Exhibit 1
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AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER (together will all Exhibits
hereto, the "Agreement"), dated as of February 25, 2002 among iMedeon Inc., a
Georgia corporation (the "Company"), the stockholders of the Company ("Company
Stockholders"), ViryaNet Ltd., an Israeli company ("Parent"), and ViyraNet
Acquisition, Inc. ("Merger Sub"), a Georgia corporation and a subsidiary of
ViryaNet, Inc., the US subsidiary of Parent. Capitalized terms not otherwise
defined herein shall have the meanings ascribed to such terms in Annex I
attached hereto.
RECITALS
WHEREAS, the respective boards of directors of each of Parent
and Merger Sub have approved the merger of Merger Sub with and into the Company
(the "Merger") and approved the Merger upon the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, the board of directors of the Company has submitted
this Agreement to the Company Stockholders in accordance with the requirements
of the Georgia Business Corporation Code (the "GCL"); and
WHEREAS, all of the Company Stockholders have approved the
Merger and all other transactions contemplated under this Agreement; and
WHEREAS, the Company, Company Stockholders, Parent and Merger
Sub desire to make certain representations, warranties, covenants and agreements
in connection with the Merger.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. The Merger; Closing; Effective Time; Deliveries Upon Signing
1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in
Section 1.3) Merger Sub shall be merged with and into the
Company and the separate corporate existence of Merger Sub
shall thereupon cease. The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to
as the "Surviving Corporation"), and the separate corporate
existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by
the Merger, except as set forth herein. The Merger shall have
the effects specified in the GCL.
1.2. Closing. The closing of the Merger (the "Closing") shall take
place concurrently with the signature of this Agreement at the
offices of Parent (the "Closing Date").
1.3. Effective Time. Concurrently with the Closing, the Company and
Merger Sub will cause a Certificate of Merger (the "Georgia
Certificate of Merger") to be executed, acknowledged and filed
with the Secretary of State of Georgia as provided in Section
14-2-1105 of the GCL. The Merger shall become effective when
the Georgia Certificate of Merger has been duly filed with the
Secretary of State of Georgia (the "Effective Time").
1.4. Deliveries Upon Signing. Prior to signing the Agreement the
parties shall deliver each other the deliverables set forth in
Section 9 below.
2. Articles of Incorporation and By-Laws of the Surviving Corporation
2.1. Articles of Incorporation. The Articles of Incorporation of
Merger Sub, as in effect immediately prior to the Effective
Time, shall be at the Effective Time, the Articles of
Incorporation of the Surviving Corporation until thereafter
amended as provided by law.
2.2. The By-Laws. The Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be, at the
Effective Time, the Bylaws of the Surviving Corporation until
thereafter amended as provided therein or by applicable law.
3. Officers and Directors of the Surviving Corporation
3.1. Directors. The directors of Merger Sub at the Effective Time
shall, from and after the Effective Time, be the directors of
the Surviving Corporation until their successors have been
duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the
Charter and the By-Laws.
3.2. Officers. The officers of Merger Sub at the Effective Time
shall, from and after the Effective Time, be the officers of
the Surviving Corporation until their successors have been
duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the
Charter and the By-Laws.
4. Effect of the Merger on Capital Stock; Exchange of Certificates
4.1. Conversion of Outstanding Shares. At the Effective Time, as a
result of the Merger and without any action on the part of the
holder of any capital stock of the Company, the shares of
Common Stock, Series A Preferred Stock and Series B Preferred
Stock of the Company (each as defined in Section 5.3) issued
and outstanding immediately prior to the Effective Time (each
a "Share" or, collectively, the "Shares") which are held by
the Company Stockholders shall be converted into, and become
exchangeable for, (A) such number of Ordinary Shares, par
value NIS 0.1 per share, of Parent ("Parent Ordinary Shares")
set forth next to such Company Stockholder's name and below
the column "First Closing" on Schedule 4.1 attached hereto
(the "Initial Consideration") (B) such amount of cash or other
immediately available funds set forth next to the Company
Stockholder's name and below the column "First Closing" on
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Schedule 4.1 attached hereto (the "Cash Consideration") and
(C) the right to receive additional consideration ("Additional
Consideration"). The Additional Consideration shall be
delivered in accordance with Section 4.7 (the "Additional
Consideration Payment") and shall be either (i) an amount of
cash equal to $457,932, or (ii) subject to the requisite
approval of the shareholders of Parent, 889,189 Parent
Ordinary Shares (the "Additional Consideration Shares"). The
Initial Consideration, the Cash Consideration and the
Additional Consideration shall hereinafter be referred to
collectively as the "Merger Consideration." At the Effective
Time, all Shares shall no longer be outstanding and shall be
canceled and retired and shall cease to exist, and each
certificate (a "Certificate") formerly representing any of
such Shares shall thereafter represent only the right to the
Merger Consideration.
4.1.1 Parent agrees that at the Effective Time, it shall
issue to each of the persons listed on Schedule 4.1
attached hereto the ("Management Stockholders") the
number of Parent Ordinary Shares set forth next to
each person named as a Management Stockholder on
Schedule 4.1. In addition, Parent acknowledges and
agrees that at the Effective Time, it shall issue to
the "Company Optionholders" identified on Schedule
4.1, options exercisable for such number of Parent
Ordinary Shares set forth next to each Company
Optionholder's name, such options to have an exercise
price per share equal to the closing price per share
of Parent Ordinary Shares on The NASDAQ National
Market ("NASDAQ") on the date immediately preceding
the Closing Date and no requirement of vesting.
4.1.2 The Management Stockholders and Company Optionholders
shall be entitled to receive Additional Consideration
pursuant to the terms set forth in Section 4.7.
4.2. Non-Transferability. Additional Consideration Payments or
delivery of Additional Consideration Shares, as the case may
be, will be delivered only to Company Stockholders who were
stockholders of record of the Company as of the Closing Date
(or, in the event of the death of any Company Stockholder, to
any of their spouses or lineal descendants or other estate
planning devices created or implemented for the purposes of
providing the economic benefits of the Shares to such spouses
or lineal descendants upon the death of the Company
Stockholder), the persons listed as Management Stockholders on
Schedule 4.1 (or, in the event of the death of any Management
Stockholder, to any of their spouses or lineal descendants or
other estate planning devices created or implemented for the
purposes of providing the economic benefits of the Shares to
such spouses or lineal descendants upon the death of the
Management Stockholder) and persons listed as Company
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Optionholders on Schedule 4.1 (or, in the event of the death
of any Company Optionholder, to any of their spouses or lineal
descendants or other estate planning devices created or
implemented for the purposes of providing the economic
benefits of the Shares to such spouses or lineal descendants
upon the death of the Company Optionholder). The right to
receive any such Additional Consideration Payments or
Additional Consideration Shares, as the case may be, shall be
non-transferable and any purported transfer of such right
shall be void and of no force and effect, except the right to
receive any such Additional Consideration Payments or
Additional Consideration Shares, as the case may be, may be
transferable in the event of the death of any Company
Stockholder, Management Stockholder or Company Optionholder to
any of their spouses or lineal descendants or other estate
planning devices created or implemented for the purposes of
providing the economic benefits of the Shares to such spouses
or lineal descendants upon the death of the Company
Stockholder, Management Stockholder or Company Optionholder.
4.3. Deleted.
4.4. Merger Sub. At the Effective Time, each share of Common Stock,
par value $1.00 per share, of Merger Sub that is issued and
outstanding immediately prior to the Effective Time shall be
converted into one share of common stock of the Surviving
Corporation.
4.5. Cancellation of Stock Options and Warrants and Stock Plans. At
the Effective Time, each outstanding option to purchase Shares
(a "Company Option") under the Stock Plans, whether vested or
unvested, shall be canceled without further action and each
outstanding warrant or similar security or right exercisable
or exchangeable for Shares (a "Company Warrant") shall be
canceled without further action. On or prior to the Effective
Time, the Company shall take all corporate action necessary to
cancel, concurrent with the Merger, the Stock Plans and any
agreements between any holders of Company Options or Company
Warrants and the Company; provided, however, the effectiveness
of such actions by the Company may be conditioned upon the
Closing.
4.6. Delivery of Certificates. As of the Closing Date, the Company
shall cause all Certificates to be delivered to the location
where the Closing will occur. Each Certificate shall be
delivered with its stock power executed in favor of Parent.
Parent shall cancel the Certificates, and, on or immediately
after the Effective Time, Parent shall mail or cause to be
mailed to the previous holders of the Certificates, at the
addresses designated by such holders, certificates
representing that number of whole Parent Ordinary Shares that
such holders are entitled to receive pursuant to payment of
the Initial Consideration.
4.7. Delivery of Additional Consideration. Subject to satisfaction
or waiver of the relevant provisions of Section 10 below, the
Additional Consideration shall be delivered to the Company
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Stockholders, Management Stockholders and Company
Optionholders pursuant to a second closing (the "Second
Closing") to be held no later than 90 days after the Closing
Date. Unless Parent is unable to obtain any required approval
of its shareholders for the issuance of the Additional
Consideration Shares, Parent shall deliver the Additional
Consideration Shares as the Additional Consideration, provided
that if Parent delivers Additional Consideration Shares as the
Additional Consideration, the Additional Consideration Shares
which would otherwise be deliverable to a Company Optionholder
pursuant to this Section 4.7 shall be delivered in the form of
options exercisable for such number of Parent Ordinary Shares
which have an exercise price equal to the closing price per
share of Parent Ordinary Shares on NASDAQ on the date
immediately preceding the Second Closing and no requirement of
vesting. Parent covenants and agrees that following the
Closing, it will submit to its shareholders, as quickly as
possible, the matter of the issuance of the Additional
Consideration Shares for approval and will use its best
efforts to obtain such approval. The delivery of the
Additional Consideration at the Second Closing shall be made
by Parent to the Company Stockholders, the Management
Stockholders and the Company Optionholders. Any cash payments
made by Parent to the Company Stockholders, Management
Stockholders and Company Optionholders at the Second Closing
shall be made by wire transfer to a previously designated
account of such Company Stockholder, Management Stockholder or
Company Optionholder. The Additional Consideration to be
delivered to each Company Stockholder, Management Stockholder
and Company Optionholder shall equal (subject to any reduction
by reason of Section 5.24) the amount of cash or number of
Parent Ordinary Shares set beside each Person's name and below
the column Second Closing on Scheulde 4.1.
4.8. Legends. It is understood that the certificates evidencing the
Parent Ordinary Shares issued to the holders of Shares in
return for the surrender of their Certificates shall bear one
or all of the following legends:
4.8.1. "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered
for sale, pledged or hypothecated in the absence of a
registration statement in effect with respect to the
securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is
not required."
4.8.2. "The holder of this security registered with the
Company is that which is noted on the face of this
security. Such holder has entered into an agreement
with the Company in which such holder has agreed not
to sell, offer to sell, pledge, hypothecate or
otherwise transfer the shares represented by this
security for a limited period of time."
4.8.3. Any legend required by the "blue sky" or securities
laws of any state.
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4.9. Dissenters' Rights. Pursuant to Section 8.6, each Company
Stockholder shall agree that it waives any rights or claims
relating to any dissenters' or similar rights in connection
with the Merger and that it will not have a right to exercise
any dissenters' or similar rights in connection with such
Merger.
4.10. Tax Treatment. The parties acknowledge and agree that they
intend for the Merger to be a taxable transaction for U.S.
federal income tax purposes. The parties note that the use of
a second tier subsidiary by Parent for purposes of
effectuating the transaction, and the payment of a portion of
the consideration in cash were done with the intention that
such actions would cause the transaction to become taxable for
US income tax purposes and cause the transaction not to
qualify as a "reorganization" within the meaning to Sec. 368
of the Internal Revenue Code of 1986 (the "Code"). The parties
also acknowledge that each "five-percent transferee
shareholder" within the meaning of Treasury Regulations
section 1.367(a)-3(c)(5)(ii) does not intend to file a gain
recognition agreement (as described in Treasury Regulations
section 1.367(a)-8) and that such failure to file such gain
recognition agreement was intentional on the part of each such
five-percent transferee shareholder and with the expectation
that the transaction would be taxable to each such
five-percent transferee shareholder. The parties agree to file
U.S. federal income tax returns in a manner consistent with
the treatment of the Merger as a taxable transaction for U.S.
federal income tax purposes, unless otherwise advised in
writing by (i) a Governmental Authority, or (ii) such party's
tax and/or legal advisors, that under applicable law, such
returns should be filed in a manner inconsistent with such
treatment. Each party agrees to use reasonable efforts to
notify the other parties to the Agreement in writing promptly
if such party is notified in writing by a Governmental
Authority or by its tax and/or legal advisor that the
Governmental Authority or such tax and/or legal advisor is
asserting or concluding that the Merger is a reorganization
under the Code and is, therefore, not currently taxable and
will take reasonable efforts to consult with the other parties
to this Agreement as to whether and how to respond to such
advice prior to filing any such return or amending any
previously filed returns. Each of the Company and the Company
Stockholders (i) acknowledges and agrees that it is not
relying upon Parent, Merger Sub, the Company or any
Representative thereof as to any opinion regarding the tax
treatment or tax consequences of the Merger, and (ii) for good
and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, on behalf of itself and each of
its Representatives, releases and forever discharges the
Parent, Merger Sub, the Company or any Representative thereof
from any and all claims, demands, proceedings or causes of
action relating to any actions by the Parent, Merger Sub, the
Company or any Representative taken in accordance with this
Section 4.10
5. Representations and Warranties of the Company
The Company hereby represents and warrants, to and for the benefit of
Parent and Merger Sub, (any reference to the Company shall be also
deemed to include the Subsidiaries, as defined in Section 5.1.5 below)
that the statements contained in this Section 5 are correct and
complete as of the date of this Agreement, except as set forth in the
disclosure schedule attached hereto as Schedule 5 (the "Disclosure
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Schedule"). The Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made only to the
extent that the Disclosure Schedule identifies the exception with
particularity and describes the relevant facts in reasonable detail,
provided that an item adequately described on a Schedule shall be
adequately described by any cross-reference to such Schedule.
5.1. Due Organization; Subsidiaries; Etc.
5.1.1. The Company is duly organized, validly existing and
in good standing under the laws of the State of
Georgia. The Company has all requisite corporate
power and authority to conduct its business in the
manner in which its business is currently being
conducted and to own and use its assets in the manner
in which its assets are currently owned and used.
5.1.2. The Company has not conducted any business under or
otherwise used, for any purpose or in any
jurisdiction, any fictitious name, assumed name,
trade name or other name, other than the name
"iMedeon" or "Future Horizons".
5.1.3. The Company is not and has not been required to be
qualified, authorized, registered or licensed to do
business as a foreign corporation in any
jurisdiction, except where the failure to be so
qualified, authorized, registered or licensed has not
had and will not have a Material Adverse Effect on
the Company.
5.1.4. Part 5.1.4 of the Disclosure Schedule accurately sets
forth (i) the names of the members of the Company's
board of directors, (ii) the names of the members of
each committee of the Company's board of directors,
and (iii) the names and titles of the Company's
officers.
5.1.5. The Company does not own, directly or indirectly, any
controlling interest in any entity and the Company
has never owned, beneficially or otherwise, any
shares or other securities of, or any direct or
indirect equity interest in, any entity (a
"Subsidiary"). Each of the Subsidiaries is duly
organized, validly existing and in good standing
under the laws of the state of its incorporation and
has all requisite corporate power and authority to
conduct its business in the manner in which its
business is currently being conducted and to own and
use its assets in the manner in which its assets are
currently owned and used. The Company owns,
beneficially and of record, all of the issued and
outstanding share capital of each Subsidiary and all
rights thereto free and clear of liens, claims,
charges and other encumbrances and all rights,
options to purchase, proxies, voting agreements,
calls or commitments of every kind. The Company has
not agreed and is not obligated to make any future
investment in or capital contribution to the
Subsidiaries or any entity. The Company has not
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guaranteed and is not responsible or liable for any
obligation of the Subsidiaries or any of the entities
in which it owns or has owned any equity interest.
All issued and outstanding share capital of each
Subsidiary was duly authorized and is validly issued
and outstanding, fully paid and non-assessable.
5.2. Charter Documents; Records. The Company has delivered to
Parent accurate and complete copies of: (A) Charter documents
of the Company, including all amendments thereto; (B) the
stock records of the Company; and (C) the minutes and other
records of the meetings and other proceedings (including any
actions taken by written consent or otherwise without a
meeting) of the stockholders of the Company, the board of
directors of the Company and all committees of the board of
directors of the Company. There have been no formal meetings
or other proceedings of the stockholders of the Company, the
board of directors of the Company or any committee of the
board of directors of the Company that are not fully reflected
in such minutes or other records. Except as set forth in Part
5.2 of the Disclosure Schedule, there has not been any
violation of any of the provisions of the Company's Charter
documents, nor has the Company taken any action that is
inconsistent with any resolution adopted by the Company's
stockholders, the Company's board of directors or any
committee of the Company's board of directors, which would
have a Material Adverse Effect on the Company. Except as set
forth in Part 5.2 of the Disclosure Schedule, the books of
account, stock records, minute books and other records of the
Company are accurate, up-to-date and complete in all material
respects, and have been maintained in accordance with prudent
business practices.
5.3. Capitalization. The authorized share capital of the Company
immediately prior to the Closing shall be 28,112,968
consisting of (i) 20,588,186 shares of Common Stock no par
value per share, of which 5,918,730 shares are issued and
outstanding (the "Common Stock"), (ii) 577,186 share of Series
A Convertible Participating Preferred Stock, no par value per
share, of which 448,552 are issued and outstanding (the
"Series A Preferred Stock"), and (iii) 6,197,596 shares of
Series B Redeemable Convertible Participating Preferred Stock,
no par value per share, of which 5,084,524 are issued and
outstanding (the "Series B Preferred Stock" and, collectively
with the Common Stock and the Series A Preferred Shares, the
"Company Shares"). All issued and outstanding Company Shares
were duly authorized and are validly issued and outstanding,
fully paid and non-assessable. The issued and outstanding
share capital of the Company, on a fully diluted and
as-converted basis taking into consideration all convertible
or exchangeable securities and other interests in the Company
is set forth in Part 5.3 of the Disclosure Schedule. Except as
set forth in Part 5.3 of the Disclosure Schedule, at the
Closing Date, there are not any outstanding or authorized
subscriptions, options, warrants, calls, rights, commitments,
convertible securities, or any other agreements of any
character directly or indirectly obligating the Company to
issue any of its shares or any securities convertible into, or
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exchangeable for, or evidencing the right to subscribe for,
any shares of the Company.
5.4. Financial Statements.
5.4.1. The Company has delivered to Parent the following
financial statements and notes (collectively, the
"Company Financial Statements"):
5.4.1.1. The consolidated audited balance sheets of
the Company as of December 31, 1999, and
2000, and the related audited statements of
operations and statements of stockholders'
equity of the Company for the years then
ended, together with the notes thereto and
the unqualified report and opinion of a
recognized firm of independent certified
accountants relating thereto;
5.4.1.2. the unaudited balance sheet of the Company
as of December 31, 2001 (the "Unaudited
Balance Sheet"), and the related unaudited
statement of operations of the Company for
the twelve months then ended; and
5.4.1.3. A trial balance sheet dated as of January
31, 2002 (the "Trial Balance Sheet").
5.4.2. The Company Financial Statements are accurate and
complete in all material respects and present fairly
the financial position of the Company as of the
respective dates thereof and the results of
operations of the Company for the periods covered
thereby. The Company Financial Statements have been
prepared in accordance with US generally accepted
accounting principles consistently applied throughout
the periods covered and comply with the requirements
of all applicable US regulations, except that the
Unaudited Balance Sheet and the Trial Balance Sheet
may not contain all footnotes required by generally
accepted accounting principles or normal year-end
adjustments.
5.4.3. All proper and necessary books of account, minute
books, registers and records have been maintained by
the Company, are in its possession and contain
accurate information relating to all material
transactions to which the Company has been a party,
except where the failure to maintain such books of
account, minute books, registers and records would
not have a Material Adverse Effect on the Company.
5.4.4. A complete list of the Company's debts and loan
facilities as of the date of the Balance Sheet, is
set forth in Part 5.4.4 of the Disclosure Schedule.
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5.5. Absence of Changes. Except as set forth in Part 5.5 of the
Disclosure Schedule, since December 31, 2001:
5.5.1. there has not been any material adverse change in the
Company's business, prospects, operations, assets,
liabilities, debts, work force or its condition
(financial or otherwise) and no event has occurred
that will, or could reasonably be expected to, have a
Material Adverse Effect on the Company;
5.5.2. there has not been any material loss, damage or
destruction to, or any material interruption in the
use of, any of the Company's assets (whether or not
covered by insurance);
5.5.3. the Company has not declared, accrued, set aside or
paid any dividend or made any other distribution in
respect of any shares of capital stock, and has not
repurchased, redeemed or otherwise reacquired any
shares of capital stock or other securities;
5.5.4. except as set forth in Part 5.3 of the Disclosure
Schedule, the Company has not sold, issued or
authorized the issuance of (i) any capital stock or
other security, (ii) any option or right to acquire
any capital stock or any other security or (iii) any
instrument convertible into or exchangeable for any
capital stock or other security;
5.5.5. the Company has not amended or waived any of its
rights under, or permitted the acceleration of
vesting under, (i) any provision of employee options
plans (written or oral), (ii) any provision of any
agreement evidencing any outstanding Option, or (iii)
any restricted stock purchase agreement;
5.5.6. except as required by this Agreement, there has been
no amendment to the Company's charter documents, and
the Company has not effected or been a party to any
recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
5.5.7. the Company has not formed any subsidiary or acquired
any equity interest or other interest in any other
Entity;
5.5.8. the Company has not made any capital expenditure
which, when added to all other capital expenditures
made on behalf of the Company since such date,
exceeds $10,000;
5.5.9. the Company has not (i) entered into or permitted any
of the assets owned or used by it to become bound by
any Contract that is or would constitute a Material
Agreement (as defined in Section 5.10), or (ii)
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amended or prematurely terminated, or waived any
material right or remedy under, any such Contract;
5.5.10. the Company has not (i) acquired, leased or licensed
any right or other asset from any other Person, (ii)
sold or otherwise disposed of, or leased or licensed,
any right or other asset to any other Person, or
(iii) waived or relinquished any right, except for
immaterial rights or other immaterial assets
acquired, leased, licensed or disposed of in the
ordinary course of business and consistent with the
Company's past practices;
5.5.11. the Company has not written off as uncollectible, or
established any extraordinary reserve with respect
to, any account receivable or other indebtedness;
5.5.12. the Company has not made any pledge of any of its
assets or otherwise permitted any of its assets to
become subject to any Encumbrance, except for pledges
of immaterial assets made in the ordinary course of
business and consistent with the Company's past
practices;
5.5.13. the Company has not (i) lent money to any Person, or
(ii) incurred or guaranteed any indebtedness for
borrowed money;
5.5.14. the Company has not (i) established or adopted any
employee benefit plan, (ii) paid any bonus or made
any profit-sharing or similar payment to, or
increased the amount of the wages, salary,
commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors,
officers or employees, or (iii) hired any new
employees;
5.5.15. there has been no resignation or termination of
employment of any officer or key employee of the
Company;
5.5.16. the Company has not changed any of its methods of
accounting or accounting practices in any respect;
5.5.17. the Company has not made any Tax election;
5.5.18. the Company has not commenced or settled any Legal
Proceeding;
5.5.19. the Company has not entered into any transaction or
taken any other action outside the ordinary course of
business or inconsistent with its past practices; and
5.5.20. the Company has not agreed or committed to take any
of the actions referred to in clauses 5.5.3 through
5.5.19 above.
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5.6. Properties and Assets. Full and accurate details of the
Company's material properties and assets are contained in Part
5.6 of the Disclosure Schedule. Except as disclosed in Part
5.6 of the Disclosure Schedule or in the notes to the Company
Financial Statements, the Company has good title to its
assets, including without limitation those reflected in the
Company Financial Statements, free and clear of any right,
interest or equity of any individual or entity (including any
right to acquire, option, or right of preemption) or any
mortgage, charge, pledge, Lien, or assignment, or any other
encumbrance or security interest or arrangement of whatsoever
nature over or in the relevant property ("Security
Interests"). With respect to the assets that are leased, the
Company is in compliance with all material provisions of such
leases, such leases are valid and binding, and, to the best of
its knowledge, the Company holds leasehold interests in such
assets free and clear of all Security Interests, except for
Security Interests that, both individually and in the
aggregate, would not have a material adverse effect on the
Company.
5.7. Bank Accounts; Receivables.
5.7.1. Part 5.7.1 of the Disclosure Schedule provides
accurate information with respect to each account
maintained by or for the benefit of the Company at
any bank or other financial institution.
5.7.2. Part 5.7.2 of the Disclosure Schedule provides an
accurate and complete breakdown of all accounts
receivable, notes receivable and other receivables of
the Company as of February 7, 2002. Except as set
forth in Part 5.7.2 of the Disclosure Schedule, all
existing accounts receivable of the Company
(including those accounts receivable reflected on the
Unaudited Balance Sheet that have not yet been
collected and those accounts receivable that have
arisen since February 7, 2002 and have not yet been
collected) (i) represent valid obligations of
customers of the Company arising from bona fide
transactions entered into in the ordinary course of
business, (ii) are current and, to the Company's best
knowledge, will be collected in full when due,
without any counterclaim or set off.
5.8. Equipment; Leasehold.
5.8.1. All material items of equipment and other tangible
assets owned by or leased to the Company are adequate
for the uses to which they are being put, are in good
condition and repair (ordinary wear and tear
excepted) and are adequate for the conduct of the
Company's business in the manner in which such
business is currently being conducted.
5.8.2. The Company does not own any real property or any
interest in real property, except for the leasehold
created under the real property lease identified in
Part 5.10 of the Disclosure Schedule.
12
5.9. Intellectual Property and Other Intangible Assets.
5.9.1. As used herein, the term "Company Intellectual
Property" shall mean all registered patents, designs,
copyrights and trademarks, all applications for
registration thereof, and all computer programs
including, but not limited to, computer programs
embodied in semiconductor chips, and related
flow-charts, programmer notes, updates and data,
whether in object or source code form, developed, or
used in connection with the business of the Company,
and all hardware, algorithms, utilities flowcharts,
logic, documentation, processes, formulations, data,
experimental methods, or results, descriptions,
business or scientific plans, depictions, customer
lists and any other written, printed or
electronically stored materials or information,
including specifications, pricing plans, market
research or data, potential marketing strategies,
prospective users and distribution channels,
engineering drawings, information concerning
specialized suppliers, specifications for products
and/ or processes and/or software, test protocols,
and all other materials relating thereto, and copies
thereof in any storage media, and all other works of
authorship, inventions, concepts, ideas, and
discoveries developed, discovered, conceived,
created, made, reduced to practice, or used by the
Company and all intellectual property rights therein,
including, without limitation, all copyrights in the
United States and elsewhere, including all rights of
registration and publication, rights to create
derivative works, and all other rights incident to
copyright ownership, for the residue now unexpired of
the present term of any and all such copyrights and
any term thereafter granted during which such
information is entitled to copyright, and all
inventions (patentable or unpatentable), trade
secrets, know-how, ideas and confidential information
embodied or reflected in such information, including
any shop rights, for the longest period of protection
accorded to such interests under applicable law.
5.9.2. Except as specifically set forth in Part 5.9.2 of the
Disclosure Schedule, (i) the Company owns or has the
right to use, free and clear of all Liens, claims and
restrictions the Company Intellectual Property used
in the conduct of its business or deemed by the
Company necessary for use in the conduct of its
business as presently conducted, (ii) to the best of
the Company's knowledge, such Company Intellectual
Property does not infringe upon or violate any right,
lien, or claim of others, including without
limitation, its present or former employees or the
former employers of all such persons. Except as set
forth in Part 5.9.2 of the Disclosure Schedule, the
Company is not currently obligated or under any
liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner or licensee
of, or other claimant to, any patent, trademark,
13
service xxxx, trade name, copyright or other
intangible asset, with respect to the use thereof or
in connection with the conduct of its business or
otherwise.
5.9.3. Any and all Company Intellectual Property of any kind
which has been developed or is currently being
developed by any of the Company or any employees of
the Company (but as to employees including only
Company Intellectual Property which is developed by
such employees while such employees are employed by
the Company and which is developed by such employees
within the scope of their employment with the
Company) shall be the property solely of the Company.
The Company has taken security measures to protect
the secrecy and confidentiality of all the Company
Intellectual Property, which measures are reasonable
and customary in the industry in which the Company
operates. Each person who, either alone or in concert
with others, developed, invented, discovered,
derived, programmed or designed the Company
Intellectual Property, or who has knowledge of or
access to information about the Company Intellectual
Property, has entered into a written non-disclosure
agreement with the Company regarding ownership and
treatment of the Company Intellectual Property, in a
form reasonably satisfactory to the Company.
5.9.4. Neither the Company nor any of its directors,
officers or employees has received any communications
alleging that the Company has violated or by
conducting its business as currently conducted, would
violate, any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or
entity. Neither the Company nor any of its directors,
officers or employees has received notice nor is it
otherwise aware of any infringement of or conflict
with asserted rights of others, with respect to any
of the Company Intellectual Property, or of any
facts, or assertion of any facts, which would render
any of the Company Intellectual Property invalid or
unenforceable.
5.9.5. To the best knowledge of the Company, none of the
Company's employees, officers or directors are
obligated under any contract (including licenses,
covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or
order of any court or administrative agency, that
would interfere with the use of such persons' best
efforts to promote the interests of the Company or
that would conflict with the Company's business as
conducted and as proposed to be conducted. To the
best knowledge of the Company, neither the execution
nor delivery of the Agreement, nor the carrying on of
the Company's business by employees of the Company,
nor the conduct of the Company's business as proposed
to be conducted, will materially conflict with or
result in a material breach of the terms, conditions
14
or provisions of, or constitute a material default
under, any contract, covenant or instrument under
which any of the Company's employees, officers or
directors is now obligated. It is not currently
anticipated to become, necessary to utilize any
inventions, and specifically, patent applications, of
any of the Company's employees (or people the Company
currently intends to hire) made prior to their
employment by the Company other than those that have
been assigned to the Company pursuant to valid and
legally binding instruments of assignment.
5.9.6. The Company Intellectual Property owned by the
Company constitutes all of the Company Intellectual
Property necessary to enable the Company to conduct
its business in the manner in which such business has
been and is being conducted. Except as set forth in
Part 5.9.6 of the Disclosure Schedule, the Company
has not licensed any of the Company Intellectual
Property to any Person on an exclusive basis, nor has
the Company entered into any covenant not to compete
or Contract limiting its ability to exploit fully any
of its Company Intellectual Property or to transact
business in any market or geographical area or with
any Person.
5.10. Agreements and Trading.
5.10.1 All the material agreements to which the Company is a
party (including instruments, leases, licenses,
arrangements, or undertakings of any nature, written
or oral) (the "Material Agreements") are listed in
Part 5.10.1 of the Disclosure Schedule.
5.10.2 To the best of the Company's knowledge, and except as
set forth in Part 5.10.2 of the Disclosure Schedule,
all the Material Agreements are in full force and
effect and the Company has no knowledge of the
invalidity of or grounds for rescission, avoidance or
repudiation of any of the Material Agreements and,
except as set forth in Part 5.10.2 of the Disclosure
Schedule, the Company has not received any notice of
any intention to terminate any such agreement.
5.10.3 To the best of the Company's knowledge and other than
as set forth in Part 5.10.3 of the Disclosure
Schedule, the Company and all third parties with whom
it has transacted business have performed in all
respects all of their material obligations under the
Material Agreements, except for such non-performance
that, both individually and in the aggregate, would
not have a Material Adverse Effect on the Company. To
the best of the Company's knowledge, and except as
set forth in Part 5.10.3 of the Disclosure Schedule,
no party to any of the Material Agreements is in
breach or in default in any respect of its material
obligations thereunder. Except as set forth in Part
5.10.3 of the Disclosure Schedule, no party to any of
15
the material Agreements has made a claim of which the
Company is aware to the effect that the Company has
failed to perform a material obligation thereunder.
5.10.4. Except as set forth in Part 5.10.4 of the Disclosure
Schedule, there are no agreements, promises or
understandings in force restricting the competitive
freedom of the Company to provide and take goods and
services by such means and from and to such
individuals or entities as it may from time to time
think fit.
5.10.5. The Company has delivered to Parent accurate and
complete copies of all written Material Agreements
identified in Part 5.10.5 of the Disclosure Schedule,
including all amendments thereto. Part 5.10.5 of the
Disclosure Schedule provides an accurate description
of the terms of each Material Agreement that is not
in written form. Each Material Agreement identified
in Part 5.10.1 of the Disclosure Schedule is valid
and in full force and effect, and, to the Company's
best knowledge, is enforceable by the Company in
accordance with its terms, subject to (i) laws of
general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules
of law governing specific performance, injunctive
relief and other equitable remedies.
5.10.6. Except as set forth in Part 5.10.6 of the Disclosure
Schedule:
5.10.6.1. the Company has not violated or breached,
or committed any material default under, any
Material Agreement, and, to the Company's
best knowledge, no other Person has violated
or breached, or committed any material
default under, any Material Agreement;
5.10.6.2. no event has occurred, and no circumstance
or condition exists, that (with or without
notice or lapse of time) will, or could
reasonably be expected to, (A) result in a
material violation or breach of any of the
provisions of any Material Agreement, (B)
give any Person the right to declare a
material default or exercise any remedy
under any Material Agreement, (C) give any
Person the right to accelerate the maturity
or performance of any Material Agreement, or
(D) give any Person the right to cancel,
terminate or modify any Material Agreement;
5.10.6.3. the Company has not received any notice or
other communication regarding any actual or
possible material violation or breach of, or
material default under, any Material
Agreement; and
16
5.10.6.4. the Company has not waived any of its
rights under any Material Agreement.
5.10.7. No Person is renegotiating, or has a right pursuant
to the terms of any Material Agreement to
re-negotiate, any amount paid or payable to the
Company under any Material Agreement or any other
material term or provision of any Material Agreement.
5.10.8. The Material Agreements identified in Part 5.10.1 of
the Disclosure Schedule collectively constitute all
of the Contracts necessary to enable the Company to
conduct its business in the manner in which its
business is currently being conducted.
5.10.9. Part 5.10.9 of the Disclosure Schedule identifies and
provides a brief description of each material
proposed Contract as to which any bid, offer, award,
written proposal, term sheet or similar document has
been submitted or received by the Company regarding
the business of the Company since June 30, 2001, or
which is otherwise still pending.
5.10.10. Part 5.10.10 of the Disclosure Schedule provides an
accurate description and breakdown of the Company's
backlog under Material Agreements.
5.11. Capital Expenditure and Commitments. Except as disclosed in
Part 5.11 of the Disclosure Schedule or in the Company
Financial Statements:
5.11.1. The Company has not undertaken to make any material
capital commitment, expenditure or purchase in excess
of $10,000.
5.11.2. The Company is not a party to any material hire, hire
purchase, credit sale or conditional sale agreement
or any contract providing for payment on deferred
terms in respect of assets purchased by the Company.
5.11.3. The Company is not in breach of any material
obligation under any material deed, agreement or
transaction to which it is a party, and to the best
of its knowledge, no third party that has transacted
business with the Company is in breach of any of its
material obligations under any material deed,
agreement, or transaction with the Company to which
it is a party.
5.11.4. The Company is not aware of any Security Interest on,
over or affecting the issued or unissued share
capital of the Company and there is no agreement or
commitment to give or create any such Security
Interest and no claim has been made by any Person to
be entitled to any such Security Interest.
17
5.11.5. The Company has not given any guarantee, indemnity or
security for, or otherwise agreed to become directly
or contingently liable for, any obligation of any
other individual or entity, except in its ordinary
course of business, and to the best of its knowledge,
no individual or entity has given any guaranty of or
security for any of the Company's obligations.
5.11.6. There are in force no powers of attorney given by the
Company with respect to any asset or business of the
Company, and no individual or entity, as agent,
representative, distributor or otherwise, is entitled
or authorized to bind or commit the Company to any
obligation not in the ordinary course of the
Company's business.
5.11.7. The Company has not applied for or received any grant
or allowance from any governmental authority.
5.12. Compliance with Legal Requirements.
5.12.1. To the best of its knowledge, information and belief,
the Company has carried on its business and affairs
in all material respects in accordance with all
applicable laws and regulations, to the extent
material to the Company's business or assets,
including, inter alia, in accordance with the
provisions of the GCL, and in accordance with the
Company's charter documents, and, the Company is not
aware of any material violation or default with
respect to any statute, regulation, order, decree, or
judgment of any court or any governmental agency
which could have a material adverse effect upon the
Company's assets or business, and the Company has
been granted and there are now in force all material
approvals, consents, and licenses necessary for the
carrying on of its business in the places and in the
manner in which it is now carried on, and, the
Company is not aware of any circumstances which
evidence or indicate that any such approvals,
consents or licenses, to the extent material to the
Company's business or assets, are likely to be
suspended, canceled, revoked or not renewed.
5.12.2. The copy of each of the charter documents of the
Company provided to Parent, is complete, true and
accurate and has not been amended or repealed.
5.12.3. All documents required to be filed with or delivered
to the applicable Georgia or federal authorities in
respect of the Company have been properly filed or
delivered in a timely manner, except for such non
compliance that, both individually and in the
aggregate, would not have a Material Adverse Effect
on the Company.
18
5.13. Governmental Authorizations. Part 5.13 of the Disclosure
Schedule identifies each material Governmental Authorization
held by the Company, and the Company has delivered to Parent
accurate and complete copies of all Governmental
Authorizations identified in Part 5.13 of the Disclosure
Schedule. The Governmental Authorizations identified in Part
5.13 of the Disclosure Schedule are valid and in full force
and effect, and collectively constitute all Governmental
Authorizations necessary to enable the Company to conduct its
business in the manner in which its business is currently
being conducted. Except as set forth in Part 5.13 of the
Disclosure Schedule, the Company is and has been in
substantial compliance with the terms and requirements of the
respective Governmental Authorizations identified in Part 5.13
of the Disclosure Schedule. The Company has not received any
notice or other communication from any Governmental Body
regarding (a) any actual or possible violation of or failure
to comply with any term or requirement of any Governmental
Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization.
5.14. Tax Matters.
5.14.1. To the best of the Company's knowledge, the Company
Financial Statements make full provisions for all
Taxes for which the Company was then or thereafter
became or may hereafter become liable or accountable
in respect of or by reference to any income, profit,
receipt, gain, transaction, agreement, distribution
or event which was earned, accrued, received, or
realized, entered into, and the Company promptly paid
or fully provided in its books of account for all
Taxes for which it has or may hereafter become liable
or accountable in the period from the date of its
incorporation to the Closing Date.
5.14.2. To the best of the Company's knowledge, the Company
has at all times and within the requisite time limits
promptly, fully and accurately observed, performed
and complied with all material obligations or
conditions imposed on it, or to which any claim,
deduction, allowance or relief made, claimed by or
afforded to it was made subject, under any
legislation relating to Taxes, except for such
non-compliance that, both individually and in the
aggregate, would not have a Material Adverse Effect
on the Company.
5.14.3. The Company is not aware of any circumstances which
will or may, whether by lapse of time or the issue of
any notice of assessment or otherwise, give rise to
any dispute with any relevant Government Body in
relation to its liability or accountability for
Taxes, any claim made by it, any relief, deduction,
or allowance afforded to it, or in relation to the
status or character of the Company or any of its
enterprises under or for the purpose of any provision
19
of any legislation relating to Taxes, except for such
dispute or claim that, both individually and in the
aggregate, would not have a Material Adverse Effect
on the Company.
5.15. Employees.
5.15.1. Full particulars of all the officers, employees and
consultants of the Company (each, an "Employee"),
including their present compensation packages, are
disclosed in Part 5.15.1 of the Disclosure Schedule,
which particulars show all material benefits
including, without limitation, salaries, directors'
fees, social benefits, bonuses, commissions, profit
shares, automobile, reimbursement of expenses and
benefits in kind ("Benefits") payable or which the
Company is bound to provide (whether now or in the
future) to each officer, employee and consultant of
the Company and are true, accurate and complete. None
of the Employees is entitled to any bonuses (whether
in cash or otherwise) in connection with his/her
employment during 2001 and the Company did not
undertake, whether in writing or otherwise, to grant
any of the Employees bonuses in connection with 2001.
5.15.2. Except as set forth in Part 5.15.2 of the Disclosure
Schedule, no key employee of the Company has been
dismissed in the last six months or has given notice
of termination of his employment.
5.15.3. Subject to the provisions of any applicable Georgia
law and binding custom and except as set forth in
Part 5.15.1 of the Disclosure Schedule, there are no
agreements or arrangements (whether legally
enforceable or not) for the payment of any pensions,
allowances, lump sums, or other like benefits on
retirement or on death or termination or during
periods of sickness or disablement for the benefit of
any officer or former officer or employee or former
employee of the Company or for the benefit of the
dependents of any such individual in operation at the
date hereof.
5.15.4. Except as set forth in Part 5.15.3, all the Benefits
to which any officer or former officer or employee or
former employee of the Company is or may be entitled
including, inter alia, severance pay, leave and
health, have been paid or adequately provided for in
the Company Financial Statements.
5.15.5. A complete list of all of the options granted to
employees, directors, officers or consultants of the
Company, and their respective vesting schedules, is
set forth in Part 5.15.5 of the Disclosure Schedule.
Except as set forth therein, the Company does not
operate any share incentive scheme, share option
scheme or profit sharing scheme for the benefit of
any of its directors, officers, employees or
consultants.
20
5.15.6. Except as set forth in Part 5.15.3 of the Disclosure
Schedule, neither the execution, delivery or
performance of this Agreement, nor the consummation
of any of the other transactions contemplated by this
Agreement, will result in any payment (including any
bonus, golden parachute or severance payment) to any
current or former Employee or director of the Company
(whether or not under any option plan (written or
oral), or materially increase the benefits payable
under any option plan (written or oral) or result in
any acceleration of the time of payment or vesting of
any such benefits, except as provided therein.
5.15.7. Part 5.15.1 of the Disclosure Schedule contains a
list of all salaried employees of the Company as of
the date of this Agreement, and correctly reflects,
in all material respects, their salaries, any other
compensation payable to them (including compensation
payable pursuant to bonus, deferred compensation or
commission arrangements), their dates of employment
and their positions.
5.15.8. No Employee is not fully available to perform work
because of disability or other leave.
5.15.9. The Company is in compliance in all material respects
with all applicable Legal Requirements and Contracts
relating to employment, employment practices, wages,
bonuses and terms and conditions of employment,
including employee compensation matters.
5.15.10. The Company is not aware of any organizational
campaigns, petitions or other unionization activities
seeking recognition of a collective bargaining unit
which could affect the Company; nor is the Company
aware of any controversies, strikes, slowdowns or
work stoppages pending or threatened between the
Company and any of its employees. To the Company's
best knowledge, the consummation of any of the
transactions contemplated by this Agreement will not
have a material adverse effect on the Company's labor
relations, and none of the Company's key employees
has notified the Company of any intention to
terminate his or her employment with the Company.
5.16. Insurance.
5.16.1. Full and accurate details of the Company's insurance
policies are contained in Part 5.16.1 of the
Disclosure Schedule, including such policies as are
required under the Company's agreements with its
customers.
5.16.2. The Company has the benefit of adequate insurance
against all risks and losses usually insured against
by companies carrying on the same or a similar
21
business and (without prejudice to the generality of
the foregoing) for the full replacement or
reinstatement value of all its assets of an insurable
nature and against accident, damage, injury, third
party loss (including product liability) and loss of
profits with a well established and reputable
insurer.
5.16.3. The Company has not done anything or suffered any
damage which has rendered or might render any
policies of insurance taken out by it void or
voidable or which might result in an increase in
premiums and the Company has complied with all
conditions attached to such policies.
5.16.4. There is no claim outstanding under any of such
policies nor, to the best of the Company's knowledge,
are there any circumstances likely to give rise to
such a claim.
5.17. Related Party Transactions. Except as set forth in Part 5.17
of the Disclosure Schedule: (a) no Related Party has, and no
Related Party has at any time since December 31, 1998 had, any
direct or indirect interest in any material asset used in or
otherwise relating to the business of the Company; (b) no
Related Party is, or has at any time since December 31, 1998
been, indebted to the Company; (c) since December 31, 1998, no
Related Party has entered into, or has had any direct or
indirect financial interest in, any Material Agreement,
transaction or business dealing involving the Company; (d) no
Related Party is competing, or has at any time since December
31, 1998 competed, directly or indirectly, with the Company;
and (e) no Related Party has any claim or right against the
Company (other than rights under Options and rights to receive
compensation for services performed as an employee of the
Company). For purposes of this Section 5.17 each of the
following shall be deemed to be a "Related Party": (i) each of
the Company Stockholders if such person owns, or has at any
time in the past owned, an aggregate of five percent (5%) or
more of the capital stock of the Company; (ii) each individual
who is, or who has at any time since December 31, 1998 been,
an officer of the Company; (iii) each member of the immediate
family of each of the individuals referred to in clauses `(i)'
and `(ii)' above; and (iv) any trust or other Entity (other
than the Company) in which any one of the individuals referred
to in clauses `(i)' `(ii)' and `(iii)' above holds (or in
which more than one of such individuals collectively hold),
beneficially or otherwise, a material voting, proprietary or
equity interest, provided, however, that the Parent and Merger
Sub acknowledge that the Company Stockholders that are not
natural Persons have made and shall continue to make
investments and participate in the businesses, in the ordinary
course of their business, in Persons/Entities that may
compete, directly or indirectly, with the Company and the
Parent, and the Parent and Merger Sub agree that such
activities shall not constitute a breach of the
representations and warranties contained in this Section 5.17.
22
5.18. Legal Proceedings; Orders.
5.18.1. The Company is not involved in pending Legal
Proceeding, and, to the Company's best knowledge, no
Person has threatened to commence any Legal
Proceeding: (i) that involves the Company or any of
the assets owned or used by the Company or any Person
whose liability the Company has or may have retained
or assumed, either contractually or by operation of
law; or (ii) that challenges, or that may have the
effect of preventing, delaying, making illegal or
otherwise interfering with, any of the transactions
contemplated by this Agreement. To the Company's best
knowledge, no event has occurred, and no claim,
dispute or other condition or circumstance exists,
that will, or that could reasonably be expected to,
give rise to or serve as a basis for the commencement
of any such Legal Proceeding.
5.18.2. Except as set forth in Part 5.18.2 of the Disclosure
Schedule, no Legal Proceeding has ever been commenced
by or has ever been pending against the Company.
5.18.3. There is no order, writ, injunction, judgment or
decree to which the Company, or any of the assets
owned or used by the Company, is subject. To the
Company's best knowledge, no officer or other
employee of the Company is subject to any order,
writ, injunction, judgment or decree that prohibits
such officer or other employee from engaging in or
continuing any conduct, activity or practice relating
to the Company's business.
5.19. Authority; Binding Nature of Agreement. The Company has the
absolute and unrestricted right, power and authority to enter
into and to perform its obligations under this Agreement; and
the execution, delivery and performance by the Company of this
Agreement have been duly authorized by all necessary action on
the part of the Company, its board of directors and
stockholders. This Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
5.20. Non-Contravention; Consents. Neither (1) the execution,
delivery or performance of this Agreement, nor (2) the
consummation of any of the transactions contemplated by this
Agreement, will directly or indirectly (with or without notice
or lapse of time):
5.20.1. contravene, conflict with or result in a violation of
(i) any of the provisions of the Company's charter
documents, or (ii) any resolution adopted by the
Company's stockholders, the Company's board of
directors or any committee of the Company's board of
directors;
23
5.20.2. contravene, conflict with or result in a violation
of, or give any Governmental Body or other Person the
right to challenge any of the transactions
contemplated by this Agreement or to exercise any
remedy or obtain any relief under, any Legal
Requirement or any order, writ, injunction, judgment
or decree to which the Company, or any of the assets
owned or used by the Company, is subject;
5.20.3. contravene, conflict with or result in a violation of
any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate or modify, any
Governmental Authorization that is held by the
Company or that otherwise relates to the Company's
business or to any of the assets owned or used by the
Company;
5.20.4. contravene, conflict with or result in a material
violation or breach of, or result in a material
default under, any provision of any Material
Agreement that is or would constitute a Material
Agreement, or give any Person the right to (i)
declare a default or exercise any remedy under any
such Material Agreement, (ii) accelerate the maturity
or performance of any such Material Agreement, or
(iii) cancel, terminate or modify any such Material
Agreement; or
5.20.5. result in the imposition or creation of any Lien or
Encumbrance upon or with respect to any asset owned
or used by the Company (except for minor liens that
will not, in any case or in the aggregate, materially
detract from the value of the assets subject thereto
or materially impair the operations of the Company).
Except for the Georgia Certificate of Merger, the Company is
not and will not be required to make any filing with or give
any notice to, or to obtain any Consent from, any Person in
connection with (x) the execution, delivery or performance of
this Agreement or any of the other agreements referred to in
this Agreement, or (y) the consummation of any of the
transactions contemplated by this Agreement, other than such
filings or Consents that the lack of which can not be
reasonably expected to have a Material Adverse Effect on the
Company and the Merger.
5.21. No Conflicting Interest. Except as set forth in Part 5.21 of
the Disclosure Schedule, the Company is not aware that any
director, officer, key employee or Related Party of the
Company has any interest in any corporation, partnership, or
other entity that is engaged in a business which is in
competition with that of the Company, is a supplier or
customer of the Company, or is a party to any contract which
may have any effect on the business of the Company; provided,
however, that the Parent and Merger Sub acknowledge that the
Company Stockholders that are not natural Persons have made
and shall continue to make investments and participate in the
24
businesses, in the ordinary course of their business, in
Persons/Entities that may compete, directly or indirectly,
with the Company and the Parent, and the Parent and Merger Sub
agree that such activities shall not constitute a breach of
the representations and warranties contained in this Section
5.21.
5.22. Brokers. No broker, finder or investment banker, for which the
Company or Parent may be liable, 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
directors, officers, employees or agents or any of the Company
Stockholders.
5.23. Full Disclosure. This Agreement (including the Disclosure
Schedule) does not, (i) contain any representation, warranty
or information that is false or misleading with respect to any
material fact, or (ii) omit to state any material fact
necessary in order to make the representations, warranties and
information contained and to be contained herein and therein
(in the light of the circumstances under which such
representations, warranties and information were or will be
made or provided) not false or misleading.
5.24. Survival/Remedies. The representations and warranties
contained in this Section 5 shall survive the Closing Date and
shall continue in full force and effect until the consummation
of the Second Closing. Except for cases of fraud, the sole and
exclusive remedy of Parent after the Closing with respect to
any claim, loss, liability, damage, deficiency, cost or
expense (a "Loss") resulting from the breach of representation
or warranty by the Company pursuant to this Agreement shall be
to offset the amount of such Loss against any Additional
Consideration otherwise deliverable to the Company
Stockholders, Management Stockholders and Company
Optionholders; provided that such offset shall not exceed an
amount (either in cash or Parent Ordinary Shares, as may be
applicable to the Second Closing) equal to 50% of the
Additional Consideration (deducted from each Company
Stockholder, Management Stockholder and Company Optionholder
pro rata, provided that each Person's obligation hereunder
shall be limited to 50% of the Additional Consideration set
forth opposite such Person's name on Schedule 4.1). In
furtherance of the foregoing, Parent hereby waives, from and
after the Second Closing, any and all rights, claims and
causes of action it may have against the Company, or the
Company Stockholders, or any of their respective affiliates,
directors, officers or employees with respect to all Losses
arising under or based upon any law, common law, equity or
otherwise.
In the event that the Parent shall have the right to offset a
Loss in accordance with the above paragraph, and such Loss
shall be offset from the Additional Consideration Shares, the
price per each of the Additional Consideration Shares to be
offset shall be measured in accordance with a value of $0.511
per share (the "Average Closing Price").
25
6. Representations and Warranties of the Company Stockholders.
Each of the Company Stockholders, severally and not jointly, represents
and warrants as to itself and not as to any other Company Stockholder,
to and for the benefit of Parent and Merger Sub, that the statements
contained in this Section 6 are correct and complete as of the date of
this Agreement
6.1. Authority; Binding Nature of Agreement. Such Company
Stockholder has the absolute and unrestricted right, power and
authority to enter into and to perform its obligations under
this Agreement; and the execution, delivery and performance by
the Company of this Agreement have been duly authorized by all
necessary action on the part of the Stockholder. This
Agreement constitutes the legal, valid and binding obligation
of the Company Stockholder enforceable against it in
accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief
of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
6.2. Title to Stock. Such Company Stockholder has good title to its
Shares and such Shares are not subject to any Security
Interests or Lien of any kind.
6.3. Investment. Such Company Stockholder (A) understands that the
Parent Ordinary Shares have not been, and may not be in the
near future, registered under the Securities Act, or under any
state securities laws, and are being offered and sold in
reliance upon federal and state exemptions for transactions
not involving any public offering, (B) is acquiring Parent
Ordinary Shares solely for his or its own account for
investment purposes, and not with a view to the distribution
thereof, (C) is a sophisticated investor with knowledge and
experience in business and financial matters, (D) has received
certain information concerning Parent and has had the
opportunity to obtain additional information as desired in
order to evaluate the merits and the risks inherent in holding
Parent Ordinary Shares, (E) is able to bear the economic risk
and lack of liquidity inherent in holding Parent Ordinary
Shares, and (F) is an Accredited Investor within the meaning
of Regulation D promulgated under the Securities Act.
6.4. Risk Factors. Such Company Stockholder has reviewed all of the
risk factors detailed in the Parent SEC Documents (as such a
term is defined in Section 7.2.1 below).
6.5. No Other Representations. Except for the representations and
warranties made in this Section 6, no Company Stockholder
makes any representation or warranty as to itself or the
Company.
26
6.6. Survival. Except for the representations contained in Sections
6.1 and 6.2, the representations and warranties contained in
this Section 6 shall expire on and be terminated as of the
Closing Date. Notwithstanding the above, in the event of a
fraud by a Company Stockholder relating to the matters
specified in Sections 6.1 and 6.2 above, the remedy of the
Parent shall be limited to the Parent Ordinary Shares received
by the Company Stockholder responsible for such fraud. In
addition, the Parent acknowledges that no Company Stockholder
shall be liable to any act of fraud by another Company
Stockholder.
In determining the number of Ordinary Shares recoverable from
a Company Stockholder by Parent pursuant to this Section 6.6,
the value per share of each Ordinary Share received by such
Company Stockholder shall be measured in accordance with the
Average Closing Price.
7. Representations and Warranties of Parent
Parent represents and warrants to the Company that the statements
contained in this Section 7 are correct and complete as of the date of
this Agreement.
7.1. Due Organization; Subsidiaries; Etc.
7.1.1. Parent is duly organized and validly existing under
the laws of the State of Israel. Parent has all
requisite corporate power and authority to conduct
its business in the manner in which its business is
currently being conducted and to own and use its
assets in the manner in which its assets are
currently owned and used. Merger Sub is duly
organized, validly existing and in good standing
under the laws of the State of Georgia. Merger Sub
has all requisite corporate power and authority to
conduct its business in the manner in which its
business is currently being conducted and to own and
use its assets in the manner in which its assets are
currently owned and used.
7.1.2. Except as set forth in Part 7.1.2 of the Parent
Disclosure Schedule, Parent has not conducted any
business under or otherwise used, for any purpose or
in any jurisdiction, any fictitious name, assumed
name, trade name or other name, other than the name
"ViryaNet" and "RTS".
7.1.3. Parent is not and has not been required to be
qualified, authorized, registered or licensed to do
business as a foreign corporation in any
jurisdiction, except where the failure to be so
qualified, authorized, registered or licensed has not
had and will not have a Material Adverse Effect on
Parent.
27
7.1.4. Part 7.1.4 of the Parent Disclosure Schedule
accurately sets forth (i) the names of the members of
Parent's board of directors, (ii) the names of the
members of each committee of the Company's board of
directors, and (iii) the names and titles of Parent's
officers.
7.1.5. Except for Merger Sub and Parent's subsidiary(ies)
set forth in Part 7.1.5 of the Parent Disclosure
Schedule (collectively, the "Parent Subsidiaries"),
Parent does not own, directly or indirectly, any
controlling interest in any entity and Parent has
never owned, beneficially or otherwise, any shares or
other securities of, or any direct or indirect equity
interest in, any entity. Each of the Parent
Subsidiaries is duly organized, validly existing and
in good standing under the laws of the state of its
incorporation and has all requisite corporate power
and authority to conduct its business in the manner
in which its business is currently being conducted
and to own and use its assets in the manner in which
its assets are currently owned and used. Parent owns,
beneficially and of record, all of the issued and
outstanding share capital of each Parent Subsidiary
and all rights thereto free and clear of liens,
claims, charges and other encumbrances and all
rights, options to purchase, proxies, voting
agreements, calls or commitments of every kind.
Parent has not agreed and is not obligated to make
any future investment in or capital contribution to
the Parent Subsidiaries or any entity. The Parent has
not guaranteed and is not responsible or liable for
any obligation of the Parent Subsidiaries or any of
the entities in which it owns or has owned any equity
interest. All issued and outstanding share capital of
each Parent Subsidiary was duly authorized and is
validly issued and outstanding, fully paid and
non-assessable.
7.2. SEC Filings; Financial Statements.
7.2.1. Parent has timely filed all required forms, reports
and documents with the SEC since becoming a SEC
reporting company on September 19, 2000, each of
which has complied in all material respects with all
applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations
promulgated thereunder, each as in effect on the
dates such forms, reports, and documents were filed.
Parent has made available to the Company and each of
the Company Stockholders accurate and complete copies
(excluding copies of exhibits) of each report,
registration statement and definitive proxy statement
filed by Parent with the SEC between such date and
the date of this Agreement (the "Parent SEC
Documents"). As of the time it was filed with the SEC
(or, if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such
filing) each of the Parent SEC Documents, including
any financial statements or schedules included or
incorporated by reference therein, complied in all
28
material respects with the applicable requirements of
the Securities Act or the Exchange Act and the rules
and regulations promulgated thereunder (as the case
may be).
7.2.2. The consolidated financial statements contained in
the Parent SEC Documents: (i) complied as to form in
all material respects with the published rules and
regulations of the SEC applicable thereto; (ii) were
prepared in accordance with US generally accepted
accounting principles applied on a consistent basis
throughout the periods covered; and (iii) fairly
present the consolidated financial position of Parent
and its subsidiaries as of the respective dates
thereof and the consolidated results of operations of
Parent and its subsidiaries for the periods covered
thereby.
7.3. Authority; Binding Nature of Agreement. Each of Parent and
Merger Sub has the absolute and unrestricted right, power and
authority to perform its obligations under this Agreement. The
execution, delivery and performance by each of Parent and
Merger Sub of this Agreement (including, in relation to
Parent, the contemplated issuance of Parent Ordinary Shares as
part of the Merger Consideration in accordance with this
Agreement) have been duly authorized by all necessary action
on the part of Parent and its board of directors and by Merger
Sub and its board of directors and stockholders. Other than
the issuance of the Additional Consideration Shares pursuant
to Section 4.1 above, no vote of Parent's shareholders is
needed to approve any of the transactions contemplated by this
Agreement. This Agreement constitutes the legal, valid and
binding obligation of Parent, enforceable against it in
accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief
of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
7.4. Valid Issuance. The Parent Ordinary Shares to be issued in the
transactions contemplated by this Agreement as part of the
Merger Consideration will, when and if issued in accordance
with the provisions of this Agreement, be validly issued,
fully paid and nonassessable.
7.5. Consents and Approvals. Except as set forth on Part 7.5 of the
Parent Disclosure Schedule, no filing or registration with, no
notice to and no permit, authorization, consent or approval of
any third party or any Governmental Body is necessary for the
consummation by Parent of the transactions contemplated by
this Agreement.
7.6. No Violation. Neither the execution and delivery of this
Agreement by Parent, the performance by Parent of its
obligations hereunder nor the consummation by Parent of the
transactions contemplated hereby will (a) violate, conflict
with or result in any breach of any provision of the Articles
or Memorandum of Association of Parent, (b) violate any order,
writ, judgment, injunction, decree, statute, rule or
regulation of any court or domestic or foreign Governmental
29
Body applicable to Parent, or (c) violate, conflict with or
result in any breach of any provisions of any material
Contract of Parent, which such violation can be reasonably
expected to have a Material Adverse Effect on the Parent.
7.7. Legal Proceedings. Except as set forth in the Parent SEC
Documents or in Part 7.7 of the Parent Disclosure Schedule,
Parent is not aware of any pending Legal Proceeding, and, to
Parent's best knowledge, no Person has threatened to commence
any Legal Proceeding: (i) that involves Parent or any of the
assets owned or used by Parent or any Person whose liability
Parent has or may have retained or assumed, either
contractually or by operation of law; or (ii) that challenges,
or that may have the effect of preventing, delaying, making
illegal or otherwise interfering with, any of the transactions
contemplated by this Agreement. To Parent's best knowledge, no
event has occurred, and no claim, dispute or other condition
or circumstance exists, that will, or that could reasonably be
expected to, give rise to or serve as a basis for the
commencement of any such Legal Proceeding.
7.8. Receipt of Information. Parent has been afforded the
opportunity to ask questions of and receive answers from duly
authorized officers or other representatives of the Company
concerning the Company's business, assets and financial
position. The provisions of this Section 7.8 shall not be
deemed to derogate in any manner from the Company's and the
Company Stockholders' representations and warranties set forth
in Sections 5 and 6 above.
7.9. Non-Contravention; Consents. Except as set forth in Part 7.9
of the Parent Disclosure Schedule, neither (1) the execution,
delivery or performance of this Agreement, nor (2) the
consummation of any of the transactions contemplated by this
Agreement, will directly or indirectly (with or without notice
or lapse of time):
7.9.1. contravene, conflict with or result in a violation of
(i) any of the provisions of Parent's or Merger Sub's
charter documents, or (ii) any resolution adopted by
Parent's or Merger Sub's stockholders, Parent's or
Merger Sub's board of directors or any committee of
Parent's or Merger Sub's board of directors;
7.9.2. contravene, conflict with or result in a violation
of, or give any Governmental Body or other Person the
right to challenge any of the transactions
contemplated by this Agreement or to exercise any
remedy or obtain any relief under, any Legal
Requirement or any order, writ, injunction, judgment
or decree to which Parent or Merger Sub, or any of
the assets owned or used by Parent or Merger Sub, is
subject;
7.9.3. contravene, conflict with or result in a violation of
any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate or modify, any
Governmental Authorization that is held by Parent or
30
Merger Sub or that otherwise relates to Parent's
business or to any of the assets owned or used by
Parent;
7.9.4. contravene, conflict with or result in a material
violation or breach of, or result in a material
default under, any provision of any Contract of
Parent that is or would constitute a material
Contract of Parent, or give any Person the right to
(i) declare a default or exercise any remedy under
any such Contract, (ii) accelerate the maturity or
performance of any such Contract, or (iii) cancel,
terminate or modify any such Contract; or
7.9.5. result in the imposition or creation of any Lien or
Encumbrance upon or with respect to any asset owned
or used by Parent (except for minor liens that will
not, in any case or in the aggregate, materially
detract from the value of the assets subject thereto
or materially impair the operations of Parent).
Except as set forth in Part 7.9 of the Parent Disclosure
Schedule, the Company is not and will not be required to make
any filing with or give any notice to, or to obtain any
material Consent from, any Person in connection with (x) the
execution, delivery or performance of this Agreement or any of
the other agreements referred to in this Agreement, or (y) the
consummation of any of the transactions contemplated by this
Agreement.
7.10. Absence of Changes. Except as provided in the Parent SEC
Documents or as set forth in Part 7.13 of the Parent
Disclosure Schedule, since December 31, 2001:
7.10.1. there has not been any material adverse change in
Parent's business, prospects, operations, assets,
liabilities, debts, work force or its condition
(financial or otherwise) and no event has occurred
that will, or could reasonably be expected to, have a
Material Adverse Effect on Parent;
7.10.2. there has not been any material loss, damage or
destruction to, or any material interruption in the
use of, any of Parent's assets (whether or not
covered by insurance);
7.10.3. Parent has not declared, accrued, set aside or paid
any dividend or made any other distribution in
respect of any shares of capital stock, and has not
repurchased, redeemed or otherwise reacquired any
shares of capital stock or other securities;
7.10.4. except as set forth in the Parent SEC Documents or
any issuance of incentives under Parent's stock
incentive plan, Parent has not sold, issued or
31
authorized the issuance of (i) any capital stock or
other security, (ii) any option or right to acquire
any capital stock or any other security or (iii) any
instrument convertible into or exchangeable for any
capital stock or other security;
7.10.5. Parent has not amended or waived any of its rights
under, or permitted the acceleration of vesting
under, (i) any provision of employee options plans
(written or oral), (ii) any provision of any
agreement evidencing any outstanding option
exercisable into Parent Ordinary Shares, or (iii) any
restricted stock purchase agreement;
7.10.6. except as required by this Agreement, there has been
no amendment to Parent's charter documents, and
Parent has not effected or been a party to any
recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
7.10.7. Parent has not changed any of its methods of
accounting or accounting practices in any respect;
7.10.8. Parent has not made any Tax election;
7.10.9. Parent has not amended or prematurely terminated, or
waived any material right or remedy under any
material Contract of Parent.
7.10.10. Parent has not made any pledge of any of its assets
or otherwise permitted any of its assets to become
subject to any Encumbrance, except for pledges of
assets made in the ordinary course of business
consistent with Parent's past practices; and
7.10.11. Parent has not agreed or committed to take any of the
actions referred to in clauses 7.10.3 through 7.10.10
above.
7.11. Properties and Assets. Except as disclosed in Part 7.11 of the
Parent Disclosure Schedule or in Parent's SEC Documents,
Parent has good title to its assets, including without
limitation those reflected in Parent SEC Documents, free and
clear of any Security Interests.
7.12. NASDAQ Listing. Parent Ordinary Shares are listed and trade on
NASDAQ under the symbol "VRYA." Other than as set forth in the
Parent SEC Documents, Parent has not received notice from
Nasdaq (1) that it has or will suspend trading of Parent
Ordinary Shares for any reason or (2) that Parent is not in
compliance with any applicable Nasdaq Marketplace Rules and is
subject to delisting if it does not comply with such NASDAQ
Marketplace Rules.
32
7.13 Full Disclosure. This Agreement (including the Parent
Disclosure Schedule) does not, (i) contain any representation,
warranty or information that is false or misleading with
respect to any material fact, or (ii) omit to state any
material fact necessary in order to make the representations,
warranties and information contained and to be contained
herein and therein (in the light of the circumstances under
which such representations, warranties and information were or
will be made or provided) not false or misleading.
7.14 Brokers. Except as disclosed in Part 7.14 of the Parent
Disclosure Schedule, no broker, finder or investment banker,
for which the Company or Parent may be liable, 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
Parent, Merger Sub or any of their respective directors,
officers, employees or agents.
7.15 Intellectual Property. Parent owns all right, title and
interest to, or has the right to use pursuant to a valid and
enforceable written license, all industrial and intellectual
property rights, in any jurisdiction throughout the world,
including patents, patent applications and patent disclosures;
trademarks, trade names, service marks and Internet domain
names, and registrations and applications; copyrights,
copyright registrations and copyright applications; know-how,
trade secrets, proprietary processes and formulae,
specifications, flow charts, inventions, instructions,
marketing materials and all documentation and media
constituting, describing or relating to the foregoing,
including manuals, memoranda and records; and, computer
software (including source code and object code, data,
databases and documentation) ("Intellectual Property Rights")
necessary for its business as currently conducted (the "Parent
Intellectual Property Rights"). Parent has not received any
written notice (including any cease and desist letters or
offers to license) of infringement of or conflict with
asserted rights of others with respect to the use of
Intellectual Property Rights. To the knowledge of Parent, all
patents and other registrations for Parent Intellectual
Property Rights are valid and enforceable and none of the
Parent Intellectual Property Rights has been misused, and
except as set forth in Part 7.15 of the Disclosure Schedule,
no claim by any third party contesting the validity,
enforceability, use or ownership of the Parent Intellectual
Property Rights has been made or is currently pending or to
the knowledge of Parent threatened and there are no grounds
for same. No loss or expiration of any patents or
registrations included in the Parent Intellectual Property
Rights is pending or threatened (except for patents expiring
at the end of their statutory terms and not due to Parent's
failure to pay maintenance fees). Parent has performed all
acts and has paid all required fees and taxes to maintain all
patents, registrations and applications of such Parent
Intellectual Property Rights in full force and effect, except
for such non-performance which can not be reasonably expected
to have a Material Adverse Effect on the Parent. To its
knowledge, Parent does not and shall not in the conduct of its
business as now conducted infringe or conflict with any right
of any third party where such infringement or conflict would
reasonably be expected to result in any Material Adverse
Effect. Parent is not, and will not be as a result of the
execution and delivery of this Agreement or the performance of
33
any obligations hereunder, in breach of any license or other
agreement relating to any Intellectual Property Rights. To the
knowledge of Parent, no third party is infringing or has
infringed any Parent Intellectual Property Rights and Parent
is not aware of any facts indicating a likelihood of the
foregoing.
7.16 Compliance With Legal Requirements. Parent holds all material
licenses, certificates, permits, franchises and rights from
all appropriate foreign, federal, state or other public
authorities necessary for the conduct of its business and the
use of its assets, other than such licenses, certificates,
permits or franchises that the lack of which can not be
reasonably expected to have a Material Adverse Effect on the
Parent. Parent is presently conducting its business so as to
comply in all material respects with all applicable statutes,
ordinances, rules, regulations and orders of any governmental
authority other than such non-compliances which can not be
reasonably expected to have a Material Adverse Effect on the
Parent. Further, except as set forth in the Parent SEC
Documents, Parent is not presently charged with or, to the
knowledge of Parent, under governmental investigation with
respect to, any actual or alleged violation of any statute,
ordinance, rule or regulation. Parent is presently not the
subject of any pending or, to its knowledge, threatened
adverse proceeding by any regulatory authority having
jurisdiction over its business, properties or operations. None
of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will
result in the termination of any such license, certificate,
permit, franchise or right held by Parent.
7.17 Survival. The representations and warranties contained in this
Section 7 shall survive until the expiration of the one
hundred twenty (120) day period immediately following the
Closing Date.
8. Further Actions.
8.1. Public Announcements. The Company and Company Stockholders
shall not (and the Company shall not permit any of its
Representatives to) issue any press release or make any public
statement regarding this Agreement, or regarding any of the
transactions contemplated by this Agreement, without Parent's
prior written consent, and Parent shall not (and shall not
permit any of its Representatives to) issue any press release
or make any public statement regarding this Agreement, or
regarding any of the transactions contemplated by this
Agreement, without the Company's prior written consent.
Notwithstanding the provisions of the preceding sentence, each
party shall be permitted to issue any press release or make
any public statement as such party is advised by counsel is
legally required to be issued or made under any applicable
laws. Except as is legally required under applicable law, no
party shall make a public announcement or press release
referencing or mentioning GE Capital Equity Investments, Inc.
("GE") or any affiliate of GE without the express prior
written consent of GE.
34
8.2. Lock-Up. Concurrently with the execution and delivery of this
Agreement, the Company Stockholders, Management Stockholders
and Company Optionholders shall execute a Lock-up Agreement in
form attached hereto as Exhibit 8.2 (the "Lock-Up Agreement").
"Locked-Up" shall mean the commitment and obligation of the
Company Stockholders not to sell, transfer, offer for sale,
pledge, dispose of, encumber or undertake to do any of the
foregoing with respect to any applicable Initial Consideration
and the Additional Consideration Shares (if issued).
Notwithstanding the foregoing, in the event that within six
(6) months following the Closing Date, Parent issues any of
its securities as part of a private placement, and the Lock-Up
obligations agreed with the purchasers of such securities are
more favorable to such purchasers (compared to the Lock-Up
obligations set forth above) then the Lock-Up obligations
imposed on the Company Stockholders, Management Stockholders
and Company Optionholders shall be automatically amended to be
equal to those agreed with such new purchasers.
8.3. Registration of Shares. Parent and the Company Stockholders
shall, as of the Closing Date, enter into a Registration
Rights Agreement (the "Registration Rights Agreement")
relating to the registration of the Parent Ordinary Shares, in
the form attached as Exhibit 8.3 of this Agreement.
8.4. Employees. As soon as practicable after the Closing Date,
Parent shall provide to all employees of the Company who shall
remain in the employ of the Company (the "Continuing
Employees") such employee benefits plans, programs and
arrangements as are generally made available to employees of
Parent's US subsidiary (the "US Subsidiary"), provided,
however, that (a) nothing in this Section 8.4 or elsewhere in
this Agreement shall limit the right of Parent or the
Surviving Corporation to amend or terminate any such health
and/or welfare benefit plan at any time, and (b) if Parent or
the Surviving Corporation terminates any such health and/or
welfare benefit plan, then, subject to any appropriate
transition period, the Continuing Employees shall be eligible
to participate in US Subsidiary's health, vacation and other
non-equity based employee benefit plans, to substantially the
same extent as similarly situated employees of the US
Subsidiary. The Continuing Employees shall be given, to the
extent consistent with US Subsidiary's benefit plans and with
applicable Legal Requirements, service credit under US
Subsidiary's benefit plans, for purposes of eligibility and
vesting, equal to the service credit currently provided to
such Continuing Employees under comparable US Subsidiary
Employee Plans. Nothing in this Section 8.4 or elsewhere in
this Agreement shall be construed to create a right in any
employee to employment with Parent, the US Subsidiary, the
Surviving Corporation or any Subsidiary of the Surviving
Corporation and, subject to any other binding agreement
between an employee and Parent, the US Subsidiary, the
Surviving Corporation or any Subsidiary of the Surviving
Corporation, the employment of each Continuing Employee shall
be "at will" employment.
35
8.5. Tax Liability. Each party shall be responsible for all its
respective tax obligations deriving from the transactions
contemplated in this Agreement.
8.6. Waiver of Dissenters' Rights. Each of the Company
Stockholders, by its execution of this Agreement, agrees that
it will not exercise any dissenters' or similar rights in
connection with the Merger and acknowledges that such Company
Stockholder hereby waives any and all dissenting or similar
rights, under any and all applicable laws, in connection with
the transactions contemplated under this Agreement.
8.7. Right to appoint a Board member and observer to Parent's
Board. GE shall have the right, starting from the annual
meeting of Parent's shareholders in 2002 and until the annual
meeting of Parent's shareholder in 2003, to nominate one
director (the "GE Designee"), who shall be Xxxxxxx Xxxxxxxx.
In addition, upon the election of the GE Designee and so long
as such GE Designee serves as a member of Parent's board of
directors, GE shall have the right to appoint a non-voting
observer to the Board of Directors (or to nominate one person
for election to Parent's Board of Directors, if and when
agreed with Parent). The Board of Directors of Parent shall
recommend to the shareholders of Parent to vote for the
election of such director and Parent will use its best efforts
to cause such election.
8.8. Further Assurances. If, at any time after the Closing Date,
Parent shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things
are reasonably necessary, desirable or proper to carry out the
purposes of this Agreement, Parent shall so advise the Company
Stockholders in writing, and the Company Stockholders
thereupon shall execute and deliver all such deeds, bills of
sale, assignments and assurances and do all such other acts
and things reasonably necessary, desirable or proper to vest,
perfect or confirm its right, title or interest in, to or
under the Shares, and otherwise to carry out the purposes of
this Agreement.
8.9. Approval of Parent Shareholders. Parent agrees that it will
submit to its shareholders for a vote or approval prior to the
date of the Second Closing, the issuance of the Additional
Consideration Shares to the Company Stockholder, Management
Stockholders and Company Optionholders as the Additional
Consideration Payment.
9. Deliverables: Prior to the signature of this Agreement, each of the
parties shall have delivered to the other party the following
deliverables:
9.1 The Company and the Company Stockholders shall have
delivered to the Parent:
9.1.1. A legal opinion of Xxxxxx, Xxxxxxx & Xxxxxx, L.L.P.,
counsel for the Company, in the form attached as
Exhibit 9.1.1 hereto, addressed to Parent and dated
as of the Closing Date;
36
9.1.2. A certificate, in the form attached as Exhibit 9.1.2,
executed by two Officers of the Company certifying
that each of the representations and warranties set
forth in Section 5 is accurate in all material
respects as of the Closing Date, and that the
conditions set forth in such certificate have been
duly satisfied (the "Company Closing Certificate");
9.1.3. A certificate of good standing of the Company from
the Secretary of State of Georgia dated no earlier
than one day prior to the date of the Agreement;
9.1.4. The executed Lock-Up Agreements, signed by all of the
Company Stockholders;
9.1.5. Duly executed written resolutions of the Company's
Stockholders approving and adopting the Merger, in
the form attached as Exhibit 9.1.5.
9.1.6. Written resignations of all directors of the Company
and all members of the Audit Committee and
Compensation Committee of the Company, effective as
of the Closing Date;
9.1.7. Certificates representing all the Shares, accompanied
by share transfer deeds duly executed.
9.1.8 The executed consent of the landlord of the Company's
premises in Atlanta to the sub-lease of such premises
to any third party who shall sign the sub-lease
agreement in the form attached to such consent.
9.1.9 A executed release, in the form of Exhibit 9.1.9,
signed by each of the Company Stockholders.
9.1.10 Duly executed written resolutions of the Company's
Board of Directors approving and adopting the Merger
and the other transactions under this Agreement, in
the form attached as Exhibit 9.1.10.
9.1.11 Duly executed undertaking letters by the Company
Stockholders in the form attached as Exhibit 9.1.11.
9.1.12 Executed copy of the Georgia Certificate of Merger.
9.2 The Parent shall have delivered to the Company:
37
9.2.1 A legal opinion of Meitar, Liquornik, Geva & Co.,
Israeli attorneys to the Parent, in form attached as
Exhibit 9.2.1 hereto, addressed to the Company and
dated as of the Closing Date;
9.2.2 A legal opinion of Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP,
U.S. attorneys to the Parent, in form attached as
Exhibit 9.2.2 hereto, addressed to the Company and
dated as of the Closing Date;
9.2.3 a certificate in the form attached as Exhibit 9.2.3
hereto executed by an Officer of Parent certifying
that each of the representations and warranties set
forth in Section 7 is accurate in all material
respects as of the Closing Date and that the
conditions set forth in such certificate have been
duly satisfied.
9.2.4 Executed Registration Rights Agreement.
9.2.5 A Voting Agreement signed by Xxxxxx XxXxxxx, in the
form attached as Exhibit 9.2.5 hereto.
10. The Second Closing:
The consummation of the Second Closing shall be subject to the
satisfaction, at or prior to the Second Closing, of each of the
following conditions, any or all of which may be waived in writing by
Parent:
10.1 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the
consummation of the transactions contemplated by this
Agreement shall have been issued by any court of competent
jurisdiction and remain in effect, and there shall not be any
Legal Requirement enacted or deemed applicable to the
transactions contemplated by this Agreement that makes
consummation of the transactions contemplated by this
Agreement illegal, which Legal Requirement shall not have been
removed within thirty (30) days of enactment.
10.2 No Legal Proceedings. No Person (excluding Parent and its
affiliates) shall have commenced or taken substantial steps
towards any Legal Proceeding seeking to enjoin the
consummation of the Merger or the Second Closing.
11. Miscellaneous Provisions
11.1. Each of Parent and the Company shall bear and pay all fees,
costs and expenses (including legal fees and accounting fees)
that have been incurred or that are incurred by such party
(and, in the case of the Company Stockholders, also by the
Company) in connection with the transactions contemplated by
this Agreement, including all fees, costs and expenses
incurred by such party in connection with or by virtue of (a)
38
the investigation and review conducted by Parent and its
Representatives with respect to the Company's business (and
the furnishing of information to Parent and its
Representatives in connection with such investigation and
review), provided, that any audit of the Company's financial
statements for 2001 shall be a cost of Parent and not the
Company (b) the negotiation, preparation and review of this
Agreement (including the Disclosure Schedule) and all
agreements, certificates, opinions and other instruments and
documents delivered or to be delivered in connection with the
transactions contemplated by this Agreement, and (c) the
preparation and submission of any filing or notice required to
be made or given in connection with any of the transactions
contemplated by this Agreement, and the obtaining of any
Consent required to be obtained in connection with any of such
transactions; provided, however, that the Company's legal and
all other expenses with respect to the transactions
contemplated under this Agreement shall not exceed an
aggregate amount of $100,000. For the avoidance of doubt, each
of Parent on the one hand, and the Company on the other hand,
shall bear and pay for all such fees, costs and expenses
incurred by such party in connection with the transactions
contemplated by this Agreement. In addition, it is agreed and
understood that each of the Company Stockholders shall pay its
own expenses in connection with the transactions contemplated
by this Agreement.
11.2 Further Assurances. Each party hereto shall execute and cause
to be delivered to each other party hereto such instruments
and other documents, and shall take such other actions, as
such other party may reasonably request (prior to, at or
after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this
Agreement.
11.3. Notices. Any notice or other communication required or
permitted to be delivered to any party under this Agreement
shall be in writing and shall be deemed properly delivered,
given and received when delivered (by hand, by registered
mail, by courier or express delivery service or by facsimile)
to the address or facsimile telephone number set forth
beneath the name of such party below (or to such other
address or facsimile telephone number as such party shall
have specified in a written notice given to the other parties
hereto):
if to Parent or Merger Sub:
ViryaNet Limited
0 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX, 00000
Attention: Win Xxxxx, Chief Executive Officer
Meitar, Liquornik, Geva & Co.
00 Xxxx Xxxxxx Xxxxxx Xx.
Xxxxx Xxx, 00000
Israel
Attention: Xxx Xxxx, Adv.
39
if to the Company:
00000 Xxxxxx Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx Xxxxxxxxx
with a copy to:
Xxxxxx, Xxxxxxx & Xxxxxx, L.L.P.
1600 Atlanta Financial Center
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Xx.
If to the Company Stockholders:
at such address listed on Exhibit 11.3 attached hereto
11.4. Headings. The boldface headings contained in this Agreement
are for convenience of reference only, shall not be deemed to
be a part of this Agreement and shall not be referred to in
connection with the construction or interpretation of this
Agreement.
11.5. Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and
all of which, when taken together, shall constitute one
agreement.
11.6. Governing Law. This Agreement shall be construed in accordance
with, and governed in all respects by, the internal laws of
the State of New York (without giving effect to principles of
conflicts of laws). Each party to this Agreement consents to
the exclusive jurisdiction and venue of the courts of the
State of New York.
11.7. Successors and Assigns. This Agreement shall be binding upon
the Company, each of the Company Stockholders and their
respective successors and assigns (if any), Parent, Merger Sub
and their successors and assigns (if any). Neither party may
assign any of its rights under this Agreement to any other
Person without obtaining the consent or approval of the other
parties hereto.
11.8. Specific Performance. The parties to this Agreement agree
that, in the event of any breach or threatened breach by any
party to this Agreement of any covenant, obligation or other
40
provision set forth in this Agreement for the benefit of any
other party to this Agreement, such other party shall be
entitled to (a) a decree or order of specific performance or
mandamus to enforce the observance and performance of such
covenant, obligation or other provision, and (b) an injunction
restraining such breach or threatened breach.
11.9. Amendments. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written
instrument duly executed and delivered on behalf of all of the
parties hereto.
11.10. Severability. In the event that any provision of this
Agreement, or the application of any such provision to any
Person or set of circumstances, shall be determined to be
invalid, unlawful, void or unenforceable to any extent, the
remainder of this Agreement, and the application of such
provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and
shall continue to be valid and enforceable to the fullest
extent permitted by law.
11.11. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto relating to the subject
matter hereof and thereof and supersedes all prior agreements
and understandings among or between any of the parties
relating to the subject matter hereof and thereof, including
the Non-Binding Term Sheet between the Company and the Parent
dated January 18, 2002.
11.12. Construction.
11.12.1. For purposes of this Agreement, whenever the context
requires: the singular number shall include the
plural, and vice versa; the masculine gender shall
include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter
genders; and the neuter gender shall include the
masculine and feminine genders.
11.12.2. The parties hereto agree that any rule of
construction to the effect that ambiguities are to be
resolved against the drafting party shall not be
applied in the construction or interpretation of this
Agreement.
11.12.3. As used in this Agreement, the words "include" and
"including" and variations thereof, shall not be
deemed to be terms of limitation, but rather shall be
deemed to be followed by the words "without
limitation".
11.12.4 Except as otherwise indicated, all references in this
Agreement to "Sections", "Schedules" and "Exhibits"
are intended to refer to Sections of this Agreement
and Schedules and Exhibits to this Agreement.
41
11.13 Consent to Jurisdiction. EACH PARTY TO THIS AGREEMENT HEREBY
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS
PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF NEW
YORK STATE SITTING IN THE COUNTY OF NEW YORK OR ANY FEDERAL
COURT OF THE UNITED STATES OF AMERICA SITTING IN THE SOUTHERN
DISTRICT OF NEW YORK IN ANY SUIT, ACTION OR PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.
NO PARTY TO THIS AGREEMENT MAY MOVE TO (I) TRANSFER ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH NEW YORK COURT OR
FEDERAL COURT TO ANOTHER JURISDICTION, (II) CONSOLIDATE ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH NEW YORK COURT
OR FEDERAL COURT WITH A SUIT, ACTION OR PROCEEDING IN ANOTHER
JURISDICTION OR (III) DISMISS ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH NEW YORK COURT OR FEDERAL COURT FOR
THE PURPOSE OF BRINGING THE SAME IN ANOTHER JURISDICTION. EACH
PARTY AGREES THAT A FINAL JUDGMENT IN ANY SUCH SUIT, ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY
OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. EACH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY
AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY
NEW YORK COURT SITTING IN THE COUNTY OF NEW YORK OR ANY
FEDERAL COURT SITTING IN THE SOUTHERN DISTRICT OF NEW YORK.
EACH PARTY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH
SUIT, ACTION OR PROCEEDING BY NOTICE IN THE MANNER SPECIFIED
IN SECTION 11.3.
11.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
42
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth above.
VIRYANET LTD.
BY:
------------------------------------------
Name:____________________
Title:_____________________
43
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
VIRYANET ACQUISITION, LTD.
BY:
------------------------------------------
Name:____________________
Title:_____________________
44
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
IMEDEON, INC.
BY:
------------------------------------------
Name:____________________
Title:_____________________
45
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
GE CAPITAL EQUITY INVESTMENTS, INC.
BY:
------------------------------------------
Name:____________________
Title:_____________________
46
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
ECTMI TRUTTA HOLDINGS LP
BY:
------------------------------------------
Name:____________________
Title:_____________________
47
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
AETHER SYSTEMS INC.
BY:
------------------------------------------
Name:____________________
Title:_____________________
48
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
VALENTIS INVESTORS LLC
BY:
------------------------------------------
Name:____________________
Title:_____________________
49
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
IMPRIMIS SB, L.P.
By: Imprimis SB G.P. LLC
Its General Partner
BY:
------------------------------------------
Name:____________________
Title:_____________________
50
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
INSIGHT CAPITAL PARTNERS II, L.P.
By: InSight Venture Associates II, L.L.C.
Its General Partner
BY:
------------------------------------------
Name:____________________
Title:Its Managing Member
51
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
INSIGHT CAPITAL PARTNERS
(CAYMAN) II, L.P.
By: InSight Venture Associates II, LLC
Its General Partner
BY:
------------------------------------------
Name:____________________
Title:_____________________
52
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
---------------------------------
XXXXXX MEDIATE
53
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
MEDIATE INVESTMENTS, LLLP
BY:
------------------------------------------
Name:____________________
Title:_____________________
54
ANNEX I
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Annex I):
"Consent" shall mean any approval, consent, ratification, permission,
waiver or authorization (including any Governmental Authorization).
"Contract" shall mean any written, oral or other agreement, contract,
subcontract, lease, understanding, instrument, note, warranty, insurance policy,
benefit plan or legally binding commitment or undertaking of any nature.
"Disclosure Schedule" shall mean the schedule (dated as of the date of
the Agreement) delivered to Parent on behalf of the Company.
"Encumbrance" shall mean any lien, pledge, hypothecation, charge,
mortgage, security interest, encumbrance, claim, infringement, interference,
option, right of first refusal, preemptive right, community property interest or
restriction of any nature (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction
on the use of any asset and any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset).
"Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Governmental Authorization" shall mean any: (a) permit, license,
certificate, franchise, permission, clearance, registration, qualification or
authorization issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement; or (b)
right under any Contract with any Governmental Body.
"Governmental Body" or "Governmental Authority" shall mean any: (a)
nation, state, commonwealth, province, territory, county, municipality, district
or other jurisdiction of any nature; (b) federal, state, local, municipal,
foreign or other government; or (c) governmental or quasi-governmental authority
of any nature (including any governmental division, department, agency,
commission, instrumentality, official, organization, unit, body or Entity and
any court or other tribunal).
-3-
"Liens" shall mean all mortgages, pledges, liens, security interests,
conditional and installment sale agreements, encumbrances, charges or other
claims of third parties of any kind.
"Legal Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), hearing, inquiry, audit, examination or
investigation commenced, brought, conducted or heard by or before, or otherwise
involving, any court or other Governmental Body or any arbitrator or arbitration
panel.
"Legal Requirement" shall mean any federal, state, local, municipal,
foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Body.
"Material Adverse Effect" A violation or other matter will be deemed to
have a "Material Adverse Effect" if such violation or other matter can be
reasonably expected to have a material adverse effect on the business,
condition, assets, liabilities, operations or financial performance or
prospects.
"Person" shall mean any individual, Entity or Governmental Body.
"Representatives" shall mean officers, directors, employees, agents,
attorneys, accountants, advisors and representatives.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stock Plans" shall mean the iMedeon Stock Incentive Plan, as amended,
or any other plan or program used by Company to grant Company Options.
"Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax,
transfer tax, stamp tax, sales tax, use tax, property tax, business tax,
withholding tax or payroll tax), levy, assessment, tariff, duty (including any
customs duty), deficiency or fee, and any related charge or amount (including
any fine, penalty or interest), imposed, assessed or collected by or under the
authority of any Governmental Body.
"Tax Returns" shall mean returns, reports and information statements with
respect to Tax required to be filed by or on behalf of the Company with any
taxing authority, domestic or foreign.
-4-
