapable of being fulfilled as of the Closing Date; provided, however,
that (i) delivery of any notification or information pursuant to this Section
5.13 shall be for notification purposes only and shall not expand or limit the
rights or affect the obligations of any party hereunder or give rise to any
other liability on the part of any party, and (ii) the failure to have complied
in all respects with this Section 5.13 shall not constitute a breach or have any
implications on any party's rights or obligations hereunder or give rise to any
liability on the part of any party.
Section 5.14 Indemnification, Exculpation and Insurance.
(a) From and after the Effective Time, the Parent shall, and shall
cause the Surviving Company to, to the fullest extent permitted by
applicable Legal Requirements, indemnify, defend and hold harmless, and
provide advancement of expenses to, each Person who is now or at any time
prior to the Effective Time was, an officer or director of the Company or
any of its Subsidiaries (each an "Indemnitee" and, collectively, the
"Indemnified Parties") against all losses, claims, damages, costs,
expenses, liabilities or judgments or amounts that are paid in settlement
of or in connection with any investigation (formal or informal), claim,
proceeding or action that is based in whole or in part on, or arises in
whole or in part out of, the fact that such Person is or was a director or
officer of the Company or any of its Subsidiaries, and pertaining to any
matter existing or occurring, or any acts or omissions occurring, at or
prior to the Effective Time, whether asserted or claimed prior to, or at
or after, the Effective Time (including matters, acts or omissions
occurring in connection with (i) the approval of or entering into this
Agreement or the consummation of the Transactions or (ii) the Options
Matters) to the same extent such Persons are entitled to be indemnified,
defended, held harmless or have the right to advancement of expenses as of
the date of this Agreement by the Company or any of its Subsidiaries
pursuant to applicable Legal Requirements, the Company Charter Documents
and indemnification agreements of the Company and its Subsidiaries, if
any, in existence on the date hereof with any directors or officers of the
Company and its Subsidiaries disclosed on Section 5.14 of the Company
Disclosure Letter. The Articles of Association of the Surviving Company
will contain provisions with respect to indemnification and exemption that
are at least as favorable to the Indemnified Parties as those contained in
the Company Articles of Association as in effect on the date hereof, which
provisions will not be amended, repealed or otherwise modified for a
period of seven years from the Effective Time in any manner that would
adversely affect the rights thereunder of the Indemnified Persons, unless
such modification is required by Legal Requirement.
58
(b) At the Company's election in consultation with Parent, (i) the
Company shall use its reasonable best efforts to obtain prior to the
Effective Time prepaid "tail" insurance policies with a claims period of
seven years from the Effective Time with respect to directors' and
officers' liability indemnification and insurance in amount and scope (and
containing terms and conditions that are in the aggregate) no less
favorable to the Indemnified Parties than the Company's existing
directors' and officers' liability insurance policies disclosed on Section
5.14(b) of the Company Disclosure Letter (the "Current Policies") for
claims arising from facts or events that occurred on or prior to the
Effective Time (including matters, acts or omissions occurring in
connection with (i) the approval of or entering into this Agreement or the
consummation of the Transactions or (ii) the Options Matters)
(collectively, a "Tail Policy") (provided that the Company shall not pay a
premium of more than 400% of the annual premium paid by the Company for
the Current Policies as of the date hereof (the "Tail Cap") for such
"tail" policies) or (ii) if the Company shall not have obtained such tail
policy, for a period of seven years after the Effective Time, Parent shall
cause to be maintained in effect directors' and officers' liability
insurance policies with respect to claims arising from facts or events
that occurred prior to the Effective Time (including matters, acts or
omissions occurring in connection with (i) the approval of or entering
into this Agreement or the consummation of the Transactions, or (ii) the
Options Matters) in amount and scope (and containing terms and conditions
that are in the aggregate) no less favorable to the Indemnified Parties
than the Current Policies; provided, that if the annual premiums for such
policies at any time during such period exceed 200% of the annual premium
paid by the Company for the Current Policies as of the date hereof (the
"Current Premium"), Parent shall be required to provide such coverage as
will then be available at an annual premium equal to 200% of the Current
Premium; provided, further, that Parent may satisfy its obligations
pursuant to this clause (ii) by obtaining a Tail Policy or, if a Tail
Policy cannot be obtained without paying an aggregate premium greater than
the Tail Cap, prepaid tail policies with such coverage as will then be
available for an aggregate premium equal to the Tail Cap.
(c) If that the Parent or the Surviving Company or any of their
respective successors or assigns (i) consolidates with or merges into any
other Person and is not the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers or conveys all or
substantially all its properties and assets to any Person, the Parent
shall cause proper provisions to be made so that the successors and
assigns of the Parent or the Surviving Company assume the obligations set
forth in this Section 5.14. The provisions of this Section 5.14 are (i)
intended to be for the benefit of, and shall be enforceable by, each
Indemnitee, his or her heirs and his or her representatives and (ii) in
addition to, and not in substitution for, any other rights to
indemnification or contribution that any such Person may have by Contract
or otherwise. The obligations of the Parent and the Surviving Company
under this Section 5.14 shall not be terminated or modified in such a
manner as to adversely affect any Indemnitee to whom this Section 5.14
applies without the express written consent of such affected Indemnitee
(it being expressly agreed that the Indemnitees to whom this Section 5.14
applies shall be third party beneficiaries of this Section 5.14).
Section 5.15 Listing of the Parent Common Stock. The Parent shall use its
reasonable best efforts to cause the Parent Common Stock issuable in the Merger
59
to be approved for listing on the Nasdaq, subject to official notice of
issuance, as promptly as practicable after the date hereof, and in any event
prior to the Closing Date.
Section 5.16 Company Affiliates; Restrictive Legend. The Company shall
deliver to the Parent, prior to the Closing Date, a letter identifying all
Persons who are, to the Knowledge of the Company, at the time of the Company
General Meeting, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act (the "Company Affiliates"). The Company shall use commercially
reasonable efforts to cause each such Person to deliver to the Parent prior to
the Closing Date, a written agreement substantially in the form of Exhibit B.
Section 5.17 Tax Treatment.
(a) Each of the Parent and the Company shall use reasonable efforts
to cause the Merger to qualify as a tax free exchange under Section 104(h)
of the Ordinance and as a reorganization under Section 368 of the Code.
(b) The Company, the Parent and Merger Sub shall execute and deliver
to each of Weil, Gotshal & Xxxxxx LLP, counsel to the Company ("WGM"), and
O`Melveny & Xxxxx LLP, counsel to the Parent and Merger Sub ("OMM"),
certificates substantially in the forms attached hereto at Exhibits F and
G at such time or times as reasonably requested by each such law firm in
connection with its delivery of the tax opinion referred to in Section
6.2(d) or 6.3(d), as the case may be.
(c) Each of the Company, the Parent and Merger Sub shall cause its
respective Israeli counsel to deliver to each of WGM and OMM opinions
substantially in the forms attached hereto at Exhibits H and I at such
time or times as reasonably requested by each such law firm in connection
with its delivery of the tax opinion referred to in Section 6.2(d) or
6.3(d), as the case may be, according to which the Merger is effected
pursuant to Israeli statutes and as a result of which the following events
occur simultaneously at the Effective Time: (i) all of the assets and
liabilities of Merger Sub become the assets and liabilities of the Company
and (ii) Merger Sub's separate legal existence ceases for all legal
purposes.
(d) Prior to the Effective Time, none of the Company, the Parent or
Merger Sub shall take, fail to take or cause to be taken any action which
would cause to be untrue any of the representations in certificates
described in this Section 5.17. Each party shall, and shall cause each of
its respective Subsidiaries to, use reasonable best efforts to cause the
Merger to qualify as a reorganization within the meaning of Section 368(a)
of the Code.
ARTICLE 6
CONDITIONS PRECEDENT
Section 6.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) (i) the Court Approval approving the Merger Proposal shall have
been obtained, and (ii) if Section 5.2(f) applies, the Registration
Statement shall have been declared effective by the SEC and no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose and no
60
similar proceeding in respect of the Registration Statement shall have
been initiated or threatened by the SEC.
(b) The shares of the Parent Common Stock issuable to the Company's
securityholders as contemplated by this Agreement shall have been approved
for listing on Nasdaq, subject to official notice of issuance.
(c) No injunction, judgment, order, decree, statute, law, ordinance,
rule or regulation, entered, enacted, promulgated, enforced or issued by
any court or other Governmental Entity of competent jurisdiction or other
similar legal restraint or prohibition (collectively, "Restraints") shall
be in effect, and there shall not be pending any suit, action or
proceeding by any Governmental Entity, in each case, (i) preventing the
consummation of the Merger, or (ii) prohibiting or limiting the ownership
or operation by the Parent of any material portion of the business or
assets of the Surviving Company and its Subsidiaries taken as a whole in a
jurisdiction where either party has substantial operations or from which
it derives substantial revenues, or compelling the Surviving Company or
the Parent and their respective Subsidiaries to dispose of or hold
separate any material portion of the business or assets of the Surviving
Company and its Subsidiaries, taken as a whole, in a jurisdiction where
either party has substantial operations or from which it derives
substantial revenues, in each case as a result of the Merger or any of the
other Transactions. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired. Any notification, waiting period, or approval
requirements under the comparable Antitrust Laws of other applicable
foreign jurisdictions in which either party has operations or from which
either party derives revenue shall have been satisfied if legally required
to be so satisfied by Closing.
(d) The OCS Approval and the Investment Center Approval shall have
been obtained. Notwithstanding the foregoing, the Israeli Income Tax
Ruling shall not be required as a condition to the consummation of the
Transactions pursuant to this Section 6.1(d).
Section 6.2 Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) (i) The representations and warranties of the Parent and Merger
Sub set forth herein (other than the representations and warranties as to
capitalization of the Parent set forth in the first two sentences of
Section 3.2 (the "Parent Capitalization Representations") and the
representation and warranty set forth in Section 3.9(b)) shall be true and
correct in all material respects as of the date hereof (except to the
extent that any such representation or warranty is expressly made as of an
earlier specific date, in which case as of such date), provided, however,
that for purposes of this condition, all such representations and
warranties (other than the Parent Capitalization Representations and
Section 3.9(b)) shall be deemed to be true and correct in all material
respects unless the failure of such representations and warranties to be
so true and correct (without giving effect to any limitation as to
"materiality" or "Material Adverse Effect" set forth therein) results, or
would reasonably be expected to result, individually or in the aggregate,
61
in a Material Adverse Effect on the Parent; (ii) the Parent Capitalization
Representations shall be true and correct in all respects as of the dates
set forth therein, provided, that the condition set forth in this Section
6.2(a)(ii) shall be deemed satisfied if the actual number of shares of
Parent Common Stock or other securities outstanding or issuable under
Parent Share Options or Parent Notes outstanding as of the date hereof is
greater than the number represented in the Parent Capitalization
Representations by no more than 0.5%; and (iii) the representation and
warranty set forth in Section 3.9(b) shall be true and correct in all
respects as of the date hereof. The Company shall have received a
certificate signed on behalf of the Parent by the chief executive officer
of the Parent to such effect.
(b) The Parent and Merger Sub shall have performed in all material
respects all obligations required to be performed by them under this
Agreement at or prior to the Closing Date; provided, however, that
unintentional breaches shall not be deemed to be a breach for purposes of
this Section 6.2(b). The Company shall have received a certificate signed
on behalf of the Parent by the chief executive officer of the Parent to
such effect.
(c) Between the date of this Agreement and the Closing Date, there
shall not have been any change, effect, event, occurrence, condition,
development or state of facts with respect to the Parent or any of its
Subsidiaries which, individually or in the aggregate, has had, or would
reasonably be expected to have, a Material Adverse Effect on the Parent
that has not been cured by the Effective Time.
(d) The Company shall have received from WGM an opinion dated as of
the Closing Date and stating that the Merger will be treated for United
States Federal income tax purposes as a "reorganization" within the
meaning of Section 368(a) of the Code. In rendering such opinion, WGM
shall rely upon representations and covenants contained in the
certificates of the Company, the Parent and Merger Sub and the opinions of
the Israeli counsel described in Section 5.17. Each such certificate shall
be dated on or before the date of such opinion and shall not have been
withdrawn or modified.
Section 6.3 Conditions to Obligations of the Parent and Merger Sub. The
obligation of the Parent and Merger Sub to effect the Merger is further subject
to satisfaction or waiver of the following conditions:
(a) (i) The representations and warranties of the Company set forth
herein (other than the representations and warranties as to capitalization
of the Company set forth in Section 2.3(a) (the "Company Capitalization
Representations") and the representation and warranty set forth in Section
2.9(b)) shall be true and correct in all material respects as of the date
hereof (except to the extent that any such representation or warranty is
expressly made as of a specific earlier date, in which case as of such
date); provided, however, that for purposes of this condition, all such
representations and warranties (other than the Company Capitalization
Representations and Section 2.9(b)) shall be deemed to be true and correct
in all material respects unless the failure of such representations and
warranties to be so true and correct (without giving effect to any
limitation as to "materiality" or "Material Adverse Effect" set forth
therein) results, or would reasonably be expected to result, individually
62
or in the aggregate, in a Material Adverse Effect on the Company; (ii) the
Company Capitalization Representations shall be true and correct in all
respects as of the dates set forth therein, provided, that the condition
set forth in this Section 6.3(a)(ii) shall be deemed satisfied if the
actual number of Company Shares or other securities outstanding or
issuable under Company Options, Company SARs or Convertible Notes
outstanding as of the date hereof is greater than the number represented
in the Company Capitalization Representations by no more than 0.5%; and
(iii) the representation and warranty set forth in Section 2.9(b) shall be
true and correct in all respects as of the date hereof. The Parent shall
have received a certificate signed on behalf of the Company by the chief
executive officer of the Company to such effect.
(b) The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or
prior to the Closing Date; provided, however, that unintentional breaches
shall not be deemed to be a breach for purposes of this Section 6.3(b).
The Parent shall have received a certificate signed on behalf of the
Company by the chief executive officer of the Company to such effect.
(c) Between the date of this Agreement and the Closing Date, there
shall not have been any change, effect, event, occurrence, condition,
development or state of facts with respect to the Company or any of its
Subsidiaries which, individually or in the aggregate, has had, or would
reasonably be expected to have, a Material Adverse Effect on the Company
that is not cured by the Effective Time.
(d) The Parent shall have received from OMM an opinion dated as of
the Closing Date and stating that the Merger will be treated for United
States Federal income tax purposes as a "reorganization" within the
meaning of Section 368(a) of the Code. In rendering such opinion, OMM
shall rely upon the representations and covenants contained in the
certificates of the Company, the Parent and Merger Sub and the opinions of
the Israeli counsel as described in Section 5.17. Each such certificate
shall be dated on or before the date of such opinion and shall not have
been withdrawn or modified; provided, however, that if, in connection with
obtaining the Court Approval from the Applicable Court, the parties agree
to modifications or other changes to the terms hereof or the structure of
the Merger such that such opinion cannot be rendered, then, if the Company
waives the condition set forth in Section 6.2(d), the Parent and Merger
Sub will be automatically and without need for further action by any
Person deemed to have concurrently therewith waived the condition set
forth in this Section 6.3(d).
(e) Neither the Parent nor the Company shall have received any
written indication from the Investment Center to the effect that the
consummation of the Merger will jeopardize or materially adversely affect
its Approved Enterprise tax status and its status as an industrial
company, and the Parent shall have received a certificate signed on behalf
of the Company by the chief executive officer of the Company and the chief
financial officer of the Company to such effect (only with respect to the
Company).
63
ARTICLE 7
TERMINATION
Section 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after obtaining the requisite approval
of the shareholders of the Company:
(a) by mutual written consent of the Parent and the Company;
(b) by either the Parent or the Company if the Merger shall not have
been consummated by March 30, 2007 (the "End Date"), but the right to
terminate this Agreement pursuant to this Section 7.1(b) shall not be
available to any party whose action or failure to act results in the
failure of the Merger to be consummated by such time and such action or
failure to act constitutes a breach of this Agreement; provided that, (x)
if the only condition to consummation of the Merger that has not been
satisfied or waived (other than conditions that by their nature are to be
satisfied at Closing which are reasonably expected to be satisfied by the
End Date as it may be extended) is the condition set forth in the last two
sentences of Section 6.1(c), then the End Date shall be extended until
June 30, 2007, and (y) if the only condition to consummation of the Merger
that has not been satisfied or waived (other than conditions that by their
nature are to be satisfied at Closing which are reasonably expected to be
satisfied by the End Date as it may be extended) is the condition set
forth in Section 6.1(a), and such condition is not satisfied solely as a
result of the Company's inability to finalize the Company Disclosure
Documents (or Parent's inability to finalize the Registration Statement)
due to a failure to complete any necessary Restated Financials and address
to the satisfaction of the SEC any comments of the SEC related to any
necessary Restated Financials, then, so long as the Company continues to
use its reasonable best efforts to complete any necessary Restated
Financials and resolve any such comments , as promptly as practicable,
then the End Date shall be extended until the date that is 90 days after
the Company is able to comply with the covenant set forth in Section
5.1(b)(iii); provided further that if (A) after the date of this Agreement
and prior to such termination an Acquisition Proposal shall have been
communicated to the board of directors or executive officers of the
Company or shall have been publicly made directly to the shareholders of
the Company, and (B) the Company or any of its Subsidiaries enters into
such or any other definitive agreement (other than a confidentiality
agreement) providing for an Acquisition Transaction or consummates an
Acquisition Transaction within twelve months of such termination (changing
the 15% and 85% amounts referred to in the definitions thereof in Section
5.6(a) to 40% and 60%, respectively, for purposes of this Section 7.1(b)),
then the Company shall, concurrently with the consummation of the
transactions contemplated by such agreement providing for an Acquisition
Transaction or Acquisition Proposal, pay to the Parent $74,000,000 (the
"Termination Fee") by wire transfer of immediately available funds;
(c) by either the Parent or the Company if any Restraint having any
of the effects set forth in Section 6.1(c) shall be in effect and shall
have become final and nonappealable;
64
(d) by either the Parent or the Company if the required approval of
the shareholders or (if applicable) creditors of the Company contemplated
by this Agreement shall not have been obtained by reason of the failure to
obtain the required vote at the respective meetings; provided that if (A)
after the date of this Agreement and prior to such termination an
Acquisition Proposal shall have been communicated to the board of
directors or executive officers of the Company or shall have been publicly
made directly to the shareholders of the Company, and (B) the Company or
any of its Subsidiaries enters into such or any other definitive agreement
(other than a confidentiality agreement) providing for an Acquisition
Transaction or consummates an Acquisition Transaction within twelve months
of such termination (changing the 15% and 85% amounts referred to in the
definitions thereof in Section 5.6(a) to 40% and 60%, respectively, for
purposes of this Section 7.1(d)), then the Company shall, concurrently
with the consummation of the transactions contemplated by such agreement
providing for an Acquisition Transaction or Acquisition Proposal, pay to
the Parent the Termination Fee by wire transfer of immediately available
funds;
(e) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of the Parent or Merger Sub set forth in
this Agreement, which breach would (if it occurred or was continuing as of
the Closing Date) give rise to the failure of the conditions set forth in
Section 6.2(a) or Section 6.2(b), provided, that if such inaccuracy in the
Parent's or Merger Sub's representations and warranties or breach by the
Parent or Merger Sub is curable by the Parent or Merger Sub, then the
Company may not terminate this Agreement under this Section 7.1(e) for
thirty days after delivery of written notice from the Company to the
Parent and Merger Sub of such breach (it being understood that (i) the
Company may not terminate this Agreement pursuant to this paragraph (e) if
such breach or inaccuracy by the Parent or Merger Sub is cured during such
thirty-day period, (ii) the Company may not terminate this Agreement
pursuant to this paragraph (e) if it is in breach of this Agreement and
such breach would (if it occurred or was continuing as of the Closing
Date) give rise to the failure of the conditions set forth in Section
6.3(a) or Section 6.3(b)), and (iii) a termination by the Company pursuant
to this Section 7.1(e) shall not constitute a Triggering Event);
(f) by the Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this
Agreement, which breach would (if it occurred or was continuing as of the
Closing Date) give rise to the failure of the conditions set forth in
Section 6.3(a) or Section 6.3(b), provided, that if such inaccuracy in the
Company's representations and warranties or breach by the Company is
curable by the Company, then the Parent may not terminate this Agreement
under this Section 7.1(f) for thirty days after delivery of written notice
from the Parent to the Company of such breach, (it being understood that
(i) the Parent may not terminate this Agreement pursuant to this paragraph
(f) if such breach or inaccuracy by the Company is cured during such
thirty-day period, and (ii) the Parent may not terminate this Agreement
pursuant to this paragraph (f) if it is in breach of this Agreement and
such breach would (if it occurred or was continuing as of the Closing
Date) give rise to the failure of the conditions set forth in Section
6.2(a) or Section 6.2(b)); provided further that if (A) such termination
results from a breach of any of the Company's covenants or agreements set
65
forth in this Agreement or a knowing breach by the Company of any of its
representations and or warranties set forth in this Agreement, (B) after
the date of this Agreement and prior to such termination an Acquisition
Proposal shall have been communicated to the board of directors or
executive officers of the Company or shall have been publicly made
directly to the shareholders of the Company, and (C) the Company or any of
its Subsidiaries enters into such or any other definitive agreement (other
than a confidentiality agreement) providing for an Acquisition Transaction
or consummates an Acquisition Transaction within twelve months of such
termination (changing the 15% and 85% amounts referred to in the
definitions thereof in Section 5.6(a) to 40% and 60%, respectively, for
purposes of this Section 7.1(f)), then the Company shall, concurrently
with the consummation of the transactions contemplated by such agreement
providing for an Acquisition Transaction or Acquisition Proposal, pay to
the Parent the Termination Fee by wire transfer of immediately available
funds;
(g) by the Parent, if after the date of this Agreement a change,
effect, event, occurrence, condition, development or state of facts having
a Material Adverse Effect has occurred with respect to the Company;
provided, that if such Material Adverse Effect is curable by the Company,
then the Parent may not terminate this Agreement under this Section 7.1(g)
for thirty days after delivery of written notice from the Parent to the
Company of such Material Adverse Effect (it being understood that the
Parent may not terminate this Agreement pursuant to this paragraph (g) if
such Material Adverse Effect is cured during such thirty-day period);
(h) by the Parent if a Triggering Event (as defined below) shall
have occurred, in which event the Company shall pay to the Parent the
Termination Fee no later that two Business Days after such termination;
(i) by the Company in order to enter into a binding definitive
agreement providing for a Superior Proposal (an "Alternative Agreement")
if: (i) the board of directors of the Company shall have determined in
good faith after consultation with its outside legal counsel that entering
into such Alternative Agreement is required in order for the board of
directors of the Company to comply with its fiduciary obligations to the
Company's shareholders; (ii) the Company shall have performed the actions
described in Section 5.2(e)(iv) with respect to such Superior Proposal;
(iii) immediately prior to or simultaneously with such termination, the
Company shall have paid the Parent the Termination Fee; and (iv)
concurrently with such termination the Company enters into such
Alternative Agreement; or
(j) by the Company, if after the date of this Agreement a change,
effect, event, occurrence, condition, development or state of facts having
a Material Adverse Effect has occurred with respect to the Parent;
provided, that if such Material Adverse Effect is curable by the Parent,
then the Company may not terminate this Agreement under this Section
7.1(j) for thirty days after delivery of written notice from the Company
to the Parent of such Material Adverse Effect (it being understood that
(i) the Company may not terminate this Agreement pursuant to this
paragraph (j) if such Material Adverse Effect is cured during such
thirty-day period, and (ii) a termination by the Company pursuant to this
Section 7.1(j) shall not constitute a Triggering Event).
66
A "Triggering Event" shall be deemed to have occurred if: (i) the board of
directors of the Company or any committee thereof shall for any reason have
publicly withdrawn or shall have publicly amended or modified in a manner
adverse to the Parent its recommendation in favor of, the approval of this
Agreement, the Merger or the other Transactions; (ii) the Company shall have
failed to include in the Company Disclosure Documents the recommendation of the
board of directors of the Company in favor of the approval of this Agreement,
the Merger or the other Transactions; (iii) the board of directors of the
Company or any committee thereof shall have publicly approved or recommended any
Acquisition Proposal; (iv) the provisions of Section 5.6 of this Agreement shall
have been willfully and materially breached; (v) the Company shall have entered
into any letter of intent or similar document or any agreement, contract or
commitment accepting any Acquisition Proposal; or (vi) a tender or exchange
offer relating to securities of the Company shall have been commenced by a
Person unaffiliated with the Parent and the Company shall not have sent to its
security holders pursuant to Rule 14d-9 or 14e-2 promulgated under the Exchange
Act or Section 329 of the Companies Law, within ten Business Days after such
tender or exchange offer is first commenced and published sent or given, a
statement disclosing that the Company recommends rejection of such tender or
exchange offer.
The Company acknowledges that the agreements contained in this Section 7.1
with respect to payment of the Termination Fee (it being understood that in no
event shall the Company be required to pay more than one Termination Fee) are an
integral part of the Transactions, and that without these agreements the Parent
would not enter into this Agreement; accordingly, if the Company fails to pay
any amount due pursuant to this Section7.1, then the Company shall (in addition
to the Termination Fee) pay to the Parent its costs and expenses (including
reasonable attorneys' fees and expenses) in connection with collecting such
amount due, together with interest on the amount of the fee at the prime rate of
Citibank, N.A. in effect on the date such payment was required to be made. The
Parent's acceptance of the Termination Fee shall constitute conclusive evidence
that this Agreement has been validly terminated. The Parent's right to receive a
Termination Fee in the circumstances provided in this Agreement is the exclusive
remedy available to the Parent for any failure of the Merger and other
Transactions to be consummated in those circumstances, and the Company shall
have no further liability with respect to this Agreement or the Transactions,
except in the event of willful breach of this Agreement.
Section 7.2 Investment.
(a) If this Agreement is terminated (i) by the Company or the Parent
pursuant to Section 7.1(b) or by the Company pursuant to Section 7.1(e) as
a result of Parent's breach of Section 5.8, and, in either case, at the
time of such termination the condition set forth in Section 6.1(c), to the
extent relating to any Antitrust Laws, shall not have been satisfied (but
all other conditions to the Parent's obligation to close the Transactions
pursuant to Section 6.1 and Section 6.3 (other than those by their nature
that are to be satisfied at the Closing) have been satisfied), or (ii)
pursuant to Section 7.1(c) (if the Restraint giving rise to the right to
terminate relates to Antitrust Laws), then, at the Company's option (to be
exercised in its sole discretion by delivery of written notice to Parent
within ten Business Days of the termination of the Merger Agreement
67
pursuant to the provisions set forth in the foregoing clause (i) or (ii)
(the "Investment Option Notice")), the Parent shall be obligated to make
an investment in the Company (the "Investment"), and the Company shall be
obligated to issue the Company Shares to Parent pursuant to the
Investment, as follows. The "Investment" shall be the purchase by Parent
from the Company of a number of Company Shares equal to up to 9.9% (which
amount shall be determined by the Company in its sole discretion, and
indicated in the Investment Option Notice) of the outstanding Company
Shares on the date of such termination (the "Investment Shares") for a per
share purchase price equal to the greater of (A) $38.15 and (B) the
average closing price of one Company Share for the five consecutive
trading days that the Company Shares have traded ending on and including
the date of such termination as reported on Nasdaq (or other principal
market on which the Company Shares are quoted and traded). Each of Parent
and the Company agree to consummate the Investment at a closing (the
"Investment Closing") to occur as promptly as practicable after delivery
to the Parent of the Investment Option Notice. The place of any Investment
Closing shall be at the offices of Parent, and the time of the Investment
Closing shall be 10:00 a.m. (California Time). At the Investment Closing,
Parent shall deliver cash in the aggregate amount set forth above, and
simultaneously therewith the Company shall deliver to Parent a certificate
or certificates representing the Investment Shares, which shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever (other than restrictions under securities Legal Requirements or
restrictions under paragraph (b)). Each of Parent and the Company agrees
to use reasonable best efforts to cooperate with and provide information
to the other, for the purpose of any required notice or application for
approval to any Governmental Entity in connection with the Investment.
Consummation of the Investment shall constitute conclusive evidence that
this Agreement has been validly terminated. Notwithstanding the foregoing,
the Company shall be entitled to reduce, in its discretion, the number of
Investment Shares to be purchased by the Parent.
(b) With respect to the Investment Shares, the Parent shall not, for
a period of two years after the Investment Closing (the "Lock-Up Period"),
(i) directly or indirectly, sell, offer, contract or grant any option to
sell (including without limitation any short sale), pledge, transfer,
establish an open "put equivalent position" within the meaning of Rule
16a-1(h) under the Exchange Act or otherwise dispose of any Investment
Shares, (ii) publicly announce an intention to do any of the foregoing, or
(iii) enter into any swap or other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequences of ownership of the Investment Shares, whether any such swap
or transaction is to be settled by delivery of Investment Shares or other
securities, in cash or otherwise. After the expiration of the Lock-Up
Period, except in connection with a sale pursuant to an effective
registration statement, the Parent shall not (x) sell, offer, contract or
grant any option to sell (including without limitation any short sale) or
transfer ("Transfer") to any Person (or to Persons who, to the knowledge
of Parent, are acting as a "group" as such term is defined in Section
13(d)(3) of the Exchange Act, but excluding in any case underwriters and
selling group members with respect to a bona fide public offering of
Company Shares), in one or a series of transactions, an aggregate number
of Company Shares equal to 4.9% of the outstanding Company Shares at the
68
time of any such Transfer; or (y) Transfer Company Shares to any Person
(excluding in any case underwriters and selling group members with respect
to a bona fide public offering of Company Shares) if, to the knowledge of
the Parent after reasonable inquiry of the proposed transferee and doing a
reasonable search of the SEC's XXXXX database, such Transfer would result
in the transferee beneficially owning more than 4.9% of the outstanding
Company Shares. With respect to the Investment Shares, the Parent hereby
agrees, for so long as it owns any such shares, to vote the Investment
Shares in the same proportion as the other shareholders of the Company
vote on all matters that are presented to the shareholders of the Company
for their approval. For the purpose of clarity, the Parent acknowledges
that, with respect to the Investment Shares, the Parent will not be
entitled to appoint any directors to the board of directors of the Company
and the Parent will not be entitled to rights not generally available to
the shareholders of the Company.
(c) Until the expiration of the Lock-Up Period, neither the Parent
nor any of the Parent's subsidiaries or representatives shall, without the
prior written consent of the Company or its board of directors (or a duly
empowered committee thereof): (i) acquire, publicly offer to acquire, or
agree to acquire, directly or indirectly, by purchase or otherwise any
shares of any class of Voting Securities or securities convertible into or
exchangeable for, or other direct or indirect rights to acquire, any
shares of any class of Voting Securities of the Company, or any assets of
the Company or any subsidiary or division thereof; (ii) make, or in any
way participate, directly or indirectly, in any "solicitation" of
"proxies" to vote (as such terms are used in the rules of the SEC), or
seek to advise or influence any Person or entity with respect to the
voting of any Voting Securities of the Company; (iii) make any public
announcement with respect to, or publicly submit a proposal for or offer
of (with or without conditions) any extraordinary transaction involving
the Company or any of its securities or assets; (iv) form, join or in any
way participate in a "group" as defined in Section 13(d)(3) of the
Exchange Act, in connection with any of the foregoing; (v) otherwise
publicly act or publicly seek to control or influence the management,
board of directors or policies of the Company; or (vi) publicly request
the Company or any of its representatives, directly or indirectly, to
amend or waive any provision of this paragraph. Notwithstanding anything
in this Agreement to the contrary, the restrictions set forth in clauses
(i) through (vi) of the foregoing sentence (collectively, the "Standstill
Obligations") shall cease to apply in the event any Person or "group" as
defined in Section 13(d)(3) of the Exchange Act, unaffiliated with Parent,
makes a bona fide, public, unsolicited proposal to acquire 40% or more of
the outstanding Voting Securities of the Company; provided that the
Standstill Obligations shall again apply in the event of the public
withdrawal of such proposal; provided further that nothing herein shall be
construed to toll in any way the two-year Lock-Up Period during which the
Standstill Obligations apply. "Voting Securities" shall mean at any time
shares of any class of capital stock of the Company which are then
entitled to vote generally in the election of directors.
(d) The Company's right to receive the Investment in the
circumstances provided in paragraph (a) is the exclusive remedy available
to the Company for any failure of the Merger and other Transactions to be
consummated in those circumstances (regardless of whether the Company
exercises its option to receive the Investment), and the Parent shall have
69
no further liability with respect to this Agreement or the Transactions,
except in the event of willful breach of this Agreement or pursuant to
Section 8.11; provided however that if the Parent fails to consummatedthe
Investment as promptly as practicable after delivery of the Investment
Option Notice, then the Parent shall (in addition to the Investment) pay
to the Company its costs and expenses (including reasonable attorneys'
fees and expenses) in connection with enforcing such obligation, together
with interest on the amount of the Investment at the prime rate of
Citibank, N.A. in effect on the date such payment was required to be made.
Section 7.3 Notice of Termination; Effect of Termination. Any termination of
this Agreement under Section 7.1 above will be effective immediately upon (or,
if the termination is pursuant to Section 7.1(e), Section 7.1(f), Section 7.1(g)
or Section 7.1(j) and in each case the proviso therein is applicable, thirty
days after) the delivery of written notice of the terminating party to the other
parties hereto specifying the provision of this Agreement on which such
termination is based. If this Agreement is terminated by either the Company or
the Parent as provided in Section 7.1, this Agreement shall forthwith become
void and have no effect, without any liability or obligation on the part of the
Parent or the Company, except (i) to the extent that such termination results
from the willful breach by a party of any of its representations, warranties,
covenants or agreements in this Agreement, and (ii) notwithstanding the
foregoing, Section 7.1, Section 7.2 and this Section 7.3 and Article 8 shall
survive any termination of this Agreement. No termination of this Agreement
shall affect the obligations of the parties contained in the Confidentiality
Agreement, all of which obligations shall survive termination of this Agreement
in accordance with their terms.
ARTICLE 8
GENERAL PROVISIONS
Section 8.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement which by its terms contemplates
performance after the Effective Time.
Section 8.2 Fees and Expenses.
(a) Except as set forth in this Section 8.2 and, with respect to
Termination Fees, all fees and expenses incurred in connection with this
Agreement and the Transactions shall be paid by the party incurring such
expenses whether or not the Merger is consummated.
(b) Whether or not the Transactions are consummated, the Parent and
the Company shall share equally all fees and expenses, other than
attorneys' and accountants fees and expenses, incurred in relation to the
obtaining of the Court Approval and any fees paid under the HSR Act or
other applicable Antitrust Laws.
Section 8.3 Amendment. Subject to applicable Legal Requirements, this
Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed by each of the Parent and the Company.
70
Section 8.4 Extension; Waiver. At any time prior to the Effective Time, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) waive compliance
by the other party with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party (except for deemed waivers provided under Section 6.3(d)). The
failure of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such rights.
Section 8.5 Notices. All notices, claims, demands and other communications
hereunder shall be in writing and shall be deemed given when delivered
personally or by internationally recognized overnight courier (providing proof
of delivery), or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) If to the Parent or Merger Sub, to:
Sandisk Corporation
000 XxXxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Telecopy No.: x0 000 000 0000
Attention: General Counsel
With a copy (which shall not constitute notice) to:
O'Melveny & Xxxxx LLP
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000 XXX
Telecopy No.: x0 000 000 0000
Attention: Xxxxxxx X. Xxxxx
Xxxxx X. Xxxxxxxx
and:
Xxxxxxxx, Xxxxxxx & Xx.
0 Xxxxx Xxxxxx
Xxx-Xxxx 00000 Xxxxxx
Telecopy No.: x000 0 000 0000
Attention: Xxxxxx X. Amir
(b) If to the Company, to:
msystems Ltd.
7 Xxxx Xxxx Xx.
00
Xxxx Xxxx 00000 Xxxxxx
Telecopy No.: x000-0-000-0000
Attention: General Counsel
With a copy (which shall not constitute notice) to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 XXX
Telecopy No.: x0 000 000 0000
Attention: Xxxxxx Xxxxxxxxxx
Xxxxxxx Xxxxxx
and:
Meitar Liquornik Geva & Leshem Xxxxxxxxx
00 Xxxx Xxxxxx Xxxxxx Xx.
Xxxxx Xxx 00000, Israel
Telecopy No.: x000 0 000 0000
Attention: Xxx Xxxx
Section 8.6 Interpretation. When a reference is made in this Agreement to a
section or article, such reference shall be to a section or article of this
Agreement, unless otherwise clearly indicated to the contrary. Whenever the
words "include," "includes" or including are used in this Agreement they shall
be deemed to be followed by the words "without limitation." The words "hereof,"
"herein" and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole and not to any
particular provision of this Agreement, and annex, article, section, paragraph,
exhibit and schedule references are references to the annex, articles, sections,
paragraphs, exhibits and schedules of this Agreement, unless otherwise
specified. The plural of any defined term shall have a meaning correlative to
such defined term and words denoting any gender shall include all genders and
the neuter. Where a word or phrase is defined herein, each of its other
grammatical forms shall have a corresponding meaning. Any reference to a party
to this Agreement or any other agreement or document contemplated hereby shall
include such party's successors and permitted assigns. A reference to any
legislation or to any provision of any legislation shall include any
modification, amendment, re-enactment thereof, any legislative provision
substituted therefore and all rules, regulations and statutory instruments
issued or related to such legislation. The headings and captions in this
Agreement are for reference only and shall not be used in the construction or
interpretation of this Agreement. The parties have participated jointly in the
negotiation and drafting of this Agreement. If any 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 provision
of this Agreement. No prior draft of this Agreement nor any course of
performance or course of dealing shall be used in the interpretation or
construction of this Agreement. No parole evidence shall be introduced in the
construction or interpretation of this Agreement unless the ambiguity or
72
uncertainty in issue is plainly discernable from a reading of this Agreement
without consideration of any extrinsic evidence. The words "date hereof" mean
July 30, 2006.
Section 8.7 Definitions. For purposes of this Agreement:
(a) "Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such first Person, where "Control"
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management policies of a Person, whether
through the ownership of voting securities, by contract, as trustee or
executor, or otherwise.
(b) "Business Day" means any day other than Saturday, Sunday or any
other day on which banks are legally permitted to be closed in San
Francisco, California.
(c) "Contract" means any binding written, oral, electronic or other
contract, lease, license, sublicense, instrument, note, bond, indenture,
option, warrant, purchase order, arrangement, commitment, undertaking,
obligation or understanding of any nature.
(d) "Knowledge" of any Person which is not an individual means the
actual knowledge of such Person's directors and executive officers and the
knowledge that any of such Persons would be reasonably expected to have in
the conduct of their respective duties.
(e) "Legal Requirements" means any Israeli or U.S. federal or state
law, or material local or municipal law, or foreign or other law, statute,
constitution, ordinance, code, edict, decree, judgment, order, rule,
regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any
federal, state, local or foreign government, any court, administrative,
regulatory or other governmental agency, commission or authority or any
non-governmental self-regulatory agency, commission or authority having
(through authority granted by a governmental agency or commission) the
force of law (each, a "Governmental Entity").
(f) "Material Adverse Change" or "Material Adverse Effect" means,
when used in connection with the Company or the Parent, any change,
effect, event, occurrence, condition, development or state of facts that
(i) has a substantial, material and long-term adverse effect on the
business, results of operations or financial condition of such party and
its Subsidiaries, taken as a whole, other than any change, effect, event,
occurrence, condition, development or state of facts arising from or
relating to (A) general economic conditions, (B) the industry in which
such party operates in general, (C) the negotiation, execution,
announcement, pendency or performance of this Agreement or the
consummation of the Merger or the other Transactions, including (1) the
impact thereof on relationships, contractual or otherwise, with customers,
suppliers, distributors or partners, and (2) any resulting shortfalls or
declines in revenue, margins or profitability, but excluding for purposes
of this clause (C) the departure of employees, (D) failure by such party
to meet internal projections or forecasts, analyst expectations or
publicly announced earnings or revenue projections, or decreases in such
party's stock price (including as a result of failure to meet such
73
projections, forecasts or analyst expectations), in and of itself (for the
avoidance of doubt this clause (D) shall not preclude the other party from
asserting that the underlying cause of any such failure or decrease in
stock price is a Material Adverse Effect), (E) any declaration of war by
or against, or an escalation of hostilities involving, or an act of
terrorism against, any country where such party or its major sources of
supply have material operations or where such party has sales, (F) changes
in applicable Legal Requirements or in generally accepted accounting
principles or accounting standards, or changes in general legal,
regulatory or political conditions, (G) with respect to the Company, the
matters described in Section 8.7(f) of the Company Disclosure Letter (the
"Options Matters"), or any investigation, claim, suit, restatement, tax
effect or any other matter arising therefrom or related thereto, (H) any
claim or litigation arising from allegations of breach of fiduciary duty
with respect to the Company or the Parent relating to this Agreement, the
Merger or the other Transactions, or disclosure violations in securities
filings made in connection with the Merger, (I) any action taken by
Parent, the Company or any of their respective Subsidiaries as
contemplated or permitted by this Agreement or with the Parent's consent,
in the case of the Company, or the Company's consent in the case of the
Parent, or any failure to take action which failure results from Parent's
or the Company's, as the case may be, refusal to grant its consent to such
action pursuant to Article 4, or (J) the failure to obtain the consent of
a counterparty under any Contract listed in the Company Disclosure Letter
in connection with the Transactions; or (ii) with respect to the
representations and warranties contained in Section 2.1, 2.4, 2.19, 2.20,
3.1 and 3.3 and 3.9, that prevents the consummation of the Merger.
Notwithstanding anything to the contrary contained in this Agreement, but
without limiting the provisions contained in clauses (A) through (J)
above, for purposes of determining whether the conditions set forth in
Sections 6.3(a ) or 6.3(c) have been satisfied and whether Parent may
terminate this Agreement pursuant to Section 7.1(g), a "Material Adverse
Effect" shall be deemed to have occurred with respect to the Company
pursuant to clause (i) of the definition thereof if (and only if) the
applicable change, effect, event, occurrence, condition, development or
state of facts (or aggregation of changes, effects, events, occurrences,
conditions, developments or states of facts) relates to the Company and
its Subsidiaries and has resulted in or would reasonably be expected to
result in aggregate liabilities (net of insurance coverage) to Parent or
its Subsidiaries (including, for purposes hereof, the Surviving Company
(or its Subsidiaries)) relating to the Company and its Subsidiaries and
diminutions in the value of the Surviving Company (including its
Subsidiaries) adding to $450,000,000 or more in the aggregate.
(g) "Permitted Lien" shall mean (i) any Lien for Taxes not yet due
or being contested in good faith by appropriate proceedings and for which
adequate accruals or reserves have been established on the financial
statements in accordance with GAAP, (ii) Liens securing indebtedness or
liabilities that are reflected in the Company SEC Documents, (iii) such
immaterial non-monetary Liens or other imperfections of title, if any,
including, without limitation, (A) easements or claims of easements
whether shown or not shown by the public records, boundary line disputes,
overlaps, encroachments and any matters not of record which would be
disclosed by an accurate survey or a personal inspection of the property,
(B) rights of parties in possession, (C) any supplemental Taxes or
74
assessments not shown by the public records and (D) title to any portion
of the premises lying within the right of way or boundary of any public
road or private road, (iv) Liens imposed or promulgated by Laws with
respect to real property and improvements, including zoning regulations,
(v) Liens disclosed on existing title reports or existing surveys (in
either case copies of which title reports and surveys have been delivered
or made available to Parent), and (vi) mechanics', carriers', workmen's,
repairmen's and similar Liens, incurred in the ordinary course of
business.
(h) "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
(i) "Restated Financials" means the Company's restated financial
statements included in the Company's Form 20-F for the fiscal year ended
December 31, 2005 filed with the SEC on July 17, 2006 (including the
report of Ernst & Young, independent auditors to the Company, with respect
to the audited consolidated financial statements included therein) and any
further restatement of the Company's financial statements necessitated by
the Options Matters.
(j) "Subsidiary" of any Person means another Person, an amount of
the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its board
of directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first Person.
Section 8.8 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered (whether delivered by telecopy or
otherwise) one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties, it being understood and agreed that all parties need not sign the
same counterpart.
Section 8.9 Entire Agreement; Third-Party Beneficiaries. This Agreement and
the documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Confidentiality Agreement,
the Company Disclosure Letter and the Parent Disclosure Letter (a) constitutes
the entire agreement among the parties with respect to the subject matter
hereof, and supersedes all prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter of this Agreement and
(b) except for the provisions of Section 5.14 are not intended to confer upon
any Person, other than the parties, any rights or remedies.
Section 8.10 Severability. If any term or other provision of this Agreement
or the application hereof is invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect. If the final
judgment of a court of competent jurisdiction or other authority declares that
any term or provision hereof is invalid, void or unenforceable, the parties
agree that the court making such determination shall have the power to and
shall, subject to the discretion of such court, reduce the scope, duration, area
or applicability of the term or provision, to delete specific words or phrases,
or to replace any invalid, void or unenforceable term or provision with a term
76
or provision that is valid and enforceable and that comes closest to expressing
the intention of the invalid or unenforceable term or provision.
Section 8.11 Other Remedies; Specific Performance. Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled (without any requirement to post a bond or other
security) to seek one or more injunction or other equitable remedies to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which they are entitled at
law or in equity.
Section 8.12 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ANY OTHER CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER
OF THE STATE OF NEW YORK OR OTHERWISE) THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK; PROVIDED, HOWEVER,
THAT (I) MATTERS INVOLVING THE INTERNAL CORPORATE AFFAIRS OF THE PARENT, MERGER
SUB OR THE COMPANY, SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION IN WHICH
SUCH CORPORATION OR COMPANY IS ORGANIZED, AND (II) PROVISIONS RELATED TO THE
COURT APPROVAL AND THE MERGER THAT ARE REQUIRED UNDER ISRAELI LAW TO BE GOVERNED
BY ISRAELI LAW WILL BE SO GOVERNED.
Section 8.13 Venue; Waiver of Jury Trial. In addition, each of the parties
(a) consents to submit itself to the personal jurisdiction of any Federal court
(and if such Federal court finds that it can not exercise jurisdiction, any
Delaware state court) sitting in Newcastle County in the State of Delaware and
higher courts sitting in other locations with jurisdiction with respect to any
appeals from such courts, if any dispute arises out of this Agreement or any of
the Transactions, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
including (i) any claim that it is not personally subject to the jurisdiction of
the above-named courts for any reason other than the failure to lawfully serve
process, (ii) that it or its property is exempt or immune from jurisdiction of
any such court or from any legal process commenced in such courts (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise), (iii) to the fullest
extent permitted by applicable Legal Requirements, that (1) the suit, action or
proceeding in any such court is brought in an inconvenient forum, (2) the venue
of such suit, action or proceeding is improper and (iii) this Agreement, or the
subject matter hereof, may not be enforced in or by such courts and (c) agrees
that it will not bring any action relating to this Agreement or any of the
Transactions in any court other than a Federal court (or if such Federal court
76
finds that it can not exercise jurisdiction) such Delaware state court sitting
in Newcastle County in the State of Delaware. EACH OF THE PARENT, MERGER SUB,
AND THE COMPANY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT IT MAY HAVE TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
NEGOTIATION OR ENFORCEMENT HEREOF OR THE TRANSACTIONS. Each party to this
Agreement hereby agrees that in connection with any such action process may be
served in the same manner as notices may be delivered under Section 8.5 and
irrevocably waives any defenses or objections it may have to service in such
manner.
Section 8.14 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties. No duties under this Agreement may
be delegated, in whole or in part, by operation of law or otherwise by any of
the parties hereto without the prior written consent of the other parties. Any
assignment or delegation in violation of the preceding sentence shall be void.
Subject to the preceding two sentences, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and permitted assigns.
77
Each of the Parent, Merger Sub and the Company has caused this Agreement
to be duly executed and delivered as of the date first written above.
SANDISK CORPORATION
By: _______________________________
Name: _____________________________
Title: ______________________________
PROJECT DESERT LTD.
By: _______________________________
Name: _____________________________
Title: ______________________________
MSYSTEMS LTD.
By: _______________________________
Name: _____________________________
Title: ______________________________
I-4
SF1:638165.1
Annex I
DEFINED TERMS INDEX
Defined Term Section
------------ -------
Accounting Rules 2.7(e)
Acquisition Proposal 5.6(a)
Acquisition Transaction 5.6(a)
Agreement Preamble
Affiliate 8.7(a)
Affiliate Agreements Recitals
Alternative Agreement 7.1(i)
Antitrust Laws 2.5(b)
Applicable Court 5.2(a)
Applicable Date 2.7(a)
Approvals 2.5(b)
Arrangement Regulations 5.2(a)
Assumed Options 5.4(c)
Bankruptcy and Equity Exception 2.4)
Blue Sky Laws 2.5(b)
Business Day 8.7(b)
Cause 5.10(e)
Certificate 1.4(c)
Citigroup 2.15
Closing 1.2
Closing Date 1.2
Code Recitals
Companies Law Recitals
Company Preamble
Company Affiliates 5.16
Company Capitalization Representations 6.3(a)
Company Charter Documents 2.2
Company Contract 2.17(b)
Company Disclosure Document 2.12
Company Disclosure Letter Article 2
Company Employee Plan 2.11(a)
Company Filed SEC Reports 2.7(a)
Company General Meeting 2.12
Company Intellectual Property 2.16(a)
Company Option Plans 1.3(c)
Company Product 2.16(a)
Company Registered Intellectual Property Rights 2.16(b)
Company SAR 1.3(c)
Company Share Options 1.3(c)
Company Shares 1.3(b)
Confidentiality Agreement 5.5
I-1
Contract 8.7(c)
Convertible Notes 2.3(a)
Court Approval 5.2(a)
Current Policies 5.14(b)
Current Premiums 5.14(b)
Director Resignations Recitals
Effective Time 1.2
Employee 2.11(a)
Employment Agreement 2.11(a)
End Date 7.1(b)
Environmental Laws 2.6(a)
ERISA 2.11(a)
ERISA Affiliate 2.11(a)
Exchange Act 2.5(b)
Exchange Agent 1.4(a)
Exchange Ratio 1.3(b)
401(k) Plans 5.10(b)
GAAP 2.7(e)
Good Reason 5.10(e)
Governmental Entity 8.7(e)
Grants 2.21
Hazardous Material 2.6(a)
HSR Act 2.5(b)
Indemnified Parties 5.14(a)
Indemnities 5.14(a)
Indenture 5.11
Information Statement 5.2(a)
Intellectual Property 2.16(a)
Intellectual Property Rights 2.16(a)
International Employee Plan 2.11(a)
Investment 7.2(a)
Investment Center 2.5(b)
Investment Center Approval 2.5(b)
Investment Closing 7.2(a)
Investment Option Notice 7.2(a)
Investment Shares 7.2(a)
IRS 2.11(c)
Israeli Employees 2.11(j)
Israeli Income Tax Ruling 5.4(c)
Knowledge 8.7(d)
Lock-Up Period Recitals
Legal Requirements 8.7(e)
Licensing Policy 5.8(c)
Liens 2.3(c)
Material Adverse Change 8.7(f)
Material Adverse Effect 8.7(f)
I-2
Merger Recitals
Merger Proposal 5.2(a)
Merger Sub Preamble
Nasdaq 1.3(f)
Noncompetition Agreement Recitals
OCS 2.5(b)
OCS Approval 2.5(b)
OMM 5.17(a)
Options Matters 8.7(f)
Ordinance 1.4(c)
Parent Preamble
Parent Authorized Preferred Stock 3.2
Parent Capitalization Representations 6.2(a)
Parent Common Stock 1.3(b)
Parent Disclosure Letter Article 3
Parent Filed SEC Reports 3.7(a)
Parent Junior Preferred Stock 3.2
Parent Notes 3.2
Parent Rights 3.2
Parent Rights Agreement 3.2
Parent Share Options 3.2
Patents 2.16(a)
Permitted Lien 8.7(g)
Per Share Consideration 1.3(b)
Person 8.7(h)
Privilege Exception 5.3(a)
R&D Law 5.4(a)
Registered Intellectual Property Rights 2.16(a)
Registration Date 5.2(f)
Registration Statement 5.2(f)
Restated Financials 8.7(i)
Restraints 6.1(c)
Returns 2.14(b)
RTPA 2.5(b)
Xxxxxxxx-Xxxxx Act 2.7(a)
SEC 2.7(a)
Section 350 Vote 5.2(a)
Securities Act Recitals
Severance Pay Law 2.11(j)
Subsidiary 8.7(j)
Superior Proposal 5.6(a)
Surviving Company 1.1
Tail Cap 5.14(b)
Tail Policy 5.14(b)
Tax 2.14(a)
Termination Fee 7.1(b)
I-3
Trademarks 2.16(a)
Transactions Recitals
Triggering Event 7.1
URLs 2.16(a)
U.S. Counterpart Plans 5.10(c)
Voting Undertakings Recitals
WGM 5.17(a)
I-4
