EXHIBIT 99.2
AGREEMENT
Between
PLATINUM technology, inc.
and
MEMCO Software Ltd.
Dated as of: August 13, 1998
AGREEMENT (the "Agreement") dated as of the 13th day of August, 1998 by and
between PLATINUM technology, inc., a public company organized under the laws of
Delaware (the "Buyer"), and MEMCO Software, Ltd., a corporation organized under
the laws of the State of Israel (the "Company").
WHEREAS, Buyer is a public company duly organized and existing under the
laws of the United States, and has an authorized capital stock of 180,000,000
shares of Common Stock, $.001 par value, (the "Buyer Stock") of which 85,757,918
shares were issued and outstanding as of August 10, 1998 (excluding any shares
issued or issuable on or after such date upon exercise of options outstanding on
such date) and 10,000,000 shares of Class II Preferred Stock, $.01 par value,
1,000,000 shares of which (subject to adjustment upward or downward by the
Buyer's Board of Directors) have been designated Series A Junior Participating
Preferred Stock and 1,775,000 of which (subject to adjustment upward or downward
in accordance with the Buyer's Certificate of Incorporation, as amended) have
been designated as Class II Series B Preferred Stock;
WHEREAS, the Company is a corporation organized and existing under the laws
of the State of Israel, and has an authorized capital stock of 30,000,000
Ordinary Shares, NIS 0.01 par value, of which 17,462,324 shares were issued and
outstanding as of August 10, 1998 (the Ordinary Shares are hereinafter referred
to as the "Company Stock");
WHEREAS, the Board of Directors of the Company deems it desirable and in
the best interests of the Company and its shareholders that the Company and its
shareholders enter into an arrangement pursuant to Section 233 ("Section 233")
of the Companies Ordinance (New Version) 5743-1983, whereby, inter alia, all the
issued and outstanding shares of the Company Stock not already owned by Buyer
shall be deemed transferred to Buyer in exchange for newly issued shares of the
Buyer Stock (the "Arrangement");
WHEREAS, the Board of Directors of the Company deems it desirable and in
the best interests of the Company and its shareholders, as part of the
Arrangement, that the Company and Buyer enter into this Agreement, pursuant to
which all the issued and outstanding shares of the Company Stock not already
owned by Buyer shall be deemed transferred to Buyer in exchange for newly issued
shares of the Buyer Stock and options to purchase the Buyer Stock, on the terms
and conditions hereinafter set forth;
WHEREAS, the Board of Directors of Buyer deems it desirable and in the best
interests of Buyer and its shareholders that Buyer and the Company enter into
this Agreement, pursuant to which all the issued and outstanding shares of the
Company Stock not already owned by Buyer shall be deemed transferred to Buyer in
exchange for newly issued shares of the Buyer Stock and options to purchase the
Buyer Stock, on the terms and conditions hereinafter set forth; and
WHEREAS, concurrently with the execution of this Agreement, Xxxxxx Xxxxx,
Xxxxxx Xxxxxxx, Xxxxx Xxxxxxx, Xxx Xxxxx, Xxxxx Xxxxxxx, Xxxxxx Xxxxxxxxx and
Ophir Holdings, Ltd shall have executed an agreement to vote all shares of the
Company Stock "beneficially owned" (as such term is defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended
2
(the "Exchange Act")), by each of them in favor of the transactions contemplated
by this Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the premises and of
the mutual covenants and agreements contained herein, hereby agree as follows:
3
PLAN OF
REORGANIZATION
This Agreement is intended to constitute a plan of reorganization within
the meaning of Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Internal Revenue Code of 1986,
as amended (the "Code"). It is also intended that the transactions contemplated
by this Agreement be recorded for accounting purposes as a pooling of interests.
1. THE EXCHANGE.
1.1 The Exchange. Pursuant to this Agreement, as of the time of the Filing
(as hereinafter defined) (the "Closing Date"), by virtue of the Filing and
without any action on the part of the holders thereof, all issued and
outstanding shares of the Company Stock not already owned by Buyer will be
deemed transferred to in exchange for newly-issued, shares of the Buyer Stock in
the aggregate amount and in the manner set forth in Section 2 below (the
"Exchange"), and all outstanding options to purchase shares of the Company Stock
will either be exercised prior to the date and time of the filing (the "Filing")
of the Final Court Order (as defined in Section 7.1(c)) with the Registrar of
Companies in Israel, or will be deemed assumed by Buyer by the exchange of
equivalent options to purchase shares of the Buyer Stock, as set forth in
Section 2 below. Thereupon, the corporate existence of the Company, with all its
purposes, powers and objects, shall continue unaffected and unimpaired by the
Arrangement under the laws of the State of Israel.
1.2 Closing. Unless this Agreement shall have been terminated and the
transactions contemplated by this Agreement abandoned pursuant to the provisions
of Section 12, the closing of the Exchange (the "Closing") shall take place on
the Closing Date which shall occur no later than five (5) business days after
the satisfaction of all of the conditions set forth in Sections 9, 10 (or waiver
of such conditions to the extent such condition may be waived), but not earlier
than January 1, 1999, or such other date upon which the parties hereto may agree
in writing. The Closing shall take place at the offices of Buyer's counsel or
such other place upon which the parties hereto may agree.
2. MANNER AND BASIS FOR EXCHANGING THE COMPANY STOCK AND OPTIONS.
2.1 Exchange of the Company Stock. Subject to the provisions of this
Section 2, each share of the Company Stock issued and outstanding immediately
prior to the Closing Date (other than shares of the Company Stock owned by Buyer
or by any subsidiary of Buyer and shares of the Company Stock owned by the
Company or any subsidiary of the Company) shall, as of the Closing Date, by
virtue of the Filing and without any action on the part of the holders thereof,
be converted into the right to receive 0.836 (the "Exchange Ratio") of an
authorized validly issued, fully paid and non-assessable share of the Buyer
Stock (the "Consideration"). If prior to the Closing Date, Buyer should split or
combine the Buyer Stock, or pay a share dividend or other distribution in shares
of the Buyer Stock, or otherwise change the Buyer Stock into any other
securities, the Exchange Ratio will be appropriately adjusted to reflect such
split, combination, dividend or other distribution or change.
4
2.2 Conversion of Options. (a) As of the Closing Date, each outstanding
option to purchase the Company Stock (each, an "Option"), whether or not vested
or exercisable, shall be assumed by Buyer and shall be deemed to constitute an
option to acquire, on the same terms and conditions (including treatment as an
incentive stock option or a non-qualified stock option, as the case may be,) as
were applicable under such Option, the same number of shares of the Buyer Stock
as the holder of such Option would have been entitled to receive pursuant to the
Agreement had such holder exercised such Option in full immediately prior to the
Closing Date (not taking into account whether such Option was in fact
exercisable at such time), at a per share exercise price equal to (i) the
aggregate exercise price for the Company Stock subject to such Option divided by
(ii) the number of full shares of the Buyer Stock (rounded up to the next full
share of the Buyer Stock) purchasable pursuant to such Option as provided in
this Section 2.2. As soon as practicable after the Closing Date, Buyer either
shall amend the Company plan to provide for the issuance of the Buyer Stock in
lieu of the Company Stock and advise each holder of an Option in writing of such
holder's right to acquire shares of the Buyer Stock and the Option agreements of
each such holder shall be deemed to be appropriately amended so that such
Options shall represent rights to acquire shares of the Buyer Stock on
substantially the same terms and conditions as contained in the outstanding
Options (subject to any adjustments required by the preceding sentence) or
deliver to each holder of an Option an amended option agreement under a
comparable Buyer stock option plan.
2.3 Surrender and Exchange Procedure. As soon as practicable after the
Closing Date, each holder of any outstanding certificate or certificates
theretofore representing shares of the Company Stock shall be entitled, upon
surrender of such certificate or certificates to American Stock Transfer and
Trust Company, acting in its capacity as exchange agent, or such successor agent
or agents as may be appointed by Buyer (the "Exchange Agent"), to receive
therefor a certificate or certificates representing the number of full shares of
the Buyer Stock into which the shares of the Company Stock theretofore
represented by the certificate or certificates so surrendered shall be required
to be exchanged as aforesaid, as shall be more particularly provided in the
Exchange Agent Agreement to be entered into by Buyer and the Exchange Agent (the
"Exchange Agent Agreement"). At or prior to the Closing Date, Buyer shall
deliver to the Exchange Agent a sufficient number of certificates representing
the Buyer Stock and cash in lieu of fractional shares to effect delivery of the
aggregate Consideration required to be issued pursuant to the Exchange.
(a) Action of Exchange Agent. On or before the third business day
following the Closing Date, the Exchange Agent will send a notice and a
transmittal form to each holder of record of an outstanding certificate or
certificates which immediately prior to the Closing Date represented shares
of the Company Stock, at the address of each such holder as it appears on
the books of American Stock Transfer and Trust Company, the Company's
registrar and transfer agent (the "Company Transfer Agent"), advising such
holder of the terms of the Exchange and the procedure for the surrender and
exchange of certificates. Upon surrender of the certificates for
cancellation to the Exchange Agent, together with such transmittal form
duly executed and any other required documents, the holder of such
certificates shall be entitled to receive for each share of the Company
Stock formerly represented by such certificates, the Consideration and the
certificates so surrendered shall forthwith be canceled.
5
(b) Rights Prior to Surrender. Until so surrendered, each such
outstanding certificate which prior to the Closing Date represented shares
of the Company Stock shall be deemed to evidence ownership of the number of
full shares of the Buyer Stock and any cash in lieu of any fractional share
of the Buyer Stock into which such shares of the Company Stock shall have
been so exchanged. After the Closing Date there shall be no further
registry of transfers of shares of the Company Stock, and, if certificates
representing such shares are presented to Buyer or its transfer agent, or
to the Company Transfer Agent, they shall be canceled and exchanged for
certificates representing shares of the Buyer Stock and any cash in lieu of
any fractional share of the Buyer Stock as provided in the Exchange Agent
Agreement.
(c) No Dividends. No dividends or distributions payable after the
Closing Date will be paid on shares of the Buyer Stock issuable to persons
entitled to shares of the Buyer Stock in exchange for the Company Stock
until such persons shall have surrendered their certificates representing
the Company Stock, provided, however, that when certificates shall have
been so surrendered, there shall be paid to the holders thereof, but
without interest thereon, except to the extent paid to all holders of the
Buyer Stock, any dividends and other distributions payable subsequent to
the Closing Date and prior to the surrender of such certificates for the
shares of the Company Stock.
(d) No Fractional Shares. No fractional shares of the Buyer Stock and
no scrip certificates therefor shall be issued to represent any fractional
share interests in the Buyer Stock to be delivered hereunder in exchange
for shares of the Company Stock. In lieu thereof, each holder of the
Company Stock shall be entitled to receive at the time the certificates for
the Buyer Stock are issued pursuant to this Section 2, an amount in cash
equal to the product obtained by multiplying the fractional share interest
to which such holder would otherwise be entitled by the share value as of
the Closing Date. For purposes of this Agreement, the "share value" means,
as of the date of determination, the average of the closing sale price per
share of the Buyer Stock, as reported on the Nasdaq National Market System
("Nasdaq") for the most recent five (5) days that the shares of the Buyer
Stock have traded ending on the trading day immediately prior to the
Closing Date.
3. PUBLICITY.
Except as otherwise required by applicable law, Buyer and the Company agree
that no publicity, release or announcement concerning the transactions
contemplated hereby shall be issued without the advance approval of the form and
substance of the same by the parties hereto, and their respective legal counsel.
4. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.
The Company represents and warrants to Buyer, subject to the exceptions
disclosed in writing in the disclosure letter supplied by the Company to Buyer
(the "Company Schedules") which sets forth the Schedules referenced in this
Article 4 and which is dated as of the date hereof, as follows:
6
4.1 Organization of the Company. The Company is a corporation duly
organized and validly existing under the laws of the State of Israel and has all
requisite power and authority to carry on its business as now conducted, and to
own its assets. The Company is duly qualified to do business and is in good
standing in the jurisdictions in which the Company is required to be qualified
in order to carry on its business, and is duly authorized and licensed under all
laws, regulations, ordinances or orders of public authorities, or otherwise, to
carry on its business in the places and in the manner presently conducted,
except for qualifications, authorizations or licenses of which would not have a
Material Adverse Effect on the Company. In this Agreement, the term "Material
Adverse Effect" used in reference to the Company or any of its Subsidiaries (as
hereinafter defined) means any event, change or effect materially adverse to the
business or financial condition, assets, liabilities, results of operations of
the Company and its Subsidiaries, taken as a whole, other than changes resulting
solely from changes in general economic or software industry conditions. The
Company has heretofore delivered to Buyer true and complete copies of its
Memorandum of Association and its Articles of Association certified by the
Secretary of the Company, as in effect on the date hereof. The minute books of
the Company contain substantially accurate records of all meetings of its Board
of Directors, all committees of its Board of Directors, and of its shareholders
since its incorporation and accurately reflect all material transactions
referred to in such minutes.
4.2 Capitalization. Except as set forth on Schedule 4.2 hereto, the
authorized capital stock of the Company consists of 30,000,000 Ordinary Shares,
NIS 0.01 par value, of which there were 17,462,324 shares issued and outstanding
as of the date hereof plus any shares issued on the date hereof upon exercise of
options outstanding as of August 10, 1998. All outstanding shares of the Company
Stock are duly authorized, validly issued, fully paid and non-assessable and are
not subject to preemptive rights created by statute, the Memorandum of
Association or Articles of Association of the Company or any agreement or
document to which the Company is a party or by which it is bound.
4.3 Subsidiaries. The subsidiaries of the Company (the "Subsidiaries")
consists of Memco Software, Inc., a Delaware corporation ("Memco US"), Abirnet
Ltd., a corporation organized under the laws of the State of Israel, Memco
Software Europe Ltd., a corporation organized under the laws of the United
Kingdom, Abirnet, Inc., a Delaware corporation and Network Information
Technology, Inc., a California corporation ("NIT"). Schedule 4.3 sets forth the
percentage and numbers of the outstanding shares of each subsidiary owned by the
Company, or any other person, firm or corporation. Except for the Subsidiaries,
there exists no other corporation, joint venture, partnership or other entity of
which the Company, directly or indirectly, through other corporations or
otherwise, owns 50% or more of the outstanding capital stock or interest. Each
of the Subsidiaries is qualified to do business in the jurisdictions in which
each such Subsidiary is required to be qualified in order to carry on its
business, and is duly authorized, and licensed under all laws, regulations,
ordinances or orders of public authorities, or otherwise, to carry on its
business in the places and in the manner presently conducted, except for
authorizations, qualifications or licenses of which the failure to obtain would
not have a Material Adverse Effect on the Company. The outstanding shares of
capital stock, or other evidence of ownership, of each of the Subsidiaries are
validly issued, fully paid and non-assessable, and the shares of each of the
Subsidiaries, to the extent owned by the Company or another Subsidiary, are
owned by the Company or such other Subsidiary free of any claims, liens, charges
or encumbrances of any nature whatsoever, except as set forth in
7
Schedule 4.3. Each of the Subsidiaries is duly organized and validly existing in
good standing under the laws of the jurisdiction of its organization and has the
power to carry on its business as now conducted and to own its assets. The
Company has delivered to Buyer, true and complete copies of the Certificate of
Incorporation (or similar instrument) and By-Laws (or similar instrument) of
each Subsidiary, as in effect on the date hereof. The minute books of each
Subsidiary contain substantially accurate records of all meetings of its Board
of Directors and its shareholders since the time of its incorporation and
accurately reflect all material transactions referred to in such minutes. Except
as set forth in Schedule 4.3, the Company does not directly or indirectly own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any interest in, any corporation, partnership,
joint venture or other business association or entity.
4.4 Grants, Incentives and Subsidies. Schedule 4.4 hereto provides a
complete list of all grants, incentives and subsidies ("Grants") from the
Government of the State of Israel or any agency thereof to the Company or any
Subsidiary, including, without limitation, (a) Approved Enterprise Status and
(b) grants from the office of the Chief Scientist. Correct copies of all
applications submitted by the Company or any Subsidiary to the Investment Center
for receipt of Approved Enterprise Status in accordance with the Encouragement
of Capital Investments Law -- 1959 ("Investment Center") and of all letters of
approval, and supplements thereto, granted to the Company or to any Subsidiary
by the Investment Center have been provided to Buyer. Schedule 4.4 details the
nature of the Grants, all material terms and conditions thereof and all material
undertakings of the Company or its Subsidiaries given in connection with the
Grants. Schedule 4.4 lists with respect to each grant that the Company or any of
its Subsidiaries received or is entitled to receive from (x) the Chief Scientist
and (y) the Israel-United States Binational Industrial Research and Development
Foundation ("BIRD"), the following information: (i) the total amount of the
grant received by the Company or any of its Subsidiaries and the amount
available for future use by the Company or any of its Subsidiaries; (ii) the
time period in which the Company or any of its Subsidiaries received, or will be
entitled to receive, each grant; (iii) a general description of the research and
development program for which such grant was approved; (iv) the royalty
repayment schedule applicable to such grant and the total repayment due; (v) the
type of revenues from which royalty payments should be made; and (vi) the total
amount of royalties paid as of an unidentified recent date and the total royalty
obligations which accrue as of such date. The Company and its Subsidiaries are
in compliance, in all material respects, with the terms and conditions of the
Grants and, except as disclosed in Schedule 4.4 hereto, has duly fulfilled, in
all material respects, all the undertakings relating thereto. The Company is
unaware of any event which might lead to the annulment or material limitation of
any of the Grants.
4.5 Options, Warrants, Etc. Schedule 4.5 hereto contains a complete and
correct list of all plans under which options to purchase Company Shares have or
may be granted ("Option Plans"). Schedule 4.5 includes a list by Option Plan for
each outstanding option, as of the date hereof, of the following: (a) the name
of the holder of such option, (b) the number of shares subject to such option
and (c) the exercise price of such option. As of the date hereof, the Company
had reserved 5,813,614 shares of the Company Stock, net of exercises, for
issuance to employees pursuant to the Option Plans, under which options are
outstanding for 3,645,133 shares of the Company Stock minus any options
exercised on the date hereof. No repricing of options has taken place. All
shares of the Company Stock subject to issuance under
8
the Option Plans, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in Schedule
4.5, there are no outstanding options, warrants, rights, calls, commitments or
agreements calling for the issuance or transfer,sale or disposition by the
Company or any Subsidiary of any shares, issued or unissued, of the capital
stock of the Company or any Subsidiary, or of any securities convertible or
exchangeable, actually or contingently, into any such capital stock, to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound, or of which the Company has knowledge.
4.6 Officers and Directors. The Company Schedule contains a complete and
correct list of the names and business addresses of all officers and directors
of the Company and each of the Subsidiaries.
4.7 Financial Statements. Except as set forth on Schedule 4.7 hereto, the
books of account of the Company and its Subsidiaries are correct and complete in
all material respects and fairly present their income, expenses, assets and
liabilities in accordance with United States generally accepted accounting
principles consistently applied. The audited consolidated financial statements
of the Company and its consolidated Subsidiaries, if any, for each of the years
in the three year period ended December 31, 1997, together with the reports and
opinions thereon of Luboshitz, Kasierer & Co., Member Firm of Xxxxxxxx
Worldwide, and Xxxxxxx, Cohen, Rubin, Certified Public Accountants (Israel), and
the unaudited consolidated financial statements of the Company and its
consolidated Subsidiaries, if any, for the six months ended June 30, 1998, all
of which have previously been delivered to Buyer, present fairly, in all
material respects, the consolidated financial position of the Company and its
consolidated Subsidiaries, if any, as of said dates and the consolidated results
of their operations for such periods, and were prepared in conformity with
United States generally accepted accounting principles consistently applied
throughout the periods covered thereby (except as may be indicated in the notes
thereto and subject, in the case of unaudited statements, to normal recurring
audit adjustments not material in scope or amount), such unaudited financial
statements include and will include all adjustments (consisting only of normal
accruals) necessary for a fair presentation, in all material respects, of the
financial condition and results of operations of the Company in accordance with
United States generally accepted accounting principles consistently applied
throughout the periods covered thereby. The Company Financial Statements (as
hereinafter defined) are true and complete as of their respective dates comply
as to form in all respects with all applicable accounting requirements and with
the published rules and regulations of the United States Securities and Exchange
Commission ("SEC"). The audited consolidated financial statements of the Company
and its consolidated Subsidiaries, if any, for the fiscal year ended December
31, 1997 and the unaudited consolidated financial statements of the Company and
its consolidated Subsidiaries, if any, for the six months ended June 30, 1998,
are herein called the "Company Financial Statements". Except (a) for normal or
ordinary recurring liabilities incurred in the ordinary course of business
consistent with past practice, (b) for transaction expenses incurred in
connection with this Agreement, (c) for liabilities set forth on the most recent
balance sheet included in the Company Financial Statements, or (d) as set forth
in the Schedule 4.7, neither the Company nor any of its Subsidiaries has any
material liabilities or material obligations of any nature, whether or not
accrued, contingent or otherwise, and there is no existing condition, situation
or set of circumstances which would reasonably be expected to result in a
material liability or material obligation that either (i) would be required to
be
9
reflected or reserved against in a consolidated balance sheet of the Company and
its Subsidiaries prepared in accordance with generally accepted accounting
principles as applied in preparing the Company Financial Statements or (ii)
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
4.8 Absence of Changes. Except as set forth on Schedule 4.8 hereto, since
June 30, 1998, except with respect to the actions contemplated by this
Agreement, each of the Company and its Subsidiaries has conducted its business
only in the ordinary course and in a manner consistent with past practice and,
since such date, there has not been (a) any Material Adverse Effect on the
Company or any development that could reasonably be expected to have a Material
Adverse Effect on the Company; (b) any material change by the Company or any of
its Subsidiaries in its accounting methods, principles or practices; (c) any
material revaluation by the Company or any of its Subsidiaries of any of its
assets, including, without limitation, writing down the value of capitalized
software or inventory or deferred tax assets or writing off notes or accounts
receivable other than in the ordinary course of business; or (d) any other
action or event that would have required the consent of Buyer pursuant to
Section 8.1.1 had such action or event occurred after the date of this
Agreement.
4.9 Taxes.
(a) All taxes, including, without limitation, income, property, gross
receipts, sales, use, franchise, excise, value added, capital, social
security, withholding, and employees' withholding taxes imposed by the
State of Israel, by the U.S., by any other foreign country, and by any
political subdivision of the State of Israel, the U.S. and any foreign
country ("Taxes"), which have become due and payable by the Company or any
of its Subsidiaries, including any Taxes for which the Company or any of
its Subsidiaries is liable under a tax sharing agreement, indemnification
agreement, contract and other arrangement, together with any interest or
penalties thereon ("Company Taxes"), whether disputed or not, have, to the
extent material, been paid in full or adequately provided for by reserves
shown on the books of account of the Company; all material deposits
required by law to be made by the Company and its Subsidiaries with respect
to Company Taxes have been duly made, and all material returns with respect
to Company Taxes are materially complete and correct and have been timely
filed with, and where indicated, have been examined by the relevant tax
authorities through the fiscal years set forth on Schedule 4.9 hereto and
no extension of time for the assessment of deficiencies with respect to
such taxes is in effect for any fiscal year. As of the date of this
Agreement, neither the Company nor any Subsidiary is liable for the payment
of Company Taxes (other than sales and franchise taxes) in any jurisdiction
other than those listed on Schedule 4.9 hereto. No material deficiency or
adjustment in respect of any Company Taxes has been assessed against the
Company or any Subsidiary and remains unpaid, other than such Company Taxes
which are being contested in good faith and disclosure of which has been
previously made in writing to Buyer in writing, and the Company has no
knowledge of any proposed or threatened assessment of additional liability
for Company Taxes against the Company or any Subsidiary for any period
ending prior to the date of this Agreement. The Company has delivered to
Buyer copies of all material tax returns filed for Company Taxes for the
fiscal years ended
10
December 31, 1995 and 1996 and a draft of the Company's tax return to be
filed for Company Taxes for the fiscal year ended December 31, 1997.
(b) Schedule 4.4 hereto, together with the Company's 1997 20-F, lists
each tax incentive to which the Company is entitled under the laws of the
State of Israel, the period for which such tax incentive applies, and the
nature of such tax incentive. To the Company's knowledge, the Company has
complied with all material requirements of Israeli law to be entitled to
claim the tax incentive. To the Company's knowledge, subject to the receipt
of the approvals set forth in Section 10.8 below, except as disclosed on
Schedule 4.4, the consummation of the Arrangement will not adversely affect
the ability of the Company to claim the benefit of any tax incentive for
the remaining duration of the incentive or require any recapture of any
previously claimed incentive, and no consent or approval of any
governmental authority is required, other than as contemplated by Section
10.8, prior to consummation of the Arrangement in order to preserve the
entitlement of the Company to any such incentive. Except as set forth on
Schedule 4.9 hereto, no Subsidiary of the Company is entitled to any
benefit of the type described in this Section 4.9(b).
4.10 Ownership of Assets. Except as set forth in Schedules under Section
4.10 hereto, the Company and its Subsidiaries have good and valid title to, all
of their respective owned assets and properties, tangible and intangible
(including all assets reflected in the Company's Financial Statements, except
those disposed of in the ordinary course of business since June 30, 1998), and
good title to their leasehold estates, in each case free and clear of all
claims, liens, mortgages, pledges, conditional sales agreements, restrictions on
transfer or other encumbrances or charges ("Encumbrances") except, in each case,
for (a) liens for current taxes not delinquent, or taxes being protested in good
faith (such protests being expressly set forth in a Schedule hereto), and (b)
such imperfections in the title thereto and Encumbrances, if any, as do not
materially detract from the value, or interfere with the present or continued
use, of the property of the Company or its Subsidiaries, or otherwise impair
their business or operations. Except as set forth in the Company's Financial
Statements, the notes thereto and the Company's Schedules attached hereto, none
of the properties or assets, the value of which is reflected in the Company's
Financial Statements, is held by the Company or any Subsidiary as lessee or
subject to any lease or as conditional vendee under conditional sale or other
title retention agreement or as optionee under any option to purchase.
4.11 Intangible Assets.
(a) Schedules 4.11.1 (patents) and 4.11.2 (trademarks and tradenames)
hereto set forth a list, including the title of all patents and patent
applications, and all registered trademarks and trade names and
applications therefor, owned by the Company or any Subsidiary (other than
Commercial Software or intellectual property in the public domain). Except
as set forth in Schedules 4.11.1 and 4.11.2, the Company or its
Subsidiaries owns, or is licensed, or otherwise possesses legally
enforceable rights, to use, sell or license, as applicable, all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, maskworks, schematics, technology, trade secrets, know-how,
computer software (in both source code for all software owned by the
Company or its Subsidiaries and object code form), and tangible or
intangible
11
proprietary information or material (excluding in each case Commercial
Software (as defined below)) that are material to the business of the
Company and its Subsidiaries, taken as a whole, as currently conducted (the
"Company Intellectual Property Rights"). Each of the Company and its
Subsidiaries has licenses for all Commercial Software used in its business
and neither the Company nor any Subsidiary has any obligation to pay fees,
royalties and other amounts at any time pursuant to any such license other
than payments which are in amounts and terms which are generally
commercially charged for such Commercial Software. "Commercial Software"
means commercially available software programs available to the public
which have been licensed to the Company or any of its Subsidiaries pursuant
to end-user licenses and which are used in the Company's or any of its
Subsidiaries' respective internal business operations or which are broadly
available to the public on a royalty free basis.
(b) Schedules 4.11.3 (as licensor or under which the Company
otherwise grants rights) and 4.11.4 (as licensee or under which the Company
receives rights) set forth a complete list of all licenses, sublicenses and
other agreements as to which the Company or any of its Subsidiaries is a
party and which are material to the Company and its Subsidiaries taken as a
whole (as licensor, licensee or otherwise) and pursuant to which the
Company or any of its Subsidiaries or any other person is authorized to
use, sell, distribute or license any Company Intellectual Property Rights
(excluding object code end-user licenses granted to end-users which in some
cases includes standard third party commercial source code escrows), in the
ordinary course of business that permit use of software products without a
right to modify, distribute or sublicense the same ("End-User Licenses").
To the Company's knowledge, neither the Company nor any of its Subsidiaries
is in violation of any such license, sublicense or agreement, except for
such violations that could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company.
(c) Except for the third party intellectual property which is
incorporated in any existing product or service of the Company (the
"Embedded Products") for which the Company has valid non-exclusive licenses
which are disclosed in Schedule 4.11.4 and except as otherwise set forth in
Schedules 4.11.3 and 4.11.4, the Company or one of its Subsidiaries is the
sole and exclusive owner of the Company Intellectual Property Rights (free
and clear of any liens or encumbrances) listed on Schedule 4.11.5, and has
sole and exclusive rights to the use and distribution therefor or the
material covered thereby in connection with the services or products in
respect of which such Company Intellectual Property Rights are currently
being used, sold, licensed or distributed. Schedule 4.11.4 lists all
material written licenses, sublicenses and other agreements as to which the
Company or any of its Subsidiaries is a party and pursuant to which the
Company or any such subsidiary is authorized to use any Embedded Products.
Neither the Company nor any of its Subsidiaries is contractually obligated
to pay compensation to any third party with respect to any Company
Intellectual Property Rights, except pursuant to the agreements disclosed
on Schedules 4.11.3 and 4.11.4.
(d) To the Company's knowledge, neither the Company nor any of its
Subsidiaries has infringed, in any material respect, on any intellectual
property rights of any third persons.
12
(e) Except as disclosed in Schedule 4.11.5, no claims with respect to
the Company Intellectual Property Rights are pending or, to the knowledge
of the Company, threatened by the Company or any third party, (i) alleging
that the manufacture, sale, licensing or use of any Company Intellectual
Property Rights as now manufactured, sold, licensed or used by the Company
or any of its Subsidiaries or any third party infringes on any intellectual
property rights of any third party or the Company, (ii) against the use by
the Company or any of its Subsidiaries or any third party of any
technology, know-how or computer software used in the Company's business as
currently conducted or (iii) challenging the ownership by the Company or
any of its Subsidiaries, validity or effectiveness of any such Company
Intellectual Property Rights; provided, however, no disclosure pursuant to
this paragraph (e) shall be required with respect to any Company
Intellectual Property Rights which are licensed to the Company or any of
its Subsidiaries on a non-exclusive basis, unless the Company has knowledge
of the pending or threatened claim and such claim, if true, could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
(f) Except as disclosed in Schedule 4.11.6 hereto or as required by
the Office of the Chief Scientist, neither the Company nor any of its
Subsidiaries has entered into any agreement under which the Company or its
Subsidiaries is restricted from selling, licensing or otherwise
distributing any products to any class or type of customers, in any
geographic area or during any period of time.
(g) The Company or one of its Subsidiaries has taken reasonable
security measures to safeguard and maintain their respective property
rights in, all Company Intellectual Property Rights owned by the Company or
any of its Subsidiaries. To the knowledge of the Company, no current or
prior officers, employees or consultants of the Company or any of its
Subsidiaries claim, and neither the Company nor any of its Subsidiaries is
aware of any grounds to assert a claim to, any ownership interest in any
Company Intellectual Property Right as a result of having been involved in
the development of such property while employed by or consulting to the
Company or one of its Subsidiaries, or otherwise. Except as disclosed in
Schedule 4.11.7 and except for Embedded Products, all of the computer
software products within the Company Intellectual Property Rights have been
developed by employees of the Company or its Subsidiaries within the scope
of their employment or by consultants who have assigned all rights to such
products to the Company or its Subsidiaries.
(h) To the knowledge of the Company (and except with respect to the
software products licensed to Buyer under the OEM Licensing Agreement dated
July 13, 1995 by and between the Company and Buyer as to which the Company
does not make the representation), as of the date hereof, there are no
defects in the Company's or any of its Subsidiaries' software products, and
there are no errors in any documentation, specifications, manuals, user
guides, promotional material, internal notes and memos, technical
documentation, drawings, flow charts, diagrams, source language statements,
demo disks, benchmark test results, and other written materials related to,
associated with or used or produced in the development of the Company's or
any of its Subsidiaries' software products (collectively, the "Design
Documentation"), which defects or errors would reasonably be expected to
have, individually or in the aggregate, a Material
13
Adverse Effect on the Company. Except as disclosed in Schedule 4.11.8, the
occurrence in or use by any computer software included in the Company
Intellectual Property Rights, of dates on or after January 1, 2000 (the
"Millennial Dates") will not materially adversely affect the performance of
such software with respect to date dependent data, computations, output or
other functions (including without limitation, calculating, computing and
sequencing) and such software will create, sort and generate output data
related to or including Millennial Dates without any material errors or
omissions; provided, however, that the foregoing warranty does not apply to
any Millennial Date defect or any other deficiency in any product (other
than Embedded Products) or other item or service not developed, acquired,
sold, provided or performed by the Company or its Subsidiaries.
(i) Except for the matters disclosed in Section 4.4, no government
funding or university or college facilities were used in the development of
the computer software programs or applications owned by the Company or one
of its Subsidiaries.
(j) Except as disclosed in Schedule 4.11.9, to the knowledge of the
Company, neither the Company nor any of its Subsidiaries has made any
material oral or written representations or warranties which it believes to
be legally binding and which are outside of its normal practice.
(k) The consummation of the transactions contemplated hereby will not
result in the loss or impairment, in any material respect, of the Company's
rights to own or use any of the Company Intellectual Property Rights nor
will it require the consent of any governmental entity or third party in
respect of any such Company Intellectual Property Rights.
4.12 Insurance. Schedule 4.12 hereto provides a complete list and brief
description of all policies of fire, liability (including officers' and
directors' liability), title, key-man life insurance and other forms of
insurance held by the Company and Memco US as of the date hereof. Such policies
are in amounts, and against such losses and risks, as have generally been
maintained by the Company and its Subsidiaries in prior years. Except as set
forth in Schedule 4.12 hereto, neither the Company nor any Subsidiary has any
knowledge of any state of facts or of the occurrence of any event, which
reasonably might (a) form the basis for any claim against the Company or any
Subsidiary, not fully covered by insurance, or not provided for in Company's
Financial Statements, and which may exceed U.S. $100,000 in liability, or (b)
increase the insurance premiums paid by the Company or any Subsidiary, in excess
of U.S. $200,000 per annum in the aggregate, or affect the availability of the
insurance coverage currently maintained by the Company and its Subsidiaries on
substantially the same terms (other than premiums or deductible amounts) as now
in effect.
4.13 Litigation. Except as set forth on Schedule 4.13 hereto, there are no
actions, suits, proceedings or investigations, pending before any court or
governmental agency or before any arbitrator of any kind, or any order,
injunction or decree outstanding, or, to the knowledge of the Company or any
Subsidiary, threatened, against the Company or any Subsidiary or against or
relating to their property, assets or business, that, if adversely determined
would have a Material Adverse Effect on the Company. Neither the Company nor any
Subsidiary have been,
14
or is in violation of any applicable law, rule, regulation, statute, ordinance,
order, injunction, decree, award, judgment or other requirement of any
governmental body, court, or arbitrator ("Law or Order") relating to its
property, assets, or business, except for such Law or Order, or other
requirement of which the Company is unaware, or which would not have a Material
Adverse Effect on the Company. The Company has made available to Buyer or its
counsel correct and complete copies of all correspondence prepared by its
counsel for the Company's auditors in connection with the last two completed
audits of the Company's financial statements and any such correspondence since
the date of the last such audit.
4.14 Agreements and Obligations. Except as set forth in the Company
Schedules or Schedule 4.14, and except for agreements, arrangements and
contracts which are filed as exhibits to the Company Securities Reports (as
hereinafter defined) (the "SEC Exhibits"), neither the Company nor any of its
Subsidiaries is a party to nor is it or its assets bound by any Listed
Agreement. For purposes of this Agreement, "Listed Agreement" means the
following:
(a) any union or collective bargaining agreements;
(b) any employment or consulting agreement, contract or binding
commitment (including royalty agreements with employees) providing for
compensation or payments in excess of $150,000 in any year not terminable
by the Company or its subsidiary on thirty days notice without liability,
except to the extent general principles of wrongful termination or other
employment law may limit the Company's or its subsidiary's ability to
terminate employees at will;
(c) any partnership agreement or joint venture agreement to establish
an entity or other similar arrangement to share in profits from an
activity;
(d) any agreement of indemnification or guaranty not entered into in
the ordinary course of business with any party in excess of $100,000
individually or in the aggregate, and any agreement of indemnification or
guarantee between the Company or any of its Subsidiaries and any of its
officers or directors, irrespective of the amount of such agreement or
guarantee;
(e) any agreement, contract or binding commitment containing any
covenant directly or indirectly limiting the freedom of the Company or any
of its Subsidiaries to engage in any line of business, compete with any
person, or sell any product, or following the consummation of the
Arrangement would so limit Buyer, the Company or any of the Subsidiaries;
(f) any agreement, contract or binding commitment relating to capital
expenditures and involving future obligations in excess of $250,000;
(g) any agreement, contract or binding commitment relating to the
disposition or acquisition of assets not in the ordinary course of business
(since October 1996) or any ownership interest in any corporation,
partnership, joint venture or other business enterprise;
15
(h) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of
money or extension of credit (other than extensions of credit in the
ordinary course of business from vendors);
(i) any development agreement (including any agreements with
independent contractors);
(j) any material (which for these purposes shall include any agreement
which grants any exclusivity or limits the Company's ability to conduct its
business in any way) distribution, sales representative, reseller, or
value-added reseller agreement which cannot be terminated on thirty (30)
days notice without cost or expense to the Company or its Subsidiaries,
including in such Company Schedules an indication of those distributors,
sales representatives, resellers or value-added resellers who have not met
the quotas established in accordance with those agreements or whose
agreements are otherwise currently terminable;
(k) other than in connection with the transactions contemplated by
this Agreement, any other agreement, contract or binding commitment which
involves payment by the Company or any of its Subsidiaries of $100,000 or
more in any twelve (12) month period or $250,000 in the aggregate and which
cannot, by its terms, be terminated on thirty (30) days notice without cost
or expense to the Company or its Subsidiaries;
(l) any escrow agreements involving Company Intellectual Property
Rights (including source codes);
(m) any agreements to register its securities;
(n) any agreement required to be disclosed in Section 4.11;
(o) any voting trust or shareholders' agreement;
(p) any tax sharing or tax indemnification agreements; or
(q) any other agreements, contracts or binding commitments, which
materially affects the business, properties or assets of the Company and
its Subsidiaries taken as a whole.
The numerical thresholds set forth in this Section 4.14 shall not be deemed in
any respects to define materiality for other purposes of this Agreement. The
Company has provided or made available to Buyer true and complete copies of all
Listed Agreements as amended to date.
Except as set forth on Schedule 4.14 hereto, to the Company's knowledge,
the Company and its Subsidiaries have, in all material respects, performed all
obligations required to be performed by them to date under all Listed Agreements
(a true and correct copy of each of which written agreements has been filed with
the SEC or has been provided to Buyer), are not
16
in default in any material respect under any of the Listed Agreements which
would permit the other party to terminate or would give rise to a claim for
material damages by the other party, and neither the Company nor any Subsidiary
knows of any default or alleged default in any material respect thereunder by
any other party, or of any event which, with the giving of notice or the passage
of time, would become such a default by the Company or any of its Subsidiaries
which would permit such other party, to terminate, or would give rise to a claim
for material damages against the defaulting party, or such other party. All of
the Listed Agreements are valid and in full force and effect and, to the best of
the knowledge of the Company, none is subject to rescission or reformation and
there are no circumstances or writings extrinsic to any of such Listed
Agreements which would materially modify their terms, prevent their assignment
or create an encumbrance thereon. Notwithstanding the foregoing, the Company
makes no representation regarding the Listed Agreements between the Company and
Buyer.
4.15 Condition of Assets. All accounts receivable reflected on the Company
Financial Statements have arisen in the ordinary course of business and
represent valid obligations due to the Company or its Subsidiaries, in the
aggregate recorded amounts thereof, except to the extent set forth in the
Company Financial Statements as reserves for bad debts. All tangible assets
owned by the Company or any Subsidiary or otherwise used in the conduct of their
business is in good operating condition and repair, except for normal
breakdowns, reasonable wear and use, damage by fire or unavoidable casualty, not
materially affecting the business of the Company, except as set forth in the
Company Schedules.
4.16 Permits. The Company and its Subsidiaries have all permits, licenses,
orders, approvals, franchises and other rights and privileges ("Permits")
necessary in order for them to carry on their business as presently conducted,
except such Permits which no governmental authority has demanded be obtained, or
of which the Company is unaware, or which the failure to obtain, if required,
would not have a Material Adverse Effect on the Company, except as set forth in
the Company Schedules. Schedule 4.16 hereto sets forth a list of all such
material Permits from all Israeli and other governmental and regulatory bodies
held by the Company and its Subsidiaries, including all Permits from the Israeli
Ministry of Defense for the export or import of encryption software. The Company
and its Subsidiaries has and currently conducts business in compliance, in all
material respects, with such Permits, except as set forth in the Company
Schedules.
4.17 Banking Arrangements. Schedule 4.17 hereto sets forth the name of each
bank in or with which the Company or a Subsidiary has an account, credit line or
safety deposit box and the names of all persons presently authorized to draw
thereon or have access thereto, and a brief statement describing the purpose of
each such account .
4.18 No Breach; Consents. The transactions contemplated by this Agreement
and the Arrangement will not give rise to a right to terminate by the other
party thereto or result in a breach of the terms or conditions of or constitute
a default under, or violate, as the case may be, (a) the Memorandum of
Association or Articles of Association, or similar instrument, of the Company or
any Subsidiary, (b) any agreement or other document or undertaking listed or
referred to on Schedule 4.14 or Schedule 4.11, to which the Company or a
Subsidiary is a party or by which any of them is bound, (c) any Permit, Law or
Order applicable to the Company and its Subsidiaries, except as set forth on
Schedules 4.14 or 4.18 or for violations or breaches
17
which could not reasonably be expected, in the aggregate, have a Material
Adverse Effect on the Company or adversely affect the ability of the Company to
consummate the transactions contemplated hereby.
4.19 Authority for Agreement. All corporate and other proceedings
required to be taken by or on behalf of the Company, other than shareholder
approval and receipt of the Final Court Order (as defined in Section 7.1) and
Filing, to authorize the Company and its shareholders to enter into and carry
out this Agreement and the Arrangement have been duly and properly taken. This
Agreement has been duly executed and delivered by the Company and subject to
such shareholder approval and receipt of the Final Court Order and Filing, and
assuming the due authorization, execution and delivery hereof by Buyer, is valid
and binding upon the Company and the exchange of shares of the Buyer Stock for
all of the outstanding shares of the Company Stock under the Arrangement will be
binding upon the Company shareholders, subject as to enforceability, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equitable or fiduciary
principles. The Company has all requisite corporate power and authority to
enter into this Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity"), is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except (a) in
connection, or in compliance, with the provisions of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvement Act of 1976, as amended ("HSR Act"), the Exchange Act, (b)
applicable requirements, if any, of Nasdaq, (c) the filing of the Final Court
Order with the Registrar of Companies in Israel, (d) the required approvals of
the Arrangement and this Agreement by the Company's shareholders pursuant to
Israeli law, (e) filings with the SEC, (f) filings with the Israel Investment
Center of the Israeli Ministry of Trade & Industry, (g) filings with the Chief
Scientist of the Israeli Ministry of Trade & Industry, (h) filings with and the
approval of the Israeli Commissioner of Restrictive Trade Practices, if
necessary, (i) filings with the Israeli Securities Authority and (j) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings, the failure of which to be obtained or made would not have,
individually or in the aggregate, a Material Adverse Effect on the Company.
The required vote for the approval of the Arrangement is the affirmative
vote of the majority of shareholders represented at the Company Shareholder
Meeting (as defined in Section 7.1(a)) in person or by proxy and the holders of
not less than 75% of the voting power of each class of shares represented at
such meeting in person or by proxy. The required vote for the approval of the
Agreement is a simple majority of the voting power of the shares held by
shareholders participating in the Company Shareholder Meeting in person or by
proxy. No other vote of the securityholders of the Company is required by law,
the Company's Memorandum of Association and Articles of Association or otherwise
in order for the Company to consummate the Arrangement and the transactions
contemplated hereby.
4.20 Relationships with Related Persons. Except as disclosed in the
Company Securities Reports filed with the SEC prior to the date hereof and
except as set forth and identified on the Company Schedules and except for this
Agreement and the transactions contemplated hereby, there are no, and since
December 31, 1997 have not been any,
18
undischarged contracts or agreements or other material transactions between the
Company or any of its Subsidiaries, on the one hand, and any director or
executive officer of the Company or any of their respective Related Persons (as
defined below), on the other hand, and no director or executive officer of the
Company or any of their respective Related Persons have any interest in any of
the assets of the Company or any of its Subsidiaries. No executive officer,
director of the Company or any of their respective Related Persons has any
claim, charge, action or cause of action against the Company or any of its
Subsidiaries, except for claims for accrued vacation pay, accrued benefits under
the Benefit Plans (as hereinafter defined), claims for compensation, expense
reimbursement and similar obligations and similar matters and agreements. For
purposes hereof, the term "Related Persons" shall mean:
(a) each other member of such individual's Family; and
(b) any person or entity that is directly or indirectly controlled by any
one or more members of such individual's Family. For purposes of this
definition, the "Family" of an individual includes (i) such individual, (ii) the
individual's spouse, siblings, or ancestors (iii) any lineal descendant of such
individual, or their siblings, or ancestors or (iv) a trust for the benefit of
the foregoing.
4.21 Powers of Attorney. Schedule 4.21 hereto sets forth the names of all
persons now holding powers of attorney from the Company or any Subsidiary, and a
summary of the terms thereof.
4.22 Brokers. Except with respect to the engagement of Xxxxxx Brothers,
Inc. by the Company, the terms of which have been presented to Buyer all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on directly by the Company with Buyer without the intervention
of any broker or investment banker or third party. Except for the engagement of
Xxxxxx Brothers, Inc., neither the Company nor any of its officers or directors
has engaged, consented to, or authorized any broker, investment banker or third
party to act on its or his behalf, directly or indirectly, as a broker or finder
in connection with the transactions contemplated by this Agreement.
4.23 Real Estate. Except as set forth on Schedule 4.23 hereto, the
Company owns no real property. Schedule 4.23 hereto sets forth a brief
description of all real properties which are leased to the Company or its
Subsidiaries, including all plants and structures located thereon. The
Company's and its Subsidiaries facilities are in good operating condition for
the purposes used by the Company and its Subsidiaries, reasonable wear and tear
excepted. None of the properties occupied by the Company or its Subsidiaries, or
the occupancy or operation thereof, is in violation of any law or any building,
zoning or other ordinance, code or regulation in such a manner as to materially
interfere with the use and occupancy thereof in the ordinary course of the
business of the Company and its Subsidiaries. Except as set forth on Schedule
4.23, no notice from any governmental body has been served upon the Company or
any of its Subsidiaries claiming any violation of any such law, ordinance, code
or regulation, of the type described in the preceding sentence, or requiring any
substantial work, repairs, construction, alterations or installation on or in
connection with said properties which has not been complied with.
19
4.24 Securities Filings.
(a) The Company has filed all forms, reports and documents required
to be filed with the SEC, Nasdaq, and the Israel Securities Authority
(collectively, the "Securities Regulators") since October 1996. All such
required forms, reports and documents are referred to herein as the
"Company Securities Reports". The Company has provided to Buyer true and
correct copies of the Company Securities Reports. As of their respective
dates, the Company Securities Reports (i) complied, when filed, in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act") or the Exchange Act, the regulations of
Nasdaq, and the securities laws of Israel, as the case may be, and the
rules and regulations applicable to such Company Securities Reports, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such
filing) 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 the light of the circumstances under which they
were made, not misleading. None of the Subsidiaries is required to file any
forms, reports or other documents with the Securities Regulators.
(b) As of the date hereof, there are no material amendments or
modifications to agreements, documents or other instruments which
previously had been filed by the Company with the SEC pursuant to the
Securities Act or the Exchange Act or any other agreements, documents or
other instruments, which have not yet been filed with the SEC but which are
required to be filed by the Company.
4.25 Proxy Statement Disclosures. No information supplied by the Company
to Buyer for inclusion or incorporation in the S-4 Registration Statement and
the Proxy Statement/Prospectus (both as defined in Section 8.2 below) shall, at
the time such Proxy Statement/Prospectus is mailed or such S-4 Registration
Statement becomes effective contain an untrue statement of a material fact, or
omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not false or
misleading. The Proxy Statement will comply (with respect to the Company) as to
form in all material respects with the provisions of the Exchange Act, the rules
and regulations thereunder, except that no representation or warranty is made by
the Company with respect to statements made or incorporated by reference therein
based on information supplied by Buyer specifically for inclusion or
incorporation by reference in the Proxy Statement/Prospectus.
4.26 Environmental Matters. To the Company's knowledge, the Company and
its Subsidiaries are in compliance with all applicable environmental regulations
and standards relating to the conduct of the business of the Company and there
exists no toxic waste or other environmental hazard that has not previously been
publicly disclosed by the Company or otherwise disclosed in writing to Buyer
which would have a Material Adverse Effect on the Company.
4.27 Restrictions on Business Activities. Except as set forth in the
Company Schedules, there is no agreement, judgment, injunction, order or decree
binding upon the Company or its Subsidiaries or their properties (including,
without limitation, their intellectual
20
properties) which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any material acquisition of property by the
Company or any of its Subsidiaries or the conduct of the business by the Company
or any of its Subsidiaries including any exclusive distribution or licensing
agreements which cannot be terminated on less than 30 days notice without any
cost or expense to the Company or its Subsidiaries.
4.28 Intentionally Omitted.
4.29 Labor Matters. Except as set forth in Schedule 4.14, the Company is
not a party to or bound by any collective bargaining agreement or other
understanding with a labor organization, including, without limitation, any
collective employment agreements to which the Company is subject by law,
regulation or administrative order, and the Company has not experienced any
strikes, grievances, other collective bargaining disputes or, claims of unfair
labor practices. There is not organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of the
Company.
4.30 Employee Benefits.
(a) Schedule 4.30.1 contains a true and complete list of each (i)
written, deferred compensation and each bonus or other incentive
compensation, stock purchase, stock option and other equity compensation
plan, program, agreement or arrangement; (ii) severance or termination pay,
medical or surgical, hospitalization, life insurance and other "welfare"
plan, fund or program, profit-sharing, stock bonus or other "pension" plan,
fund or program; (iii) employment, termination, consulting or severance
agreement; and (iv) other employee benefit plan, program, agreement or
arrangement, in each case, that is sponsored, maintained or contributed to
or required to be contributed to by the Company or any Subsidiary ("Benefit
Plans").
(b) With respect to each Benefit Plan, the Company has heretofore
provided to Buyer true and complete copies of the Benefit Plan and any
amendments thereto (or if the Benefit Plan is not a written Benefit Plan, a
description thereof), any related trust or other funding vehicle, any
reports or summaries required under any Law or Order applicable to such
Benefit Plan.
(c) Except (i) as set forth on Schedule 4.30.2, (ii) for the
acceleration of vesting of outstanding stock options to the extent required
in accordance with the terms of the Option Plans (but not otherwise) and
set forth in Schedule 4.30.2, and (iii) except for employment agreements
with directors and officers entered into before the date of this Agreement
and filed with the SEC, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
(i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming
due to any current or former director or employee of the Company or any of
its Subsidiaries from the Company or any of its Subsidiaries, under any
Benefit Plan of otherwise, (ii) materially increase any benefits otherwise
payable under any Benefit Plan, (iii) result in the acceleration of the
time of payment or vesting of any such benefits or (iv) create a right to
receive payments upon a subsequent termination of employment.
21
(d) There are no pending, or, to the knowledge of the Company,
threatened or anticipated claims by or on behalf of any Benefit Plan, by
any employee or beneficiary covered under any such Benefit Plan or
otherwise involving any such Benefit Plan (other than routine claims for
benefits).
(e) Except as set forth in Schedule 4.30.3, neither the Company nor
any of its Subsidiaries operates any profit sharing scheme for the benefit
of any of their officers or employees. Each Benefit Plan has been operated
and administered in all material respects in accordance with its terms and
applicable Law.
(f) All of the material benefits to which any officer, former officer,
employee or former employee of the Company and the Subsidiaries is or may
be entitled including, inter alia, severance pay, leave and health, have
been paid, to the extent due, or adequately provided for in the Company
Financial Statements to the extent required by United States generally
accepted accounting principles, and neither the Company nor its
Subsidiaries has any unfunded liability with respect to such Benefits.
(g) The Company has complied in all material respects with all
applicable laws relating to labor, including any provisions thereof
relating to wages, termination pay, vacation pay, fringe benefits,
collective bargaining and the payments and/or accrual of the same and all
Company Taxes, insurance and all other costs and expenses applicable
thereto, and the Company is not liable for any arrearage, or any Company
Taxes, costs or penalties for failure to comply with any of the foregoing,
except as set forth in the Company Schedules.
4.31 Pooling of Interests. To the best knowledge of the Company, based on
consultation with its independent accountants, neither the Company nor its
directors, officers or stockholders has taken any action which would preclude
(a) Buyer's ability to account for the Arrangement as a pooling of interests or
(b) Buyer's or the Company's ability to continue to account for as a pooling of
interests any past acquisition by the Company currently accounted for as a
pooling of interests.
4.32 Board Approvals. The Board of Directors of the Company, has, on or
prior to the date hereof, unanimously approved this Agreement and the
Arrangement by those permitted to vote thereon.
4.33 Fairness Opinion. The Board of Directors of the Company has received
a written opinion from Xxxxxx Brothers, Inc. dated no later than the date
hereof, that the Exchange Ratio contemplated by this Arrangement is fair to the
Company's shareholders from a financial point of view and has delivered to Buyer
a copy of such opinion.
4.34 Releases. General releases of all claims from each of Xxxxxx Xxxxx,
Xxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxx Xxxxxxx, Xxxxxxxx Xxxxxx, Xxxxxx Xxxxxxxxx,
Xxxxx Xxxxx, Xxxxx Xxxxxxx and Xxx Gal may have through the Closing Date, or if
earlier, the date Buyer obtains control of the Board of Directors of the Company
pursuant to Section 8.17 of this Agreement against the Company and its
Subsidiaries, substantially in the form set forth in Exhibit 4.35, have been
executed and delivered by such persons to the Company.
22
4.35 Non-Competition Agreements. Non-competition Agreements have been
executed by Xxxxxx Xxxxx and Xxxxxx Xxxxxxx.
4.36 Schedules. The Company Schedules when delivered in final form to
Buyer will not reflect any agreements, arrangements or conditions which are
materially inconsistent with the due diligence information provided to Buyer
prior to the execution of this Agreement and the announcement of the
Arrangement.
5. REPRESENTATIONS AND WARRANTIES BY THE BUYER.
Buyer represents and warrants to the Company, subject to the exceptions
disclosed in writing in the disclosure letter supplied by Buyer to the Company
(the "Buyer Schedules") which sets forth the Schedules referenced in this
Article 5 and which is dated as of the date hereof, as follows:
5.1 Organization of Buyer. Buyer is a corporation duly organized and
validly existing under the laws of the State of Delaware and has full power and
authority to carry on its business as now conducted, and to own its assets.
Buyer is duly qualified to do business and is in good standing in the
jurisdictions in which Buyer is required to be qualified in order to carry on
its business, and is duly authorized, and licensed under all laws, regulations,
ordinances or orders of public authorities, or otherwise, to carry on its
business in the places and in the manner presently conducted, except for
qualifications, authorizations or licenses of which would not have a Material
Adverse Effect on Buyer. In this Agreement, the term "Material Adverse Effect"
used in reference to Buyer or any of its Subsidiaries means any event, change or
effect materially adverse to the financial condition, assets, liabilities,
results of operations or business of Buyer and its Subsidiaries, taken as a
whole, other than changes resulting solely from changes in general economic or
software industry conditions. Buyer has heretofore delivered to the Company true
and complete copies of its Articles of Incorporation certified by the Secretary
of the Buyer, as in effect on the date hereof. The minute books of the Buyer
contain substantially accurate records of all meetings of its Board of
Directors, all committees of its Board of Directors and of its shareholders
since its incorporation and accurately reflect all material transactions
referred to in such minutes.
5.2 Capitalization. The authorized capital stock of the Buyer consists of
180,000,000 common shares $.001 par value of which there were 85,757,918 shares
issued and outstanding as of August 10, 1998 plus any shares issued on the date
hereof upon exercise of options outstanding on such date and 10,000,000 shares
of Class II Preferred Stock, $.01 par value, 1,000,000 shares of which (subject
to adjustment upward or downward by the Buyer's Board of Directors) have been
designated Series A Junior Participating Preferred Stock and 1,775,000 of which
(subject to adjustment upward or downward in accordance with the Buyer's
Certificate of Incorporation, as amended) have been designated as Class II
Series B Preferred Stock. No shares of the Series A Junior Participating
Preferred Stock are issued or outstanding as of the date hereof. The shares of
the Buyer Stock to be issued pursuant to the Arrangement and upon the exercise
of the Options will include a corresponding number of rights (such rights being
hereinafter referred to collectively as "Buyer Rights") to purchase shares of
Series A Junior Participating Stock pursuant to the Rights Agreement dated as of
December 21, 1995 (the "Buyer Rights Agreement") between Buyer and Xxxxxx Trust
and Savings Bank, as Rights Agent.
23
All outstanding shares of the Buyer Stock are duly authorized, validly issued,
fully paid and non-assessable and are not subject to preemptive rights created
by statute, the Articles of Incorporation of Buyer or any agreement or document
to which Buyer is a party or by which it is bound.
5.3 Subsidiaries. For purposes of this Agreement, any corporation, joint
venture, partnership or other entity of which Buyer, directly or indirectly,
through other corporations or otherwise, owns 50% or more of the outstanding
capital stock or interest in shall be deemed to be a Subsidiary of Buyer. Each
of the Subsidiaries is qualified to do business in the jurisdictions in which
each such Subsidiary is required to be qualified in order to carry on its
business, and is duly authorized, and licensed under all laws, regulations,
ordinances or orders of public authorities, or otherwise, to carry on its
business in the places and in the manner presently conducted, except for
authorizations, qualifications or licenses of which the failure to obtain would
not have a Material Adverse Effect on Buyer. The outstanding shares of capital
stock, or other evidence of ownership, of each of the Subsidiaries are validly
issued, fully paid and non-assessable, and the shares of each of the
Subsidiaries, to the extent owned by Buyer or another Subsidiary, are owned by
the Buyer or such other Subsidiary free of any claims, liens, charges or
encumbrances of any nature whatsoever, except as set forth in Schedule 5.3.1.
Each of the Subsidiaries is duly organized and validly existing in good standing
under the laws of the jurisdiction of its organization and has the power to
carry on its business as now conducted and to own its assets.
5.4 Options, Warrants, Etc. Schedule 5.4 hereto contains a complete and
correct list of all plans under which options to purchase the Buyer Stock have
or may be granted ("Option Plans") and the number of options to purchase the
Buyer Stock or the stock of any of the Subsidiaries. To the Buyer's knowledge,
the options granted under the Option Plans have been granted at fair market
value. Except as set forth in Schedule 5.4 and in connection with the
acquisition of businesses or technology, there are no outstanding options,
warrants, rights, calls, commitments or agreements calling for the issuance or
transfer, sale or disposition by Buyer or any Subsidiary of any shares, issued
or unissued, of the capital stock of Buyer or any Subsidiary, or of any
securities convertible or exchangeable, actually or contingently, into any such
capital stock, to which Buyer or any Subsidiary is a party or by which Buyer or
any Subsidiary is bound, or of which Buyer has knowledge.
5.5 Financial Statements. The books of account of Buyer and its
Subsidiaries are correct and complete in all material respects and fairly
present their income, expenses, assets and liabilities in accordance with United
States generally accepted accounting principles consistently applied. The
audited consolidated financial statements of Buyer and its consolidated
Subsidiaries, if any, for each of the years in the three year period ended
December 31, 1997, together with the reports and opinions thereon of KPMG Peat
Marwick, Certified Public Accountants (United States), and the unaudited
consolidated financial statements of Buyer and its consolidated Subsidiaries, if
any, for the six months ended June 30, 1998, all of which have previously been
delivered to Company, present fairly, in all material respects, the consolidated
financial position of the Buyer and its consolidated Subsidiaries, if any, as of
said dates and the consolidated results of their operations for such periods,
and were prepared in conformity with United States generally accepted accounting
principles consistently applied throughout the periods covered thereby (except
as may be indicated in the notes thereto and subject, in the case of
24
unaudited statements, to normal recurring audit adjustments not material in
scope or amount), such unaudited financial statements include and will include
all adjustments (consisting only of normal accruals) necessary for a fair
presentation, in all material respects, of the financial condition and results
of operations of the Buyer in accordance with United States generally accepted
accounting principles consistently applied throughout the periods covered
thereby. The Buyer Financial Statements (as hereinafter defined) are true and
complete as of their respective dates comply as to form in all respects with
applicable accounting requirements and with the published rules and regulations
of the SEC. The audited consolidated financial statements of Buyer and its
consolidated Subsidiaries, if any, for the fiscal year ended December 31, 1997
and the unaudited consolidated financial statements of the Buyer and its
consolidated Subsidiaries, if any, for the six months ended June 30, 1998, are
herein called the "Xxxxx Financial Statements". Except (a) for normal or
ordinary recurring liabilities incurred in the ordinary course of business
consistent with past practice, (b) for transaction expenses incurred in
connection with this Agreement, (c) for liabilities set forth on the most recent
balance sheet included in the Buyer Financial Statements, (d) liabilities which
have or may be incurred in connection with acquisitions of other businesses or
technology by Buyer or its Subsidiaries, whether or not in the ordinary course
of business, or (e) as set forth in the Schedule 5.5, neither Buyer nor any of
its Subsidiaries has any material liabilities or material obligations of any
nature, whether or not accrued, contingent or otherwise, and there is no
existing condition, situation or set of circumstances which would reasonably be
expected to result in a material liability or material obligation that either
(i) would be required to be reflected or reserved against in a consolidated
balance sheet of Buyer and its Subsidiaries prepared in accordance with
generally accepted accounting principles as applied in preparing the Buyer
Financial Statements or (ii) could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Buyer. Notwithstanding
anything in this Section 5.5 to the contrary, the financial statements for Buyer
and its consolidated Subsidiaries for the six months ended June 30, 1998 have
been delivered to Company in draft form, and the representations made with
respect to such June 30, 1998 financial statements are made with respect to the
final form of such financial statements which will be filed on August 14, 1998
and which will not vary from the draft provided to Company in any materially
adverse respect.
5.6 Absence of Changes. Since June 30, 1998, except with respect to the
actions contemplated by this Agreement and except for liabilities which have or
may be incurred in connection with acquisitions of other businesses or
technology by Buyer or its Subsidiaries, whether or not in the ordinary course
of business, each of Buyer and its Subsidiaries has conducted its business only
in the ordinary course and in a manner consistent with past practice and, since
such date, there has not been (a) any Material Adverse Effect on Buyer or any
development that could reasonably be expected to have a Material Adverse Effect
on Buyer; (b) any material change by Buyer or any of its Subsidiaries in its
accounting methods, principles or practices; or (c) any material revaluation by
Buyer or any of its Subsidiaries of any of its assets, including without
limitation, writing down the value of capitalized software or inventory or
deferred tax assets or writing off notes or accounts receivable other than in
the ordinary course of business.
5.7 Litigation. Except as set forth in the Buyer Securities Reports (as
hereinafter defined) there are no actions, suits, proceedings or investigations,
pending before any court or governmental agency or before any arbitrator of any
kind, or any order, injunction or decree
25
outstanding, or, to the knowledge of Buyer or any Subsidiary, threatened,
against Buyer or any Subsidiary or against or relating to their property, assets
or business, that, if adversely determined would have a Material Adverse Effect
on Buyer. Neither Buyer nor any Subsidiary have been, or is in violation of any
Law or Order relating to its property, assets, or business, except for such Law
or Order, or other requirement of which Buyer is unaware, or which would not
have a Material Adverse Effect on Buyer. Buyer has provided to the Company or
its counsel correct and complete copies of all correspondence prepared by its
counsel for Buyer's auditors in connection with the last two completed audits of
the consolidated financial statements of the Company and any such
correspondence since the date of the last such audit.
5.8 No Breach; Consents. The transactions contemplated by this Agreement
and the Arrangement will not give rise to a right to terminate by the other
party thereto or result in a breach of the terms or conditions of or constitute
a default under, or violate, as the case may be, (a) the Certificate of
Incorporation, or similar instrument, of Buyer or any Subsidiary, (b) any
material agreement or other document or undertaking, to which Buyer or a
Subsidiary is a party or by which any of them is bound, (c) any Permit, Law or
Order applicable to Buyer and its Subsidiaries, except for violations or
breaches which could not reasonably be expected, in the aggregate, to have a
Material Adverse Effect on Buyer or adversely affect the ability of Buyer to
consummate the transactions contemplated hereby.
5.9 Authority for Agreement. All corporate proceedings required to be
taken by or on behalf of Buyer, authorize Buyer to enter into and carry out this
Agreement and the Arrangement have been duly and properly taken. This Agreement
has been duly executed and delivered by Buyer and subject as to enforceability,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity. Buyer has all requisite corporate power and authority to
enter into this Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Buyer or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except (a) in connection, or in compliance, with the
provisions of the HSR Act and the Exchange Act, (b) applicable requirements,
if any, of Nasdaq (c) filings with SEC, (d) filings with the Israeli Investment
Center of the Israeli Ministry of Trade & Industry, (e) filings with the Chief
Scientist of the Israeli Ministry of Trade & Industry, (f) filings with and the
approval of the Israeli Commissioner of Restrictive Trade Practices, if
necessary, (g) filings with the Israeli Securities Authority and (h) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings, the failure of which to be obtained or made could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Buyer.
5.10 Brokers. Except with respect to the engagement of Credit Suisse First
Boston Corporation by Buyer, the terms of which have been presented to Buyer all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on directly by Buyer with Buyer without the intervention of
any broker or investment banker or third party. Except for the engagement of
Credit Suisse First Boston Corporation, neither Buyer nor any of its officers or
directors has engaged, consented to, or authorized any broker, investment banker
or third party to act on its or his behalf, directly or indirectly, as a broker
or finder in connection with the transactions contemplated by this Agreement.
26
5.11 Securities Filings. Buyer has filed all forms, reports and documents
required to be filed with the SEC or Nasdaq since January 1, 1995. All such
required forms, reports and documents are referred to herein as the "Buyer
Securities Reports." As of their respective dates, the Buyer Securities Reports
(a) complied in all material respects with the requirements of the Securities
Act or the Exchange Act, the regulations of Nasdaq, as the case may be, and the
rules and regulations applicable to such Buyer Securities Reports, and (b)
did not at the time they were filed (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) 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 the light of the circumstances under which they were made, not
misleading. None of the Subsidiaries is required to file any forms, reports or
other documents with the Securities Regulators. As of the date hereof, there are
no material amendments or modifications to agreements, documents or other
instruments which previously had been filed by Buyer with the SEC pursuant to
the Securities Act or the Exchange Act or any other agreements, documents or
other instruments, which have not yet been filed with the SEC but which are or
will be required to be filed by Buyer.
5.12 Proxy Statement Disclosures. No information supplied by Buyer to
Company for inclusion in the Proxy Statement/Prospectus (as defined in Section
8.2 below) shall, at the time such Proxy Statement/Prospectus is mailed be false
or misleading with respect to any material fact, or will omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not false or misleading.
5.13 Pooling of Interests. To the knowledge of Buyer, based on
consultation with its independent accountants, neither Buyer nor its directors,
officers or stockholders has taken any action which would preclude (i) Buyer's
ability to account for the Arrangement as a pooling of interests or (ii)
Company's or Buyer's ability to continue to account for as a pooling of
interests any past acquisition by the Buyer currently accounted for as a pooling
of interests.
5.14 Board Approvals. The Board of Directors of Buyer, has, on or prior to
the date hereof, unanimously approved this Agreement and the Arrangement.
5.15 Fairness Opinion. The Board of Directors of the Buyer has received an
opinion from Credit Suisse First Boston Corporation as of the date hereof, that
the Exchange Ratio contemplated by this Agreement is fair to Buyer's
shareholders from a financial point of view and has delivered to Buyer a copy of
such opinion.
5.16 Employee Benefits.
(a) Except as could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Buyer, (i) each Buyer
Plan complies with the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), the Code and all other applicable statutes and
governmental rules and regulations and (ii) there has been no failure to
make any contribution or pay any amount due to any Buyer Plan as required
by Section 412 of the Code or Section 302 of ERISA and no Buyer Plan, nor
any trust created thereunder, has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived.
27
(b) To the knowledge of Buyer, there are no actions, suits or claims
pending or threatened (other than routine claims for benefits) with respect
to any Buyer Plan which would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Buyer. Neither Buyer nor
any of its ERISA Affiliates has incurred or would reasonably be expected to
incur any material liability under or pursuant to Title IV of ERISA. No
prohibited transactions described in Section 406 of ERISA or Section 4975
of the Code have occurred which could reasonably be expected to result in
material liability to Buyer or its subsidiaries.
(c) As used herein, "Buyer Plan" means a "pension plan" (as defined
in Section 3(2) of ERISA), a "welfare plan" (as defined in Section 3(1) of
ERISA), or any bonus, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
vacation, severance, death benefit, insurance or other plan, arrangement or
understanding, in each case established, maintained or contributed to by
Buyer or any of its ERISA Affiliates or as to which Buyer or any of its
Affiliates or otherwise may have any material liability.
(d) As used herein, "ERISA Affiliate" means (i) any entity which is a
member of a "controlled group of corporations" with or under "common
control" (as such terms are defined in Sections 414(b) or (c) of the Code)
with the Company, (ii) any entity which is (or at any relevant time was) a
member of an "affiliated service group" (as such term is defined in Section
414(m) of the Code) which includes the Company, or (iii) any other entity
or person which, with respect to the Company, must be treated as a single
employer under any other provision of Code Section 414 or ERISA Section
4001.
5.17 Taxes. Except as set forth in Schedule 5.17:
(a) Buyer and each of its subsidiaries has timely filed all Returns
required by applicable Tax law to be filed by Buyer and each of its
subsidiaries, except where any such failure to file that could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Buyer. All Taxes imposed on Buyer or any of its
subsidiaries by a taxing authority or for which Buyer or any of its
subsidiaries is or could be liable, whether to a taxing authority or to
other persons or entities, to the extent required to be paid by Buyer or
any of its subsidiaries have been paid, except for any such failure to pay
that could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Buyer.
(b) Except to the extent that any such failure to withhold could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Buyer, as of the Closing Date, Buyer and each of
its subsidiaries, will have withheld with respect to its employees all
federal and state taxes, FICA, FUTA and other Taxes required to be
withheld.
(c) There is no Tax deficiency outstanding, proposed or assessed
against Buyer or any of its subsidiaries, except any deficiency that, if
paid, could not reasonably
28
be expected to have, individually or in the aggregate, a Material Adverse
Effect on Buyer.
5.18 Intellectual Property. Buyer and its subsidiaries have all patents,
trademarks, trade names, service marks, trade secrets, copyrights and other
proprietary Buyer intellectual property rights (collectively, "Buyer
Intellectual Property Rights") as are necessary in connection with the business
of Buyer and its subsidiaries, taken as a whole, except where the failure to
have such Intellectual Property Rights could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Buyer. Neither
Buyer nor any of its subsidiaries has infringed any Intellectual Property Rights
of any third party, other than any infringements that could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Buyer.
6. CONFIDENTIAL INFORMATION.
6.1 Confidentiality. Each party agrees that, the terms of the
Confidentiality Agreement dated August 7, 1998 (the "Confidentiality Agreement")
between the Buyer and the Company shall remain in full force and effect, other
than those set forth in clauses (a) through (f) on page 3.
6.2 Non-Solicitation. Without the prior written consent of the other party,
neither Buyer nor the Company, will for a period of two (2) years from the date
of this Agreement, solicit or cause to be solicited the employment of any person
who is employed by the other during such time.
7. REQUIRED APPROVALS AND CLOSING.
7.1 Shareholders and Court Approvals.
(a) The Company undertakes to take appropriate action to file a motion
(the "First Motion") with the Tel Aviv-Jaffa District Court or any other
competent court in Israel (the "Court") to order that an extraordinary
meeting of the Company's shareholders be convened at the earliest
practicable date for the purpose of considering and approving (if they deem
fit) the Arrangement and this Agreement, including the Exchange and the
other transactions contemplated by this Agreement (the "Company
Shareholders Meeting"), which shall have been recommended for approval by
the Company's Board of Directors unless based upon the written advice of
its Israeli counsel that such recommendation is not consistent with its
fiduciary obligations, in which case the Company's Board of Directors shall
make no recommendation with regard to the Arrangement, the Agreement or any
other Acquisition Proposal (as defined in Section 8.6).
(b) Subsequent to approval of the First Motion by the Court, the
Company shall take appropriate action to convene the Company Shareholders
Meeting, in accordance with the Court's instructions and applicable law.
29
(c) Subsequent to approval of the Agreement and the Arrangement at the
Company Shareholders Meeting, by the requisite vote required under law, the
Company shall as soon as practicable file with the Court a motion (the
"Second Motion") requesting that the Court issue an order approving the
Arrangement (the "Final Court Order").
(d) As soon as possible subsequent to the issuance of the Final Court
Order and the satisfaction of all Closing conditions, but not earlier than
January 1, 1999, the Company shall file the Final Court Order with the
Registrar of Companies in Israel. The First Motion, the Second Motion and
any related motions and the description of the Arrangement to the Israeli
court shall be reviewed and approved by Buyer prior to the filing thereof
by the Company. In connection with the Company Shareholders Meeting, the
Company will duly solicit the vote of the shareholders of the Company, for
their approval, as set forth above in this Section 7.1, by mailing or
delivering to each such shareholder the Proxy Statement/Prospectus in the
form included in the S-4 Registration Statement, as soon as practicable
after the date said Registration Statement is declared effective by the SEC
and after Court approval of the First Motion.
7.2 Closing. The Closing of this Agreement shall take place simultaneously
with the Filing.
8. COVENANTS.
8.1 Conduct of Business of the Company Prior to Closing Date.
8.1.1 Conduct by the Company. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms and the Closing Date, the Company (which for the purposes
of this Section 8.1 shall include the Company and each of the Subsidiaries)
agrees, except as set forth on Schedule 8.1 hereto and except to the extent that
Buyer shall otherwise consent in writing (which consent shall not be
unreasonably withheld or delayed), to carry on its business in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted, to timely pay its debts and Taxes, subject to good faith disputes
over such debts or Taxes, on the same payment terms such debts and Taxes have
historically been paid, to collect its receivables in the same manner and on the
same terms such receivables have historically been collected, to timely pay or
perform other material obligations when due and to use all commercially
reasonable efforts consistent with past practices and policies to preserve
intact the Company's present business organizations, keep available the services
of its present officers and employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with the Company, to the end that the Company's goodwill and
ongoing businesses be unimpaired at the Closing Date. The Company shall promptly
notify Buyer of any event or occurrence not in the ordinary course of business
of the Company. Except as expressly provided for by this Agreement or as set
forth on the Company Schedules, the Company shall not, prior to the Closing Date
or earlier termination of this Agreement pursuant to its terms, without the
prior written consent of Buyer (which consent shall not be unreasonably withheld
or delayed):
30
(a) Except as required by the Company's benefit plans and agreements,
accelerate, amend or change the period of exercisability of options or
restricted stock, or reprice options granted under the Option Plans or
authorize cash payments in exchange for any options granted under any of
such plans;
(b) Enter into any material partnership agreements, joint development
agreements or strategic alliance agreements;
(c) Except as required by the Benefit Plans or under Israeli Law,
grant any severance or termination pay (i) to any executive officer or (ii)
to any other employee except payments made in connection with the
termination of employees who are not executive officers in amounts
consistent with Company's policies and past practices or pursuant to
written agreements outstanding, or policies existing, on the date hereof
and as previously disclosed in writing to Buyer;
(d) Other than in the ordinary course of business consistent with past
practices, transfer or license to any person or entity or otherwise extend,
amend or modify any rights to the Company Intellectual Property Rights
(including rights to resell or relicense the Company Intellectual Property
Rights) or enter into grants to future patent rights, other than the
Company"s standard forms of End-User Licenses entered into in the ordinary
course of business consistent with past practices;
(e) Commence any litigation other than (i) for the routine collection
of bills, (ii) for software piracy or (iii) in such cases where the Company
in good faith determines that failure to commence suit would result in the
material impairment of a valuable aspect of the Company's business,
provided that the Company consults with Buyer prior to the filing of such a
suit (except that the Company shall not require the approval of, and shall
not be required to consult with, Buyer with respect to any claim, suit or
proceeding by the Company against Buyer or any of its affiliates);
(f) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital
stock, or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company;
(g) Repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock;
(h) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock of any class or
securities convertible into, or subscriptions, rights, warrants or options
to acquire, or enter into other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities,
other than (i) the issuance of shares of the Company Stock pursuant to the
exercise of Company Stock options outstanding as of the date of this
Agreement and (ii) the grant of options to purchase at fair market value at
the time of grant up to 700,000 shares of the Company Stock, in the
aggregate and 30,000 shares of Company
31
Stock, in the aggregate, to any one other individual, to newly hired
employees or in the ordinary course of business and in accordance with the
Company's standard policies consistent with past practice.
(i) Except as set forth on Schedule 8.1, cause, permit or propose any
amendments to the Company's Articles of Association or amend any Listed
Agreement;
(j) Sell, lease, license, encumber or otherwise dispose of any of the
Company's properties or assets which are material, individually or in the
aggregate, to the business of the Company, except in the ordinary course of
business consistent with past practice;
(k) Incur any indebtedness for borrowed money (other than ordinary
course trade payables or pursuant to existing credit facilities in the
ordinary course of business) or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire debt securities
of the Company or guarantee any debt securities of others;
(l) Except as required by law and as set forth on Schedule 8.1, adopt
or amend any Benefit Plan or increase the salaries or wage rates of any of
its employees (except for wage increases in the ordinary course of business
and consistent with past practices), including but not limited to (but
without limiting the generality of the foregoing), the adoption or
amendment of any stock purchase or option plan, the entering into of any
employment contract or the payment of any special bonus or special
remuneration to any director or employee other than the bonuses reflected
on the Company Financial Statements;
(m) Revalue any of the Company's assets, including without limitation
writing down the value of inventory, writing off notes or accounts
receivable other than in the ordinary course of business consistent with
past practice or waive any right of material value;
(n) Pay, discharge or satisfy in an amount in excess of $50,000 (in
any one case) or $250,000 (in the aggregate), any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), including, without limitation, under any employment contract or
with respect to any bonus or special remuneration, other than the payment,
discharge or satisfaction in the ordinary course of business of liabilities
of the type reflected or reserved against in the Company Financial
Statements (or the notes thereto);
(o) Except as required by applicable tax law, make or change any
material election in respect of Company Taxes, adopt or change in any
material respect any accounting method in respect of Company Taxes, file
any material tax return or any amendment to a material tax return, enter
into any closing agreement, settle any claim or assessment in respect of
Company Taxes (except settlements effected solely through payment of
immaterial sums of money), or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of
Company Taxes;
32
(p) Intentionally take any action, including the acceleration of
vesting (except as contemplated under the Option Plans) of any options,
warrants, restricted stock or other rights to acquire shares of the Company
Stock, which would be reasonably likely to interfere with Buyer"s ability
to account for the Arrangement as a pooling of interests;
(q) Enter into any Listed Agreement other than in the usual, regular
and ordinary course of business consistent with past practices and
policies; or
(r) Take, or agree in writing or otherwise to take, any of the actions
described in clauses (a) through (q) above, or any action which would cause
or would be reasonably likely to cause any of the conditions to the
Arrangement set forth in Sections 9 or 10, not to be satisfied.
8.1.2 Conduct by Buyer. Except as expressly provided for by this Agreement,
Buyer shall not, prior to the Closing Date or earlier termination of this
Agreement pursuant to its terms, without the prior written consent of the
Company (which consent shall not be unreasonably withheld or delayed), adopt any
amendments to its Certificate of Incorporation or take any other action
requiring a vote of the holders of the Buyer Stock, which would materially
adversely affect the terms and provisions of the Buyer Stock or take or agree in
writing or otherwise to take, any of the foregoing actions.
8.2 Registration Statement/Proxy Statement. The Company and Buyer will, as
promptly as practicable hereafter, prepare and file with the SEC a proxy
statement/prospectus and form of proxy, in connection with the vote of the
Company's shareholders with respect to the Arrangement, and the issuance of the
Buyer Stock and Buyer Rights pursuant to this Agreement (such proxy
statement/prospectus, together with any amendments thereof or supplements
thereto, in each case in the form or forms mailed to the Company's Shareholders,
is herein called the "Proxy Statement/Prospectus"). Buyer will, as promptly as
practicable, prepare and file with the SEC a registration statement on Form S-4
(the "S-4 Registration Statement"), containing the Proxy Statement/Prospectus,
in connection with the registration under the United States Securities Act of
1933, as amended (the "Act") of the shares of the Buyer Stock and Buyer Rights
issuable upon exchange of the Company Stock. The Company and Buyer will, and
will cause their accountants and legal counsel to, use their best efforts to
have or cause the S-4 Registration Statement declared effective as promptly as
practicable, including, without limitation, causing their accountants to deliver
necessary or required instruments such as opinions and certificates, and will
take any other action required or necessary to be taken under United States
federal or state securities laws or otherwise in connection with the
registration process. The Company will use its best efforts to cause the Proxy
Statement/Prospectus to be mailed to shareholders of the Company at the earliest
practicable date after approval by the Court of the First Motion and to hold the
Company Shareholders Meeting as soon as practicable after approval by the Court
of the First Motion. The Proxy Statement/Prospectus will, when prepared pursuant
to this Section 8.2 and mailed to the Company's Shareholders, to the extent
required by the SEC be substantially in accordance with the requirements of
Regulation 14A under the Exchange Act. No filing of or amendment or supplement
to the S-4 Registration Statement will be made by Buyer without providing the
Company with the opportunity to review and comment thereon. Buyer will advise
the Company promptly after it received notice thereby, of the time when the S-4
Registration Statement has
33
become effective or any amendment or any supplement has been filed, the issuance
of any stop order, the suspension of the qualification of the Buyer Stock
issuable in connection with the Arrangement for offering or sale in any
jurisdiction or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the S-4 Registration Statement or comments thereon and
responses thereto and requests by the SEC for additional information. The Proxy
Statement/Prospectus and the S-4 Registration Statement shall not include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they are made, not misleading. In the Proxy
Statement/Prospectus, the Company's Board of Directors shall state that the
directors permitted to vote thereon unanimously recommend that shareholders of
the Company approve the Arrangement, unless based upon the written advice of its
Israeli counsel that such recommendation is not consistent with its fiduciary
obligations, in which case the Company's Board of Directors shall make no
recommendation with regard to the Arrangement, this Agreement or any other
Acquisition Proposal (as defined in Section 8.6). Each party shall use its best
effort to cause its respective outside accounting firms to conduct customary
agreed upon procedures with respect to the Proxy Statement/Prospectus and
deliver written reports thereon, dated no earlier than five (5) business days
prior to the effective date of the Proxy Statement/Prospectus.
8.3 Information for the Buyer Registration Statement. The Company will
furnish Buyer with all information concerning the Company required for inclusion
or incorporation by reference in (a) the S-4 Registration Statement, (b) the
Nasdaq listing application to be filed with respect to the shares of the Buyer
Stock to be delivered hereunder or (c) any statements or applications made by
Buyer to any governmental body in connection with the transactions contemplated
by this Agreement, and all information furnished to Buyer for such applications
and statements shall be true and correct in all material respects without
omission of any material fact required to be stated to make such information, in
light of the circumstances under which they are made, not misleading.
8.4 Inclusion of the Buyer Stock on Nasdaq. As promptly as practicable
after the date hereof, and in any event prior to the Closing Date, Buyer shall
use its best efforts to cause the shares of the Buyer Stock to be issued
pursuant to this Agreement to be included on Nasdaq, subject to notice of
official issuance thereof.
8.5 Affiliates Pooling of Interests. Neither the Company nor Buyer nor
their respective affiliate shareholders as hereinafter defined, shall take or
cause to be taken any action, whether before or after the Closing Date, which
would disqualify the transaction contemplated herein as a pooling of interests
for accounting purposes.
(a) The Company has advised Buyer that Xxxxxx Xxxxx, Xxxxxx Xxxxxxx,
Xxx Xxxxx, Xxxxx Xxxxxxx and Ophir Holdings Ltd. may be deemed "affiliates"
of the Company for purposes of Rule 145 under the Act and for purposes of
qualifying for "pooling of interests" accounting treatment (each such
person is herein referred to as an "Affiliate Shareholder"). The Company
shall cause each person who is identified as an Affiliate Shareholder to
deliver to Buyer, on or prior to the Closing Date, a written agreement, to
the effect that such Affiliate Shareholder will not sell, pledge, transfer
or otherwise dispose of any shares of the Buyer Stock issued to such
Affiliate Shareholder
34
pursuant to the Arrangement, except pursuant to an effective registration
statement or in compliance with Rule 145 or an exemption from the
registration requirements of the Act. The Company shall promptly advise
Buyer if any person becomes or ceases to be such an Affiliate Shareholder.
(b) Each person who is identified as an Affiliate Shareholder has
delivered to Buyer a written agreement, to the effect that such Affiliate
Shareholder will not thereafter sell or in any other way reduce such
Affiliate Shareholder's risk relative to any shares of the Company Stock
during the period commencing 30 days prior to the Closing Date and will not
sell or otherwise reduce such person's risk relative to any shares of the
Buyer Stock acquired under the Agreement until publication of financial
results covering at least 30 days of combined operations of Buyer and the
Company as required by the SEC so as to ensure that the transactions
contemplated by this Agreement qualify as a "pooling of interests". Buyer
shall publish such financial results covering at least 30 days of combined
operations of Buyer and the Company following the end of Buyer's fiscal
quarter in which the Closing occurs and in which there have been at least
30 days of combined operations, but not later than 45 days following the
end of such quarter. During the period between the date of this Agreement
and the thirtieth day prior to the Closing Date, the Company shall cause
each person who is identified as an Affiliate Shareholder to formally
notify Buyer of any and all proposed sales or acquisitions of the Company
Stock or the Buyer Stock in advance of any such acquisition or sale. Such
notification will permit Buyer to review the circumstances of the proposed
transaction with its advisors to ensure that pooling of interests
accounting is not compromised by such sales or purchases.
8.6 No Solicitation.
(a) From and after the date of this Agreement until the Closing Date or the
earlier termination of this Agreement in accordance with its terms, the Company
and its Subsidiaries will not, and will not permit their respective directors,
officers, investment bankers and affiliates to, and will use their best efforts
to cause their respective employees, representatives and other agents not to,
directly or indirectly, (i) solicit, initiate, or encourage any inquiries or
proposals that constitute, or could reasonably be expected to lead to, any
Acquisition Proposal (as defined below), (ii) engage in negotiations or
discussions concerning, or provide any non-public information to any person or
entity in connection with, any Acquisition Proposal, or (iii) agree to, approve,
recommend or otherwise endorse or support any Acquisition Proposal. As used
herein, the term "Acquisition Proposal" shall mean any proposal, offer or
expression of interest relating to a possible (i) merger, consolidation or
similar transaction involving the Company or any Subsidiary of Company, (ii)
sale, lease, license or other disposition, directly or indirectly, by merger,
consolidation, share exchange or otherwise, of any assets of Company or any
subsidiary of Company representing 20% or more of the assets of Company on a
consolidated basis, (iii) issuance, sale or other disposition of (including by
way of merger, consolidation, share exchange or any similar transaction)
securities (or options, rights or warrants to purchase or securities convertible
into, such securities) representing 20% or more of the votes attached to the
outstanding securities of Company, (iv) transaction in which any person shall
acquire beneficial ownership (as such term is
35
defined in Rule 13d-3 under the Exchange Act), or the right to acquire
beneficial ownership, or any "group" (as such term is defined under the
Exchange Act) shall have been formed which beneficially owns or has the
right to acquire beneficial ownership of, 20% or more of the outstanding
shares of Company Stock, (v) liquidation, dissolution, or other similar
type of transaction with respect to Company or any subsidiary of Company,
or (vi) transaction which is similar in form, substance or purpose to any
of the foregoing transactions, provided, however, that the term
"Acquisition Proposal" shall not include the Arrangement and the
transactions contemplated thereby. The Company will immediately cease any
and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing.
(b) Notwithstanding the provisions of paragraph (a) above, prior to
the approval of this Agreement and the Arrangement by the shareholders of
the Company at the Company Shareholders meeting, nothing contained in this
Agreement shall prevent Company or its Board of Directors, directly or
through representatives or agents on behalf of the Board, from complying
with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act with
regard to an Acquisition Proposal. Notwithstanding the foregoing, the
Company will provide to Buyer, within 24 hours of providing any non-public
information to any third party, such non-public information if the Company
has not previously provided such information to Buyer.
(c) The Company will (i) notify Buyer within 24 hours if any proposal
is made or any information or access is requested in connection with an
Acquisition Proposal and (ii) within 24 hours communicate to Buyer the
principal terms and conditions of any such Acquisition Proposal or
potential Acquisition Proposal or inquiry, the identity of the offeror or
potential offeror, and a list and description of any information provided
to the offeror or potential offeror.
8.7 Break-Up Fee.
(a) If this Agreement is terminated pursuant to (i) Section 12.2(b)
under circumstances that the failure to close by June 30, 1999 was due to a
not immaterial breach of this Agreement by the Company, or the Company
failed to convene the Company Shareholders Meeting to vote upon the
Agreement and the Arrangement prior to June 30, 1999 and such failure was
not caused by Buyer, (ii) 12.2(d), or (iii) 12.2(e) and Buyer is not then
in material breach of the terms of this Agreement, the Company shall pay to
Buyer, within five (5) business days following Buyer's written request
therefor, the aggregate sum of $15,000,000 U.S. (the "Initial Payment")
plus Expenses (as hereinafter defined). In addition, if within twelve
months after termination of this Agreement for any reason other than
pursuant to Section 12.2(f) there shall be consummated a transaction in
which a shareholder or group other than the Company's current principal
shareholders shall acquire 50.1% of the Company's Stock or its assets, then
Section 6.2 shall terminate and the Company shall either, at the sole
option of Buyer (x) pay to Buyer, $30,000,000 U.S., minus the Initial
Payment to the extent previously paid or (y) provide the non-exclusive
royalty-free license (the "License Option") in the form set forth in
Exhibit 8.7 (the "License") and pay to Buyer $5,000,000 provided however
that if the Initial Payment has previously been paid, Buyer shall pay to
the
36
Company $10,000,000. "Expenses" shall mean all of the reasonable out-of-
pocket expenses of Buyer, including but not limited to attorneys' fees,
accounting fees, financial printing fees, filing fees and fees and expenses
of financial advisors, in each case incurred in connection with this
Agreement and the Arrangement up to a maximum of $3,000,000.
(b) If this Agreement is terminated (i) pursuant to Section 12.2(f)
and the Company is not then in material breach of this Agreement, or (ii)
pursuant to Section 12.2(b) under circumstances that the failure to close
by June 30, 1999 was due to Buyer's not immaterial breach of this
Agreement, Buyer shall pay to Company within five (5) business days
following the Company's written request therefor the Initial Payment plus
Expenses.
(c) If a party hereto fails to promptly pay to the other party any fee
or expense due hereunder, the defaulting party shall pay the costs and
expenses (including reasonable documented legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other
legal action, taken to collect payment, together with interest on the
amount of any unpaid fee at the publicly announced prime rate of American
National Bank & Trust Company from the date such fee was required to be
paid.
(d) Any payment required to be made pursuant to this Section 8.7 shall
be made by wire transfer of immediately available funds to an account
designated by the party entitled to the payment.
8.8 Legal Requirements. Each of Buyer and the Company will take all
reasonable actions necessary or desirable to comply promptly with all legal
requirements which may be imposed on them with respect to the consummation of
the transactions contemplated by this Agreement (including furnishing all
information required under the HSR Act and in connection with approvals of or
filings with any Governmental Entity, and prompt resolution of any litigation
prompted hereby) and will promptly cooperate with and furnish information to any
party hereto necessary in connection with any such requirements imposed upon any
of them or their respective subsidiaries in connection with the consummation of
the transactions contemplated by this Agreement, and will take all reasonable
actions necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity or other
public or private third party required to be obtained or made in connection with
the Arrangement or taking of any action contemplated by this Agreement.
8.9 Blue Sky Laws. Buyer shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Buyer Stock pursuant hereto. The Company shall
use its reasonable commercial efforts to assist Buyer as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the issuance of the Buyer Stock pursuant hereto.
8.10 Reasonable Commercial Efforts and Further Assurances. Each of the
parties to this Agreement shall each use its reasonable commercial efforts to
effectuate the transactions
37
contemplated hereby as expeditiously as reasonably practicable and to fulfill
and cause to be fulfilled the conditions to closing under this Agreement
(including resolution of any litigation prompted hereby). Each party hereto, at
the reasonable request of another party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.
8.11 Indemnification. From and after the Closing Date, Buyer shall
indemnify, defend and hold harmless (and advance expenses to) all past and
present officers, directors and employees (each, an "Indemnified Person") of the
Company and of its subsidiaries to the same extent such persons are indemnified
as of the date of this Agreement by the Company pursuant to any resolutions of
the Company, agreements between the Company and any such person, the Company's
Articles of Association or applicable law, from and against all claims, damages,
losses, obligations or liabilities with respect to acts or omissions (each, a
"Claim") occurring at or prior to the Closing Date. In the event of any dispute
regarding whether a director, officer or employee has met the standards of
conduct set forth therein, such question shall be conclusively determined by the
written opinion of reputable disinterested legal counsel selected by the
Company's Board of Directors. The provisions of this Section 8.11 are for the
benefit of the Indemnified Persons, any of whom shall have all rights at law and
in equity to enforce the rights hereunder. Buyer shall maintain in effect for
not less than six years from the Closing Date the current policies of directors'
and officers' liability insurance maintained by the Company and the Subsidiaries
(provided that Buyer may substitute therefor policies of at least the same
coverage containing terms and conditions which are no less advantageous to the
Indemnified Persons in all material respects so long as no lapse in coverage
occurs as a result of such substitution) with respect to all matters, including
the transactions contemplated hereby occurring prior to, and including the
Closing Date, provided that, in the event that any Claim is asserted or made
within such six year period, such insurance shall be continued in respect of any
such Claim until final disposition of any and all such Claims, provided,
further, that Buyer shall not be obligated to make annual premium payments for
such insurance to the extent such premiums exceed 200% of the premiums paid as
of the date hereof by the Company for such insurance (provided that in such case
Buyer shall purchase as much coverage as possible for 200% of the premiums paid
as of the date hereof for such insurance.
8.12 Notification. Between the date of this Agreement and the Closing Date,
each party will promptly notify the other party in writing if such party becomes
aware of any development, fact or condition that causes or constitutes a breach
of any agreement or covenant under this Agreement applicable to such party or of
such party's representations and warranties as of the date of this Agreement, or
if such party becomes aware of the occurrence after the date of this Agreement
of any fact or condition that would cause or constitute a breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition.
8.13 S-8 Registration Statement. Buyer shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of the Buyer
Stock and Buyer Rights for delivery upon exercise of the Options assumed. Buyer
shall file a Registration Statement on Form S-8 (or any successor form) or any
other appropriate form, effective within one (1) business day after the Closing
Date, with respect to shares of the Buyer Stock subject to such
38
Options and shall use all reasonable efforts to maintain the effectiveness of
such registration statement or registration statements, and maintain the current
status of the prospectuses contained therein, for so long as such Options remain
outstanding.
8.14 Israeli Prospectus. Buyer shall use its reasonable best efforts and
the Company cooperate as reasonably necessary to either (a) obtain an exemption
from the Israeli Securities Authority from any prospectus requirements with
respect to the exchange of the Company Stock with the Israeli shareholders of
the Company or (b) comply with the prospectus requirements of the Israeli
Securities Law of 1968.
8.15 Employee Benefits. (a) Buyer agrees that it will honor, from and
after the Closing Date, all Benefit Plans and all employment agreements entered
into by the Company prior to the date hereof provided, however, that nothing in
this Agreement shall be interpreted as limiting the power of Buyer to amend or
terminate any Benefit Plan or any other individual employee benefit plan,
program, agreement or policy or as requiring Buyer to offer to continue (other
than as required by its terms) any written employment contract. As soon as
administratively practicable following the Closing Date, Buyer shall cause all
employees of the Company and its Subsidiaries then actually at work (the
"Company Employees") to be covered under employee benefit and fringe benefit
plans, programs, policies and arrangements that are substantially the same as
the employee benefit plans, programs, policies and arrangements that Buyer
maintains for similarly situated employees of Buyer (the "Buyer-Provided
Plans").
(b) All service of a Company Employee taken into account prior to the
Closing Date under any Benefit Plan shall, on and after the Closing Date, be
taken into account as service with Buyer or any of its Subsidiaries (as
applicable) for purposes of eligibility to participate and vesting and accrual
of benefits under any similar Buyer-Provided Plan provided, however, that a
Company Employee"s service prior to the Closing Date shall not be taken into
account as service for purposes of the accrual of benefits under any defined
benefit pension plan maintained by Buyer or any of its Subsidiaries on or after
the Closing Date. Buyer shall cause all Buyer-Provided Plans to (A) waive any
pre-existing condition limitations otherwise applicable on and after the Closing
Date to the extent that such conditions are covered under the Benefit Plans
immediately prior to the Closing Date and (B) provide that any expenses incurred
by the Company Employees (and their dependents) during the plan year within
which the Closing Date occurs shall be taken into account for purposes of
satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions (and like adjustments or limitations on coverage) under the Buyer-
Provided Plans. Any salary deduction elections of the Company Employees under a
flexible spending plan maintained by the Company pursuant to section 125 of the
Code prior to the Closing Date shall continue in effect under any similar Buyer-
Provided Plan on and after the Closing Date, and any amounts credited and
debited to accounts of such employees under such Benefit Plan as of the Closing
Date shall be credited and debited to such employees" accounts under such Buyer-
Provided Plan.
(c) If a Company Employee is terminated by Buyer for reasons other than
such Employee"s failure to perform his or her duties or responsibilities to the
reasonable satisfaction of Buyer within six (6) months following the Closing
Date and such Employee"s Options did not otherwise vest as a consequence of the
Arrangement, any unvested stock options owned by such Company Employee shall
become vested upon such termination. Notwithstanding the foregoing,
39
no Options shall vest as a result of this provision if in the opinion of Buyer"s
accountants or the SEC such vesting will interfere with the Company"s ability to
account for the acquisition of the Company as a "pooling of interests".
8.16 Non-Competition Agreements. The Company shall use its best efforts to
cause each of Xxxxxxxx Xxxxxxxx, Xxxx Xxxxx and Xxxxxx Xxxxxx to execute a Non-
Competition Agreement substantially in the form set forth in Exhibit 8.16.
8.17 Company Directors. After issuance of the Final Court Order, assuming
all of the conditions in Section 9 have been satisfied or waived, and Buyer
agrees that no further conditions to Closing exist other than the Filing, the
Company and its directors shall promptly (but no later than three (3) business
days thereafter) take such actions as are necessary for persons nominated by
Buyer to constitute a majority of the Company"s Board of Directors until the
Closing Date. In order to obtain such majority, a current Director of the
Company may appoint an alternative to himself (hereinafter referred to as an
"Alternate Director"). The appointment of any such Alternate Director shall be
irrevocable and the scope of authority of such Alternate Director shall not be
limited in any manner. Any director who appoints an Alternate Director shall
agree not to attend any meeting of the Board or committee after the date of such
designation. If the Closing does not occur and this Agreement is terminated, any
person acting as a director or Alternate Director nominated by Buyer (other than
Xxxxxx X. Xxxxxxxxxx) shall resign.
8.18 Technology Escrow Agreement. With five (5) business days of the date
of this Agreement, the Company and Buyer shall have entered into a Technology
Escrow Agreement with an Escrow Agent located in Israel, in the form set forth
in Exhibit 8.18.
8.19 Company Schedules/Affiliate Opinion. Within five (5) business days of
the date of this Agreement, the Company shall deliver to Buyer (a) the Company
Schedules required pursuant to Article 4 and (b) the legal opinion of Xxxxxxxxxx
& Xxxxx LLP, without any material condition, in form and substance satisfactory
to Buyer and Buyer"s accountants which identifies the persons who may be deemed
to be "affiliates" of the Company for purpose of Rule 145 under the Act and
states that each such person has executed and delivered to Buyer an agreement to
the effect set forth in Section 8.5.
9. CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE.
The obligations of Buyer to enter into and complete this Agreement are
subject to the fulfillment in all respects, prior to or at the Closing Date, of
each of the following conditions, any one or more of which may be waived by
Buyer (except when the fulfillment of such condition is a requirement of law):
9.1 Representations and Warranties. All representations and warranties of
the Company contained in this Agreement and in any written statement (including
financial statements), certificate, Exhibit, Schedule, or other document
delivered pursuant hereto or in connection with the transactions contemplated
hereby, that are qualified by materiality or "Material Adverse Effect" shall
have been true and correct in all respects on and as of the date
40
hereof and the representations and warranties that are not so qualified shall
have been true and correct in all material respects on and as of the date
hereof.
9.2 Covenants. The Company shall have performed and complied, in all
material respects, with all covenants and agreements required by this Agreement
to be performed or complied with by it prior to or at the Closing Date.
9.3 Shareholder Authorization. The shareholders of the Company shall have
approved the Arrangement by the vote required under Israeli law.
9.4 Registration Statement Effective. The S-4 Registration Statement shall
have been declared effective under the Act and shall not be subject to a "stop
order" and no proceedings shall have been instituted or threatened by the SEC to
suspend the effectiveness thereof.
9.5 No Injunctions. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or prohibition preventing
the consummation of this Agreement or the Arrangement shall be in effect.
9.6 Certificates. The Company shall have delivered to Buyer, in form
satisfactory to Buyer and its counsel, and dated the Closing Date, a certificate
signed by the [President and the Vice President-Finance] of the Company, for and
on behalf of the Company setting forth the following:
(a) The names of the officers of the Company authorized to execute and
deliver the documents and instruments deliverable hereunder
(b) The due adoption by the Board of Directors and shareholders of the
Company, in accordance with its Memorandum of Association and Articles of
Association and with the applicable laws of the State of Israel, of resolutions:
(i) approving the Arrangement, including the execution and delivery of this
Agreement, the consummation of the Arrangement and the carrying out of the
transactions contemplated hereby and thereby, and (ii) authorizing and directing
the officers of the Company to take such other and further action as may be
required to consummate the transactions contemplated hereby, together with
copies of the foregoing resolutions
(c) That all of the conditions set forth in Sections 9.1, 9.2, 9.3 and
9.5 hereof have been fulfilled, at or prior to the Closing Date, and that the
Company is not otherwise in default under any of the provisions of this
Agreement
(d) The number of outstanding shares of the Company Stock as of the
Closing Date and
(e) That such certificate or certificates are being executed and
delivered in order to induce Buyer to consummate the Agreement.
41
9.7 Company Counsel Opinion. The Company shall have delivered to Buyer
opinions of the Company's Israeli counsel, Meitar, Xxxxxxx & Co., and the
Company's United States counsel, Xxxxxxxxxx & Xxxxx LLP, in the form set forth
in Exhibits 9.7(a) and 9.7(b) hereto, respectively.
9.8 Intentionally Omitted.
9.9 Intentionally Omitted.
9.10 Resignations. Each of the directors of the Company and the
Subsidiaries shall have submitted their resignation as directors of the Company
and the Subsidiaries.
9.11 Intentionally Omitted.
9.12 Other Approvals. The following approvals, orders or permits shall
have been received in form and substance reasonably satisfactory to Buyer:
(a) Issuance of Final Court Order;
(b) Approval of Israel Chief Scientist for change in control of the
Company;
(c) Approval of the Israel Investment Center for change in control of
the Company;
(d) (i) Exemption from the Israel Securities Authority from any
prospectus requirement with respect to the exchange of the Buyer Stock with
the Israeli shareholders of the Company or (ii) compliance with the
prospectus requirements of the Israel Securities Law of 1968;
(e) The applicable waiting period under HSR Act shall have expired.
10. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO CLOSE.
The obligations of the Company to enter into and consummate the Arrangement
are subject to the fulfillment in all respects, prior to or on the Closing Date,
of each of the following conditions, any one or more of which may be waived by
the Company (except when the fulfillment of such condition is a requirement of
law):
10.1 Representations and Warranties. All representations and warranties of
the Company contained in this Agreement and in any written statement (including
financial statements), certificate, Exhibit, Schedule, or other document
delivered pursuant hereto or in connection with the transactions contemplated
hereby, that are qualified by materiality or "Material Adverse Effect" shall
have been true and correct in all respects on and as of the date hereof and the
representations and warranties that are not so qualified shall have been true
and correct in all material respects on and as of the date hereof.
42
10.2 Covenants. Buyer shall have performed and complied, in all material
respects, with all covenants, agreements and conditions required in this
Agreement to be performed or complied with by it prior to or at the Closing
Date.
10.3 Registration Statement Effective. The S-4 Registration Statement
shall have become effective and shall not be subject to a "stop order" and no
proceedings shall have been instituted or threatened by the SEC to suspend the
effectiveness thereof.
10.4 No Injunction. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or prohibition preventing
the consummation of this Agreement or the Arrangement shall be in effect.
10.5 Certificates. Buyer shall have delivered to the Company, in form
satisfactory to the Company and its counsel and dated as of the Closing Date, a
certificate or certificates signed by the President or Vice President and the
Chief Financial Officer of Buyer, for and on behalf of Buyer setting forth the
following:
(a) The names of the officers of Buyer authorized to execute and
deliver the documents and related instruments deliverable hereunder;
(b) The due adoption by the Board of Directors of Buyer, in accordance
with its Certificate of Incorporation and the applicable laws of the United
States, of resolutions approving the execution, delivery and consummation
of this Agreement and the carrying out of the transactions contemplated
hereby, and also authorizing and directing the officers of Buyer to take
such other and further actions as may be required to consummate the
transactions contemplated hereby, together with copies of the foregoing
resolutions;
(c) All of the conditions set forth in Sections 10.1, 10.2 and 10.4
hereof have been satisfied at or prior to the Closing Date, and that Buyer
is not in default under any of the provisions of this Agreement; and
(d) That such certificate or certificates are being executed and
delivered in order to induce the Company to consummate the Arrangement,
including the transactions contemplated by this Agreement.
10.6 Listing. Nasdaq shall have approved for listing, upon official
notice of issuance, the Buyer Stock to be issued upon the Closing pursuant to
the Arrangement.
10.7 Shareholder Authorization. The shareholders of the Company shall
have approved the Arrangement by the requisite votes required under Israeli law.
10.8 Other Approvals. The following approvals, orders and permits shall
have been received in form and substance reasonably satisfactory to the Company:
(a) Issuance of Final Court Order;
43
(b) Israeli Trade Commission Approval.
(c) Approval of the Israel Chief Scientist for the change in control
of the Company.
(d) Approval of the Israel Investment Center for the change in control
of the Company.
(e) The applicable waiting period under the HSR Act shall have
expired.
10.9 Affiliate Letters. The affiliate shareholders of Buyer shall each
have executed and delivered to Buyer an agreement with respect to pooling of
interests substantially in the form set forth in Exhibit 10.9 hereto.
11. ACTIONS AFTER THE CLOSING DATE.
11.1 Survival of Representations and Warranties. Except for the agreements
set forth in this Agreement which by their terms are to be carried out
subsequent to the date hereof or the Closing Date, none of the representations,
warranties, covenants and agreements made in this Agreement, or in any Exhibit,
Schedule, certificate or document delivered pursuant to this Agreement, shall
survive the Closing Date.
11.2 Further Acts. Each of the parties hereto shall perform such further
acts and execute such additional documents as may be reasonably required to
effectuate the transactions contemplated hereby.
12. MODIFICATION OR TERMINATION WAIVERS.
12.1 Modifications and Waivers. This Agreement may be amended or modified
at any time before or after approval of this Agreement by the Company's
shareholders, by a written instrument executed by the Company and Buyer, and any
of the terms, covenants, representations, warranties or conditions hereof may be
waived by a written instrument executed by the party waiving compliance,
provided, however, that after such vote by the shareholders of the Company,
Section 2 hereof shall not be amended to change the terms of the Exchange,
provided, further, that after such vote by the shareholders of the Company,
there shall not be made any amendment that by law requires further approval by
such shareholders or the Court without the further approval of such shareholders
or the Court. The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
party at a later time to enforce the same. No waiver by any party of the breach
of any term, covenant, representation or warranty contained in this Agreement as
a condition to such party's obligations hereunder shall release or affect any
liability resulting from such breach, and no waiver of any nature, whether by
conduct or otherwise, in any one or more instances, shall be deemed to be or
construed as a further or continuing waiver of any such condition or of any
breach of any other term, covenant, representation or warranty of this
Agreement.
44
12.2 Termination. This Agreement may be terminated at any time prior to
the Closing Date (notwithstanding that approval by the shareholders of the
Company may have been obtained) under any of the following circumstances:
(a) By mutual consent of the Company and Buyer or by mutual action of
their respective Boards of Directors;
(b) By the Company or Buyer, if the Closing Date shall not have
occurred on or before June 30, 1999, unless such delay shall have been
caused by the breach of the party seeking to terminate;
(c) By the Company or Buyer, if any court of competent jurisdiction
or other governmental body shall have issued an order, decree, or ruling,
or taken any other action permanently restraining, enjoining, or otherwise
prohibiting the Arrangement and/or the Agreement and such order, license,
ruling or other action shall have become final and non-appealable;
(d) By the Company or Buyer, if the Arrangement, this Agreement or
the issuance of the shares of the Buyer Stock pursuant to this Agreement,
as the case may be, shall have been voted on by shareholders of the Company
at a meeting duly convened therefor and such shareholders did not approve
the Arrangement, this Agreement or the issuance of shares of the Buyer
Stock pursuant to this Agreement, as the case may be, by the requisite
vote, or if the court does not issue the First Court Order or the Final
Court Order by June 15, 1999;
(e) By Buyer, if there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement
on the part of the Company and such breach has not been cured within ten
(10) business days after written notice to the Company (provided, that
Buyer is not in material breach of the terms of this Agreement; and
provided further, that no cure period shall be required for a breach which
by its nature cannot be cured) such that the conditions set forth in
Section 9 or Section 10, as the case may be, will not be satisfied; and
(f) By the Company, if there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement
on the part of the Buyer and such breach has not been cured within ten (10)
business days after written notice to Buyer (provided, that the Company is
not in material breach of the terms of this Agreement and provided further,
that no cure period shall be required for a breach which by its nature
cannot be cured) such that the conditions set forth in Section 9 or Section
10, as the case may be, will not be satisfied.
Any such termination shall first be approved by the Board of Directors of
the party seeking termination and shall, except for termination effected
pursuant to Section 12.1(a) or 12.2(b) be upon at least ten days' notice of
termination given to the other party by the party seeking termination.
45
Upon termination of this Agreement pursuant to this Section 12.2, none of
the Company, or Buyer, nor the directors, officers, or shareholders of any of
such parties shall have any liability to the other, and the only right or remedy
of Buyer or the Company in connection with such termination shall be to
terminate this Agreement provided, however that the provisions of Sections 6.1,
6.2 and 8.7 shall remain in full force and effect and survive any termination of
this Agreement. Notwithstanding the foregoing to the contrary, nothing in this
Section 12.2 shall relieve any party to this Agreement of liability for any
willful or intentional breach of this Agreement.
13. GENERAL PROVISIONS
13.1 Expenses. Each of the parties hereto shall pay their own respective
expenses (including, without limitation, the fees, disbursements and expenses of
their attorneys, accountants and investment advisors), in connection with the
negotiation and preparation of this Agreement and the transactions contemplated
hereby.
13.2 Notices. Any notice or other communication required or which may be
given hereunder shall be in writing and delivered (a) personally, (b) via
telecopy, (c) via overnight courier (providing proof of delivery) or (d) via
registered or certified mail (return receipt requested). Such notice shall be
deemed to be given, dated and received (i) when so delivered personally, via
telecopy upon confirmation, or via overnight courier upon actual delivery or
(ii) two days after the date of mailing, if mailed by registered or certified
mail. Any notice pursuant to this section shall be delivered as follows:
If to Buyer to:
PLATINUM technology, inc.
0000 Xxxxx Xxxxxx Xxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx
Xxxxx X. Xxxxxxxx
Telecopy: 000-000-0000
With copies to:
Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopy: 000-000-0000
46
If to the Company, to:
MEMCO Software Ltd.
00 Xxxxx Xxxxxxxxxx Xxxxxx
Xxx Xxxx, 00000, Xxxxxx
Attention: Xxxxxx Xxxxx
Telecopy: 972 3 645 0001
With copies to:
Meitar, Xxxxxxx & Co.
00 Xxxx Xxxxxx Xxxxxx Xxxx
Xxxxx-Xxx 00000
Tel Aviv, Israel
Attention: Xxx Xxxx, Adv.
Telecopy: 972 3 610 3111
Xxxxxxxxxx & Xxxxx LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx
Telecopy: 000-000-0000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
13.3 Governing Law. This Agreement shall be construed and governed by the
laws of the State of Delaware applicable to agreements made and to be performed
entirely in that jurisdiction provided, however, that matters affecting the
validity of corporate action taken by the Company or matters relating to the
Arrangement shall be governed by the laws of Israel.
13.4 Entire Agreement. This Agreement and the Confidentiality Agreement
contain the entire agreement between the parties hereto with respect to the
subject matter hereof, and there are no representations, warranties,
understandings or agreements other than those expressly set forth herein.
13.5 Schedules and Exhibits. All Schedules or Exhibits annexed hereto and
the documents and instruments delivered at the Closing are expressly made a part
of this Agreement as fully as though completely set forth herein, and all
references to this Agreement herein or in any of such documents (whether or not
such references include a specific reference to such documents) shall be deemed
to refer to and include all such documents. Any breach of, or default under, any
provision of any of such documents shall for all purposes constitute a breach or
default under this Agreement.
47
All Schedules and Exhibits provided herein by the Company to Buyer or Buyer
to the Company shall be in the English language, except such agreements not in
English already existing between the Company or Buyer and third parties.
13.6 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
13.7 Section Headings. The section headings contained in this Agreement are
inserted for purposes of convenience of reference only and shall not affect the
meaning or interpretation of this Agreement.
13.8 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
13.9 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the parties.
[SIGNATURE PAGE FOLLOWS]
48
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the date first above written.
BUYER:
By /s/ Xxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxx
Title: General Counsel
COMPANY:
By /s/ Xxxxxx Xxxxx
----------------------------------
Name: Xxxxxx Xxxxx
Title: Chairman CEO
By
----------------------------------
Name:
Title:
49
PLAN OF ARRANGEMENT
Between The Company of the First Part
and The holders of the Ordinary Shares,
NIS 0.01 par value per share of the Second Part
In this Arrangement the following terms shall have the meanings assigned to them
respectively hereunder:
"Arrangement": This Plan of Arrangement, as drafted, or with
such amendments, supplements or conditions
that the competent court may determine or
require.
"Arrangement Effective Time": The time that this Arrangement shall become
effective in accordance with Section 5
hereinafter.
"Board": The Board of Directors of the Company.
"Companies Ordinance": The Companies Ordinance [New Version], 1983.
"Company": MEMCO Software Ltd.
"Exchange": The Exchange of Ordinary Shares in accordance
with the preamble below.
"Extraordinary General Meeting": The Extraordinary General Meeting of the
Company's shareholders, and any adjournments
or postponements thereof, in which the
Company's shareholders will be requested to
approve this Arrangement.
"Nasdaq": The National Association of Securities
Dealers, Inc. Automated Quotation
System/National Market, in the United States.
"Ordinary Shares": The issued and outstanding Ordinary Shares,
NIS 0.01 par value per share, of the Company.
WHEREAS, as of the date hereof, the Company has an authorized capital stock
of 30,000,000 Ordinary Shares, of which 17,462,324 shares were issued and
outstanding as of August 10, 1998; and
WHEREAS, the Ordinary Shares are listed for trading on Nasdaq; and
WHEREAS, the Board deems it desirable and in the best interests of the
Company and its shareholders that the Company and its shareholders enter into
the Arrangement, pursuant to which, (i) all of the Ordinary Shares will be
deemed transferred to PLATINUM technology, inc. (the "Buyer"), other than those
already owned by Buyer, in exchange (the "Exchange") for shares of Common Stock,
par value $.001 per share, of Buyer (the "Buyer Stock"); and (ii) the Agreement,
dated as of August 12, 1998 between the Company and Buyer, attached hereto as
Annex A (the "Agreement"), shall be approved; and
WHEREAS, under the Agreement, Buyer agreed that (i) in the Exchange, each
Ordinary Share will be deemed transferred to Buyer in exchange for 0.836 shares
of the Buyer Stock; and (ii) each such share of the Buyer Stock shall be listed
for trading on Nasdaq; and
WHEREAS, the Company granted to certain employees and directors options to
purchase Ordinary Shares (the "Options"), under certain stock option plans (the
"Option Plans"); and
WHEREAS, each Option Plan includes a provision to the effect that in the
event that, upon a merger, reorganization, recapitalization or similar
transaction, the Ordinary Shares underlying the Options shall be exchanged for
other securities of another corporation, each Option holder shall be entitled to
purchase such number of such other securities as were exchangeable for the
number of Ordinary Shares which such Option holder would have been entitled to
purchase, except for such action, and appropriate adjustments shall be made in
the purchase price per share to reflect such combination or exchange; and
WHEREAS, under the Agreement, Buyer agreed that each Option shall be
assumed by Buyer and shall be deemed to constitute an option to acquire, on the
same terms and conditions as were applicable under such Option, the same number
of shares of the Buyer Stock as the holder of such Options would have been
entitled to receive pursuant to the Exchange had such holder exercised such
Option in full immediately prior to the Exchange (not taking into account
whether such Option was in fact exercisable at such time); and
WHEREAS, on August 12, 1998, the Board approved in principle entering into
a definitive agreement, based, among other things, on an opinion of Xxxxxx
Brothers, the Company's financial advisor in connection with the Arrangement,
that, as of the date of such opinion, the consideration to be offered to the
Company's shareholders in the Arrangement was fair to such shareholders from a
financial point of view. Xxxxxx Brothers' written opinion, dated August 12,
1998, is attached hereto as Annex B (the "Opinion"); and
WHEREAS, on August 12, 1998, the Board approved the terms of the
Arrangement, the Agreement and the Exchange, and determined (i) that the terms
of the Agreement, the Arrangement and the Exchange are fair to, and in the best
interests of, the
Company and its shareholders; and (ii) that the Company commence proceedings
under Section 233 of the Companies Ordinance, under which proceedings the
District Court would be requested to convene the Extraordinary General Meeting
and to approve the Arrangement.
NOW THEREFORE, it was agreed between the parties, as follows:
1. The preamble and Annexures of this Arrangement constitute an integral
part hereof.
2. As of the Arrangement Effective Time, the Ordinary Shares shall be
deemed transferred to Buyer in exchange for the Buyer Stock, in accordance with
the Exchange.
3. The Agreement shall be approved, effective as of the Arrangement
Effective Time.
4. The above constitutes one integral Arrangement, is not separable, and
cannot be partially performed.
5. This Arrangement will become effective upon the filing with the
Registrar of Companies in Israel of a copy of the District Court Order approving
the Arrangement in accordance with Section 233 of the Companies Ordinance.
6. The Company is entitled to agree, on behalf of all the parties to this
Arrangement, to any amendment or revision of, or supplement to, this
Arrangement, or to any term or condition that the District Court will deem fit
to determine or require.
Annex A
[Agreement]
[Annex - Financial Advisor Opinion]
