TRANSACTION AGREEMENT By and Among BMC SOFTWARE ISRAEL, LIMITED, BMC SOFTWARE, INC., and IDENTIFY SOFTWARE LTD. dated as of March 21, 2006
Exhibit 2.1
EXECUTION VERSION
By and Among
BMC SOFTWARE ISRAEL, LIMITED,
BMC SOFTWARE, INC.,
and
IDENTIFY SOFTWARE LTD.
dated as of
March 21, 2006
Table of Contents
Page | ||||||
ARTICLE I | ||||||
SALE AND PURCHASE | ||||||
Section 1.01. | Offer |
1 | ||||
Section 1.02. | Sale and Purchase of Securities |
2 | ||||
Section 1.03. | Purchase Price for Shares of the Company |
2 | ||||
Section 1.04. | Closing |
3 | ||||
Section 1.05. | Closing Transactions |
4 | ||||
Section 1.06. | Withholding for Payment of Taxes |
4 | ||||
Section 1.07. | Sellers’ Representative |
5 | ||||
Section 1.08. | Certain Transaction Taxes |
5 | ||||
ARTICLE II | ||||||
REPRESENTATIONS AND WARRANTIES | ||||||
REGARDING THE COMPANY | ||||||
Section 2.01. | Organization and Qualification; Subsidiaries |
5 | ||||
Section 2.02. | Organizational Documents |
6 | ||||
Section 2.03. | Authorization of Agreement |
6 | ||||
Section 2.04. | Capitalization |
6 | ||||
Section 2.05. | No Conflict; Required Filings and Consents |
8 | ||||
Section 2.06. | Permits; Compliance |
8 | ||||
Section 2.07. | Financial Statements; Undisclosed Liabilities |
9 | ||||
Section 2.08. | Absence of Certain Changes or Events |
9 | ||||
Section 2.09. | Absence of Litigation |
11 | ||||
Section 2.10. | Employee Benefit Plans; Labor Matters |
12 | ||||
Section 2.11. | Taxes |
17 | ||||
Section 2.12. | Insurance |
19 | ||||
Section 2.13. | Properties |
19 | ||||
Section 2.14. | Leases |
20 | ||||
Section 2.15. | Intellectual Property |
21 | ||||
Section 2.16. | Software Contracts |
24 | ||||
Section 2.17. | Certain Contracts |
25 | ||||
Section 2.18. | Related Party Transactions. |
27 | ||||
Section 2.19. | Accounts Receivable |
27 | ||||
Section 2.20. | Bank Accounts; Investments; Derivative Transactions |
28 | ||||
Section 2.21. | Improper Payments |
28 | ||||
Section 2.22. | Environmental, Health and Safety |
29 | ||||
Section 2.23. | Customer List |
29 | ||||
Section 2.24. | Brokers |
29 | ||||
Section 2.25. | Product Liability |
29 | ||||
Section 2.26. | Books and Records |
29 | ||||
Section 2.27. | Grants and Benefits |
29 | ||||
Section 2.28. | No Misleading Statements |
30 |
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Page | ||||||
ARTICLE III | ||||||
REPRESENTATIONS AND WARRANTIES | ||||||
REGARDING BUYER AND GUARANTOR | ||||||
Section 3.01. | Organization and Qualification |
30 | ||||
Section 3.02. | Authority |
30 | ||||
Section 3.03. | No Conflict; Required Filings and Consents |
31 | ||||
ARTICLE IV | ||||||
COVENANTS | ||||||
Section 4.01. | Affirmative Covenants |
31 | ||||
Section 4.02. | Negative Covenants |
32 | ||||
Section 4.03. | Access and Information |
35 | ||||
ARTICLE V | ||||||
ADDITIONAL AGREEMENTS | ||||||
Section 5.01. | Appropriate Action; Consents; Filings |
36 | ||||
Section 5.02. | Public Announcements |
37 | ||||
Section 5.03. | Further Assurances |
37 | ||||
Section 5.04. | No Solicitation |
37 | ||||
Section 5.05. | Retention Program |
39 | ||||
ARTICLE VI | ||||||
CONDITIONS | ||||||
Section 6.01. | Conditions to Obligations of Each Party |
39 | ||||
Section 6.02. | Additional Conditions to Obligations of Buyer and Guarantor |
39 | ||||
Section 6.03. | Additional Conditions to Obligations of the Company |
42 | ||||
ARTICLE VII | ||||||
INDEMNIFICATION; ESCROW FUND; SURVIVAL OF | ||||||
REPRESENTATIONS AND WARRANTIES | ||||||
Section 7.01. | By the Company |
42 | ||||
Section 7.02. | Defense of Third Party Claims |
43 | ||||
Section 7.03. | Other Claims, Payment |
44 | ||||
Section 7.04. | Satisfaction of Claims from the Escrow Fund |
44 | ||||
Section 7.05. | Liability Limitations; Survival of Representations and Warranties |
45 | ||||
Section 7.06. | By Buyer |
46 | ||||
ARTICLE VIII | ||||||
TERMINATION, AMENDMENT AND WAIVER | ||||||
Section 8.01. | Termination |
46 | ||||
Section 8.02. | Effect of Termination |
47 | ||||
Section 8.03. | Amendment |
47 | ||||
Section 8.04. | Waiver |
47 | ||||
Section 8.05. | Fees, Expenses and Other Payments |
47 | ||||
Section 8.06. | Payment Upon Termination. |
48 |
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Page | ||||||
ARTICLE IX | ||||||
GENERAL PROVISIONS | ||||||
Section 9.01. | Notices |
49 | ||||
Section 9.02. | Headings |
50 | ||||
Section 9.03. | Severability |
50 | ||||
Section 9.04. | Entire Agreement |
50 | ||||
Section 9.05. | Assignment |
50 | ||||
Section 9.06. | Parties in Interest |
50 | ||||
Section 9.07. | Specific Performance |
51 | ||||
Section 9.08. | Failure or Indulgence Not Waiver; Remedies Cumulative |
51 | ||||
Section 9.09. | Governing Law |
51 | ||||
Section 9.10. | Dispute Resolution |
51 | ||||
Section 9.11. | Counterparts |
52 | ||||
Section 9.12. | Guaranty |
52 |
Exhibits
Exhibit A – Escrow Agreement
Exhibit B – Form of Opinion of Counsel to the Company
Exhibit A – Escrow Agreement
Exhibit B – Form of Opinion of Counsel to the Company
Annexes
Annex A – Definitions
Annex B – Undertaking
Annex C – Notice of Offer
Annex D – Sellers’ Representatives List
Annex A – Definitions
Annex B – Undertaking
Annex C – Notice of Offer
Annex D – Sellers’ Representatives List
iii
THIS TRANSACTION AGREEMENT, dated as of March 21, 2006 (this “Agreement”), is by and
among BMC Software Israel, Limited, an Israeli company (“Buyer”), BMC Software, Inc., a
Delaware corporation (“Guarantor”) and Identify Software Ltd., an Israeli company (the
“Company”). Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to them in Annex A hereto.
WHEREAS, Buyer desires to acquire all of the Shares (as herein defined) outstanding as of the
Closing Date (herein defined), and it undertakes to make an offer to all owners of Shares of the
Company to acquire all of the Shares in exchange for the Purchase Price (as defined below), all on
the terms and subject to the conditions hereinafter set forth; and
WHEREAS, certain shareholders having individual rights to appoint members to the Company’s
Board of Directors (the “Committed Shareholders”) hold Shares representing approximately
45% of the outstanding Shares as of the date of this Agreement; and
WHEREAS, the Committed Shareholders have executed and delivered to the Company and Buyer an
undertaking in the form of Annex B hereto (the “Undertaking”) whereby the Committed
Shareholders have irrevocably agreed to execute and deliver the Acceptance (as herein defined) to
Buyer on the date of this Agreement; and
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 enter into this Agreement whereby, among other
things, all of the Shares of the Company shall be purchased by Buyer in consideration for the
payment of the Purchase Price, all upon the terms and subject to the conditions set forth herein
and in accordance with the laws of the State of Israel.
NOW, THEREFORE, in consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth in this Agreement, the parties hereto agree as
follows:
ARTICLE I
SALE AND PURCHASE
SALE AND PURCHASE
Section 1.01. Offer.
(a) Not later than two (2) Business Days following execution of this Agreement, Buyer will
make a written offer to all holders of Shares named in the shareholder register of the Company on
the date of this Agreement to sell their Shares to Buyer pursuant to the terms and subject to the
conditions of this Agreement (the “Offer”). Subject to Section 1.01(c) of this Agreement,
the Offer will be made in substantially the form of the Notice of Offer attached as Annex C
hereto and it will be open for acceptance for a period of 60 days from the date the Notice of Offer
is first mailed to the holders of Shares (the “Notice Date”); provided, however, that if
Buyer has not received Acceptances (as defined below) representing at
least 662/3% of the issued and
outstanding Shares by the end of such 60-day period, then Buyer may elect to extend the Offer for
an additional 30 days (as and if extended, the “Offer Period”). The Company shall inform
Buyer of the issuance of any Shares of the Company pursuant to the exercise of any
1
Option prior to
the Closing, and will assist Buyer in delivering the Offer to such former Option Holder such that
the Offer will cover all issued and outstanding Shares.
(b) Any holder of Shares of the Company may accept the Offer by executing and delivering the
Acceptance attached to the Notice of Offer (the “Acceptance”) to the Company, which
Acceptances shall be irrevocable. The Company shall promptly provide copies of all Acceptances to
Buyer. Upon acceptance of the Offer, such holder of Shares of the Company shall be deemed an
“Accepting Seller” for the purpose of this Agreement.
(c) If the holders of at least 85% of the issued and outstanding Shares (but less than all
holders of the Shares of the Company) accept the Offer at any time within two months of the Notice
Date, not later than two (2) Business Days following receipt of Acceptances representing at least
85% of the issued and outstanding Shares, Buyer shall send a notice to each holder of Shares of the
Company who has not accepted the Offer (a “Dissenting Holder”), informing such Dissenting
Holder of Buyer’s intention to require such Dissenting Holder to sell its Shares of the Company to
Buyer, on the same terms and conditions as set out in the Notice of Offer and this Agreement,
pursuant to Section 341 of the Israeli Companies Law and Article 20(d) of the Company’s Articles of
Association (the “Section 341 Notice”); provided, however, that upon receipt of Acceptances
representing at least 662/3% but less than 85% of the issued and outstanding Shares, Buyer in its
sole discretion may elect to send a Section 341 Notice to each Dissenting Holder at any time during
the Offer Period. In any event, with Acceptances representing at
least 662/3% of the issues and
outstanding Shares, within two (2) Business Days following the expiration of the Offer Period,
Buyer shall send a Section 341 Notice to each Dissenting Holder. The Company shall assist Buyer in
the dispatch of the Section 341 Notice to each Dissenting Holder and each Option Holder.
Section 1.02. Sale and Purchase of Securities.
(a) Upon the terms and subject to the satisfaction of the conditions contained in this
Agreement, at the Closing (as defined herein) each Accepting Seller shall sell, transfer and
deliver to Buyer, and Buyer shall purchase and accept delivery from each Accepting Seller, all of
such Accepting Sellers’ Shares, free and clear of any Liens.
(b) Upon the terms and subject to the satisfaction of the conditions contained in this
Agreement, at the Closing Buyer shall acquire good and valid title free and clear of any Liens to
all Shares of the Company held by the Dissenting Holders in accordance with Section 341 of the
Israeli Companies Law and Article 20(d) of the Company’s Articles of Association (the
“Compulsory Acquisition”).
Section 1.03. Purchase Price for Shares of the Company.
(a) The aggregate purchase price for all outstanding Shares shall be One Hundred Fifty Million
Dollars ($150,000,000.00) (the “Purchase Price”), of which One Hundred Thirty One Million
Two Hundred Fifty Thousand Dollars ($131,250,000.00) shall be paid at the Closing, less Expenses
(as defined in 8.05(b)) incurred by the Company after December 31, 2005 and any additional Expenses
payable by Sellers pursuant to Section 5.01(b) (the “Closing Payment”). Eighteen Million
Seven Hundred Fifty Thousand Dollars ($18,750,000.00) shall be
2
placed in escrow pursuant to Section
1.05(d) (the “Escrow Amount”). All references in this Agreement to Dollars or to $ or US$
are to United States Dollars.
(b) The purchase price for each outstanding Share owned by a Seller and acquired by Buyer
pursuant to Sections 1.02(a) and (b) of this Agreement shall be derived pursuant to the following
formula (rounded to four decimal places) and shall be paid to each Seller as provided in this
Agreement:
Purchase Price per Share = ($150,000,000 + B - E) | ||||
(X+Y) |
Where: B equals the aggregate exercise price for all Options outstanding on
the date hereof and listed in Schedule 2.04(c) of the Company’s Disclosure Schedule; E
equals the Expenses incurred by the Company after December 31, 2005 and any additional Expenses
payable by Sellers pursuant to Section 5.01(b); X equals the total number of Shares
outstanding immediately prior to the Closing (without giving effect to any Shares to be issued
pursuant to Cashless Exercises of Options at the Closing); and Y equals the aggregate
number of Shares issuable pursuant to the Options outstanding immediately prior to the Closing.
(c) At Closing, 87.5% of the Purchase Price per Share shall be paid in cash at Closing (the
“Per Share Closing Payment”). The remaining 12.5% of the Purchase Price per Share shall be
placed in escrow on the Closing Date pursuant to Section 1.05(d) (the “Per Share Escrow
Payment”) and, subject to the escrow and indemnity provisions hereof, shall be disbursed in
accordance with the terms of the Escrow Agreement (as defined herein). For the avoidance of doubt:
(i) each shareholder shall receive for each Share held the Purchase Price per Share, and (ii) each
Optionholder (as hereinafter defined) shall receive for each Share issuable upon exercise of
exercisable Options at the Closing the Purchase Price per Share net of the exercise price of such
Option.
(d) In no event will the aggregate Per Share Closing Payment and Per Share Escrow Payment
payable under this Agreement with respect to all outstanding Shares (including in connection with
the Compulsory Acquisition) exceed the Purchase Price. The Company shall deliver to Buyer not
later than five (5) Business Days prior to the Closing a list of outstanding Shares of the Company
and the record holders thereof as well as a detailed description of the Expenses incurred by the
Company since December 31, 2005, and Buyer shall calculate the Per Share Closing Payments and Per
Share Escrow Payments and inform the Company and the Sellers’ Representative (or a paying agent
designated by the Sellers’ Representative) in writing of the results of such calculation. Buyer
and the Company shall agree on such calculation prior to Closing.
Section 1.04. Closing. The closing of the purchase and sale of the Shares (the
“Closing”) will take place at the offices of Xxxxxx & Xxxxxx L.L.P., 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx, as soon as reasonably practicable, but in no event later than five (5) Business
Days, following the date on which all of the conditions specified in Article VI (other than the
conditions which by their terms are only capable of being satisfied at the Closing) have been
satisfied or waived, unless another time, date and place are agreed to in writing by Buyer and the
Company and on such other date the conditions specified in Article VI (other than the conditions
3
which by their terms are only capable of being satisfied at the Closing) shall have been satisfied
or waived. The date of Closing is referred to in this Agreement as the “Closing Date.”
Section 1.05. Closing Transactions. At the Closing, the following events shall occur, each
event being (i) conditioned on the occurrence or waiver of each other event and (ii) being deemed
to have occurred simultaneously with the other events:
(a) Each Accepting Seller shall tender to Buyer share certificate(s) representing all the
issued and outstanding Shares owned by such Accepting Seller together with a share transfer deed
representing all such Shares duly executed in favor of Buyer. If any share certificate shall have
been lost, stolen or destroyed, Buyer may, in its reasonable discretion and as a condition
precedent to the payment of the Purchase Price to the Accepting Seller selling the Shares
represented by such share certificate, require the owner of such lost, stolen or destroyed share
certificate to provide an appropriate affidavit and to deliver an indemnity against any claim that
may be made against Buyer or the Company with respect to such share certificate.
(b) All outstanding Options shall be subjected to the Cashless Exercise.
(c) The Company shall deliver to Buyer the shareholders’ register of the Company evidencing
the transfer of the Shares (including the shares acquired through the Compulsory Acquisition and
the Cashless Exercise) to Buyer or its designee.
(d) Buyer shall pay to the Sellers’ Representative, or a paying agent designated by the
Sellers’ Representative and reasonably acceptable to Buyer, the Closing Payment for the benefit of,
and distribution to, the Accepting Sellers, Dissenting Holders and Exercising Option Holders (or
the trustee of such Exercising Option Holders) and in accordance with the Articles of Association
of the Company. Such amount shall be paid in cash in U.S. dollars by wire transfer of immediately
available funds pursuant to wire instructions delivered by the Sellers’ Representative or paying
agent to Buyer not later than three (3) Business Days prior to the Closing. The Sellers shall pay
any and all charges and Expenses of any paying agent designated by the Sellers’ Representative to
act on its behalf in connection with the disbursement of the Closing Payment and such changes and
Expenses shall reduce the Closing Payment as provided in Section 1.03(b) of this Agreement.
(e) Buyer shall transfer the Escrow Amount by wire transfer of immediately available funds to
XX Xxxxxx Chase Bank (the “Escrow Agent”) to such account or accounts as designated in
writing by the Escrow Agent. The Escrow Amount together with all subsequent earnings on
investments thereof while deposited with the Escrow Agent shall be referred to as the “Escrow
Fund.” The Escrow Fund shall be held by the Escrow Agent pursuant to the terms and conditions
of an Escrow Agreement in substantially the form attached hereto as Exhibit A (the
“Escrow Agreement”) between the Escrow Agent, Buyer and the Sellers’ Representative.
(f) Buyer shall deliver to the Company, and the Company shall deliver to Buyer, such documents
and instruments as shall evidence fulfillment or waiver of the conditions to Closing set forth in
Article VI of this Agreement.
Section 1.06. Withholding for Payment of Taxes. Buyer shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to any Seller,
4
unless
Buyer has received from Seller an exemption from such withholding tax in respect of each such
payment to its satisfaction at least five (5) Business Days prior to Closing, such amounts as Buyer
in its sole discretion determines that it is required to deduct and withhold with respect to the
making of any such payment under any applicable U.S. federal, state, local or foreign Tax law at
the maximum rate for such withholding. To the extent that amounts are so withheld by Buyer and
paid pursuant to any applicable U.S. federal, state, local or foreign Tax law, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid to such Seller in
respect of which such deduction and withholding was made by Buyer.
Section 1.07. Sellers’ Representative. The Company will provide Buyer with the name of the
Person appointed by the Company to serve as the sellers’ representative (the “Sellers’
Representative”), which Sellers’ Representative shall be one of the individuals named in
Annex D to this Agreement. From and after the Closing, the Sellers’ Representative (or a
paying agent designated by the Sellers’ Representative) shall have full power and authority to
receive and disburse the Closing Payment, to the extent distributed by the Escrow Agent to the
Sellers’ Representative, the Escrow Amount, among the Sellers in accordance with the schedule of
shareholders provided to Buyer pursuant to Section 1.03(d), and the Articles of Association of the
Company, to negotiate and sign all amendments to this Agreement and all other documents in
connection with the transactions contemplated by this Agreement (including without limitation the
Escrow Agreement and all other instruments called for by this Agreement) and to grant, provide,
negotiate and sign all waivers, consents, instructions and authorizations and to take all other
actions called for under or contemplated by or that may otherwise be necessary or appropriate in
connection with this Agreement or any of the foregoing agreements or instruments and to prosecute,
defend and settle in the Sellers’ Representative’s discretion all indemnification disputes
(including hiring counsel and other litigation assistance) and to receive all notices, requests and
demands that may be made under and pursuant to this Agreement. From and after the Closing, Buyer
shall be entitled to deal exclusively with the Sellers’ Representative in respect of any matter
arising under this Agreement. Should the Sellers’ Representative be unable or unwilling to serve
or to appoint his successor to serve in his stead, and unless the Sellers’ Representative appoints
a successor to serve in his stead, then the Sellers’ Representative shall be designated as provided
in Article XV of the Escrow Agreement. All of the costs and expenses incurred by the Sellers’
Representative in connection with this Agreement and the exercise of the authority granted
hereunder shall be payable out of the Escrow Fund.
Section 1.08. Certain Transaction Taxes. Sellers shall be responsible for the payment of
all transfer, sales, use, registration or other similar Taxes resulting from the transactions
contemplated by this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
REGARDING THE COMPANY
REPRESENTATIONS AND WARRANTIES
REGARDING THE COMPANY
The Company hereby represents and warrants to Buyer that as of the date hereof and as of the
Closing Date:
Section 2.01. Organization and Qualification; Subsidiaries. Each of the Company, except as
set forth on Schedule 2.01 of the disclosure schedule delivered to Buyer by the
5
Company on the date
hereof (the “Company Disclosure Schedule”) and its Subsidiaries is a legal entity duly
organized, validly existing and in good standing under the Laws of the jurisdiction of its
organization, has all requisite organizational power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted and is duly qualified and in
good standing to do business in each jurisdiction in which the nature of the business conducted by
it or the ownership or leasing of its properties makes such qualification necessary. Schedule 2.01
of the Company Disclosure Schedule sets forth a true and complete list of each of the Company’s
directly or indirectly owned Subsidiaries, together with (A) the specification of the nature of the
legal organization of each such Subsidiary, (B) the jurisdiction of incorporation or organization
of each such Subsidiary and (C) the percentage of each such Subsidiary’s outstanding Shares owned
by the Company or another Subsidiary of the Company.
Section 2.02. Organizational Documents. Schedule 2.02 of the Company Disclosure Schedule
contains complete and correct copies as of the date hereof of the memorandum of association and
articles of association and other charter, bylaws or other equivalent organizational documents, in
each case as amended or restated, of the Company and each of its Subsidiaries. None of the Company
or any of its Subsidiaries is in violation of any of the provisions of its charter or bylaws (or
other equivalent organizational documents). The minute books and stock records of the Company and
its Subsidiaries heretofore furnished to Buyer, except as redacted to omit references to this
transaction, correctly and completely reflect in all material respects as of the date hereof all
corporate actions taken at all meetings of, or by written consents of, directors and Share holders
of the Company and its Subsidiaries (including committees thereof).
Section 2.03. Authorization of Agreement. The Company has all requisite corporate power
and authority to execute and deliver this Agreement, to perform its obligations hereunder and,
subject to compliance with Section 341(a) of the Israeli Companies Law and Article 20(d) of the
Company’s Articles of Association, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary corporate action and,
except as contemplated by this Agreement, no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by Buyer and Guarantor, constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in accordance with its
terms, except as enforcement hereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar Laws relating to or affecting the
enforcement of creditors’ rights generally and legal principles of general applicability governing
the availability of equitable remedies (whether considered in a proceeding in equity or at law or
under applicable legal codes.
Section 2.04. Capitalization.
(a) Schedule 2.04(a) of the Company Disclosure Schedule sets forth a correct and complete
description of the following: (A) all of the authorized Shares of the Company and each of its
Subsidiaries and (B) the amount of outstanding Shares of the Company and each of its Subsidiaries
and each record owner thereof as of the date hereof. Except as described in
6
Schedule 2.04(a) of
the Company Disclosure Schedule or issued after the date hereof upon the exercise of Options
outstanding on the date hereof and listed on Schedule 2.04(c) of the Company’s Disclosure Schedule,
no Shares of the Company or any of its Subsidiaries are issued or outstanding or reserved for any
purpose. All outstanding Shares of each Subsidiary of the Company are owned by the Company or by a
direct or indirect wholly-owned Subsidiary of the Company, free and clear of all Liens and
limitations on voting rights. Except as set forth in Schedule 2.04(c) of the Company Disclosure
Schedule, (A) there are no voting trusts, proxies or other agreements or understandings that
survive the Closing to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound with respect to the voting of any Shares of the Company
or any of its Subsidiaries, and (B) there are no bonds, debentures, notes or other indebtedness of
the Company or any of its Subsidiaries that survive the Closing granting holders thereof the right
to vote (or convertible into, or exchangeable for, securities having the right to vote) on any
matters on which holders of Shares of the Company or any of its Subsidiaries may vote. Except as
set forth in Schedule 2.04(c) of the Company Disclosure Schedule as of the date hereof, there are
no outstanding securities, options, warrants, agreements, arrangements or commitments of any
character to which the Company or any of its Subsidiaries is a party obligating the Company or any
of its Subsidiaries to grant, issue, deliver or sell, or cause to be granted, issued, delivered or
sold, any Shares of the Company or any of its Subsidiaries, by sale or otherwise (all of such
securities, options, warrants or other rights, agreements, arrangements or commitments are
collectively referred to as the “Option Plans” or, each such instrument individually, as
the context requires, an “Option Plan”). There are no obligations, contingent or
otherwise, of the Company or any of its Subsidiaries to dispose of any Shares of the Company or any
of its Subsidiaries.
(b) Except as set forth in Schedule 2.04(b) of the Company Disclosure Schedule, all of the
outstanding Shares of the Company and each of its Subsidiaries are duly authorized, validly issued,
and fully paid and nonassessable, and have not been issued in violation of (nor are any of the
authorized Shares of such entities subject to) any preemptive or similar rights created by statute,
the charter or bylaws (or the equivalent organizational documents) of the Company or its
Subsidiaries or any agreement to which the Company or its Subsidiaries is a party or bound.
Neither the Company nor any of its Subsidiaries directly or indirectly owns, has agreed to purchase
or otherwise acquire or holds any interest convertible into or exchangeable or exercisable for,
Shares of any Person (other than the Subsidiaries of the Company set forth in Schedule 2.01 of the
Company Disclosure Schedule).
(c) There are no obligations, contingent or otherwise, of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Shares of the Company or any of its
Subsidiaries. Except as set forth in Schedule 2.04(c) of the Company Disclosure Schedule as of the
date hereof, there are no agreements, arrangements or commitments of any character (contingent or
otherwise) pursuant to which any Person is or may be entitled to receive any payment based on the
revenues or earnings, or calculated in accordance therewith, of the Company or any of its
Subsidiaries (except for agreements to pay commissions or bonuses to employees, consultants,
resellers or independent contractors, and agreements to pay royalties, in each case, in the
ordinary course of business). Schedule 2.04(c) accurately lists in respect of each Option
outstanding: (i) the name of the grantee, (ii) the position or affiliation of the grantee with the
Company, (iii) the date of such grant, (iv) the terms of the vesting of such Option, (v) the terms
under which the vesting of such Options may be accelerated, (vi) the percentage of the
7
Shares
subject to such Option as have vested as of the date hereof, which vested percentage information
shall be updated immediately prior to Closing, and (vii) whether such Options may be exercised or
cancelled automatically in connection with the Closing as contemplated by Section 4.01(b) of this
Agreement, or whether the consent of the holder of such Option is required to effect such
cancellation.
Section 2.05. No Conflict; Required Filings and Consents.
(a) Assuming that the Company Approvals (as defined in Section 2.05(b)) have been obtained and
that the filings and notifications described in Section 2.05(b) have been made, the execution and
delivery of this Agreement by the Company does not, and the consummation of the transactions
contemplated hereby will not (i) conflict with or violate the memorandum of association and
articles of association and other charter, bylaws, or equivalent organizational documents, in each
case as amended or restated, of the Company or any of its Subsidiaries, (ii) conflict with or
violate any Laws applicable to the Company or any of its Subsidiaries or by which any of their
respective assets or properties is bound or subject or (iii) except as described in Schedule
2.05(a) of the Company Disclosure Schedule, result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or require payment under, or
result in the creation of a Lien (other than Permitted Liens, as herein defined) on any of the
properties or assets of the Company or any of its Subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its Subsidiaries is a party or by or to which any of them
or any of their respective assets or properties is bound or subject.
(b) Except as set forth in Schedule 2.05(b) of the Company Disclosure Schedule, the execution
and delivery of this Agreement by the Company does not, and consummation of the transactions
contemplated hereby will not, require the Company or any of its Subsidiaries to obtain any consent,
license, permit, approval, waiver, authorization or order of (collectively, the “Company
Approvals”), or to make any filing with or notification to, any Governmental Authority or third
Person.
Section 2.06. Permits; Compliance. Except as set forth in Schedule 2.06 of the Company
Disclosure Schedule, each of the Company and its Subsidiaries is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease, maintain and operate its properties and
to carry on its business as it is now being conducted (collectively, the “Permits”). There
is no action, proceeding or investigation pending or, to the Knowledge of the Company, threatened
that has resulted in or after notice or lapse of time or both could reasonably be expected to
result in, revocation, suspension, adverse modification, non-renewal, impairment, restriction,
termination or cancellation of, or order of forfeiture or substantial fine with respect to, any of
the Permits. The Company and its Subsidiaries are and for the last two (2) years have been at all
times in compliance in all material respects with all Laws applicable to them or by or to which any
of their respective assets or properties are bound or subject and all of the Permits. None of the
Company or any of its Subsidiaries has received from any Governmental Authority any notification
with respect to possible non-compliance with any such Laws or Permits.
8
Section 2.07. Financial Statements; Undisclosed Liabilities.
(a) Included in Schedule 2.07(a) of the Company Disclosure Schedule are true and complete
copies of the consolidated financial statements of the Company consisting of audited consolidated
balance sheets of the Company as of December 31, 2005 and 2004, the related audited consolidated
statements of income, changes in owners’ equity and cash flows for the calendar years then ended
(including the notes or other supplementary information thereto) (the “Financial
Statements”).
(b) The Financial Statements (i) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except (A) to the extent required by changes in
GAAP and (B) as may be indicated in the notes thereto) and (ii) fairly present the consolidated
financial position of the Company and its Subsidiaries as of the respective dates thereof and the
consolidated results of operations and cash flows for the period indicated. The books and records
of the Company and its Subsidiaries have been and are being maintained in accordance with GAAP.
(c) Except (i) as disclosed in the most recent balance sheet included in the Financial
Statements, (ii) for liabilities and obligations incurred in the ordinary course of business and
consistent with past practice of the Company and its Subsidiaries since the date of the most recent
balance sheet contained in the Financial Statements, or (iii) arising under this Agreement,
neither the Company nor any of its Subsidiaries has any material liability, commitment or
obligation of any nature, whether or not absolute, accrued, contingent or otherwise.
(d) The Company and its Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance consistent with the Company being a private company,
that transactions are recorded as necessary to permit preparation of financial statements in
conformity with GAAP.
(e) Neither the Company nor its Subsidiaries has received any written complaint, allegation,
assertion or claim, that the Company or any of its Subsidiaries has engaged in questionable
accounting or auditing practices.
Section 2.08. Absence of Certain Changes or Events . Except as set forth in
Schedule 2.08 of the Company Disclosure Schedule, since December 31, 2005 through the date of this
Agreement, each of the Company and its Subsidiaries has conducted its businesses only in the
ordinary course and in a manner consistent with past practice and there has not been:
(i) any material damage, destruction or loss (whether or not covered by insurance) with
respect to any assets or properties owned or leased by the Company or any of its
Subsidiaries;
(ii) any material change by the Company or any of its Subsidiaries in their accounting
methods, principles or practices;
(iii) except for dividends by a Subsidiary of the Company to the Company or another
wholly owned Subsidiary of the Company, any declaration, setting aside or payment of any
dividends on or distributions in respect of any Shares of the Company or
9
any of its
Subsidiaries, or any redemption, purchase or other acquisition by the
Company or any of its
Subsidiaries of any Shares of the Company or any of its Subsidiaries;
(iv) any increase in the benefits under, or the establishment or amendment of, any
bonus, insurance, severance, retention, change of control, deferred compensation, pension,
retirement, profit sharing, option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any increase in the compensation payable or to
become payable to directors, consultants, officers or employees of the Company or any of its
Subsidiaries, except for increases in salaries or wages payable or to become payable, in
each case in the ordinary course of business and consistent with past practice;
(v) any payment by the Company or any of its Subsidiaries to any director, officer or
holder of 5% or more of the outstanding Shares of the Company, or any Affiliate of any of
the foregoing, whether as a loan or otherwise, except regular compensation and usual benefit
payments made in the ordinary course of business consistent with past practice;
(vi) any entry by the Company or any of its Subsidiaries into any contract with any
director, officer or holder of 5% or more of the outstanding Shares of the Company, or any
Affiliate of any of the foregoing, other than on an arms-length basis;
(vii) any revaluation by the Company or any of its Subsidiaries of any of their assets
or properties, including the writing down of the value of inventory or the writing down or
off of notes or accounts receivable, other than in the ordinary course of business
consistent with past practices;
(viii) any material acquisition of any assets, business or Person (other than the
purchase of assets from suppliers or vendors in the ordinary course of business);
(ix) any sale, transfer, lease, exchange or other disposition of any material assets or
properties owned or leased by the Company or any of its Subsidiaries (other than in the
ordinary course of business);
(x) any capital expenditures made by or on behalf of the Company or its Subsidiaries in
excess of $250,000 in the aggregate;
(xi) any waiver, release, discharge, transfer or cancellation by the Company or any of
its Subsidiaries of any material rights or claims, other than in the ordinary course of
business;
(xii) the creation of any Lien (other than Permitted Liens) on any assets or properties
owned or leased by the Company or any of its Subsidiaries, except in the ordinary course of
business;
(xiii) any entry by the Company or any of its Subsidiaries into any commitment,
arrangement or transaction material to the Company and its Subsidiaries, taken as a
10
whole,
other than in the ordinary course of business (other than this Agreement and the
transactions contemplated hereby);
(xiv) any disclosure of any source code of any of the products of the Company or any of
its Subsidiaries, except to employees, escrow agents and contractors who reasonably need to
know same and owe a duty of confidentiality to the Company and its Subsidiaries;
(xv) any development of code that is not in the ordinary course of business and in a
manner consistent with past practices;
(xvi) any material increase (including by way of guaranteeing or assuming the
obligations of third Persons to repay indebtedness for borrowed money) in the Company’s and
its Subsidiaries’ indebtedness for borrowed money;
(xvii) any material change in the manner in which the Company or any of its
Subsidiaries extends discounts or credits to customers or any material change in the manner
or terms by which the Company or any of its Subsidiaries collects its accounts receivables
or otherwise deals with customers;
(xviii) any payment, discharge, settlement or satisfaction of any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) prior to
the same being due in excess of $200,000 in the aggregate in connection with any settlement
or compromise of any material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes;
(xix) any change in any of the Company’s methods of reporting income or deductions for
Tax purposes from those employed in the preparation of the Tax returns for the taxable year
ending December 31, 2004; or
(xx) any agreement or commitment by the Company or any of its Subsidiaries to do any of
the foregoing or any action taken by the Company or any of its Subsidiaries that, if taken
during the period from the date of this Agreement through the Closing would constitute a
breach of Section 4.02.
From and after the date of this Agreement through the Closing, any action taken after the date
of this Agreement that is expressly permitted under Section 4.02 of this Agreement shall not
constitute a breach of this Section 2.08 as of the Closing.
Section 2.09. Absence of Litigation. Except as set forth in Schedule 2.09 of the Company
Disclosure Schedule, there is no claim, action, suit, litigation, proceeding, arbitration, other
dispute resolution proceeding or, to the Knowledge of the Company, investigation of any kind, at
Law or in equity, pending or, to the Knowledge of the Company, threatened against the Company or
any of its Subsidiaries or any of their assets, properties or rights and neither the Company nor
any of its Subsidiaries is subject to any order, consent decree or settlement agreement of, or
other similar agreement with, or, to the Knowledge of the Company, investigation by, any
Governmental Authority or arbitration tribunal, or any judgment, order,
11
writ, injunction, decree,
cease-and-desist order or award of any Governmental Authority or arbitrational tribunal.
Section 2.10. Employee Benefit Plans; Labor Matters.
(a) For purposes of this Section 2.10, a Subsidiary of the Company shall be deemed to also
include each corporation, trade, business, or entity under common control with the Company, within
the meaning of Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended
(the “Code”), or Section 4001 of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”). Schedule 2.10(a) of the Company Disclosure Schedule sets forth as of
the date hereof an accurate and complete list of each employee benefit plan, program, arrangement
and contract (including, without limitation, any “employee benefit plan”, as defined in
Section 3(3) of ERISA, each employee benefit plan concerning pension payments, and any employee
benefit plans, such as Foreign Plans, that are not subject to the provisions of ERISA), and each
sick leave program, severance program, retention program, referral incentive, personnel policy,
stock option plan, bonus plan or arrangement, incentive award plan or arrangement, vacation policy,
compensation or deferred compensation plan, policy, agreement or arrangement, and executive
compensation or supplemental income arrangement, and any other
policy or program which may provide for payment or other benefits to employees of the Company
or any Subsidiary, including all amendments thereto, sponsored, maintained or contributed to by the
Company or any of its Subsidiaries, or with respect to which the Company or any of its Subsidiaries
has or could incur liability, including without limitation, under Section 4069, 4212(c) or 4204 of
ERISA, whether or not such plan, program, arrangement or contract has been terminated prior to the
date of this Agreement (the “Benefit Plans”). The Company has provided to Buyer a true and
correct copy of (i) the most recent annual or other report (including, without limitation, Form
5500) filed with the Pension and Welfare Benefits Administration or other Governmental Authority
with respect to each Benefit Plan for which such reporting requirement exists, (ii) each Benefit
Plan, including any amendments thereto, (iii) each trust agreement, insurance contract and other
funding agreement relating to each Benefit Plan, (iv) the most recent summary plan description for
each Benefit Plan for which a summary plan description is required, including any summary of
material modifications, (v) the most recent actuarial report or valuation relating to each Benefit
Plan subject to Title IV of ERISA and each other Benefit Plan that is a funded scheme (meaning a
scheme in or under which resources are set aside in advance relating to the intended or promised
benefits), and (vi) the most recent determination letter, if any, issued by the Internal Revenue
Service (“IRS”) with respect to any Benefit Plan intended to be qualified under Section 401
of the Code.
(b) With respect to the Benefit Plans and except as otherwise set forth in Schedule 2.10(b) of
the Company Disclosure Schedule:
(i) Each Benefit Plan has been administered in all material respects in accordance with
its terms and applicable Law and, as to any Benefit Plan intended to be qualified under
Section 401 of the Code, such Benefit Plan materially satisfies the requirements of such
Section and has received a favorable IRS opinion letter that includes all changes required
to be made by applicable Law or has timely filed a request for a determination letter
covering such required amendments;
12
(ii) There are no actions, suits or claims pending (other than routine claims for
benefits) or, to the Knowledge of the Company, threatened against, or with respect to, any
of the Benefit Plans or their assets, and there is no basis for any such action, suit or
claim;
(iii) All premiums, contributions or payments required to be made to the Benefit Plans
pursuant to their terms and provisions and applicable Law have been made timely;
(iv) No Benefit Plan is a “multiemployer plan” as defined in Section 3(37) of
ERISA, or is a plan that is subject to Title IV of ERISA, Section 302 of ERISA or Section
412 of the Code;
(v) The Company and its Subsidiaries have substantially performed all obligations,
whether arising by operation of Law or by contract, required to be performed by them in
connection with the Benefit Plans, and there have been no defaults or violations by any
other Person with respect to the Benefit Plans;
(vi) All reports and disclosures relating to the Benefit Plans required to be filed
with or furnished to Governmental Authorities, Benefit Plan participants or beneficiaries
have been filed or furnished in accordance with applicable Law in a timely manner;
(vii) No act, omission or transaction has occurred which would result in imposition on
the Company or any of its Subsidiaries, directly or indirectly, of (A) breach of fiduciary
duty liability damages under Section 409 of ERISA, (B) a civil penalty assessed pursuant to
Section 502 of ERISA, (C) a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or
(D) the imposition of a Lien on any of the assets of the Company or any of its Subsidiaries
in connection with any Benefit Plan;
(viii) There is no matter pending (other than routine qualification determination
filings) with respect to any of the Benefit Plans before the IRS, the Department of Labor or
other Governmental Authority;
(ix) No trust funding a Benefit Plan, is a trust intended to be exempt from tax
pursuant to Section 509(c) of the Code;
(x) As to any Benefit Plan intended to be qualified under Section 401 of the Code,
there has been no termination or partial termination of the Benefit Plan within the meaning
of Section 411(d)(3) of the Code;
(xi) Other than in connection with the termination of Options contemplated under
Section 4.01(b) herein, the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not (A) require the Company or any of its
Subsidiaries to make a larger contribution to, or pay greater benefits or provide other
rights under, any Benefit Plan than it otherwise would, or (B) create or give rise to any
additional vested rights or service credits under any Benefit Plan, in either case whether
or not some other subsequent action or event would be required to cause such payment or
provision to be triggered; and
13
(xii) The vacation policies of the Company and the Subsidiaries do not provide for the
carryover of vacation from one calendar year to the next.
(c) Neither the Company nor any of its Subsidiaries is a party to any collective bargaining or
other labor union contracts. No collective bargaining agreement or other labor union contract is
being negotiated by the Company or any of its Subsidiaries and no Person is currently seeking to
represent the Company’s or any of its Subsidiaries’ employees. There is no pending or, to the
Knowledge of the Company, threatened labor dispute, strike or work stoppage against the Company or
any of its Subsidiaries. Neither the Company nor any of its Subsidiaries or any of their
respective representatives or employees has committed any unfair labor practices in connection with
the operation of the respective businesses of the Company and its Subsidiaries, and there is no
pending or, to the Knowledge of the Company, threatened charge or complaint against the Company or
any of its Subsidiaries by the National Labor Relations Board or any other Governmental Authority.
(d) Schedule 2.10(d) of the Company Disclosure Schedule sets forth as of the date hereof true
and correct information concerning (i) all severance and change of control plans or
arrangements for the benefit of present directors or officers (or other equivalent positions)
or employees of the Company or any of its Subsidiaries and any former directors or officers (or
other equivalent positions) or employees of the Company if any such plans or arrangements provide
for any continuing obligations of the Company, (ii) all employment agreements and other specific
arrangements with any present director or officer (or other equivalent position) or employee of the
Company or any of its Subsidiaries and any former directors or officers (or other equivalent
positions) or employees of the Company if any such plans or arrangements provide for any continuing
obligations of the Company, (iii) any Person who has accepted an offer of employment made by the
Company or any of its Subsidiaries but whose employment has not yet started and of any outstanding
offer of employment made to any Person by the Company or any of its Subsidiaries providing for
annual compensation in excess of $150,000, (iv) all agreements with present consultants of or
independent contractors to the Company or any of its Subsidiaries and all such agreements with
former consultants of or independent contractors to the Company or any of its Subsidiaries if any
such agreements provide for any continuing obligations of the Company, providing for annual
compensation in excess of $150,000, (v) all non-competition agreements with the Company or any of
its Subsidiaries executed by directors or officers (or other equivalent positions) of the Company
or any of its Subsidiaries and (vi) the terms applicable to the secondment of any Person to the
Company or any of its Subsidiaries or by the Company or any of its Subsidiaries to any other
Person, except any such agreements or arrangements pursuant to which Options have been granted to
such director, officer or employee (all of which are described in Schedule 2.04(c) of the Company
Disclosure Schedule).
(e) Except as provided in Schedule 2.10(e) of the Company Disclosure Schedule, (x) no Benefit
Plan provides retiree medical or retiree life insurance benefits to any Person and (y) neither the
Company nor any of its Subsidiaries is contractually obligated to provide any Person with life
insurance or medical benefits upon retirement or termination of employment, other than as required
by the provisions of Sections 601 through 608 of ERISA and Section 4980B of the Code.
14
(f) Except as set forth in Schedule 2.10(f) of the Company Disclosure Schedule as of the date
hereof, neither the Company nor any of its Subsidiaries has amended, or taken any other actions
with respect to the employment of any employees, officers or directors or to any of the Benefit
Plans or any of the plans, programs, agreements, policies or other arrangements described in
Section 2.10(d) of this Agreement since December 31, 2005 which could increase the Company or any
of its Subsidiaries’ costs or obligations thereunder.
(g) Except as set forth on Schedule 2.10(g) of the Company Disclosure Schedule, each Benefit
Plan may be unilaterally amended or terminated at any time by the Company or its applicable
Subsidiary without liability other than for benefits accrued thereunder prior to the date of such
amendment or termination.
(h) Except for the exercise of vested Options pursuant to Section 4.01(b) and the acceleration
of vesting of Options to the extent described on Schedule 2.04(c) in connection with the
consummation of the transactions contemplated by this Agreement, no payments of money or other
property, acceleration of benefits, or provisions of other rights have or will be made hereunder,
under any agreement contemplated herein, under the Benefit Plans or under any of the plans,
programs, agreements, policies or other arrangements described in Section 2.10(d) of this
Agreement which, in the aggregate, would result in imposition of the sanctions imposed under
Sections 280G and 4999 of the Code, whether or not some other subsequent action or event would be
required to cause such payment, acceleration, or provision to be triggered.
(i) Except as set forth in Schedule 2.10(i) of the Company Disclosure Schedule, no present or
former employee or independent contractor performing services for the Company or any of its
Subsidiaries has a claim pending or, to the Knowledge of the Company, has threatened to make a
claim against the Company or any of its Subsidiaries, including any claim for (i) overtime pay,
other than overtime pay for the current payroll period, (ii) wages, salaries or profit sharing
(excluding wages, salaries or profit sharing for the current payroll period), (iii) vacations, time
off or pay in lieu of vacation or time off, other than vacation or time off (or pay in lieu
thereof) earned in respect of the current fiscal year, (iv) any violation of any rule or contract
relating to minimum wages or maximum hours of work, (v) discrimination against employees on any
basis, (vi) severance pay or unlawful or wrongful employment or termination practices, (vii)
unlawful retirement, termination or labor relations practices or breach of contract or (viii) any
violation of occupational safety or health standards. There are no administrative charges,
arbitration or mediation proceedings or court complaints pending or, to the Knowledge of the
Company, threatened against the Company or any of its Subsidiaries before the U.S. Equal Employment
Opportunity Commission or any state or federal court or agency or any other entity concerning
alleged employment discrimination, contract violation or any other matters relating to the
employment of labor.
(j) Except as set forth in Schedule 2.10(j) to the Company Disclosure Schedule, the Company
and its Subsidiaries are and have been in compliance with all applicable Laws, rules and
regulations relating to the employment of labor, including but not limited to employment and
employment practices, terms and conditions of employment, overtime, wages and hours, payroll
documents, equal opportunity, occupational health and safety, severance, termination or discharge,
collective bargaining and the payment of employee welfare and retirement and other Taxes, the full
payment of social security and health insurance contributions and taxes, the
15
Worker Adjustment
Retraining and Notification Act and the Immigration Reform and Control Act of 1986, each as
amended, and other applicable Law and are not engaged in any unfair labor practice or any violation
of any other Law, rule or regulation concerning employment or retention of independent contractors.
(k) Schedule 2.10(k) of the Company Disclosure Schedule sets forth as of the date hereof, for
the Company and each of its Subsidiaries, a true and complete list of all employees, officers and
directors (or the equivalent of such positions) who perform services for such Person, and for each
such Person includes (i) the name of such Person’s employer, (ii) job title(s), (iii) a complete
and accurate summary description of the material compensation paid to such Person (including the
date of the most recent increase thereof) and any severance pay, lump sum or other payment,
compensation or other remuneration that such Person is or would be eligible to receive, or has
received, upon termination of employment or service or as a result of the transactions contemplated
by this Agreement, (iv) accrued but unused vacation and paid time off as of the date of this
Agreement, (v) the amount of service credited for Benefit Plan purposes for such employee and (vi)
such Person’s status as of a date within one week of the date of this Agreement (i.e., active,
vacation, leave of absence, and if so, type of leave). Schedule 2.10(k) of the Company Disclosure
Schedule will be updated by the Company as of the Closing Date.
(l) With respect to the Benefit Plans, individually and in the aggregate, except as set forth
in Schedule 2.10(l) of the Company Disclosure Schedule, there are no funded benefit obligations for
which contributions have not been made or properly accrued and there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise properly reflected in
accordance with generally accepted accounting principles, on the financial statements of the
Company and its Subsidiaries.
(m) The representations and warranties of the Company in this Section 2.10 shall specifically,
but not by way of limitation, apply to Foreign Plans that are Benefit Plans, as applicable.
(n) Except as set forth in Schedule 2.10(n) of the Company Disclosure Schedule or as otherwise
accrued in the Financial Statements, the contribution and benefit liabilities of the Company and
its Subsidiaries respecting each Benefit Plan that is a Foreign Plan are fully funded based upon
applicable accounting valuation and actuarial methodology contained in the most recent accounting,
valuation or actuarial report respecting the Foreign Plan.
(o) Except as set forth in Section 2.10(o) of the Company Disclosure Schedule, (i) Options
granted to present or former officers, directors, employees and other service providers to the
Company and/or its Subsidiaries if not exercised prior to the Closing, can and will be cancelled
prior to the Closing without the consent of the Option Holders in a manner consistent with the
terms of the respective agreements governing such options and applicable Law and (ii) all Options
granted by the Company to its officers and employees in Israel were granted under employee option
plans approved by the Israel Income Tax Authorities under Section 102 of the Israel Income Tax
Ordinance. The Company has complied with all requirements of such Section 102 and the regulations
promulgated thereunder.
16
Section 2.11. Taxes.
(a) Except as set forth in Schedule 2.11(a) of the Company Disclosure Schedule, (i) all
returns, reports, information returns or other similar documents or statements (“Tax
Returns”) of or with respect to any Tax which are required to be filed on or before the Closing
Date, taking into account extensions of time for filing, by or with respect to the Company or any
of its Subsidiaries have been or will be duly and timely filed, (ii) all items of income, gain,
loss, deduction and credit or other material items (“Tax Items”) required to be included in
each such Tax Return have been or will be so included and all information provided in each such Tax
Return is true, correct and complete in all material respects, (iii) all Taxes which have become or
will become due with respect to the period covered by each such Tax Return have been or will be
timely paid in full, (iv) all Tax withholding and deposit requirements imposed on or with respect
to the Company or any of its Subsidiaries have been or will be satisfied in all material respects,
and (v) no penalty, interest or other charge is or will become due with respect to the late filing
of any such Tax Return or late payment of any such Tax.
(b) Schedule 2.11(b) of the Company Disclosure Schedule lists as of the date hereof all income
Tax Returns filed with respect to any of the Company and its Subsidiaries for the six taxable years
ending prior to the date hereof, indicates those income Tax Returns that have been audited,
indicates those income Tax Returns that are currently the subject of audit, and indicates those
income Tax Returns whose audits have been closed. All records which the Company or any of its
Subsidiaries are required to keep for Tax purposes or which would be needed to substantiate any
claim made or position taken in relation to Tax by the Company or any of its Subsidiaries have been
duly kept and are available for inspection at the premises of the Company or its Subsidiaries.
(c) Except as set forth in Schedule 2.11(c) of the Company Disclosure Schedule as of the date
hereof, there is not in force any extension of time with respect to the due date for the filing of
any Tax Return of or with respect to the Company or any its Subsidiaries or any waiver or agreement
for any extension of time for the assessment or payment of any Tax of or with respect to the
Company or any of its Subsidiaries.
(d) There is no written claim against the Company or any of its Subsidiaries for any Taxes,
and no assessment, deficiency or adjustment has been asserted, proposed or, to the Knowledge of the
Company, threatened with respect to any Tax Return of or with respect to the Company or any of its
Subsidiaries other than those disclosed (and to which are attached true and complete copies of all
audit or similar reports) in Schedule 2.11(d) of the Company Disclosure Schedule.
(e) No claim has ever been made by a Governmental Authority in a jurisdiction where any of the
Company or any of its Subsidiaries does not file Tax Returns that it is or may be subject to
taxation in that jurisdiction.
(f) The total amounts set up as liabilities for current and deferred Taxes in the financial
statements referred to in Section 2.07(a) of this Agreement are sufficient to cover the payment of
all Taxes, whether or not assessed or disputed, which are, or are hereafter found to
17
be, or to have
been, due by or with respect to the Company and any of its Subsidiaries up to and through the
periods covered thereby.
(g) Except as set forth in Schedule 2.11(g) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries have entered into any Tax allocation, sharing or indemnity
agreement under which the Company or its Subsidiaries could become liable to another Person (other
than the Company or its Subsidiaries) as a result of the imposition of Tax upon such Person, or the
assessment or collection of Tax.
(h) Except for Liens for Taxes not yet due and payable, no Liens for Taxes exist upon the
assets of any of the Company or its Subsidiaries.
(i) Except as set forth in Schedule 2.11(i) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries will be required to include any amount as income for any
taxable period beginning after December 31, 2005 as a result of a change in accounting method for
any taxable period ending on or before December 31, 2005 or pursuant to any agreement with any Tax
authority with respect to any such taxable period.
(j) Neither the Company nor any of its Subsidiaries owns any interest in any controlled
foreign corporation (as defined in Section 957 of the Code), passive foreign investment company (as
defined in Section 1297 of the Code), or other entity the income of which is required to be
included in the income of the Company or such Subsidiary.
(k) Except as set forth in Schedule 2.11(k) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries have entered into any agreement or arrangement with any Taxing
Authority (except for the election of tax route under Section 102 of the Income Tax Ordinance) that
requires any of the Company and its Subsidiaries to take any action or to refrain from taking any
action.
(l) Except as set forth in Schedule 2.11(l) of the Company Disclosure Schedule, none of the
transactions contemplated by this Agreement will result in Tax liability or the recognition of any
item of income or gain to any of the Company or its Subsidiaries.
(m) Except with respect to any exercise of rights under the Option Plans prior to the Closing
and/or except as set forth in Schedule 2.11(m) of the Company Disclosure Schedule as of the date
hereof, no transaction contemplated by this Agreement is subject to Tax withholding by the Company
or its Subsidiaries.
(n) Except as set forth in Schedule 2.11(n) of the Company Disclosure Schedule as of the date
hereof, neither the Company nor any of its Subsidiaries (i) has been a member of an affiliated
group filing a consolidated Tax Return or (ii) has any liability for the Taxes of any Person under
United States Treasury Regulations by reason of being a member of a group of entities filing a
consolidated, combined or unified Tax Return (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract, or otherwise.
(o) Neither the Company nor any of its Subsidiaries has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code.
18
(p) Each of the Company and its Subsidiaries are duly registered for the purposes of Value
Added Tax (“VAT”), as defined in the relevant laws concerning VAT in its country of
organization, if applicable. Except as set forth on Schedule 2.11(p) of the Company Disclosure
Schedule, each of the Company and its Subsidiaries have complied in all material respects with all
laws concerning VAT, including with respect to the making on time of accurate returns and payments
and the maintenance of records. None of the Company nor any of its Subsidiaries has made any
exempt supplies in the current or preceding VAT year applicable to it and there are no
circumstances by reason of which there might not be a full entitlement to credit for all VAT
chargeable on supplies and acquisitions received and imports made (or agreed or deemed to be
received or made) by it.
(q) Except as set forth on Schedule 2.11(q) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is treated for any Tax purpose as a resident in a country other
than the country of its organization and none of the Company or any of its Subsidiaries has or have
had within the statutory limitation period a branch, agency or permanent establishment in a country
other than the country of its organization.
(r) Schedule 2.11(r) of the Company Disclosure Schedule 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. The Company has complied with all requirements of
Israeli law to be entitled to claim any Tax incentive. Except as disclosed on Schedule 2.11(r) of
the Company Disclosure Schedule, the consummation of the sale and purchase of Securities as set
forth in this Agreement will not adversely affect the remaining duration of the Tax incentives or
require any recapture of any previously claimed Tax incentive, and no consent or approval of any
Governmental Authority is required prior to the Closing in order to preserve the entitlement of the
Company to any such Tax incentive. Except as set forth on Schedule 2.11(r) of the Company
Disclosure Schedule, no Subsidiary of the Company is entitled to any benefit of the type described
in this Section 2.11(r).
Section 2.12. Insurance. Schedule 2.12 of the Company Disclosure Schedule sets forth as of
the date hereof an accurate and complete list of all insurance coverage of the Company and its
Subsidiaries currently in effect. Except as set forth in Schedule 2.12 of the Company Disclosure
Schedule as of the date hereof, neither the Company nor any of its Subsidiaries has received any
notice of cancellation or termination with respect to any insurance policy of such Person. Except
as set forth in Schedule 2.12 of the Company Disclosure Schedule, all premiums due with respect to
the insurance policies of the Company and its Subsidiaries set forth in Schedule 2.12 of the
Company Disclosure Schedule have been fully paid and all such insurance policies are valid and
enforceable policies. Schedule 2.12 of the Company Disclosure Schedule sets forth an accurate and
complete list of all pending claims against such insurance policies. There exist no pending claims
against such insurance policies with respect to which the insurers have denied liability. True and
correct copies of each document listed in Schedule 2.12 of the Company Disclosure Schedule have
been provided to Buyer.
Section 2.13. Properties.
(a) Except as set forth in Schedule 2.13(a) of the Company Disclosure Schedule, the Company
and each of its Subsidiaries has good and marketable title, free and clear of all Liens,
19
to all of
the properties and assets, real and personal, tangible or intangible, that are reflected on the
most recent balance sheet contained in the Financial Statements or acquired after the date of such
balance sheet, except for dispositions of such properties or assets in the ordinary course of
business consistent with past practice and except for (i) Liens for Taxes not yet due and payable
or contested in good faith by appropriate proceedings, (ii) mechanic’s, material men’s, repairman’s
or similar Liens arising in the ordinary course of business with respect to obligations that are
not more than sixty (60) days past due or that are being contested in good faith by appropriate
proceedings, (iii) liens granted to Plenus Technologies Ltd. in connection with the Credit Line
Agreement between Identify Technologies Ltd and Plenus Technologies Ltd. dated December 30, 2004,
and (iv) imperfections of title, easements and encumbrances, if any, as do not interfere with the
use of the property as such property is used on the date of this Agreement (the items in clauses
(i), (ii), (iii) and (iv) collectively, the “Permitted Liens”).
(b) Neither the Company nor any of its Subsidiaries owns any real property.
(c) Except as set forth in Schedule 2.13(c) of the Company Disclosure Schedule all equipment,
vehicles and other tangible personal property owned or leased by the Company or its Subsidiaries
with a book or market value in excess of $15,000 and is in reasonable good operating condition and
repair, except for normal wear and tear. All such equipment, vehicles and other tangible personal
property that is leased by the Company or its Subsidiaries is maintained in all material respects
(either by the Company or its Subsidiaries, the manufacturer or lessor, as the case may be) in
accordance with manufacturer and lessor requirements set forth in the applicable lease or other
similar agreement governing such property.
Section 2.14. Leases. Schedule 2.14 of the Company Disclosure Schedule contains an
accurate and complete list as of the date hereof of each lease pursuant to which the Company or its
Subsidiaries leases any real property or any equipment, vehicles or other tangible personal
property with a book or market value in excess of $50,000 (each a “Lease”). A true and
complete copy of each Lease has been provided to Buyer. Except as set forth in Schedule 2.14 of
the Company Disclosure Schedule, with respect to each Lease: (i) such Lease is in full force and
effect and is valid, binding and enforceable in accordance with its terms except as enforcement
hereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
or other similar Laws relating to or affecting the enforcement of creditors’ rights generally and
legal principles of general applicability governing the availability of equitable remedies (whether
considered in a proceeding in equity or at law under applicable legal codes; (ii) neither the
Company nor any of its Subsidiaries is in breach or default thereof, nor has the Company or any of
its Subsidiaries received notice that the Company or any of its Subsidiaries is in breach or
default thereof; and (iii) to the Company’s Knowledge no event has occurred which, with notice, or
lapse of time or both, would constitute a breach or default thereof by the Company or any of its
Subsidiaries or, to the Knowledge of the Company, by any other party thereto or would permit
termination, modification or acceleration thereof by any other party thereto. The leasehold estate
created by each Lease (a “Leased Premise”) is free and clear of all Liens other than any
Permitted Liens.
20
Section 2.15. Intellectual Property.
(a) Schedule 2.15(a) of the Company Disclosure Schedule contains a complete and accurate list
as of the date hereof of all software programs currently being marketed by the Company and its
Subsidiaries, all preceding versions and releases thereof, and all software products or programs
under development by the Company and its Subsidiaries but not currently marketed (collectively, the
“Software Programs”). Except as set forth in Schedule 2.15(a) of the Company Disclosure
Schedule, (i) the Company and its Subsidiaries own or license all intellectual property rights in
the Software Programs and the documentation therefore, and (ii) the Company has the right to make,
have made, sell, use, copy, distribute, prepare derivative works from, support, modify, enhance,
import, or offer for sale, in any country in the world the Software Programs. The Company owns or
has the right to use all patents, trademarks, service marks, trade names, trade dress, domain
names, logos, designs, corporate names and copyrights
(including issued patents, registrations and applications pertaining thereto (whether or not
filed) and extensions, continuations, renewals or divisions of any such issued patents,
registrations or applications) and all other intellectual property rights, trade secrets,
processes, formulas, know-how, inventions, customer lists, supplier lists, manufacturer lists,
manuals and other confidential or proprietary information, processes and formulae used in its
businesses or otherwise necessary for the conduct of its businesses (collectively, the “Company
Intellectual Property”), free and clear of all Liens except for Permitted Liens. Schedule
2.15(a) of the Company Disclosure Schedule contains as of the date hereof a complete and accurate
list of all registered trademarks and service marks and applications for registration of any marks,
domain name registrations, all registered copyrights and applications for registration of
copyrights, and all filed patent applications and issued patents relating to any of the Software
Programs or the business of the Company and its Subsidiaries, and owned by the Company or any of
its Subsidiaries. Schedule 2.15(a) of the Company Disclosure Schedule contains a complete and
accurate list as of the date hereof of all domain name registrations owned or held by or for the
Company and its Subsidiaries, the dates of each registration and renewal, the registrars, user
names and passwords for each registration, and any disputes regarding such domain names.
(b) In no instance has the eligibility of the Software Programs for protection under
applicable copyright law been forfeited to the public domain by omission of any required notice or
any other action.
(c) The Company has used reasonable efforts to ensure that the Software Programs, including
the Source Code, object code and related technical system documentation for the Software Programs
(i) have been treated as confidential and proprietary and (ii) have been disclosed by the Company
and its Subsidiaries only to (a) solely with respect to object code and documentation, authorized
customer and prospective customers, (b) employees and contractors who have had a “need to know” the
contents thereof in connection with the performance of their duties to the Company and its
Subsidiaries and who have executed written agreements requiring the recipient to keep the
information in strict confidence, or (c) solely with respect to object code and documentation,
potential investors and strategic business contacts who have executed written agreements requiring
the recipient to keep the information in confidence, and (d) escrow agents who have executed
written agreements requiring the recipient to keep the information in confidence. There has been
no violation by any Person that has resulted, or would result, in the loss of protection of any
trade secret or confidential information of the Company or its
21
Subsidiaries. Except as disclosed
in Schedule 2.15(c) of the Company Disclosure Schedule, with regards to the trade secrets of the
Company and its Subsidiaries, the Company and its Subsidiaries have taken at least the following
actions: (i) all employees, agents, consultants, contractors and any other party who have had
access to the Company’s confidential or proprietary information have been required to sign a
non-disclosure agreement; (ii) using secure servers, (iii) having unique password/protection; (iv)
having security on its premises; and (v) imposing confidentiality obligations with customers to
protect object code and documentation.
(d) Except as disclosed in Schedule 2.15(d) of the Company Disclosure Schedule, all Persons
who now, or have been during the three (3) year period prior to the date of this Agreement,
employees, agents, consultants and/or contractors of the Company or its Subsidiaries, who have
contributed to or participated in any material way in the conception and/or development of the
Software Programs, Technical Documentation (as hereinafter
defined), or Company Intellectual Property on behalf of the Company or its Subsidiaries have
executed nondisclosure agreements in the form provided to Buyer and either (1) have been a party to
a “work-for-hire” arrangement or agreements with the Company or its Subsidiaries in accordance with
applicable Law that has accorded the Company and its Subsidiaries exclusive ownership of all
tangible and intangible property thereby arising, or (2) have executed appropriate instruments of
assignment in favor of the Company and its Subsidiaries as assignee that have conveyed to the
Company and its Subsidiaries exclusive ownership of all tangible and intangible property thereby
arising, with the result that the Company is the sole and exclusive owner of, without limitation,
all right, title and interest in and to the Company Intellectual Property, including without
limitation all intellectual property rights, including rights under copyright, patent and trade
secrets laws, in and to the Software Programs. The Company and its Subsidiaries have taken
appropriate actions to protect the confidentiality of confidential information provided to it by
customers and other third-parties.
(e) The existence and the manufacture, importation into any country in the world, offering for
sale, license, lease, transfer, use, reproduction, distribution, modification or other exploitation
by the Company or its Subsidiaries of any Software Program or any other Company Intellectual
Property, as such Software Program or other Company Intellectual Property, as the case may be, is
or was, or is currently contemplated to be, sold, licensed, leased, transferred, used or otherwise
exploited by such Persons, does not and will not (1) infringe on any patent, trademark, copyright
or other intellectual property right of any Person, (2) constitute a misuse or misappropriation of
any trade secret, know-how, process, proprietary information or other intellectual property right
of any other Person or (3) entitle any other Person to any interest therein, or right to
compensation from the Company or its Subsidiaries, or any injunction or other court order affecting
the Software Programs or their copying, distribution, use, manufacture, sale, offering for sale,
and/or importing into any country in the world. None of the Company or any of its Subsidiaries has
received from any other Person any notification with respect to any matters of the type
contemplated by the immediately preceding sentence. Except as set forth in Schedule 2.15(e) of the
Company Disclosure Schedule, there are no restrictions on the Company’s or any of its Subsidiaries’
ability to manufacture, import, market, offer for sale, sell, license, lease, transfer, use,
reproduce, distribute, modify, disclose or otherwise exploit any Software Programs or any other
Company Intellectual Property. The Company has no Knowledge of any infringement, misappropriation
or other violation of any Software Program or other Company Intellectual Property by any third
Person.
22
(f) The Software Programs and the electronic data processing, information, communications,
telecommunications and computer systems that are used by the Company or its Subsidiaries in their
respective businesses (collectively, the “Technology Systems”) substantially operate in
accordance with their technical specifications and are adequate for the operation of the business
of the Company and its Subsidiaries as currently operated. Except as set forth in Schedule 2.17(b)
of the Company Disclosure Schedule, the Company and its Subsidiaries own or have the right to use
(subject to license agreements) all components of the Technology Systems. To the Company’s
Knowledge, there has not been any material malfunction with respect to any of the Technology
Systems since inception that has not been remedied or replaced without disruption to the business
of the Company and its Subsidiaries.
(g) Except for technical measures and features that are expressly documented in the Source
Code and that are designated to prevent unauthorized use of the Software Programs as disclosed in
Schedule 2.15(g) of the Company Disclosure Schedule, no portion of the Software Programs contains
any “back door,” “time bomb,” “Trojan horse,” “worm,” “drop dead device,” “virus” or other software
routines or hardware components designed to permit unauthorized access; to disable or erase
software, hardware, or data; or to perform any other such actions.
(h) Neither the Company nor any of its Subsidiaries has taken any action that could cause, or
has failed to take any action, the failure of which could cause, (i) any Source Code or trade
secret relating to the Software Programs or any of the Company Intellectual Property to be released
from an escrow or otherwise made available or disclosed to any Person or entity other than those
Persons described in Section 2.15(d), dedicated to the public or otherwise placed in the public
domain or (ii) any other adverse effect to the protection of the Software Programs under trade
secret, copyright, patent or other intellectual property laws.
(i) Neither the Company nor any of its Subsidiaries belongs to or has entered into any
contract with any organization whose primary activity is the development, preparation, and/or
promulgation of standards.
(j) Other than (i) the Company Intellectual Property licensed from Third Parties, (ii) the
Licenses and the Marketing Agreements (as hereinafter defined), or (iii) the rights of the OCS (as
hereinafter defined) as disclosed in Schedule 2.27 of the Company Disclosure Schedule, no Person
other than the Company or its Subsidiaries has any right or interest of any kind or nature in or
with respect to the Software Programs, the Technical Documentation or Company Intellectual
Property.
(k) Except for the Marketing Agreements or as set forth in Schedule 2.15(k) of the Company
Disclosure Schedule, the manufacture, offer for sale, importation, sale, license, lease, transfer,
use, reproduction, distribution, modification, disclosure or other exploitation by the Company or
its Subsidiaries of any version or release of any computer program included in the Software
Programs does not and will not obligate the Company or its Subsidiaries to pay any royalty, fee or
other compensation to any other Person other than OCS.
(l) The Software Programs and Technical Documentation contain no programming or materials in
which any third Person has a joint or common ownership interest, including any right or license
therein or in any intellectual property rights thereto. The Software Programs and
23
Technical
Documentation (as hereinafter defined) do not contain derivative works of any programming or
materials, the proprietary rights to which are not owned in their entirety by the Company or its
Subsidiaries.
(m) Schedule 2.15(m) of the Company Disclosure Schedule contains a complete and accurate list
as of the date hereof of all software libraries, compilers and other third-party software used in
the development, maintenance, support and/or enhancement of the Software Programs or otherwise used
in the ongoing business of the Company or any of its Subsidiaries but excluding any software
licensed under shrink-wrap or click-wrap agreements or preinstalled on computer equipment
(“Support Software”). Schedule 2.15(m) of the Company Disclosure Schedule contains a
complete and accurate list as of the date hereof of all license agreements for
the use of all such Support Software (the “In-Bound Licenses”) and, if any such
Support Software is not licensed, the basis of the use of such Support Software by the Company and
its Subsidiaries. All use of each of such Software Programs by the Company and its Subsidiaries
has been in compliance with the respective In-Bound License or other rights of use listed in
Schedule 2.15(m) of the Company Disclosure Schedule. Except as set forth in Schedule 2.15(m), all
rights or licenses of the Company are transferable to Buyer as contemplated herein without any fee,
consent, or other approval, which has not been obtained.
(n) The technical documentation of the Software Programs (the “Technical
Documentation”) includes the Source Code (with comments) for all Software Programs, as well as
any pertinent comments or explanation necessary to allow its reasonable use by Buyer’s skilled
personnel without reliance on the special knowledge or memory of others. The Technical
Documentation also includes any programs (including compilers), “workbenches,” tools and higher
level (or “proprietary”) languages necessary for the reasonable development, support, maintenance,
enhancement and implementation of the Software Programs.
(o) Except as expressly set forth on Schedule 2.15(o) of the Company Disclosure Schedule as of
the date hereof, none of the Software Programs have been developed using or use, embed or
incorporate in the Software Programs any computer software or programs that are subject to any
“open source,” “copyleft,” or other similar types of license terms, including but not limited to,
any GNU General Public License, GNU Lesser General Public Library, Library General Public License,
Lesser General Public License, Mozilla license, Berkeley Software Distribution license, Open Source
Initiative license, MIT, Apache, and/or Public Domain licenses, or any other “open source” or
freeware type licenses.
Section 2.16. Software Contracts.
(a) The Company has made available to Buyer all licenses of the Software Programs granted by
the Company or any of its Subsidiaries to other parties (the “Licenses”), other than
shrink-wrap or click-wrap agreements, and other than Licenses that accounted for less than
$100,000.00 of the Company’s consolidated revenues for the year ended December 31, 2005. All such
contracts constitute only end-user agreements, each of which grants the end user thereunder
principally the nonexclusive right and license to use an identified Software Program and related
user documentation in the form of software object code.
24
(b) Schedule 2.16(b) of the Company Disclosure Schedule sets forth, as of the date hereof, an
accurate and complete list of all contracts, agreements, licenses, or other commitments or
arrangements in effect with respect to the marketing, remarketing, distribution, licensing or
promotion of (i) the Software Programs or any other Technical Documentation or the Company
Intellectual Property by any independent salesperson, distributor, sublicensor or other remarketer
or sales organization or (ii) any third party’s software products by the Company or any of its
Subsidiaries (the “Marketing Agreements”).
(c) Schedule 2.16(c) of the Company Disclosure Schedule sets forth an accurate and complete
list as of the date hereof of all contracts, agreements, licenses, or other commitments or
arrangements that (i) require or relate to any escrow, disclosure, and/or provision or
transfer, whether or not contingent on any event, of all or any portion of any Source Code of any
of the Software Programs or (ii) grant to any third Person any exclusive rights, whether or not
limited in time or territory, with respect to any of the Software Programs and/or any of the
Company Intellectual Property. None of the Source Code of any of the Software Programs has been
released or provided by an escrow agent or the like to any Persons.
Section 2.17. Certain Contracts.
(a) Schedule 2.17(a) of the Company Disclosure Schedule contains a complete and accurate list,
as of the date hereof, of each of the following contracts, agreements or instruments (whether oral
or written), other than In-Bound Licenses, Licenses, or Marketing Agreements, to which the Company
or any of its Subsidiaries is a party or to which any of them or any of their properties is bound,
copies of each of which have been provided to Buyer:
(i) any agreement involving payments by or to the Company or any of its Subsidiaries in
excess of $100,000;
(ii) any agreement under which the Company or any of its Subsidiaries has agreed to
indemnify any third Person in any manner, including with respect to, or to share the Tax
liability of any third Person, excluding pursuant to commercial agreements with respect to
the sale, licensing of products or the provision of services by the Company;
(iii) any agreement or commitment to make a capital expenditure or to purchase a
capital asset in excess of $100,000 by or on behalf of the Company or any of its
Subsidiaries;
(iv) any power of attorney (other than powers of attorney given in the ordinary course
of business with respect to routine export, Tax or securities matters);
(v) any bond, indenture, note, loan or credit agreement or other agreement relating to
the borrowing of money or to the direct or indirect guarantee or assumption of the
obligations of any other Person for borrowed money;
(vi) any agreement limiting or restricting the freedom of the Company or any of its
Subsidiaries (A) to engage in any line of business, (B) to own, operate, sell, transfer,
pledge or otherwise dispose of or encumber any asset, (C) to compete with any Person or (D)
to engage in any business or activity in any geographic region;
25
(vii) any lease or similar agreement under which the Company or any of its Subsidiaries
is the lessor of, or makes available for use by any third Person, any tangible personal
property owned by the Company or any of its Subsidiaries, in each case for an annual rent in
excess of $50,000;
(viii) any joint venture or partnership (or other ownership arrangement) agreements;
(ix) any agreement that contains restrictions with respect to the payment of dividends
or any other distribution in respect of such Person’s Shares or the purchase, redemption or
other acquisition of any such Shares;
(x) any agreement relating to the acquisition or divestiture by the Company or any of
its Subsidiaries of Shares, assets or business of any Person, which provides for
consideration or payments in excess of $100,000 and is not made in the ordinary course of
business;
(xi) any agreement containing provisions applicable upon a change of control of the
Company or providing for retention or severance payments;
(xii) any exclusive license, sales, distributorship or similar agreement relating to
the products sold or services provided by such Person, including without limitation the
Software Programs that provide for any exclusivity as to time, territory, customer(s), or
field of use;
(xiii) any employment, consulting, management or independent contractor agreement
between the Company or any of its Subsidiaries and any Person providing for annual payments
to such Person in excess of $100,000;
(xiv) any exclusive license to any intellectual property rights of or to the Company or
any of its Subsidiaries;
(xv) any agreement or commitment presently in effect between the Company or any of its
Subsidiaries, on the one hand, and the present or former officers, directors or holders of
5% or more of the outstanding Shares of the Company or any of its Subsidiaries, on the other
hand; and
(xvi) any outstanding loan, advance or investment by the Company or any of its
Subsidiaries to or in any Person, or any agreement or commitment relating to the making of
any such loan, advance or investment (excluding trade receivables and advances to employees
for normally incurred business expenses each arising in the ordinary course of business
consistent with past practice).
(b) Except as set forth in Schedule 2.17(b) of the Company Disclosure Schedule, with respect
to each Contract (as defined below): (i) as of the date hereof, such Contract is in full force and
effect and is valid and enforceable in accordance with its terms, except as enforcement hereof may
be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other
similar Laws relating to or affecting the enforcement of creditors’ rights
26
generally and legal
principles of general applicability governing the availability of equitable remedies (whether
considered in a proceeding in equity or at law or under applicable legal codes; (ii) neither the
Company nor any of its Subsidiaries is in breach or default thereof, nor have the Company or any of
its Subsidiaries received notice that the Company or any of its Subsidiaries is in breach or
default thereof; and (iii) to the Company’s Knowledge, no event has occurred which, with notice, or
lapse of time or both, would constitute a breach or default thereof by the Company or any of its
Subsidiaries or, to the Knowledge of the Company, by any other party thereto or would permit
termination, modification, or acceleration thereof by any other
party thereto. Except as set forth in Schedule 2.17(b) of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries is a party to any oral contract, agreement, or
other arrangement which, if reduced to written form, would be required to be listed in Schedule
2.17(a) of the Company Disclosure Schedule under the terms of this Section 2.17. The Company has
provided to Buyer an accurate description of each oral contract, agreement or other arrangement set
forth in Schedule 2.17(b) of the Company Disclosure Schedule.
(c) Each contract, arrangement, commitment or understanding of any type or form required to be
set forth in Schedules 2.15(a), 2.15(m), 2.15(o), 2.16(a), 2.16(b), 2.16(c), 2.17(a) or 2.17(b) of
the Company Disclosure Schedule, whether or not set forth in such Schedules, is referred to herein
as a “Contract.”
Section 2.18. Related Party Transactions. Except as set forth in Schedule 2.18 of the
Company Disclosure Schedule, to the Knowledge of the Company, no officer, director or holder of 5%
or more of the outstanding Shares of the Company or any of its Subsidiaries (or any Affiliate of
such officer, director or holder) owns or holds, directly or indirectly, any interest in (excepting
holdings solely for passive investment purposes of securities of publicly held and traded entities
constituting less than 5% of the equity of any such entity), or is an officer, director, employee
or consultant of any Person that is, a competitor, lessor, lessee, customer or supplier of the
Company or any of its Subsidiaries or which conducts a business similar to any business conducted
by the Company or any of its Subsidiaries. To the Knowledge of the Company, no officer, director
or holder of 5% or more of the outstanding Shares of the Company or any of its Subsidiaries (or any
Affiliate of such officer, director or holder) (or equivalent position) of the Company or any of
its Subsidiaries (a) has any claim, charge, action or cause of action against the Company or any of
its Subsidiaries, except for claims for reasonable unreimbursed travel or entertainment expenses,
accrued vacation pay or accrued salary and bonus, accrued benefits under any employee benefit plan
existing on the date hereof, (b) has made, on behalf of the Company or any of its Subsidiaries, any
payment or commitment to pay any commission, fee or other amount to, or to purchase or obtain or
otherwise contract to purchase or obtain any goods or services from, any other Person of which any
officer or director of the Company or any of its Subsidiaries is a partner, member or stockholder
(except holdings solely for passive investment purposes of securities of publicly held and traded
entities constituting less than 5% of the equity of any such entity), (c) owes any money to the
Company or any of its Subsidiaries or (d) has any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the business of the Company or any of its
Subsidiaries.
Section 2.19. Accounts Receivable. Except as set forth in Schedule 2.19 of the Company
Disclosure Schedule, all outstanding accounts, notes and loans receivable reflected on the most
recent balance sheet included in the Financial Statements or accrued after the date
27
thereof and
prior to the Closing are due and valid claims against account debtors for goods or services
delivered or rendered, collectible in accordance with past experience, and subject to no defenses,
offsets or counterclaims, except to the extent reserved against on the most recent balance sheet
included in the Financial Statements in accordance with GAAP. Neither the Company nor any of its
Subsidiaries has any obligation
pursuant to any rule or regulation of any Governmental Authority (whether in bankruptcy or
insolvency proceedings or otherwise) to repay, return, refund or forfeit any receivables previously
collected. Except as set forth in Schedule 2.19 of the Company Disclosure Schedule, all receivables
of the Company and its Subsidiaries arose in the ordinary course of business, none of the obligors
of such receivables have refused or given notice that it refuses to pay the full amount thereof and
none of the obligors of such receivables is an Affiliate of the Company or any of its Subsidiaries.
Except as set forth in Schedule 2.19 of the Company Disclosure Schedule, no receivables of the
Company or its Subsidiaries are subject to prior assignment or Lien other than Permitted Liens.
Except as reflected on the most recent balance sheet included in the Financial Statements, neither
the Company nor any of its Subsidiaries has incurred any liabilities to customers for discounts,
returns, promotional allowances or otherwise.
Section 2.20. Bank Accounts; Investments; Derivative Transactions.
(a) Schedule 2.20(a) of the Company Disclosure Schedule sets forth as of the date hereof the
names and addresses of all banks, trust companies, savings and loan associations and other
financial institutions at which the Company or any of its Subsidiaries maintains an account,
deposit, safe deposit box, lock box or other arrangement for the collection of accounts receivable
or line of credit or other loan facility relationship or accounts of any nature and the names of
all Persons authorized to draw thereon, make withdrawals therefrom or have access thereto.
(b) Schedule 2.20(b) of the Company Disclosure Schedule sets forth as of the date hereof an
accurate and complete list of all deposit accounts, debt or equity securities and other investments
owned, Beneficially or of record, by the Company and any of its Subsidiaries
(“Investments”). The Company and its Subsidiaries have good and marketable title to all of
the Investments.
(c) Neither the Company nor any of its Subsidiaries has any outstanding obligations in respect
of a derivative transaction including, but not limited to, any foreign exchange transaction.
Section 2.21. Improper Payments. Neither the Company nor any of its Subsidiaries has, nor
has any director, officer or employee of the Company or any of its Subsidiaries, directly or
indirectly used funds or other assets of the Company or any of its Subsidiaries, or made any
promise or undertaking in such regards, for (a) illegal contributions, gifts, entertainment or
other expenses relating to political activity, (b) illegal payments to or for the benefit of
governmental officials or employees, whether domestic or foreign, (c) illegal payments to or for
the benefit of any Person, firm, corporation or other entity, or any director, officer, employee,
consultant, agent or representative thereof, (d) the establishment or maintenance of a secret or
unrecorded fund, or (e) participated in or co-operated with an international boycott as defined in
Section 999 of the Code.
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Section 2.22. Environmental, Health and Safety. The Company and its Subsidiaries have
complied in all material respects with all applicable Laws of Governmental Authorities concerning
the environment, public health and safety, and employee health and safety, and no claim, action,
suit, litigation, proceeding or investigation has been filed or commenced against the Company or
any of its Subsidiaries alleging any failure to comply with any such Laws. Neither the Company nor
any of its Subsidiaries has any liability under any applicable Law of any Governmental Authority or
common law remedy concerning the release or threatened release of hazardous substances, public
health and safety, or pollution or protection of the environment. To the Company’s Knowledge,
neither the Company nor any of its Subsidiaries has exposed any Person to any substance or
condition that could form the basis for any liability for any illness of or personal injury to such
Person.
Section 2.23. Customer List. The Company has provided to Buyer a complete and accurate
list of all customers of the Company and its Subsidiaries since January 1, 2005 and until December
31, 2005 which generated revenues in excess of $100,000 during such period. Except as set forth in
Schedule 2.23 of the Company Disclosure Schedule as of the date hereof, none of such customers has
notified the Company that it has terminated or intends to terminate its Licenses with the Company
or any of its Subsidiaries.
Section 2.24. Brokers. Except for Xxxxxx Xxxxxx Partners, no broker, finder or investment
banker is entitled to any brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or on behalf of the
Company or any of its Subsidiaries.
Section 2.25. Product Liability. Except as listed on Schedule 2.25 of the Company
Disclosure Schedule, the Company and its Subsidiaries have not given or made any warranties to
third parties with respect to any products sold by them, except for the warranties imposed by the
provisions of the Licenses and applicable Law. Except as listed on Schedule 2.25 of the Company
Disclosure Schedule, the Company has no Knowledge of any present claim against the Company not
fully covered by insurance for product liability on account of any express or implied warranty.
Section 2.26. Books and Records. All books and records relating to the ownership and
operation of the Company and its Subsidiaries are located at the premises of the Company and its
Subsidiaries, have been maintained substantially in accordance with applicable Law, and comprise
all of the books and records relating to the ownership and operation of the Company and its
Subsidiaries and their respective assets.
Section 2.27. Grants and Benefits. Schedule 2.27 of the Company Disclosure Schedule
provides a complete list as of the date hereof of all pending and outstanding grants, incentives
and subsidies, and applications therefor
(collectively, “Grants”) from the government of the State of Israel or any agency thereof,
or from any foreign governmental or administrative agency, granted to the Company or any of its
Subsidiaries, including, without limitation, (i) Approved Enterprise Status from the Investment
Centre and (ii) grants from the Office of the Chief Scientist (the “OCS”). The Company
provided to Buyer, prior to the date hereof, true and correct copies of all documents evidencing
Grants submitted by the Company or any of its Subsidiaries and all letters of approval, and
supplements thereto, granted to the Company or any of its Subsidiaries. Schedule 2.27 of the
Company Disclosure Schedule includes the aggregate amounts of each Grant, and the aggregate
outstanding obligations thereunder of the Company or any
29
of its Subsidiaries with respect to
royalties, or the outstanding amounts to be paid by the OCS to the Company or any Subsidiary.
Except as set forth on Schedule 2.27 of the Company Disclosure Schedule, the Company or such
Subsidiary, as appropriate, is in compliance, in all material respects, with the terms and
conditions of their respective Grants and has duly fulfilled, in all material respects, all the
undertakings relating thereto. The Company is not aware of any event or other set of circumstances
which might lead to the revocation or material modification of any of the Grants.
Section 2.28. No Misleading Statements. The representations and warranties included in
this Article II along with the Company Disclosure Schedule, when taken together, do not include any
untrue statement of a material fact and do not omit to state any material fact necessary to make
the statements contained herein or therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
REGARDING BUYER AND GUARANTOR
REPRESENTATIONS AND WARRANTIES
REGARDING BUYER AND GUARANTOR
Buyer and Guarantor hereby represent and warrant to the Company that as of the date hereof and
as of the Closing Date:
Section 3.01. Organization and Qualification. Buyer is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Israel and Guarantor is a
corporation duly organized, validly existing and in good standing under the Laws of the State of
Delaware.
Section 3.02. Authority. Buyer and Guarantor have all requisite corporate power and
authority to execute and deliver this Agreement, to perform their obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of this Agreement by
Buyer and Guarantor and the consummation by Buyer and Guarantor of the transactions contemplated
hereby have been duly authorized by all necessary corporate action and no other corporate
proceedings on the part of Buyer or Guarantor are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Buyer and Guarantor and, assuming the due authorization, execution and delivery hereof
by the Company, constitutes the legal, valid and binding obligation of Buyer and Guarantor
enforceable against Buyer and Guarantor in accordance with its terms, except as enforcement hereof
may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other
similar Laws relating to or affecting the enforcement of creditors’ rights generally and legal
principles of general applicability governing the availability of equitable remedies (whether
considered in a proceeding in equity or at law or under applicable legal codes).
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Section 3.03. No Conflict; Required Filings and Consents.
(a) Assuming that Buyer and Guarantor Approvals (as defined in Section 3.03(b)) have been
obtained and the filings and notifications described in Section 3.03(b) have been made, the
execution and delivery of this Agreement by Buyer and Guarantor does not, and the consummation of
the transactions contemplated hereby will not (i) conflict with or violate the charters, bylaws or
equivalent organizational documents, in each case as amended or restated, of Buyer and Guarantor,
(ii) conflict with or violate any Laws applicable to Buyer or Guarantor or any of Buyer’s or
Guarantor’s Subsidiaries or by which any of their respective assets or properties is bound or
subject, or (iii) result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or require payment under, or result in the creation of
a Lien on any of the properties or assets of Buyer or Guarantor or any of Buyer’s or Guarantor’s
Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Buyer or Guarantor or any of Buyer’s
or Guarantor’s Subsidiaries is a party or by or to which Buyer or Guarantor or any of Buyer’s or
Guarantor’s Subsidiaries or any of their respective assets or properties is bound or subject,
except for any such conflicts or violations described in clause (ii) or breaches, defaults, events,
rights of termination, amendment, acceleration or cancellation or Liens described in clause (iii)
that would not reasonably be expected to materially and adversely effect the ability of Buyer or
Guarantor to perform its obligations under this Agreement.
(b) The execution and delivery of this Agreement by Buyer and Guarantor does not, and the
consummation of the transactions contemplated hereby will not, require Buyer or Guarantor or any of
Buyer’s or Guarantor’s Subsidiaries to obtain any consent, license, permit, approval, waiver,
authorization or order of (the “Buyer and Guarantor Approvals”), or to make any filing with
or notification to, any Governmental Authority or third Person, except where the failure to obtain
such Buyer and Guarantor Approvals, or to make such filings or notifications, would not reasonably
be expected to materially and adversely effect the ability of Buyer or Guarantor to perform its
obligations under this Agreement.
ARTICLE IV
COVENANTS
COVENANTS
Section 4.01. Affirmative Covenants.
(a) The Company hereby covenants and agrees that, prior to, or conditioned upon, the Closing,
unless otherwise expressly contemplated by this Agreement or consented to in writing by Buyer, it
will, and will cause each of its Subsidiaries to (i) operate its business in the usual
and ordinary course consistent with past practices and (ii) use commercially reasonable
efforts to preserve substantially intact its business organization, maintain its rights and
franchises, retain the services of its respective officers and key employees and consultants and
maintain its relationships and goodwill with its suppliers, customers, distributors, licensors,
licensees and other Persons doing business with it.
(b) The Company hereby covenants and agrees that prior to, or conditioned upon, the Closing,
it shall take all steps necessary and appropriate under the terms of the Option Plans and
31
applicable Laws to cause the exercise, cancellation or termination (as applicable), effective no
later than the Closing Date, of all the outstanding rights to acquire Shares of the Company
pursuant to the Option Plans (such rights, collectively or individually as the context requires
“Options” or each an “Option”). In this regard, at the appropriate time(s) prior
to the Closing, in accordance with the terms of the Option Plans (as may be modified to provide for
the Cashless Exercise set forth below) and applicable Law, the Company shall take the following
steps: (1) provide all notice and exercise rights required to be provided prior to the Closing to
the holders of rights to acquire the Company’s Shares under the Option Plans (the “Option
Holders”) pursuant to the respective terms of such Option Plans and applicable Laws, (2) obtain
the Option Holders’ consent to the termination of all Options and Option Plans to the extent
required under the terms of the respective Option Plans and/or applicable Laws or otherwise if
deemed appropriate by the Company, and (3) take any and all such other steps as may be required
under the terms of the Option Plans and applicable Laws or as the Company shall deem advisable to
effect such exercise, cancellation or termination. Any Options that have not been exercised prior
to the Closing and where the Purchase Price Per Share (as such amount is calculated pursuant to
Section 1.03(b) of this Agreement) exceeds the per Share exercise price shall be subjected to
cashless exercise in connection with the Closing (such cashless exercise, the “Cashless
Exercise” and all Option Holders who shall have exercised their Options pursuant thereto, the
“Exercising Option Holders”). Upon such Cashless Exercise each Option shall be deemed to
have been exercised for the number of Shares of the Company covered by such Option with the
exercise price under the Option reduced from the Purchase Price Per Share as set forth in
Section1.03. Any notices and exercise rights may be made contingent on the occurrence of the
Closing and shall apply to the Options to the extent vested under the terms of the Option Plans and
any applicable agreements thereunder taking into account the transactions contemplated by this
Agreement. The Company further covenants and agrees that it will cause the appropriate Taxes to be
withheld and paid (unless appropriate exemptions shall have been obtained by the Option Holder, as
established to the reasonable satisfaction of the Company and Buyer), and it will comply with all
reporting requirements to Governmental Authorities and Option Holders, with regard to any income
that may be realized upon the exercise of any and all of the Options. The Company shall cause each
Option Plan to be terminated effective as of the Closing Date and immediately following the
exercise, termination and/or cancellation of the Options contemplated by the preceding provisions
of this paragraph. The Company shall take any such other steps as may be necessary or appropriate
to ensure that immediately prior to the Closing the holders of all then outstanding Options shall
have exercised their Options on a cashless basis and the only rights of the Option Holders in
respect of their Options outstanding immediately prior to the Closing shall be entitled to receive,
pursuant to Section 1.03 of this Agreement, the Purchase Price per Share, net of the exercise
price, for each Share of the Company isuable pursuant to their Cashless Exercise.
(c) The Company hereby covenants and agrees that at least three (3) Business Days prior to the
Closing, the Company shall hold a general or special meeting of its shareholders to ratify the
appointment of the Sellers’ Representative.
Section 4.02. Negative Covenants. Except as expressly contemplated by this Agreement or in Schedule 4.02
of the Company Disclosure Schedule, or otherwise consented to in writing by either Xxxxx Xxxxxxx,
Xxxxxx Xxxxxxxxxx or Xxxx XxXxxxxx on behalf of Buyer (which consent shall not be unreasonably
withheld), from the date of this Agreement until the Closing,
32
the Company shall not do, and the
Company will not permit any of its Subsidiaries to do, any of the foregoing:
(a) (i) increase the compensation payable to or to become payable to or grant any bonuses to
any present or former director, consultant, officer or employee of the Company or any of its
Subsidiaries; (ii) grant any severance or termination pay; (iii) enter into or amend any
employment, consulting, severance, termination or other similar agreement or arrangement with any
present or former director, consultant, officer or employee of the Company or any of its
Subsidiaries; (iv) establish, adopt or enter into any employee benefit plan or arrangement; (v)
amend, or take any other actions to increase the amount of, or accelerate the payment or vesting
of, any benefit or amount under any Benefit Plan or any of the plans, programs, agreements,
policies or other arrangements described in Section 2.10(d) of this Agreement or (vi) make any loan
to any present or former director, consultant, officer or employee of the Company or any of its
Subsidiaries; except in each case (1) as required by any contract, agreement or other legal
obligation of the Company or any of its Subsidiaries existing on the date of this Agreement or (2)
as required by applicable Law;
(b) declare, set aside or pay any dividend on, or make any other distribution in respect of,
any outstanding Shares of the Company or any of its Subsidiaries, except for dividends or other
distributions by a wholly owned Subsidiary of the Company to the Company or another wholly owned
Subsidiary of the Company;
(c) except in connection with any cancellation or termination of Options as contemplated
pursuant to this Agreement, (i) directly or indirectly redeem, purchase or otherwise acquire, or
offer to redeem, purchase or otherwise acquire, any outstanding Shares of the Company or any of
its Subsidiaries; (ii) effect any reorganization or recapitalization; or (iii) split, combine or
reclassify any of the Shares of the Company or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for, such Shares;
(d) except in connection with the grant or exercise of Options as contemplated pursuant to
this Agreement, offer, issue, deliver, grant or sell, or authorize or propose the offering,
issuance, delivery, grant or sale (including the grant of any Liens or limitations in voting
rights) of, (A) any Shares of the Company or any of its Subsidiaries or (B) any securities
convertible into or exchangeable for, or any rights, warrants or options to acquire any such
Shares;
(e) (i) merge, consolidate, combine or amalgamate with any Person or dissolve or liquidate,
(ii) acquire or agree to acquire, by merging or consolidating with, purchasing Shares of, or
purchasing all or a portion of the assets of, or in any other manner, any business or any Person or
otherwise acquire or agree to acquire any assets of any other Person (other than the purchase of
assets from suppliers or vendors in the ordinary course of business consistent with past practice)
or (iii) make any loans, advances or capital contributions to, or investments in, any Person except
for loans, advances and capital contributions (A) to any wholly owned Subsidiary of the Company,
(B) pursuant to and in accordance with the terms of any legal obligation existing as of the date of
this Agreement, or (C) to employees for advances made in the ordinary course of business and
consistent with past practices;
33
(f) sell, transfer, lease, exchange or otherwise dispose of, whether by merging, consolidating
or in any other manner, or grant any Lien (other than Permitted Liens) with respect to any
properties or assets of the Company or any of its Subsidiaries (other than through licensing
permitted by Section 4.02(g) hereof), except for sales of (i) inventories and assets in the
ordinary course of business consistent with past practice and (ii) worn out or obsolete property in
the ordinary course of business consistent with past practice;
(g) (i) transfer, assign, pledge, convey, or grant any ownership interest or any exclusive
license or rights to any Company Intellectual Property; (ii) grant any material nonexclusive
licenses to any Company Intellectual Property except those in the ordinary course of business
consistent with past practice; (iii) take any action that would, or fail to take any action the
failure of which would, directly or indirectly cause any of the Company Intellectual Property to
enter the public domain or otherwise adversely affect the Company Intellectual Property, or its
validity or enforceability; (iv) license to any Person, or otherwise extend, amend or modify any
Person’s rights to, any of the Company Intellectual Property or any of the Software Programs, other
than in the ordinary course of business consistent with past practice; or (v) disclose or provide
any of the Source Code for any Software Programs to anyone except employees, escrow agents and
contractors of the Company and its Subsidiaries who have signed a written agreement imposing a duty
of confidence with respect to such Source Code; (vi) use, whether in development or otherwise,
embed or incorporate in the Software Programs any computer software or programs that are subject to
any “open source,” “copyleft,” or other similar types of license terms, including but not limited
to, any GNU General Public License, GNU Lesser General Public Library, Library General Public
License, Lesser General Public License, Mozilla license, Berkeley Software Distribution license,
Open Source Initiative license, MIT, Apache, and/or Public Domain licenses, or any other “open
source” or freeware type licenses that are not already licensed and being used or expand the use of
any of the above licenses; (vii) place into escrow any additional Source Code other than in the
ordinary course of business; or (viii) permit any Source Code to be released from an escrow;
(h) adopt or propose any amendments to the Company’s or its Subsidiaries’ charter, bylaws or
similar organizational documents;
(i) change any of the Company’s methods of accounting in effect at December 31, 2005, except
to the extent required to comply with GAAP, (ii) make or rescind any election relating to Taxes,
(iii) settle or compromise any material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes or (iv) change any of the Company’s methods of reporting income or deductions for Tax purposes from those employed
in the preparation of the Tax returns for the taxable year ending December 31, 2004, except, in
each case, as may be required by Law;
(j) incur, create, assume, guarantee or otherwise become liable for any obligation for
borrowed money, purchase money indebtedness or any obligation of any other Person, whether or not
evidenced by a note, bond, debenture, guarantee, indemnity or similar instrument, except for (i)
additional borrowings under credit lines existing at the date of this Agreement not exceeding
$100,000 in the aggregate, (ii) trade payables incurred in the ordinary course of business
consistent with past practice, and (iii) indebtedness to any wholly owned Subsidiary of the
Company;
34
(k) make or commit to make any capital expenditures in excess of $250,000 in the aggregate;
(l) pay, discharge, settle or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise) prior to the same being due in excess of
$200,000 in the aggregate, other than pursuant to mandatory terms of any agreement, understanding
or arrangement as in effect on the date hereof;
(m) enter into any material arrangement or contract with any third Person that provides for an
exclusive arrangement with that third Person or is substantially more restrictive on the Company or
any of its Subsidiaries or substantially less advantageous to the Company or any of its
Subsidiaries than arrangements or contracts existing on the date hereof;
(n) (A) enter into, renew, modify, amend or terminate any Contract, or waive, delay the
exercise of, release or assign any material rights or claims thereunder except in the ordinary
course of business consistent with past practice or (B) enter into or amend in any material manner
any contract, agreement or commitment with any former or present director, consultant, officer or
employee of the Company or any of its Subsidiaries or with any Affiliate of any of the foregoing
Persons except to the extent permitted under Section 4.02(a);
(o) take or cause to be taken any action that could reasonably be expected to delay or
adversely affect the consummation of the transactions contemplated hereby or that could reasonably
be expected to result in any of the representations and warranties contained in Article II becoming
untrue or inaccurate in any material respect;
(p) enter into any new line of business; or
(q) agree in writing or otherwise to do any of the foregoing.
Section 4.03. Access and Information. The Company shall, and the Company shall cause each of its
Subsidiaries to (i) afford to Buyer and Buyer’s officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives (collectively, the “Buyer
Representatives”) reasonable access at reasonable times upon reasonable prior notice, to the
officers, employees, agents, properties, offices, facilities, books and records of the Company and
its Subsidiaries and (ii) furnish promptly to Buyer and the Buyer Representatives such information concerning the business, properties,
contracts, records and personnel (including, without limitation, financial, operating and other
data and information) of the Company and each of its Subsidiaries as may be reasonably requested,
from time to time, by Buyer. Buyer shall treat all information obtained from the Company as
Proprietary Information (as such term is defined in the Confidentiality Agreement) and Buyer shall
continue to honor, and cause the Buyer Representatives to honor, its obligations thereunder. Buyer
shall not contact or initiate or engage in discussions relating to the transactions contemplated by
this Agreement with any customer, vendor or lessor of the Company without the prior written consent
of the Company.
35
ARTICLE V
ADDITIONAL AGREEMENTS
ADDITIONAL AGREEMENTS
Section 5.01. Appropriate Action; Consents; Filings.
(a) The Company and Buyer will each cooperate with each other and use (and the Company will
cause each of its Subsidiaries to use) commercially reasonable efforts (i) to take, or to cause to
be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable
under the Agreement, applicable Law or otherwise to consummate and make effective the transactions
contemplated by this Agreement, including, but not limited to, soliciting and encouraging each
holder of Shares to execute and return the Acceptance promptly, (ii) to obtain from any
Governmental Authorities any consents, licenses, permits, waivers, approvals, authorizations or
orders required to be obtained and to make any filings with or notifications or submissions to any
Governmental Authority (other than described in the following clause (iii)) required to be made by
such Person in connection with the authorization, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, (iii) to make all necessary filings, and make
any other required submissions, with respect to this Agreement, that are necessary, proper or
advisable under applicable Law or otherwise are reasonably required to obtain, the Company
Approvals set forth in Schedule 2.05(b) to the Company Disclosure Schedule and the Buyer Approvals.
(b) The Company and Buyer agree to cooperate and use commercially reasonable efforts (and the
Company will cause each of its Subsidiaries to cooperate and use commercially reasonable efforts)
to contest and resist, any action, including legislative, administrative or judicial action, and to
have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order
(whether temporary, preliminary or permanent) of any Governmental Authority that is in effect and
that restricts, prevents or prohibits the consummation of the transactions contemplated by this
Agreement. If any action, request or motion for an order of a Court of competent jurisdiction
ruling against the Compulsory Acquisition is filed by any Dissenting Holder(s), then the Company
hereby covenants and agrees that it will contest, resist, challenge and defend against any such
action, request or motion, and if such an order is imposed, then the Company shall use all
commercially reasonable efforts to have the order removed prior to the date set forth in Section
8.01(f). Expenses related thereto or arising therefrom shall be borne by Sellers and not by the
Company, and all fees, costs and awards recovered therefrom shall belong to Sellers.
Notwithstanding anything herein to the contrary, nothing in this Agreement will be deemed to require Buyer or any of its Subsidiaries to agree to, or permit
the Company or any of its Subsidiaries, to agree to any divestiture (including, without limitation,
through a licensing agreement) of any business, assets or property, or the imposition of any
limitation on the ability of any of them to conduct their business or to own or exercise control of
such business, assets or properties.
(c) The Company will give (and the Company will cause any applicable Subsidiary of the Company
to give) any notices to third Persons, and use (and the Company will cause any applicable
Subsidiary of the Company to use) commercially reasonable efforts to obtain any consents from third
Persons (A) necessary, proper or advisable to consummate the transactions contemplated by this
Agreement, (B) otherwise required under any contracts, licenses, leases or other agreements in
connection with the consummation of the transactions contemplated hereby
36
or (C) required to prevent
a Material Adverse Effect from occurring prior to or after the Closing. If any party fails to
obtain any such consent from a third Person, the Company will (and the Company will cause each of
its Subsidiaries to) use commercially reasonable efforts and will take any such actions reasonably
requested by Buyer, to limit the adverse effect upon the Company and its Subsidiaries and Buyer,
and their respective businesses, from the failure to obtain such consent.
(d) The Company will give prompt notice to Buyer upon becoming aware of (i) any notices,
complaints, investigations or hearings (or communications indicating that the same may be
contemplated) of any Governmental Authorities with respect to the transactions contemplated hereby
or the business of the Company or any of its Subsidiaries, (ii) any notices or other communications
from any third Persons alleging that the consent of such Person is or may be required with respect
to the transactions contemplated hereby, (iii) the institution or the threat of material litigation
involving the Company or any of its Subsidiaries, or (iv) any event or condition that might
reasonably be expected to cause any of the representations or warranties set forth in Article II
not to be true and correct at the Closing or of any other change that might reasonably be expected
to cause a breach of the covenants of the Company under this Agreement or to delay or impede the
consummation of the transactions contemplated by this Agreement or the ability of the Company to
fulfill its obligations set forth herein. No delivery of any notice pursuant to clause (iv) of
this Section 5.01(d) shall cure any breach of any representation or warranty of the Company or
otherwise limit or affect the remedies available hereunder to Buyer.
(e) Buyer and Guarantor will give prompt notice to the Company upon becoming aware of (i) any
notices, complaints, investigations or hearings (or communications indicating that the same may be
contemplated) of any Governmental Authorities with respect to the transactions contemplated hereby,
or (ii) any notices or other communications from any third Persons alleging that the consent of
such Person is or may be required with respect to the transactions contemplated hereby, or (iii)
any event or condition that might reasonably be expected to cause any of the representations or
warranties set forth in Article III not to be true and correct at the Closing or that might
reasonably be expected to cause a breach of the covenants of Buyer or Guarantor under this
Agreement, in each case delaying or impeding the consummation of the transactions contemplated by
this Agreement or the ability of Buyer or Guarantor to fulfill their obligations set forth herein.
Section 5.02. Public Announcements. The Company shall consult with Buyer and Buyer shall consult with
the Company before issuing any press release or otherwise making any public statements with respect
to this Agreement and the transactions contemplated hereby and shall not issue any such press
release or make any such public statement prior to such consultation, except as may be required by
Law.
Section 5.03. Further Assurances. In case at any time any further action is necessary or desirable to
carry out the purposes of this Agreement, each of the parties hereto will take such further action
(including the execution and delivery of such further instruments and documents) as any other party
reasonably may request, all at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification thereof under Article VII).
Section 5.04. No Solicitation.
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(a) The Company and each of its Subsidiaries and Affiliates shall not, directly or indirectly,
through any officer, director, employee, representative or agent of the Company or any of its
Subsidiaries or otherwise (and it shall cause such officers, directors, employees, representatives
and agents not to, directly or indirectly), (i) solicit, initiate, resume, facilitate or encourage
any inquiries or proposals that constitute, or could reasonably be expected to lead to, an
Acquisition Proposal (as defined below) or (ii) engage in negotiations or discussions concerning,
or provide any non-public information or access to its employees or facilities to any Person or
enter into any agreement relating to, any Acquisition Proposal. For purposes of this Agreement,
“Acquisition Proposal” means any inquiry, proposal or offer from any Person relating to any
direct or indirect acquisition or purchase of any assets or business that constitutes 20% or more
of the net revenues, net income or the assets of the Company and its Subsidiaries, taken as a
whole, or 20% or more of any class of equity securities of the Company or any of its Subsidiaries,
any tender offer or exchange offer that, if consummated, would result in any Person beneficially
owning 20% or more of any class of equity securities of the Company or any of its Subsidiaries, or
any merger, consolidation, business combination, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its Subsidiaries, other than the transactions
contemplated by this Agreement.
(b) The Company agrees that as of the date of this Agreement, it and its Subsidiaries shall
immediately cease and cause to be terminated any existing, direct or indirect, activities,
discussions or negotiations with any Person (other than with Buyer or its representatives)
conducted heretofore with respect to any Acquisition Proposal. The Company shall notify Buyer
promptly (but in any case within twenty-four (24) hours) after receipt by them (or their advisors)
of any Acquisition Proposal or any request for nonpublic information in connection with an
Acquisition Proposal or for access to the properties, books or records of the Company or any of its
Subsidiaries by any Person that informs the Company that it is considering making, or has made, an
Acquisition Proposal. The Company shall provide Buyer the material terms of any proposal or
inquiry that it may receive in respect of any such Acquisition Proposal or inquiry, including the
identity of the Person making the Acquisition Proposal or inquiry, and shall furnish to Buyer a
copy of any such proposal or inquiry, if it is in writing, or a written summary of any such proposal or inquiry, if it is not in writing, and such other details of the proposal or
inquiry as Buyer may reasonably request. The Company shall keep Buyer fully informed on a current
basis (and in any event within 24 hours) of all developments and the status of any Acquisition
Proposal or any request for nonpublic information in connection with any Acquisition Proposal or
for access to the properties, books or records of the Company or any of its Subsidiaries by any
Person or entity that is considering making, or has made, an Acquisition Proposal. The Company
shall provide Buyer with copies of all documents received from any Person or entity that is
considering making or has made an Acquisition Proposal.
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Section 5.05. Retention Program. Promptly after the execution of this Agreement, Buyer agrees to
convey to the key employees of the Company a retention program to be implemented after the Closing
in a form reasonably acceptable to the Company.
ARTICLE VI
CONDITIONS
CONDITIONS
Section 6.01. Conditions to Obligations of Each Party. The respective obligations of each party to
effect the transactions contemplated hereby shall be subject to the satisfaction at or prior to the
Closing of the following conditions, any or all of which may be waived in writing by the parties
hereto:
(a) No Order. No Governmental Authority of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) that
is in effect and has the effect of making the transactions contemplated hereby illegal or otherwise
prohibiting consummation of the transactions contemplated hereby.
(b) Government Consents. The permits, approvals, filings and consents required to be
obtained or made prior to the consummation of the transactions contemplated by this Agreement under
applicable federal laws of the United States or the Laws of the State of Israel shall have been
obtained or made, as the case may be, and all such regulatory approvals shall be in full force and
effect.
Section 6.02. Additional Conditions to Obligations of Buyer and Guarantor. The obligations of Buyer to
effect the transactions contemplated hereby and the obligations of the Guarantor hereunder are also
subject to the satisfaction at or prior to the Closing of the following conditions, any or all of
which may be waived in writing by Buyer:
(a) Representations and Warranties.
(i) Each of the representations and warranties contained in Article II of this
Agreement (other than Section 2.04(a)) shall be true and correct in all respects as of the
date of this Agreement and as of the Closing Date as though made on and as of the Closing
Date (except to the extent that such representations and warranties specifically relate to a
specified date, in which case such representations and warranties shall be true and correct in all respects as of such specified date), except for failures of any such
representations or warranties to be true and correct that, individually or in the aggregate,
have not had and could not reasonably be expected to have a Material Adverse Effect. The
representations and warranties contained in Section 2.04(a) shall be true and correct in all
respects as of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date. For purposes of this Section 6.02(a)(i), “Material Adverse Effect”
means any change, effect, event or occurrence, that taken as a whole, individually or in the
aggregate, has resulted or could reasonably be expected to result in Damages in excess of
Eighteen Million Dollars ($18,000,000.00). Buyer shall have received a certificate to such
effect, dated the Closing Date, of the Chief Executive Officer and the Chief Financial
Officer of the Company.
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(ii) Each of the representations and warranties contained in Section 3 (other than
Section 3.01 of the Undertaking) of the Undertaking shall be true and correct as of the date
of the Undertaking and as of the Closing Date with the same force and effect as if made as
of the Closing, except for failures of any such representations or warranties to be true and
correct that do not materially impair such shareholder’s ability to perform its obligations
thereunder and hereunder or to consummate the transactions contemplated by the Undertaking
or this Agreement. The representations and warranties contained in Section 3.01 of the
Undertaking shall be true and correct in all respects as of the date of this Agreement and
as of the Closing as though made on and as of the Closing. Buyer shall have received a
certificate to such effect, dated the Closing Date, of an executive officer of each of the
shareholders who have executed and delivered the Undertaking.
(b) Agreements and Covenants. The Company shall have performed or complied in all
respects with all of its obligations, agreements and covenants required by this Agreement (other
than the obligations, agreements and covenants required by Section 4.02 of this Agreement) to be
performed or complied with by it on or prior to the Closing, except for failures of any such
performance or compliance that, individually or in the aggregate, have not resulted in and could
not reasonably be expected result in Damages in excess of Eighteen Million Dollars
($18,000,000.00). The Company shall have complied in all respects with all of its obligations,
agreements and covenants required by Section 4.02 of this Agreement and shareholders who have
delivered the Undertaking shall have performed or complied in all respects with all of their
respective obligations, agreements and covenants required by the Undertaking, in each case, except
for failures of any such performance or compliance that, individually or in the aggregate, have not
resulted in and could not reasonably be expected result in Damages in excess of Five Million
Dollars ($5,000,000.00). Buyer shall have received a certificate to such effect, date the Closing
Date, of the Chief Executive Officer and the Chief Financial Officer of the Company.
(c) Absence of Regulatory Conditions. There shall not be any action taken, or any Law
enacted, entered, enforced or applicable to the transactions contemplated by this Agreement, by any
Governmental Authority in connection with the grant of a regulatory approval necessary to the
continuing operation of the current or future business of the Company or its Subsidiaries, which
imposes any condition or restriction upon Buyer or the business or operations of the Company or its
Subsidiaries that reasonably could be expected to have a Material Adverse Effect (as defined in
Section 6.02(a)(i)).
(d) Third Person Consents. The Company shall have provided to Buyer evidence
reasonably satisfactory to Buyer that the Company has obtained the consents and approvals set forth
in Schedule 6.02(d) of the Company Disclosure Schedule.
(e) Pending Actions. There shall not be pending any action, proceeding or
investigation by any Governmental Authority or arbitrator, mediator or other alternative dispute
referee challenging, or seeking material damages in connection with, the transactions contemplated
by this Agreement or seeking to restrain, prohibit or limit the exercise of full rights of
ownership or operation by Buyer of all or any portion of the Company or its Subsidiaries.
40
(f) Opinion of Counsel. Buyer shall have received from Zysman, Aharoni, Xxxxx & Co.,
Law Offices, counsel to the Company, an opinion dated the Closing Date covering the matters set
forth in Exhibit B in form and substance reasonably satisfactory to Buyer.
(g) Escrow Agreement. Buyer shall have received the Escrow Agreement, duly executed
and delivered by the Sellers’ Representative and the Escrow Agent.
(h) Resignations. Buyer shall have received the resignations, effective as of the
Closing, of each director of the Company and its Subsidiaries. If the Company exhausts all
commercially reasonable efforts to obtain such resignations and Buyer is legally entitled to remove
from office all directors of the Company and its Subsidiaries immediately following the Closing,
then Buyer shall remove such directors and this condition to Buyer’s obligation to close shall be
deemed satisfied.
(i) Ownership of Capital Stock. Immediately following the Closing, Buyer will own
100% of the issued an outstanding capital stock of the Company and, directly or indirectly, all of
its Subsidiaries. Owners of at least 662/3% of the outstanding Shares of the Company shall have
executed and delivered to Buyer Acceptances and if any holder of Shares did not execute and deliver
an Acceptance to Buyer, 30 days shall have elapsed since mailing of the Section 341 Notice and
there shall not be pending any request, motion or other action before a Court of competent
jurisdiction with respect to the Compulsory Acquisition which makes the transactions contemplated
by this Agreement illegal or otherwise prohibits the consummation of the transactions contemplated
by this Agreement.
(j) Cancellation of Options. As of the Closing Date all of the outstanding Options
(including the Intel Warrant and Plenus Warrant) shall have been exercised, terminated or
cancelled, all consents necessary to effect such exercise (including pursuant to Cashless
Exercise), termination or cancellation shall have been obtained, and the Company shall have
delivered to Buyer all documentation in form reasonably acceptable to Buyer evidencing such
exercise, termination or cancellations, and, to the extent required under the terms of each
respective Option, consent.
(k) Execution of BMC Employment Agreement. The Chief Executive Officer of the
Company, Xxxxx Xxxxxx, shall have agreed to be employed by, or provide services to, the Company or
Buyer for a period of no less than one year from the Closing Date and shall have agreed to
negotiate an employment or consulting agreement in good faith.
(l) Sellers’ Representative. The Sellers’ Representative shall have been appointed by
the Company and such appointment shall have been ratified by a majority in interest of the
shareholders of the Company present at a general or special meeting.
(m) No Material Adverse Effect. Since December 31, 2005, there has not been a
Material Adverse Effect. For purposes of this Section 6.02(m), “Material Adverse Effect” means any
change, effect, event or occurrence that has or could reasonably be expected to result in Damages
(excluding consequential and punitive damages) in excess of Eighteen Million Dollars
($18,000,000.00) the cause of which could not reasonably be expected to be remedied within one year
from the change, effect, event or occurrence so as to reduce the Damages (excluding
41
consequential
and punitive damages) resulting therefrom below Eighteen Million Dollars ($18,000,000.00).
Section 6.03. Additional Conditions to Obligations of the Company. The obligations of the Company to
effect the transactions contemplated hereby are also subject to the satisfaction at or prior to the
Closing of the following conditions, any or all of which may be waived in writing by the Company:
(a) Representations and Warranties. Each of the representations and warranties
contained in Article III of this Agreement (other than Section 3.02) shall be true and correct in
all respects as of the date of this Agreement and as of the Closing Date as though made on and as
of the Closing Date, except for failures of any such representations or warranties to be true and
correct that do not materially impair Buyer’s or Guarantor’s ability to perform its obligations
hereunder or to consummate the transactions contemplated by this Agreement. The representations and
warranties contained in Section 3.02 shall be true and correct in all respects as of the date of
this Agreement and as of the Closing Date as though made on and as of the Closing Date. The
Company shall have received a certificate of an executive officer of each of Buyer and Guarantor,
dated the Closing Date, to such effect.
(b) Agreements and Covenants. Each of Buyer and Guarantor shall have performed or
complied in all respects with all obligations, agreements, covenants and guarantees required by
this Agreement to be performed or complied with by it on or prior to the Closing, except for
failures to perform or comply in all respects with obligations, agreements, covenants and
guarantees that do not materially impair Buyer’s or Guarantor’s ability to perform its obligations
hereunder or to consummate the transactions contemplated by this Agreement. The Company shall have
received a certificate of an executive officer of each of Buyer and Guarantor, dated the Closing
Date, to such effect.
ARTICLE VII
INDEMNIFICATION; ESCROW FUND; SURVIVAL OF
REPRESENTATIONS AND WARRANTIES
INDEMNIFICATION; ESCROW FUND; SURVIVAL OF
REPRESENTATIONS AND WARRANTIES
Section 7.01. By the Company. Subject to the terms and conditions of this Article VII, the Company
(solely by way of the Escrow Fund) hereby agrees to indemnify, defend and hold harmless Buyer and
the Buyer Affiliates from and against all claims, causes of action, demands, lawsuits, suits,
proceedings, governmental investigations and administrative orders (“Claims”) and all debts,
liabilities, obligations, losses, damages (including punitive and consequential damages, but
excluding indirect damages based on lost profits or diminution in value), costs and expenses,
penalties, as well as reasonable legal fees, disbursements and costs related thereto
(“Damages”) asserted against, imposed upon, or incurred by such Person, directly or
indirectly, by reason of, arising out of, or resulting from (a) the inaccuracy or breach as of the
date hereof or as of the Closing Date of any representation or warranty of the Company contained in
this Agreement or (b) the breach of any covenant or agreement of the Company contained in or made
pursuant to this Agreement. It is agreed among the parties hereto that the obligations of the
Company to Buyer and Buyer’s Affiliates pursuant to this Article VII from and after the Closing
Date shall not be obligations of the Company, but rather shall be satisfied only pursuant to the
Escrow Agreement and the procedures set forth in Sections 7.02, 7.03 and 7.04 hereof.
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Section 7.02. Defense of Third Party Claims. In addition to the provisions of Section 7.03, the
obligations and liabilities of the Company to indemnify any other party under this Article VII with
respect to Claims or Damages relating to or arising from third party claims or actions (a
“Third Party Claim”), shall be subject to the following terms and conditions:
(a) The party or parties to be indemnified hereunder (whether one or more, the
“Indemnified Party”) will give the Sellers’ Representative prompt written notice of any
such Third Party Claim. The Sellers’ Representative may undertake the defense thereof by
representatives chosen by it and reasonably acceptable to the Indemnified Party upon written notice
to the Indemnified Party within 20 days of receiving notice of such Third Party Claim (or sooner if
the nature of the Third Party Claim so requires); provided that the Sellers’ Representative agrees
that such claim for indemnification associated with such Third Party Claim shall be discharged with
amounts from the Escrow Fund. Failure of the Indemnified Party to give such notice shall not
affect the Sellers’ duty or obligations under this Article VII, except to the extent the Sellers’
are materially prejudiced thereby. If the Sellers’ Representative undertakes the defense of a
Third Party Claim, the Indemnified Party may retain separate co-counsel at its sole cost and
expense (except that the Company will be responsible for the reasonable fees and expenses of the
separate co-counsel to the extent the Indemnified Party reasonably concludes that the counsel the
Sellers’ Representative has selected has a conflict of interest). The Indemnified Party shall make
available to the Sellers’ Representative or its representatives all records and other materials
required by them and in the possession or under the control of the Indemnified Party, for the use
of the Sellers’ Representative and its representatives in defending any such Third Party Claim, and
shall in other respects give reasonable cooperation in such defense. After the Closing, in any
circumstance in which the Company would be the indemnifying party, Sellers’ Representative shall
have full authority to act as attorney-in-fact for each of the Sellers’ for whose account Escrow
Funds have been deposited pursuant to the Escrow Agreement, all in accordance with Section 7.04
hereof.
(b) If the Sellers’ Representative, within 20 days after notice of any such Third Party Claim
(or sooner if the nature of the Third Party Claim so requires), fails to agree to defend such Third
Party Claim or thereafter fails or ceases to defend such Third Party Claim, actively and in good
faith, then the Indemnified Party will (upon further notice) have the right to undertake the defense, compromise or settlement of such Third Party Claim, or consent to the entry of a
judgment with respect thereto, and the Sellers and the Sellers’ Representative shall thereafter
have no right to challenge the Indemnified Party’s defense, compromise or settlement thereof.
(c) Notwithstanding anything in this Article VII to the contrary (i) if a Third Party Claim
could reasonably be expected to adversely affect the Indemnified Party other than as a result of
money damages or other money payments, the Indemnified Party shall have the right to defend,
compromise or settle such Third Party Claim, and (ii) the Sellers’ Representative shall not,
without the written consent of the Indemnified Party, settle or compromise any Third Party Claim or
consent to the entry of any judgment which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Indemnified Party of an unconditional release from
all liability in respect of such Third Party Claim.
(d) The party controlling the defense of any Third Party Claim shall deliver, or cause to be
delivered, to the other parties copies of all correspondence, pleadings, motions, briefs,
43
appeals
or other written statements relating to or submitted in connection with the defense of the Third
Party Claim, and timely notices of, and the right to participate in (as an observer) any hearing or
other court proceeding relating to the Third Party Claim.
(e) Within two (2) Business Days following final, nonappealable resolution of an Assumed Claim
(as defined herein) with the applicable third party to such Assumed Claim (whether through
compromise, settlement, the entry of a judgment with respect thereto or otherwise) in accordance
with the terms of this Section 7.02, the Sellers’ Representative shall pay (solely by directing
delivery of amounts from the Escrow Fund pursuant to Section 7.04) the Indemnified Party an amount
in cash equal to the amount of Damages incurred by the Indemnified Party in connection with such
Assumed Claim, together with interest from the date such Damages were incurred by the Indemnified
Party until the date of actual payment, at an annual rate equal to the prime interest rate then
generally in effect on the date of payment as set forth in The Wall Street Journal. For purposes
of this Agreement, an “Assumed Claim” is (i) a Third Party Claim the defense of which is
undertaken by the Sellers’ Representative pursuant to the terms of this Section 7.02 or (ii) a
Third Party Claim the defense of which is undertaken by the Indemnified Party and the resolution of
which (whether through compromise, settlement, the entry of a judgment with respect thereto or
otherwise) has been consented to in writing by the Sellers’ Representative, which consent shall not
be unreasonably withheld.
Section 7.03. Other Claims, Payment. Upon the occurrence of a Claim or Damages (other than an Assumed
Claim) for which indemnification is believed by Buyer to be due under this Article VII, the
Indemnified Party shall provide notice of such Claim or Damages to the Sellers’ Representative,
stating the circumstances giving rise to the Claim or Damages, specifying the amount or the
estimated amount of the Claim or Damages and making a request for any payment then believed due.
Any such claim for indemnification shall be conclusive against the Sellers in all respects 20
Business Days after receipt by the Sellers’ Representative of such notice, unless within such
period the Sellers’ Representative sends the Indemnified Party a notice disputing the propriety of
such claim. Such notice of dispute shall describe the basis for such objection and the amount of
the claim as to which the Sellers’ Representative does not believe should be subject to
indemnification. Upon receipt of any such notice of objection, both the Indemnified Party and the
Sellers’ Representative shall use commercially reasonable efforts to cooperate and arrive at a
mutually acceptable resolution of such dispute within the next 30 days. If a mutually acceptable
resolution cannot be reached between the Indemnified Party and the Sellers’ Representative within
such 30-day period, the Indemnified Party shall have the right to submit such claim to binding
arbitration pursuant to Section 9.10. If it is finally determined that all or a portion of such
claim amount is owed to the Indemnified Party, the Sellers’ Representative shall, within two (2)
Business Days of such determination, pay (solely by directing delivery of amounts from the Escrow
Fund pursuant to Section 7.04) the Indemnified Party such amount owed in cash, together with
interest from the date that the Indemnified Party initially requested such payment until the date
of actual payment, at an annual rate equal to the prime interest rate then generally in effect on
the date of payment as set forth in The Wall Street Journal.
Section 7.04. Satisfaction of Claims from the Escrow Fund. After the Closing, any obligations and
liabilities of the Company or the Sellers’ Representative to Buyer or any Buyer Affiliate pursuant
to Article VII of this Agreement shall be satisfied solely from payments of
44
amounts from the Escrow Fund to Buyer or such Buyer Affiliate. Pursuant to the terms of the Escrow
Agreement, if the Company or the Sellers’ Representative is determined to owe an amount pursuant to
the procedures set forth in Sections 7.02 or 7.03, then the amount due the Indemnified Party
hereunder shall be satisfied by the delivery to the Indemnified Party pursuant to the Escrow
Agreement of an amount from the Escrow Fund equal to the lesser of: (i) the amount of the claim to
be satisfied and (ii) the remaining amount of the Escrow Fund. The Sellers’ Representative shall
have the power and authority to make all decisions with regard to the settlement of claims brought
pursuant to this Agreement from the Escrow Funds. If the Sellers Representative is unable to carry
out his duties as Sellers’ Representative, then unless the Sellers’ Representative shall have named
his successor, the Sellers who held the highest number of Shares immediately prior to the Closing
shall be designated and appointed as the Sellers’ Representative, as shall assume all of the powers
and duties of the Sellers’ Representative under this Agreement and the Escrow Agreement. If any
successor Sellers’ Representative becomes unable to carry out his duties as Sellers’
Representative, unless the Sellers’ Representative shall have named his successor, his replacement
shall be the Seller who held the next highest number of Shares of the Company immediately prior to
the Closing.
Section 7.05. Liability Limitations; Survival of Representations and Warranties.
(a) All representations, warranties, covenants and agreements of the Company and Buyer in this
Agreement or any certificate delivered pursuant hereto shall survive the Closing and any
investigation thereof; provided, however, that in no event shall any Indemnified Party be permitted
to make any claim under Article VII unless such claim is first asserted on or before eighteen (18)
months from the Closing. After the Closing, indemnification pursuant to this Article VII shall be
the sole and exclusive remedy of the parties for any breach of this Agreement, except with respect
to actual fraud committed by a party hereto. Buyer and Buyer Affiliates shall not be entitled to
indemnification for claims under Article VII (other than a claim under Article VII with respect to
the representation and warranty contained in Section 2.04 of this Agreement) unless the aggregate
amount of all claims under Article VII is in excess of $1,000,000 (and, in such event, Buyer or
Buyer Affiliates shall only be entitled indemnification for the amount of such claims which in the
aggregate exceed $1,000,000). Buyer and Buyer’s Affiliates shall not be entitled to
indemnification for any single claim under Article VII not exceeding $10,000.00, and claims not
exceeding $10,000.00 shall not be considered for purposes of determining whether the amount of
claims exceed $1,000,000 in the aggregate.
(b) Except to the extent that a particular representation, warranty or covenant is qualified
in accordance with this Section 7.05(b) by a disclosure contained in the Company Disclosure
Schedule, none of the representations, warranties or covenants of the Company shall, and Buyer’s
ability to claim a breach thereof pursuant to this Article VII shall not, be treated as waived,
qualified or otherwise affected by Buyer’s knowledge of any such breach. In order for a disclosure
contained in the Company Disclosure Schedule to be deemed to qualify a particular representation,
warranty or covenant contained herein, such disclosure must identify by Section number the
particular representation, warranty or covenant it is intended to qualify and shall not be deemed
to qualify any other representation, warranty or covenant in this Agreement.
45
(c) In no event shall the Company have any liability to Buyer or Buyer’s Affiliates hereunder
for punitive, indirect or consequential damages, or damages measured based on loss profits or
diminution of value of Buyer or Buyer’s Affiliates.
(d) The obligation of the Company to indemnify an Indemnified Party against any Damages under
Article VII shall be (i) reduced to take into account any Tax benefits to be received by the
Indemnified Party as a result of such Damages or the underlying reasons therefore, and (ii) reduced
by the amount of any recoveries obtained by the Indemnified Party from any Third Party, including
any insurance company, in respect of such Damages.
Section 7.06. By Buyer. Subject to the terms and conditions of this Article VII, Buyer
hereby agrees to indemnify, defend and hold harmless the Company and each Seller and their
respective directors, officers, employees, partners and controlled and controlling Persons, from
and against all Claims and Damages asserted against, imposed upon, or incurred by such Person,
directly or indirectly, by reason of, arising out of, or resulting from (a) the inaccuracy or
breach as of the date hereof or as of the Closing Date of any representation or warranty of Buyer
contained in this Agreement or (b) the breach of any covenant or agreement of Buyer contained in or
made pursuant to this Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
TERMINATION, AMENDMENT AND WAIVER
Section 8.01. Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual written consent of Buyer and the Company;
(b) by Buyer, upon a breach of any representation, warranty, covenant or agreement on the part
of the Company set forth in this Agreement or on the part of any shareholder in an Undertaking,
which (i) would give rise to the failure of a condition set forth in Section 6.02(a) or (b) and
(ii) is not curable by the Company or if curable has not been cured within 30 days following the
earlier of receipt by Buyer of written notice of such breach or untruth from the Company, as the
case may be, or receipt by the Company of written notice of such breach or untruth from Buyer (a
“Buyer Terminable Breach”); provided that Buyer is not then in Company Terminable Breach
(as defined below) of any representation, warranty, covenant or other agreement contained in this
Agreement;
(c) by
Buyer, if holders of less than 662/3% of the issued and outstanding Shares have accepted
the Offer by the last day of the Offer Period or at any time following the last day of the Offer
Period if the aggregate number Shares held by Accepting Sellers
account for less than 662/3% of the
issued and outstanding Shares;
(d) by the Company, upon a breach of any representation, warranty, guarantee, covenant or
agreement on the part of Buyer or Guarantor set forth in this Agreement, which (i) would give rise
to the failure of a condition set forth in Section 6.03(a) or (b) and (ii) is not curable by Buyer
or Guarantor or if curable has not been cured within 30 days following the earlier of receipt by
the Company of written notice of such breach or untruth from Buyer or Guarantor or receipt by Buyer
or Guarantor of written notice of such breach or untruth from the
46
Company (a “Company
Terminable Breach”); provided that the Company is not then in Buyer Terminable Breach of any
representation, warranty, covenant or other agreement contained in this Agreement;
(e) by either Buyer or the Company, if there shall be any Law, order, injunction or decree
which is final and nonappealable preventing the consummation of the transactions contemplated by
this Agreement or that makes consummation of the transactions contemplated by this Agreement
illegal; provided, however, that the right to terminate this Agreement under this Section 8.01(e)
shall not be available to any party whose failure or whose Affiliate’s failure to perform any
material covenant, agreement or obligation hereunder has been the cause of, or resulted in, such
action or event; or
(f) by either Buyer or the Company, if the Closing shall not have occurred within 130 days of
the date of this Agreement; provided, however, that the right to terminate this Agreement under
this Section 8.01(f) shall not be available to any party whose failure or whose Affiliates’ failure
to perform any material covenant, agreement or obligation hereunder has been the cause of, or
resulted in, the failure of the Closing to occur on or before such date.
The right of any party hereto to terminate this Agreement pursuant to this Section 8.01 shall
remain operative and in full force and effect regardless of any investigation made by or on behalf
of any party hereto, any Person controlling any such party or any of their respective officers,
directors, representatives or agents, whether prior to or after the execution of this Agreement.
Section 8.02. Effect of Termination. Except as provided in Section 8.05 and Section 8.06
of this Agreement, in the event of the termination of this Agreement pursuant to Section 8.01, this
Agreement shall forthwith become void, there shall be no liability on the part of Buyer or the
Company or their respective officers, directors, stockholders, managers or partners and all rights
and obligations of any party hereto shall cease, except that nothing herein shall relieve any party
of any liability for any and all of the damages suffered by the other party as a result of such
breach of such party’s representations, warranties covenants or agreements contained in this
Agreement. Notwithstanding the foregoing, the provisions of Section 8.05 and 8.06 and Article IX
shall survive any termination of this Agreement. No termination of this Agreement shall affect the
obligations of the parties under the Confidentiality Agreement.
Section 8.03. Amendment. This Agreement may not be amended except by an instrument in
writing signed by Buyer and the Company.
Section 8.04. Waiver. At any time prior to the Closing, any party hereto entitled to the
benefits thereof may (a) extend the time for the performance of any of the obligations or other
acts of the other party hereto, (b) waive any inaccuracies in the representations and warranties of
the other party contained herein or in any document delivered pursuant hereto and (c) waive
compliance by the other party with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in writing signed by the
party or parties to be bound thereby.
Section 8.05. Fees, Expenses and Other Payments.
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(a) All Expenses (as defined below) incurred by Buyer shall be borne solely and entirely by
Buyer. All Expenses incurred by the Company shall be borne solely and entirely by Sellers, except
that all Expenses incurred by the Company prior to December 31, 2005 shall be borne by the Company.
(b) “Expenses” as used in this Agreement shall include all out-of-pocket expenses
(including, without limitation, all fees and expenses of counsel, accountants, investment bankers,
experts and consultants to a party hereto and its Affiliates) incurred by a party or on its behalf
in connection with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement.
Section 8.06. Payment Upon Termination.
(a) If this Agreement is terminated by the Company pursuant to the provisions of Section
8.01(d) and all of the conditions contained in Sections 6.01 and 6.02 have been satisfied or waived
(other than the conditions which by their terms are only capable of being satisfied on the Closing
Date), then Buyer agrees to pay the Company, within fifteen (15) Business Days of the date on which
Buyer has received notice of the Company’s termination of this Agreement pursuant to Section
8.01(d), by wire transfer of immediately available funds, the sum of Ten Million Dollars
($10,000,000.00) as liquidated damages and with no further liability or obligation to the Company
or any Seller. If Buyer fails to pay the Company such amount within fifteen (15) Business Days of
the date on which Buyer has received such notice, then the Company shall be entitled to pursue its
claim for breach of this Section 8.06(a) in a Court of competent jurisdiction, and if the Company
receives a final, nonappealable judgment that Buyer has breached this Section 8.06(a), then Buyer
agrees to pay the Company, within fifteen (15) Business Days of the date on which the judgment
became final and nonappealable, by wire transfer of immediately available funds, the sum of Thirty
Million Dollars ($30,000,000.00) as liquidated damages and with no further liability or obligation
to the Company or any Seller.
(b) The Company agrees that Section 8.06(a) shall be the sole and exclusive remedy of the
Company and its Affiliates for termination of the Agreement by the Company (or for which the
Company could have terminated this Agreement) as a result of any breach of any agreement,
representation, warranty or covenant or any other failure by Buyer or its Affiliates to perform or
observe any terms, provisions, covenants, arrangements or agreement on their part under this
Agreement. The Company shall have no other remedy for any such termination of this Agreement and
shall not assert or pursue in any manner, directly or indirectly, any claim or cause of action
against the Buyer or Guarantor or any of their respective Affiliates, officers or directors based
on any such termination other than for breach of this Section 8.06.
(c) If this Agreement is terminated by Buyer pursuant to the provisions of Section 8.01(c),
then the Company will pay Buyer, within fifteen (15) Business Days of the date on which the Company
has received notice of Buyer’s termination of this Agreement pursuant to Section 8.01(c), by wire
transfer of immediately available funds, a sum of not in excess of One Million Dollars
($1,000,000.00) representing Buyer’s documented Expenses.
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ARTICLE IX
GENERAL PROVISIONS
GENERAL PROVISIONS
Section 9.01. Notices. All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been duly given upon receipt, if delivered
personally, mailed by registered or certified mail (postage prepaid, return receipt requested) to
the parties at the following addresses (or at such other address for a party as shall be specified
by like changes of address) or sent by electronic transmission to the telecopier number specified
below:
(a) If to Buyer or Guarantor, to:
BMC Software, Inc.
0000 XxxxXxxx Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
0000 XxxxXxxx Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxx LLP
First City Tower, 0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
First City Tower, 0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx
Telecopier No.: (000) 000-0000
Telecopier No.: (000) 000-0000
(b) If to the Company:
Identify Software
94 Derech Em-Ha’moshavot
X.X. Xxx 0000
Xxxxxx-Xxxxx 00000
Xxxxxx
94 Derech Em-Ha’moshavot
X.X. Xxx 0000
Xxxxxx-Xxxxx 00000
Xxxxxx
Attention: Xxxxx Xxxxxx
Telecopier No.: 972-3 910 1919
Telecopier No.: 972-3 910 1919
with a copy to:
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx, Esq.
Telecopier No.: (000) 000-0000
Telecopier No.: (000) 000-0000
49
and with a copy to:
Zysman, Aharoni, Xxxxx & Co.
00X Xxxxxxxx Xx.
Xxx Xxxx 00000
Xxxxxx
00X Xxxxxxxx Xx.
Xxx Xxxx 00000
Xxxxxx
Attention: Shy Baranov, Esq.
Telecopier No.: 972 3 795 5510
Telecopier No.: 972 3 795 5510
(c) If to Sellers’ Representative, to the name, address and telecopier number provided in
writing by the Company to Buyer at least three (3) Business Days prior to Closing.
Section 9.02. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
Section references herein are, unless the context otherwise requires, references to sections of
this Agreement.
Section 9.03. Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of Law or public policy, all other conditions
and provisions of this Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as closely as possible
in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
Section 9.04. Entire Agreement. This Agreement (together with the Annexes, the Exhibits
and the Company Disclosure Schedule) and the Confidentiality Agreement constitute the entire
agreement of the parties, and supersede all prior agreements and undertakings, both written and
oral, among the parties or between any of them, with respect to the subject matter hereof.
Section 9.05. Assignment. This Agreement shall not be transferred or assigned by Buyer
without the consent of the Company or by the Company without the consent of Buyer, except that
Buyer may transfer or assign in whole or from time to time in part, to one or more of its
Affiliates its rights or obligations under this Agreement, but no such transfer or assignment will
relieve Buyer of its obligations under this Agreement.
Section 9.06. Parties in Interest. This Agreement shall be binding upon and inure solely
to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended
to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
50
Section 9.07. Specific Performance. The parties hereby acknowledge and agree that the
failure of any party to perform its agreements and covenants hereunder, including its failure to
take all actions as are necessary on its part to the consummation of the transactions contemplated
by this Agreement, will cause irreparable injury to the other parties for which damages, even if
available, will not be an adequate remedy. Accordingly, each party hereby consents to the issuance
of injunctive relief by any court of competent jurisdiction to compel performance of such party’s
obligations and to the granting by any court of the remedy of specific performance of its
obligations hereunder.
Section 9.08. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay
on the part of any party hereto in the exercise of any right hereunder shall impair such right or
be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or
agreement herein, nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive to, and not exclusive of, any rights or remedies
otherwise available.
Section 9.09. Governing Law. This Agreement shall be governed by, and construed in
accordance with Israeli Law.
Section 9.10. Dispute Resolution. Except as provided in Section 8.06 of this Agreement,
any disputes arising out of or relating to this Agreement, or the alleged breach hereof, or in any
way relating to the subject matter of this Agreement or the relationship between the parties
created by this Agreement (hereafter a “Dispute”) shall be finally resolved by three
arbitrators in a binding arbitration administered by the International Centre for Dispute
Resolution (“ICDR”) of the American Arbitration Association (“AAA”) under its
International Arbitration Rules (the “Rules”) then in force. The parties shall each
appoint one arbitrator within 20 days of receipt of a notice to arbitrate a Dispute, and within 20
days of the nomination of the second arbitrator the two arbitrators appointed by the parties shall
together appoint by mutual agreement the third arbitrator, who shall be the presiding arbitrator.
If any appointment is not made within the time allotted by the Rules, then the ICDR shall appoint
the arbitrator according to the Rules. The seat of the arbitration shall be New York, New York.
The arbitration shall be conducted solely in the English language and the award rendered solely in
U.S. dollars. If a party refuses to honor its obligations to arbitrate under this Section 9.10,
the other party may obtain appropriate relief compelling arbitration in any court having
jurisdiction over the refusing party; the order compelling arbitration shall require that the
arbitration proceedings take place in New York, New York and in the manner specified herein. For
purposes of the preceding sentence, each party hereby expressly submits, and the Sellers’
Representative shall submit (solely in his capacity as the Sellers’ Representative for purposes of
claims under this Agreement), to the personal jurisdiction and venue of the federal and state
courts residing in the Southern District of New York, and expressly waives any claim of improper
venue and any claim that such courts are an inconvenient forum. Each party hereby irrevocably
consents, and the Sellers’ Representative shall consent (solely in his capacity as the Sellers’
Representative for purposes of claims under this Agreement), to the service of process of any of
the aforementioned courts in any such suit, action or proceeding by the providing of notice in
accordance with the provisions of Section 9.01. Any award of the arbitrators pursuant to the
foregoing may be enforced in any court of competent jurisdiction. Each party irrevocably
stipulates, and the
51
Sellers’
Representative shall irrevocably stipulate (solely in his capacity as the Sellers’ Representative for purposes of claims under this Agreement), that this Section 9.10
shall satisfy the requirements for an agreement in writing pursuant to Article II of the United
Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York
on June 10, 1958. Nothing contained in this Section 9.10 shall prevent any party hereto from
seeking injunctive relief for any breach of this Agreement in any court that has jurisdiction over
the matter that is reasonably necessary to obtain such relief.
Section 9.11. Counterparts. This Agreement may be executed in multiple counterparts, and
by the different parties hereto in separate counterparts, each of which when executed shall be
deemed to be an original but all of which taken together shall constitute one and the same
agreement. The Agreement shall become effective (i) as to Buyer, Guarantor and the Company when
all such parties have executed this Agreement, and (ii) as to Accepting Sellers, when any such
Accepting Seller has executed and delivered the Acceptance to Buyer.
Section 9.12. Guaranty. Guarantor hereby unconditionally guarantees, as if it were the
primary obligor: (1) the payment by Buyer of the Purchase Price; and (2) the performance of the
obligations of Buyer (including any of their permitted assignees) set forth herein.
52
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of
the date first written above by their respective officers thereunto duly authorized.
BMC SOFTWARE ISRAEL, LTD. | ||||||
By: | /s/ Xxxxxx Xxxxx | |||||
Name: Xxxxxx Xxxxx | ||||||
Title: Chief Executive Officer | ||||||
BMC SOFTWARE, INC. | ||||||
By: | /s/ Xxx Xxxxxx | |||||
Name: Xxx Xxxxxx | ||||||
Title: Senior Vice President | ||||||
IDENTIFY SOFTWARE LTD. |
By: | /s/ Xxxxx Xxxxxx | |||||||
Name: Xxxxx Xxxxxx | ||||||||
Title: President and Chief Executive Officer | ||||||||
53