EXHIBIT 2.1
______________________________________________________________________________
STOCK PURCHASE AGREEMENT
by and among
UNIVERSAL COMMUNICATION SYSTEMS, INC.
as Buyer
and
the following Shareholders of TOU Millennium Electric Ltd.:
Xxx X. Xxxxxxx
Catlan Development Limited.
as Sellers
August 22, 2003
______________________________________________________________________________
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of August
22, 2003, by and between UNIVERSAL COMMUNICATION SYSTEMS, INC., a Nevada
corporation ("Buyer"), and the following shareholders of TOU Millennium Electric
Ltd.: Xxx X. Xxxxxxx and Xxxxxx Development Limited (collectively, "Sellers" and
each individually a "Seller"). Buyer and Sellers are sometimes referred to
individually in this Agreement as a "Party" and collectively as the "Parties."
All other capitalized terms used in this Agreement and not otherwise defined
have the meanings set forth in Article 8 of this Agreement.
PREAMBLE
Sellers collectively own all of the issued and outstanding capital
stock of Millennium Electric TOU, Inc., an Israeli corporation (the "Company").
Buyer, a publicly traded company, has agreed with Sellers on 12 June 2003, to
purchase from Sellers, and Sellers desire to sell to Buyer, all of the
outstanding capital stock of the Company, on the terms and subject to the
conditions set forth in this Agreement.
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
ARTICLE 1 - PRINCIPAL TRANSACTION
---------------------------------
Section 1.1 Sale and Purchase of Shares. On the terms and subject to the
conditions of this Agreement, Sellers agree to sell and transfer to Buyer, and
Buyer agrees to purchase from Sellers, all outstanding capital stock of the
Company owned or controlled by Seller, which capital stock is equal to 100% of
the issued and outstanding shares of the Company, (the "Shares"), free and clear
of all Encumbrances. The effective date for the transfer of all rights in the
Shares to the Buyer shall be 12 June 2003 (the "Effective Date").
Section 1.2 Purchase Price. In consideration of the transfer of the Shares
to Buyer and the other undertakings set forth in this Agreement, Buyer agrees to
issue to Sellers at the Closing the following Purchase Price (the "Purchase
Price") which will be allocated among Sellers on a pro rata basis in accordance
with their respective Share ownership:
(a) Four million four hundred thousand (4,400,000) shares of
restricted common stock of Buyer in the name of Sellers (the "Initial
Stock").
(b) Options to purchase additional eight million eight hundred
thousands (8,800,000) shares of Buyer common stock, at a price of
$0.05/share, exercisable for a period of five years from the
ii
date of
the Closing (the "Initial Options"), upon delivery of Draft Financial
Statements of the Company for the 2002 fiscal year, and Draft Interim
Financial Statements through the quarter ended June 2003 (as further
defined in Section 2.4). Within 7 days after receipt of a Revenue
Reports indicating the Company has achieved USD $1.3 million in
Revenue, options to purchase 13.2 million shares of Buyer common
stock, exercisable during a period of 36 months from the date of
issuance, at:
(i) USD $0.06 per share, if such Revenue is achieved at any time
during the fiscal year ending December 31, 2003; or
(ii) USD $0.07 per share if such Revenue is achieved
accumulatively at any time during the fiscal year ending December 31,
2004;
(iii) USD $0.08 per share if such Revenue is achieved
accumulatively at any time during the fiscal year ending December 31,
2005.
(c) Within 7 days after receipt of a Revenue Report indicating
the Company has achieved USD $4.4 million in Revenue, options to
purchase additional 13.2 million shares of Buyer common stock,
exercisable during a period of 48 months from the date of issuance,
at:
(i) USD $0.17 per share if such Revenue is achieved during the
fiscal year ending December 31, 2004
(ii) USD $0.18 per share if such Revenue is achieved
accumulatively at any time during the fiscal year ending December 31,
2005; or
(iii) USD $0.19 per share if such Revenue is achieved
accumulatively at any time during the fiscal year ending December 31,
2006.
(d) Within 7 days after receipt of a Revenue Report indicating
the Company has achieved USD $12.2 million in Revenue, options to
purchase additional 13.2 million shares of Buyer common stock,
exercisable during a period of 60 months from the date of issuance,
at:
(i) USD $0.37 per share if such Revenue is achieved during the
fiscal year ending December 31, 2005; or
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(ii) USD $0.38 per share if such Revenue is achieved
accumulatively at any time during the fiscal year ending December 31,
2006; or
(iii) USD $0.39 per share if such Revenue is achieved
accumulatively at any time, during the fiscal year ending December 31,
2007.
The shares issued pursuant to sub-sections (a) and (b) above, will be
issued as "restricted securities" as defined in Rule 144 of the Securities
Act of 1933, as amended, and will be restricted from trading for a period
of not less than 12 months from the date of issue. The Buyer shall file, at
its own expense, a registration statement with the SEC within 180 days of
the Closing, which registration statement shall include all Buyer common
stock and options that compose the Purchase Price, and shall take promptly
all any action and provide at its own expense any approval, opinion
(including legal opinion), confirmation and document which may be necessary
to complete and give effect to said registration and to the tradability of
said common stock. Subject to SEC approval, the Buyer common stock, and
options when exercised, that compose the Purchase Price shall become free
trading common stock. Other than as stated in Section 2.28 hereinunder, the
Buyer shall not be responsible for any broker fees or commissions related
to the shares and options issued pursuant to this Agreement.
Section 1.3 Deliveries of payment and documents. Notwithstanding the
Effective Date, the closing of the transactions contemplated by this Agreement
(the "Closing") will take place by mail with Xxxxxx & Xxxx, P.A., serving as
Escrow Agent, on August 22, 2003 or on such date mutually agreed by Buyer and
Sellers or, in the absence of mutual agreement, at a time and date specified in
writing by either Buyer or Sellers upon five business days' notice to the other
after fulfillment or waiver of the conditions precedent set forth in Article 5
of this Agreement (the "Closing Date").
Section 1.4
(a) At the Closing, Sellers will execute and/or deliver to Buyer
(i) certificates representing the Shares duly endorsed in blank or
accompanied by irrevocable stock powers duly endorsed in blank and
sufficient to transfer the Shares to Buyer free and clear of all
Encumbrances as of the Effective Date; (ii) all files, documents,
agreements, books of account, corporate seals, minute books, stock
records, and other corporate records pertaining to the Company; and
(iii) the various certificates, instruments and other documents
referred to in Section 5.1.
(b) At the Closing, Buyer will execute and/or deliver to Sellers
(i) the Purchase Price; (ii) the employment agreement referred to in
Section 5.1 hereunder; and (iii) the various certificates, instruments
and other documents referred to in Section 5.2.
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ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------------------
Sellers, jointly and severally, represent and warrant to Buyer as follows:
Section 2.1 Disclosure Schedule. Sellers have delivered to Buyer the
Disclosure Schedule, which includes the numbered schedules specifically referred
to in this Article 2 (the "Disclosure Schedule"). The information contained in
the Disclosure Schedule to the best of Sellers' Knowledge is complete and
accurate, and all documents that are attached to or form a part of the
Disclosure Schedule are complete and accurate copies of the genuine original
documents they purport to represent. References to Schedules in this Agreement
shall be to Schedules included in the Disclosure Schedule.
Section 2.2 Organization and Good Standing. The Company and each Subsidiary
is a corporation duly organized, validly existing and in good standing under the
laws of the state and/or nation of its incorporation, with full corporate power
and authority to conduct their respective businesses as now being conducted, to
own or use the properties and assets that they purport to own or use, and to
perform their respective obligations under all Applicable Contracts. Copies of
the Organizational Documents are attached to Schedule 2.2. Except as disclosed
on Schedule 2.2, the Company does not have any Subsidiaries and does not own or
have any right to acquire any equity interest in any other Person.
Section 2.3 Capitalization; Ownership. The authorized capital stock of the
Company consists of Ordinary Shares, of which 100 shares are issued and
outstanding, and of 100 Management Shares, of which all 100 are issued and
outstanding. There are no other authorized classes or series of capital stock or
other equity securities of the Company. All of the shares of common stock of the
Company, including the Shares were validly issued, are fully paid and
nonassessable, and were not issued in violation of any preemptive or similar
rights of any shareholder. Shareholders' pro rata Share ownership is set forth
on Schedule 2.3. There are no outstanding Contracts that require Sellers to sell
any shares of common stock of the Company, including the Shares, or that require
the Company to issue or sell any shares of capital stock of the Company,
including the Shares or any securities convertible into shares of capital stock
of the Company, including the Shares. The Shares represent 100% of the
outstanding capital stock of the Company. Sellers own, beneficially and of
record, all of the Shares free and clear of all Encumbrances. Except as set
forth on Schedule 2.3, none of the Shares are held jointly with any other
Person, including any Shareholder. At the Closing, Sellers will deliver to Buyer
valid title to all of the issued and outstanding Shares free and clear of all
Encumbrances. Except as set forth on Schedule 2.3, the Company owns all of the
issued and outstanding shares of capital stock of each Subsidiary free and clear
of all Encumbrances. The authorized capital, as well as the issued and
outstanding stock of each Subsidiary, is as set forth below:
Name of Subsidiary Share Description Authorized Shares Outstanding Shares
Solar Style Ltd. Ordinary Shares 50,000 200
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There are no other classes or series of capital stock or other equity securities
of any Subsidiary. All of the shares of common stock of the Subsidiaries were
validly issued, are fully paid and nonassessable, and were not issued in
violation of any preemptive or similar rights of any shareholder. There are no
outstanding Contracts that require the Company to sell any shares of common
stock of any Subsidiary or that require any Subsidiary to issue or sell any
shares of capital stock of any Subsidiary or any securities convertible into
shares of capital stock of any Subsidiary. The Company owns beneficially and of
record, all of the outstanding capital stock of each Subsidiary free and clear
of all Encumbrances.
Section 2.4 Financial Statements; Reports. Copies of the audited
consolidated financial statements for the Company and its Subsidiaries at and
for the fiscal years ended December 31, 2001 and consolidated financial
statements 2000 copies of the Draft Financial Statements through December 31,
2002, are attached to Schedule 2.4 (the "Financial Statements"). The Draft
Financial Statements include the balance sheet of the Company at December 31,
2002 (the "Balance Sheet"). The Sellers believe that the Draft Financial
Statements and balance sheet of the Company at December 31, 2002 will not be
substantially different from the final audit financial statements for the same
date. Also attached to Schedule 2.4 are copies of the draft interim consolidated
balance sheets and interim statements of income and cash flows of the Company
and its Subsidiaries at and for the quarter ended June 30, 2003 thereto during
the current fiscal year, if any, each prepared internally by the Company (the
"Interim Financial Statements"). The Draft Financial Statements and Draft
Interim Financial Statements present fairly the financial condition of the
Company and its Subsidiaries, on a consolidated basis, at the dates indicated
and the Company's and the Subsidiaries' consolidated results of operations for
the periods then ended, all in accordance with Israeli GAAP applied on a basis
consistent throughout such periods and consistent with prior periods (subject,
in the case of the Interim Financial Statements, to normal recurring year-end
adjustments, the effect of which will not individually or in the aggregate be
materially adverse, and the absence of notes which if presented would not differ
materially from those included in the Draft Financial Statements).
Since the date of its incorporation, the Company, and its subsidiaries (if
applicable) has timely filed all material forms, reports, schedules, statements
and other material documents required to be filed by it under applicable Legal
Requirements. As of their respective dates, or if amended, as of the date of the
last such amendment, any filings, financial statements or exhibits included
therein (a) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading; and, (b) complied with applicable Legal Requirements as
the case may be, and any applicable rules and regulations thereunder.
Section 2.5 Books and Records. The books of account, and any other records
of the Company and each Subsidiary, all of which have been made available to
Buyer, are complete and accurate and have been maintained in accordance with
sound business practices. As of the Closing Date, all of these books and records
will be in the possession of the Company or each Subsidiary, as applicable.
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Section 2.6 No Undisclosed Liabilities. Neither the Company nor any
Subsidiary has any liability or obligation of any nature except for liabilities
or obligations expressly reflected or reserved against in the Balance Sheet and
current liabilities incurred in the Ordinary Course of Business since December
31, 2002, which will not, individually or in the aggregate, cause a Material
Adverse Consequence to the Company or its business.
Section 2.7 Taxes. Except as set forth on Schedule 2.7, all reports
required by the State of Israel, declarations, statements and returns of any
kind with respect to Taxes that are required to be filed for the Company or any
Israeli Subsidiary (collectively, the "Returns") have been filed within the
times and in the manner prescribed by applicable Legal Requirements. The Company
and each Subsidiary have paid, or caused to be paid, all Taxes due and owing by
them, whether or not shown (or required to be shown) on a Tax Return, and the
Company has provided a sufficient reserve for the payment of all Taxes not yet
due and payable on the Balance Sheet. Taxes paid or provided for on the Balance
Sheet include all Taxes for which the Company or any Subsidiary may be liable in
its own right, or as the transferee of the assets of, or as successor to, any
other corporation, association, partnership, joint venture or other entity. All
Taxes required to have been collected or withheld with respect to the Company or
any Subsidiary have been duly collected or withheld and, to the extent required
before the Closing Date, have been or will, prior to the Closing Date, be duly
paid to the proper Governmental Body. Except as disclosed on Schedule 2.7, all
Tax deficiencies asserted by any Governmental Body against the Company or any
Subsidiary have been paid or finally settled and recorded on the Draft Balance
Sheet, and to the best of the Sellers' Knowledge no grounds exist for the
assertion of any deficiency for any periods that have not been audited by an
applicable Governmental Body. Except as disclosed on Schedule 2.7, there are no
audits of or other Proceedings pending with respect to any Returns. Except as
disclosed on Schedule 2.7, there are no outstanding waivers of statutes of
limitations regarding any Taxes payable by the Company or any Subsidiary.
Neither the Company nor any Subsidiary is a party to any tax-sharing agreement
or similar arrangement that will survive the Closing. Sellers have made
available to Buyer complete and accurate copies of (i) all Returns regarding all
open years and any amendments thereto, (ii) all audit or examination reports or
written proposed adjustments (whether formal or informal) received from any
Governmental Body relating to any Return and (iii) any closing agreements
entered into by the Company or any Subsidiary with any Governmental Body
regarding Taxes. Neither the Company nor any Subsidiary has signed an extension
with any Governmental Body concerning any liability for Taxes, and no open
matters exist for any prior periods.
Section 2.8 No Material Adverse Consequence; Absence of Restricted Events.
Since December 31, 2002: the Company and its Subsidiaries have conducted their
operations and affairs only in the Ordinary Course of Business; there has not
been any Material Adverse Consequence in the business, operations, properties,
prospects, assets or condition of the Company or any of its Subsidiaries; and no
event has occurred or circumstance exists that may result in such a Material
Adverse Consequence. Except as disclosed on Schedule 2.8, since December 31,
2002, no Restricted Event has occurred with respect to the Company or any
Subsidiary.
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Section 2.9 Employees; Labor Relations.
(a) Since its incorporation the Company has one employee, Xx. Xxx
Xxxxxxx. There are, nor have there been, any other employees of the
Company or its Subsidiaries. Upon the execution of the employment
agreement referenced in Section 5.1 hereto and the fulfillment of all
obligations and undertakings of Buyer hereunder, Xx. Xxxxxxx will have
no claim against the Company with respect to his employment.
Notwithstanding the above, the Company received secretarial services
through an employee of an affiliate of Catlan Development Limited and
the services of an assistant manager who was engaged as an independent
consultant. The agreements relating to the Company's relationship with
Xx. Xxxxxx More are set forth in Schedule 2.9. To Sellers' Knowledge,
no employee of the Company or any Subsidiary intends to terminate his
or her employment. Each employee of the Company and each Subsidiary is
employed on an "at will" basis.
(b) Neither the Company nor any Subsidiary is now, or has ever,
been a party to any collective bargaining or other labor Contract.
Since January 1, 1997, there has not been, there is not presently
pending or existing and to Sellers' Knowledge there is not Threatened,
any strike, slowdown, picketing, work stoppage, labor arbitration or
Proceeding concerning (i) the grievance of any employee; (ii) any
application or complaint filed by an employee or union with any
Governmental Body; or (iii) organizational activity or other labor
dispute against or affecting the Company or any Subsidiary or any of
their respective premises. No application for certification of a
collective bargaining agent is pending with respect to the Company or
any Subsidiary or to Sellers' Knowledge Threatened. No event has
occurred or circumstance exists that could provide the basis for any
work stoppage or other labor dispute. There is no lockout of any
employees by the Company or any Subsidiary, and no such action is
contemplated.
(c) Except as set forth on Schedule 2.9, the Company and its
Subsidiaries have complied with all Legal Requirements relating to
employment, termination of employment, leaves of absence, equal
employment opportunity, nondiscrimination, accommodation of
disabilities, affirmative action, immigration, child labor, wages,
hours, benefits, collective bargaining, the payment of social
security, unemployment and similar Taxes, other payroll Taxes, the
payment of employee wages and benefits, occupational safety and
health, workers compensation and plant closing or layoffs. Neither the
Company nor any Subsidiary is liable for the payment of any Taxes,
fines, penalties or other amounts, however designated, for
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failure to comply with any of the foregoing Legal Requirements. No
employee of the Company or any Subsidiary is working under a United
States work authorization.
(d) Except as set forth on Schedule 2.9, neither the Company nor
any Subsidiary is a party to any Contract with any of the present or
former director, officer, employee or consultant of the Company or any
Subsidiary with respect to length, duration or conditions of
employment (or the termination of employment), independent contractor
relationship, salary, bonus or other incentive compensation,
commission, percentage compensation, deferred compensation, health
insurance or any other form of remuneration, or restricting in any way
the termination of employment or an independent contractor
relationship. There is no pending or to the Sellers' Knowledge
Threatened or existing but unasserted, claim against the Company or
any Subsidiary for violation of any Contract described above, nor is
there any factual basis upon which a claim could be asserted.
(e) A copy of each employee policy manual, handbook or other
employment policies provided or applicable to the employees of the
Company or any Subsidiary, and a copy of the employment application
forms, form offer letters and other hiring documents (including
pre-employment tests) currently being used by the Company or any
Subsidiary or which have been used by the Company or any Subsidiary in
the last two years, in connection with the hiring of any new employee,
if existing, have been provided to Buyer.
Section 2.10 Employee Benefit Plans. Neither the Company nor any Subsidiary
nor any predecessor or affiliate of the Company or any Subsidiary has ever
established, maintained or contributed, to or otherwise participated in, or had
an obligation to establish, maintain, contribute to or otherwise participate in,
any Employee Benefit or Retirement Plan.
Section 2.11 Real Property. There is no real property or real property
interests owned or controlled by the Company or any Subsidiary (the "Real
Property"). Schedule 2.11 sets forth a complete list of all leases of real
property concerning the Company or any Subsidiary (individually, a "Real
Property Lease," collectively, the "Real Property Leases" and with respect to
the underlying real property, "Leased Real Property"). Sellers have provided
Buyer with a complete and accurate copy of each Real Property Lease. No building
or improvement that the Company or any Subsidiary owns, leases or uses
encroaches on any easement or property owned by another, and no building or
improvement owned by another encroaches on any property that the Company or any
Subsidiary owns, leases or uses or on any easement the benefit of which runs to
the benefit of the Company or any Subsidiary. There are no ground subsidences or
slides on any real property that the Company or any Subsidiary leases or uses.
All buildings and improvements that the Company or any Subsidiary leases or uses
are in good condition, normal wear and tear excepted, are structurally sound and
not in need of repairs, are fit for their intended
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purposes, and are adequately serviced by all utilities necessary for the
effective operation of the business of the Company or such Subsidiary, as
applicable, as presently conducted. None of the real property leased or used by
the Company or any Subsidiary is the subject of any condemnation action and
there is no proposal under consideration by any public or governmental authority
or entity to use any of the real property leased or used by the Company or a
Subsidiary for some other purpose.
Section 2.12 Personal Property. Except for the Intellectual Property
licensed to the Company as set forth on Schedule 2.17(b), the Company and each
Subsidiary has good and marketable title, free and clear of all Encumbrances, to
all of the personal property and other assets of the Company and each
Subsidiary, tangible and intangible, including all property reflected in the
Balance Sheet or acquired after the date of the Balance Sheet, but excluding any
personal property since sold or otherwise disposed of in the Ordinary Course of
Business. All personal property owned by the Company or any Subsidiary will be
in the possession of the Company or a Subsidiary on the Closing Date.
Section 2.13 Accounts Receivable. All accounts receivable of the Company
and all Subsidiaries that are reflected on the Draft Balance Sheet or the Draft
Interim Financial Statements or on the other accounting records of the Company
or any Subsidiary as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent on the Closing Date valid obligations
arising from sales or advances actually made, services actually performed or
other obligations actually incurred in the Ordinary Course of Business. Unless
paid before the Closing Date, the Accounts Receivable are, or will be as of the
Closing Date, current and collectible, and each of the Accounts Receivable
either will have or has been collected in full prior to the Closing Date or will
be collected in full within ninety days after their due date.
Section 2.14 Litigation. Except as set forth on Schedule 2.14 there is no
Proceeding or Order pending against the Company or any Subsidiary or that
otherwise relates to or may affect the business of, or any of the property or
assets owned, leased or used by, the Company or any Subsidiary or that may
interfere with the transactions contemplated by this Agreement. To Sellers'
Knowledge, no such Proceeding or Order has been Threatened and no event has
occurred or circumstance exists that may give rise to or serve as a basis for
any such Proceeding or Order.
Section 2.15 Authorization and Enforceability; No Conflict with Other
Instruments or Proceedings.
(a) Sellers have full capacity, power and authority to enter into
and perform this Agreement and to carry out the transactions
contemplated by this Agreement. This Agreement is binding upon Sellers
and is enforceable against each of them in accordance with its terms.
(b) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated by this Agreement
will not to the best of Seller's Knowledge (i) contravene the
Organizational Documents or result in a breach of
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any provision of, or constitute a default under, any Applicable
Contract; (ii) violate any Legal Requirement or Order or give any
Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify any Governmental Authorization applicable to the
Company or any Subsidiary; (iii) result in the imposition of any Tax
on the Company or any Subsidiary (iv) result in any Encumbrance being
created or imposed upon or with respect to any of the property or
assets owned, leased or used by the Company or any Subsidiary; or (v)
result in the acceleration of any of the indebtedness of the Company
or any Subsidiary or increase the rate of interest payable by the
Company or any Subsidiary with respect to any indebtedness. All
consents, approvals or authorizations of, or declarations, filings or
registrations with, any Person required in connection with the
execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated by this Agreement are
set forth on Schedule 2.15 and will be obtained or made, as
applicable, by Sellers before the Closing.
Section 2.16 Contracts. Except for purchase orders for supplies issued in
the Ordinary Course of Business, Schedule 2.16 lists each Material Contract to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound or affected. Each Material Contract is in full force and
effect and is valid and enforceable in accordance with its terms. The Company,
each Subsidiary and each other Person that is a party to a Material Contract has
complied and is fully complying with the terms of the applicable Material
Contract, and no event has occurred or circumstance exists that (with or without
notice or lapse of time) may contravene, conflict with or result in a violation
or breach of, or give the Company, a Subsidiary or any other Person the right to
declare a default under, any Material Contract. Copies of each Material Contract
are attached to Schedule 2.16.
Section 2.17 Intellectual Property. Schedule 2.17(a) sets forth all
Intellectual Property Assets presently owned by the Company or any Subsidiary.
Schedule 2.17(b) sets forth all Intellectual Property licensed or used by the
Company or any Subsidiary. The Company or any Subsidiary, as applicable, will
own an irrevocable exclusive worldwide perpetual royalty-free license to use
those Intellectual Property Assets set forth on Schedule 2.17(b) and any
improvements thereon, on the Closing Date, free and clear of all Encumbrances,
and following the Closing, Buyer, the Company and its Subsidiaries will have the
right to use each Intellectual Property Asset without payment to any other
Person. To the best of Sellers' Knowledge, there is no infringement of or
unlawful use by any Person of any of the Intellectual Property Assets of the
Company or any Subsidiary, and to the best of Sellers' Knowledge, neither the
Company nor any Subsidiary has infringed or unlawfully used any Intellectual
Property Assets of any other Person. Schedule 2.17(b) also sets forth a list of
all Contracts relating to Intellectual Property Assets to which the Company or
any Subsidiary is a party or by which the Company or any Subsidiary is bound or
affected. To the best of Seller's Knowledge, none of the Intellectual Property
Assets of the Company or any Subsidiary is subject to any pending or to Sellers'
Knowledge Threatened claim or challenge, and there is no valid basis for
asserting any claim or challenge. The Intellectual Property Assets are all those
necessary for the operation of the
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business of the Company and its Subsidiaries as presently conducted and are
sufficient in form and quality so that following the Closing, Buyer will have
the ability to operate the Company and its Subsidiaries consistent with the
operation of the Company and its Subsidiaries before the Closing. No
Intellectual Property Assets owned, licensed or used by the Company or any
Subsidiary are subject to any outstanding Order restricting the use of the
Intellectual Property Assets. To the best of Sellers' Knowledge, Buyer's
exploitation of the Intellectual Property Assets set forth on Schedule 2.17(a)
and (b) will not infringe the rights of any other Person.
Section 2.18 Insurance. Schedule 2.18 contains a list of all policies of
liability, errors and omissions, crime, fidelity, life, fire, product liability,
workers' compensation, health, director and officer liability and other forms of
insurance owned or maintained by the Company or any Subsidiary, including for
each policy: the name of the insurer; the amount of coverage; the type of
insurance; the policy number; the renewal or expiration date; and all pending
claims under the policy. All of the insurance policies listed on Schedule 2.18
are (a) outstanding and in full force; (b) taken together provide adequate
insurance coverage for the assets and the operations of the Company and its
Subsidiaries for all risks normally insured against by a Person carrying on the
same type of business as the Company and its Subsidiaries; and (c) are
sufficient for compliance with all Legal Requirements and Contracts to which the
Company or any Subsidiary is a party or is bound or affected. The present
insurance coverage of the Company and its Subsidiaries will remain in effect
through the Closing Date.
Section 2.19 No Illegal Payments. Neither the Company, any Subsidiary nor
any other Person associated with or acting on behalf of the Company or any
Subsidiary has used any funds of the Company or any Subsidiary for unlawful
contributions, gifts, entertainment or other expenses or made any direct or
indirect unlawful payments from such funds or established or maintained any
unlawful or unrecorded funds.
Section 2.20 Certain Relationships. Except for the intellectual property
owned by Xx. Xxxxxxx and licensed by the Company set forth on Schedule 2.17,
neither Sellers, nor any Related Person of any Seller, is an owner, shareholder,
creditor, director, agent, consultant or employee of, or lender to, any Person
engaged in a business that acts as a supplier of any goods or services to the
Company, any Subsidiary, or any part of which is in actual or potential
competition with the Company or any Subsidiary. Neither the Company nor any
Subsidiary has any outstanding indebtedness to Sellers or any Related Person,
and neither Sellers nor any Related Person has any outstanding indebtedness to
the Company or any Subsidiary.
Section 2.21 Environmental Matters.
(a) Compliance. To the best of Seller's Knowledge The Company and
its Subsidiaries are in full compliance with all applicable
Environmental Laws, and there are no circumstances that may prevent or
interfere with full compliance in the future. Compliance includes
possession of, and compliance with, all required permits and other
Governmental Authorizations. Neither the Company nor its Subsidiaries
is party to any Order or Contract with respect to any Environmental
Law.
11
(b) Notices. Neither the Company nor any Subsidiary has received
any communication (written or oral), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges (i) that the
Company or any Subsidiary is not in compliance with an Environmental
Law or (ii) that the Company or any Subsidiary is potentially
responsible for any investigation or cleanup of Hazardous Substances.
(c) Environmental Liability. For the Company, any Subsidiary and
any Person whose liability the Company or any Subsidiary has or may
have retained or assumed, either contractually, by operation of law or
otherwise, there is no: (i) Environmental Liability existing, pending
or Threatened, or (ii) past or present event, circumstance or
condition that could form the basis for any Environmental Liability,
including the release, discharge or disposal of a Hazardous Substance
at any location or site.
(d) No Nuisance. To the best of Sellers' belief, the business of
the Company and each Subsidiary as currently conducted does not
constitute a nuisance and no claim of nuisance has been made by any
adjoining landowner or other Person, and neither the Company nor any
Subsidiary has made or received complaints to or from anyone regarding
a nuisance caused or created by any adjoining landowner or Person.
(e) Documents. Sellers have disclosed to Buyer all environmental
reports, audit reports, inspection reports, and sampling results
conducted for the Real Property or the Company or any Subsidiary and
which are in the possession of the All current Company or Subsidiary
permits and Governmental Authorizations under any Environmental Law
are set forth in Schedule 2.22..
Section 2.22 Permits and Licenses; Compliance with Legal Requirements. All
Governmental Authorizations necessary for the Company and its Subsidiaries to
carry on their respective businesses as presently conducted are identified on
Schedule 2.22 and have been timely obtained, are in full force and effect and
have been complied with. All fees and charges incident to those Governmental
Authorizations have been fully paid and are current and no suspension or
cancellation of any Governmental Authorization has been Threatened or could
result by reason of the transactions contemplated by this Agreement. Neither the
Company nor any Subsidiary is subject to, nor have they been Threatened with,
any Material Adverse Consequence as the result of a failure to comply with any
Legal Requirement applicable to it or the conduct or operation of their
respective businesses or the ownership or use of any of their respective
properties or assets, and no event has occurred or circumstance exists (with or
without notice or lapse of time) that may give rise to any such Material Adverse
Consequence. The Company and its Subsidiaries are presently, and during all
applicable limitations periods have been, in full compliance with all applicable
Legal Requirements.
12
Section 2.23 Bank Accounts. Schedule 2.23 contains a list of the names,
account numbers and locations of all banks and other financial institutions at
which the Company or any Subsidiary has any accounts or safe deposit boxes and
the names of all persons authorized to draft or have access to such accounts.
Section 2.24 Independent Contractors. All independent contractors engaged
by the Company or any Subsidiary are identified on Schedule 2.2.24. The
independent contractor relationships of the Company and each Subsidiary have
been maintained consistent with prevailing industry practices. The Company and
its Subsidiaries require that those employees required to be licensed are duly
licensed pursuant to all applicable Legal Requirements and that they maintain
their licenses in good standing as a condition for continued affiliation.
Schedule 2.24 lists the agents, associates and sales persons of the Company or
its Subsidiaries, as applicable, as of June 30, 2003, and the number of such
agents, associates and sales persons has not materially changed since such date.
Each of the agents, associates and sales persons of the Company and its
Subsidiaries has entered into an independent contractor agreement with the
Company. Attached to Schedule 2.24 is the current form of independent contractor
agreement entered into with the agents, associates and sales persons of the
Company or any Subsidiary, and no agent, associate or sales person is a party to
a Contract with the Company or any Subsidiary that is materially different in
substance or form from the current form. Set forth on Schedule 2.24 is a
schedule of the commission arrangements, including all perquisites, for each
agent, associate and sales persons of the Company. To the Knowledge of Sellers,
none of the agents of the Company or any Subsidiary has any plans to terminate
his or her independent contractor relationship with the Company or any
Subsidiary following the Closing.
Section 2.25 Franchise and Joint Venture Agreements. Except as set forth on
Schedule 2.25, neither the Company nor any Subsidiary is a party to any
franchise or joint venture Contract. Neither the Company nor any Subsidiary owes
or will owe any franchise fees.
Section 2.26 Pending Customer Transactions. Schedule 2.26 lists each of the
pending customer orders held the Company and its Subsidiaries as of the date of
this Agreement. The aggregate amount of revenues expected to be derived by the
Company and its Subsidiaries from pending but not yet consummated transactions
associated with the Company and its Subsidiaries is as per the Schedule 2.26 as
delivered to the Buyer by the Seller.
Section 2.27 No Broker's Fees. Except as set forth on Schedule 2.27,
neither Sellers nor anyone acting on Sellers' behalf has incurred any liability
or obligation to pay fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which Buyer or
the Company or any Subsidiary could be liable.
Section 2.28 Accuracy of Statements. No representation or warranty made by
Sellers in this Agreement, the Disclosure Schedule, or any statement,
certificate or schedule furnished, or to be furnished, to Buyer pursuant to this
Agreement or in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained therein not misleading. The
representations and warranties of Sellers will be deemed to be made as of the
date of this Agreement and again as of the Closing Date.
13
Section 2.29 Other Subsidiaries. To the best of Seller's Knowledge, no
Subsidiary of the Company existing under the laws of any jurisdiction outside of
Israel is in violation any of the representations made hereinabove.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------------------
Buyer represents and warrants to Sellers as follows:
Section 3.1 Organization and Standing of Buyer. Buyer and each Subsidiary
of Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the state and/or nation of its incorporation, with full
corporate power and authority to conduct their respective businesses as now
being conducted, to own or use the properties and assets that they purport to
own or use, and to perform their respective obligations under all Applicable
Contracts. Copies of the Organizational Documents are attached to Schedule 3.1.
Except as disclosed on Schedule 3.1, Buyer does not have any Subsidiaries and
does not own or have any right to acquire any equity interest in any other
Person.
Section 3.2 Capitalization; Ownership. The authorized capital stock of the
Buyer consists of 63,566,871 shares of common stock, .001 par value, of which
shares are issued and outstanding. There are no other authorized classes or
series of capital stock or other equity securities of the Buyer. All of the
shares of common stock of the Buyer were validly issued, are fully paid and
non-assessable, and were not issued in violation of any preemptive or similar
rights of any shareholder. Shareholders' pro rata Share ownership is set forth
on Schedule 3.2. There are no outstanding Contracts that require Buyer to sell
any shares of common stock of the Buyer, or that require the Buyer to issue or
sell any shares of capital stock of the Buyer or any securities convertible into
shares of capital stock of the Buyer. The Stock will represent approximately 7%
of the outstanding capital stock of the Buyer. At the Closing, Buyer will
deliver to Sellers valid title to all of the Stock free and clear of all
Encumbrances. Except as set forth on Schedule 3.2, the Buyer owns all of the
issued and outstanding shares of capital stock of each, of its subsidiary free
and clear of all Encumbrances. The authorized capital, as well as the issued and
outstanding stock of each such subsidiary is set forth on the Buyer's public
filings in the SEC Xxxxx Database at xxx.xxx.xxx on Forms 10K and 10Q.
There are no other classes or series of capital stock or other equity securities
of any Subsidiary. All of the shares of common stock of the Subsidiaries were
validly issued, are fully paid and non-assessable, and were not issued in
violation of any preemptive or similar rights of any shareholder. There are no
outstanding Contracts that require the Buyer to sell any shares of common stock
of any Subsidiary or that require any Subsidiary to issue or sell any shares of
capital stock of any Subsidiary or any securities convertible into shares of
capital stock of any Subsidiary. The Buyer owns beneficially and of record, all
of the outstanding capital stock of each Subsidiary free and clear of all
Encumbrances.
Section 3.3 Financial Statements; Reports. Copies of the audited
consolidated financial statements for the Buyer at and for the fiscal years
ended December 31, 2002, 2001 and 2000, and consolidated financial statements
for the quarter ending June 30, 2003, can be found in
14
the Buyer public filings in the SEC Xxxxx Database at xxx.xxx.xxx on Form 10K
and 10Q respectively (the "Financial Statements"). To the best of Buyers'
knowledge, the Financial Statements present fairly the financial condition of
the Buyer and its Subsidiaries, on a consolidated basis, at the dates indicated
and the Buyer's and the Subsidiaries' consolidated results of operations for the
periods then ended, all in accordance with US GAAP applied on a basis consistent
throughout such periods and consistent with prior periods.
Since the date of its incorporation, the Buyer, and its subsidiaries (if
applicable) has timely filed all material forms, reports, schedules, statements
and other material documents required to be filed by it under applicable Legal
Requirements. As of their respective dates, or if amended, as of the date of the
last such amendment, any filings, financial statements or exhibits included
therein: (a) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading; and, (b) complied with applicable Legal Requirements as
the case may be, and any applicable rules and regulations thereunder.
Section 3.4 Books and Records. The books of account, minute books, stock
record books and other records of the Buyer, are complete and accurate and have
been maintained in accordance with sound business practices. The minute book of
the Buyer contains complete and accurate records of all meetings held, and all
corporate action taken, by the shareholders or board of directors of the Buyer
(or any committee of the board of directors). As of the Closing Date, all of
these books and records will be in the possession of the Buyer.
Section 3.5 No Undisclosed Liabilities. The Buyer, on a consolidated basis,
does not have any material liability or obligation of any nature except for
liabilities or obligations expressly reflected or reserved against in the
Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since December 31, 2002, which will not, individually or in the
aggregate, adversely affect the Buyer or its business.
Section 3.6 No Material Adverse Consequence; Absence of Restricted
Events.Section 3.7 Since December 31, 2002, the Buyer and its Subsidiaries have
conducted their operations and affairs only in the Ordinary Course of Business;
there has not been any Material Adverse Consequence in the business, operations,
properties, prospects, assets or condition of the Buyer or any of its
Subsidiaries; and no event has occurred or circumstance exists that may result
in such a Material Adverse Consequence. Except as disclosed on Schedule 3.6,
since December 31, 2002, no Restricted Event has occurred with respect to the
Buyer or any of its subsidiary.
Section 3.11 Authorization and Enforceability; No Conflict with Other
Instruments or Proceedings.
(a) Buyer has full capacity, power and authority to enter into
and perform this Agreement and to carry out the transactions
contemplated by this Agreement. This Agreement is binding upon Buyer
and is enforceable against it in accordance with its terms.
(b) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated
15
by this Agreement will not (i) contravene the Organizational Documents
or result in a breach of any provision of, or constitute a default
under, any Applicable Contract; (ii) violate any Legal Requirement or
Order or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate or modify any Governmental Authorization
applicable to the Buyer; (iii) result in any Encumbrance being created
or imposed upon or with respect to any of the property or assets
owned, leased or used by the Buyer; or (iv) result in the acceleration
of any of the indebtedness of the Buyer or increase the rate of
interest payable by the Buyer with respect to any indebtedness. All
consents, approvals or authorizations of, or declarations, filings or
registrations with, any Person required in connection with the
execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated by this Agreement are
set forth on Schedule 3.11 and will be obtained or made, as
applicable, by Buyer before the Closing.
Section 3.12 No Illegal Payments. Neither the Buyer, any Subsidiary nor any
other Person associated with or acting on behalf of the Buyer or any Subsidiary
has used any funds of the Buyer or any Subsidiary for unlawful contributions,
gifts, entertainment or other expenses or made any direct or indirect unlawful
payments from such funds or established or maintained any unlawful or unrecorded
funds.
Section 3.13 Permits and Licenses; Compliance with Legal
Requirements.Section 3.14 All Governmental Authorizations necessary for the
Buyer and its Subsidiaries to carry on their respective businesses as presently
conducted, if necessary have been timely obtained, are in full force and effect
and have been complied with. All fees and charges incident to those Governmental
Authorizations have been fully paid and are current and no suspension or
cancellation of any Governmental Authorization has been Threatened or could
result by reason of the transactions contemplated by this Agreement. Neither the
Buyer nor any Subsidiary is subject to, nor have they been Threatened with, any
Adverse Consequence as the result of a failure to comply with any Legal
Requirement applicable to it or the conduct or operation of their respective
businesses or the ownership or use of any of their respective properties or
assets, and no event has occurred or circumstance exists (with or without notice
or lapse of time) that may give rise to any such Adverse Consequence. The Buyer
and its Subsidiaries are presently, and during all applicable limitations
periods have been, in full compliance with all applicable Legal Requirements.
3.14 No Broker's Fees. Except as set forth on Schedule 3.14, neither Buyer nor
anyone acting on Buyer's behalf has incurred any liability or obligation to pay
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which Sellers or the Company or
any Subsidiary could be liable.
Section 3.15 Accuracy of Statements. No representation or warranty made by
Buyer in this Agreement, the Disclosure Schedule, or any statement, certificate
or schedule furnished, or to be furnished, to Sellers pursuant to this Agreement
or in connection with the transactions contemplated by this Agreement contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained therein not misleading. The
16
representations and warranties of Buyer will be deemed to be made as of the date
of this Agreement and again as of the Closing Date.
Section 3.16 Investment Intent. Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of the
Securities Act of 1933.
ARTICLE 4 - POST CLOSING COVENANTS AND AGREEMENTS
-------------------------------------------------
The Parties (as applicable) covenant and agree as follows:
Section 4.1 Reasonable Best Efforts; Notice of Breach or Failure of
Condition. Each Party will use its, his or her reasonable best efforts to
fulfill the conditions required to be fulfilled by it, him or her to bring about
the timely consummation of the transactions contemplated by this Agreement. Each
Party will give prompt notice to the other of the occurrence of any event or the
failure of any event to occur that might preclude or interfere with (i) the
satisfaction of any condition precedent to the obligations of any Party under
this Agreement; (ii) the truth and accuracy of any Party's representations and
warranties under this Agreement; or (iii) the timely consummation of the
transactions contemplated by this Agreement.
Section 4.2 Publicity. At the Closing Date, neither Buyer nor Sellers will
issue any press release or otherwise make any public statements or announcement
concerning this Agreement or the transactions contemplated by this Agreement
without the prior written consent of the other Parties Notwithstanding the
foregoing, neither Buyer nor Sellers will be prevented at any time from
furnishing any required information to any Governmental Body or from complying
with that Party's legal obligations.
Section 4.3 Further Assurances. Buyer and Sellers will execute all
documents and take all further actions as may be reasonably required or
desirable to carry out the provisions of this Agreement and the transactions
contemplated by this Agreement at or after the Closing to evidence the
consummation of the transactions contemplated by this Agreement. Upon the terms
and subject to the conditions of this Agreement, Buyer and Sellers will take all
actions and do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement. Each Party will use its reasonable
best efforts to obtain all Governmental Authorizations of all Governmental
Bodies and non-governmental third parties which may be or become necessary for
its execution and delivery of, and the performance of that Party's obligations
pursuant to, this Agreement, and will cooperate fully with each other Party in
promptly seeking to obtain all such authorizations, consents, orders and
approvals. Notwithstanding the foregoing, in connection with obtaining any
Governmental Authorizations, no Party will be required to divest or otherwise
take or commit to take any action that limits its freedom of action with respect
to, or its ability to retain, any of its businesses, operations, properties or
assets.
Section 4.4 Covenant Not To Compete. Each Seller covenants and agrees that
as long as they are employed by the Company and for 12 months thereafter or (the
"Noncompetition Period"), they will not, and will cause their Affiliates not to,
during the Noncompetition Period,
17
compete, directly or indirectly, with the Company or any Subsidiary or
participate, directly or indirectly, in the ownership, management, financing or
control of, or act as a consultant or agent to, or furnish services or advice
to, any Person which competes or plans to compete, directly or indirectly, with
the Company or any Subsidiary. The geographic scope of the foregoing covenant is
defined in Schedule 4.4 (the "Noncompetition Territory"). The Parties agree and
intend that the time period, geographic coverage and scope of the covenants set
forth in this Section 4.4 are reasonable and necessary to protect the Company,
its Subsidiaries, and the goodwill thereof to be acquired by Buyer. Sellers
agree that in the event of any breach of any of the terms, conditions or
provisions of Sections 4.4, 4.5 or 4.6 (either actual or threatened) by any
Seller, Buyer's remedies at law will be inadequate. Sellers each agree that in
such event, Buyer will have the right to specific performance and injunctive
relief (without posting any bond or other security) in addition to any and all
other rights and remedies available at law or in equity. All rights and remedies
of Buyer or its Affiliates under Sections 4.4, 4.5 and 4.6 will be cumulative.
Section 4.5 Non-Solicitation Covenant. Each Seller covenants and agrees
that for the Noncompetition Period they will not, directly or indirectly, induce
any employee or independent contractor of Buyer, the Company, any Subsidiary or
their respective Affiliates, to leave his or her employment or terminate his or
her independent contractor relationship or, directly or indirectly, assist any
other Person in requesting or inducing any employee or independent contractor of
Buyer or any Affiliates of Buyer to leave his or her employment or terminate his
or her independent contractor relationship.
Section 4.6 Confidential Information. Each party hereto covenant and agree
that they will not, and will cause their Affiliates not to, from the date of
this Agreement and forever afterward, use or disclose to any Person any
proprietary, secret or confidential information of Buyer, the Company or any
Subsidiary, including customer names and information, sales information, and
business and trade secrets, without the prior written consent of the other
party, as applicable; provided, however, that after expiration of the
Noncompetition Period, this covenant will have no applicability to information
in the public domain.
Section 4.7 Brokers' Fees. Buyer undertakes to pay brokers' fees as
provided for in Schedule 2.27 hereto, per the written instructions of the
Seller.
ARTICLE 5 - CONDITIONS TO OBLIGATION TO CLOSE
---------------------------------------------
Section 5.1 Conditions to Obligation of Buyer. Buyer's obligation to
purchase the Shares and to take the other actions required to be taken by Buyer
at the Closing is subject to the satisfaction, at or before the Closing, of each
of the following conditions (any of which may be waived by Buyer, in whole or in
part):
(a) The representations and warranties set forth in Article 2 of
this Agreement, individually and collectively, must have been accurate
in all material respects as of the date of this Agreement
18
and must be accurate in all material respects as of the Closing Date
as if made on the Closing Date;
(b) Sellers must have performed and complied with in all material
respects all of his covenants and obligations under this Agreement;
(c) Sellers must have delivered to Buyer in form reasonably
acceptable: (i) a certificate stating that the conditions specified in
Sections 5.1(a) and (b) have been satisfied; (ii) a letter of
resignation and release of claims from each director and officer of
the Company and of the directors and officers appointed by Sellers in
the Subsidiaries; and (iii) such other certificates, instruments or
documents as may be reasonably requested in order to execute the
transaction under this Agreement;
(d) There must not be any Proceeding or Order pending or
Threatened or any Legal Requirement in effect which would prevent the
consummation of any of the transactions contemplated by this Agreement
or which could result in any Material Adverse Consequence against
Buyer, the Company or any Subsidiary if the transactions contemplated
by this Agreement were consummated;
(e) All authorizations, consents and approvals by any third
parties, including all Governmental Authorizations, that are necessary
for the consummation of the transactions contemplated by this
Agreement, must have been received and must be in full force and
effect. All necessary filings, declarations and notices of Buyer and
Sellers with or to third parties must also have been made or given;
(f) Buyer must be satisfied with the results of its investigation
of the Company's business, properties and assets, including its review
of the Disclosure Schedule to be delivered pursuant to Section 2.1;
(g) The Board of Directors of the Company must have irrevocably
and unanimously: (i) approved the Agreement, (ii) taken any action
required by Israeli law to give legal effect to the Agreement.
(h) The execution of an employment agreement with Xxx Xxxxxxx for
the position of President and CEO of the Company for a term not less
than three years, and a two year extension if mutually agreed to by
the Parent and Xx. Xxxxxxx, with salary and benefits as provided for
in Schedule 5.1.
19
Section 5.2 Conditions to Obligation of Sellers. Sellers' obligation to
sell the Shares and to take the other actions required to be taken by Sellers at
the Closing is subject to the satisfaction, at or before the Closing, of each of
the following conditions (any of which may be waived collectively by Sellers, in
whole or in part):
(a) The representations and warranties set forth in Article 3 of
this Agreement, individually and collectively, must have been accurate
in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on
the Closing Date;
(b) Buyer must have performed and complied with in all material
respects all of its covenants and obligations under this Agreement;
(c) Buyer must have delivered to Sellers in form reasonably
acceptable: (i) a certificate stating that each of the conditions
specified in Sections 5.2(a) and (b) have been satisfied; and (ii)
such other certificates, instruments or documents as Sellers may
reasonably request; and
(d) There must not be any Proceeding or Order pending or
Threatened or any Legal Requirement enacted since the date of this
Agreement which would prevent the consummation of any of the
transactions contemplated by this Agreement or which could result in
any Material Adverse Consequence against Sellers, Buyer, the Company
or any Subsidiary if the transactions contemplated by this Agreement
were consummated.
(e) The execution of an employment agreement with Xxx Xxxxxxx for
the position of President and CEO of the Company for a term not less
than three years, with salary and benefits as provided for in Schedule
5.1 .
(f) The execution of a six month consulting contract between the
Company and Xxxxx Xxxxxxx and Xxxxxx More with an aggregate
compensation valued at $155,000 paid in monthly payments either, in
cash or in unrestricted and freely tradable Buyer common stock, as
mutually agreed by Company President and Parent valued at: (i) $25,000
per month for five months; (ii) a final payment valued at $30,000 on
the sixth month; and (iii) otherwise in form acceptable to Buyer. In
connection with the shares to be issued pursuant hereto, the Buyer
shall issue the unrestricted common stock on the tenth calendar day of
each month (or the next business day if the tenth calendar day falls
on a weekend or governmental holiday).
20
The value of the Buyer common stock shall be calculated per the 10 day
weighted average [in accordance with the daily closing price of the
Buyer as reported by Bloomberg, L.P.] during the month payment is
made.
(g) Xxx Xxxxxxx shall be named to the Board of Directors of the
Buyer.
(h) The Board of Directors of the Buyer shall have approved the
Agreement, and determine that the consideration to be paid in
connection with the Agreement is fair to the shareholders of the
Buyer.
ARTICLE 6 - TERMINATION
-----------------------
Section 6.1 Termination Events. This Agreement may be terminated by mutual
consent of the Parties or by notice given before or at the Closing:
(a) By Sellers on the one hand or Buyer on the other hand if a
material Breach of any provision of this Agreement has been committed
by the other and the Breach has not been promptly cured or waived;
(b) By Buyer if any of the conditions in Section 5.1 have not
been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under this Agreement) and Buyer
has not waived the condition on or before the Closing Date;
(c) By Sellers if any of the conditions in Section 5.2 have not
been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
Sellers to comply with his obligations under this Agreement) and
Sellers have not waived the condition on or before the Closing Date;
or
(d) By either party if the Closing has not occurred (other than
through the failure of the Party or Parties, as applicable, seeking to
terminate this Agreement to comply fully with its, his or her
obligations under this Agreement) on or before August 31, 2003, or
such later date as the Parties may agree upon.
Section 6.2 Effect of Termination. Each Party's right of termination under
Section 6.1 is in addition to any other rights it, he or she may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated pursuant to Section
6.1, all further obligations of the Parties under this Agreement will terminate.
If this Agreement is terminated by a Party because of a Breach of the Agreement
by the other Party or because one or more of the conditions to the terminating
Party's obligations
21
under this Agreement is not satisfied as a result of the
other Party's failure to comply with its, his or her obligations under this
Agreement, the terminating Party's right to pursue all legal remedies will
survive such termination unimpaired.
ARTICLE 7 - INDEMNIFICATION
---------------------------
The following provisions in this Article 7 shall apply only for those events
occurring prior to the date hereof from which a liability may have, now have or
can, shall or may arise against the Company or the Intellectual Property, until
and including the time and date hereof, which is or may be in connection with or
arising from any matter whatsoever.
Section 7.1 Indemnification and Reimbursement by Sellers. The Sellers,
jointly and severally, will indemnify and hold harmless Buyer, the Company, each
Subsidiary and their respective Representatives and Affiliates, and will
reimburse them, for all Material Adverse Consequences arising from or related to
(a) any Breach by Sellers of any representation or warranty; (b) any Breach by
any Seller of any covenant, agreement or obligation of Sellers in this Agreement
or any other instrument or document delivered by Sellers to Buyer pursuant to
this Agreement; (c) any and all liabilities of the Company or any Subsidiary of
any nature, whether accrued, absolute, contingent, or otherwise (including Tax
liabilities or Environmental Liabilities), whether or not involving a third
party, other than liabilities specifically reserved on the Balance Sheet or
incurred in the Ordinary Course of Business from December 31, 2002 to the
Closing Date; (d) any claims or Threatened claims against Buyer or the Company
arising out of the ownership or operation of the business of the Company and its
Subsidiaries prior to the Closing; (e) any claims, including claims for
appraisals or dissenters rights, relating to the Agreement; (f) the items listed
on Exhibit 7.1; and (g) the enforcement of indemnification rights under this
Article 7. With respect to the above, Buyer acknowledges that it has reviewed
those representations made, and documents supplied, by the Sellers and is
proceeding with this transaction based upon the due diligence performed thereon.
Section 7.2 Indemnification and Reimbursement by Buyer. Buyer will
indemnify and hold harmless Sellers, and will reimburse Sellers, for all
Material Adverse Consequences arising from or related to (a) any Breach by Buyer
of any representation, warranty, covenant or obligation of Buyer in this
Agreement or any other instrument or document delivered by Buyer to Sellers
pursuant to this Agreement, and (b) the enforcement of indemnification rights
under this Article 7.
Section 7.3 Indemnification Procedures.
(a) Third-Party Claims.
(i) Promptly after receipt by a Person entitled to be indemnified
under this Article 7 (an "Indemnified Party") of notice of the
commencement of any Proceeding against it, such Indemnified Party
will, if a claim for indemnification is to be made against a Party (an
"Indemnifying Party") under this Article 7, give notice to the
Indemnifying Party of the commencement of such Proceeding. The failure
to promptly notify the Indemnifying Party
22
will not relieve the Indemnifying Party of any liability that it may
have to an Indemnified Party except to the extent that the defense of
such action was irreparably and materially prejudiced by the
Indemnified Party's failure to provide prompt notice.
(ii) If any Proceeding is brought against an Indemnified Party
and it gives notice to the Indemnifying Party of the commencement of
such Proceeding, the Indemnifying Party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to
the extent that it wishes (unless (A) the Indemnifying Party is also a
party to such Proceeding and the Indemnified Party determines in good
faith that joint representation would be inappropriate or (B) the
Indemnifying Party fails to provide reasonable assurances to the
Indemnified Party of its financial capacity to defend such Proceeding
and provide indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel satisfactory to the
Indemnified Party. Following a proper assumption of defense by an
Indemnifying Party, as long as the Indemnifying Party diligently
conducts such defense it will not be liable for any subsequent fees of
legal counsel or other expenses incurred by the Indemnified Party in
connection with the defense of such Proceeding, other than reasonable
costs of investigation. If the Indemnifying Party assumes the defense
of a Proceeding, (A) it will be conclusively established for purposes
of this Agreement that the claims made in that Proceeding are within
the scope of and subject to indemnification; (B) no compromise or
settlement of such claims may be effected by the Indemnifying Party
without the Indemnified Party's consent unless (x) there is no finding
or admission of any violation of Legal Requirements or any violation
of the rights of any Person and no effect on any other claims that may
be made by or against the Indemnified Party, and (y) the sole relief
provided is monetary damages that are paid in full by the Indemnifying
Party concurrently with the compromise or settlement; and (C) the
Indemnified Party will have no liability with respect to any
compromise or settlement of such claims effected without its consent.
If notice is given to an Indemnifying Party of the commencement of any
Proceeding and the Indemnifying Party does not within ten days give
notice to the Indemnified Party of its election to assume the defense
of such Proceeding, the Indemnifying Party will be bound by any
determination made in such Proceeding or any compromise or settlement
effected by the Indemnified Party.
(iii) If any Party determines in good faith that there is a
reasonable probability that a Proceeding may adversely affect it or
23
its Affiliates other than as a result of monetary damages for which it
would be entitled to indemnification under this Agreement, the
Indemnified Party may, by notice to the Indemnifying Party, assume the
exclusive right to defend, compromise or settle such Proceeding, but
the Indemnifying Party will not be bound by any determination of a
Proceeding so defended or any compromise or settlement effected
without its consent (which may not be unreasonably withheld).
(iv) The Parties will make available to each other and each
other's legal counsel and other professional advisors all of its books
and records relating to a third-party claim and each Party will render
to the other assistance as may be reasonably required in order to
insure the proper and adequate defense of a third-party claim.
(v) Each Party hereby consents to the non-exclusive jurisdiction
of any court in which a Proceeding is brought against any Indemnified
Party for purposes of any claim that an Indemnified Party may have
under this Agreement with respect to such Proceeding or the matters
alleged therein.
(b) Other Claims. A claim for indemnification for any matter not
involving a third-party claim may be asserted by notice to the Party
from whom indemnification is sought.
Section 7.4 Right of Setoff.
(a) Each Indemnified Party may, as one of its remedies to effect
indemnification under this Article 7, withhold or cause to be withheld
and setoff any amounts payable (under this Agreement or otherwise)
following the Closing to the Indemnifying Party, including, but not
limited to, any amounts i.e. stock options, composing the Contingent
Payment. The right to setoff will be exercisable whether the claim for
indemnification is liquidated or unliquidated, whether or not the
claim for indemnification has been reduced to judgment, and regardless
of any difficulty or uncertainty in determining or computing the
ultimate amount of the indemnification claim. The exercise of a right
of setoff in good faith, whether or not ultimately deemed to be
justified, will not constitute a default of any obligation against
which such setoff is made.
(b) For the purposes of this subsection 7.4 only, the right of
setoff shall be invoked only in the case of fraud, bad faith, willful
misconduct.
24
ARTICLE 8 - DEFINITIONS
-----------------------
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article 8:
"Accounts Receivable" has the meaning set forth in Section 2.14 of this
Agreement.
"Affiliate" means any Person directly or indirectly controlling,
controlled by, or under common control with, that Person and any officer,
director or controlling Person of that Person.
"Applicable Contract" means any Contract (a) under which any Party has
or may acquire any rights; (b) under which any Party is or may become subject to
any obligation or liability; or (c) by which any Party or any of the property or
assets owned, leased or used by any is or may become bound.
"Draft Balance Sheet" has the meaning set forth in Section 2.4 of this
Agreement.
"Breach" means, as to any representation, warranty, covenant,
obligation or other provision of this Agreement or any instrument or document
delivered pursuant to this Agreement, (a) any inaccuracy in, or any failure to
perform or comply with, such representation, warranty, covenant, obligation or
other provision the effect of which is an adverse affect in an amount not less
then USD $10,000 or (b) any claim by any Person or other occurrence or
circumstance that is or was inconsistent with such representation, warranty,
covenant, obligation or other provision, in either case regardless of whether
deliberate, reckless, negligent, innocent or unintentional.
"Buyer" has the meaning set forth in the first paragraph of this
Agreement.
"Cash Purchase Price" has the meaning set forth in Section 1.2 of this
Agreement.
"Closing" has the meaning set forth in Section 1.5 of this Agreement.
"Closing Date" means the date and time as of which the Closing actually
takes place.
"Company" has the meaning set forth in the preamble to this Agreement.
"Contract" means any agreement, contract, obligation, promise or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Disclosure Schedule" has the meaning set forth in Section 2.1 of the
Agreement.
"Draft Financial Statements" un-audited and un-reviewed financial
statements prepared by the Company and its Subsidiaries for the relevant period
"Employee Benefit Plan" means any "employee pension benefit plan" or
"employee welfare benefit plan" and any bonus or other incentive compensation
plan, benefit plan for retired employees, plan or Contract providing for
bonuses, commissions, pensions, profit-sharing, stock options, stock purchase
rights, restricted stock, phantom stock, deferred
25
compensation, accident, health or sickness insurance, retirement benefits,
vacation or other paid time off, severance, disability, compensation, employee
assistance or counseling, educational assistance, adoption assistance, group
legal, (taxable or nontaxable, direct or indirect), fringe or payroll practice
of any nature, covering any current or former (including retired) employee of
the Company or any Subsidiary.
"Encumbrance" means any charge, claim, community property interest,
condition, equitable interest, mortgage, lien, option, pledge, security
interest, right of first refusal or restriction of any kind, including any
restriction on use, voting (in the case of any security), transfer, receipt of
income or exercise of any other attribute of ownership.
"Environment" means soil, land surface or subsurface strata, surface
waters (including navigable waters and ocean waters), groundwaters, drinking
water supply, stream sediments, ambient air (including indoor air), plant and
animal life and any other environmental medium or natural resource.
"Environmental Law" means all Legal Requirements under the laws of the
State of Israel relating to pollution or the protection of human health, safety,
or the environment, including laws designed (a) to prevent, report or regulate
the release, discharge or emission of pollutants or Hazardous Substances into
the Environment; (b) to regulate the generation, treatment, storage, handling,
transportation or disposal of Hazardous Substances; (c) to assure that products
or chemicals are designed, formulated, packaged or used so that they do not
present unreasonable risks to human health or the Environment; (d) to protect or
pay for damages to natural resources such as wetlands, sand dunes or forests, as
well as plant and animal species; and (e) to clean up Hazardous Substances that
have been released and to apportion the costs of the cleanup.
"Environmental Liability" means any Material Adverse Consequence
arising from or relating to any Environmental Law or Occupational Safety and
Health Law with respect to acts or omissions by the Company, a Subsidiary or any
of their respective predecessors or affiliates or to conditions in existence or
events or circumstances having occurred, in each case on or before the Closing
Date.
"Financial Statements" has the meaning set forth in Section 2.4 of this
Agreement.
"GAAP" unless indicated otherwise, means United States generally
accepted accounting principles.
"Governmental Authorization" means any approval, consent, license,
permit, waiver or other authorization issued, granted, given or otherwise made
available by or under the authority of any Israeli Governmental Body or pursuant
to any Legal Requirement under the laws of the State of Israel .
"Governmental Body" means any: (a) nation, state, county, city, town,
village, district or other jurisdiction of any nature; (b) federal, state,
local, municipal, foreign or other government; (c) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official or entity and any court or other tribunal); (d)
multi-national organization or body; or (e) body exercising, or entitled or
purporting to exercise, any
26
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power of any nature.
"Hazardous Substance" means any hazardous, toxic or polluting
substance, waste, material or contaminant, including petroleum or petroleum
products, governed or regulated under any Environmental Law.
"Intellectual Property Assets" include all (a) legal names of Persons,
fictional business names, trade names, domain names, and registered and
unregistered trademarks, service marks, certification marks, collective marks
and related applications, both filed and in progress; (b) registered and
unregistered copyrights in published works and unpublished works and related
applications, both filed and in progress; (c) know-how, trade secrets,
confidential information, software, technical information, designs, inventions,
processes, technology and other similar data; and (d) all other intellectual
property rights throughout the world.
"Draft Interim Financial Statements" has the meaning set forth in
Section 2.4 of this Agreement.
"Knowledge" means actual awareness of a particular fact or other matter
or awareness that a prudent individual could be expected to obtain in the course
of conducting a reasonably comprehensive investigation concerning the existence
of such fact or other matter.
"Legal Requirement" means any federal, state, local, municipal,
foreign, international, multinational or other constitution, law, ordinance,
principle of common law, statute, code, regulation, order, rule or treaty.
"Management Shares" - means shares which provide their holders to
appoint the directors of the Company as provided for in the Company's Articles
of Association.
"Material Adverse Consequence" means, any change, event or effect shall
have occurred that, when taken together with all other adverse changes, events
or effects that have occurred would or would reasonably be expected to (a) be
materially adverse to the business, assets, properties, results of operations or
condition (financial or otherwise) of the Parties taken as a whole; (b) prevent
or materially delay the consummation of the transactions contemplated hereby;
(c) cause any loss, cost, liability, penalty, Tax, claim, damage, expense
(including cost of investigation, defense, settlement and reasonable attorneys'
and other professional fees), responsibility, disability, remedial action or
diminution of value; provided, however, that (i) any adverse effect (economic or
otherwise) that is caused by conditions affecting the economy or security
markets generally shall not be taken into account in determining whether there
has been a Material Adverse Consequence; (ii) any direct, adverse effect that
results solely from the public announcement of the transactions contemplated by
this Agreement shall not be taken into account in determining whether there has
been a Material Adverse Consequence.
"Material Contract" means any Applicable Contract that: (a) involves
performance of services or delivery of goods or materials by or to the Company
of an amount in excess of $100,000; (b) involves expenditures or receipts in
excess of $50,000; (c) relates to the ownership, sale or use of real or personal
property, except those relating to personal property
27
having a value per item or aggregate payments of less than $100,000 and with a
term of less than one year; (d) relates to Intellectual Property Assets; (e)
involves the sharing of profits, losses, costs or liabilities with any other
Person or by any other Person; (f) provides for payments to or by any Person
based on sales, purchases or profits, other than direct payments for goods; (g)
grants a power of attorney; (h) was entered into other than in the Ordinary
Course of Business and contains or provides for an undertaking to be responsible
for consequential damages; (i) that relates to capital expenditures in excess of
$100,000; (j) limits the freedom to compete in any line of business or
geographic area; (k) contains a guaranty of performance or payment by another
Person; (1) relates to indebtedness for borrowed money or that creates an
Encumbrance in any properties or assets; (m) relates to the length, duration or
condition of employment or the termination thereof and which cannot be
terminated on notice without liability; and (n) amends, supplements or modifies
any of the foregoing.
"Noncompetition Period" means the period set forth in Section 4.4 of
this Agreement
"Noncompetition Territory" has the meaning set forth in Section 4.4 of
this Agreement.
"Occupational Safety and Health Law" means any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether governmental or
private, designed to provide safe and healthful working conditions.
"Order" means any award, decision, injunction, judgment, order, ruling,
subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" means in accordance with the usages of
trade prevailing in the industry in which the Company or a Subsidiary, as
applicable, operates and in accordance with the historical and customary
day-to-day practices with respect to the activity in question.
"Organizational Documents" means the complete charter and the bylaws of
the Company and any Subsidiary, including all amendments thereto.
"Ordinary Shares" - means shares of the Company to which are attached
all the rights in the Company other than the rights attached to the Management
Shares as provided for in the Company's Articles of Association.
"Party or "Parties" has the meaning set forth in the first paragraph of
this Agreement.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization or other entity or
Governmental Body.
"Personal Property Lease(s)" has the meaning set forth in Section 2.12
of this Agreement.
"Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted or heard by or before,
or otherwise involving, any Governmental Body or arbitrator.
28
"Real Property" has the meaning set forth in Section 2.11 of this
Agreement.
"Real Property Lease(s)" has the meaning set forth in Section 2.11 of
this Agreement.
"Regulations" means the income tax regulations in Israel.
"Related Person" means with respect to a particular individual: (a)
each other member of such individual's Family; (b) any Person that is directly
or indirectly controlled by any one or more members of such individual's Family;
(c) any Person in which members of such individual's Family hold (individually
or in the aggregate) a Material Interest; and (d) any Person with respect to
which one or more members of such individual's Family serves as a director,
officer, partner, executor or trustee (or in a similar capacity). For purposes
of this definition, (a) the "Family" of an individual includes (i) the
individual; (ii) the individual's spouse; (iii) any other natural person who is
related to the individual or the individual's spouse within the second degree;
and (iv) any other natural person who resides with such individual.
"Representative" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor or other representative
of such Person, including legal counsel, accountants and financial advisors.
"Restricted Event" means (a) any declaration or payment of any dividend
or other distribution or payment in respect of shares of capital stock; (b) any
amendment of the Organizational Documents; (c) any payment or increase of any
bonuses, salaries or other compensation to any shareholder, director, officer or
(except in the Ordinary Course of Business) employee or entry into any
employment, severance or similar Contract with any director, officer or
employee; (d) the adoption of, or increase in the payments to or benefits under,
any Employee Benefit Plan for or with any employees; (e) any damage to or
destruction or loss of any property or assets, whether or not covered by
insurance, materially and adversely affecting the properties, assets, business,
financial condition or prospects; (f) the entry into, termination of or receipt
of notice of termination of any license, distributorship, dealer, sales
representative, joint venture, credit, note or similar Contract or transaction
involving a total remaining commitment of more than $10,000; (g) any sale (other
than sales of inventory in the Ordinary Course of Business), lease or other
disposition of any property or asset or the imposition of any Encumbrance on any
property or asset, including the sale, lease or disposition of any Intellectual
Property Asset; (h) the cancellation or waiver of any claims or rights with a
value in excess of $10,000; (i) any writedown or writeoff of any item of
inventory or writedown or writeoff of any note as uncollectible; (j) the
incurrence of any indebtedness for borrowed money or the assumption or guarantee
of obligations of any other Person; (k) any redemption, purchase, or other
acquisition of stock or any issuance or agreement to issue or purchase any
shares of capital stock; (l) any material change in the accounting methods used;
or (m) any capital expenditure in excess of $10,000 individually or $50,000 in
the aggregate; (n) any Contract or commitment, whether written or oral, to do
any of the foregoing.
"Returns" means any return (including any information return), report,
statement, schedule, notice, form or other document or information filed with or
submitted to, or reported to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection or payment of
any Tax or in connection with the administration,
29
implementation or enforcement of or compliance with any Legal Requirement
relating to any Tax.
"Revenue" shall mean all proceeds of the direct sale of goods,
services, reportable in accordance with Generally Accepted Accounting Principles
("GAAP") in the United States, including but not limited to, rights, licenses,
know-how, fees, or dividends, if applicable.
"Revenue Report" shall mean a report detailing the Revenue earned for a
given time period.
"SEC" means Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" has the meaning set forth in the first paragraph of this
Agreement.
"Shares" has the meaning set forth in Section 1.1 of this Agreement.
"Subsidiary" means any entity in which the Company has a Material
Interest.
"Tax" means any tax (including any income tax, capital gains tax,
payroll tax, value-added tax, sales tax, use tax, personal property tax,
property tax, gift tax or estate tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or other fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body of the State of Israel or payable
pursuant to any tax-sharing agreement or any other Contract relating to the
sharing of payment of any such tax, levy, assessment, tariff, duty, deficiency
or fee.
"Threatened" means, as to any claim, Proceeding, dispute, action or
other matter, that a demand or statement has been made (orally or in writing), a
notice has been given (orally or in writing) or an event has occurred or some
other circumstance exists that would lead a prudent Person to conclude that such
a claim, Proceeding, dispute, action or other matter is reasonably likely to be
asserted, commenced, taken or otherwise pursued in the future.
ARTICLE 9 - GENERAL
-------------------
Section 9.1 Survival of Representations, Warranties, Covenants and
Agreements Except as specifically provided below, all representations,
warranties, covenants and agreements made by any Party to this Agreement will
survive the Closing and any investigation at any time made by or on behalf of
the other Party before or after the Closing for a period of two years, except
that the representations and warranties set forth in Sections 2.16, 2.20, 2.22,
and 2.23 will survive for their respective statute of limitations periods and
the representations and warranties set forth in Section 2.3 will survive
forever. No investigation by or Knowledge of Buyer or its Representatives will
affect in any manner the representations, warranties, covenants or agreements of
Sellers set forth in this Agreement (or in any document to be delivered in
connection with the consummation of the transactions contemplated by this
Agreement) or
30
Buyer's right to rely thereon, and such representations, warranties and
covenants will survive any such investigation.
Section 9.2 Binding Effect; Benefits; Assignment. All of the terms of this
Agreement will be binding upon, inure to the benefit of and be enforceable by
and against the successors and authorized assigns of Buyer and Sellers. Except
as otherwise expressly provided in this Agreement, nothing in this Agreement,
express or implied, is intended to confer upon any other Person any rights or
remedies under or by reason of this Agreement, this Agreement being for the
exclusive benefit of the Parties and their respective successors and assigns.
Neither Buyer on one hand nor any Seller on the other hand will assign any of
its, his or her respective rights or obligations under this Agreement to any
other Person without the prior written consent of the other, which shall not be
unreasonably withheld, provided, however, that Buyer may assign all or part of
its interest in this Agreement (without the written consent of any Seller) to
one or more Affiliates.
Section 9.3 Entire Agreement. This Agreement, and the exhibits and
schedules to this Agreement (including the Disclosure Schedule) and the
agreements referred to in this Agreement set forth the entire agreement and
understanding of the Parties in respect of the transactions contemplated by this
Agreement and supersede all prior agreements, arrangements and understandings
relating to the subject matter hereof. No representation, promise, inducement or
statement of intention has been made by any Party that is not embodied in this
Agreement or in the documents referred to in this Agreement, and no Party will
be bound by or liable for any alleged representation, promise, inducement or
statement of intention not so set forth.
Section 9.4 Amendment and Waiver. This Agreement may be amended, modified,
superseded or canceled and any of the terms, covenants, representations,
warranties or conditions hereof may be waived only by a written instrument
executed by the Parties or, in the case of a waiver, by or on behalf of the
Party waiving compliance. The failure of any Party at any time to require
performance of any provision of this Agreement will in no manner affect the
right of that Party at a later time to enforce such provision. No waiver by any
Party of any condition or of any Breach of any term, covenant, representation or
warranty contained in this Agreement, in any one or more instances, will be
deemed to be or construed as a further or continuing waiver of any such
condition or of any Breach of the term, covenant, representation or warranty or
any other term, covenant, representation or warranty set forth in this
Agreement.
Section 9.5 Disputes. Any dispute, claim or controversy arising from or
related in any way to this Agreement, except in the case of an injunction sought
in the specific circumstances set forth in that certain Employment Agreement
between the Company and Xxx Xxxxxxx executed pursuant to this Agreement, or the
interpretation, application, breach, termination or validity thereof, including
any claim of inducement of this Agreement by fraud or otherwise, will be
submitted for resolution to arbitration pursuant to the commercial arbitration
rules then pertaining of the London Center for International Arbitration
("LCIA"), except where those rules conflict with these provisions, in which case
these provisions control. The arbitration will be held in London, England but
shall be governed by the laws of New York.
The panel shall consist of three (3) arbitrators chosen from the LCIA Panels of
Distinguished Neutrals, each of whom is a lawyer specializing in business
litigation with at least fifteen (15)
31
years experience with a law firm of over fifteen (15) lawyers or was a judge of
a court of general jurisdiction. In the event the aggregate damages sought by
the claimant are stated to be less than $5 million, and the aggregate damages
sought by the counterclaimant are stated to be less than $5 million, and neither
side seeks equitable relief, then a single arbitrator shall be chosen having the
same qualifications and experience specified above. The parties agree to
cooperate: (a.) to obtain selection of the arbitrator(s) within thirty (30) days
of initiation of the arbitration; (b.) to meet with the arbitrators within
thirty (30) days of selection; and (c.) to agree at that meeting or before upon
procedures for discovery and as to the conduct of the hearing that will result
in the hearing being concluded within no more than nine (9) months after
selection of the arbitrator(s) and in the award being rendered within sixty (60)
days of the conclusion of the hearings, or any post-hearing briefing, which
briefing will be completed by both sides within twenty (20) days after the
conclusion of the hearings. In the event no such agreement is reached, the LCIA
will select arbitrator(s), allowing appropriate strikes for reasons of conflict
or other cause and three (3) preemptory challenges for each side. The
arbitrator(s) shall set a date for the hearing, commit to the rendering of the
award within sixty (60) days of the conclusion of the evidence at the hearing,
or of any post-hearing briefing, which briefing will be completed by both sides
in no more than twenty (20) days after the conclusion of the hearings, and
provide for discovery according to these time limits, giving recognition to the
understanding of the parties hereto that they contemplate reasonable discovery,
including document demands and depositions, but that such discovery be limited
so that the time limits specified herein may be met without undue difficulty. In
no event will the arbitrator(s) allow either side to obtain more than a total of
forty (40) hours of deposition testimony from all witnesses, including both fact
and expert witnesses. In the event multiple hearing days are required, they will
be scheduled consecutively to the greatest extent possible. The arbitrator(s)
shall render their award following the substantive law of England and Wales. The
arbitrator(s) shall render an opinion setting forth findings of fact and
conclusions of law with the reasons therefor stated. A transcript of the
evidence adduced at the hearing shall be made and shall, upon request, be made
available to either party. To the extent possible, the arbitration hearings and
award will be maintained in confidence.
Each party has the right before or during the arbitration to seek and obtain
from the appropriate court provisional remedies, such as attachment, preliminary
injunction, replevin, etc., to avoid irreparable harm, maintain the status quo,
or preserve the subject matter of the arbitration.
9.6 Mediation. Any dispute, controversy, or claim arising out of or
related to this Agreement, except in the case of an injunction sought in the
specific circumstances set forth in that certain Employment Agreement between
the Company and Xxx Xxxxxxx executed pursuant to this Agreement, or the
interpretation, application, breach, termination or validity thereof, including
any claim of inducement by fraud or otherwise, which claim would, but for this
provision, be submitted to arbitration shall, before submission to arbitration,
first be mediated through non-binding mediation. The mediation shall be
conducted in London, United Kingdom and shall be attended by a senior executive
with authority to resolve the dispute from each of the operating companies that
are parties to this Agreement. The mediator shall confer with the parties to
design procedures to conclude the mediation within no more than forty-five (45)
days after initiation. Under no circumstances shall the commencement of
arbitration under this Agreement be delayed more than forty-five (45) days by
the mediation process specified herein.
32
Each party agrees to toll all applicable statutes of limitation during the
mediation process and not to use the period or pendency of the mediation to
disadvantage the other party procedurally or otherwise. No statements made by
either side during the mediation may be used by the other during any subsequent
arbitration.
Each party has the right to pursue provisional relief from any court, such as
attachment, preliminary injunction, replevin, etc., to avoid irreparable harm,
maintain the status quo, or preserve the subject matter of the arbitration, even
though mediation has not been commenced or completed.
Section 9.7 Notices. All notices, requests, demands and other
communications to be given pursuant to the terms of this Agreement will be in
writing and will be deemed to have been duly given if delivered by hand, sent by
facsimile with confirmation, sent by a nationally recognized overnight mail
service, or mailed first class, postage prepaid:
(a) If to Buyer:
Universal Communication Systems, Inc.
000 Xxxxxxx Xxxx, Xxxxx 0X
Xxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx
-- with a copy to --
Xxxxxx X. Xxxx, Esq.
Xxxxxx & Xxxx
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) If to Sellers:
TOU Millennium Electric, Inc.
Hasadna 7
X.X. Xxx 0000
Xxxxxxx Xxxxxxxxxx Xxxx
Xxxxxx 00000
Telephone:
Facsimile: 000-0-0000000
-- with a copy to --
33
Xxxxxxx Xxxx
------------
X. Xxxxxxxx & Co.
-----------------
23 Xxxxxxxx Xxxxx Road - P.O.B. 36090
Xxx Xxxx 00000
Xxxxxx
Telephone: 000-0-000-0000
Facsimile: 972-3-710-1617
Any Party may change its address, telephone number or facsimile number by prior
written notice to the other Parties.
Section 9.8 Counterparts. This Agreement may be executed in counterparts,
each of which when so executed will be deemed to be an original and such
counterparts will together constitute one and the same agreement.
Section 9.9 Expenses. Each Party will pay its or his own respective
expenses, costs and fees (including attorneys' and accountants' fees) incurred
in connection with the negotiation, preparation, execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement, and none of such expenses, with the exception that all such expenses,
costs or fees of the Sellers will be paid by the Company.
Section 9.10 Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the state of Florida as applicable to
contracts made and to be performed in the state of Florida without regard to
conflicts of laws principles.
Section 9.11 Severability. Any provision, or clause of any provision, of
this Agreement that may be found to be contrary to New York law or otherwise
unenforceable will not affect the remaining terms of this Agreement, which will
be construed as if the unenforceable provision or clause were absent from this
Agreement.
Section 9.12 Headings; Construction; Time of Essence. The headings of the
sections and paragraphs in this Agreement have been inserted for convenience of
reference only and will not restrict or otherwise modify any of the terms or
provisions of this Agreement. Unless otherwise expressly provided, the word
"including" whenever used in this Agreement does not limit the preceding words
or terms. With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
[SIGNATURES ON FOLLOWING PAGE]
34
IN WITNESS WHEREOF, each of the parties have duly executed this Agreement on the
date first set forth in the first paragraph of this Agreement.
BUYER:
UNIVERSAL COMMUNICATION SYSTEMS, INC.
By: ________________________________
Name: Xxxxxxx Xxxxxxx
Title: Chief Executive Officer
SELLERS:
XXXX X. XXXXXXX CATLAN DEVELOPMENT LIMITED
________________________ By: ______________________
Name: Xxxxxx More
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