EXECUTION COPY
SECOND AMENDED AND RESTATED
ACQUISITION AGREEMENT
DATED AS OF
DECEMBER 31, 2001
AMONG
GILAT TO HOME LATIN AMERICA (HOLLAND) N.V.,
rSTAR CORPORATION,
AND
GILAT SATELLITE NETWORKS LTD.
RELATING TO THE ACQUISITION OF
STARBAND LATIN AMERICA (HOLLAND) B.V.
TABLE OF CONTENTS
Page
ARTICLE I. CERTAIN DEFINITIONS...........................................................................3
ARTICLE II. SALE AND PURCHASE OF THE SHARES.............................................................10
Section 2.1 Sale and Purchase of the Company Shares............................................10
Section 2.2 Closing Date.......................................................................10
Section 2.3 Deliveries and Assignment of Right to Share Consideration..........................11
Section 2.4 Post-Closing Share Consideration Adjustments.......................................11
Section 2.5 The Special Distribution...........................................................13
ARTICLE III. THE OFFER AND OTHER TRANSACTIONS...........................................................16
Section 3.1 Purchaser Tender Offer.............................................................16
Section 3.2 Voting Agreement...................................................................17
Section 3.3 Proxy Statement; Form F-4 and Stockholder Meeting..................................17
Section 3.4 Financial Information of the Business..............................................18
ARTICLE IV. REPRESENTATIONS AND WARRANTIES..............................................................19
Section 4.1 Representations and Warranties of the Gilat Parties................................20
Section 4.2 Representations and Warranties of Purchaser........................................31
ARTICLE V. CONDITIONS TO CLOSING........................................................................35
Section 5.1 Conditions to Each Party's Obligation to Effect the Sale...........................35
Section 5.2 Conditions to Obligations of Purchaser.............................................36
Section 5.3 Conditions to Obligations of Gilat Israel and Seller...............................37
ARTICLE VI. ADDITIONAL COVENANTS AND AGREEMENTS.........................................................38
Section 6.1 Directors and Officers.............................................................38
Section 6.2 Additional Agreements; Cooperation.................................................38
Section 6.3 Publicity..........................................................................39
Section 6.4 Notification of Certain Matters....................................................39
Section 6.5 Access to Information..............................................................39
Section 6.6 Non-Solicitation...................................................................40
Section 6.7 Fees and Expenses..................................................................42
Section 6.8 Insurance..........................................................................42
Section 6.9 Conduct of the Parties after the Closing Date......................................42
Section 6.10 Maintenance of Transfer Agent......................................................44
i
ARTICLE VII. CONDUCT OF BUSINESS AND OF PURCHASER
PRIOR TO THE CLOSING...............................................................................44
Section 7.1 Conduct of Business Pending the Sale...............................................44
Section 7.2 Conduct of Business of Purchaser Pending the Sale..................................46
Section 7.3 Gilat Review of Expenditures.......................................................47
ARTICLE VIII. INDEMNIFICATION...........................................................................48
Section 8.1 Indemnification Generally by Gilat Israel and Seller...............................48
Section 8.2 Indemnification Generally by Purchaser.............................................49
Section 8.3 Notice of Claims for Indemnification...............................................51
Section 8.4 Survival of Representations and Warranties.........................................51
ARTICLE IX. TAX INDEMNITIES.............................................................................51
Section 9.1 Tax Indemnities....................................................................51
Section 9.2 Character of Indemnity Payments....................................................52
Section 9.3 Refunds............................................................................52
Section 9.4 Miscellaneous......................................................................52
ARTICLE X. TERMINATION..................................................................................53
Section 10.1 Termination........................................................................53
Section 10.2 Effect of Termination..............................................................54
ARTICLE XI. MISCELLANEOUS...............................................................................54
Section 11.1 Governing Law......................................................................54
Section 11.2 Remedies...........................................................................54
Section 11.3 Successors and Assigns.............................................................55
Section 11.4 Amendment..........................................................................55
Section 11.5 Entire Agreement...................................................................55
Section 11.6 No Reliance on Other Information...................................................55
Section 11.7 Severability.......................................................................55
Section 11.8 No Third Party Beneficiaries.......................................................55
Section 11.9 Notices............................................................................56
Section 11.10 Delays or Omissions................................................................57
Section 11.11 Legal Fees.........................................................................57
Section 11.12 Titles and Subtitles...............................................................57
Section 11.13 Counterparts.......................................................................57
EXHIBITS
Exhibit 2.5 Fourth Amended and Restated Certificate of Incorporation
Exhibit 3.1 Option
Exhibit 3.2 Voting Agreement
Exhibit 4.1(h) Master Agreement
ii
SCHEDULES
Gilat Parties' Disclosure Schedule
Purchaser's Schedules
4.2(b) Consents
4.2(f) Employee Agreements and Plans
4.2(g) Registration Rights
iii
SECOND AMENDED AND RESTATED
ACQUISITION AGREEMENT
This SECOND AMENDED AND RESTATED ACQUISITION AGREEMENT, dated as of
December 31, 2001 (this "Agreement"), is among Gilat To Home Latin America
(Holland) N.V., a Dutch corporation ("Seller"), rStar Corporation, a Delaware
corporation ("Purchaser"), and Gilat Satellite Networks Ltd., an Israeli
corporation, the indirect parent of Seller and an indirect majority stockholder
of Purchaser ("Gilat Israel" and together with Seller, the "Gilat Parties" and
each a "Gilat Party").
R E C I T A L S
A. Seller, Purchaser and Gilat Israel entered into an Acquisition
Agreement, dated April 23, 2001 (the "Original Acquisition Agreement"). On
September 7, 2001, Seller, Purchaser and Gilat Israel entered into an Amended
and Restated Acquisition Agreement (the "First Amended Agreement") in which they
amended and restated the Original Acquisition Agreement in its entirety. The
amendments to the Original Acquisition Agreement contained in the First Amended
Agreement reflected, among other things, Purchaser's satisfaction of its accrued
obligations under the Capital Lease (as defined below) to Spacenet Inc., a
Delaware corporation and the direct wholly-owned subsidiary of Gilat Israel
("Spacenet"). Under the Original Acquisition Agreement, the satisfaction of
Purchaser's accrued obligations to Spacenet under the Capital Lease (the
"Capital Lease Obligation") was a condition precedent to the parties'
obligations to consummate the Sale (as defined below). Purchaser satisfied the
Capital Lease Obligation through the issuance and delivery of 19,396,552 shares
of Purchaser Stock (as defined below) to an affiliate of Spacenet on May 21,
2001, as contemplated by the Original Acquisition Agreement and pursuant to the
Agreement, dated April 23, 2001, between Spacenet and Purchaser.
B. Seller, Purchaser and Gilat Israel wish to amend and restate in its
entirety the First Amended Agreement and the related exhibits and schedules
thereto as set forth in this Agreement and the related exhibits and schedules
hereto.
C. Gilat Israel, with its global subsidiaries, is a leading provider of
telecommunications solutions based on VSAT (very small aperture terminal)
satellite network technology. Since its inception, Gilat Israel has invested
considerable resources, including hundreds of millions of dollars and thousands
of man-years, in research and development, proprietary technologies, product
design and manufacturing and marketing. Gilat Israel's technology is used to
deliver advanced satellite-based, end-to-end enterprise networking and rural
telephony solutions to customers across six continents, as well as interactive
broadband data services.
D. Gilat Israel's joint venture, StarBand Communications Inc.
("StarBand"), is the first to market with an "always-on", two-way, broadband
Internet access solution for the residential and small office and home office
markets that is available virtually everywhere in North America today. StarBand
offers a stand-alone Internet access service, as well as a bundled product with
direct-to-home television service using a single
dish at the subscriber's location. Gilat Israel and certain of its affiliates
contributed to StarBand the exclusive rights for North America to its consumer
two-way VSAT technology, as well as management, employees and technological
expertise, including the operation of the satellite network. Through this
venture, Gilat Israel and its affiliates have gained significant experience in
implementing and marketing such services to consumers and small office and home
office subscribers.
E. Gilat Israel and its affiliates have also developed substantial
experience in Latin America, particularly in providing satellite-based services
to corporate clients operating large-scale networks. Such experience has
included the obtaining of licenses to operate in the various Latin American
countries, experience in the development of networks for voice and data,
relationships with local partners and other relevant business experience.
F. StarBand Latin America (Holland) B.V. has been formed as a direct
wholly-owned subsidiary of Seller (the "Company"), for the purpose of leveraging
such investment, experience and know-how into the Latin American market. As
further described in this Agreement, Gilat Israel, Seller and their affiliates
shall contribute to the Company or to the Company's subsidiaries (such
contributing entities collectively referred to herein as the "Gilat Business
Entities") the business as currently conducted by the Company and the exclusive
rights in Latin America (excluding Mexico, in which the contributed rights are
described below, but including, among other countries Brazil, Argentina, Peru,
and Colombia, and, subject to certain restrictions, Chile) to (i) implement,
operate and market broadband Internet access services and voice services to
consumers and small office and home office subscribers, (ii) provide a bundled
product with direct-to-home television service using a single satellite dish and
(iii) provide such new technologies and products related to the foregoing as
Gilat Israel may in the future develop or make available to StarBand, which
shall be offered to the Company and/or the Company's subsidiaries upon
commercially reasonable terms via a two-way satellite-based network, together
with the related assets, licenses, rights, management, employees experience and
know-how (such business, related assets, licenses, rights, management,
employees' experience and know-how, shall be referred to herein as the
"Business"). In Mexico, the Company shall receive the non-exclusive right to
operate the Business with respect to small office and home office subscribers,
through a channel which is any large, well-established corporation that (x) will
commit to sell at least 100 VSAT sites regardless of the number of VSAT's
located at an individual home or office, and (y) will be centrally billed by the
Company, but that is not (A) an Internet Service Provider, or (B) a provider of
access to broadband Internet services or voice services at a residence through
an arrangement whereby it would be reasonably likely that payment or other
commercial benefit will be paid to it for such access.
G. Seller wishes to sell to Purchaser, and Purchaser wishes to purchase
from Seller (the "Sale"), all of the issued and outstanding shares of capital
stock of the Company in exchange for the Share Consideration (as defined below),
on the terms and subject to the conditions set forth in this Agreement.
2
H. To further induce the parties hereto to enter into this Agreement,
certain principal stockholders of Purchaser, Gilat Israel and its direct
wholly-owned subsidiary, Gilat Satellite Networks (Holland) B.V. ("Xxxxx
Xxxxxxx") shall enter into a voting agreement pursuant to which they each shall
agree to vote, or cause to be voted, the shares of Purchaser Stock (as defined
below) beneficially owned or controlled by such stockholders in favor of the
Sale and the other transactions contemplated hereby and against any competing
proposal.
I. In contemplation of the Sale, Purchaser shall make a tender offer
(the "Offer") in compliance with the applicable provisions of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulation promulgated under the Exchange Act, to purchase from its stockholders
(other than Gilat Israel and its Affiliates (as defined below)) up to 6,315,789
shares of Purchaser Stock. The Offer shall be subject to this Agreement and
shall immediately following the consummation of the Sale.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the Parties hereby agree as follows:
ARTICLE I.
CERTAIN DEFINITIONS
The following terms used in this Agreement shall have the meanings
specified below.
"Additional Share Consideration" has the meaning set forth in Section
2.4(c) hereof.
"Adjusted Cash Consideration" means: (a) if the Trading Price of the
Ordinary Share is less than $12.00, an amount equal to the lesser of (i)
$10,000,000 and (ii) the sum of (x) $6,000,000 and (y) the product of (A)
466,105 and (B) the amount by which $12.00 exceeds the Trading Price of the
Ordinary Share; (b) if the Trading Price of the Ordinary Share is greater than
$12.00, an amount equal to the greater of (i) $2,000,000 and (ii) the difference
between (x) $6,000,000 and (y) the product of (A) 466,105 and (B) the amount by
which the Trading Price of the Ordinary Share exceeds $12.00; and (c) if the
Trading Price of the Ordinary Share equals $12.00, $6,000,000.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person; provided, however,
that unless expressly set forth otherwise herein, officers and directors of a
Party or of any corporation or other entity deemed to be an Affiliate of such
Party, shall not themselves be deemed an Affiliate of such Party solely by
virtue of serving as an officer or director thereof. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling,"
3
"controlled by" and "under common control with"), as applied to any Person,
means the possession, directly or indirectly, of the power to vote fifty percent
(50%) or more of the securities having voting power for the election of
directors of such Person or to otherwise direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" has the meaning set forth in the preamble hereof.
"Applicable Net Income" means, for any Calculation Period, Purchaser's
consolidated net income (excluding extraordinary items of gain or loss and
before the amortization of goodwill and other intangible assets) generated
during the applicable Calculation Period by the Business, in each case: (i) as
determined in accordance with GAAP; and (ii) as reflected on audited financial
statements of the Business (the "Audited Statement"): (x) audited by independent
certified public accountants of recognized national standing (which may be the
regular auditors of Purchaser) selected Purchaser; and (y) filed by Purchaser
with the SEC or otherwise publicly announced or delivered to holders of the
Purchaser Stock. It is clarified that for the purposes of calculating the
Applicable Net Income, the Business shall not include the Excluded Businesses.
"Assets" has the meaning set forth in Section 4.1(h)(i)(2) hereof.
"Audited Statement" has the meaning set forth in the definition of
Applicable Net Income.
"breaching party" has the meaning set forth in Section 11.2 hereof.
"Business" has the meaning set forth in the recitals to this Agreement.
"Business Contract" means any (i) Contract by which the Assets or the
Business is bound or (ii) any Contract that is necessary to conduct the Business
and to which any of the Gilat Business Entities or Subsidiaries is a party,.
"Business Day" means a day on which both Seller and national banks
doing business in New York City are open for business.
"Business Documentation" has the meaning set forth in Section 6.5(b)
hereof.
"Calculation Period" has the meaning set forth in Section 2.4(b)
hereof.
"Capital Lease" means the Amended and Restated Service Agreement
between ZapMe! Corporation and Spacenet, dated September 30, 1999, and such
products and services otherwise provided by Spacenet to the Company.
"Capital Lease Obligation" has the meaning set forth in the recitals
hereto.
"Cash Consideration" means the amount of cash equal to the quotient of
(a) the Adjusted Cash Consideration, divided by (b) 6,315,789, rounded to the
nearest whole cent.
4
"Certificate of Waiver" has the meaning set forth in Section 2.5(c)(ii)
hereof.
"Closing" and "Closing Date" have the respective meanings given to
those terms in Section 2.2 hereof.
"Code" means the Internal Revenue Code of 1986, as amended and as in
effect from time to time, and any law that shall have been a predecessor or
shall be a successor thereto.
"Company" has the meaning set forth in the recitals to this Agreement.
"Company Common Stock" has the meaning set forth in Section 4.1(f)
hereof.
"Company Material Adverse Effect" has the meaning set forth in Article
IV hereof.
"Company Shares" has the meaning set forth in Section 4.1(f)(i) hereof.
"Contract" means any written or oral contract, agreement, lease,
license, plan, instrument or other document, commitment, arrangement,
undertaking, understanding, practice or authorization that is binding on any
Person or its property under applicable Law.
"Damages" means money damages determined on a dollar-for-dollar basis
after giving effect to any related offset or reduction, including any tax or
other benefits realized as a result of such damage. In determining any amount of
Damages arising out of or by reason of any breach of warranty or covenant
relating to taxes, such Damages shall be reduced by any resulting or related tax
benefit for the same or a different tax period or periods.
"Determination Date" means the date which is the fifth Business Day
prior to the Closing Date.
"DGCL" means Delaware General Corporation Law, as amended.
"Disclosure Schedule" has the meaning set forth in Section 4.1 hereof.
"D&O Resignations" has the meaning set forth in Section 6.1 hereof.
"$" or "dollars" shall means and refers to United States dollars.
"Employee Plans" has the meaning set forth in Section 4.1(k)(i) hereof.
"Employees" means the employees of the Business as of the date hereto
or as of the Closing Date as the context may required.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
5
"Exchange Act" has the meaning set forth in the recitals hereto.
"Excluded Businesses" means any business conducted by any one or more
of the Subsidiaries other than the Business, including, without limitation, the
core enterprise and government contracts business (including, without
limitation, all receivables related to such contracts) in Latin America for the
sale of products and the installation and servicing of networks using Gilat
Israel's products.
"Excluded Business Liabilities" is defined in Section 6.9(c) hereof.
"First Calculation Period" has the meaning set forth in Section 2.4(a)
hereof.
"First Distribution Amount" has the meaning set forth in the Fourth
Amended and Restated Certificate of Incorporation.
"First Payment Date" has the meaning set forth in the Fourth Amended
and Restated Certificate of Incorporation.
"Fourth Amended and Restated Certificate of Incorporation" has the
meaning set forth in Section 2.5(a) hereof.
"Fully Diluted Basis" means at any time as applied to any calculation
of the number of securities of Purchaser, after giving effect to (x) all shares
of Purchaser Stock issued and outstanding at the time of determination, (y) all
shares of Purchaser Stock issuable upon the exercise of any option, warrants or
similar right outstanding at the time of determination and (z) all shares of
Purchaser Stock issuable upon the exercise of any conversion or exchange right
contained in any security convertible into or exchangeable for shares of
Purchaser Stock.
"GAAP" means the accounting principles generally accepted in the United
States applied on a consistent basis.
"Gilat Business Entities" has the meaning set forth in the recitals to
this Agreement.
"Xxxxx Xxxxxxx" has the meaning set forth in the recitals hereto.
"Gilat Israel" has the meaning set forth in the introductory paragraph
to this Agreement.
"Gilat Material Adverse Effect" has the meaning ascribed to it in
Article IV hereof.
"Gilat Parties" has the meaning set forth in the introductory paragraph
to this Agreement.
"Gilat Registration Statement" has the meaning set forth in Section
3.3(a) hereof.
6
"Government" or "Governmental" means, or refers to, (a) the government
of the United States, Israel, or the Netherlands or the government of any
foreign country recognized by the governments of either the United States,
Israel, or the Netherlands; (b) the government of any state, province, county,
municipality, city, town or district of the United States, Israel, the
Netherlands or any foreign country (whose national government is so recognized);
and any multi-county district; and (c) any agency, department, authority,
commission, administration, court, magistrate, tribunal, arbitrator,
instrumentality or political subdivision of, or within the geographical
jurisdiction of, any government described in the foregoing clauses (a) and (b).
"Gross Proceeds" has the meaning set forth in Section 2.5(a)(ii)
hereof.
"Indemnifiable Claims" when used in, and for purposes of, Article 8
hereof means and includes any and all direct Damages and all expenses
(including, without limitation, reasonable legal and expert fees and expenses).
"Law" means any of the following of, or issued by, any Government, in
effect on or prior to the date hereof, any statute, law, act, ordinance, code,
resolution, rule, regulation, order, guideline, decree, judgment, license,
permit, certificate or certification, registration, concession, grant, franchise
or restriction; and any published official interpretation, or ruling (whether
designated as public or private, substantive or procedural).
"Liabilities" has the meaning set forth in Section 4.1(h)(i)(3) hereof.
"Licenses" has the meaning set forth in Section 4.1(q) hereof.
"Lien" means any mortgage, lien, security interest, pledge,
encumbrance, restriction on transferability, defect of title, charge or claim of
any nature whatsoever on any property or property interest.
"Master Agreement" has the meaning set forth in Section 4.1(h)(i)(1)
hereof.
"Maximum Distribution Amount" has the meaning set forth in the Fourth
Amended and Restated Certificate of Incorporation.
"NASD" has the meaning set forth in Section 4.1(c) hereof.
"NASDAQ" has the meaning set forth in Section 4.1(c) hereof.
"Non-Cash Consideration" has the meaning set forth in Section
2.5(a)(ii) hereof.
"Offer" has the meaning set forth in the recitals hereto.
"Offer Consideration" has the meaning set forth in Section 3.1(a)
hereof.
"Offer Documents" has the meaning set forth in Section 3.1(c) hereof.
7
"Option" has the meaning set forth in Section 3.1(a) hereof.
"Ordinary Shares" means the Ordinary Shares of Gilat Israel.
"Party" means Purchaser, Seller or Gilat Israel, as the context
requires, and "Parties" means Purchaser, Seller and Gilat Israel, collectively.
"Penalty" means any civil or criminal penalty (including any interest
thereon), fine, levy, lien, assessment, charge, monetary sanction or payment, or
any payment in the nature thereof, of any kind required to be made to any
Government under any Law.
"Period" means any taxable year or any other period that is treated as
a taxable year with respect to which any Tax may be imposed under any applicable
statute, rule or regulation.
"Person" means a corporation, association, partnership, limited
liability company or partnership, joint venture, organization, business,
individual, trust, or any other entity or organization, including a Government
or any subdivision or agency thereof.
"Principal Stockholders" has the meaning set forth in Section 3.2
hereof.
"Proxy Statement" has the meaning set forth in Section 3.3(a) hereof.
"Purchaser" has the meaning set forth in the introductory paragraph to
this Agreement.
"Purchaser Material Adverse Effect" has the meaning set forth in
Article IV hereof.
"Purchaser Stock" means the common stock, par value $.01, of Purchaser.
"Purchaser's Indemnified Persons" means:
(a) Purchaser and its current and former directors, officers,
employees, agents and stockholders, and
(b) subsequent to the Closing, the Company and its Subsidiaries, and
the officers (or the persons performing the functions of officers), employees
and agents of the Company and its Subsidiaries, serving as such subsequent to
the Closing (but only in their capacity as such from and after the Closing).
"Qualified Convertible Securities" has the meaning set forth in Section
2.5(d)(i)(B) hereof.
"Qualified Sale" has the meaning set forth in Section 2.5(a)(ii)
hereof.
"Required Ordinary Shares" means that number of Ordinary Shares that
Purchaser is required to deliver to its stockholders in order to consummate the
Offer.
8
"Sale" has the meaning set forth in the recitals to this Agreement.
"SEC" has the meaning set forth in Section 3.1(c).
"SEC Documents" has the meaning set forth in Section 3.1(c) hereof.
"Second Calculation Period" has the meaning set forth in Section 2.4(b)
hereof.
"Second Distribution Amount" has the meaning set forth in the Fourth
Amended and Restated Certificate of Incorporation.
"Second Payment Date" has the meaning set forth in the Fourth Amended
and Restated Certificate of Incorporation.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" has the meaning set forth in the introductory paragraph to
this Agreement.
"Seller's Indemnified Persons" has the meaning set forth in Section
8.2(a) hereof.
"Share Consideration" has the meaning set forth in Section 2.1 hereof.
"Spacenet" has the meaning set forth in the recitals hereto.
"Special Distribution" has the meaning set forth in Section 2.5(a)
hereof.
"Special Distribution Expiration Date" has the meaning set forth in
Section 2.5(c)(ii) hereof.
"StarBand" has the meaning set forth in the recitals hereto.
"Special Committee" has the meaning set forth in Section 4.2(k) hereof.
"State Income Tax" means all Taxes (whether denominated as franchise
taxes or otherwise) measured on or by income imposed by any State of the United
States of America (or any subdivision thereof).
"Stockholder Approval" has the meaning set forth in Section 3.3(b)
hereof.
"Stockholder Meeting" has the meaning set forth in Section 3.3(b)
hereof.
"Subsidiaries" has the meaning set forth in Section 4.1(g) hereof.
"Tax Return" means any report, return, information return or other
information required to be supplied to a taxing authority in connection with
Taxes.
"Taxes" means all taxes, charges, fees, levies or other assessments,
including, without limitation, income, gross receipts, excise, environmental,
severance, occupation,
9
property, sales, use, transfer, registration, value-added, license, payroll,
franchise, Social Security and unemployment taxes imposed or required to be
withheld by any Government or other tax of any kind whatsoever, including any
interest, penalties and additions thereto, whether disputed or not.
"Trading Price" means the per share price of the Ordinary Share
determined as follows: (a) if Ordinary Shares are listed or admitted to trading
on any United States national securities exchange, average of the closing prices
of the Ordinary Shares on such exchange over the ten (10) consecutive trading
days ending on the Determination Date; (b) if the Ordinary Shares are not then
listed or admitted to trading on any United States national securities exchange
but is a NASDAQ security, the average of the closing sale prices of the Ordinary
Shares as shown by the NASDAQ over the ten (10) consecutive trading days ending
on the Determination Date; or (c) if the Ordinary Shares are not then a NASDAQ
security but are actively traded over-the-counter, the average of the closing
prices (meaning for purposes of this clause (c) the average of the highest
closing bid price and lowest closing asked price thereof) over the ten (10)
consecutive trading days ending on the Determination Date.
"Transaction Proposal" has the meaning set forth in Section 6.6(a)
hereof.
"Unsolicited Superior Proposal" has the meaning set forth in Section
6.6(b) hereof.
"Voice Services" has the meaning set forth in Section 4.1(h)(iv)
hereof.
"Voting Agreement" has the meaning set forth in Section 3.2 hereof.
ARTICLE II.
SALE AND PURCHASE OF THE SHARES
Section 2.1 Sale and Purchase of the Company Shares.
Subject to the terms and conditions of this Agreement, at the Closing,
Seller shall sell to Purchaser, and Purchaser shall purchase from Seller, the
Company Shares in exchange for 43,103,448 shares of Purchaser Stock,
representing the value $100 million divided by $2.32 (the "Share
Consideration").
Section 2.2 Closing Date.
The closing of the Sale (the "Closing") shall take place at the New
York offices of Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP, located at 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, as soon as practicable after the last
of the conditions set forth in Section 5 hereof is fulfilled or waived (subject
to applicable Law) but in no event later than the fifth Business Day thereafter,
or at such other time and place and on such other date as the Parties shall
mutually agree; provided, however, that, without the mutual agreement of the
Parties, in no event shall the Closing occur later than May 31, 2002 (the
"Closing Date").
10
Section 2.3 Deliveries and Assignment of Right to Share Consideration.
(a) Deliveries of Gilat Israel and Seller. Gilat Israel and Seller, as
the case may be, shall deliver to Purchaser the following:
(i) certificates representing the Company Shares, duly
endorsed in blank or with stock powers duly endorsed in blank, together with
such other documents as Purchaser may reasonably request to evidence the
transfer to Purchaser of good title in and to the Company Shares, free and clear
of any Liens (including, without limitation, confirmation of the recording of
any registration required under the laws of the Company's jurisdiction of
formation); and
(ii) the other instruments or documents, as shall be required
by Purchaser under Section 5.2 hereof.
(b) Deliveries of Purchaser. Purchaser shall deliver to Seller the
following:
(i) certificates representing the Share Consideration,
together with such other documents as Seller may reasonably request to evidence
the transfer to Seller of good title in and to the Share Consideration, free and
clear of any Liens; and
(ii) the other instruments or documents, as shall be required
by Gilat Israel and Seller, as the case may be, under Section 5.3 hereof.
(c) Assignment of Right to Share Consideration. The Parties agree that
Seller shall have the right to assign all or part of its right to the Share
Consideration under Section 2.1 hereof and its rights to the delivery of the
certificates representing such Share Consideration under Section 2.3(b)(i)
hereof to Gilat Israel, any of its Affiliates, and/or StarBand; provided,
however, that, in each such case, the assignee of all or part of the Share
Consideration executes and delivers a Certificate of Waiver to Purchaser.
Section 2.4 Post-Closing Share Consideration Adjustments.
(a) Company's Net Income for 2002-2003.
(i) If the Company's Applicable Net Income for the period from
July 1, 2002 through June 30, 2003 (inclusive) (the "First Calculation Period"),
is greater than or equal to $4,100,000 but no more than $4,900,000, Purchaser
shall, promptly following the determination of the Applicable Net Income for
such period, issue 2,685,382 shares of Purchaser Stock to Gilat Israel.
(ii) If the Company's Applicable Net Income for the First
Calculation Period, is greater than or equal to $4,900,000, Purchaser shall,
promptly following the determination of the Applicable Net Income for such
period, issue 5,370,765 shares of Purchaser Stock to Gilat Israel.
(iii) Anything contained in this Section 2.4(a) to the
contrary notwithstanding, in the event that the Audited Statements with respect
to the First
11
Calculation Period are not filed with the SEC or otherwise publicly announced or
delivered to the holders of shares of Purchaser Stock on or before December 31,
2003, no shares of Purchaser Stock shall be issued by Purchaser to Gilat Israel
pursuant to this Section 2.4(a).
(b) Company's Net Income for 2003-2004.
(i) If the Company's Applicable Net Income for the period from
July 1, 2003 through June 30, 2004 (inclusive) (the "Second Calculation Period"
and, together with the First Calculation Period, each a "Calculation Period"),
is greater than or equal to $27,500,000, but no more than $33,000,000, Purchaser
shall, promptly following the determination of the Applicable Net Income for
such period, issue 2,685,382 shares of Purchaser Stock to Gilat Israel.
(ii) If the Company's Applicable Net Income for the Second
Calculation Period, is greater than or equal to $33,000,000, Purchaser shall,
promptly following the determination of the Applicable Net Income for such
period, issue 5,370,765 shares of Purchaser Stock to Gilat Israel.
(iii) Anything contained in this Section 2.4(b) to the
contrary notwithstanding, in the event that the Audited Statements with respect
to the Second Calculation Period are not filed with the SEC or otherwise
publicly announced or delivered to the holders of shares of Purchaser Stock on
or before December 31, 2004, no shares of Purchaser Stock shall be issued by
Purchaser to Gilat Israel pursuant to this Section 2.4(b).
(c) Delivery of Additional Share Consideration. If Purchaser issues
shares of Purchaser Stock to Gilat Israel pursuant to this Section 2.4 (the
"Additional Share Consideration"), on the date of such issuance, Purchaser shall
deliver to Gilat Israel the certificates representing the Additional Share
Consideration, together with such other documents as Gilat Israel may reasonably
request to evidence the transfer to Gilat Israel of good title in and to the
Additional Share Consideration, free and clear of any Liens.
(d) Assignment of Right to Additional Share Consideration. The Parties
agree that Gilat Israel shall have the right to assign all or part of its right
to the Additional Share Consideration under Section 2.4(a) and (b) hereof, as
well as the delivery of the certificates representing the Additional Share
Consideration under Section 2.4(c) hereof, to any of its Affiliates and/or
StarBand.
(e) Termination of Obligation to Issue Additional Share Consideration.
Notwithstanding anything to the contrary set forth herein, the Parties agree
that upon Purchaser's completion of a Qualified Sale, Purchaser shall have no
further obligation to issue any Additional Share Consideration to Gilat Israel
under this Section 2.4 after the date of such Qualified Sale.
12
Section 2.5 The Special Distribution.
(a) The Special Distribution.
(i) In connection with the Sale and the other transactions
contemplated hereby, the Parties hereby agree to amend and restate Purchaser's
Third Amended and Restated Certificate of Incorporation in the form attached
hereto as Exhibit 2.5 (the "Fourth Amended and Restated Certificate of
Incorporation"). The proposed amendments shall (i) repeal the prohibition on
Purchaser stockholder action by written consent, (ii) grant Purchaser's
stockholders holding at least majority of the outstanding shares of Purchaser
Stock the right to call a special meeting of stockholders, and (iii) grant
Purchaser's stockholders the right to receive a cash distribution from Purchaser
pursuant to Section IV.B of the Fourth Amended and Restated Certificate of
Incorporation (the "Special Distribution"). Subject to the approval of the
proposed amendments by the holders of a majority of the shares of Purchaser
Stock, the right to the Special Distribution will attach to all of the
outstanding shares of Purchaser Stock, is represented by the same certificate
that represents shares of Purchaser Stock, and will entitle each holder thereof
to the Special Distribution, which shall be payable to Purchaser's stockholders
in the manner described in Section IV.B of the Fourth Amended and Restated
Certificate of Incorporation. Purchaser's obligation to pay the Special
Distribution shall expire on the date on which the Second Distribution Amount
(as defined in the Fourth Amended and Restated Certificate of Incorporation) is
distributed to holders of shares of Purchaser Stock, or on such earlier date as
prescribed in Section IV.B of the Fourth Amended and Restated Certificate of
Incorporation and Section 2.5(a)(ii) hereof.
(ii) Notwithstanding anything to the contrary set forth
herein, the Parties agree that upon completion of a Qualified Sale, Purchaser's
obligation to pay the Special Distribution shall terminate and holders of shares
of Purchaser Stock shall have no rights whatsoever in, to or under the First
Distribution Amount, the Second Distribution Amount or the Maximum Distribution
Amount. A "Qualified Sale" is the closing by Purchaser of (x) a firmly
underwritten public offering of Purchaser Stock raising gross proceeds to
Purchaser of at least $25 million, with a price for Purchaser Stock of at least
$2.32 per share; it being understood by the Parties that neither Gilat Israel
nor its Affiliates shall participate in the offering; or (y) the closing by
Purchaser of the sale in a single transaction of the Purchaser Stock to a third
party purchaser (other than Gilat Israel or one or more of its Affiliates)
raising gross proceeds to Purchaser of at least $100 million (the "Gross
Proceeds"), with (A) a price for the Purchaser Stock of at least $1.00 per share
and (B) at least 60% of the Gross Proceeds being in the form of cash; provided,
however, that, if any portion of the Gross Proceeds received by Purchaser in
such sale are not in the form of cash (the "Non-Cash Consideration"), prior to
the consummation of any such sale, (1) Purchaser shall have obtained an
appraisal from an independent third party appraiser of national standing and (2)
the Board of Directors of Purchaser shall have made a good faith determination
that the value of the assets, property or other consideration constituting the
Non-Cash Consideration has a value in excess of $1.00 per share of Purchaser
Stock issued in connection therefor.
13
(b) Guaranty. For the benefit of each current and future holder of
shares of Purchaser Stock (other than Gilat Israel and its Affiliates), Gilat
Israel hereby agrees that, in the event that Purchaser is unable to make the
Special Distribution to its stockholders pursuant to Section IV.B of the Fourth
Amended and Restated Certificate of Incorporation for any reason, including,
without limitation, because it has insufficient funds, not later than three (3)
Business Days prior to the First Payment Date or the Second Payment Date, as the
case may be, Gilat Israel will make a cash capital contribution to Purchaser to
the extent and in an amount necessary for Purchaser to satisfy its obligation to
make the Special Distribution under Section IV.B of the Fourth Amended and
Restated Certificate of Incorporation.
(c) Waiver of Special Distribution and Restrictions on Transfers. For
the benefit of each current and future holder of shares of Purchaser Stock
(other than Gilat Israel and its Affiliates), Gilat Israel and Seller, on their
own behalf, and on behalf of their Affiliates, hereby:
(i) irrevocably waive any and all claims or rights it has in,
to or under the Special Distribution and, without limiting the foregoing, agree
that they shall not be entitled to receive any portion of the First Distribution
Amount, the Second Distribution Amount or the Maximum Distribution Amount;
(ii) agree that prior to the earlier of (x) June 30, 2004, (y)
the date on which the Maximum Distribution Amount is actually paid to the
holders of shares of Purchaser Stock under Section IV.B of the Fourth Amended
and Restated Certificate of Incorporation, and (z) the date on which Purchaser
completes a Qualified Sale (such earlier date referred to herein as the "Special
Distribution Expiration Date"), they shall not sell, assign or otherwise
transfer any shares of Purchaser Stock held by either of them to any Person,
unless, in each case such transfer constitutes a private transaction (i.e., a
transaction exempt from registration under the Securities Act) and (A) the
proposed-transferee agrees to hold the transferred shares of Purchaser Stock in
its own name and not in "street name" and executes and delivers to Purchaser a
certificate of waiver (a "Certificate of Waiver") pursuant to which the
proposed-transferee agrees to be bound by the waiver and the restrictions on the
transfer of shares of Purchaser Stock set forth in this Section 2.5(c) in the
same manner and to the same extent as Gilat Israel, Seller and their Affiliates;
(B) the certificates evidencing such shares of Purchaser Stock contain the
legend required under Section 2.5(c)(iii) hereof; and (C) the transfer agent of
the shares of Purchaser Stock shall be instructed (1) to maintain a register of
all shares of Purchaser Stock held by Gilat Israel, Seller, their Affiliates and
their permitted assignees and transferees; (2) not to pay any Special
Distribution with respect to any shares of Purchaser Stock held by any of Gilat
Israel, Seller, their Affiliates and their permitted assignees and transferees;
and (3) not to register the transfer of any such shares of Purchaser Stock
without first having obtained an opinion of counsel to the effect that the
requirements of clause (A) above have been satisfied; and
(iii) agree and acknowledge that the certificates representing
the Purchaser Stock held by Gilat Israel, Seller and their Affiliates (as well
as any certificates transferred to any transferee in accordance with clause (ii)
above), shall bear a legend
14
indicating the waiver and restrictions on transfer of the shares of Purchaser
Stock set forth in this Section 2.5(c).
(d) Restrictions on New Issuances.
(i) For the benefit of each current and future holder of
shares of Purchaser Stock (other than Gilat Israel and its Affiliates), the
Parties agree that (and Gilat Israel and Seller shall take all steps reasonably
necessary to assure that) until the date immediately following the Special
Distribution Expiration Date, Purchaser will not:
(A) sell or issue any additional shares of Purchaser
Stock (other than (1) shares of Purchaser Stock issued upon the exercise of
stock options for shares of Purchaser Stock that are outstanding as of the
Closing Date and (2) shares of Purchaser Stock issuable pursuant to employee
stock option plans or other stock based compensation plans; provided, however,
that the number of shares of Purchaser Stock that Purchaser may issue under the
foregoing clause (2) shall not exceed in the aggregate 1% of the issued and
outstanding shares of Purchaser Stock as of the closing of the Offer on a Fully
Diluted Basis.) The Parties agree that all shares of Purchaser Stock issued
under clauses (1) and (2) of this paragraph (A) shall be entitled to the Special
Distribution;
(B) sell, issue or grant any securities convertible
into or exercisable or exchangeable for shares of Purchaser Stock, in each case,
except to the extent that any such securities are not convertible into or
exercisable or exchangeable for shares of Purchaser Stock until the Special
Distribution Expiration Date (the "Qualified Convertible Securities"); or
(C) enter into any agreement that by its terms
legally prohibits Purchaser from making the Special Distribution.
(ii) Notwithstanding anything to the contrary contained
herein, the Parties agree that Purchaser shall not be precluded or restricted in
any way from selling, issuing or granting, as the case may be: (i) shares of
Purchaser Stock or securities convertible into or exercisable or exchangeable
for shares of Purchaser Stock (other than Qualified Convertible Securities) if:
(A) such sale, issuance or grant constitutes a private transaction (i.e., a
transaction exempt from registration under the Securities Act); (B) the proposed
purchaser agrees to hold the shares of Purchaser Stock so sold, issued or
granted in its own name and not in "street name;" (C) prior to such sale,
issuance or grant, Purchaser receives a duly executed Certificate of Waiver from
the Person who will receive such shares of Purchaser Stock or such convertible
securities, as the case may be; (D) the certificates evidencing such shares
contain the legend required under Section 2.5(c)(iii) hereof; and (E) the
transfer agent of the shares of Purchaser Stock shall be instructed (1) to
maintain a register of all shares issued by Purchaser in accordance with this
Section 2.5(d)(ii) and the permitted assignees and transferees of such shares of
Purchaser Stock; (2) not to pay any Special Distribution with respect to any
shares of Purchaser Stock so issued; and (3) not to register the transfer of any
such shares without first having obtained an opinion of counsel to the effect
that the requirements of clause
15
(C) of this Section 2.5(d)(ii) have been satisfied, or (ii) any class of capital
stock of Purchaser other than Purchaser Stock or any securities convertible into
or exercisable or exchangeable for shares of a class of capital stock of
Purchaser other than Purchaser Stock.
ARTICLE III.
THE OFFER AND OTHER TRANSACTIONS
Section 3.1 Purchaser Tender Offer.
(a) The Offer. As soon as practicable following the execution of this
Agreement, Purchaser shall commence (within the meaning of Rule 14e-4(a)(4)
promulgated under the Exchange Act) the Offer to purchase from its stockholders
up to 6,315,789 shares of Purchaser Stock in exchange for such stockholder's pro
rata share of the Offer Consideration; provided, however, that neither Gilat
Israel nor any of its Affiliates shall tender its shares of Purchaser Stock in
the Offer. For purposes of this Agreement, "Offer Consideration" shall mean the
Cash Consideration and .0738 of an Ordinary Share for each share of Purchaser
Stock validly tendered in, and not properly withdrawn from, the Offer; provided,
however, that in no event shall such consideration exceed, in the aggregate,
$10,000,000 (plus any amount of cash to be paid in lieu of fractional Ordinary
Shares) and 466,105 Ordinary Shares. Gilat Israel shall deliver to Purchaser the
Required Ordinary Shares upon Purchaser's exercise of the option granted to
Purchaser pursuant to a second amended and restated option agreement between
Purchaser and Gilat Israel, a form of which is attached hereto as Exhibit 3.1
(the "Option"). Purchaser and Gilat Israel shall enter into the Option prior to
the Closing.
Notwithstanding any other provisions of the Offer, if mutually agreed
to by Gilat Israel and Purchaser, Purchaser: (i) shall not be required to accept
for payment or, subject to any applicable rules and regulations of the SEC
(including, without limitation, Rule 14e-1(c) under the Exchange Act relating to
Purchaser's obligation to pay for or return tendered shares of Purchaser Stock
promptly after termination or withdrawal of the Offer), pay for any tendered
shares; and (ii) may (x) delay the acceptance for payment of any tendered shares
and (y) terminate or, subject to the terms of this Agreement, amend the Offer as
to any shares not then paid for, if Gilat Israel and Purchaser mutually agree
that circumstances make it inadvisable to proceed with the Offer. Purchaser may
not otherwise change, modify, amend or terminate the Offer without the prior
express consent of Gilat Israel, which consent shall not be unreasonably
withheld.
(b) Expiration and Consummation of the Offer. The Offer shall expire on
the close of business on the Closing Date. Payment by Purchaser for all of the
shares of Purchaser Stock accepted by Purchaser pursuant to the Offer shall be
made immediately following the Closing; provided, however, that the Offer shall
be terminated and Purchaser shall not accept for payment or, subject to any
applicable rules and regulations of the federal securities laws, pay for any
shares of Purchaser Stock tendered in the Offer if this Agreement is terminated
or the Sale is not consummated for any reason.
16
(c) Offer Documents. As soon as practicable following the execution of
this Agreement, Purchaser shall prepare all necessary forms, reports, schedules,
statements, and other documents (collectively, "SEC Documents") with respect to
the Offer in accordance with applicable federal and state securities laws,
including, without limitation, a tender offer statement on Schedule TO (the
"Offer Documents"). Purchaser shall use all of its reasonable commercial efforts
to file the Offer Documents with the Securities & Exchange Commission (the
"SEC") and other necessary regulatory authorities as promptly as practicable
following the date hereof; provided, however, that such Offer Documents shall be
in form and substance reasonably satisfactory to Gilat Israel and its counsel.
The Parties agree that to the extent necessary to consummate the Offer and
required under applicable Law, Gilat Israel and Purchaser shall be identified as
joint offerors in the Offer Documents filed with the SEC. Purchaser will take
all steps reasonably necessary to cause the Offer Documents to be disseminated
to its stockholders to the extent and in the manner required by applicable
federal and state securities laws. If at any time prior to the consummation of
the Offer any information relating to the Business, Gilat Israel, Seller or
Purchaser, or any of their respective officers, directors, or Affiliates
(including the officers and directors of such Affiliates), should be discovered
by Gilat Israel, Seller or Purchaser which should be set forth in an amendment
or supplement to the Offer Documents so that such documents would not include
any misstatement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, the Party which discovers such information shall
promptly notify the other Parties hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC and,
to the extent required by law, disseminated to the stockholders of Purchaser.
Section 3.2 Voting Agreement.
Prior to the execution hereof, each of The Xxxxxxxxx 2000 Family
Resource Trust, The Xxxxxxxxx Charitable Trust, CAVCO of North Florida, Inc.,
The Arnouse Charitable Trust, and Xxxxxxx Arnouse (collectively, the "Principal
Stockholders"), Gilat Israel and Xxxxx Xxxxxxx has each executed a voting
agreement substantially in the form attached hereto as Exhibit 3.2 (the "Voting
Agreement"), pursuant to which the parties have agreed to vote or cause to be
voted, at the Stockholder Meeting, all of the shares of Purchaser Stock held by
each such party in favor of the Sale and the other transactions contemplated
hereby (including any increase to Purchaser's authorized capital stock, as may
be required to consummate the Sale); provided, however, that the Voting
Agreement shall terminate immediately upon the termination of this Agreement.
Section 3.3 Proxy Statement; Form F-4 and Stockholder Meeting.
(a) Preparation and Filing of Proxy Statement and Gilat Registration
Statement. As soon as practicable following the execution of this Agreement,
Purchaser shall prepare and file with the SEC a proxy statement describing the
Sale and the other transactions contemplated hereby (the "Proxy Statement");
provided, however, that such Proxy Statement must be in form and substance
reasonably satisfactory to Seller and its counsel. At the same time, Gilat
Israel shall prepare and file its registration statement on
17
Form F-4 (or such other appropriate form, the "Gilat Registration Statement")
covering the Ordinary Shares to be issued in connection with the Offer upon
exercise of the Option and shall use its commercially reasonable efforts to
cause the Gilat Registration Statement to be declared effective by the SEC as
promptly as practicable. Purchaser will use its commercially reasonable efforts
to cause the Proxy Statement to be mailed to Purchaser's stockholders as
promptly as practicable after the Gilat Registration Statement is declared
effective under the Securities Act, subject to SEC review. No filing of, or
amendment or supplement to, shall be made to either the Proxy Statement or the
Gilat Registration Statement by either Purchaser or Gilat Israel, as the case
may be, without providing the other a reasonable opportunity to review and
comment thereon, each of Purchaser and Gilat Israel will advise the other,
promptly after it receives notice thereof, of the time when the Gilat
Registration Statement has become effective or any supplement or amendment has
been filed, the issuance of any stop order, or any request by the SEC for
amendment of the Proxy Statement or the Gilat Registration Statement or comments
thereon and responses thereto or requests by the SEC for additional information.
If at any time prior to the Closing Date any information relating to Gilat
Israel, Seller or Purchaser, or any of their respective officers, directors, or
Affiliates (including the officers and directors of such Affiliates), should be
discovered by Gilat Israel, Seller or Purchaser which should be set forth in an
amendment or supplement to the Proxy Statement or the Gilat Registration
Statement, as the case may be, so that any of such documents would not include
any misstatement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, the Party which discovers such information shall
promptly notify the other Parties hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC and,
to the extent required by law, disseminated to the stockholders of Purchaser.
(b) Stockholder Approval. As soon as practicable following the
execution of this Agreement, Purchaser shall (i) take all actions reasonably
necessary in accordance with the DGCL and Purchaser's Third Amended and Restated
Certificate of Incorporation and Bylaws to convene and hold a meeting of its
stockholders ("Stockholder Meeting") for the purpose of obtaining the approval
of a majority of its stockholders (the "Stockholder Approval") of this
Agreement, the Sale, and the other transactions contemplated hereby (including
any increase to Purchaser's authorized capital stock, as may be required to
consummate the Sale); and (ii) through its Board of Directors, recommend to its
stockholders the approval and adoption of this Agreement, and subject to the
satisfaction of the conditions set forth herein, the Sale and the other
transactions contemplated hereby (including any increase to Purchaser's
authorized capital stock, as may be required to consummate the Sale).
Notwithstanding anything to the contrary set forth herein, if the Gilat
Registration Statement has not been declared effective by the SEC prior to the
date of the Stockholder Meeting, Purchaser agrees to take such action, in
accordance with the DGCL and Purchaser's Third Amended and Restated Certificate
of Incorporation and Bylaws, to properly adjourn such Stockholder Meeting until
such time as the Gilat Registration Statement has been declared effective by the
SEC.
Section 3.4 Financial Information of the Business.
18
The Gilat Parties shall timely prepare, or shall cause to be timely
prepared, as promptly as practicable, and cause to be delivered to Purchaser a
balance sheet, income statement and such other financial statements for the
Business to the extent and in the form and manner required by the applicable
federal securities laws to be filed with the SEC or otherwise disclosed in the
Proxy Statement, the Gilat Registration Statement or the Offer Documents, as the
case may be, in order to consummate the Sale and the other transactions
contemplated hereby.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
In this Agreement, any reference to: (i) a "Company Material Adverse
Effect" shall mean any event, change or effect that fundamentally and adversely
affects the ability of the Company and its Subsidiaries, taken as a whole, to
own the Assets and operate the Business or otherwise materially and adversely
effects the financial condition of the Company or the Business as reflected on
the pro forma consolidated statements included in the Proxy Statement that give
effect to the Sale; provided, however, that none of the following shall be
deemed in themselves, either alone or in combination, to constitute, and none of
the following shall be taken into account in determining whether there has been
or will be, a Company Material Adverse Effect: (a) any failure by the Company to
meet internal projections or forecasts or published revenue or earnings
predictions for any period ending on or after the date of this Agreement; (b)
any adverse change, effect, event, occurrence, state of facts or development
attributable to conditions affecting the industries in which the Company
participates, the U.S. economy as a whole, or foreign economies in any locations
where Company or any of its Subsidiaries has material operations or sales; (c)
any adverse change, effect, event, occurrence, state of facts or development
arising from or relating to any change in GAAP or any change in applicable Laws
or the interpretation thereof; or (d) any adverse change, effect, event,
occurrence, state of facts or development arising from or relating to actions
required to be taken under applicable Laws (other than the adoption of Laws
which prevent the Company from conducting the Business generally); (ii)
"Purchaser Material Adverse Effect" shall mean any event, change or effect that
is materially adverse to the financial condition, properties, assets (including
intangible assets), liabilities (including contingent liabilities), business,
operations or results of operations of Purchaser and its subsidiaries, taken as
a whole; and (iii) "Gilat Material Adverse Effect" shall mean any event, change
or effect that is materially adverse to the financial condition, properties,
assets (including intangible assets), liabilities (including contingent
liabilities), business, operations or results of operations of Gilat Israel and
its subsidiaries, taken as a whole. Notwithstanding the foregoing, with respect
to each of the Parties and after the date hereof, (i) changes or effects which
are primarily and directly caused by the execution and delivery of this
Agreement or the announcement of the transactions contemplated hereby and (ii)
changes in the market price or trading volume of a Parties' publicly traded
securities, shall not constitute a Company Material Adverse Effect, Purchaser
Material Adverse Effect or Gilat Material Adverse Effect, as the case may be (it
being understood that in any controversy concerning the applicability of this
proviso, the Party claiming the
19
benefit of this proviso shall have the burden of proof with respect to the
elements of such proviso).
In this Agreement, the words "aware," "knowledge" or similar words,
expressions or phrases with respect to a Party means such Party's actual
knowledge after reasonable inquiry of officers and directors of such Party and
its subsidiaries reasonably believed to have knowledge of the relevant matters.
Section 4.1 Representations and Warranties of the Gilat Parties.
Gilat Israel and Seller, jointly and severally, represent and warrant
to Purchaser that, except as set forth in the Disclosure Schedule delivered by
Gilat Israel and Seller to Purchaser immediately prior to the execution and
delivery of this Agreement (the "Disclosure Schedule"), the statements contained
in Section 4.1 are true and correct. Reference to any Section in the Disclosure
Schedule shall be deemed to be a reference to all other Sections in the
Disclosure Schedule.
(a) Organization; Standing and Authorization of the Gilat Parties. Each
of Gilat Parties is an entity duly organized and validly existing and in good
standing under laws of the jurisdiction of its incorporation. Seller is a direct
wholly-owned subsidiary of Gilat To Home Latin America (Netherlands Antilles)
N.V., which is a 97.5% controlled subsidiary of Xxxxx Xxxxxxx. Xxxxx Xxxxxxx is
the direct, wholly-owned subsidiary of Gilat Israel. Each of the Gilat Parties
has the full power and authority to own and operate its properties and to carry
on its businesses as now conducted. Each of the Gilat Parties has the power and
authority to enter into this Agreement and to perform its obligations hereunder
and all such action has been duly and validly authorized by all necessary
corporate action and proceedings. This Agreement has been duly and validly
authorized, executed and delivered by each of the Gilat Parties, and constitutes
a valid and binding agreement of such each Gilat Party, enforceable against such
Gilat Party in accordance with its terms.
(b) Organization; Standing and Certain Actions of the Company. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the Netherlands and will be a direct wholly-owned subsidiary
of Seller. Unless stated otherwise in Section 4.1(h)(i)(2) of the Disclosure
Schedule, on or prior to the Closing, the Company and its Subsidiaries, taken as
a whole, shall own all of the Assets free and clear of any Liens and shall have,
or have the benefit of, the full and complete rights, authority and power to
operate and conduct the Business. Except for the Excluded Businesses, as of the
Closing, the Company will conduct no business other than the Business.
(c) Consents; Filings. No filing or registration with, no notification
to, and no permit, authorization, consent or approval of, any Governmental
entity (including, without limitation, any federal, state or local regulatory
authority or agency) is required to be obtained or made by any of the Gilat
Parties or the Company in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except as
will be obtained prior to the Closing Date and except (i)
20
as required by (A) the Securities Act and the Exchange Act, (B) state securities
or "blue sky" laws and (C) the National Association of Securities Dealers, Inc.
("NASD") or the Nasdaq National Market ("NASDAQ"), and (ii) such other filings,
registrations, notifications, permits, authorizations, consents or approvals the
failure of which to be obtained, made or given would not, individually or in the
aggregate, either have a Company Material Adverse Effect, a Gilat Material
Adverse Effect or an adverse affect upon the ability of the Gilat Parties to
consummate the transactions contemplated hereby.
(d) Effect of Agreements; Conflicts.
The execution, delivery and performance by the Gilat Parties of this
Agreement and the consummation of the transactions contemplated hereby do not
and will not (i) violate, conflict with or result in a breach of any provision
of the Articles of Incorporation or Bylaws, or similar organizational
instruments of, the Gilat Parties or the Company, (ii) except to the extent
waived or consented to prior to the Closing Date, violate, conflict with, or
result in a breach of any provision of, require any consent, approval or notice
under, or constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) or result in a right of termination or
acceleration under, or result in the creation of any Lien upon any of the
properties or assets of the Gilat Parties or the Company under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or a material Contract or other material instrument or obligation to which (x) a
Gilat Party is, or the Company as of the Closing will be, a party or (y) by
which a Gilat Party is, or the Company as of the Closing will be, bound, or (z)
to which a Gilat Party or the Company, or any of its properties or assets, may
be subject, (iii) violate any judgment, ruling, order, writ, injunction,
determination, award, decree, statute, ordinance, rule or regulation applicable
to a Gilat Party or the Company, or any of its properties or assets, or (iv)
cause the suspension or revocation of any authorization, consent, approval or
license obtained by or on behalf of a Gilat Party or the Company, which
violations, conflicts, breaches, defaults, terminations, accelerations, liens,
encumbrances, suspensions or revocations, or which consents, approvals or
notices the failure to obtain or give, would, in the case of clauses (ii), (iii)
and (iv), individually or in the aggregate, be reasonably expected to result in
a Company Material Adverse Effect.
(e) Litigation and Compliance.
(i) Except as disclosed in SEC Documents filed by Gilat Israel
or in Section 4.1(e) of the Disclosure Schedule, there are no actions, suits or
proceedings of any kind pending against, or to the knowledge of the Gilat
Parties, threatened against any of the Gilat Parties before any court,
Governmental or regulatory agency, body, commission or any arbitrator that (A)
questions or calls into question the validity of this Agreement, (B) involves or
arises out of the Business or the Assets (except for such actions, suits or
proceedings that would not be reasonably expected to result in material
liability to either one or both of the Company or the Business), (C) may
reasonably be expected to have a Company Material Adverse Effect, a Gilat
Material Adverse Effect or an adverse effect upon the ability of the Gilat
Parties to effect the transactions
21
contemplated hereby, or (D) would reasonably be expected to result in material
liability to either one or both of the Company or the Business after the Closing
Date.
(ii) Each of the Gilat Business Entities is in substantial
compliance with, and is not in default or violation in any respect under, any
Law applicable to the Business or its respective business which noncompliance,
default or violation would be reasonably expected to result in a Company
Material Adverse Effect, and to the knowledge of the Gilat Parties, no such
default or violation has been alleged.
(f) Capitalization of the Company; Validity of Company Shares and
Ordinary Shares.
(i) As of the Closing, the authorized capital stock of the
Company will consist of 100,000,000 shares of common stock, par value EUR .01
(the "Company Common Stock") of which 60,000,000 shares will be issued and
outstanding (the "Company Shares"). As of the Closing, Seller will be the sole
record and beneficial owner of all of the Company Shares free and clear of any
Liens.
(ii) As of the Closing, all of the Company Shares will be
validly issued, fully paid, non-assessable and, with respect to this
transaction, free of any preemptive rights or similar rights created by statute,
the Articles of Incorporation or Bylaws or similar organizational instruments of
the Company or any agreement to which the Company will be a party or by which
the Company will be bound. Upon the Closing, Purchaser shall acquire the Company
Shares free and clear of all Liens.
(iii) As of the Closing, except as set forth in Section
4.1(f)(iii) of the Disclosure Schedule, the Company will not have any
commitments to issue or sell any shares of its capital stock or any options,
warrants or other rights to purchase or subscribe for, or securities or
obligations convertible into, exchangeable for or measured by the market price
or value of, or giving any Person any right to acquire from the Company, any
shares of its capital stock, and no such options, warrants or other rights or
securities or obligations will be outstanding. As of the Closing, the Company
Shares will not be subject to, and the Company Shares will not be issued in
violation of, any preemptive rights (with respect to this transaction only),
shareholders agreements or rights of first refusal by or with the Company or
Seller.
(iv) All of the Ordinary Shares to be issued upon exercise of
the Option will be validly issued, fully paid, non-assessable and free of any
preemptive rights or similar rights created by statute, the Articles of
Association and Memorandum of Association or similar organizational instruments
of Gilat Israel or any agreement to which Gilat Israel is a party or by which
Gilat Israel is bound. Upon issuance of such Ordinary Shares to Purchaser's
stockholders upon the consummation of the Offer, such stockholders will acquire
the Ordinary Shares free and clear of all Liens.
(g) Subsidiaries of the Company and the Gilat Business Entities.
(i) On or prior to the Closing, the Gilat Parties shall
transfer, or cause to be transferred, to the Company, all ownership interests,
except to the extent that a
22
nominal shareholder or shareholders is or are required by applicable Law, in any
entities formed by a Gilat Party exclusively to conduct the Business, as well as
in Gilat To Home Brasil Holdings Ltda. (which owns 99% of the shares of GTH
Brazil LTDA), GTH Peru S.A. and Gilat Colombia S.A. E.S.P., Such entities shall
be on or prior to the Closing subsidiaries of the Company (or, in the case of
GTH Brazil LTDA, a subsidiary of a subsidiary of the Company). The Gilat Parties
shall deliver to Purchaser on the Closing a true and correct list of the names
of such subsidiaries, including GTH Brazil LTDA (the "Subsidiaries") and their
respective jurisdictions of organization. Except for the Subsidiaries, as of the
Closing, the Company will not own any interest, direct or indirect, and will not
have any commitment to purchase any interest, direct or indirect, in any other
corporation, partnership, limited liability company, joint venture or other
enterprise. Each of the Subsidiaries will be duly organized and validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
with full power and authority to own and operate its properties and to carry on
its businesses as then conducted.
(ii) Section 4.1(g)(ii) of the Disclosure Schedule sets forth
a true and complete list of all of the Gilat Business Entities (other than the
Gilat Parties) and their respective jurisdictions of organization. Each such
Gilat Business Entities is duly organized and validly existing and in good
standing under the laws of the jurisdiction of its incorporation, with full
power and authority to own and operate its properties and to carry on its
businesses as now conducted.
(h) Master Agreement; Assets and Liabilities of the Company; Entire
Business.
(i) On or prior to the Closing Date, the Company shall:
(1) have entered into a Master Agreement with Gilat
Israel, substantially in the form attached hereto as Exhibit 4.1(h) (the "Master
Agreement"), pursuant to which, among other things, the Company either directly
or indirectly through the Subsidiaries, shall be granted the exclusive right to
operate the Business in Latin America (subject to the limitations contained
therein with respect to Chile) and the non-exclusive right to operate the
Business in Mexico with respect to SOHO subscribers through a third-party
channel under the terms contained therein;
(2) except to the extent stated otherwise on Section
4.1(h)(i)(2) of the Disclosure Schedule, have all right, title and interest in,
to and under the assets of the Business, including the Business Contracts
described in Section 4.1(l) hereof (the "Assets") and the material Assets set
forth in Section 4.1(h)(i)(2) of the Disclosure Schedule (it is clarified,
however, that not all Assets listed in Section 4.1(h)(i)(2) of the Disclosure
Schedule are material Assets). For purposes of this Agreement and the Disclosure
Schedule "material Assets" means those Assets and Business Contracts that
individually have a value greater than $100,000; and
(3) have assumed all of the liabilities of the
Business (the "Liabilities") including the material Liabilities set forth on
Section 4.1(h)(i)(3) of the Disclosure Schedule. For purposes of this Agreement
and the Disclosure Schedules, material Liabilities shall mean Liabilities that
exceed $100,000 individually or $1 million
23
in the aggregate (it is clarified, however, that not all Liabilities listed in
Section 4.1(h)(i)(3) of the Disclosure Schedule are material Liabilities).
(ii) None of the Company, the Subsidiaries or the Business as
of the Closing will be subject to or have any obligation with respect to any
obligation or liability of any kind whatsoever, whether accrued, absolute,
contingent, determined, determinable or otherwise, other than the material
Liabilities listed on Section 4.1(h)(i)(3) of the Disclosure Schedule, except
for (A) the Excluded Business Liabilities, for which the Company and/or the
Subsidiary, as the case may be, will be reimbursed by Gilat Israel and/or one of
its Affiliates (other than Purchaser, the Company or the Subsidiaries), pursuant
to Section 6.9(c)(i) hereof, and (B) any other obligation or liability that has
a value, individually of less than $100,000, but in any event not more than
$1,000,000 in the aggregate.
(iii) The Assets, together with the commitments of the Gilat
Parties under the Master Agreement, as of the Closing, will constitute all of
the assets of the Company and the Subsidiaries, except for those assets related
to the Excluded Businesses, which assets are subject to Section 6.9(c) hereof.
Except as set forth on Section 4.1(h)(iii) of the Disclosure Schedule, the
Assets, together with the commitments of the Gilat Parties under the Master
Agreement, constitute all of the assets, of any kind or nature whatsoever, of
any of the Gilat Business Entities or Subsidiaries used, or intended to be used,
in the conduct of the Business.
(iv) Except as set forth on Section 4.1(h)(iv) of the
Disclosure Schedule, (x) the Assets, together with the commitments of the Gilat
Parties under the Master Agreement, constitute all of the assets reasonably
necessary to, immediately following the Closing, operate the Business, including
voice services related to the Business ("Voice Services"), as currently
conducted, and (y) no portion of the Business is conducted by any Person other
than the Gilat Business Entities, the Subsidiaries and Comunicacion y Telefonia
Rural S.A., Servicios Rural S.A., Servicios Rurales de Telecomuncaciones S.A.,
CTR Holdings Ltd. and Rural Telecomunications Chile S.A., which conduct certain
telephony services in Chile.
(v) As of the Closing Date, revenues generated from Voice
Services will have as of the Closing Date a positive contribution to the net
income of the Business. Also, as of the Closing Date, the value of the Assets
shall exceed the value of the Liabilities as they would be reflected on a
balance sheet of the Company, dated the Closing Date, and prepared in accordance
with GAAP.
(i) Title and Condition of Assets; Leases.
(i) The Gilat Business Entities and the Subsidiaries, taken as
a whole, have, and the Company and the Subsidiaries, taken as a whole, as of the
Closing Date, will have good title in all of the Assets and, with respect to the
tangible Assets, marketable title, free and clear of material Liens, other than
the material Liens set forth in Section 4.1(h)(i)(2) of the Disclosure Schedule
described above.
24
(ii) The tangible Assets are in good working condition, order
and repair, suitable for the purpose for which they are used, ordinary wear and
tear excepted.
(iii) Except as otherwise set forth in Section 4.1(h)(i)(2) of
the Disclosure Schedule, as of the Closing Date, all of the Assets will be owned
by the Company or one of the Subsidiaries and none of the Gilat Business
Entities will have any interest in such Assets after the Closing Date.
(iv) All of the real properties and assets purported to be
leased by the Company and its Subsidiaries as of the Closing are subject to
valid leases that are in full force and effect, and there does not exist, and
the transactions contemplated hereby will not result in any default or event
that with notice or the lapse of time, or both or otherwise, would constitute a
default under any such leases. All required consents to transfer such leases, or
to sub-lease the real properties and assets subject to such lease, to the
Company or a Subsidiary, as the case may be, on or prior to the Closing will
have been obtained.
(j) Taxes. Except as set forth on Section 4.1(j) of the Disclosure
Schedule, and with respect to the Subsidiaries to the best knowledge of the
Gilat Parties:
(i) Seller and the Company and its Subsidiaries have filed or
caused to be filed all material Tax Returns required to have been filed on or
before the Closing Date, and all information set forth on such Tax Returns is
true, accurate and complete in all material respects;
(ii) Seller and the Company and its Subsidiaries have paid or
made adequate provision for all material Taxes due and payable by the Company
and its Subsidiaries on or before the Closing Date;
(iii) There are no material unpaid Taxes payable by Seller or
the Company, and its Subsidiaries or by any other Person that could result in
any material liability to Purchaser;
(iv) There is no current or pending audit, examination,
administrative or judicial proceeding, or deficiency or refund litigation with
respect to any Taxes of or Tax Returns filed by Seller or the Company or its
Subsidiaries, nor has any taxing authority filed or asserted in writing any
claim for the assessment of any unpaid Tax against or with respect to Seller or
the Company or its Subsidiaries;
(v) Seller and the Company or its Subsidiaries are in material
compliance with all applicable Tax information reporting and Tax withholding
requirements;
(vi) Seller and the Company and its Subsidiaries have
collected or withheld all amounts required to be collected or withheld by them
with respect to any Taxes, and all such amounts have been paid to the
appropriate governmental agencies or set aside in appropriate accounts for
future payment when due; and
25
(vii) Seller's, the Company's, and the Company's Subsidiaries'
financial statements fully and properly reflect, as of their respective dates,
the material liabilities of Seller, the Company, and its Subsidiaries,
respectively, for all Taxes.
For purposes of this Section 4.1(j), the term "material" shall mean an
amount of $100,000 or more.
(k) Employee Benefits; ERISA.
(i) Seller has previously made available (or will make
available to Purchaser prior to the Closing Date upon request by Purchaser) true
and complete copies or accurate summaries of all Employee Plans. For purposes of
this Agreement, "Employee Plans" means all tax-qualified pension, deferred
compensation, stock option, stock purchase, and bonus or group insurance
contracts and all other employee benefit plans, policies or programs maintained
for the benefit of the Employees.
(ii) The Employee Plans, to the extent subject to ERISA, are
in compliance with ERISA and other relevant employment related Laws, except to
the extent any such noncompliance would not result in a material liability to
the Company or the Business after the Closing Date. There are no unfunded
obligations relating to periods prior to the Closing with respect to any
Employee Plan. Each Employee Plan which is an "employee pension benefit plan"
within the meeting of Section 3(2) of ERISA and which is intended to be
qualified under Section 401(a) of the Code, has received a favorable
determination letter from the Internal Revenue Service with respect to "TRA" (as
defined in Section 1 of Rev. Proc. 93-39) and neither Gilat Israel nor Seller is
aware of any circumstances likely to result in a revocation of any such
favorable determination letter. There is no pending or threatened litigation
relating to the Employee Plans that involves any Employee or that would result
in a material liability to the Company after the Closing Date. None of the Gilat
Parties or the Company or its Subsidiaries has engaged in a transaction with
respect to any Employee Plan that, assuming the taxable period of such
transaction expired as of the date hereof, could subject the Company to a Tax or
Penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA in
an amount which would be material. Employment Matters. Section 4.1(h)(ii)(3) of
the Disclosure Schedule described above, sets forth a true and complete list of
the number of employees that will be transferred to the Company on or prior to
the Closing and their current positions with a Gilat Business Entity. There are
currently no obligations to such employees other than salaries, customary
benefits and the options described on Section 4.1(f)(iii) of the Disclosure
Schedule. Each of the Gilat Parties is, and the Company and its Subsidiaries as
of the Closing will be, in compliance in all material respects with all
applicable Laws respecting employment, health and employment practices, terms
and conditions of employment, wages, hours and occupational safety, and
discrimination in employment and none of the Gilat Parties is, and the Company
and its Subsidiaries as of the Closing will not be, engaged in any unfair labor
practice, where the failure to be in compliance (individually or in the
aggregate) could have a Company Material Adverse Effect or could reasonably be
expected to result in the imposition upon the Company after the Closing Date of
any material Penalty, liability, payment or obligation. There is no labor
strike, slowdown or stoppage pending
26
(or, to the knowledge of the Gilat Parties, any labor strike or stoppage
threatened) against or affecting the Business after the Closing Date. To the
knowledge of the Gilat Parties, no petition for certification has been filed and
is pending before the National Labor Relations Board or any similar
international regulatory entity with respect to any Employees. None of the
Employees are, nor will they be as of the Closing Date, represented by any labor
union or covered by any collective bargaining agreement.
(l) Business Contracts.
(i) Sections 4.1(h)(i)(2) and 4.1(h)(i)(3) of the Disclosure
Schedule sets forth (x) all Business Contracts and (y) all of the Business
Contracts which will be transferred to the Company or a Subsidiary on or prior
to the Closing, in each case, except for those Business Contracts to which a
Subsidiary is already bound or those Business Contracts having, individually, a
total value of less than $100,000. Except as set forth on Section 4.1(h)(i)(2)
and 4.1(h)(i)(3) of the Disclosure Schedule, neither the Business nor the Assets
are subject to or bound by any Contract having a value greater than or equal to
$100,000, which is a:
(1) lease of real property or personal property;
(2) license agreement;
(3) employment or non-competition agreement;
(4) agreement or other arrangement for the sale of
goods or services to any Government or Governmental authority;
(5) agreement with any distributor, dealer, sales
agent or representative;
(6) agreement with any manufacturer, supplier or
customer with respect to discounts or allowances or extended payment terms;
(7) joint venture or partnership agreement;
(8) agreement guaranteeing, indemnifying or creating
liability for the obligations or liabilities of another;
(9) agreement for the borrowing or lending of money;
(10) agreement with any bank, finance company or
similar organization which acquires accounts receivable or contracts for the
sale or merchandise on credit;
(11) agreement granting to any Person a Lien on any
property or asset;
27
(12) agreement for the construction or modification
of any building or structure or for the incurrence of any other capital
expenditure in excess of $50,000; or
(13) agreement which is material to the operation of
the Business.
(ii) Except as provided for in the Master Agreement and the
master agreement between Gilat Israel and StarBand, neither the Business nor the
Assets is subject to or bound by any contract which is an agreement which will
restrict any one or more of Purchaser, the Company and the Subsidiaries from
conducting the Business in any manner anywhere in the world after the Closing.
(iii) All Business Contracts are valid and in full force and
effect and constitute the legal, valid and binding obligations of the relevant
Gilat Business Entity or Subsidiary, as the case may be, and, to the knowledge
of the Gilat Parties, of the other parties thereto. There are no existing
defaults by the Gilat Business Entities or Subsidiary, as the case may be, to
any such Business Contracts and, to the knowledge of the relevant Gilat Parties,
of the other parties thereto and no event, act or omission has occurred that
would result in a default thereunder.
(iv) On or prior to the Closing Date, the Gilat Parties shall,
or shall cause the relevant the Gilat Business Entities to, assign and transfer
all Business Contracts listed in Sections 4.1(h)(i)(2) and 4.1(h)(i)(3) of the
Disclosure Schedule, to the Company or a Subsidiary, to the extent that any
Subsidiary is not already a party thereto, effective as of the Closing Date, at
which time such Business Contracts shall constitute legal, valid and binding
obligations of the Company or a Subsidiary, as the case may be, enforceable in
accordance with their respective terms. Except as otherwise set forth in
Sections 4.1(h)(i)(2) and 4.1(h)(i)(3) of the Disclosure Schedule, any and all
consents and novations necessary to transfer and assign the Business Contracts
to the Company or a Subsidiary, as the case may be, shall have been obtained on
or prior to the Closing.
(m) Intellectual Property.
(i) The Gilat Business Entities own or have the right to use
all Intellectual Property necessary for the conduct of the Business. None of the
Intellectual Property infringes or violates the intellectual property rights of
any third parties. The Gilat Business Entities have not received any written or
verbal communication alleging that they have been or may be engaged in, liable
for or contributing to any infringement, nor do any of the Gilat Business
Entities have knowledge that any such communication will be forthcoming. There
is, to the knowledge of the Gilat Business Entities, no unauthorized use,
exercise, exploitation, disclosure, infringement or misappropriation of any of
the Intellectual Property by any third party, including, without limitation, any
employee or former employee of any of the Gilat Business Entities. The
Intellectual Property is not subject to any outstanding order, judgment, decree,
stipulation or agreement restricting in any manner the ownership or licensing
thereof by Purchaser. On or prior to the Closing Date, pursuant to the Master
Agreement or otherwise, the
28
Company or a Subsidiary, as the case may be, shall own or have the right to use
all of the Intellectual Property necessary for the conduct of the Business.
(ii) All of the Licensed Intellectual Property is licensed
pursuant to valid written agreements, enforceable in accordance with their
terms.
(iii) For purposes of this Section 4.1(n):
(1) "Copyrights" shall mean, as used in the Business,
all registered and unregistered copyrights and applications for copyright
registration in every country of the world;
(2) "Intellectual Property" shall mean Patents,
Trademarks, Copyrights and Know-How, including Licensed Intellectual Property;
(3) "Know-How" shall mean, as used in the Business,
technical information, trade secrets, inventions, processes, specifications,
manuals, reports, documents, drawings, procedures, processes, devices, software
and source code, software documentation, flow charts, recording media, research
and development data, notebooks, marketing information, customer lists, database
rights, other tangible embodiments of information and proprietary rights other
than Copyrights, Patents and Trademarks, in every country of the world;
(4) "Licensed Intellectual Property" shall mean all
intellectual property owned by third parties and licensed to any Gilat Business
Entity and used in the Business;
(5) "Patents" shall mean all utility and design
patents and patent applications (including any divisions, continuations,
continuations-in-part, reexaminations, extensions, renewals or reissues
thereof), design, design registrations, utility models used in the Business and
any similar rights and applications therefor, in every country of the world; and
(6) "Trademarks" shall mean all registered and
unregistered trademarks, service marks, trade dress, trade names, fictitious
business names, internet domain names, or other similar names used in the
Business and applications for registration of any of the foregoing, in every
country of the world.
(n) Environmental Matters. Except as set forth in Section 4.1(o) of the
Disclosure Schedule and except as would not result in a Company Material Adverse
Effect:
(i) Each of the Gilat Parties has, and the Company and its
Subsidiaries as of the Closing will have, obtained all Environmental Permits and
all licenses and other authorizations and made all registrations and given all
notifications that are required to conduct the Business under any applicable
Environmental Law.
(ii) To the knowledge of the Gilat Parties, there is no
Environmental Claim pending against the Gilat Parties or the Company and its
Subsidiaries under an
29
Environmental Law that would result in material liability to the Company after
the Closing Date.
(iii) Each of the Gilat Parties is, and the Company and its
Subsidiaries as of the Closing will be, in compliance with (A) all terms and
conditions of their Environmental Permits and (B) all applicable Environmental
Laws.
(iv) None of the Gilat Parties generate, treat, store,
transport, discharge, dispose of or release any Hazardous Materials on or from
any property now or previously owned, leased or used by the Gilat Parties or
that will be owned, leased or used by the Company and its Subsidiaries after the
Closing.
(v) For purposes of Section 4.1(o):
(1) "Environment" shall mean any surface water,
ground water, or drinking water supply, land surface or subsurface strata, or
ambient air and includes, without limitation, any indoor location;
(2) "Environmental Claim" means any written notice or
written claim by any Person alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
Governmental costs, or harm, injuries or damages to any Person, property or
natural resources, and any fines or penalties) arising out of, based upon,
resulting from or relating to (A) the emission, discharge, disposal or other
release or threatened release in or into the Environment of any Hazardous
Materials or (B) circumstances forming the basis of any violation, or alleged
violation, of any applicable Environmental Law;
(3) "Environmental Laws" means any federal, state,
and local laws, codes, and regulations as now or previously in effect relating
to pollution, the protection of human health, the protection of the Environment
or the emission, discharge, disposal or other release or threatened release of
Hazardous Materials in or into the Environment;
(4) "Environmental Permit" shall mean a permit,
identification number, license or other written authorization required under any
applicable Environmental Law; and
(5) "Hazardous Materials" shall mean all pollutants,
contaminants, or chemical, hazardous or toxic materials, substances,
constituents or wastes, including, without limitation, asbestos or
asbestos-containing materials, polychlorinated biphenyls and petroleum, oil, or
petroleum or oil derivatives or constituents, including, without limitation,
crude oil or any fraction thereof.
(o) SEC Documents; Gilat Registration Statement; Filing Status.
(i) Gilat Israel has filed all SEC Documents required to be
filed by it since January 1, 2000 with the SEC, each of which complied when
filed in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and
30
do not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except as otherwise publicly disclosed by Gilat by way of a press
release or in a filing with the SEC, since the date of Gilat Israel's Annual
Report on Form 20F for the year ended Xxxxxxx 0, 0000, Xxxxx Xxxxxx has not had
any Gilat Material Adverse Effect.
(ii) None of the information supplied or to be supplied by or
on behalf of Gilat Israel expressly for inclusion or incorporation by reference
in the definitive form of the Gilat Registration Statement to be filed with the
SEC or mailed to Purchaser's stockholders will at the dates mailed to
Purchasers' stockholders and filed with the SEC contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Gilat Registration
Statement will comply as to form in all material respects with the provisions of
the Securities Act and the rules and regulations promulgated thereunder except
that no representation is made by Gilat Israel with respect to information
relating to or supplied by Purchaser or its Affiliates (excluding Gilat Israel
and its officers and directors, but including the officers and directors of
Purchaser and its other Affiliates).
(iii) Gilat Israel is a "foreign private issuer" as that term
is defined in Rule 3b-4 under the Exchange Act.
(p) No Broker. Except for Xxxxxx Xxxxxxx Xxxx Xxxxxx & Co., whose fees
will be paid solely by Seller, neither Gilat Israel nor Seller has employed or
retained any broker, consultant or other intermediary in connection with the
transactions contemplated hereby who would be entitled to a broker's, finder's
or similar fee or commission in connection therewith.
(q) Licenses. On or prior to the Closing, the Company will have, or
have the benefit of, all licenses, approvals, authorizations, consents,
franchises, orders or other permits of all Governmental or regulatory agencies,
whether federal, state, local or foreign, and of any third parties (where
applicable), necessary for the operation of the Business as currently conducted
(collectively, the "Licenses"); provided, however, that in the event that any
License cannot be transferred or otherwise assigned to the Company or one of its
Subsidiaries on or prior to Closing (either as a result of prohibitions under
applicable Law or under existing terms and conditions of any Business
Contracts), the Gilat Parties shall take all actions reasonably necessary to
ensure that, without any cost or expense to the Company, the Company has the
benefit of such non-transferable License on or prior to the Closing to the
extent necessary to operate the Business as currently conducted. All Licenses
will be in full force and effect as of the Closing.
Section 4.2 Representations and Warranties of Purchaser.
Purchaser hereby represents and warrants to Seller and Gilat Israel as
follows:
31
(a) Organization and Authorization. Purchaser is a corporation duly
incorporated, validly existing and in good standing under laws of the State of
Delaware and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where it is required to be so qualified by the
conduct of its business or the nature of its assets. Purchaser has the full
power and authority to own and operate its properties and to carry on its
business as now conducted. Purchaser has the power and authority to enter into
this Agreement and to perform the obligations hereunder and all such action has
been duly and validly authorized by all necessary corporate proceedings, subject
to Sections 5.1(a) and (d) hereof. This Agreement has been duly and validly
authorized, executed and delivered by Purchaser and constitutes a valid and
binding agreement of Purchaser, enforceable against Purchaser in accordance with
its terms.
(b) Consents; Filings. No filing or registration with, notification to
and no permit, authorization, consent or approval of any Governmental entity is
required by Purchaser or any of Purchaser's subsidiaries in connection with the
execution and delivery of this Agreement or the consummation by Purchaser of the
transactions contemplated hereby, except as set forth in Schedule 4.2(b) hereto
and except: (i) as required by (A) the Securities Act and the Exchange Act, (B)
state securities or "blue sky" laws, and (C) the NASDAQ and (ii) such other
filings, registrations, notifications, permits, authorizations, consents or
approvals the failure of which to be obtained, made or given would not,
individually or in the aggregate, materially impair Purchaser's ability to
consummate the transactions contemplated hereby.
(c) Litigation and Compliance.
(i) As of the date hereof, except as disclosed in Purchaser's
SEC Documents, there are no actions, suits or proceedings of any kind pending
against, or to Purchaser's knowledge, threatened against Purchaser or any of its
Affiliates (excluding the Gilat Business Entities and their respective officers
and directors, but including the officers and directors of Purchaser and its
other Affiliates) before any court, Governmental or regulatory agency, body,
commission or any arbitrator that (A) questions or calls into question the
validity of this Agreement or (B) that may reasonably be expected to have a
Purchaser Material Adverse Effect or an adverse effect upon the ability of
Purchaser to effect the transactions contemplated hereby.
(ii) Each of Purchaser and its subsidiaries is in substantial
compliance with, and is not in default or violation in any respect under, any
Law applicable to its business which noncompliance, default or violation would
be reasonably expected to have a Purchaser Material Adverse Effect, and to the
knowledge of Purchaser, no such default or violation has been alleged.
(d) Effect of Agreements; Conflicts. The execution, delivery and
performance by Purchaser of this Agreement and the consummation of the
transactions contemplated hereby, do not and will not (i) violate, conflict with
or result in a breach of any provision of its Articles of Incorporation or
Bylaws, (ii) violate, conflict with, or result in a breach of any provision of,
require any consent, approval or notice under, or constitute a default (or an
event that, with notice or lapse of time or both, would constitute a default) or
result
32
in a right of termination or acceleration under, or result in the creation of
any Lien upon, any of the properties or assets of Purchaser under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust or a material Contract or other material instrument or obligation to which
Purchaser is a party or by which Purchaser is bound or to which Purchaser, or
any of its properties or assets, may be subject, (iii) violate any judgment,
ruling, order, writ, injunction, determination, award, decree, statute,
ordinance, rule or regulation applicable to Purchaser, or any of its respective
properties or assets, or (iv) cause the suspension or revocation of any
authorization, consent, approval or license obtained by or on behalf of
Purchaser, which violations, conflicts, breaches, defaults, terminations,
accelerations, liens, encumbrances, suspensions or revocations, or which
consents, approvals or notices the failure to obtain or give, would, in the case
of clauses (ii), (iii) and (iv), individually or in the aggregate, be reasonably
expected to prevent, restrict or delay the consummation of the transactions
contemplated hereby.
(e) Purchaser Stock. All shares of Purchaser Stock that will be issued
and delivered to Seller or Gilat Israel, as the case may be, pursuant to
Sections 2.1 and 2.4 hereof will be duly authorized and, when delivered and paid
for in accordance with the terms hereunder, will be validly issued, fully paid
and non-assessable, and free of preemptive rights with no personal liability
attaching to the ownership thereof and included for trading on the NASDAQ upon
official notice of issuance.
(f) Employee Agreements and Plans. Schedule 4.2(f) hereto sets forth a
true and complete list of all of Purchaser's current bonus, incentive, deferred
compensation, stock purchase, stock option, stock appreciation rights, group
insurance, severance pay, retirement, golden parachute or other benefit plan,
Contracts, or employment or consulting Contracts applicable to any of the
directors and officers of Purchaser and any consultants retained by Purchaser,
which Purchaser shall make available to Seller prior to the Closing upon request
by Seller.
(g) Capitalization of Purchaser. The authorized capital stock of
Purchaser consists of 200,000,000 shares of Purchaser Stock and 5,000,000 shares
of preferred stock, par value $.01 per share, of Purchaser. As of November 30,
2001, 63,802,563 shares of Purchaser Stock were issued and outstanding. All of
such issued and outstanding shares of Purchaser Stock are validly issued, fully
paid and non-assessable and free of preemptive rights. As of the date hereof,
2,767,529 shares of Purchaser Stock were reserved for issuance upon exercise of
outstanding options, warrants, calls, claims, rights (including without
limitation any stock appreciation or similar rights), convertible securities or
other agreements or commitments to purchase or otherwise acquire shares of
Purchaser's capital stock. Except as set forth above and as otherwise
contemplated by this Agreement, there are not now, and as of the Closing Date
there will not be, any shares of capital stock of Purchaser issued or
outstanding or any subscriptions, options, warrants, calls, claims, rights
(including without limitation any stock appreciation or similar rights),
convertible securities or other agreements or commitments of any character
obligating Purchaser to issue, transfer or sell any of its securities. Except as
disclosed in Schedule 4.2(g) hereto, none of Purchaser and its subsidiaries is
party to any
33
Contract or other obligation relating to or providing for registration rights
with respect to its capital stock.
(h) SEC Documents; Proxy Statement and Offer Documents; and Stockholder
Meeting.
(i) Purchaser has filed all SEC Documents required to be filed
by it since January 1, 2000 with the SEC, each of which complied when filed in
all material respects with all applicable requirements of the Securities Act and
the Exchange Act and do not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(ii) None of the information supplied or to be supplied by or
on behalf of Purchaser expressly for inclusion or incorporation by reference in
the definitive form of (A) the Proxy Statement, or in the related proxy and
notice of meeting or other soliciting materials used in connection therewith, or
(B) any of the Offer Documents to be filed with the SEC or mailed to Purchaser's
stockholders will at the dates mailed to Purchasers' stockholders and filed with
the SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement and Offer Documents will comply as to form in
all material respects with the provisions of the Securities Act, the Exchange
Act and the rules and regulations promulgated thereunder except that no
representation is made by Purchaser with respect to information relating to or
supplied by Gilat Israel or its Affiliates (excluding Purchaser and its officers
and directors, but including the officers and directors of Gilat Israel and its
other Affiliates).
(iii) In accordance with applicable federal securities laws,
the DGCL and Purchaser's Certificate of Incorporation and Bylaws, the
Stockholder Meeting shall be duly called and held and proper notice thereof
shall be provided to Purchaser's stockholders.
(i) No Restrictions on Payment of Dividends. Except as contemplated by
this Agreement, as of the date hereof, Purchaser is not, and as of the Closing
Date Purchaser will not be, subject to any Contract or other obligation with any
Person that in any way prevents, prohibits, or otherwise restricts or conditions
Purchaser's ability to make or pay the First Distribution Amount, Second
Distribution Amount or the Maximum Distribution Amount, as the case may be,
under Section IV.B of the Fourth Amended and Restated Certificate of
Incorporation.
(j) Disclosure. All of the facts and circumstances not required to be
disclosed as exceptions under or to any of the foregoing representations and
warranties made by Purchaser by reason of any minimum disclosure requirement in
any such representation and warranty would not, in the aggregate, have a
Purchaser Material Adverse Effect.
34
(k) Opinion of Purchaser's Financial Advisor. The special committee of
the Board of Directors of Purchaser (the "Special Committee"), comprised of
independent directors and established to evaluate the fairness of the
transactions contemplated by the First Amended Agreement to Purchaser's
stockholders, has received an opinion from CIBC World Markets Corp., dated on or
prior to the date of the First Amended Agreement, to the effect that, as of such
date, (i) the consideration to be paid in the Sale is fair, from a financial
point of view, to Purchaser and (ii) the "Offer Consideration," as such term is
defined in the First Amended Agreement, to be received by the holders of
Purchaser Stock in the Offer is fair, from a financial point of view, to such
holders, other than Gilat Israel and its Affiliates.
(l) No Broker. Except for CIBC World Markets Corp., whose fees will be
paid solely by Purchaser, neither Purchaser nor any of its subsidiaries has
employed or retained any broker, consultant or other intermediary in connection
with the transactions contemplated hereby who would be entitled to a broker's,
finder's or similar fee or commission in connection therewith.
ARTICLE V.
CONDITIONS TO CLOSING
Section 5.1 Conditions to Each Party's Obligation to Effect the Sale.
The respective obligation of each Party to effect the Sale and the
other transactions contemplated hereby is subject to the satisfaction or waiver
on or prior to the Closing Date of the following conditions:
(a) Stockholder Approval. The Stockholder Approval shall have been
obtained.
(b) No Injunctions or Restraints. No judgment, order, decree, statute,
law, ordinance, rule or regulation entered, enacted, promulgated, enforced or
issued by any court or other Governmental entity of competent jurisdiction or
other legal restraint or prohibition shall be in effect preventing the
consummation of the transactions contemplated hereby.
(c) Governmental Action. No action or proceeding shall be instituted by
any Governmental authority seeking to prevent consummation of the transactions
contemplated hereby or seeking material damages in connection with the
transactions contemplated hereby which continues to be outstanding.
(d) Board Approval. A majority of the Board of Directors of Purchaser,
upon recommendation of the Special Committee, shall have approved the Sale and
the other transactions contemplated hereby.
(e) Gilat Registration Statement. The Gilat Registration Statement
shall have become effective under the Securities Act and shall not be the
subject of any stop order or proceedings seeking a stop order and no stop order
or similar restraining order shall be
35
threatened or entered by the SEC or any state securities administration
preventing the Sale or the other transactions contemplated hereby.
(f) Third Party Consents. The Parties shall have received all necessary
third party and Governmental consents and such consents shall be in full force
and effect as of the Closing Date.
(g) Amended and Restated Certificate. The Parties shall have received
confirmation that the Fourth Amended and Restated Certificate of Incorporation
has been filed with the Secretary of State of the State of Delaware (provided
that such filing take place contemporaneously with the Closing).
Section 5.2 Conditions to Obligations of Purchaser. The obligation of
Purchaser to consummate the Sale is subject to the satisfaction of the following
express conditions, each of which may be waived (in whole or in part) in writing
by Purchaser.
(a) Opinion of Gilat Parties' Counsel. As may be reasonably requested
by Purchaser, special Netherlands counsel, Israeli counsel and/or a special U.S.
counsel to the Gilat Parties, as the case may be, shall deliver to Purchaser an
opinion dated as of the Closing Date in form and substance customary for the
type of transactions contemplated hereby.
(b) Representations and Warranties. The representations and warranties
of Gilat Israel and Seller contained herein and in all agreements, documents and
instruments executed and delivered pursuant hereto shall be true and correct in
all material respects (except that any specific representations or warranties
that are qualified as to materiality must be true as written) on and as of the
Closing Date as if made on and as of the Closing Date, except for changes
contemplated by this Agreement (except that any such representations or
warranties made as of a specific date shall have been true on and as of such
date), and Purchaser shall have received certificates, dated as of the Closing
Date, signed by an executive officer of each of Gilat Israel and Seller, to the
foregoing effect. Those representations and warranties of the Gilat Parties
contained herein that are to be true and correct as of the Closing Date, shall
be true and correct in all material respects on and as of the Closing Date. The
Company shall have been formed and the Assets to be transferred and assigned to
the Company shall have been transferred by the relevant Gilat Business Entity on
or prior to the Closing Date as contemplated hereby.
(c) Compliance with This Agreement. Gilat Israel and Seller shall have
performed and complied in all material respects with all agreements, covenants,
obligations and conditions contained herein which are required to be performed
or complied with by Gilat Israel or Seller, as the case may be, before or at the
Closing (except that any specific agreement or covenant that is qualified as to
materiality must have been performed as written), and Purchaser shall have
received certificates, dated as of the Closing Date, signed by an executive
officer of Gilat Israel and Seller, to the foregoing effect.
36
(d) Master Agreement. The Company shall have entered into the Master
Agreement which shall be in full force and effect on the Closing Date.
(e) Voting Agreement and Option. Gilat Israel shall, and shall have
caused Xxxxx Xxxxxxx to, have executed and delivered the Voting Agreement to
Purchaser. In addition, Gilat Israel shall have executed and delivered the
Option to Purchaser.
(f) Proceedings and Other Documents. All corporate and other
proceedings in connection with the transactions contemplated hereby and all
documents incidental thereto shall be reasonably satisfactory in form, scope and
substance to Purchaser and its counsel, and Purchaser and its counsel shall have
received all such counterpart originals or certified or other copies of such
documents as Purchaser or their counsel may reasonably request.
Section 5.3 Conditions to Obligations of Gilat Israel and Seller.
The obligation of Gilat Israel and Seller to consummate the Sale is
subject to the satisfaction of the following express conditions, each of which
may be waived (in whole or in part) in writing by Gilat Israel and Seller.
(a) Opinion of Purchaser's Counsel. As may be reasonably requested by
the Gilat Parties, Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP, counsel for Purchaser,
shall deliver to the Gilat Parties an opinion dated as of the Closing Date in
form and substance customary for the type of transactions contemplated hereby.
(b) Representations and Warranties. The representations and warranties
of Purchaser contained herein and in all agreements, documents and instruments
executed and delivered pursuant hereto shall be true and correct in all material
respects (except that any specific representations or warranties that are
qualified as to materiality must be true as written) on and as of the Closing
Date as if made on and as of the Closing Date, except for changes contemplated
by this Agreement (except that any such representations or warranties made as of
a specific date shall have been true on and as of such date), and Gilat Israel
and Seller shall have received certificates, dated as of the Closing Date,
signed by an executive officer of Purchaser, to the foregoing effect. Those
representations and warranties of Purchaser contained herein that are to be true
and correct as of the Closing Date, shall be true and correct in all material
respects on and as of the Closing Date.
(c) Compliance with This Agreement. Purchaser shall have performed and
complied in all material respects with all agreements, covenants, obligations
and conditions contained herein which are required to be performed or complied
with by Purchaser before or at the Closing (except that any specific agreement
or covenant that is qualified as to materiality must have been performed as
written), and each of Gilat Israel and Seller shall have received a certificate,
dated the Closing Date, signed by an executive officer of Purchaser, to the
foregoing effect.
37
(d) Voting Agreement and Option. Each of the Principal Stockholders
shall have executed and delivered the Voting Agreement to Purchaser. Purchaser
shall have executed and delivered the Option to Gilat Israel.
(e) Directors and Officers Resignations. Purchaser shall have delivered
to Seller all of the D&O Resignations, as contemplated in Section 6.1 hereof.
(f) Gilat Israel's Nominees for Directors. At the Stockholder Meeting,
Gilat Israel's nominees for members of Purchaser's Board of Directors shall have
been elected to take office effective as of the Closing.
(g) Proceedings and Other Documents. All corporate and other
proceedings in connection with the transactions contemplated hereby and all
documents incidental thereto shall be reasonably satisfactory in form, scope and
substance to Seller and its counsel, and Seller and its counsel shall have
received all such counterpart originals or certified or other copies of such
documents as Seller or its counsel may reasonably request.
ARTICLE VI.
ADDITIONAL COVENANTS AND AGREEMENTS
Section 6.1 Directors and Officers.
Prior to or simultaneously with the execution of this Agreement,
Purchaser shall have delivered to Seller the written resignations of all of
Purchaser's directors and the chief executive officer, to be effective as of the
Closing Date, which resignations shall be irrevocable except in the event that
this Agreement is terminated (collectively, the "D&O Resignations").
Section 6.2 Additional Agreements; Cooperation.
(a) Subject to the terms and conditions herein provided, each of the
Parties agrees to use its reasonable best efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated hereby, and to cooperate with each other in connection
with the foregoing, including using its reasonable best efforts (i) to obtain
all necessary waivers, consents and approvals from other parties to loan
agreements, material leases and other material contracts, (ii) to obtain all
necessary consents, approvals and authorizations as are required to be obtained
under any federal, state or foreign law or regulations, (iii) to defend all
lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated hereby, (iv) to lift or rescind
any injunction or restraining order or other order adversely affecting the
ability of the Parties to consummate the transactions contemplated hereby, (v)
to effect all necessary registrations and filings, including, but not limited
to, filings under the Securities Act and Exchange Act and submissions of
information requested by Governmental authorities, (vi) provide all necessary
information for the Proxy Statement, the Offer Documents and the Gilat
Registration
38
Statement, and (vii) to fulfill all conditions to this Agreement. Without
limiting the generality of the foregoing, the Gilat Parties shall use their
respective best effort to take, or cause to be taken, all action reasonably
necessary to cause the Company to be formed and to transfer and assign all of
the Assets to the Company as contemplated hereby.
(b) Each of the Parties agrees to furnish to the other Party hereto
such necessary information and reasonable assistance as such other Party may
request in connection with its preparation of necessary filings or submissions
to any regulatory or Governmental agency or authority, including, without
limitation, any filings necessary under the provisions of the Securities Act,
the Exchange Act and any other applicable federal or state statute or required
by NASDAQ.
Section 6.3 Publicity.
The Parties shall consult with each other in issuing any press release
and other public statements with respect to any of the transactions contemplated
hereby, and shall not issue any such press release or make any such public
statement prior to such consultation and agreement of all Parties as to their
content and timing, except as may be required by applicable Law.
Section 6.4 Notification of Certain Matters.
Each of the Parties shall promptly notify the other Parties of (i) its
obtaining of actual knowledge as to the matters set forth in clauses (x) and (y)
below, or (ii) the occurrence, or failure to occur, of any event, which
occurrence or failure to occur would be likely to cause (x) any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the date the Sale is
consummated, or (y) any material failure of the Gilat Parties or Purchaser, as
the case may be, or of any officer, director, employee or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement; provided, however, that no such
notification shall affect the representations or warranties of the Parties or
the conditions to the obligations of the Parties hereunder.
Section 6.5 Access to Information.
(a) From the date of this Agreement until the consummation of the Sale,
the Gilat Parties will, and will cause the Company and the other Gilat Business
Entities to, give Purchaser and its authorized agents and representatives
(including counsel, environmental and other consultants, accountants and
auditors) full access during normal business hours to all facilities, personnel
and operations and to all books, records, documents, contracts, and financial
statements relevant to the conduct of the Business, and will permit Purchaser to
make such inspections as it may reasonably require and will cause the executive
officers of each of the Gilat Business Entities to furnish Purchaser with such
financial and operating data and other information with respect to the Business
as Purchaser may from time to time reasonably request.
39
(b) Purchaser agrees that information received by it concerning the
operations of the Business shall be considered confidential and Purchaser will
not, and will cause its agents and representatives not to, use any information
obtained pursuant to Section 6.5(a) for any purpose unrelated to the
consummation of the transactions contemplated hereby. Subject to the
requirements of Law, Purchaser will keep confidential, and will cause its agents
and representatives to keep confidential, all information and documents obtained
pursuant to Section 6.5(a) unless such information (i) was already known to
Purchaser, (ii) becomes available to Purchaser from other sources not known by
Purchaser to be bound by a confidentiality obligation, (iii) is disclosed with
prior written approval of Seller or Gilat Israel, or (iv) is or becomes readily
ascertainable from published information. In the event that this Agreement is
terminated or the transactions contemplated hereby shall otherwise fail to be
consummated, Purchaser shall promptly cause all copies of documents or extracts
thereof containing information and data as to the Company to be returned. In the
event that this Agreement has been terminated or the transactions contemplated
hereby shall have failed to be consummated and Purchaser or any of its agents or
representatives are requested or required (by oral questions, interrogatories,
requests for information, or documents in legal proceedings, subpoena, civil
investigative demand, or other similar process) to disclose any of the materials
delivered or obtained pursuant to this Agreement (the "Business Documentation"),
Purchaser shall provide Seller with prompt written notice of any such request or
requirement so that the Gilat Parties or the other Gilat Business Entities, as
the case may be, may seek a protective order or other appropriate remedy. If, in
the absence of a protective order or other remedy, Purchaser or any of its
agents or representatives are compelled to disclose any of such Business
Documentation to any tribunal or else stand liable for contempt or suffer other
censure or penalty, Purchaser or its agents or representatives, as the case may
be, may, without liability hereunder, disclose to such tribunal only that
portion of the Business Documentation which counsel for the Gilat Parties
advises is legally required to be disclosed; provided, that Purchaser shall
exercise commercially reasonable efforts to preserve the confidentiality of the
Business Documentation, including, without limitation, by cooperating with the
Gilat Parties and the other Gilat Business Entities, as the case may be, to
obtain an appropriate protective order or other reliable assurance that
confidential treatment will be accorded the Business Documentation by such
tribunal.
Section 6.6 Non-Solicitation.
(a) Neither Purchaser nor any of its Affiliates (excluding Gilat Israel
and its officers and directors, but including the officers and directors of
Purchaser and its other Affiliates) will, directly or indirectly, through any
directors, officers, employees, agents, representatives or otherwise, solicit,
initiate, facilitate or encourage (including by way of furnishing or disclosing
non-public information) any inquiries or the making of any proposal with respect
to any merger, consolidation or other business combination involving Purchaser
or its subsidiaries or the acquisition of all or any significant assets or
capital stock of or by Purchaser and its subsidiaries (a "Transaction Proposal")
or negotiate, explore or otherwise engage in discussions with any Person (other
than Gilat Israel or Seller and its representatives) with respect to any
Transaction Proposal or enter
40
into any agreement, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the transactions contemplated hereby.
(b) Notwithstanding the provisions of Section 6.6(a) hereof, in the
event that prior to the consummation of the Sale, the Board of Directors of
Purchaser determines in good faith, after consultation with outside counsel,
that it is necessary to respond to an Unsolicited Superior Proposal (as defined
below) in order to comply with its fiduciary duties to Purchaser's stockholders
under applicable Law, the Board of Directors of Purchaser may (subject to this
and the following sentences) (x) withdraw or modify its approval or
recommendation of the Sale, this Agreement and the other transactions
contemplated hereby, or (y) approve or recommend an Unsolicited Superior
Proposal or terminate this Agreement (and concurrently with or after such
termination, if it so chooses, cause Purchaser to enter into any agreement with
respect to any Unsolicited Superior Proposal), but in each of the cases set
forth in this clause (y), no action shall be taken by Purchaser pursuant to
clause (y) until a time that is after the fifth (5th) business day following
Seller's receipt of written notice advising Seller that the Board of Directors
of Purchaser has received an Unsolicited Superior Proposal, specifying the
material terms and conditions of such Unsolicited Superior Proposal and
identifying the Person making such Unsolicited Superior Proposal, to the extent
such identification of the Person making such proposal does not breach the
fiduciary duties of the Board of Directors as advised by outside legal counsel
and; provided, that if the Board of Directors takes any action pursuant to the
foregoing clauses (x) and (y), Purchaser shall within two (2) business days of
such action, pay Seller an amount equal to 3% of the consideration payable by
Purchaser under Section 2.1 hereof and reimburse Gilat Israel, Seller and the
Company for any of their out of pocket expenses (including without limitation
fees and expenses of outside professionals) by wire transfer of immediately
available funds to an account specified by Seller. For purposes of this
Agreement, an "Unsolicited Superior Proposal" means any bona fide, unsolicited,
written proposal made by a third party to enter into an agreement with respect
to a Transaction Proposal on terms that the Board of Directors of Purchaser
determines in its good faith judgment (after consultation with outside counsel
and a financial advisor of nationally recognized reputation) to be more
favorable to Purchaser's stockholders (including Gilat Israel, but solely in its
capacity as a stockholder) than the Sale and the other transactions contemplated
hereby.
(c) In addition to the obligations of Purchaser set forth in paragraphs
(a) and (b) of this Section 6.6, Purchaser shall immediately advise Seller
orally and in writing of any request for information or of any Transaction
Proposal, the material terms and conditions of such request or Transaction
Proposal, and to the extent such disclosure is not a breach of the fiduciary
duties of the Board of Directors as advised by outside legal counsel, the
identity of the Person making such request or Transaction Proposal.
(d) Nothing contained in this Section 6.6 shall prohibit Purchaser from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act, or from making any disclosure to
Purchaser's stockholders if, in the good faith judgment of the Board of
Directors of Purchaser, after consultation with outside counsel, failure to
disclose would be inconsistent with its fiduciary duties to Purchaser's
stockholders under applicable law; provided, however, that neither Purchaser
41
nor its Board of Directors nor any committee thereof shall, except as permitted
by Section 6.6, withdraw or modify, or propose publicly to withdraw or modify,
its position with respect to this Agreement or the Sale and the other
transactions contemplated hereby or approve or recommend, or propose publicly to
approve or recommend, an Transaction Proposal.
Section 6.7 Fees and Expenses.
Whether or not the Sale is consummated, the Parties shall each bear
their respective expenses incurred in connection with the Sale and other
transactions contemplated hereby, including, without limitation, the
preparation, execution and performance of this Agreement, and all fees and
expenses of investment bankers, finders, brokers, agents, representatives,
counsel and accountants.
Section 6.8 Insurance.
Gilat Israel shall cause to be maintained in effect for not less than
three years from the Closing Date the current policies of the directors' and
officers' liability insurance maintained by Purchaser (provided that Gilat
Israel may substitute therefor policies of at least the same coverage that cover
Purchaser's current directors and officers which contain terms and conditions
that are no less advantageous) with respect to matters occurring on or prior to
the Closing Date; provided, that in no event shall Gilat Israel be required to
expend annually more than 200% of the amount Purchaser spent for these purposes
in the last fiscal year to maintain or procure insurance coverage. Gilat Israel
shall cause Purchaser to indemnify the directors of Purchaser to the fullest
extent permitted under the DGCL, including without limitation reimbursement for
reasonable and documented attorneys' fees.
Section 6.9 Conduct of the Parties after the Closing Date.
(a) Gilat Israel and Seller each agree to use their respective
commercially reasonable efforts to ensure that following the Closing Date, (i)
Purchaser remains a public company, with shares of its common stock listed for
trading on the NASDAQ -National Market (or, if such listing becomes reasonably
impracticable, listed or quoted on the American Stock Exchange, the NASDAQ -
Small Cap or on the bulletin board (in that order or priority)) and (ii)
Purchaser and its subsidiaries operates and conducts its business, and uses its
current cash and cash equivalent holdings in a manner consistent with the
operation of the Business, including the Voice Services, as currently conducted,
for a period of one year following the Closing Date and thereafter as otherwise
approved by Purchaser's Board of Directors including a majority of Purchaser's
independent directors as being in the best interest of Purchaser's shareholders.
Notwithstanding the foregoing, the Parties acknowledge that (x) Purchaser
received a delisting notice from NASDAQ on June 27, 2001, (y) on June 29, 2001,
2001, Purchaser sent notice to NASDAQ requesting a hearing with a Nasdaq Listing
Qualification Panel with respect to the delisting by NASDAQ of shares of
Purchaser Stock, and (z) Purchaser's eligibility to remain listed for trading on
the NASDAQ National Market is subject to the outcome of
42
the qualification hearing that was held on August 9, 2001 between the Nasdaq
Hearing Panel and Purchaser.
(b) Gilat Israel and Seller shall:
(i) for the longer of (x) a period of one year following the
Closing Date or (y) the Special Distribution Expiration Date, not permit
Purchaser to pay or declare any dividends or make any other distributions (other
than the Special Distribution);
(ii) for a period two years following the Closing Date (and
without limiting any obligation under applicable Law), not permit Purchaser or
any of its subsidiaries to enter into any material transaction with Gilat Israel
or any of its Affiliates on terms which are materially less favorable to
Purchaser and its subsidiaries as could be obtained by Purchaser and/or its
subsidiaries from an unaffiliated third party in an arms-length transaction,
except as may be reasonably necessary for the Parties to fulfil their
obligations in Section 6.9(c) hereof (provided that in no event shall the
Purchaser or any of its subsidiaries incur any cost or expense with respect
thereto); and
(iii) for the longer of (x) a period of three years following
the Closing Date or (y) the Special Distribution Expiration Date, except as
otherwise provided in the Master Agreement or, with no cost or expense to the
Purchaser and/or its subsidiaries, as may be reasonably necessary for the
Parties to fulfill their obligations in Section 6.9(c) hereof, not charge
Purchaser or any of its subsidiaries for any administrative services (such as
legal, financial and accounting services) other than at Gilat Israel's actual
cost therefor.
(iv) during the term of the Master Agreement (including,
without limitation, any automatic renewals thereof), it shall not agree to any
amendment, modification or other change to the Master Agreement which is
detrimental to the business interests of any one or more of the Company,
Purchaser or the Business in any material respect.
(c) Subject to the terms and provisions hereof, to the extent that any
Subsidiaries transferred to the Company hereunder conducts any Excluded
Businesses:
(i) Following the Closing, Gilat Israel and/or its Affiliates
and Purchaser will take such action, and cause the Company and the Subsidiaries
to take such action, as shall be reasonably necessary in order to permit Gilat
Israel to obtain and/or retain, as the case may be, directly or through any of
its Affiliates as it shall designate, the full value and benefits of the
Excluded Businesses, including, without limitation, by causing the assets
related to such Excluded Businesses (to the extent they do not constitute
Assets) to be transferred out of any such Subsidiary; provided, however, in no
event shall (x) any such action be taken that will result in a Purchaser
Material Adverse Effect or a Company Material Adverse Effect, it being
understood by the Parties that for purposes of this clause 6.9(c)(i)(x), that a
"Company Material Adverse Effect" shall not include any event, change or adverse
effect to a Subsidiary to the extent such Subsidiary
43
conducts or otherwise operates any part of the Excluded Businesses, or (y) any
one or more of the Purchaser, the Company, any Subsidiary or the Business be
required to incur or pay any costs or expense with respect to any such action
except to the extent any costs or expenses associated therewith are paid or
reimbursed by Gilat Israel or one of its Affiliates (other than the Company, the
Purchaser or any of the Subsidiaries).
(ii) None of the Purchaser, the Company, any Subsidiary or the
Business will be required to assume, pay or discharge any liability or
obligation related to or associated with the Excluded Businesses (an "Excluded
Business Liability") except to the extent any costs or expenses associated
therewith are paid or reimbursed by Gilat Israel or one of its Affiliates (other
than the Company, the Purchaser or any of the Subsidiaries).
Section 6.10 Maintenance of Transfer Agent.
For the benefit of each current and future holder of shares of
Purchaser Stock (other than Gilat Israel and its Affiliates), until the Special
Distribution Expiration Date, Purchaser shall maintain, and Gilat Israel and
Seller shall cause Purchaser to maintain: (i) an independent transfer agent of
shares of Purchaser Stock and (ii) cause such transfer agent to only register
and record the transfer of shares of Purchaser Stock in accordance with the
provisions of Section 2.5(c) hereof.
ARTICLE VII.
CONDUCT OF BUSINESS AND OF PURCHASER PRIOR TO THE CLOSING
Section 7.1 Conduct of Business Pending the Sale.
(a) Except as otherwise contemplated hereby, prior to Closing, except
with the prior consent of Purchaser (which consent shall not be unreasonably
withheld), Gilat Israel and Seller shall, and shall cause each of the Gilat
Business Entities to:
(i) conduct their respective operations with respect to the
Business in the ordinary course, including complying in all material respects
with all applicable Laws relating to the Business, and maintaining the books and
records of the Business in accordance with applicable Law and past practices;
(ii) maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with it with
respect to the operation of the Business and take no action which would
materially adversely affect the ability of the Parties to consummate the
transactions contemplated hereby;
(iii) use commercially reasonable efforts to preserve the
Business; and
(iv) conduct their respective operations in a manner which
will not result in a Gilat Material Adverse Effect.
44
(b) Without limiting the generality of the foregoing, except as
otherwise contemplated hereby, prior to Closing, except with the prior consent
of Purchaser (which consent shall not be unreasonably withheld), in connection
with the operation of the Business, Gilat Israel and Seller shall not nor will
it permit any of the Gilat Business Entities to:
(i) create, incur, assume, maintain or permit to exist any
debt for borrowed money that materially affects the operation of the Business or
the Assets other than under lines of credit in the ordinary course of business
consistent with past practices;
(ii) (1) increase in any manner the compensation of any
Employee except in the ordinary course of business consistent with past
practice; (2) with respect to the Employees, pay or agree to pay any pension,
retirement allowance or other employee benefit not required, or enter into or
agree to enter into any agreement or arrangement with such Employee, whether
past or present, relating to any such pension, retirement allowance or other
employee benefit, except as required under currently existing agreements, plans
or arrangements; (3) grant any severance or termination pay to, or enter into
any employment or severance agreement with any Employee except consistent with
commercially acceptable standards; or (4) except as may be required to comply
with applicable Law, become obligated (other than pursuant to any new or renewed
collective bargaining agreement) under any new pension plan, welfare plan,
multiemployer plan, employee benefit plan, benefit arrangement, or similar plan
or arrangement, which was not in existence on the date hereof, including any
bonus, incentive, deferred compensation, stock purchase, stock option, stock
appreciation right, group insurance, severance pay, retirement or other benefit
plan, agreement or arrangement, or employment or consulting agreement with or
for the benefit of any Employee or amend any of such plans or any of such
agreements in existence on the date hereof; provided, however, that this clause
(4) shall not prohibit the Gilat Parties or the Gilat Business Entities from
renewing any such plan, agreement or arrangement already in existence on terms
no more favorable to the parties to such plan, agreement or arrangement;
(iii) except as otherwise expressly contemplated hereby, enter
into any other Business Contracts, except for (1) Business Contracts for the
purchase, sale or lease of goods or services involving payments or receipts by
the Gilat Parties or the Gilat Business Entities not in excess of $100,000, or
(ii) leases for rental space in an amount not to exceed $100,000 for any lease;
(iv) except as otherwise expressly contemplated hereby,
authorize, recommend, propose or announce an intention to authorize, recommend
or propose, or enter into any agreement in principle or an agreement with
respect to any sale, transfer, lease, license, pledge, mortgage, or other
disposition or encumbrance of a material amount of Assets, or any entry into a
material Business Contract or any amendment or modification of any material
Business Contract or any release or relinquishment of any material Business
Contract rights; or
(v) authorize or commit to make capital expenditures with
respect to and in connection with the operation of the Business in excess of
$100,000.
45
Section 7.2 Conduct of Business of Purchaser Pending the Sale.
(a) Except as otherwise contemplated hereby (including, without
limitation, the acknowledgement set forth in Section 7.2(b) hereof), prior to
Closing, except with the prior consent of Gilat Israel (which consent shall not
be unreasonably withheld), each of Purchaser and its subsidiaries will conduct
their respective operations according to its ordinary course of business
consistent with past practice, and will use all commercially reasonable efforts
to preserve intact its business organization, to keep available the services of
its officers and employees and to maintain satisfactory relationships with
suppliers, distributors, customers and others having business relationships with
it and take no action which would materially adversely affect the ability of the
Parties to consummate the transactions contemplated hereby. Without limiting the
generality of the foregoing, Purchaser will not nor will it permit any of its
subsidiaries to, without the prior written consent of Gilat Israel (which
consent shall not be unreasonably withheld):
(i) amend its Certificate of Incorporation or Bylaws or other
organizational instruments;
(ii) except as otherwise expressly contemplated hereby,
authorize for issuance, issue, sell, deliver, grant any options or warrants for,
or otherwise agree or commit to issue, sell or deliver any shares of any class
of its capital stock or any securities convertible into, shares of any class of
its capital stock, except pursuant to and in accordance with the terms of
currently outstanding options or warrants;
(iii) except as otherwise expressly contemplated hereby,
split, combine or reclassify any shares of its capital stock, declare, set aside
or pay any dividend or other distribution (whether in cash, stock or property or
any combination thereof) in respect of its capital stock or purchase, redeem or
otherwise acquire any shares of its own capital stock or of any of its
subsidiaries;
(iv) (1) create, incur, assume, maintain or permit to exist
any debt for borrowed money other than under existing lines of credit in the
ordinary course of business consistent with past practice; (2) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person except for
its wholly owned subsidiaries, in the ordinary course of business and consistent
with past practices; or (3) make any loans, advances or capital contributions
to, or investments in, any other Person in an aggregate amount exceeding
$100,000;
(v) (1) increase in any manner the compensation of any
employee, director or officer except in the ordinary course of business
consistent with past practice; (2) pay or agree to pay any pension, retirement
allowance or other employee benefit not required, or enter into or agree to
enter into any agreement or arrangement with such director or officer or
employee, whether past or present, relating to any such pension, retirement
allowance or other employee benefit, except as required under currently existing
agreements, plans or arrangements; (3) grant any severance or termination pay
to, or enter into any employment or severance agreement with any employee,
officer or
46
director except consistent with commercially acceptable standards; or (4) except
as may be required to comply with applicable Law, become obligated (other than
pursuant to any new or renewed collective bargaining agreement) under any new
pension plan, welfare plan, multiemployer plan, employee benefit plan, benefit
arrangement, or similar plan or arrangement, which was not in existence on the
date hereof, including any bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance, severance
pay, retirement or other benefit plan, agreement or arrangement, or employment
or consulting agreement with or for the benefit of any Person, or amend any of
such plans or any of such agreements in existence on the date hereof; provided,
however, that this clause (4) shall not prohibit Purchaser from renewing any
such plan, agreement or arrangement already in existence on terms no more
favorable to the parties to such plan, agreement or arrangement;
(vi) except as otherwise expressly contemplated hereby, enter
into any other agreements, commitments or contracts, except for (i) agreements,
commitments or contracts for the purchase, sale or lease of goods or services
involving payments or receipts by Purchaser or its subsidiaries not in excess of
$100,000, or (ii) leases for rental space in an amount not to exceed $100,000
for any lease;
(vii) except as otherwise expressly contemplated hereby,
authorize, recommend, propose or announce an intention to authorize, recommend
or propose, or enter into any agreement in principle or an agreement with
respect to, any plan of liquidation or dissolution, any acquisition of a
material amount of assets or securities, any sale, transfer, lease, license,
pledge, mortgage, or other disposition or encumbrance of a material amount of
assets or securities or any material change in its capitalization, or any entry
into a material Contract or any amendment or modification of any material
Contract or any release or relinquishment of any material Contract rights;
(viii) authorize or commit to make capital expenditures in
excess of $100,000;
(ix) make any change in the accounting methods or accounting
practices followed by Purchaser;
(x) settle any action, suit, claim, investigation or
proceeding (legal, administrative or arbitrative) in excess of $200,000 without
the consent of Seller; or
(xi) agree to do any of the foregoing.
(b) Discontinuation of School Business. Notwithstanding the provisions
of Section 7.2(a), each of the Gilat Parties hereby acknowledge that Purchaser
is and will continue to, without requiring the consent of Gilat Israel or Seller
and without being subject to the restrictions contained in Section 7.2(a), take
certain action that is not in the ordinary course of business nor consistent
with past practices in connection with the discontinuation and winding down of
Purchaser's school-related businesses.
Section 7.3 Gilat Review of Expenditures.
47
Upon the execution of this Agreement, the Parties agree that Gilat
Israel shall have the right to review and approve all proposed cash expenditures
of Purchaser equal to or greater than $25,000 prior to their disbursement. The
Parties agree that from the date hereof until the Closing Date, other than in
the ordinary course consistent with past practice, as not otherwise restricted
by the provisions of Section 7.2(a) or as permitted by Section 7.2(b), Purchaser
shall not take any action that may materially affect Purchaser's cash and cash
equivalent holdings, which as of the date hereof equals at least $36 million,
including, without limitation, writing checks or making cash disbursements of
any kind, without the prior express consent of both Gilat Israel and Purchaser's
Chief Executive Officer.
ARTICLE VIII.
INDEMNIFICATION
Section 8.1 Indemnification Generally by Gilat Israel and Seller.
(a) From and after the Closing Date, Gilat Israel and Seller shall
jointly and severally indemnify Purchaser's Indemnified Persons against, hold
Purchaser's Indemnified Persons harmless from, and promptly reimburse
Purchaser's Indemnified Persons for, any and all Indemnifiable Claims incurred,
suffered, sustained or required to be paid by any of Purchaser's Indemnified
Persons, resulting from, arising out of, based upon or in respect of the
following (including, without limitation, any of the following sought to be
imposed, or that under any Law or legal or equitable principle or right of
action could be imposed, upon Purchaser's Indemnified Persons):
(i) any failure or breach of the representations or warranties
made by Gilat Israel and Seller in Section 4.1 of this Agreement or in any
agreement, document or instrument executed and delivered pursuant hereto or in
connection with the closing of the transactions hereunder to be true as of the
date on which they are made;
(ii) any breach of any covenant made by Gilat Israel or Seller
in this Agreement;
(iii) any liability, payment or obligation concerning the
Business or the Assets or required by this Agreement to be disclosed by Gilat
Israel or Seller to Purchaser and not so disclosed; provided, however, that
neither of the Gilat Parties shall have any liability under this Section 8.1
until the aggregate amount to which Purchaser's Indemnified Persons would
otherwise be entitled exceeds $100,00; and provided, further, however, that the
Gilat Parties aggregate liability under this Section 8.1 shall not exceed $50
million; or
(iv) any Excluded Business Liability.
(b) Each of the Gilat Parties shall be entitled, at its option, to
assume and control the defense of any claims, actions, suits or proceedings by
any third party alleged or asserted against Purchaser's Indemnified Persons in
respect of, resulting from, related to or arising out of any such liabilities,
payments and obligations for which indemnification
48
under this Section 8.1 is sought by them at its expense and through counsel
selected by Gilat Israel or Seller, as the case may be, and approved by
Purchaser (which approval shall not be unreasonably withheld, conditioned or
delayed) if Gilat Israel or Seller, as the case may be, gives prompt notice of
its intention to do so to Purchaser's Indemnified Persons and reimburses
Purchaser's Indemnified Persons for their reasonable costs and expenses incurred
prior to the assumption by Gilat Israel or Seller, as the case may be, of such
defense; provided, however, that Purchaser's Indemnified Persons shall have the
right to employ separate counsel (including local counsel), and the relevant
Gilat Party shall bear the reasonable and documented fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the relevant Gilat
Party to represent Purchaser's Indemnified Persons would present such counsel
with a conflict of interest or (ii) the actual or potential defendants in, or
targets of, any such action include both Purchaser's Indemnified Persons and the
relevant Gilat Party and Purchaser's Indemnified Persons shall have reasonably
concluded that there may be legal defenses available to it which are different
from or additional to those available to the relevant Gilat Party. In the event
that Gilat Israel or Seller, as the case may be, shall assume the defense of any
such claim, action, suit or proceeding as aforesaid, Purchaser's Indemnified
Persons shall nevertheless be permitted to continue to participate in any such
claim, action, suit or proceeding with counsel of their choice at the expense of
Purchaser's Indemnified Persons.
Section 8.2 Indemnification Generally by Purchaser.
(a) From and after the Closing Date, Purchaser shall indemnify Gilat
Israel and Seller and their respective officers, directors, employers, agents
and stockholders (collectively, the "Seller's Indemnified Persons") against,
hold Seller's Indemnified Persons harmless from, and promptly reimburse Seller's
Indemnified Persons for, any and all Indemnifiable Claims incurred, suffered,
sustained or required to be paid by any of Seller's Indemnified Persons
resulting from, arising out of, based upon or in respect of the following
(including, without limitation, any of the following sought to be imposed, or
which under any Law or legal or equitable principle or right of action could be
imposed, upon Seller's Indemnified Persons):
(i) any failure or breach of the representations or warranties
made by Purchaser in Section 4.2 of this Agreement or in any agreement, document
or instrument executed and delivered pursuant hereto or in connection with the
closing of the transactions contemplated hereunder to be true on the date of
this Agreement or on the Closing Date; or
(ii) any breach of any covenant made by Purchaser in or
pursuant to this Agreement; provided, however, that Purchaser shall not have any
liability under this Section 8.2 until the aggregate amount to which Seller's
Indemnified Persons would otherwise be entitled exceeds $100,000; and provided,
further, however, that Purchaser's aggregate liability under this Section 8.2
shall not exceed $50 million.
(b) Prior to the Closing, Purchaser shall be entitled, at its option,
to assume and control the defense of any claims, actions, suits or proceedings
by any third party alleged
49
or asserted against Seller's Indemnified Parties in respect of, resulting from,
related to or arising out of any such liabilities, payments and obligations for
which indemnification under this Section 8.2 is sought by them at its expense
and through counsel selected by Purchaser and approved by the Gilat Parties
(which approval shall not be unreasonably withheld, conditioned or delayed) if
Purchaser, gives prompt notice of its intention to do so to Seller's Indemnified
Persons and reimburses Seller's Indemnified Persons for their reasonable costs
and expenses incurred prior to the assumption by Purchaser of such defense;
provided, however, that Seller's Indemnified Persons shall have the right to
employ separate counsel (including local counsel), and Purchaser shall bear the
reasonable and documented fees, costs and expenses of such separate counsel if
(i) the use of counsel chosen by Purchaser to represent Seller's Indemnified
Persons would present such counsel with a conflict of interest or (ii) the
actual or potential defendants in, or targets of, any such action include both
Seller's Indemnified Persons and Purchaser and Seller's Indemnified Persons
shall have reasonably concluded that there may be legal defenses available to it
which are different from or additional to those available to Purchaser.
(c) After the Closing or if Purchaser shall not have assumed the
defense of any claim, action or proceeding pursuant to Section 8.1(a) hereof,
Seller's Indemnified Persons shall have the right, but not the obligation, to
contest, defend or litigate, and to retain counsel of their choice in connection
with, any claim, action, suit or proceeding by any third party alleged or
asserted against Seller's Indemnified Persons in respect of, resulting from,
related to or arising out of any such liabilities, payments and obligations for
which indemnification under this Section 8.2 is sought by them and the cost and
expense thereof shall be subject to the indemnification obligations of Purchaser
hereunder.
(d) If Purchaser acknowledges in writing its obligation to indemnify
Seller's Indemnified Persons in respect of such liabilities, payments and
obligations to the full extent provided by this Section 8.2, and it provides
reasonable evidence of its ability to satisfy any adverse judgment, Purchaser
shall be entitled, at its option, to assume and control the defense of such
claims, actions suits or proceedings at its expense and through counsel of its
choice if it gives prompt notice of its intention to do so to Seller's
Indemnified Persons and reimburses Seller's Indemnified Persons for their costs
and expenses incurred prior to the assumption by Purchaser of such defense.
(e) In the event that Purchaser shall assume the defense of any such
claim, action, suit or proceeding as aforesaid, Seller's Indemnified Persons
shall nevertheless be permitted to continue to participate in any such claim,
action, suit or proceeding with counsel of their choice at Seller's Indemnified
Persons' expense.
(f) Purchaser shall not be entitled to settle or compromise any such
claim, action, suit or proceeding without the prior written consent of Seller,
which consent shall not be unreasonably withheld, conditioned or delayed, except
that the consent of Seller shall not be required if such settlement would entail
solely the payment of cash damages payable in full (and not by installment or on
any deferred basis) for which Purchaser shall be responsible and shall effect
payment simultaneously with the execution of any settlement
50
agreement and releases (including releases of Seller's Indemnified Persons) and
provided that such settlement does not entail any admission or stipulation that
could adversely affect Seller's Indemnified Persons (or their successors and
assigns).
Section 8.3 Notice of Claims for Indemnification.
Purchaser on the one hand, or Gilat Israel or Seller, on the other
hand, as the case may be, shall notify each other promptly, and in any event
within thirty (30) days, of the assertion by any third party of any claim
against any of Purchaser's Indemnified Persons or Seller's Indemnified Persons,
as the case may be, with respect to which any of them intend to make a claim for
indemnification under Section 8.1 or Section 8.2 hereof. Any notice of any claim
pursuant to Section 8.1 or Section 8.2 shall set forth the dollar amount thereof
sought by the party seeking indemnification, unless the amount of such claim is
not yet determinable (and such notice shall so state), and a statement of the
facts underlying such claim in reasonably sufficient detail (to the extent such
facts are readily available to the party claiming indemnification) so as to
inform the Party against which indemnification is sought as to the basis of such
claim and the manner in which the amount of such claim was computed. The failure
by an indemnified party to notify an indemnifying party of an Indemnifiable
Claim shall not relieve the indemnifying party of any indemnification
responsibility under Section 8.1 or Section 8.2, provided that such failure does
not materially prejudice the ability of the indemnifying party to defend such
Indemnifiable Claim. Purchaser's Indemnified Persons and Seller's Indemnified
Persons shall cooperate with each other in any investigation by the others of
any such claim.
Section 8.4 Survival of Representations and Warranties.
All of the representations and warranties of Gilat Israel and Seller
contained in Section 4.1 hereof and of Purchaser contained in Section 4.2 hereof
shall continue in effect until the second anniversary of the Closing Date.
ARTICLE IX.
TAX INDEMNITIES
Section 9.1 Tax Indemnities. From and after the Closing Date, Gilat
Israel and Seller shall jointly and severally indemnify and hold Purchaser and
the Company harmless from all federal, state, local, foreign and other Taxes
imposed on Purchaser, the Company or any of its Subsidiaries (A) for any
pre-Closing period or (B) resulting from the transfer prior to the Closing of
assets, properties and businesses to the Company, or the consummation prior to
the Closing of any other actions or transactions contemplated hereby.
Notwithstanding any other provision to the contrary in this Agreement, Gilat
Israel and Seller agree that after the Closing, no Tax Return (or amendments to
any previously filed Tax Return) with respect to the Company shall be filed with
or submitted to any Government without prior approval by Purchaser.
51
Section 9.2 Character of Indemnity Payments.
All amounts paid pursuant to Article 9 of this Agreement by one Party
to another Party (other than interest payments) shall be treated by such Parties
as an adjustment to the Share Consideration. In the event any taxing authority
shall assert, or applicable Law shall require, that any amount referred to in
the preceding sentence shall be treated as income to the recipient thereof, then
the amount of such payment, if, and only if, such payment relates to Taxes,
shall be adjusted to reflect the impact of all applicable Taxes so that the
recipient, after the impact of all Taxes is taken into consideration, shall be
in the same position as it would have been had the event creating the obligation
on the part of the payor to make such payment never occurred.
Section 9.3 Refunds.
(a) In the event that Purchaser or the Company receives a refund or
credit of Tax for which Gilat Israel or Seller, made a payment pursuant to
Section 9.1 of this Agreement or any other provision of this Agreement, then
Purchaser or the Company, as the case may be, shall promptly pay to Gilat Israel
or Seller, as the case may be, the amount of such refund (including any accrued
interest paid in respect of such refunded Tax) or credit. In the event that any
refund or credit of Taxes for which a payment has been made to Gilat Israel or
Seller, as the case may be, pursuant to this Section 9.3(a) is subsequently
reduced or disallowed, Gilat Israel and Seller shall, jointly and severally,
indemnify and hold harmless the payor for any Tax liability assessed against
such payor by reason of the reduction or disallowance.
(b) In the event that Gilat Israel or Seller receives a refund or
credit of Tax for which Purchaser or the Company made a payment pursuant to
Section 9.1 or any other provision of this Agreement, then Gilat Israel or
Seller, as the case may be, shall promptly pay to Purchaser or the Company, as
the case may be, the amount of such refund (including any accrued interest paid
in respect of such refunded Tax) or credit. In the event that any refund or
credit of Taxes for which a payment has been made to Purchaser or the Company
pursuant to this Section 9.3(b) is subsequently reduced or disallowed, Purchaser
or the Company, as the case may be, shall indemnify and hold harmless the payor
for any Tax liability assessed against such payor by reason of the reduction or
disallowance.
Section 9.4 Miscellaneous.
(a) Prior Tax Sharing Agreements. This Agreement terminates and
supersedes as of the Closing Date any and all other tax sharing agreements, if
any, in effect on the Closing Date as to which the Company or any of its
Subsidiaries is or was a party, for all Taxes imposed by any federal, state,
foreign or local Government or taxing authority, regardless of the period for
which such Taxes are imposed.
(b) Survival of Claims. Notwithstanding any other provision of this
Agreement, no claim for indemnification under this Article 9 may be made in
respect of any Tax that is asserted by any taxing authority after the applicable
statute of limitations period with
52
respect to such Tax has expired, except for a claim for indemnification for the
cost of contesting such assertion.
ARTICLE X.
TERMINATION
Section 10.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by the written consent of Purchaser and Seller;
(b) by either Purchaser or Seller, if the transactions contemplated
hereby shall not have been consummated pursuant hereto by 5:00 p.m. Eastern
Standard Time on May 31, 2002, unless such date shall have been extended by
mutual written consent of Purchaser and Seller; provided, however, that a Party
may not terminate this Agreement pursuant to this clause (b) if the transactions
contemplated by this Agreement are not consummated by May 31, 2002 is a result
of a breach by such Party of its representations, warranties or agreements
hereunder.
(c) by Purchaser, by written notice to Seller if any of the conditions
set forth in Sections 5.1 or 5.2 hereof (including with respect to any
representations and warranties) shall not have been, or it becomes apparent that
any of such conditions will not have been fulfilled by the Closing Date, unless
such failure shall be due to failure of Purchaser to perform or comply with any
of the covenants, agreements or conditions hereof to be performed or complied
with by it prior to the Closing;
(d) by Seller, by written notice to Purchaser if any of the conditions
set forth in Sections 5.1 or 5.3 hereof (including with respect to any
representations and warranties) shall not have been, or it becomes apparent that
any of such conditions will not have been fulfilled by the Closing Date (other
than Section 6.6 of this Agreement), unless such failure shall be due to failure
of either of the Gilat Parties to perform or comply with any of the covenants,
agreements or conditions hereof to be performed or complied with by them prior
to Closing;
(e) by Seller, if (i) Section 6.6 shall be breached by Purchaser or any
of its officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative of Purchaser, in any
material respect and Purchaser shall have failed promptly to terminate the
activity giving rise to such breach following such time as Purchaser first
becomes aware thereof and used best efforts to cure such breach, or (ii)
Purchaser shall breach Section 6.6 by failing to promptly notify the Gilat
Parties as required thereunder; provided, in the case of (i), Purchaser shall
comply with applicable requirements relating to the payment (including the
timing of any payment) of each of the Gilat Parties' expenses and the fees
required by Section 6.6 hereof;
(f) by Seller, if (i) the Board of Directors of Purchaser or any
committee thereof, under the circumstances contemplated in Section 6.6 hereof,
shall have withdrawn or modified in a manner adverse to the Gilat Parties its
approval or recommendation of this
53
Agreement or the Sale and the other transactions contemplated hereby or failed
to reconfirm its recommendation within five business days after a written
request to do so, or approved or recommended any Transaction Proposal or (ii)
the Board of Directors of Purchaser or any committee thereof shall have resolved
to take any of the foregoing actions; provided, that in the case of clauses (i)
or (ii), Purchaser shall comply with applicable requirements relating to the
payment (including the timing of any payment) of each of the Gilat Parties'
expenses and the fee required by Section 6.6(b); or
(g) by Purchaser, if it elects to terminate this Agreement in
accordance with Section 6.6(b); provided, that it has complied with all
provisions thereof.
Section 10.2 Effect of Termination.
In the event of the termination of this Agreement pursuant to this
Article 10, this Agreement shall become void and have no effect, without any
liability to any Person in respect thereof or of the transactions contemplated
hereby on the part of any Party except as otherwise provided in Section 11.2
hereof.
ARTICLE XI.
MISCELLANEOUS
Section 11.1 Governing Law.
(a) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware without regard to principles of
conflicts of laws.
(b) Each of the Parties hereto irrevocably consents to the service of
process, pleading, notices or other papers by the mailing of copies thereof by
registered, certified or first class mail, postage prepaid, to such party at
such party's address set forth herein, or by any other method provided or
permitted under Delaware law.
(c) Each party irrevocably and unconditionally agrees and consents that
any suit, action or other legal proceeding arising out of or related to this
Agreement shall be brought and heard in State of Delaware, and each Party
irrevocably consents to personal jurisdiction in any and all tribunals in the
State of Delaware.
Section 11.2 Remedies.
The rights and remedies provided herein and all other rights and
remedies available at law or in equity are, to the extent permitted by law,
cumulative and not exclusive of any other right or remedy now or hereafter
available at law or in equity. In the event that a Party brings a claim, action
or proceeding against any of the other Parties alleging breach of such Party's
obligations hereunder (the "breaching party"), and the non-breaching party
successfully obtains a final, non-appealable ruling from a court of competent
jurisdiction that such breaching party has in fact breached its obligations
hereunder, such non-breaching party shall be entitled to be reimbursed for all
of its reasonable and documented out of pocket expenses for outside
professionals (including,
54
attorneys and financial advisors) incurred by it in connection with bringing the
successful suit, claim or proceeding.
Section 11.3 Successors and Assigns.
Except as otherwise provided in Sections 2.3(c), 2.4(d) and 2.5 hereof,
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by any Party without the prior written consent of the other
Parties; provided, however, that if the Parties mutually agree, Purchaser may
assign its rights, but not its obligations, hereunder to any wholly-owned
subsidiary of Purchaser formed by Purchaser specifically to consummate the Sale.
Except as otherwise expressly provided herein, the provisions hereof shall inure
to the benefit of, and be binding upon, the successors and permitted assigns of
the Parties hereto.
Section 11.4 Amendment.
This Agreement may be amended by the Parties at any time prior to the
consummation of the Sale. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the Parties.
Section 11.5 Entire Agreement.
This Agreement and the Exhibits and Schedules hereto constitute the
entire agreement among the Parties with respect to the subject matter hereof.
There are no representations, warranties, covenants or undertakings with respect
to the subject matter hereof other than those expressly set forth herein. This
Agreement supersedes all prior agreements between the Parties with respect to
the subject matter hereof.
Section 11.6 No Reliance on Other Information.
Except for the representations and warranties contained in this
Agreement, none of the Parties nor any representative, agent or affiliate or
other Person acting for any of them makes any other representation or warranty,
express or implied.
Section 11.7 Severability.
If any provision of this Agreement, including any phrase, sentence,
clause, section or subsection is inoperative or unenforceable for any reason,
such circumstances shall not have the effect of rendering the provision in
question inoperative or unenforceable in any other case or circumstance, or of
rendering any other provision or provisions herein contained invalid,
inoperative, or unenforceable to any extent whatsoever.
Section 11.8 No Third Party Beneficiaries.
Except as provided for in Section 2.5 hereof, nothing in this Agreement
shall confer any rights upon any Person or entity that is not a party or
permitted assignee of a party to this Agreement.
55
Section 11.9 Notices.
All notices and other communications required or permitted hereunder
shall be in writing and shall be delivered by hand, transmitted via facsimile or
mailed by first-class mail, postage prepaid, addressed
(a) if to Gilat Israel or Seller:
c/o Gilat Satellite Networks, Ltd.
00/X Xxxxx Xxxxxxx Xxxxxx
Daniv Park, Kiryat Xxxx
Petah Tikva, Israel
Facsimile: 972-3-921-3321
Attn: Xxxx Xxxxxxxxxx
with a copy to:
Xxxxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
(b) if to Purchaser:
rStar Corporation
0000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx Xxxxxxxxx, Chairman
with a copy to:
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
0000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
and
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxxx Xxxxx, Esq.
56
Section 11.10 Delays or Omissions.
No delay or omission to exercise any right, power or remedy accruing to
the Parties upon any breach or default by the another Party under this
Agreement, shall impair any such right, power or remedy of the non-breaching
Parties, nor shall it be construed to be a waiver of any such breach or default,
or any acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Party of any breach or default under this Agreement or any
waiver on the part of another Party of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in writing. All remedies, either under this Agreement, or
by law or otherwise afforded to a Party, shall be cumulative and not
alternative.
Section 11.11 Legal Fees.
The provision of Section 7.2 to the contrary notwithstanding,
simultaneously with the Closing, Purchaser shall be entitled to pay, and it
shall pay, all reasonable legal fees and disbursements incurred by Purchaser in
connection with the transactions contemplated by this Agreement.
Section 11.12 Titles and Subtitles.
The titles of the sections, paragraphs and subparagraphs of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
Section 11.13 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
[SIGNATURES BEGIN ON THE NEXT PAGE]
57
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
duly executed on its behalf either by itself or by one of its officers thereunto
duly authorized, all as of the date and year first above written.
PURCHASER:
rSTAR CORPORATION
By: /s/ Xxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: CEO
SELLER:
GILAT TO HOME LATIN AMERICA
(HOLLAND) N.V.
By: /s/ Giora Oron
---------------------------------------
Name: Giora Oron
Title: CEO
GILAT SATELLITE NETWORKS LTD.
By: /s/ Xxxx Xxxxxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxxxxx
Title: Chief Financial Officer and
Vice President, Finance and
Administration
